<PAGE>
As filed with the Securities and Exchange Commission on February 28, 1997
Registration Nos. 33-76574; 811-08414
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form N1-A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 11
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12
NORTHSTAR STRATEGIC INCOME FUND
---------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Two Pickwick Plaza, Greenwich, CT 06830
-----------------------------------------------------
(Address of Principal Executive Offices)
(203)863-6200
--------------------------------------
(Registrant's telephone number)
Mark L. Lipson
c/o Northstar Investment Management Corporation
Two Pickwick Plaza, Greenwich, CT 06830
-----------------------------------------------------
(Name and address for agent for service)
Copies of all correspondence to:
Jeff Steele, Esq.
Dechert, Price & Rhodes
1500 K. Street, N.W., Suite 500
Washington, D.C. 20005
<PAGE>
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
- - -
on [date] pursuant to paragraph (b)
- - -
60 days after filing pursuant to paragraph (a)(1)
- - -
X on March 1 pursuant to paragraph (a)(1)
- - -
75 days after filing pursuant to paragraph (a)(2)
- - -
on [date] pursuant to paragraph (a)(2) of Rule 485
- - -
If appropriate, check the following box:
X this post-effective amendment designates a new effective
- - - date for a previously filed post-effective amendment.
- -------------------------------------------------------------
* Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) of the Invesment
Company Act of 1940. The Registrant has filed the Notice required by
Rule 24f-2 for its most recent fiscal year on or about February 16,
1996.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(a)
UNDER THE SECURITIES ACT OF 1933
PART A
COMBINED PROSPECTUS
<TABLE>
<CAPTION>
FORM N-1A PART A ITEM PROSPECTUS CAPTION
<S> <C>
1. Cover Page Cover Page
2. Synopsis What you pay to invest
3. Condensed Financial Information Cover Page; Objective; Investment
Strategy; Holdings; Risks; The Risks
of Investing in Mutual Funds; Investment
Practices; The Business of Mutual Funds;
Where to go for more Information
4. General Description of Registrant Cover Page; Objective; Investment
Strategy; Holdings; Risks; The Risks
of Investing in Mutual Funds; Investment
Practices; The Business of Mutual Funds;
Where to go for more Information
5. Management of the Fund Meet the Portfolio Managers; The Business
of Mutual Funds
6. Capital Stock and Other Securities Buying, Selling and Exchanging;
Choosing a Share Class; Opening a
NorthStar Account; Mutual Fund Earnings
and your Taxes; Where to go for more
Information
7. Purchases of Securities Being Offered Buying, Selling and Exchanging;
Choosing a Share Class; Opening a
NorthStar Account; How Dealers
are Compensated
8. Redemption or Repurchase Buying, Selling and Exchanging
9. Legal Proceedings Not Applicable
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
FORM N-1A PART B ITEM STATEMENT OF ADDITIONAL INFORMATION
CAPTION
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information & History Cover Page; Other Information
13. Investment Objectives and Policies Cover Page; Investment Restrictions;
Investment Techniques
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal N/A
Holders of Securities
16. Investment Advisory and Other Services of Northstar; the Subadvisers
Services and the Administrator
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices Allocation
18. Capital Stock and Other Purchases and Redemptions
Securities
19. Purchases, Redemptions and Net Asset Value; Purchases and
Redemptions
20. Tax Status Dividends, Distribution and Taxes
21. Underwriter Underwriter and Distribution Services
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C in the Registration Statement.
<PAGE>
THE NORTHSTAR FUNDS
Prospectus
March 1, 1997
(Graphic of a star appears on the right side of page)
This prospectus
contains
important
information
about investing in
Northstar
Funds.
It tells you:
(Bullet) how to choose the funds that are right for you
(Bullet) how to buy and sell shares
(Bullet) how you earn money on your investments
(Bullet) how investing in mutual funds may affect your taxes
Please read it carefully before you invest, and keep it for
future reference.
Growth Funds
NORTHSTAR Growth Fund
NORTHSTAR Growth + Value Fund
NORTHSTAR Special Fund
Income and Growth Funds
NORTHSTAR Income and Growth Fund
NORTHSTAR Balance Sheet Opportunities Fund
Income Funds
NORTHSTAR High Total Return Fund
NORTHSTAR High Yield Fund
NORTHSTAR Strategic Income Fund
NORTHSTAR Government Securities Fund
Your investment:
(Bullet) is not a bank deposit
(Bullet) is not insured or guaranteed by the
FDIC, the Federal Reserve Board or
any other governement agency
(Bullet) is affected by market
fluctuations-there is no guarantee
that you won't lose money.
Some of these funds may invest in junk bonds.
You'll find out more about how
these can affect your investment in the
section called The risks of investing
in mutual funds, that begins on page 36.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
What's inside
(Picture of a bulls eye and arrow) OBJECTIVES
(Picture of a clock) INVESTMENT
STRATEGY
(Picture of a safe) HOLDINGS
(Picture of scales) RISKS
(Picture of a coin) WHAT YOU PAY TO INVEST
(Picture of a stack of money) HOW THE
FUND HAS PERFORMED
These pages contain a description of each of our funds, including its
objective, investment strategy, types of holdings, risks and portfolio managers.
You'll also find:
What you pay to invest.A list of the fees and expenses you pay both
directly and indirectly - when you invest in the fund.
HOW THE FUND HAS PERFORMED. A chart that shows the fund's financial
performance for up to ten years, by share class.
What's inside
An introduction to the
Northstar family of funds 3
Northstar Growth Funds
Growth Fund 4
Growth + Value Fund 6
Special Fund 8
Northstar Income and Growth Funds
Income and Growth Fund 10
Balance Sheet Opportunities Fund 12
Northstar Income Funds
High Total Return Fund 14
High Yield Fund 16
Strategic Income Fund 18
Government Securities Fund 20
Meet the portfolio managers 22
Your guide to buying, selling and exchanging shares of Northstar funds 25
Mutual fund earnings and your taxes 32
The business of mutual funds 34
The risks of investing in mutual funds 36
WHERE TO GO FOR MORE INFORMATION 40
2
<PAGE>
AN INTRODUCTION TO THE
NORTHSTAR FAMILY OF FUNDS
Risk is the potential that
your investment will lose
money or not earn as much
as you hope. All mutual
funds have varying degrees
of risk, depending on the
securities they invest in.
Please read this prospectus
carefully to be sure you
understand the risks and
potential benefits associated
with each of our funds.
(Picture of a telephone)
IF YOU HAVE ANY QUESTIONS
ABOUT THE NORTHSTAR
FAMILY OF FUNDS OR ABOUT
CHOOSING SUITABLE
INVESTMENTS, PLEASE CALL
US AT 1-800-595-7827.
An introduction to the
Northstar family of funds
This prospectus has been designed to help you make informed decisions about your
investments.
We've divided our funds into three categories, and color-coded them to make it
easy to find what you're looking for.
[ ] GROWTH FUNDS APPEAR ON THE GREEN PAGES
Our Growth Funds focus on long-term growth by investing primarily in equi-
ties. They will suit you if you:
(Bullet) are investing for the long term - at least several years
(Bullet) are willing to accept higher risk in exchange for potentially
higher long-term returns.
[ ] INCOME AND GROWTH FUNDS APPEAR ON THE BLUE PAGES
Our Income and Growth Funds seek income and growth of capital in
varying combinations. They will suit you if you:
(Bullet) want both regular income and capital appreciation
(Bullet) are looking for potentially higher returns than those offered by
the income funds, but don't feel comfortable with the level of
risk associated with the growth funds.
[ ] INCOME FUNDS APPEAR ON THE RED PAGES
Northstar offers both aggressive and conservative Income Funds. Both offer
regular income, but some take higher risks to attain higher returns.
The Income Funds will suit you if you:
(Bullet) want a regular stream of income
(Bullet) want higher potential returns than money market funds
(Bullet) are willing to accept some risk.
3
<PAGE>
NORTHSTAR
Growth
Fund
Registrant
Northstar Growth Fund
Portfolio manager
Geoffrey Wadsworth
Objective
This fund seeks long-term (Picture of a bulls eye and arrow)
growth of capital by investing
primarily in domestic common
stocks.
Investment strategy
The fund invests in large and (Picture of a clock)
mid-sized companies that the
portfolio manager feels have
above average prospects for growth.
HOLDINGS
Under normal market conditions, the (Picture of safe)
fund invests at least 65% of its assets
in securities purchased on the basis of
the potential for capital appreciation.
The fund also holds preferred stocks and
convertible securities. It may invest
up to 20% of its net assets in foreign
issuers, but only 10% can be in
securities that are not listed on a
U.S. securities exchange. It may also invest
in other higher-risk securities and engage
in other investment practices. These
are described on page 36.
RISKS
Because they invest in equities, all (Picture of scales)
growth funds are affected by changes in
the stock market. This fund is also subject
to the risks associated with
investing in foreign securities. Please
refer to the section beginning on page
36, The risks of investing in mutual funds.
WHAT YOU PAY TO INVEST
There are two types of fees and expenses (Picture of a coin)
when you invest in mutual funds:
fees, including sales charges, you pay
directly when you buy or sell shares, and
operating expenses paid each year by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2) 4.00(2)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Management fee % 0.75 0.75 0.75 0.75
12b-1 fee(3) % 0.30 1.00 1.00 0.95
Other expenses(4) % 0.45 0.45 0.45 0.30
T OTAL FUND OPERATING EXPENSES
AFTER REIMBURSEMENT % 1.50 2.20 2.20 2.00
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example - actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 62 93 125 218
Class B
with redemptions $ 74 101 141 235(5)
without redemptions $ 22 69 118 235(5)
Class C
with redemptions $ 33 69 118 253
without redemptions $ 22 69 118 253
Class T
with redemptions $ 62 85 108 220(6)
without redemptions $ 20 63 108 220(6)
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) Because of the 12b-1 fee, long-term shareholders may pay more than
the maximum permitted front-end sales charge.
(4) These figures are after the adviser reimbursed its expenses. Before
reimbursement, other expenses would have been 0.51% for Class A, 0.49% for Class
B, 0.60% for Class C, and 0.34% for Class T. Total fund operating expenses would
have been 1.56% for Class A, 2.24% for Class B, 2.35% for Class C, and 2.04% for
Class T.
(5) Class B shares convert to Class A shares after year 8. This figure
uses Class A expenses for years 9 and 10.
(6) Class T shares convert to Class A shares after year 8 or on June 2,
1998, whichever is later. This figure uses Class A expenses for years 9 and 10.
4 GROWTH FUNDS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW THE FUND HAS The following chart shows the Audited by other independent NORTHSTAR
PERFORMED fund's financial performance by accountants prior to 1995. GROWTH
(Picture of money) share class. The 1995 and 1996 FUND
figures have been audited by The fund's performance is also
Coopers & Lybrand L.L.P., reported in national newspapers
independent accountants. under these trading symbols:
GRWTHA or GRWTHT.
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED DECEMBER 31, 1996 1995(1) 1996 1995(1) 1996 1995(1)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the
beginning of the period $ 15.53 17.59 15.50 17.59 15.50 17.59
Net investment income
(loss) $ 0.02 0.08 (0.06) 0.06 (0.05) 0.04
Net realized and
unrealized gain on
investments $ 3.18 1.95 3.13 1.92 3.12 1.92
Total from investment
operations $ 3.20 2.03 3.07 1.98 3.07 1.96
Dividends from net
investment income $ - (0.10) - (0.08) - (0.06)
Dividends from net
realized gain on
investments sold $ (0.81) (3.99) (0.81) (3.99) (0.81) (3.99)
Total distributions $ (0.81) (4.09) (0.81) (4.07) (0.81) (4.05)
Net asset value at the end
of the period $ 17.92 15.53 17.76 15.50 17.76 15.50
TOTAL INVESTMENT RETURN(2) % 20.54 11.55 19.74 11.27 19.74 11.17
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of
the period ($000s) $ 4,750 1,355 4,444 1,987 365 69
Ratio of expenses to
average net assets % 1.50 1.42 (3) 2.20 2.07 (3) 220 2.11 (3)
Ratio of expense
reimbursement to average
net assets % 0.06 - 0.04 - 0.15 -
Ratio of net investment
income (loss) to average
net assets % 0.11 0.63 (3) (0.55) 0.06 (3) (0.57) 0.02 (3)
Average commissions per
share $ 0.0593 - 0.0593 - 0.0593 -
Portfolio turnover rate % 62 134 62 134 62 134
CLASS T
YEAR ENDED DECEMBER 31, 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
OPERATING PERFORMANCE
Net asset value at the
beginning of the period $ 15.53 15.75 17.33 16.36 16.37 12.49 13.85 11.96 10.47 10.54
Net investment income
(loss) $ (0.06) 0.07 0.08 0.02 0.02 0.09 0.10 0.20 0.16 0.09
Net realized and
unrealized gain (loss) on
investments $ 3.16 3.77 (1.41) 1.67 1.30 4.62 (0.83) 2.66 1.58 (0.07)
Total from investment
operations $ 3.10 3.84 (1.33) 1.69 1.32 4.71 (0.73) 2.86 1.74 0.02
Dividends from net
investment income $ - (0.07) (0.08) (0.04) (0.02) (0.08) (0.10) (0.20) (0.17) (0.08)
Dividends from net
realized gain on
investments sold $ (0.81) (3.99) (0.15) (0.67) (1.31) (0.75) (0.51) (0.76) (0.08) -
Distributions from capital $ - - (0.02) (0.01) - - (0.02) (0.01) - (0.01)
Total distributions $ (0.81) (4.06) (0.25) (0.72) (1.33) (0.83) (0.63) (0.97) (0.25) (0.09)
Net asset value at the end
of the period $ 17.82 15.53 15.75 17.33 16.36 16.37 12.49 13.85 11.96 10.47
TOTAL INVESTMENT RETURN (2) % 19.90 24.40 (7.66) 10.36 8.05 38.10 (5.24) 24.25 16.70 0.11
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of
the period ($000s) $ 70,406 76,343 76,391 80,759 56,759 40,884 24,927 29,842 25,359 27,493
Ratio of expenses to
average net assets % 2.00 2.00 2.00 2.04 2.15 2.25 2.33 2.33 2.46 2.29
Ratio of expense
reimbursement to average
net assets % 0.04 - - - - - - - - -
Ratio of net investment
income (loss) to average
net assets % (3.05) 0.37 0.49 0.13 0.09 0.66 0.80 1.39 1.40 0.83
Average commissions per
share $ 0.0593 - - - - - - - - -
Portfolio turnover rate % 62 134 54 42 47 64 54 75 59 55
</TABLE>
(1) Share classes A, B & C commenced
operations on June 5, 1995.
(2) Assumes dividends have been rein-
vested and does not reflect the
effect of sales charges. Unaudited
prior to 1992.
(3) Annualized.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
GROWTH FUNDS 5
<PAGE>
NORTHSTAR
GROWTH +
VALUE FUND
REGISTRANT
Northstar Trust
PORTFOLIO MANAGER
Louis Navellier
OBJECTIVE
This fund seeks capital appreciation (Picture of a bulls eye and arrow)
by investing in a diversified portfolio
of equity securities.
INVESTMENT STRATEGY
The fund invests primarily in companies (Picture of a clock)
the portfolio manager identifies as
either growth or value through quantitative analysis.
Growth companies have above average earnings
or sales growth, and higher price to earnings
ratios. Value companies are temporarily
undervalued or out of favor, and tend to have
lower price to book ratios, higher earnings
or dividend yields and higher returns on equity.
The percentage of fund assets allocated
to the two different kinds of companies
varies depending on the portfolio manager's
assessment of economic conditions and investment
opportunities.
HOLDINGS
The fund invests in common stocks, preferred (Picture of a safe)
stocks, convertible securities, warrants and other
stock purchase rights, private placements and other
restricted equity securities, equity interests in
trusts, limited partnerships and joint ventures
and interests in real estate investment
trusts. It may hold up to 20% of its assets
in foreign companies as American Depository
Receipts. It may also invest in other
higher-risk securities and engage in other
investment practices. These are described on page 36.
RISKS
Because they invest in equities, all (Picture of a scales)
growth funds are affected by changes in
the stock market. Please refer to the section
beginning on page 36, The risks of investing in
mutual funds.
WHAT YOU PAY TO INVEST
There are two types of fees and expenses when you invest in mutual funds:
fees, including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C>
Management fee % 1.00 1.00 1.00
12b-1 fee(3) % 0.30 1.00 1.00
Other expenses(4) % 0.55 0.55 0.55
TOTAL FUND OPERATING EXPENSES
AFTER REIMBURSEMENT % 1.85 2.55 2.55
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example-actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 65 103 143 254
Class B
with redemptions $ 77 112 158 271(5)
without redemptions $ 26 79 136 271(5)
Class C
with redemptions $ 36 79 136 289
without redemptions $ 26 79 136 289
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) Because of the 12b-1 fee, long-term shareholders may pay more than the
maximum permitted front-end sales charge.
(4) These figures are after the adviser reimbursed its expenses. Before
reimbursement, other expenses would have been 0.03% for Class B and 0.05% for
Class C. Total fund operating expenses would have been 2.58% for Class B and
2.60% for Class C.
(5) Class B shares convert to Class A shares after year 8. This figure
uses Class A expenses for years 9 and 10.
6 GROWTH FUNDS
<PAGE>
HOW THE FUND HAS The following chart shows the
PERFORMED fund's financial performance by NORTHSTAR
(Picture of money) share class. These figures are GROWTH +
unaudited. VALUE FUND
<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 31, 1997 CLASS A CLASS B CLASS C
<S> <C> <C> <C>
OPERATING PERFORMANCE (1)
Net asset value at the beginning of the period $ 10.00 10.00 10.00
Net investment income $ - - -
Net realized and unrealized gain (loss) on investments $ (0.03) (0.04) (0.04)
Total from investment operations $ (0.03) (0.04) (0.04)
Dividends from net investment income $ - - -
Dividends from net realized gain on investments sold $ - - -
Distributions from capital $ - - -
Total distributions $ - - -
Net asset value at the end of the period $ 9.97 9.96 9.96
TOTAL INVESTMENT RETURN(2) % (0.30) (0.40) (0.40)
RATIOS AND SUPPLEMENTAL DATA (1)
Net assets at the end of the period ($000s) $ 5,799 11,011 2,871
Ratio of expenses to average net assets % 1.82 (3) 2.55 (3) 2.55 (3)
Ratio of expense reimbursement to average net assets % - 0.03 (3) 0.05 (3)
Ratio of net investment income (loss) to average net assets % (0.37) (3) (1.14) (3) (1.16) (3)
Average commissions per share $ 0.0334 0.0334 0.0334
Portfolio turnover rate % 3 3 3
</TABLE>
(1) Unaudited.
(2) Assumes dividends have been rein-
vested and does not reflect the
effect of sales charges.
(3) Annualized.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
GROWTH FUNDS 7
<PAGE>
NORTHSTAR
SPECIAL
FUND
REGISTRANT
Northstar Special Fund
PORTFOLIO MANAGER
Louis Navellier
OBJECTIVE
This fund seeks (Picture of a bulls eye and arrow)
capital appreciation by
investing primarily in a
diversified portfolio of
domestic equity
securities selected on
the basis of their
potential for growth.
INVESTMENT STRATEGY
The fund focuses on smaller, (Picture of a clock)
lesser-known companies,
including emerging growth
companies.
HOLDINGS
The fund holds (Picture of a safe)
common stocks, preferr
convertible securities, warrants
and other stock purchase rights,
private placements and other
estricted equity securities, equity
ests in trusts, limited partner-
ships and joint ventures and inter-
ests in real estate investment
trusts. It may invest up to 20% of
its net assets in foreign issuers,
but only 10% can be in securities
that are not listed on a U.S. secu-
rities exchange. It may also invest
in other higher-risk securities and
engage in other investment prac-
tices. These are described on
page 36.
RISKS
Because the (Picture of a scale)
invest in equities, all growth
funds are affected by changes in
the stock market. This fund is also
subject to the risks associated
with investing in smaller compa-
nies, emerging growth companies
and foreign securities. Please
refer to the section beginning on
page 36, The risks of investing in
mutual funds.
WHAT YOU PAY
TO INVEST
There are two (Picture of a coin)
types of fees and
expenses when you
invest in mutual funds:
fees, including sales
charges, you pay directly
when you buy or sell
shares, and operating
expenses paid each year
by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2) 4.00(2)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Management fee % 0.75 0.75 0.75 0.75
12b-1 fee(3) % 0.30 1.00 1.00 0.95
Other expenses (4) % 0.41 0.42 0.45 0.37
TOTAL FUND OPERATING EXPENSES
AFTER REIMBURSEMENT % 1.46 2.17 2.20 2.07
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example-actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 62 91 123 214
Class B
with redemptions $ 73 101 139 232(5)
without redemptions $ 22 68 116 232(5)
Class C
with redemptions $ 33 69 118 253
without redemptions $ 22 69 118 253
Class T
with redemptions $ 62 87 111 224(6)
without redemptions $ 21 65 111 224(6)
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) Because of the 12b-1 fee, long-term shareholders may pay more than
the maximum permitted front-end sales charge.
(4) These figures are after the adviser reimbursed its expenses. Before
reimbursement, other expenses would have been 0.42% for Class A, 0.43% for Class
B, 0.46% for Class C and 0.41% for Class T. Total fund operating expenses would
have been 1.47% for Class A, 2.18% for Class B, 2.21% for Class C and 2.11% for
Class T
(5) Class B shares convert to Class A shares after year 8. This figure
uses Class A expenses for years 9 and 10.
(6) Class T shares convert to Class A shares after year 8 or on June 2,
1998, whichever is later. This figure uses Class A expenses for years 9 and 10.
8 GROWTH FUNDS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW THE FUND HAS The following chart shows the The fund's performance is also NORTHSTAR
PERFORMED fund's financial performance by reported in national newspapers Special
(Picture of money) share class. The 1995 and 1996 fig- under these trading symbols: Fund
ures have been audited by Coopers SPECLA, SPECLB, SPECLC or
& Lybrand L.L.P., independent SPECLT.
accountants. Audited by other inde-
pendent accountants prior to 1995.
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED DECEMBER 31, 1996 1995(1) 1996 1995(1) 1996 1995(1)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the
beginning of the period $ 20.92 19.56 20.84 19.56 20.84 19.56
Net investment (loss) $ (0.04) (0.09) (0.12) (0.12) (0.13) (0.15)
Net realized and
unrealized gain on
investments $ 3.84 2.48 3.74 2.43 3.75 2.46
T otal fr om investment
operations $ 3.80 2.39 3.62 2.31 3.62 2.31
Dividends from net
realized gain on
investments sold $ - (1.03) - (1.03) - (1.03)
T otal distributions $ - (1.03) - (1.03) - (1.03)
Net asset value at the
end of the period $ 24.72 20.92 24.46 20.84 24.46 20.84
T OTAL INVESTMENT
RETURN(2) % 18.16 12.20 17.37 11.79 17.37 11.79
RATIOS AND SUPPLEMENTAL
DATA
Net assets at the end of
the period ($000s) $ 65,660 2,335 126,859 1,491 37,342 62
Ratio of expenses to
average net assets % 1.46 1.50(3) 2.17 2.20(3) 2.20 2.20 (3)
Ratio of expense
reimbursement to average
net assets % 0.01 - 0.01 0.01(3) 0.01 0.03 (3)
Ratio of net investment
income (loss) to average
net assets % (0.30) (0.91)(3) (1.01) (1.64)(3) (1.03) (1.60) (3)
Average commissions per
share $ 0.0392 - 0.0392 - 0.0392 -
Portfolio turnover rate % 140 71 140 71 140 71
</TABLE>
<TABLE>
<CAPTION>
CLASS T
Y EAR ENDED DECEMBER 31, 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at the
beginning of the period $ 20.84 19.64 20.79 17.40 15.74 10.64 11.67 9.55 7.90 8.92
Net investment (loss) $ (0.21) (0.34) (0.25) (0.32) (0.33) (0.21) (0.20) (0.06) (0.13) (0.14)
Net r ealized and
unrealized gain (loss) on
investments $ 3.85 2.57 (0.76) 3.83 2.61 6.24 (0.83) 2.18 1.78 (0.88)
T otal fr om investment
operations $ 3.64 2.23 (1.01) 3.51 2.28 6.03 (1.03) 2.12 1.65 (1.02)
Dividends from net
realized gain on
investments sold $ - (1.03) (0.14) (0.12) (0.62) (0.93) - - - -
T otal distributions $ - (1.03) (0.14) (0.12) (0.62) (0.93) - - - -
Net asset value at the
end of the period $ 24.48 20.84 19.64 20.79 17.40 15.74 10.64 11.67 9.55 7.90
T OTAL INVESTMENT
RETURN(2) % 17.47 11.34 (4.86) 20.16 14.54 57.27 (8.83) 22.20 20.89 (11.43)
RATIOS AND SUPPLEMENTAL
DATA
Net assets at the end of
the period ($000s) $ 35,670 33,557 38,848 28,838 11,336 5,480 3,024 3,958 3,330 3,078
Ratio of expenses to
average net assets % 2.07 2.16 2.16 2.34 2.84 2.95 2.95 2.95 2.96 2.94
Ratio of expense
reimbursement to average
net assets % 0.04 - - - - 0.74 2.03 1.94 3.05 1.58
Ratio of net investment
income (loss) to average
net assets % (0.89) (1.50) (1.25) (1.66) (2.12) (1.57) (0.97) (0.44) (1.06) (1.22)
Average commissions per
share $ 0.0392 - - - - - - - - -
Portfolio turnover rate % 140 71 39 35 40 85 72 85 40 57
</TABLE>
(1) Share classes A, B & C commenced
operations on June 5, 1995.
(2) Assumes dividends have been
reinvested and does not reflect
the effect of sales charges.
Unaudited prior to 1992.
(3) Annualized.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
GROWTH FUNDS 9
<PAGE>
NORTHSTAR
INCOME
AND GROWTH
FUND
REGISTRANT
Northstar Trust
PORTFOLIO MANAGERS
Geoffrey Wadsworth, Jack Fisher
OBJECTIVE
This fund seeks (Picture of a bulls eye and arrow)
current income
balanced with capital
appreciation primarily
by investing in dividend
paying equity securities,
convertible securities,
and investment grade
debt securities.
INVESTMENT
STRATEGY
This fund invests in a mix of equity (Picture of a clock)
and investment grade debt securi-
ties designed to provide both cur-
rent income and long-term growth
of capital.
HOLDINGS
Under normal mar- (Picture of a safe)
ket conditions, the fund invests at
least 65% of its total assets in
income-producing securities. It
generally holds no more than 30%
of its assets in convertible securi-
ties. It may invest up to 20% of its
net assets in foreign issuers, but
only 10% can be in securities that
are not listed on a U.S. securities
exchange. It may also invest in
other higher-risk securities and
engage in other investment
practices. These are described on
page 36.
RISKS
All income and (Picture of a scale)
growth funds are affected by
changes in interest rates. This
fund is also subject to the risks
associated with investing in for-
eign securities. Please refer to
the section beginning on page 36,
The risks of investing in mutual
funds.
WHAT YOU PAY
TO INVEST (Picture of a coin)
There are two
types of fees and
expenses when you
invest in mutual funds:
fees, including sales
charges, you pay dir
when you buy or sell
shares, and operating
by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C>
Management fee (3) % 0.75 0.75 0.75
12b-1 fee(4) % 0.30 1.00 1.00
Other expenses % 0.47 0.51 0.45
TOTAL FUND OPERATING EXPENSES % 1.52 2.26 2.20
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example-actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 62 93 126 220
Class B
with redemptions $ 74 103 144 241(5)
without redemptions $ 23 71 121 241(5)
Class C
with redemptions $ 33 71 121 260
without redemptions $ 23 71 121 260
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) This is the maximum management fee. The actual fee charged reduces
with asset size: 0.75% on the first $250 million, 0.70% on the next $250
million, 0.65% on the next $250 million, 0.60% on the next $250 million and
0.55% on assets over $1 billion.
(4) Because of the 12b-1 fee, long-term shareholders may pay more than the
maximum permitted front-end sales charge.
(5) Class B shares convert to Class A shares after year 8. This figure
uses Class A expenses for years 9 and 10.
10 INCOME AND GROWTH FUNDS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW THE FUND HAS The following chart shows the The fund's performance is also
PERFORMED fund's financial performance by reported in national newspapers NORTHSTAR
(Picture of money) share class. These figures have under these trading symbols: INCOME
been audited by Coopers & INCGRA, INCGRB or INCGRC. AND GROWTH
Lybrand L.L.P., independent AND GROWTH FUND
accountants.
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED OCTOBER 31, 1996 1995 1994 (1) 1996 1995 1994 (1) 1996 1995 1994 (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 10.86 10.00 10.00 10.84 9.99 10.64 10.83 9.99 10.37
Net investment income $ 0.32 0.35 0.30 0.24 0.27 0.20 0.24 0.27 0.20
Net realized and unrealized gain (loss) on investments $ 1.29 0.84 (0.05) 1.28 0.85 (0.65) 1.28 0.85 (0.38)
Total from investment operations $ 1.61 1.19 0.25 1.52 1.12 (0.45) 1.52 1.12 (0.18)
Dividends from net investment income $(0.31) (0.33) (0.25) (0.23) (0.27) (0.20) (0.23) (0.28) (0.20)
Total distributions $(0.31) (0.33) (0.25) (0.23) (0.27) (0.20) (0.23) (0.28) (0.20)
Net asset value at the end of the period $12.16 10.86 10.00 12.13 10.84 9.99 12.12 10.83 9.99
TOTAL INVESTMENT RETURN (2) %14.48 13.19 2.48 13.60 12.31 (4.20) 13.68 12.33 (1.75)
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $85,250 76,031 72,223 71,123 60,347 37,767 60,458 53,661 4,823
Ratio of expenses to average net assets % 1.52 1.51 1.50(3) 2.26 2.23 2.20(3) 2.20 2.22 2.20(3)
Ratio of expense reimbursement to average net assets % - - 0.06(3) - - 0.16(3) - - 0.47(3)
Ratio of net investment income to average net assets % 2.78 3.39 3.73(3) 2.04 2.66 3.00(3) 2.10 2.67 2.87(3)
Average commissions per share $0.0600 - - 0.0600 - - 0.0600 - -
Portfolio turnover rate % 147 91 26 147 91 26 147 91 26
</TABLE>
(1) Class A commenced operations on
November 8, 1993. Class B com-
menced operations on February 9,
1994. Class C commenced opera-
tions on March 31, 1994.
(2) Assumes dividends have been rein
vested and does not reflect the
effect of sales charges.
(3) Annualized.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
INCOME AND GROWTH FUNDS 11
<PAGE>
NORTHSTAR
BALANCE SHEET
OPPORTUNITIES
FUND
REGISTRANT
Northstar Balance Sheet
Opportunities Fund
PORTFOLIO MANAGERS
Thomas Ole Dial, Peter Bakst
OBJECTIVE
This fund seeks (Picture of a bulls eye and arrow)
income, with a
secondary objective of
capital appreciation,
primarily by investing in
domestic debt and
equity securities.
INVESTMENT
STRATEGY
The portfolio managers review var- (Picture of a clock)
ious factors relating to a potential
issuer, especially its financial
statements, to determine which
type of security-debt or equity-
offers the best potential for a high
current income combined with the
potential for capital growth.
HOLDINGS
Under normal mar- (Picture of a safe)
ket conditions, the fund invests at
least 65% of its assets in income-
producing securities. It may hold
up to 50% of its assets in debt
securities rated as low as B by
Moody's or S&P (junk bonds).
Equity securities include common
stocks, preferred stocks, convert-
ible securities and warrants and
other stock purchase rights.
Income producing securities have
varying maturities and pay fixed,
floating or adjustable interest
rates. The fund may also hold pay-
in-kind securities and discount
obligations, including zero coupon
securities. The fund may invest up
to 20% of its net assets in foreign
issuers, but only 10% of its net
assets can be in securities that are
not listed on a U.S. securities
exchange. It may also invest in
other higher-risk securities and
engage in other investment
practices. These are described on
page 36.
RISKS
All income and (Picture of a scale)
growth funds are affected by
changes in interest rates. This
fund is also subject to the risks
associated with investing in junk
bonds and foreign securities.
Please refer to the section begin-
ning on page 36, The risks of
investing in mutual funds.
WHAT YOU PAY
TO INVEST
There are two (Picture of a coin)
types of fees and
expenses when you
invest in mutual funds:
fees, including sales
charges, you pay directly
when you buy or sell
shares, and operating
expenses paid each year
by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2) 4.00(3)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Management fee % 0.65 0.65 0.65 0.65
12b-1 fee(3) % 0.30 1.00 1.00 0.75
Other expenses(4) % 0.45 0.45 0.45 0.29
TOTAL FUND OPERATING EXPENSES
AFTER REIMBURSEMENT % 1.40 2.10 2.10 1.69
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example-actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 61 90 120 207
Class B
with redemptions $ 73 98 136 225(5)
without redemptions $ 21 66 113 225(5)
Class C
with r edemptions $ 32 66 113 243
without redemptions $ 21 66 113 243
Class T
with redemptions $ 59 75 92 192(6)
without redemptions $ 17 53 92 192(6)
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) Because of the 12b-1 fee, long-term shareholders may pay more than
the maximum permitted front-end sales charge.
(4) These figures are after the adviser reimbursed its expenses. Before
reimbursement, other expenses would have been 0.54% for Class A, 0.52% for Class
B, 0.55% for Class C and 0.35% for Class T. Total fund operating expenses would
have been 1.49% for Class A, 2.17% for Class B, 2.20% for Class C and 1.75% for
Class T.
(5) Class B shares convert to Class A shares after year 8. This figure uses
Class A expenses for years 9 and 10.
(6) Class T shares convert to Class A shares after year 8 or on June 2,
1998, whichever is later. This figure uses Class A expenses for years 9 and 10.
12 INCOME AND GROWTH FUNDS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW THE FUND HAS The following chart shows the other independent accountants NORTHSTAR
PERFORMED fund's financial performance by prior to 1995. Balances Sheet
(Picture of Money) share class. The 1995 and 1996 Opportunities
figures have been audited by The fund's performance is also Fund
Coopers & Lybrand L.L.P., indepen- reported in national newspapers
dent accountants. Audited by under this trading symbol: BASHOPT
</TABLE>
<TABLE>
<CAPTION>
Class A Class B Class C
Year ended December 31, 1996 1995(1) 1996 1995(1) 1996 1995(1)
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 12.53 12.77 12.51 12.77 12.52 12.77
Net investment income $ 0.56 0.43 0.50 0.35 0.49 0.38
Net realized and unrealized gain on
investments $ 0.74 1.06 0.71 1.09 0.70 1.07
T otal fr om investment operations $ 1.30 1.49 1.21 1.44 1.19 1.45
Dividends from net investment income $(0.57) (0.48) (0.50) (0.45) (0.48) (0.45)
Dividends from net realized gain on
investments sold $(1.48) (1.25) (1.48) (1.25) (1.48) (1.25)
T otal distributions $(2.05) (1.73) (1.98) (1.70) (1.96) (1.70)
Net asset value at the end of the period $ 11.78 12.53 11.74 12.51 11.75 12.52
T OTAL INVESTMENT RETURN (2) % 10.54 11.95 9.76 11.56 9.72 11.49
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $ 1,100 797 3,765 1,759 372 231
Ratio of expenses to average net assets % 1.40 1.27(3) 2.10 1.95(3) 2.10 1.91
Ratio of expense reimbursement to average net
assets % 0.09 - 0.07 - 0.10 -
Ratio of net investment income to average net
assets % 4.30 4.99(3) 3.64 4.38(3) 3.61 4.49
Average commissions per share $0.0690 - 0.0690 - 0.0690 -
Portfolio turnover rate % 107 131 107 131 107 131
CLASS T
YEAR ENDED DECEMBER 31, 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 12.54 11.54 12.94 12.05 11.66 10.13 10.71 9.71 9.11 10.39
Net investment income $ 0.53 0.57 0.57 0.49 0.55 0.57 0.61 0.68 0.62 0.56
Net realized and unrealized gain (loss) on
investments $ 0.73 2.27 (1.25) 1.20 0.36 1.53 (0.54) 1.00 0.58 (1.04)
Total from investment operations $ 1.26 2.84 (0.68) 1.69 0.91 2.10 0.07 1.68 1.20 (0.48)
Dividends from net investment income $ (0.53) (0.59) (0.54) (0.49) (0.52) (0.57) (0.63) (0.68) (0.60) (0.57)
Dividends from net realized gain on
investments sold $ (1.48) (1.25) (0.16) (0.31) - - - - - (0.22)
Distributions from capital $ - - (0.02) - - - (0.02) - - (0.01)
Total distributions $ (2.10) (1.84) (0.72) (0.80) (0.52) (0.57) (0.65) (0.68) (0.60) (0.80)
Net asset value at the end of the period $ 11.79 12.54 11.54 12.94 12.05 11.66 10.13 10.71 9.71 9.11
TOTAL INVESTMENT RETURN (2) % 10.18 25.11 (5.33) 14.08 8.06 21.17 0.78 17.70 13.39 (5.35)
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $59,490 72,472 73,764 80,841 56,823 49,367 44,750 58,006 57,425 58,772
Ratio of expenses to average net assets % 1.69 1.68 1.69 1.77 2.02 2.06 2.10 2.04 2.10 1.98
Ratio of expense reimbursement to average net
assets % 0.06 - - - - - - - - -
Ratio of net investment income to average net
assets % 3.99 4.44 4.36 3.99 4.73 5.21 5.73 6.38 6.30 5.70
Average commissions per share $0.0690 - - - - - - - - -
Portfolio turnover rate % 107 131 59 38 59 77 57 56 25 46
</TABLE>
(1) Share classes A, B & C commenced
operations on June 5, 1995.
(2) Assumes dividends have been rein-
vested and does not reflect the
effect of sales charges. Unaudited
prior to 1992.
(3) Annualized.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
INCOME AND GROWTH FUNDS 13
<PAGE>
NORTHSTAR
HIGH TOTAL
RETURN
FUND
REGISTRANT
Northstar Trust
PORTFOLIO MANAGER
Thomas Ole Dial
OBJECTIVE (Picture of a bulls eye and arrow)
This fund seeks
high income and
capital appreciation.
INVESTMENT
STRATEGY (Picture of a clock)
The fund invests primarily in high-
er-yielding, lower-rated bonds
(junk bonds) to achieve high cur-
rent income with the potential for
capital growth.
HOLDINGS
Under normal mar- (Picture of a safe)
ket conditions, the fund invests at
least 65% of its total assets in
higher-yielding, lower-rated U.S.
dollar-denominated debt securities
of U.S. and foreign issuers. It may
also invest up to 35% of its total
assets in securities denominated in
foreign currencies. No more than
50% of its assets can be in securi-
ties of foreign issuers, including
35% in emerging market debt.
Most of the debt securities the
fund invests in are lower rated and
considered speculative, including
bonds in the lowest rating cate-
gories and unrated bonds. It can
invest up to 10%, and can hold up
to 25% of its assets in securities
rated below Caa by Moody's or
CCC by S&P. It also holds debt
securities that pay fixed, floating or
adjustable interest rates and may
hold pay-in-kind securities and dis-
count obligations, including zero
coupon securities. The fund may
also hold common stock, preferred
stock, convertible securities and
rights and warrants attached to
debt instruments. It may also
invest in other higher-risk securi-
ties and engage in other invest-
ment practices. These are
described on page 36.
RISKS (Picture of a scale)
All income funds
are affected by changes in interest
rates. This fund is also subject to
the risks associated with investing
in lower rated bonds that are
speculative in nature and foreign
securities. Please refer to the sec-
tion beginning on page 36, The
risks of investing in mutual funds.
WHAT YOU PAY
TO INVEST (Picture of a coin)
There are two
types of fees and
expenses when you
invest in mutual funds:
fees, including sales
charges, you pay directly
when you buy or sell
shares, and operating
expenses paid each year
by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C>
Management fee(3) % 0.75 0.75 0.75
12b-1 fee(4) % 0.30 1.00 1.00
Other expenses % 0.47 0.48 0.48
TOTAL FUND OPERATING EXPENSES % 1.52 2.23 2.23
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example-actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 62 93 126 220
Class B
with redemptions $ 74 102 142 238(5)
without redemptions $ 23 70 119 238(5)
Class C
with redemptions $ 33 70 119 256
without redemptions $ 23 70 119 256
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) This is the maximum management fee. The actual fee charged reduces
with asset size: 0.75% on the first $250 million, 0.70% on the next $250
million, 0.65% on the next $250 million, 0.60% on the next $250 million and
0.55% on assets over $1 billion.
(4) Because of the 12b-1 fee, long-term shareholders may pay more than the
maximum permitted front-end sales charge.
(5) Class B shares convert to Class A shares after year 8. This figure
uses Class A expenses for years 9 and 10.
14 INCOME FUNDS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW THE FUND HAS The following chart shows the The fund's performance is also NORTHSTAR
PERFORMED fund's financial performance by reported in national newspapers High Total
(Picture of Money) share class. These figures have under these trading symbols: Return
been audited by Coopers & HITRA, HITRB or HITRC. Fund
Lybrand L.L.P., independent
accountants.
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED OCTOBER 31, 1996 1995 1994(1) 1996 1995 1994(1) 1996 1995 1994(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 4.48 4.41 5.00 4.47 4.41 5.20 4.49 4.41 5.06
Net investment income $ 0.46 0.48 0.41 0.43 0.45 0.33 0.43 0.44 0.26
Net realized and unrealized gain on investments $ 0.32 0.07 (0.60) 0.32 0.06 (0.80) 0.32 0.09 (0.65)
Total from investment operations $ 0.78 0.55 (0.19) 0.75 0.51 (0.47) 0.75 0.53 (0.39)
Dividends from net investment income $ (0.48) (0.48) (0.40) (0.45) (0.45) (0.32) (0.45) (0.45) (0.26)
Total distributions $ (0.48) (0.48) (0.40) (0.45) (0.45) (0.32) (0.45) (0.45) (0.26)
Net asset value at the end of the period $ 4.78 4.48 4.41 4.77 4.47 4.41 4.79 4.49 4.41
TOTAL INVESTMENT RETURN (2) % 18.14 13.02 (4.11) 17.08 11.97 (9.30) 17.28 12.44 (7.21)
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $167,698 88,552 50,797 346,919 96,362 25,880 54,382 11,011 2,330
Ratio of expenses to average net assets % 1.52 1.55 1.50(3) 2.23 2.25 2.20(3) 2.23 2.27 2.20(3)
Ratio of expense reimbursement to average
net assets % - - 0.11(3) - - 0.20(3) - - 0.99(3)
Ratio of net investment income to average
net assets % 9.86 10.90 10.09(3) 9.14 10.20 9.72(3) 9.14 10.18 9.46(3)
Portfolio turnover rate % 158 145 163 158 145 163 158 145 163
</TABLE>
(1) Class A commenced operations on
November 8, 1993. Class B com-
menced operations on February 9,
1994. Class C commenced opera-
tions on March 31, 1994.
(2) Assumes dividends have been rein-
vested and does not reflect the
effect of sales charges.
(3) Annualized.
If you are a new investor with Northstar, please note that you can only
invest in this fund until April 29, 1997. Starting April 30, 1997, only
investors who already own shares of the Northstar High Total Return
Fund will be able to buy, sell or exchange shares of the fund.
The trustees of the fund have elected to close the fund to new
investors to prevent the fund's performance from being adversly
affected by a large influx of assets, and to protect the interests of
existing fund shareholders.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
INCOME FUNDS 15
<PAGE>
NORTHSTAR
HIGH YIELD
FUND
REGISTRANT
Northstar High Yield Fund
PORTFOLIO MANAGERS
Peter Bakst, Jeffrey Aurigemma
OBJECTIVE (Picture of a bulls eye and arrow)
This fund seeks
high current income by
investing primarily in long-
term and intermediate-term
fixed income securities,
with emphasis on high
yield corporate debt
instruments of domestic
and foreign issuers.
INVESTMENT
STRATEGY (Picture of a clock)
The fund invests mostly in high-
yield bonds (junk bonds) to acheive
high current income.
HOLDINGS
Under normal mar- (Picture of a safe)
ket conditions, this fund invests at
least 65% of its total assets in
high yield or junk bonds rated
below investment grade. It can
hold up to 100% of its assets in
debt securities rated as low as Ca
by Moody's or CC by S&P or in
securities that aren't rated but
Northstar considers to be of equiv-
alent quality, and up to 1% of its
assets in bonds in the lowest rat-
ing categories. It may invest up to
35% of its net assets in foreign
issuers, but only 10% can be in
securities that are not listed on a
U.S. securities exchange. The fund
may also hold up to 25% of its
assets in preferred stocks, convert-
ible securities and rights and war-
rants associated with debt
instruments. It may also invest in
other higher-risk securities and
engage in other investment prac-
tices. These are described on
page 36.
RISKS
All income funds (Picture of a scale)
are affected by changes in interest
rates. This fund is also subject to
the risks associated with investing
in lower rated bonds that are
speculative in nature, and foreign
securities. Please refer to the sec-
tion beginning on page 36, The
risks of investing in mutual funds.
WHAT YOU PAY
TO INVEST (Picture of a coin)
There are two
types of fees and
expenses when you
invest in mutual funds:
fees, including sales
charges, you pay directly
when you buy or sell
shares, and operating
expenses paid each year
by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2) 4.00(2)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Management fee % 0.45 0.45 0.45 0.45
12b-1 fee(3) % 0.30 1.00 1.00 0.65(4)
Other expenses % 0.36 0.36 0.37 0.21
TOTAL FUND OPERATING EXPENSES % 1.11 1.81 1.82 1.31
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example-actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 58 81 106 176
Class B
with redemptions $ 70 90 121 194(5)
without redemptions $ 18 57 98 194(5)
Class C
with redemptions $ 29 57 99 214
without redemptions $ 18 57 99 214
Class T
with redemptions $ 55 64 72 152(6)
without redemptions $ 13 42 72 152(6)
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) Because of the 12b-1 fee, long-term shareholders may pay more than the
maximum permitted front-end sales charge.
(4) May be increased up to 0.95%.
(5) Class B shares convert to Class A shares after year 8. This
figure uses Class A expenses for years 9 and 10.
(6) Class T shares convert to Class A shares after year 8 or on June 2,
1998, whichever is later. This figure uses Class A expenses for years 9 and 10.
16 INCOME FUNDS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW THE FUND HAS The following chart shows the other independent accountants NORTHSTAR
PERFORMED fund's financial performance by prior to 1995. High Yield
(Picture of money) share class. The 1995 and 1996 Fund
figures have been audited by The fund's performance is also
Coopers & Lybrand L.L.P., indepen- reported in national newspapers FUND
dent accountants. Audited by under these trading symbols:
HIYLDB or HIYLDT.
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED DECEMBER 31, 1996 1995(1) 1996 1995(1) 1996 1995(1)
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 8.56 8.68 8.57 8.68 8.57 8.68
Net investment income $ 0.76 0.48 0.71 0.44 0.72 0.44
Net realized and unrealized gain (loss) on investments $ 0.44 (0.10) 0.43 (0.09) 0.42 (0.09)
Total from investment operations $ 1.20 0.38 1.14 0.35 1.14 0.35
Dividends from net investment income $ (0.75) (0.50) (0.69) (0.46) (0.69) (0.46)
Distributions from capital $ (0.07) - (0.07) - (0.07) -
Total distributions $ (0.82) (0.50) (0.76) (0.46) (0.76) (0.46)
Net asset value at the end of the period $ 8.94 8.56 8.95 8.57 8.95 8.57
TOTAL INVESTMENT RETURN(2) % 14.74 4.48 13.94 4.17 13.93 4.17
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $13,146 7,466 79,199 29,063 14,275 3,410
Ratio of expenses to average net assets % 1.11 1.02(3) 1.81 1.71(3) 1.82 1.72(3)
Ratio of expense reimbursement to average net assets % - - - - - -
Ratio of net investment income to average net assets % 8.60 9.83(3) 7.88 9.18(3) 7.85 9.29(3)
Average commissions per share $0.0777 - 0.0777 - 0.0777 -
Portfolio turnover rate % 128 103 128 103 128 103
</TABLE>
<TABLE>
<CAPTION>
CLASS T
YEAR ENDED DECEMBER 31, 1996 1995 1994 1993 1992 1991 1990 1989(4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 8.56 8.29 9.31 9.09 7.94 6.27 8.55 10.00
Net investment income $ 0.73 0.84 0.81 0.85 0.92 1.08 1.12 0.60
Net realized and unrealized gain (loss)
on investments $ 0.45 0.26 (0.99) 0.80 1.19 1.67 (2.30) (1.45)
Total from investment operations $ 1.18 1.10 (0.18) 1.65 2.11 2.75 (1.18) (0.85)
Dividends from net investment income $ (0.73) (0.83) (0.83) (0.83) (0.94) (1.08) (1.10) (0.60)
Dividends from net realized gain $ - - (0.01) (0.60) (0.02) - - -
Distributions from capital $ (0.07) - - - - - - -
Total distributions $ (0.80) (0.83) (0.84) (1.43) (0.96) (1.08) (1.10) (0.60)
Net asset value at the end of the period $ 8.94 8.56 8.29 9.31 9.09 7.94 6.27 8.55
TOTAL INVESTMENT RETURN(2) % 14.49 13.71 (2.18) 18.89 27.57 46.49 (14.59) (8.81)
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $124,431 139,711 136,426 125,095 64,063 25,651 11,342 11,045
Ratio of expenses to average net assets % 1.31 1.33 1.34 1.40 1.50 1.50 1.44 1.35(3)
Ratio of expense reimbursement to average net assets % - - - - 0.05 0.46 0.81 1.30(3)
Ratio of net investment income (loss) to average
net assets % 8.43 9.69 9.08 8.84 10.30 14.84 15.15 11.44(3)
Average commissions per share $ 0.0777 - - - - - - -
Portfolio turnover rate % 128 103 86 176 122 57 156 40
</TABLE>
(1) Classes A, B & C commenced
operations on June 5, 1995.
(2) Assumes dividends have been rein-
vested and does not reflect the
effect of sales charges.
(3) Annualized.
(4) Class T commenced operations on
May 30, 1989.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
INCOME FUNDS 17
<PAGE>
NORTHSTAR
STRATEGIC
INCOME
FUND
REGISTRANT
Northstar Strategic Income Fund
PORTFOLIO MANAGERS
Ryan Johanson, Michael Graves
OBJECTIVE
This fund seeks (Picture of bulls eye and arrow)
high current income and
a net asset value with
limited volatility by allo-
cating substantially all of
its assets among (i) U.S.
Government Securities,
(ii) high yield securities,
including preferred
stocks, convertible secu-
rities, zero coupon and
pay-in-kind securities,
lower-rated foreign gov-
ernment securities, (iii)
investment grade corpo-
rate debt securities, and
(iv) investment grade securities
(or unrated securities that
Northstar determines to be of
equivalent quality) issued by
foreign governments or their
agencies or instrumentalities,
or supranational entities.
INVESTMENT
STRATEGY (Picture of a clock)
The portfolio manager rotates the
allocation of assets between the
four sectors based on the econom-
ic outlook, to maximize current
income without assuming undue
risk. To control risk, the fund will
never allocate more than 60% of
its assets to a single sector.
HOLDINGS (Picture of a safe)
In addition to the
securities listed above, the fund
holds debt securities rated as low
as Ca by Moody's or CC by S&P or
in securities that aren't rated but
Northstar considers to be of equiv-
alent quality (junk bonds). Up to
10% of the assets allocated to the
high yield sector can be in bonds
in the lowest rating categories (C
by Moody's and D by S&P) includ-
ing bonds in default. It may also
invest in other higher-risk securi-
ties and engage in other invest-
ment practices. These are
described on page 36.
RISKS (Picture of a scale)
All income funds
are affected by changes in inter-
est rates. This fund is also subject
to the risks associated with
investing in junk bonds and for-
eign securities, but the fund also
attempts to limit these risks by
investing in less volatile securi-
ties. Please refer to the section
beginning on page 36, The risks
of investing in mutual funds.
WHAT YOU PAY
TO INVEST (Picture of a coin)
There are two
types of fees and
expenses when you
invest in mutual funds:
fees, including sales
charges, you pay directly
when you buy or sell
shares, and operating
expenses paid each year
by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2) 4.00(2)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Management fee % 0.65 0.65 0.65 0.65
12b-1 fee(3) % 0.30 1.00 1.00 0.95(4)
Other expenses(5) % 0.45 0.45 0.45 0.30
TOTAL FUND OPERATING EXPENSES
AFTER REIMBURSEMENT % 1.40 2.10 2.10 1.90
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example-actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 61 90 120 207
Class B
with redemptions $ 73 98 136 225(6)
without redemptions $ 21 66 113 225(6)
Class C
with redemptions $ 32 66 113 243
without redemptions $ 21 66 113 243
Class T
with redemptions $ 61 82 103 209(7)
without redemptions $ 19 60 103 209(7)
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) Because of the 12b-1 fee, long-term shareholders may pay more than the
maximum permitted front-end sales charge.
(4) May be increased up to 1.00%.
(5) These figures are after the adviser reimbursed its expenses. Before
reimbursement, other expenses would have been 0.50% for Class A, 0.54% for Class
B, 0.56% for Class C and 0.39% for Class T. Total fund operating expenses would
have been 1.45% for Class A, 2.19% for Class B, 2.21% for Class C and 1.99% for
Class T.
(6) Class B shares convert to Class A shares after year 8. This figure
uses Class A expenses for years 9 and 10.
(7) Class T shares convert to Class A shares after year 8 or on June 2,
1998, whichever is later.
18 INCOME FUNDS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW THE FUND HAS The following chart shows the other independent accountants NORTHSTAR
PERFORMED fund's financial performance by prior to 1995. Strategic
(Picture of money) share class. The 1995 and 1996 Income
figures have been audited by The fund's performance is also Fund
Coopers & Lybrand L.L.P., indepen- reported in national newspapers INCOME
dent accountants. Audited by under these trading symbols:
STRINCA, STRINCB or STRINT.
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED DECEMBER 31, 1996 1995(1) 1996 1995(1) 1996 1995(1)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 12.40 12.24 12.39 12.24 12.38 12.24
Net investment income $ 0.93 0.63 0.85 0.55 0.85 0.55
Net realized and unrealized gain on investments $ 0.35 0.13 0.36 0.15 0.35 0.14
Total from investment operations $ 1.28 0.76 1.21 0.70 1.20 0.69
Dividends from net investment income $ (1.01) (0.60) (0.93) (0.55) (0.93) (0.55)
T otal distributions $ (1.01) (0.60) (0.93) (0.55) (0.93) (0.55)
Net asset value at the end of the period $ 12.67 12.40 12.67 12.39 12.65 12.38
TOTAL INVESTMENT RETURN(2) % 10.88 6.40 10.18 5.89 10.11 5.81
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $ 17,293 21,790 30,733 22,143 4,222 2,172
Ratio of expenses to average net assets % 1.40 1.36(3) 2.10 2.06(3) 2.10 2.02(3)
Ratio of expense reimbursement to average net assets % 0.05 0.07(3) 0.09 0.06(3) 0.11 0.06(3)
Ratio of net investment income to average net assets % 7.55 7.03(3) 6.82 6.47(3) 6.79 6.48(3)
Portfolio turnover rate % 130 153 130 153 130 153
</TABLE>
<TABLE>
<CAPTION>
CLASS T
YEAR ENDED DECEMBER 31, 1996 1995 1994 (4)
<S> C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 12.39 11.71 12.00
Net investment income $ 0.88 0.98 0.51
Net realized and unrealized gain (loss) on investments $ 0.35 0.66 (0.25)
Total from investment operations $ 1.23 1.64 0.26
Dividends from net investment income $ (0.95) (0.96) (0.49)
Dividends from net realized gain on investments sold $ - - (0.05)
Distributions from capital $ - - (0.01)
Total distributions $ (0.95) (0.96) (0.55)
Net asset value at the end of the period $ 12.67 12.39 11.71
TOTAL INVESTMENT RETURN(2) % 10.39 14.54 2.14
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $ 27,350 30,228 25,252
Ratio of expenses to average net assets % 1.90 1.90 1.90(3)
Ratio of expense reimbursement to average net assets % 0.09 0.28 0.63(3)
Ratio of net investment income to average net assets % 7.07 6.86 7.92(3)
Portfolio turnover rate % 130 153 156
</TABLE>
(1) Classes A, B & C commenced opera-
tions on June 5, 1995.
(2) Assumes dividends have been rein-
vested and does not reflect the
effect of sales charges.
(3) Annualized.
(4) Class T commenced operations on
July 1, 1994.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
INCOME FUNDS 19
<PAGE>
NORTHSTAR
GOVERNMENT
SECURITIES
FUND
REGISTRANT
Northstar Government
Securities Fund
PORTFOLIO MANAGER
Ryan Johanson
OBJECTIVE (Picture of a bulls eye and arrow)
This fund seeks
high current income
and conservation of
principal by investing
primarily in debt
obligations issued or
guaranteed by the
U.S. Government or
its agencies and
instrumentalities.
INVESTMENT
STRATEGY (Picture of a clock)
The portfolio manager selects
U.S. Government Securities of
various terms depending on inter-
est rates and market opportuni-
ties. This fund is managed so it
qualifies as an investment for fed-
eral credit unions and political
subdivisions of the State of
Michigan. Shareholders will be
notified 60 days before making
any change to this policy.
HOLDINGS (Picture of a safe)
Under normal con-
ditions, the fund holds 65% of its
assets in securities supported by
the full faith and credit of the U.S.
Government. No more than 20%
of its assets may be in securities
issued by a single instrumentality
or agency not supported by the
full faith and credit of the U.S.
Government. It may also invest in
mortgage-backed, zero-coupon
and other higher-risk securities
and engage in other investment
practices. These are described on
page 36.
RISKS (Picture of a scale)
All income funds
are affected by changes in interest
rates. Shares of this fund are not
insured or guaranteed by the
United States Government or its
agencies or instrumentalities, but
the fund's holdings are not sub-
ject to the credit risks associated
with corporate securities. Please
refer to the section beginning on
page 36, The risks of investing in
mutual funds.
WHAT YOU PAY
TO INVEST (Picture of a coin)
There are two
types of fees and
expenses when you
invest in mutual funds:
fees, including sales
charges, you pay directly
when you buy or sell
shares, and operating
expenses paid each year
by the fund.
<TABLE>
<CAPTION>
FEES YOU PAY DIRECTLY
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Maximum sales charge on your initial
investment (as a % of offering price) % 4.75 none none none
Maximum deferred sales charge % none (1) 5.00 (2) 1.00 (2) 4.00(2)
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND
(as a % of average net assets)
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C> <C>
Management fee (3) % 0.45 0.45 0.45 0.45
12b-1 fee(4) % 0.30 1.00 1.00 0.65(5)
Other expenses % 0.34 0.35 0.35 0.20
TOTAL FUND OPERATING EXPENSES % 1.09 1.80 1.80 1.30
</TABLE>
EXAMPLE
Here's an example of what you would pay in expenses if you invested $1,000,
reinvested all your dividends, the fund earned an average annual return of 5%,
and annual operating expenses remained at the current level. Keep in mind that
this is only an example-actual expenses and performance may vary.
<TABLE>
<CAPTION>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A
with redemptions $ 58 81 105 174
Class B
with redemptions $ 70 90 121 193(6)
without redemptions $ 18 57 97 193(6)
Class C
with redemptions $ 29 57 97 212
without redemptions $ 18 57 97 212
Class T
with redemptions $ 55 64 71 151(7)
without redemptions $ 13 41 71 151(7)
</TABLE>
(1) Except for purchases of $1 million or more, when you sell any of the
shares within 18 months of when you bought them. Please see page 27 for details.
(2) This charge decreases over time. Please see page 27 for details.
(3) After management fee waiver of 0.20% effective January 1, 1989.
Without the waiver, the management fee would be 0.65% and total fund operating
expenses would be 1.29% for Class A, 2.00% for Class B, 2.01% for Class C and
1.51% for Class T.
(4) Because of the 12b-1 fee, long-term shareholders may pay more than the
maximum permitted front-end sales charge.
(5) May be increased up to 0.95%.
(6) Class B shares convert to Class A shares after year 8. This figure uses
Class A expenses for years 9 and 10.
(7) Class T shares convert to Class A shares after year 8 or on June 2,
1998, whichever is later. This figure uses Class A expenses for years 9 and 10.
20 INCOME FUNDS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW THE FUND HAS The following chart shows the other independent accountants NORTHSTAR
PERFORMED fund's financial performance by prior to 1995. Government
(Picture of money) share class. The 1995 and 1996 Securities
figures have been audited by The fund's performance is also Fund
Coopers & Lybrand L.L.P., indepen- reported in national newspapers
dent accountants. Audited by under this trading symbol: GOVTT.
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED DECEMBER 31, 1996 1995 (1) 1996 1995 (1) 1996 1995 (1)
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning of the period $ 10.07 9.51 10.07 9.51 10.07 9.51
Net investment income $ 0.63 0.34 0.57 0.30 0.58 0.30
Net realized and unrealized gain (loss) on investments $ (0.60) 0.59 (0.60) 0.59 (0.62) 0.59
Total from investment operations $ 0.03 0.93 (0.03) 0.89 (0.04) 0.89
Dividends from net investment income $ (0.62) (0.37) (0.56) (0.33) (0.56) (0.33)
Total distributions $ (0.62) (0.37) (0.56) (0.33) (0.56) (0.33)
Net asset value at the end of the period $ 9.48 10.07 9.48 10.07 9.47 10.07
TOTAL INVESTMENT RETURN(2) % 0.57 10.04 (0.15) 9.61 (0.21) 9.61
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the period ($000s) $ 14,185 3,235 9,135 2,790 1,147 8
Ratio of expenses to average net assets % 1.09 1.02 (3) 1.80 1.70 (3) 1.80 1.68 (3)
Ratio of expense reimbursement and waiver to average net
assets % 0.20 0.20 (3) 0.20 0.20 (3) 0.21 0.20 (3)
Ratio of net investment income to average net assets % 6.85 6.01 (3) 6.05 5.20 (3) 6.22 5.28 (3)
Portfolio turnover rate % 101 295 101 295 101 295
</TABLE>
<TABLE>
<CAPTION>
CLASS T
YEAR ENDED DECEMBER 31, 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Net asset value at the beginning
of the period $ 10.07 8.74 10.32 9.22 8.99 8.47 8.47 8.26 8.80 9.94
Net investment income $ 0.60 0.58 0.56 0.59 0.61 0.67 0.68 0.72 0.75 0.64
Net realized and unrealized gain
(loss) on investments $ (0.59) 1.35 (1.56) 1.09 0.23 0.52 - 0.21 (0.48) (1.10)
Total from investment operations $ 0.01 1.93 (1.00) 1.68 0.84 1.19 0.68 0.93 0.27 (0.46)
Dividends from net investment
income $ (0.60) (0.60) (0.57) (0.58) (0.61) (0.67) (0.68) (0.72) (0.75) (0.64)
Dividends from net realized gain
on investments sold $ - - - - - - - - - -
Distributions from capital $ - - (0.01) - - - - - (0.06) (0.04)
Total distributions $ (0.60) (0.60) (0.58) (0.58) (0.61) (0.67) (0.68) (0.72) (0.81) (0.68)
Net asset value at the end of the
period $ 9.48 10.07 8.74 10.32 9.22 8.99 8.47 8.47 8.26 8.80
TOTAL INVESTMENT RETURN(2) % 0.32 22.90 (9.82) 18.48 9.77 14.73 8.57 11.73 2.97 (4.72)
RATIOS AND SUPPLEMENTAL DATA
Net assets at the end of the
period ($000s) $ 112,126 150,951 152,608 184,156 144,144 121,389 108,420 123,735 169,421 237,190
Ratio of expenses to average net
assets % 1.30 1.30 1.29 1.31 1.39 1.44 1.43 1.45 1.88 1.79
Ratio of expense reimbursement and
waiver
to average net assets % 0.21 0.20 0.20 0.20 0.20 0.20 0.20 0.20 - -
Ratio of net investment income
(loss) to average net assets % 6.37 6.23 6.00 5.83 6.81 7.68 8.23 8.57 8.47 7.02
Portfolio turnover rate % 101 295 315 81 120 87 17 74 494 412
</TABLE>
(1) Share classes A, B & C commenced
operations on June 5, 1995.
(2) Assumes dividends have been rein-
vested and does not reflect the
effect of sales charges. Unaudited
prior to 1992.
(3) Annualized.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
INCOME FUNDS 21
<PAGE>
MEET THE
PORTFOLIO
MANAGERS
JEFFREY AURIGEMMA Jeffrey Aurigemma has been co-manager of the Northstar
High Yield Fund since December 1996. He joined Northstar in October 1993.
Mr. Aurigemma has over seven years of experience in high yield fixed income
investments. Before joining Northstar, he was a Senior Analyst - Fixed Income
for National Securities & Research.
PETER BAKST Peter Bakst has been co-manager of the Northstar Balance Sheet
Opportunities Fund since July 1996, and co-manager of the Northstar High Yield
Fund since December 1996. He joined Northstar in June 1996.
Mr. Bakst has over ten years of experience in both high yield fixed income
and high yield equity investments. Before joining Northstar, he was Director-
High Yield Debt Group for CS First Boston Corp., President of Presidio Capital
Management, and Managing Director at Bankers Trust Securities Corp.
THOMAS OLE DIAL Thomas Ole Dial has managed the Northstar High Total Return
Fund since its inception, and has co-managed the Northstar Balance Sheet
Opportunities Fund since July 1996. Mr. Dial, who has over ten years of money
management experience, joined Northstar in October 1993.
Before joining Northstar, Mr. Dial was Executive Vice President, Chief
Investment Officer-Fixed Income of National Securities & Research Corporation,
and Senior Portfolio Manager of the National Bond Fund from August 1990 through
July 1993.
JACK FISHER Jack Fisher has been co-manager of the Northstar Income and
Growth Funds since August 1996. He is responsible for the fund's common stock
component.
Mr. Fisher, who has more than 20 years of investment research and equity
management experience, is president of Wilson/Bennett Capital Management Inc.
MICHAEL GRAVES Michael Graves has been co-manager of the Northstar Strategic
Income Fund since December 1996. He joined Northstar in August 1994.
Mr. Graves has over seven years of experience in high yield fixed income
investments. Before joining Northstar, he was a Senior Analyst - Fixed Income
for National Securities & Research.
RYAN JOHANSON Ryan Johanson has managed the Northstar Government Securities
Fund, and has been co-manager of the Northstar Strategic Income Fund since March
1997, when he joined Northstar.
Mr. Johanson has over ten years of experience in fixed-income investments.
Before joining Northstar, he was Director of Global Market Risk Management -
Asia for Barclays Bank, Senior Manager of Banque Indosuez, and Chief Investment
Officer at Fidelity Federal Bank.
LOUIS NAVELLIER Louis Navellier has managed the Northstar Growth + Value
Fund and the Northstar Special Fund since their inception.
Mr. Navellier has been managing assets since 1986 and is the sole owner of
Navellier & Associates Inc., a registered investment adviser that manages
investments for high-net-worth individuals, institutions and pension funds.
GEOFFREY WADSWORTH Geoffrey Wadsworth has managed the Northstar Growth Fund
since February 1996, and has been co-manager of the Northstar Income and Growth
Fund since December 1996. Mr. Wadsworth, who has over 25 years of money
management experience, joined Northstar in October 1993.
Before joining Northstar, Mr. Wadsworth was a Vice President of National
Securities & Research Corporation. He was portfolio manager of the National
Stock Fund and assistant manager of the National Income and Growth Fund,
National Worldwide Opportunities Fund and National Total Return Fund.
22
<PAGE>
SUB-ADVISERS
NAVELLIER FUND MANAGEMENT, INC.
A registered investment adviser, Navellier
Fund Management was established to pro-
vide sub-advisery investment services for
various Northstar portfolios. It currently
serves as sub-adviser to the Northstar
Growth + Value Fund and the Northstar
Special Fund and manages over $2 billion
for private accounts. The company is
wholly-owned by Louis Navellier.
Navellier Fund Management receives a fee
for its services based on the average daily
net assets of the funds it manages. This fee
is paid by Northstar, and not by the funds, at
a rate of 0.64% for the Northstar Growth +
Value Fund and 0.48% for the Northstar
Special Fund.
WILSON/BENNETT CAPITAL
MANAGEMENT, INC.
A registered investment adviser,
Wilson/Bennett serves as sub-adviser on
the common stock portion of the Northstar
Income and Growth Fund. The company
currently manages over $111 million for
individuals, pension plans and corporations.
Wilson/Bennet receives a monthly fee for
its services based on the average daily net
assets it manages. This fee is paid by
Northstar, and not the funds, at a rate of
0.20% on the first $125 million, 0.25% on
the next $125 million, and 0.30% on assets
over $250 million.
PERFORMANCE
PROFILE:
THOMAS OLE DIAL
THESE FIGURES DEMONSTRATE
MR. DIAL'S HISTORICAL TRACK
RECORD. THEY DO NOT INDICATE
HOW THE NORTHSTAR HIGH T
RETURN FUND WILL PERFORM IN
THE FUTURE.
Before joining Northstar in October 1993,
Mr. Dial served as Executive Vice President,
Chief Investment Officer-Fixed Income of
National Securities & Research Corporation.
He was Senior Portfolio Manager of the
National Bond Fund from August 1990
through July 1993 and had full discretionary
authority for the selection of the fund's
investments. On July 31, 1993 the fund had
$614.7 million in net assets.
The National Bond Fund had investment
objectives, policies and strategies that
were substantially similar to those of the
Northstar High Total Return Fund, which
Mr. Dial now manages.
The charts show the average annual
returns for the National Bond Fund during
the period when Mr. Dial managed the
fund and the average annual returns for
the Northstar High Total Return Fund (see
page 24).
These figures reflect changes in share
prices and reinvestment of dividends and
<TABLE>
<CAPTION>
NATIONAL LEHMAN HIGH
BOND FUND YIELD BOND
(%) INDEX (%)
<S> <C> <C>
One year ended July 31, 1993 18.90 15.33
Three years, ended July 31, 1993 23.64 17.50
Cumulative total return 89.03 62.22
August 1990 to July 1993
</TABLE>
(Chart appears here. Plot points to be filled in by customer.)
1990 1991 1992 1993
National Bond Fund
Lehman High Yield Bond Index
distributions, and are after deduction of all
fund fees and expenses.
Included for comparison are performance
figures of the Lehman Brothers High Yield
Bond Index, an unmanaged index of fixed
rate, publicly issued, non-investment grade
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
23
<PAGE>
MEET THE
PORTFOLIO
MANAGERS
PERFORMANCE
PROFILE: THOMAS
OLE DIAL, CONTINUED
debt registered with the SEC. This index is considered to be representative
of the United States market for non-investment
NORTHSTAR HIGH LEHMAN HIGH
TOTAL RETURN YIELD BOND
FUND (%) INDEX (%)
One year, ended 15.70 11.35
December 31, 1996
Three years, ended 8.63 9.51
December 31, 1993
Cumulative total return 31.80 33.61
November 1993 to December 1996
grade debt. It has been adjusted to reflect reinvestment of dividends.
(Chart appears here. Plot points to be filled in by customer)
1993 1994 1995 1996
Northstar High Total Return Fund
Lehman High Yield Bond Index
PERFORMANCE
PROFILE:
LOUIS NAVELLIER
THESE FIGURES DEMONSTRATE THE
HISTORICAL TRACK RECORD OF
NAVELLIER AND ASSOCIATES. THEY
HAVE BEEN PROVIDED BY
NAVELLIER AND ASSOCIATES AND
HAVE NOT BEEN VERIFIED OR
AUDITED. THEY DO NOT INDICATE
HOW THE NORTHSTAR GROWTH +
VALUE FUND WILL PERFORM IN
THE FUTURE.
In addition to owning Navellier Fund Management, Inc., Louis Navellier is
the sole owner of Navellier & Associates, Inc., a registered investment adviser
that has been managing large pools of private assets since 1987.
Mr. Navellier and his staff use a computer-based system he developed to
analyze over 7,000 stocks as a basis for making buying and selling decisions.
The table illustrates his past performance in managing accounts with investment
policies and objectives substantially similar to the Northstar Growth + Value
Fund.
The results shown are a composite of the actual performance of all equity
accounts managed by Navellier & Associates from 1987 to present, calculated
according to AIMR standards. The accounts were not subject to the requirements
of the Investment Company Act of 1940 or the Internal Revenue Code, the
limitations of which might have adversely affected performance results. Results
are after deduction of fees and expenses. Prior to January 1, 1993, any account
expenses not deducted from the accounts, such as management fees paid outside
the accounts, are not reflected in the performance results. If these fees had
been deducted from the accounts, they would have reduced performance. Fees were
not materially different from the Growth + Value Fund's anticipated expense
ratio, but were generally higher than the expense ratio for Class A shares and
lower than the expense ratios for Class B and C shares.
<TABLE>
<CAPTION>
NAVELLIER
AND ASSOCIATES S&P 500
COMPOSITE (%) INDEX (%)
<S> <C> <C>
1987 8.05 5.24
1988 11.40 16.51
1989 22.20 31.58
1990 12.51 (3.15)
1991 66.43 30.50
1992 3.12 7.61
1993 16.83 10.09
1994 1.53 1.31
1995 43.80 37.59
1996 10.68 22.31
one year 10.68 22.31
three years 17.33 19.44
five years 14.25 15.10
ten years 18.28 15.21
since inception 18.28 15.21
</TABLE>
(Chart appears here. Plot points to be filled in by customer)
<TABLE>
<CAPTION>
1987 1988 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Navellier and
Associates Composite
S&P 500 Index
</TABLE>
24
<PAGE>
Your guide to buying, selling and exchanging
shares of Northstar funds
THERE ARE THREE STEPS TO TAKE WHEN
YOU WANT TO BUY, SELL OR EXCHANGE SHARES OF OUR FUNDS:
o first, choose a share class
o second, open a Northstar account and make your first investment
o third, choose one of several ways to buy, sell or exchange shares.
CHOOSING
A SHARE CLASS
All Northstar funds are available
in Class A, Class B and Class C
shares.
The chart below summarizes the differences
between the share classes - your choice of
share class will depend on how much you
are investing and for how long. Large
investments qualify for a reduced Class A
sales charge and avoid the higher distribu-
tion fees of classes B and C. Investments in
Class B and Class C shares don't have a
front-end sales charge but there is a restric-
tion on the amount you can invest at one
time. Your financial adviser can help you, or
feel free to call us for more information.
Some of our funds also have Class T shares.
You can no longer buy Class T shares
unless you are reinvesting income, or
exchanging Class T shares you already
own, including Class T shares of The Cash
Management Fund of Salomon Brothers
Investment Series (a money-market fund
that's available through Northstar, but isn't
one of the Northstar funds).
In addition to Class A, Class B and Class C
shares, the Northstar Growth Fund offers
Class I shares. Class I shares are only
available to certain defined benefit plans,
insurance companies and foundations
investing for their own account. Class I
shares may have different sales charges
and other expenses, which may affect per-
formance. You can obtain additional infor-
mation concerning Class I shares by
calling us at 1-800-595-7827.
We've listed actual expenses charged to the
funds beginning on page 4.
<TABLE>
<CAPTION>
<S> <C> <C>
Maximum CLASS A no limit
amount you CLASS B $500,000
can buy CLASS C $750,000
CLASS T can only be purchased by reinvesting income or exchanging
other Class T shares
Front end CLASS A yes, varies by size of investment
sales charge CLASS B none
CLASS C none
CLASS T none
Deferred CLASS A only on investments of $1 million or more if you sell within 18 months
sales charge CLASS B yes, if you sell within 5 years
CLASS C yes, if you sell within 1 year
CLASS T yes, if you sell within 4 years
Service fee CLASS A .25% per year
CLASS B .25% per year
CLASS C .25% per year
CLASS T .25% per year
Distribution CLASS A .05% per year
fee CLASS B .75% per year
CLASS C .75% per year
CLASS T from .40% to .75% per year (varies by fund)
Conversion CLASS B Class B shares convert to class A after 8 years
CLASS T Class T shares convert to class A after 8 years or on June
2, 1998 (whichever is later)
</TABLE>
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
25
<PAGE>
YOUR GUIDE TO
BUYING, SELLING AND
EXCHANGING SHARES
OF NORTHSTAR FUNDS
<TABLE>
<CAPTION>
FRONT END SALES CHARGES YOUR INVESTMENT FRONT-END SALES CHARGE AMOUNT RETAINED BY DEALERS
(Class A shares only) as a percentage as a percentage as a percentage
of your net investment of offering price of offering price
<S> <C> <C> <C>
up to $99,999 4.99 4.75 4.00
$100,000 to $249,999 3.90 3.75 3.10
$250,000 to $499,999 2.83 2.75 2.30
$500,000 to $999,999 2.04 2.00 1.70
$1,000,000 and over - - -
</TABLE>
WAYS TO REDUCE FRONT-END SALES CHARGES
There are three ways you can reduce your
sales charges.
1. TAKE ADVANTAGE OF PURCHASES YOU'VE ALREADY MADE Rights of accumulation
let you combine the value of all the Class A shares you already own with your
current investment to calculate your sales charge.
2. TAKE ADVANTAGE OF PURCHASES YOU INTEND TO MAKE By signing a non-binding
letter of intent, you can combine investments you plan to make over a 13 month
period to calculate the sales charge you'll pay on each investment.
3. BUY AS PART OF A GROUP OF INVESTORS You can combine your investments
with others in a recognized group when cal culating your sales charge. The
following is a general list of the groups
Northstar recognizes for this benefit.
(Bullet) you, your spouse and your children under the age of 21
(Bullet) a trustee or fiduciary for a single trust, estate or
fiduciary account (including qualifying pension, profit sharing and other
employee benefit trusts)
(Bullet) any other organized group that has been in existence
for at least six months, and wasn't formed soley for the purpose of investing at
a discount.
If you think you might be eligible to reduce your sales charges using any of
these methods, please call us or consult the SAI.
26
<PAGE>
DEFERRED SALES CHARGES
(Classes A, B, C & T)
We deduct a contingent deferred sales
charge (CDSC) from the proceeds when
you sell shares as indicated below. CDSC is
charged on the current market value of the
shares, or on the price you paid for them,
whichever is less. You aren't charged a
CDSC on shares you acquired by reinvest-
ing your dividends, or on amounts repre-
senting appreciation.
When you ask us to sell shares, we will sell
those that are exempt from the CDSC first,
and then sell the shares you have held the
longest. This helps keep your CDSC as low
as possible.
CLASS A SHARES
There is generally no CDSC on Class A
shares, except for purchases of $1 million
or more, when you sell them within 18
months of when you bought them.
YOUR INVESTMENT CDSC ON SHARES
BEING SOLD
First $1M - $2,499,999 1.00%
$2,500,000 to $4,999,999 0.50%
$5,000,000 and over 0.25%
CLASS B, C & T SHARES
YEARS AFTER YOU CLASS B CLASS C CLASS T
BOUGHT THE SHARES
1st year 5.00% 1.00% 4.00%
2nd year 4.00% none 3.00%
3rd year 3.00% none 2.00%
4th year 2.00% none 1.00%
5th year 2.00% none none
after 5 years none none none
WHEN THE CDSC MIGHT BE WAIVED
We may waive the CDSC for Class B and
Class C shares if:
(Bullet) the shareholder dies or becomes
disabled
(Bullet) you're selling your shares through our
systematic withdrawal program
(Bullet) you're selling shares of a retirement
plan and you are over 70 1/2 years old
(Bullet) you're exchanging Class B, C or T
shares for the same class of shares of
another Northstar fund.
If you think you might be eligible for a
CDSC waiver, please call us or consult
the SAI.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
27
<PAGE>
YOUR GUIDE TO
BUYING, SELLING AND
EXCHANGING SHARES
OF NORTHSTAR FUNDS
OPENING A
NORTHSTAR ACCOUNT
Once you've chosen the funds you would like to invest in and the share class
you prefer, you're ready to open an account.
First, determine how much money you want to invest. The minimum initial
investment for Northstar funds is:
(Bullet) $2,500 for non-retirement accounts
(Bullet) $250 for retirement accounts
(Bullet) $25 if you are investing using
our automatic investment plan
(see page 30).
Next, open an account in one of two ways: (Bullet) give a check to your broker,
who will open an account for you, or
(Bullet) complete the application enclosed with this prospectus and mail it to
us, along with your check, made payable to Northstar Funds.
TAX-SHELTERED RETIREMENT PLANS
Call or write to us about opening your Northstar account as any one of the
following retirement plans:
(Bullet) IRAs,
(Bullet) SEP-IRAs,
(Bullet) retirement and profit sharing plans for self-
employed persons (Keogh),
(Bullet) and corporate retirement plans (401(k)).
BUYING, SELLING AND
EXCHANGING
Once you've opened an account and made your fi three ways to buy, sell or
exchange shares of Northstar funds:
(Bullet) through your broker
(Bullet) directly, by mail or over the telephone
(Bullet) using one of our automatic plans.
We'll send you a confirmation statement every time you make a transaction
that affects your account balance, except when we pay distributions.
Instructions for each option appear in the chart on page 30, but here are a
few things you should know before you begin.
HOW SHARES ARE PRICED
The price you pay or receive when you buy sell or exchange shares is determined
by the fund's net asset value (NAV) per share and share class. NAV is
calculated each business day at the close of regular trading on the New York
Stock Exchange (usually 4:00 Eastern Standard Time) by dividing the net assets
of each fund class by the number of shares outstanding. To calculate NAV, we
determine the fair market value of the fund's portfolio securities using the
method described in the Statement of Additional Information.
When you're buying shares, you'll pay the NAV that is next calculated after we
receive your order in proper form, plus any sales charges that apply. When
you're selling shares, you'll receive the NAV that is next calculated after we
receive your order in proper form, less any deferred sales charges that apply.
SOME RULES FOR BUYING
(Bullet) The minimum amount of each invest ment after your first one is:
- - $100 for non-retirement accounts
- - $25 for retirement accounts
- - $25 if you are investing using
our automatic investment plan
(see page 30).
(Bullet) We record most shares on our books electronically. We will issue
a certificate if you ask us to in writing, however most of our
shareholders prefer not to have their shares in certificate form
because certificated shares can't be sold or exchanged by telephone
or using the systematic withdrawal program.
(Bullet) We have the right to refuse a request to buy shares.
28
<PAGE>
SOME RULES FOR SELLING
(Bullet) Selling your shares may result in a
deferred sales charge. Please refer to the
table on page 27.
(Bullet) We'll pay you within three days from the
time we receive your request to sell,
unless you're selling shares you recently
paid for by check. In that case, we'll pay
(Bullet) you when your check has cleared, which
may take up to 15 days.
(Bullet) If you are a corporation, partnership,
executor, administrator, trustee, custodi-
an, guardian or you are selling shares of
a retirement plan, you'll need to com-
plete special documentation and give us
your request in writing. Please call us for
information.
(Bullet) You can reinvest part or all of the pro-
ceeds of any shares you sell without pay-
ing a sales charge. You must let us know
in writing 30 days from the day you sold
the shares, and buy the same class of
shares you sold. We will reimburse you
for any CDSC you paid. Please see page
32 for information about how this can
affect your taxes.
(Bullet) You won't pay a service charge when you
sell your shares, but your dealer may
charge you fee.
(Bullet) If selling shares results in the value of
your account falling below $500, we have
the right to close your account, so long
as your account has been open for at
least a year. We'll let you know 60 days
in advance, and if you don't bring the
account balance above $500, we'll sell
your shares, mail the proceeds to you
and close your account. We may also
close your account if you give us an
incorrect social security number or tax-
payer identification number.
(Bullet) In unusual circumstances, we may tem-
porarily suspend the processing of
requests to sell.
SOME RULES FOR
EXCHANGING
(Bullet) When you exchange shares, you are
selling shares of one fund and using the
proceeds to buy shares of another fund.
Please see page 32 for information
about how this can affect your taxes.
(Bullet) Before you make an exchange, be sure
to read the sections of the prospectus
that discuss the shares you're
exchanging to.
(Bullet) You can exchange shares of any fund
for the same class of shares of any other
fund, or for shares of The Cash
Management Fund without a sales
charge. You will, however, pay a sales
charge if you buy shares of The Cash
Management Fund, and then exchange
them for Class A shares of any of the
funds.
(Bullet) For the purposes of calculating CDSC,
shares you exchange will continue to
age from the day you first purchased
them, even if you're exchanging into
The Cash Management Fund.
(Bullet) We'll let you know 60 days in advance if
we want to make any changes to these
rules.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
29
<PAGE>
YOUR GUIDE TO
BUYING, SELLING AND
EXCHANGING SHARES
OF NORTHSTAR FUNDS
WAYS TO BUY, SELL OR EXCHANGE WHEN TO USE
THIS OPTION
THROUGH YOUR DEALER
o buy
o sell
o exchange
BY MAIL
Please call us if you have any questions-we can't process o buy
your request until we have all of the documents we need. o sell
o exchange
BY TELEPHONE
To sign up for this service, complete section 9 of the o sell
application or call us at 1-800-595-7827. o exchange
AUTOMATIC INVESTMENT PLAN
To sign up for this service, complete section 7 of the o buy
application or call us at 1-800-595-7827.
SYSTEMATIC WITHDRAWAL PROGRAM
To sign up for this service, complete section 8 of the o sell
application or call us at 1-800-595-7827.
30
<PAGE>
HOW TO USE IT
If you're BUYING shares, make your check payable to
Northstar Funds and give it to your dealer, who will for-
ward it to us.
When you're SELLING, give your written request to your
dealer, who may charge you a fee for this service.
Send your request to buy, sell or exchange in writing to:
Northstar Funds, c/o
First Data Investor Services Group Inc. P.O. Box 5131
Westborough MA 01581-5131
Your letter should tell us
(Bullet) your account number
(Bullet) your social security number or taxpayer identification
number the name the account is registered in
(Bullet) the fund name and share class you're buying or selling,
and, for exchanges, the fund name and share class
you're exchanging to
(Bullet) the dollar value or number of shares you want to buy,
sell or exchange.
If you're BUYING include a check payable to Northstar
Funds with your request.
If you're SELLING or EXCHANGING, your request must be
signed by all registered owners of the account.
We'll ask you to guarantee the signatures if:
(Bullet) you are selling more than $50,000 worth of shares
(Bullet) your address of record has changed in the past 30 days
(Bullet) you want us to send the payment to someone other than
the registered owner, to an address other than the
address of record, or in any form other than by check.
Signatures can be guaranteed by a bank, a member of the
national stock exchange or another eligible institution.
You can SELL or EXCHANGE up to $50,000 of your shares by
telephone.
Call us at 1-800-595-7827 between 8:30 a.m. and 4:00 pm
Eastern Standard Time.
When you're calling with your request, we'll ask you for
your name, social security number, broker of record or
other identification. If we don't ask for these things and
process an unauthorized telephone transaction, we are
responsible for any losses to your account. Otherwise you
are responsible for any unauthorized use of the telephone
transaction service.
We'll mail the proceeds of the sale to the address of record
or wire $1,000 or more to any commercial bank in the U.S.
that is a member of the Federal Reserve System. There is
no fee for this service.
You can authorize us to automatically withdraw a mini-
mum of $25 each month from your bank account and use it
to buy shares in Northstar funds.
There's no charge for this service, but your bank may
charge you a small set-up or transaction fee. You can can-
cel the program at any time. This program is not available
for Class T accounts.
You can ask us to automatically transfer money from your
Northstar account into your bank account.
We will sell shares or share fractions on your behalf
monthly or quarterly, and automatically deposit the pro-
ceeds into your bank account. There may be a sales charge
on shares we sell on your behalf.
You must have at least $5,000 worth of shares in your
account to participate in this program. The minimum
transfer amount is $25.
It isn't to your advantage to buy and sell shares of the same
fund at the same time, so you can't set up an systematic
withdrawal program for an account you've already signed
up on an automatic investment plan. This program is not
available for Class T accounts.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
31
<PAGE>
MUTUAL FUND
EARNINGS AND
YOUR TAXES
HOW THE FUNDS
PAY DISTRIBUTIONS
Each Northstar fund distributes virtually all of its net investment income and
net capital gains to shareholders at least annually in the form of dividends.
The funds pay dividends as follows:
Growth Funds annually
Income and Growth Funds quarterly
Income Funds monthly
As a shareholder, you are entitled to a share of the income and capital gains a
fund distributes. The amount you receive is based on the number of shares you
own.
DISTRIBUTION OPTIONS
You can take your distributions as cash or reinvest them in the same class of
shares of any of our funds. You specify your preference when you open your
account. Distribution options vary by share class, as follows. You can change
your distribution instructions at any time by notifying us by phone (if going
to the address of record), or in writing.
CLASS A, B & C SHARES
(Bullet) reinvest both income dividends and capital gain
distributions to buy additional Class A, B or C shares of
any fund you choose
(Bullet) receive income dividends in cash and reinvest capital
gain distributions to buy additional Class A, B or C shares of any
fund you choose
(Bullet) receive both income dividends and capital gain distributions in cash.
If you don't specify how you would like to receive your distributions, we'll
automatically reinvest both income dividends and capital gain distributions in
additional shares of the same fund.
CLASS T SHARES
You must receive all distributions in the same way, either in cash or by
reinvesting them in additional shares of the same fund.
32
<PAGE>
HOW YOUR
DISTRIBUTIONS
ARE TAXED
Each Northstar fund intends to meet the
requirements for being a tax-qualified reg-
ulated investment company, which means
they generally do not pay federal income
tax on the earnings they distribute to share-
holders.
As a result, distributions that you receive
will generally be considered to be taxable
in your hands. Income distributions,
whether you take them as cash or reinvest
them, are taxable as ordinary income.
Capital gain distributions are taxable as
long-term capital gains, regardless of how
long you've held the shares.
Distributions may also be subject to state,
local or foreign taxes.
If income distributed to you includes divi-
dends paid by U.S. corporations, part of the
dividends the fund pays may be eligible for
the corporate dividends-received deduction.
TIMING YOUR PURCHASE
If you buy shares of a fund just before it
makes a distribution, you will pay the full
price but part of your investment will come
back to you as a taxable distribution. Unless
you are investing in a tax-deferred account,
such as an IRA, this is not to your advantage
because you'll pay tax on the dividend but
will not have shared in the increase in the
net asset value of the fund.
WHEN DISTRIBUTIONS ARE DECLARED
For tax purposes, distributions declared by
the fund in October, November or
December and paid to you in January are
taxable in the calendar year in which they
were declared.
BACKUP WITHHOLDING TAX
We'll notify you each year of the tax status
of dividends and distributions. If we don't
have your tax identification number, or if
you have been told by the IRS that you are
subject to backup withholding tax, we may
be required to withhold U.S. federal income
tax on any distributions at the rate of 31%.
WHEN YOU SELL YOUR SHARES
When you sell or exchange shares you will
realize a capital gain or loss, depending on
the difference between what your shares
cost you and what you receive for them. A
capital gain or loss will be long-term or
short-term, depending on the length of time
you held the shares.
In your federal income tax return you
report a capital gain as income and a capi-
tal loss as a deduction.
CONSULT YOUR TAX ADVISER
The information above is general in nature.
You should consult your tax adviser to dis-
cuss how investing in Northstar funds
affects your personal tax situation.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
33
<PAGE>
THE BUSINESS
OF MUTUAL
FUNDS
HOW THE FUNDS
ARE ORGANIZED AND
MANAGED
Each of the Northstar funds is a diversified mutual fund. The Northstar Growth
+ Value Fund, Northstar Income and Growth Fund, and Northstar High Total Return
Fund are all series of the Northstar Trust (formerly the Northstar Advantage
Trust), which is registered as an investment company with the SEC. All of the
other funds are trusts registered separately with the SEC.
The trustees of each SEC-registered trust oversee the business affairs of the
funds and are responsible for major decisions about each fund's investment
objectives and policies.
The funds do not hold regular shareholder meetings, but may hold special
meetings. A special meeting is called if investors holding at least 10% of the
outstanding shares of a fund request it. Certain objectives and policies of the
funds may only be changed by shareholder vote. A shareholder vote is requir of
a Northstar fund because the fund invest ment objectives are fundamental.
The day-to-day management of the funds is handled by the following companies
and advisers appointed by the trustees:
INVESTMENT ADVISER
Provides advice and recommendations about each fund's investments. The invest-
ment adviser is paid out of each fund's management fee, which are listed begin-
ning on page 4.
NORTHSTAR INVESTMENT MANAGEMENT
CORPORATION
TWO PICKWICK PLAZA
GREENWICH, CT 06830
ADMINISTRATOR
Provides administrative, compliance and accounting services to the funds. The
administrator receives an annual administrative services fee from each fund of
.10% of the fund's average daily net assets, plus $5 per account per year.
NORTHSTAR ADMINISTRATORS CORPORATION
TWO PICKWICK PLAZA
GREENWICH, CT 06830
DISTRIBUTOR
Markets the funds and distributes shares through brokers and other financial
representatives.
NORTHSTAR DISTRIBUTORS, INC.
TWO PICKWICK PLAZA
GREENWICH, CT 06830
CUSTODIAN
Holds all the funds assets.
CUSTODIAN AND FUND ACCOUNTING AGENT:
STATE STREET BANK AND TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MA 02110
o Growth Fund
o Growth + Value Fund
o Special Fund
o Income and Growth Fund
o Balance Sheet Opportunities Fund
o High Total Return Fund
o Strategic Income Fund
o High Yield Fund
o Government Securities Fund
TRANSFER AGENT
Handles shareholder record-keeping and statements, distribution of dividends
and processing of orders to buy and sell shares.
FIRST DATA INVESTOR SERVICES GROUP, INC.
4400 COMPUTER DRIVE
WESTBOROUGH, MA 01581-5120
PORTFOLIO MANAGERS AND SUB-ADVISERS
You'll find profiles of all of our portfolio managers and sub-advisers to the
funds beginning on page 22.
34
<PAGE>
HOW DEALERS ARE
COMPENSATED
Dealers receive payment for selling shares
of Northstar funds in three ways:
THEY RECEIVE A COMMISSION WHEN
YOU BUY SHARES
The amount of the commission depends on
the amount you invest and the share class
you buy. Sales commissions are detailed in
the chart below.
(Bullet) CLASS A INVESTMENTS
(% OF OFFERING PRICE)
<TABLE>
<CAPTION>
COMMISSION AMOUNT
RECEIVED BY DEALERS PAID BY THE
OUT OF SALES CHARGES DISTRIBUTOR
YOU PAY
<S> <C> <C>
up to $99,999 4.00
$100,000 to $249,999 3.10
$250,000 to $499,999 2.30
$500,000 to $999,999 1.70
$1,000,000 to $2,499,999 0.00 1.00
$2,500,000 to $4,999,999 0.00 0.50
$5,000,000 and over 0.00 0.25
</TABLE>
(Bullet) CLASS B INVESTMENTS
Receives 4% of sale price from the distributor
(Bullet) CLASS C INVESTMENTS
Receives 1% of sale price from the distributor
THEY ARE PAID A FEE BY THE DISTRIBUTOR
FOR SERVICING YOUR ACCOUNT
They receive a service fee depending on the
average net asset value of the class of
shares their clients hold in Northstar funds.
These fees are paid from the 12-b1 fee
deducted from each fund class. In addition
to covering the cost of commissions and
service fees, the 12-b1 fee is used to pay for
other expenses such as sales literature,
prospectus printing and distribution and
compensation to the distributor and
its wholesalers. You'll find the 12-b1 fees
listed in the fund information beginning
on page 4. Service and distribution fee
percentages appear on page 25.
THEY MAY RECEIVE ADDITIONAL
BENEFITS AND REWARDS
Selling shares of Northstar funds may make
dealers eligible for awards or to participate
in sales programs sponsored by Northstar.
The costs of these benefits and rewards are
not deducted from the assets of the funds-
they are paid from the distributor's own
resources.
The distributor may also pay additional
compensation to dealers including Advest
Inc. out of its own resources for marketing
and other services to shareholders. All pay-
ments it receives for Class T shares are
paid to Advest Inc.
(Picture of a telephone) If you have any questions, please call 1-800-595-7827
35
<PAGE>
THE RISKS OF INVESTING
IN MUTUAL FUNDS
Risk is the potential that your investment will lose money or not earn as much
as you hope. The Northstar funds have varying degrees of risk, depending on the
securities they invest in. There is no guarantee that a fund will achieve its
investment objective.
You'll find a discussion of the risk factors associated with each fund
beginning on page 4.
This section provides information about the risks associated with different
kinds of securities. It also lists additional investment practices that may
involve elements of risk.
EQUITIES
(Bullet) Give the buyer ownership rights in the issuer. Common and preferred
stocks, convertible securities and stock purchase rights are types
of equities.
(Bullet) The market value of an equity security may go up or down rapidly
depending on market conditions. This affects the value of the shares
of a fund, and the value of your investment.
(Bullet) Securities of smaller companies may be subject to more abrupt or
erratic market movements because they are traded in lower volume and
are subject to greater changes in earnings and growth prospects.
DEBT SECURITIES
(Bullet) Obligations to repay borrowed money within a certain time with or
without interest. Zero-coupon securities, pay-in-kind securities,
discount obligations, mortgage-backed securities, convertible
securities and high yield securities are types of debt securities.
(Bullet) Debt securities are affected by changes in interest rates. In general,
when interest rates go up, the value of a debt security decreases;
when interest rates go down, the value of a debt security increases.
(Bullet) There is also the risk that the borrower won't be able to fulfill its
obligation, resulting in loss or a lower price than anticipated.
LOWER-RATED OR JUNK BONDS
The chart indicates which funds invest in high yield securities (junk bonds).
In addition to general risks listed above that are associated with debt
securities, junk bonds have special risks:
(Bullet) They fluctuate more in value than higher
rated securities.
(Bullet) They are more subject to the risk that the
borrower won't fulfill its obligation.
(Bullet) There may not be a market to sell them
at a reasonable price, resulting in loss or
a lower price than anticipated.
(Bullet) The fund's ability to achieve its invest-
ment objective may be more dependent
on Northstar's credit analysis than is the
case for higher rated securities.
<TABLE>
<CAPTION>
QUALITY RATING BALANCE SHEET HIGH TOTAL HIGH YIELD STRATEGIC
OPPORTUNITIES FUND RETURN FUND FUND INCOME FUND
<S> <C> <C> <C> <C>
Investment grade 9.1 1.9 - 3.7
BB 10.4 18.8 35.5 27.3
B 27.8 43.3 49.4 20.3
CCC - 4.0 1.2 1.4
CC - 0.0 - 0.0
C 3.1 - - 0.0
D - - - 0.0
Non-rated 6.1 21.3 1.1 5.1
U.S. Governments, equities & others 43.5 10.7 12.8 42.2
TOTAL 100% 100% 100% 100%
</TABLE>
36
<PAGE>
FOREIGN INVESTMENTS
(Bullet) Securities issued by companies or
governments of foreign countries. May
include equities and debt securities
including sovereign debt obligations
(securities issued to refinance foreign
government bank loans and other debt-
also known as Brady Bonds).
(Bullet) Subject to all of the risks associated with
equity and debt securities. There are also
other risks that can affect the value of a
foreign investments:
- - foreign markets may have less volume
and be less liquid
- - foreign securities may be less liquid
and more volatile
- - the value of the securities are affected
by changes in currency exchange rates
and exchange control regulations
- - the value of foreign securities may be
affected by adverse political and eco-
nomic developments, seizure or
nationalization of foreign deposits, and
government restrictions.
EMERGING MARKETS
(Bullet) Investments in emerging markets have
additional risks: developing countries
have economic structures that are less
mature, they have less stable political
systems and may have rapidly changing
interest rates.
OTHER, HIGHER RISK
SECURITIES
ILLIQUID SECURITIES-
FUNDS ARE LIMITED TO 15% OF NET ASSET VALUE
(Bullet) Securities that can't be sold quickly at a
reasonable price, or that can't be sold on
the open market. Includes restricted
securities and private placements.
(Bullet) Used to realize higher profits.
(Bullet) There may be fewer market players
which can result in lower prices, and
sales can take longer to complete.
(Bullet) Following guidelines established by the
trustees of each fund, Northstar may
consider a security that can't be sold on
the open market to be liquid if it can be
sold to institutional investors (Rule 144A)
or on foreign markets.
DERIVATIVE SECURITIES
(Bullet) Securities that derive their value from
the performance of an underlying asset.
Usually take the form of a contract to
buy or sell an asset or commodity either
now or in the future, but mortgage and
other asset-backed securities are also
generally considered derivatives. Types
of derivative securities include options,
futures contracts, options on futures and
forward contracts.
(Bullet) Used often to "hedge" or offset market
fluctuations or changes in currency
exchange or interest rates. May also be
used for speculative purposes to increase
returns.
(Bullet) In addition to the risks associated with
equities and debt securities, there are
several special risks associated with the
use of derivatives:
- - changes in the value of the derivative
may not match changes in the value of
its underlying asset
- - hedging may not be successful, and
may prevent the fund from making
other gains
- - derivatives used for speculative pur-
poses can result in gains or losses that
are substantially greater than the
derivative's original cost.
37
<PAGE>
THE RISKS OF
INVESTING IN
MUTUAL FUNDS
INVESTMENT PRACTICES
REPURCHASE AGREEMENTS - FUNDS ARE LIMITED
(Bullet) Buying a security from a bank or dealer who must buy it back at a
fixed price on a specified day. Repurchase agreements that
mature after more than seven days are considered to be illiquid
investments. Any one investment in this type of repurchase
agreement can only be 5% of the fund's net asset value.
(Bullet) Used for temporary defensive purposes or to generate income from
cash balances.
(Bullet) The bank or dealer may not be able to buy back the security.
SHORT-TERM TRADING - NO LIMIT
(Bullet) Selling a security soon after you buy it.
(Bullet) Used when the fund needs to be more liquid, in response to changes in
interest rates and economic or other developments, or when a security
has reached its price or yield objective.
(Bullet) May result in higher costs for brokerage commissions, dealer mark-ups
and other transactions costs, as well as taxable capital gains.
TEMPORARY INVESTMENTS-NO LIMIT
(Bullet) Temporarily maintaining part or all of the fund's assets in cash or in
U.S. Government securities, commercial paper, banker's acceptances,
repurchase agreements and certificates of deposit.
(Bullet) Used for temporary and defensive purposes in periods of unusual market
conditions.
(Bullet) Provides lower returns.
WHEN-ISSUED SECURITIES AND FORWARD
COMMITMENTS - NO LIMIT, EXCEPT THE
NORTHSTAR GOVERNMENT SECURITIES FUND
(Bullet) A commitment to buy a security on a
specific day in the future at a specified price.
(Bullet) Used to realize short-term profits.
(Bullet) If made through a dealer, there is a risk that the dealer
won't complete the sale, and that the fund will lose out on a good
yield or price.
(Bullet) There is also a risk that the value of the security will change
before the transaction is settled, resulting in short-term losses
instead of gains. The Northstar Government Securities Fund does not
intend to acquire securities on a "when-issued" basis.
38
<PAGE>
(Graph of a star appears here)
<PAGE>
WHERE TO GO
FOR MORE INFORMATION
You'll find more information about the Northstar family of funds in our:
ANNUAL REPORTS
The Annual reports contain information about fund performance,
the financial statements and the auditor's reports.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains complete information about the Northstar funds.
The SAI is legally part of this prospectus (it is incorporated by reference).
A copy has been filed with the Securities and Exchange Commission.
Please write or call for a free copy of the Annual reports or the SAI:
The Northstar Funds
2 Pickwick Plaza
Greenwich, CT
06830
1-800-595-7827
(Northstar logo appears bottom left)
<PAGE>
(Northstar logo)
New Account Application
1
- --------------------------------------------------------------------------------
ACCOUNT REGISTRATION
<TABLE>
<S> <C> <C> <C>
TYPE OF ACCOUNT (CHOOSE ONE ONLY):
[ ] INDIVIDUAL [ ] JOINT ACCOUNT [ ] FOR A MINOR
USE LINE A USE LINES A & B USE LINE C
<CAPTION>
TYPE OF ACCOUNT (CHOOSE ONE ONLY):
<C>
[ ] TRUST, CORPORATION, PARTNERSHIP OR OTHER ENTITY
USE LINE D
</TABLE>
<TABLE>
<S> <C> <C>
Print name exactly as account is to be registered:
A. |_|_|_|-|_|_|-|_|_|_|_|
NAME (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER
B. |_|_|_|-|_|_|-|_|_|_|_|
NAME (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER
C.
CUSTODIAN'S NAME (FIRST, MIDDLE, LAST)
|_|_|_|-|_|_|-|_|_|_|_|
MINOR'S NAME (FIRST, MIDDLE, LAST) MINOR'S SOCIAL SECURITY NUMBER
UNDER THE _____________ UNIFORM GIFTS/TRANSFERS TO MINORS ACT |_|_|-|_|_|-|_|_|_|_|
NAME OF STATE TAX I.D. NUMBER
OR
D.
|_|_|_|-|_|_|-|_|_|_|_|
NAME (IF A TRUST, INCLUDE DATE OF AGREEMENT) SOCIAL SECURITY NUMBER
2
- --------------------------------------------------------------------------------
MAILING ADDRESS
</TABLE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
STREET
( )
---------------------------------------------
DAYTIME PHONE NUMBER
- --------------------------------------------------------------------------------
CITY STATE ZIP
</TABLE>
3
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
MINIMUM INITIAL INVESTMENT $2,500 [ ] MAKE CHECK PAYABLE TO NORTHSTAR FUNDS.
Check enclosed for $ _____________________________________________________
[ ] Shares purchased and paid for through my/our investment dealer.
Trade Date _____________________ Order# _____________________
Number of Shares: Class A ___________________________
Class B ___________________________ Class C ___________________________
Please check the box beside the name of each Northstar Fund being
purchased and enter the dollar amount of each purchase. ALL DISTRIBUTIONS
WILL BE REINVESTED IN ADDITIONAL SHARES UNLESS INSTRUCTED OTHERWISE.
[ ] GROWTH FUND $ [ ] GROWTH + VALUE FUND $
Class A [ ] Class B [ ] Class C [ ] Class A [ ] Class B [ ] Class C [ ]
[ ] SPECIAL FUND $
Class A [ ] Class B [ ] Class C [ ]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DIVIDENDS [ ] Cash [ ] Other* DIVIDENDS [ ] Cash [ ] Other*
CAPITAL GAINS [ ] Cash [ ] Other* CAPITAL GAINS [ ] Cash [ ] Other*
<CAPTION>
<C> <C> <C>
DIVIDENDS [ ] Cash [ ] Other*
CAPITAL GAINS [ ] Cash [ ] Other*
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
[ ] INCOME AND GROWTH FUND $ [ ] BALANCE SHEET OPPORTUNITIES FUND $
Class A [ ] Class B [ ] Class C [ ] Class A [ ] Class B [ ] Class C [ ]
<C> <C>
[ ] HIGH TOTAL RETURN FUND $
Class A [ ] Class B [ ] Class C [ ]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DIVIDENDS [ ] Cash [ ] Other* DIVIDENDS [ ] Cash [ ] Other*
CAPITAL GAINS [ ] Cash [ ] Other* CAPITAL GAINS [ ] Cash [ ] Other*
<CAPTION>
<C> <C> <C>
DIVIDENDS [ ] Cash [ ] Other*
CAPITAL GAINS [ ] Cash [ ] Other*
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
[ ] HIGH YIELD FUND $ [ ] STRATEGIC INCOME FUND $
Class A [ ] Class B [ ] Class C [ ] Class A [ ] Class B [ ] Class C [ ]
<C>
[ ] GOVERNMENT SECURITIES FUND $
Class A [ ] Class B [ ] Class C [ ]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DIVIDENDS [ ] Cash [ ] Other* DIVIDENDS [ ] Cash [ ] Other*
CAPITAL GAINS [ ] Cash [ ] Other* CAPITAL GAINS [ ] Cash [ ] Other*
<C> <C> <C>
DIVIDENDS [ ] Cash [ ] Other*
CAPITAL GAINS [ ] Cash [ ] Other*
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C>
[ ] MONEY MARKET PORTFOLIO $
(Money Market Account)
Class A [ ] Class B [ ] Class C [ ]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIVIDENDS [ ] Cash [ ] Other*
CAPITAL GAINS [ ] Cash [ ] Other*
- --------------------------------------------------------------------------------
*Please reinvest my dividends from _________________________________ to _________________________________
(Name of Fund) (Name of Fund)
</TABLE>
4
- --------------------------------------------------------------------------------
LETTER OF INTENT, RIGHT OF ACCUMULATION (CLASS A SHARES ONLY)
LETTER OF INTENT
Although I/we have made no commitment to do so, I/we intend to invest
the dollar amount indicated below within a 13-month period in shares of
one or more of the eligible Northstar Funds.
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
RIGHTS OF ACCUMULATION
If this account qualified for a Reduced Sales Charge under the terms of
the current Prospectus, please list account numbers:
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
|_|_|_| - |_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_|_|_|_|_|_|_|_|_|
<PAGE>
ATTACH VOID CHECK HERE ATTACH VOID CHECK HERE
5
- --------------------------------------------------------------------------------
AGREEMENTS AND SIGNATURES
I/We am/are of legal age and wish to establish an account in accordance
with the terms and conditions of the current applicable Prospectus, a copy
of which has been received and read. I/We understand and agree that
neither First Data nor the Northstar Funds shall be held liable for any
loss, liability, cost or expense for acting in accordance with this
application, or any section thereof. I/We acknowledge that the account(s)
established by this application will be subject to the telephone exchange
and redemption privileges described in this current prospectus, unless
indicated otherwise, with the understanding that the Fund, Northstar and
the Transfer Agent will not be able to verify the authenticity of any
telephone or redemption order received from persons other than registered
representatives of Northstar Distributors, Inc. and that they will not be
liable for following telephone exchange or redemption instructions that
prove to be fraudulent. Shareholders would bear the loss resulting from
instructions entered by an unauthorized third party.
Under penalties of perjury, I certify (1) that the number shown on this
form is my correct taxpayer identification number and (2) that I am not*
subject to backup withholding as a result of a failure to report all
interest or dividends, or the Internal Revenue Service has notified me
that I am no longer subject to backup withholding.
*If you are subject to backup withholding, please cross through the word
"not" in part (2) above.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL (OR CUSTODIAN) DATE
- ------------------------------------------------------------------------------------------------------------------------------------
CO-OWNER (OR CORPORATE OFFICER, PARTNER OR TRUSTEE) DATE
- ------------------------------------------------------------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
- ------------------------------------------------------------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
</TABLE>
UNDER PENALTIES OF PERJURY, I CERTIFY (1) THAT THE NUMBER SHOWN ON THIS
FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER AND (2) THAT I AM NOT*
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL
INTEREST OR DIVIDENDS, OR THE INTERNAL REVENUE SERVICE HAS NOTIFIED ME
THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING.
*IF YOU ARE SUBJECT TO BACKUP WITHHOLDING, PLEASE CHECK HERE [ ] .
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE(S) _____________________________________________ DATE ___________________________
SIGNATURE(S) _____________________________________________ DATE ___________________________
6
- --------------------------------------------------------------------------------
FOR DEALER USE ONLY
We guarantee the signature(s) and legal capacity of the applicant(s)
referred to herein, and in the case of a withdrawal program we affirm
that, in our opinion, the designated withdrawal is reasonable in view of
the circumstances involved.
</TABLE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------
DEALER NAME (PLEASE PRINT CAREFULLY) DEALER NO.
- ----------------------------------------------------------------------------------------------------------------
AUTHORIZED SIGNATURE (MUST BE PROVIDED FOR WITHDRAWAL PROGRAMS, TELEPHONE REDEMPTIONS AND TELEPHONE EXCHANGES)
- ----------------------------------------------------------------------------------------------------------------
BRANCH NUMBER BRANCH ADDRESS
- ----------------------------------------------------------------------------------------------------------------
REP NAME (PLEASE PRINT CAREFULLY) FIRST AND LAST NAME PHONE NUMBER (IMPORTANT) REP NUMBER
( )
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Upon completion of the application, please
return with a check made payable to:
NORTHSTAR FUNDS,
c/o FIRST DATA, P.O. Box 5131, Westborough, MA 01581-5131
Special Account Option
7
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN
Attach a VOIDED CHECK from your bank account and a check for an initial
deposit to establish this plan (minimum $25). Please complete the
following information to invest automatically the dollar amount stated
below on approximately the 15th [ ], 30th [ ] or the 15th and 30th [ ],
of the month.
The applicant authorizes the Northstar Funds to draw monthly drafts on
your bank account number ________________________ and use the proceeds
($25 minimum) therefrom to purchase shares of Northstar ________________
FUND NAME
___________________________
$ AMOUNT
Registered in the name(s) of ______________________ _____________________
RESTRICTIONS
Each purchase of shares will be made at the current offering price
determined as of the close of business on the day on which such purchase
is made. Automatic investments may be discontinued by either Northstar
Funds or the purchaser upon 30 days written notice to the other.
The Northstar Funds reserves the right to cancel any transaction which was
executed in reliance on a draft authorized where the bank upon which the
draft was drawn refused to make payment thereon for any reason.
8
- --------------------------------------------------------------------------------
WITHDRAW PROGRAM
A Withdrawal Plan is available on Class A shares (non-certificated shares
only) provided the Fund being purchased has a value of $5,000 or more.
Withdrawals with respect to Class B and Class C shares are limited (see
the Prospectus) and are conditional upon dividends and capital gains being
automatically reinvested.
<TABLE>
<CAPTION>
<S> <C>
1. The amount of each payment shall be __________ ___________ ___________ ____________($25 minimum)
FUND NAME $ AMOUNT FUND NAME $ AMOUNT
</TABLE>
2. Payments are to be made [ ] Monthly [ ] Quarterly [ ] Semi-Annually
[ ] Annually on the [ ] 1st or [ ] 15th of the month
Choose one of the following methods of distribution.
<TABLE>
<CAPTION>
<S> <C>
[ ] ACH Please have my payments electronically transferred to my bank. I have attached the required voided check
and I have verified that my bank is a member of the Automated Clearing House (ACH).
[ ] MAIL Please have my payments mailed. I understand that the payments will be made payable to me and mailed to my
account mailing address unless a special designation is referenced below:
</TABLE>
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
NAME (PLEASE PRINT CAREFULLY.)
- -----------------------------------------------------------------------------------------------------
STREET
- -----------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE YOUR BANK ACCOUNT NUMBER
- -----------------------------------------------------------------------------------------------------
</TABLE>
9
- --------------------------------------------------------------------------------
TELEPHONE EXCHANGE REDEMPTION AND EXPEDITED TELEPHONE REDEMPTION
Signature guarantees are required if:
1. Redemption is over $50,000.
2. Proceeds are to be sent to address other than record.
ALL SHAREHOLDERS AND THEIR DEALER REPRESENTATIVES WILL AUTOMATICALLY
RECEIVE TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES, (NON-CERTIFICATED
SHARES ONLY) UNLESS AN ELECTION NOT TO RECEIVE THESE PRIVILEGES IS
EXERCISED BELOW.
<TABLE>
<CAPTION>
<S> <C>
[ ] DO NOT CODE MY [ ] DO NOT CODE MY
ACCOUNT FOR TELEPHONE ACCOUNT FOR TELEPHONE
EXCHANGE PRIVILEGE. REDEMPTION PRIVILEGE.
[ ] PLEASE WIRE REDEMPTION PROCEEDS TO MY BANK. (I UNDERSTAND THE MINIMUM FOR WIRES IS $1,000.) MY VOIDED CHECK IS ATTACHED.
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1997
NORTHSTAR GROWTH FUND
NORTHSTAR GROWTH + VALUE FUND
NORTHSTAR SPECIAL FUND
NORTHSTAR INCOME AND GROWTH FUND
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
NORTHSTAR HIGH TOTAL RETURN FUND
NORTHSTAR HIGH YIELD FUND
NORTHSTAR STRATEGIC INCOME FUND
NORTHSTAR GOVERNMENT SECURITIES FUND
TWO PICKWICK PLAZA
GREENWICH, CONNECTICUT 06830
(203) 863-6200
(800) 595-7827
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Funds dated March 1, 1997, as each may be revised from time to time. To
obtain a copy of the Funds' Prospectus, please contact Northstar Investment
Management Corporation at the address or phone number listed above.
Northstar Investment Management Corporation ("Northstar" or the "Adviser")
serves as the Fund's investment adviser. Northstar has engaged Navellier Fund
Management, Inc. (the "Subadviser") to serve as subadviser to the Northstar
Growth + Value Fund and Northstar Special Fund, subject to the supervision of
Northstar. Wilson/Bennett Capital Management, Inc. serves as subadviser to
Northstar Income and Growth Fund. Northstar Distributors, Inc. (the
"Underwriter") is the underwriter to the Funds. Northstar Administrators
Corporation (the "Administrator") is the Funds' administrator. The Underwriter
and the Administrator are affiliates of Northstar.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT RESTRICTIONS...................................................................................... 2
INVESTMENT TECHNIQUES........................................................................................ 5
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION.............................................................. 11
SERVICES OF NORTHSTAR, THE SUBADVISERS AND THE ADMINISTRATOR................................................. 13
NET ASSET VALUE.............................................................................................. 15
PURCHASES AND REDEMPTIONS.................................................................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................................................... 17
UNDERWRITER AND DISTRIBUTION SERVICES........................................................................ 20
TRUSTEES AND OFFICERS........................................................................................ 24
OTHER INFORMATION............................................................................................ 27
PERFORMANCE INFORMATION...................................................................................... 28
FINANCIAL STATEMENTS......................................................................................... 32
</TABLE>
2
<PAGE>
INVESTMENT RESTRICTIONS
NORTHSTAR GROWTH + VALUE FUND. The Fund has adopted investment restrictions
numbered 1 through 11 as fundamental policies. These restrictions cannot be
changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940, as amended) of such Fund's outstanding voting
shares. Investment restrictions numbered 12 through 15 are not fundamental
policies and may be changed by vote of a majority of the Trust's Board members
at any time. The Fund may not:
1. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that it may: (a) borrow from banks but only if,
immediately after such borrowing there is asset coverage of 300%, and (b) enter
into transactions in options, futures, and options on futures and other
transactions not deemed to involve the issuance of senior securities;
2. Underwrite the securities of others;
3. Purchase or sell real property, including real estate limited
partnerships (each of these Funds may purchase marketable securities of
companies that deal in real estate or interests therein, including real estate
investment trusts);
4. Deal in commodities or commodity contracts, except in the manner
described in the current Prospectus and SAI of the Fund;
5. Make loans to other persons (but the Fund may, however, lend portfolio
securities, up to 33% of net assets at the time the loan is made, to brokers or
dealers or other financial institutions not affiliated with the Fund or
Northstar, subject to conditions established by Northstar (See "Lending
Portfolio Securities" in this SAI), and may purchase or hold participations in
loans, in accordance with the investment objectives and policies of the Fund, as
described in the current Prospectus and SAI of the Fund;
6. Purchase on margin (except that for purposes of this restriction, the
deposit or payment of initial or variation margin in connection with futures
contracts will not be deemed to be purchases of securities on margin);
7. Sell short, except that these Funds may enter into short sales against
the box;
8. Invest more than 25% of its assets in any one industry or related group
of industries;
9. With respect to 75% of the Fund's assets, purchase a security (other
than U.S. Government obligations) if, as a result, more than 5% of the value of
total assets of the Fund would be invested in securities of a single issuer;
10. Purchase a security if, as a result, more than 10% of any class of
securities, or more than 10% of the outstanding voting securities of an issuer,
would be held by the Fund;
11. Borrow money except to the extent permitted under the 1940 Act;
12. Purchase securities of other investment companies, except in connection
with a merger, consolidation or sale of assets, and except that these Funds may
purchase shares of other investment companies, subject to such restrictions as
may be imposed by the 1940 Act and rules thereunder or by any state in which
shares of the Fund are registered;
13. Make an investment for the purpose of exercising control over
management;
14. Invest more than 15% of its net assets in illiquid securities; or
15. Borrow any amount in excess of 10% of their respective assets, other
than for temporary emergency or administrative purposes. In addition, assets,
the Fund will not make additional investments when its borrowings exceed 5% of
total assets.
NORTHSTAR INCOME AND GROWTH FUND AND NORTHSTAR HIGH TOTAL RETURN FUND. The Funds
have adopted investment restrictions numbered 1 through 11 as fundamental
policies. These restrictions cannot be changed without approval by the holders
of a majority (as defined in the Investment Company Act of 1940, as amended) of
such Fund's outstanding voting shares. Investment restrictions numbered 12
through 17 are not fundamental policies and may be changed by vote of a majority
of the Trust's Board members at any time. The Funds may not:
1. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that it may: (a) borrow from banks but only if,
immediately after such borrowing there is asset coverage of 300%, and (b) enter
into transactions in options, futures, and options on futures and other
transactions not deemed to involve the issuance of senior securities;
2. Underwrite the securities of others;
3. Purchase or sell real property, including real estate limited
partnerships (each of these Funds may purchase marketable securities of
companies that deal in real estate or interests therein, including real estate
investment trusts);
2
<PAGE>
4. Deal in commodities or commodity contracts, except in the manner
described in the current Prospectus and SAI of the Fund;
5. Make loans to other persons (but the Funds may, however, lend portfolio
securities, up to 33% of net assets at the time the loan is made, to brokers or
dealers or other financial institutions not affiliated with the Funds or
Northstar, subject to conditions established by Northstar (See "Lending
Portfolio Securities" in this SAI), and may purchase or hold participations in
loans, in accordance with the investment objectives and policies of the Fund, as
described in the current Prospectus and SAI of the Fund;
6. Participate in any joint trading accounts;
7. Purchase on margin (except that for purposes of this restriction, the
deposit or payment of initial or variation margin in connection with futures
contracts will not be deemed to be purchases of securities on margin);
8. Sell short, except that these Funds may enter into short sales against
the box;
9. Invest more than 25% of its assets in any one industry or related group
of industries;
10. Purchase a security (other than U.S. Government obligations) if, as a
result, more than 5% of the value of total assets of the Fund would be invested
in securities of a single issuer;
11. Purchase a security if, as a result, more than 10% of any class of
securities, or more than 10% of the outstanding voting securities of an issuer,
would be held by the Fund;
12. Invest in a security if, as a result of such investment, more than 5%
of its total assets (taken at market value at the time of such investment) would
be invested in securities of issuers (other than issuers of federal agency
obligations) having a record, together with predecessors or unconditional
guarantors, of less than three years of continuous operation;
13. Purchase securities of other investment companies, except in connection
with a merger, consolidation or sale of assets, and except that these Funds may
purchase shares of other investment companies, subject to such restrictions as
may be imposed by the 1940 Act and rules thereunder or by any state in which
shares of the Fund are registered;
14. Purchase or retain securities of any issuer if 5% of the securities of
such issuer are owned by those officers and directors or trustees of the Fund or
of Northstar who each own beneficially more than 1/2 of 1% of its securities;
15. Make an investment for the purpose of exercising control over
management;
16. Invest more than 15% of its net assets (determined at the time of
investment) in illiquid securities, including securities subject to legal or
contractual restrictions on resale (which may include private placements and
those 144A securities for which the Trustees, pursuant to procedures adopted by
the Fund, have not determined there is a liquid secondary market), repurchase
agreements maturing in more than seven days, options traded over the counter
that a Fund has purchased, securities being used to cover options a Fund has
written, securities for which market quotations are not readily available, or
other securities that, legally or in the Adviser's or Trustees' opinion, may be
deemed illiquid; or
17. Invest in interests in oil, gas or other mineral exploration
development programs (including oil, gas or other mineral leases).
As a fundamental policy, these Funds may borrow money from banks to the
extent permitted under the 1940 Act. As an operating (non-fundamental) policy,
these Funds do not intend to borrow any amount in excess of 10% of their
respective assets, and would do so only for temporary emergency or
administrative purposes. In addition, to avoid the potential leveraging of
assets, neither of these Funds will make additional investments when its
borrowings, including those investment techniques which are regarded as a form
of borrowing, are in excess of 5% of total assets. If either of these Funds
should determine to expand its ability to borrow beyond the current operating
policy, the Fund's Prospectus would be amended and shareholders would be
notified.
NORTHSTAR SPECIAL, GROWTH, BALANCE SHEET OPPORTUNITIES, GOVERNMENT SECURITIES,
STRATEGIC INCOME AND HIGH YIELD FUNDS. The Funds have adopted investment
restrictions numbered 1 through 12 as fundamental policies. These restrictions
cannot be changed without approval by the holders of a majority (as defined in
the Investment Company Act of 1940, as amended) of such Fund's outstanding
voting shares. Investment restrictions numbered 13 through 21 are not
fundamental policies and may be changed by vote of a majority of the Trust's
Board members at any time. Each Fund may not:
1. Borrow money, except from a bank and as a temporary measure for
extraordinary or emergency purposes, provided the Fund maintains asset coverage
of 300% for all borrowings;
3
<PAGE>
2. Purchase securities of any one issuer (except Government securities) if,
as a result, more than 5% of the Fund's total assets would be invested in that
issuer, or the Fund would own or hold more than 10% of the outstanding voting
securities of the issuer; PROVIDED, HOWEVER, that up to 25% of the Fund's total
assets may be invested without regard to these limitations;
3. Underwrite the securities of other issuers, except to the extent that in
connection with the disposition of portfolio securities, the Fund may be deemed
to be an underwriter;
4. Concentrate its assets in the securities of issuers all of which conduct
their principal business activities in the same industry (this restriction does
not apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities);
5. Make any investment in real estate, commodities or commodities
contracts, except that these Funds may: (a) purchase or sell readily marketable
securities that are secured by interest in real estate or issued by companies
that deal in real estate, including real estate investment and mortgage
investment trusts; and (b) engage in financial futures contracts and related
options, as described herein and in the Fund's Prospectus;
6. Make loans, except that these Funds may: (a) invest in repurchase
agreements, and (b) loan its portfolio securities in amounts up to one-third of
the market or other fair value of its total assets;
7. Issue senior securities, except as appropriate to evidence indebtedness
that it is permitted to incur, provided that the deposit or payment by the Fund
of initial or maintenance margin in connection with futures contracts and
related options is not considered the issuance of senior securities;
8. Borrow money in excess of 5% of its total assets (taken at market
value);
9. Pledge, mortgage or hypothecate in excess of 5% of its total assets (the
deposit or payment by a Fund of initial or maintenance margin in connection with
futures contracts and related options is not considered a pledge or
hypothecation of assets);
10. Purchase more than 10% of the voting securities of any one issuer,
except U.S. Government Securities;
11. Invest more than 15% of its net assets in illiquid securities,
including repurchase agreements maturing in more than 7 days, that cannot be
disposed of within the normal course of business at approximately the amount at
which the Fund has valued the securities, excluding restricted securities that
have been determined by the Trustees of the Fund (or the persons designated by
them to make such determinations) to be readily marketable;
12. Purchase securities of any issuer with a record of less than 3 years of
continuous operations, including predecessors, except U.S. Government Securities
and obligations issued or guaranteed by any foreign government or its agencies
or instrumentalities, if such purchase would cause the investments of a Fund in
all such issuers to exceed 5% of the total assets of the Fund taken at market
value;
13. Purchase securities on margin, except these Funds may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities (the deposit or payment by a Fund of initial or maintenance margin
in connection with futures contracts or related options is not considered the
purchase of a security on margin);
14. Write put and call options, unless the options are covered and the Fund
invests through premium payments no more than 5% of its total assets in options
transactions, other than options on futures contracts;
15. Purchase and sell futures contracts and options on futures contracts,
unless the sum of margin deposits on all futures contracts held by the Fund, and
premiums paid on related options held by the Fund, does not exceed more than 5%
of the Fund's total assets, unless the transaction meets certain "bona fide
hedging" criteria (in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing the 5%);
16. Invest in securities of any issuer if any officer or trustee of the
Fund or any officer or director of Northstar owns more than 1/2 of 1% of the
outstanding securities of the issuer, and such officers, directors and trustees
own in the aggregate more than 5% of the securities of such issuer;
17. Invest in interests in oil, gas or other mineral exploration or
development programs (although it may invest in issuers that own or invest in
such interests);
18. Purchase securities of any investment company, except by purchase in
the open market where no commission or profit to a sponsor or dealer results
from such purchase, or except when such purchase, though not made in the open
market, is part of a plan of merger, consolidation, reorganization or
acquisition of assets;
4
<PAGE>
19. Purchase more than 3% of the outstanding voting securities of another
investment company, invest more than 5% of its total assets in another
investment company, or invest more than 10% of its total assets in other
investment companies;
20. Purchase warrants if, as a result, warrants taken at the lower of cost
or market value would represent more than 5% of the value of the Fund's net
assets or if warrants that are not listed on the New York or American Stock
Exchanges or on an exchange with comparable listing requirements, taken at the
lower of cost or market value, would represent more than 2% of the value of the
Fund's net assets (for this purpose, warrants attached to securities will be
deemed to have no value); or
21. Make short sales, unless, by virtue of its ownership of other
securities, the Fund has the right to obtain securities equivalent in kind and
amount to the securities sold and, if the right is conditional, the sale is made
upon the same conditions, except in connection with arbitrage transactions. The
Strategic Income Fund, additionally, may not invest in interests of real estate
limited partnerships.
In addition to the restrictions described above, each of these Funds may,
from time to time, agree to additional investment restrictions for purposes of
compliance with the securities laws of those state and foreign jurisdictions
where that Fund intends to offer or sell its shares.
INVESTMENT TECHNIQUES
DERIVATIVE INSTRUMENTS. The Funds may invest in Derivative Instruments (as
defined in the Fund's Prospectus) for a variety of reasons, including to hedge
certain market risks, to provide a substitute for purchasing or selling
particular securities or to increase potential income gain. Derivatives may
provide a cheaper, quicker or more specifically focused way for the Fund to
invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit a Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (I.E., margin requirements) operated by
the clearing agency in order to reduce overall credit risk. As a result, unless
the clearing agency defaults, there is relatively little counterparty credit
risk associated with Derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter Derivatives. Therefore, each party
to an over-the-counter Derivative bears the risk that the counterparty will
default. Accordingly, Northstar and subadviser will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
FUTURES TRANSACTIONS -- IN GENERAL. The Fund may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or on
exchanges located outside the United States, such as the London International
Financial Futures Exchange and the Sydney Futures Exchange Limited. Foreign
markets may offer advantages such as trading opportunities or arbitrage
possibilities not available in the United States. Foreign markets, however, may
have greater risk potential than domestic markets. For example, some foreign
exchanges are principal markets so that no common clearing facility exists and
an investor may look only to the broker for performance of the contract. In
addition, any profits that the Fund might realize in trading could be eliminated
by adverse changes in the exchange rate, or the Fund could incur losses as a
result of those changes. Transactions on foreign exchanges may include both
commodities which are traded on domestic exchanges and those which are not.
Unlike trading on domestic commodity exchanges, trading on foreign commodity
exchanges is not regulated by the Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. Although the Fund
intends to purchase or sell futures contracts only if there is an active market
for such contracts, no assurance can be given that a liquid market will exist
for any particular contract at any particular time. Many futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that limit
or trading may be suspended for specified periods during the trading day.
Futures contract prices could move to the limit for several consecutive trading
days with
5
<PAGE>
little or no trading, thereby preventing prompt liquidation of futures positions
and potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market,
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate cash or high quality
money market instruments in connection with its commodities transactions in an
amount generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability otherwise to
invest those assets.
SPECIFIC FUTURES TRANSACTIONS. The Fund may purchase and sell stock index
futures contracts. A stock index future obligates the Fund to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures contract
multiplied by the difference between the settlement price of the contract on the
contract's last trading day and the value of the index based on the stock prices
of the securities that comprise it at the opening of trading in such securities
on the next business day.
The Fund may purchase and sell interest rate futures contracts. An interest
rate future obligates the Fund to purchase or sell an amount of a specific debt
security at a future date at a specific price.
The Fund may purchase and sell currency futures. A foreign currency future
obligates the Fund to purchase or sell an amount of a specific currency at a
future date at a specific price.
OPTIONS -- IN GENERAL. The Fund may purchase and write (I.E., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, the
underlying security or securities at the exercise price at any time during the
option period.
A covered call option written by the Fund is a call option with respect to
which the Fund owns the underlying security or otherwise covers the transaction
by segregating cash or other securities. A put option written by the Fund is
covered when, among other things, cash or liquid securities having a value equal
to or greater than the exercise price of the option are placed in a segregated
account with the Fund's custodian to fulfill the obligation undertaken. The
principal reason for writing covered call and put options is to realize, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. The Fund receives a premium from writing covered
call or put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS. The Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or traded
in the over-the-counter market. An option on a stock index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the
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<PAGE>
exercise price of the option. Thus, the effectiveness of purchasing or writing
stock index options will depend upon price movements in the level of the index
rather than the price of a particular stock.
The Fund may purchase and sell call and put options on foreign currency.
These options convey the right to buy or sell the underlying currency at a price
which is expected to be lower or higher than the spot price of the currency at
the time the option is exercised or expires.
The Fund may purchase cash-settlement options on interest rate swaps,
interest rate swaps denominated in foreign currency and equity index swaps in
pursuit of its investment objective. Interest rate swaps involve the exchange by
the Fund with another party of their respective commitments to pay or receive
interest (for example, an exchange of floating-rate payments for fixed-rate
payments) denominated in U.S. dollars or foreign currency. Equity index swaps
involve the exchange by the Fund with another party of cash flows based upon the
performance of an index or a portion of an index of securities which usually
includes dividends. A cash-settled option on a swap gives the purchaser the
right, but not the obligation, in return for the premium paid, to receive an
amount of cash equal to the value of the underlying swap as of the exercise
date. These options typically are purchased in privately negotiated transactions
from financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the ability of
Northstar and the subadviser to predict correctly movements in the prices of
individual stocks, the stock market generally, foreign currencies or interest
rates. To the extent the Manager's predictions are incorrect, the Fund may incur
losses.
SHORT SALES. A Fund may make short sales "against the box." A short-sale is
a transaction in which a party sells a security it does not own in anticipation
of decline in the market value of that security. A short sale is "against the
box" to the extent that the Fund contemporaneously owns or has the right to
obtain securities identical to those sold short. When the Fund makes a short
sale, it must borrow the security sold short and deliver it to the broker-dealer
through which it made the short sale as collateral for its obligation to deliver
the security upon conclusion of the sale. The Fund may have to pay a fee to
borrow particular securities, and is often obligated to pay over any accrued
interest on such borrowed securities.
PRIVATELY ISSUED COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS, INTEREST
OBLIGATIONS AND PRINCIPAL OBLIGATIONS. Each of High Total Return Fund and Income
and Growth Fund may invest up to 5% of its net assets in Privately Issued
Collateralized Mortgage-Backed Obligations ("CMOs"), Interest Obligations
("IOs") and Principal Obligations ("POs") when Northstar believes that such
investments are consistent with the Fund's investment objective. Collateralized
mortgage obligations or "CMOs" are debt obligations collateralized by mortgage
loans or mortgage pass-through securities. Typically, privately issued CMOs are
collateralized by Ginnie Mae, Fannie Mae or Freddie Mac Certificates, but also
may be collateralized by whole loans or private pass-throughs (such collateral
collectively hereinafter referred to as "Mortgage Assets"). Privately issued
CMOs are per se illiquid. Multi-class pass-through securities are equity
interest in a trust composed of Mortgage Assets. Unless the context indicates
otherwise, all references herein to CMOs include multi-class pass-thorough
securities. Payments of principal of and interest on the Mortgage Assets, and
any reinvestment income thereon, are the source of funds used to pay debt
service on the CMOs or make scheduled distribution on the multi-class
pass-through securities.
On a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. The principal of and interest on the Mortgage Assets may be allocated
among the several classes of a series of a CMO in innumerable ways. The Funds
may also invest in, among others, parallel pay CMOs and Planned Amortization
Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments
of principal on each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated maturity date or final
distribution date of each class, which, as with other CMO structures, must be
retired by its stated maturity date or final distribution date but may be
retired earlier. PAC Bonds generally call for payments of a specified amount of
principal on each payment date.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
U.S. government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
SMBS are structured with two or more classes of securities that receive
different proportions of the interest and principal distributions on a pool of
Mortgage Assets. A common type of SMBS will have at least one class receiving
only a small portion of the interest and a larger portion of the principal from
the Mortgage Assets, while the other classes will receive primarily interest and
only a small portion of the principal. In the most extreme case, one class will
receive all of the interest (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying Mortgage Assets,
7
<PAGE>
and a rapid rate of principal payments may have a material adverse effect on
such security's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, a Fund may fail to recoup
fully its initial investment in these securities. The determination of whether a
particular government-issued IO or PO backed by fixed-rate mortgage is liquid is
made by Northstar under guidelines and standards established by the Board of
Trustees. Such a security may be deemed liquid if it can be disposed of promptly
in the ordinary course of business at a value reasonably close to that used in
the calculation of net asset value per share.
INDEX WARRANTS. The Strategic Income Fund may purchase put warrants and
call warrants whose values vary depending on the change in the value of one or
more specified securities indices ("index warrants"). Index warrants are
generally issued by banks or other financial institutions and give the holder
the right, at any time during the term of the warrant, to receive upon exercise
of the warrant a cash payment from the issuer, based on the value of the
underlying index at the time of exercise. In general, if the value of the
underlying index rises above the exercise price of the index warrant, the holder
of a call warrant will be entitled to receive a cash payment from the issuer
upon exercise, based on the difference between the value of the index and the
exercise price of the warrant; if the value of the underlying index falls, the
holder of a put warrant will be entitled to receive a cash payment from the
issuer upon exercise, based on the difference between the exercise price of the
warrant and the value of the index. The holder of a warrant would not be
entitled to any payments from the issuer at any time when, in the case of a call
warrant, the exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than the value of
the underlying index. If the Strategic Income Fund were not to exercise an index
warrant prior to its expiration, then the Fund would lose the amount of the
purchase price paid by it for the warrant. The Strategic Income Fund will
normally use index warrants in a manner similar to its use of options on
securities indices. The risks of the Fund's use of index warrants are generally
similar to those relating to its use of index options. Unlike most index
options, however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only by the credit of
the bank or other institution that issues the warrant. Also, index warrants
generally have longer terms than index options. Although the Strategic Income
Fund will normally invest only in exchange-listed warrants, index warrants are
not likely to be as liquid as certain index options backed by a recognized
clearing agency. In addition, the terms of index warrants may limit the Fund's
ability to exercise the warrants at such time, or in such quantities, as the
Fund would otherwise wish to do.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and at an agreed
upon yield. Northstar will use standards set by the relevant Fund's Trustees in
reviewing the creditworthiness of parties to repurchase agreements with such
Fund. In addition, no more than an aggregate of 15% of a Fund's net assets, at
the time of investment, will be invested in illiquid investments, including
repurchase agreements having maturities longer than seven days. In the event of
failure of the executing bank or broker-dealer, a Fund could experience some
delay in obtaining direct ownership of the underlying collateral and might incur
a loss if the value of the security should decline, as well as costs in
disposing of the security.
Pursuant to an Exemptive Order under Section 17(d) and Rule 17d-1 obtained
by the Funds, excluding the Strategic Income Fund and the Northstar Trust, on
March 5, 1991, such Funds may deposit uninvested cash balances into a single
joint account to be used to enter into repurchase agreements.
As an alternative to using repurchase agreements, a Fund may, from time to
time, invest up to 5% of its assets in money market investment companies
sponsored by a third party for short-term liquidity purposes. Such investments
are subject to the non-fundamental investment limitations described herein.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS. The Funds may
enter into reverse repurchase agreements and dollar roll agreements. Under a
reverse repurchase agreement or a dollar roll agreement, a Fund sells securities
and agrees to repurchase them, or substantially similar securities in the case
of a dollar roll agreement, at a mutually agreed upon date and price. At the
time the Fund enters into a reverse repurchase or dollar roll agreement, it will
establish and maintain a segregated account with its custodian, containing cash,
U.S. Government Securities, or other liquid assets from its portfolio, having a
value not less than the repurchase price (including accrued interest). The Funds
do not account for dollar rolls as a borrowing.
These agreements may involve the risk that the market value of the
securities to be repurchased by a Fund may decline below the price at which the
Fund is obligated to repurchase. Also, in the event the buyer of securities
under a reverse repurchase agreement or a dollar roll agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the reverse repurchase agreement or the dollar roll agreement may effectively be
restricted pending such a decision.
LENDING PORTFOLIO SECURITIES. A Fund may lend portfolio securities to
broker-dealers and other financial institutions in an amount up to one-third of
the value of its total assets, provided that such loans are callable at any time
by the Fund and are at all
8
<PAGE>
times secured by collateral held by the Fund at least equal to the market value,
determined daily, of the loaned securities. A Fund will continue to receive any
income on the loaned securities, while simultaneously earning interest on cash
collateral (which will be invested in short-term debt obligations) or a
securities lending fee (in the case of collateral in the form of U.S. Government
Securities).
There may be risks of delay in recovery of the loaned securities and, in
some cases, loss of rights in the collateral should the borrower of the
securities fail financially. Loans of portfolio securities will only be made to
firms considered by Northstar to be creditworthy under guidelines adopted by the
Trustees.
FIRM COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Fund, except the
Government Securities Fund, may enter into firm commitment agreements to
purchase securities at an agreed-upon price on a specified future date. An
amount of cash or short-term U.S. Government Securities equal to the Fund's
commitment will be deposited in a segregated account at the Fund's custodian
bank to secure the Fund's obligation. Although a Fund will generally enter into
firm commitments to purchase securities with the intention of actually acquiring
the securities for its portfolio (or for delivery pursuant to options
contracts it has entered into), the Fund may dispose of a security prior to
settlement if Northstar deems it advisable to do so. A Fund entering into the
forward commitment may realize short-term gains or losses in connection with
such sales.
A Fund may enter into To Be Announced ("TBA") sale commitments wherein the
unit price and the estimated principal amount are established upon entering into
the contract, with the actual principal amount being within a specified range of
the estimate. A Fund will enter into TBA sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, the Fund will maintain, in a segregated account, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. Unsettled
TBA sale commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the acquisition of an
offsetting purchase commitment, the Fund realizes a gain or loss on the
commitment without regard to any unrealized gain or loss on the underlying
security. If the Fund delivers securities under the commitment, the Fund
realizes a gain or loss from the sale of the securities, based upon the unit
price established at the date the commitment was entered into.
A Fund may also purchase securities on a when-issued or delayed delivery
basis. In such transactions, the price is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place at a
later date, normally within one month. The value of the security on the
settlement date may be more or less than the price paid as a result of, among
other things, changes in the level of interest rates or other market factors.
Accordingly, there is a risk of loss, which is in addition to the risk of
decline in the value of the Fund's other assets. The Fund will establish a
segregated account with its custodian in which it will maintain cash and
marketable securities equal in value to commitments for when-issued or delayed
delivery securities. While when-issued or delayed delivery securities may be
sold prior to the settlement date, it is intended that a Fund will purchase such
securities with the purpose of actually acquiring them, unless a sale appears
desirable for investment reasons.
FLOATING OR VARIABLE RATE INSTRUMENTS. The Funds may purchase floating or
variable rate bonds, which normally provide that the holder can demand payment
of the obligation on short notice at par with accrued interest. Such bonds are
frequently secured by letters of credit or other credit support arrangements
provided by banks. Floating or variable rate instruments provide for adjustments
in the interest rate at specified intervals (weekly, monthly, semiannually,
etc.). A Fund would anticipate using these bonds as cash equivalents, pending
longer term investment of its funds. Other longer term fixed-rate bonds, with a
right of the holder to request redemption at certain times (often annually,
after the lapse of an intermediate term), may also be purchased by a Fund. These
bonds are more defensive than conventional long-term bonds (protecting to some
degree against a rise in interest rates), while providing greater opportunity
than comparable intermediate term bonds since the Fund may retain the bond if
interest rates decline. By acquiring these kinds of bonds, a Fund obtains the
contractual right to require the issuer of the security, or some other person
(other than a broker or dealer), to purchase the security at an agreed upon
price, which right is contained in the obligation itself rather than in a
separate agreement with the seller or some other person.
ZERO COUPON SECURITIES. Zero coupon securities are fixed income securities
that have been stripped of their unmatured interest coupons. Zero coupon
securities are sold at a (usually substantial) discount and redeemed at face
value at their maturity date without interim cash payments of interest or
principal. The amount of this discount is accredited over the life of the
security, and the accretion constitutes the income earned on the security for
both accounting and tax purposes. Because of these features, the market prices
of zero coupon securities are generally more volatile than the market prices of
securities that have a similar maturity but that pay interest periodically. Zero
coupon securities are likely to respond to a greater degree to interest rate
changes than are non-zero coupon securities with similar maturity and credit
qualities. Each Fund may invest a portion of its total assets in "zero coupon"
Treasury securities, which consist of Treasury bills or stripped interest or
principal components of U.S. Treasury bonds or notes.
9
<PAGE>
Zero coupon Treasury bonds or notes consist of stripped interest or
principal components held in STRIPS form issued through the U.S. Treasury's
STRIPS program, which permits the beneficial ownership of the component to be
recorded directly in the Treasury book-entry system. The Funds may also purchase
custodial receipts evidencing beneficial ownership of direct interests in
component parts of U.S. Treasury bonds or notes held by a bank in a custodian or
trust account.
ADDITIONAL INFORMATION ON GNMAS. The Funds may invest in U.S. Government
Securities, which are obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. A substantial portion of the assets of the
Government Securities Fund have, at various times, been invested in obligations
of the Government National Mortgage Association (popularly called GNMAs or
Ginnie Maes). All of the other Funds may also invest in GNMAs from time to time.
GNMAs are mortgage backed securities representing part ownership of a pool
of mortgage loans, in which the timely payment of principal and interest is
guaranteed by the full faith and credit of the U.S. Government. GNMA may borrow
U.S. Treasury funds to the extent needed to make payments under the guarantee.
The Funds purchase "modified pass-through" type GNMA Certificates for which
principal and interest are guaranteed, rather than the "straight pass through"
Certificates for which such guarantee is not available. The Funds also purchase
"variable rate" GNMA Certificates and may purchase other types that may be used
with GNMA's guarantee.
When mortgages in the pool underlying a GNMA Certificate are prepaid by
mortgagors or when foreclosure occurs, such principal payments are passed
through to the Certificate holders (such as a Fund). Accordingly, the life of
the GNMA Certificate is likely to be substantially shorter than the stated
maturity of the mortgages in the underlying pool, which will have maturities of
up to 30 years. Because of such variation in prepayment rights, it is not
possible to accurately predict the life of a particular GNMA Certificate.
Payments to holders of GNMA Certificates consist of the monthly
distributions of interest and principal, less the GNMA and issuer's fees. The
portion of the monthly payment that represents a return of principal may be
reinvested by a Fund holding the GNMA in then-available GNMA obligations, which
may bear interest at a rate higher or lower than the obligation from which the
payment was received, or in a differing security. The actual yield to be earned
by the holder of a GNMA Certificate is calculated by dividing such payments by
the purchase price paid for the GNMA Certificate (which may be at a premium or a
discount from the face value of the Certificate). Unpredictable prepayments of
principal, however, can greatly change realized yields. In a period of declining
interest rates it is more likely that mortgages contained in GNMA pools will be
prepaid, thus reducing the effective yield. Moreover, any premium paid on the
purchase of a GNMA Certificate will be lost if the obligation is prepaid. In
periods of falling interest rates, this potential for prepayment may reduce the
general upward price increase of GNMA Certificates that might otherwise occur.
As with other debt instruments, the price of GNMA Certificates is likely to
decrease in times of rising interest rates. Price changes of the GNMA
Certificates held by a Fund have a direct impact on the net asset value per
share of the Fund.
When interest rates rise, the value of a GNMA Certificate will generally
decline. Conversely, when rates fall, the GNMA Certificate value may rise,
although not as much as other debt issues, due to the prepayment feature. As a
result, the price per share the shareholder receives on redemption may be more
or less than the price paid for the shares. The dividends per share paid by the
Government Securities Fund may also vary.
ADDITIONAL INFORMATION ON FOREIGN SECURITIES. Each Fund, except Government
Securities Fund, may invest in securities of foreign issuers. Each of these
Funds other than Strategic Income, High Yield, and High Total Return may invest
up to 20% of its net assets in foreign securities, of which 10% of its net
assets may be invested in foreign securities that are not listed on a U.S.
securities exchange. Strategic Income may invest up to 60% of its assets in
securities of foreign issuers, High Total Return may invest up to 50% and High
Yield up to 35% of its total assets. Eurodollar certificates of deposit are
excluded for purposes of this limitation for Strategic Income.
ADDITIONAL INFORMATION ON HIGH YIELD SECURITIES. Balance Sheet
Opportunities Fund, Strategic Income Fund, High Yield Fund and High Total Return
Fund each may invest in lower-rated fixed income securities to the extent
described in the Prospectus. The lower ratings of certain securities held by
these Funds reflect a greater possibility that adverse changes in the financial
condition of the issuer or economic conditions in general, or both, or an
unanticipated rise in interest rates, may impair the ability of the issuer to
make payments of interest and principal. The inability (or perceived inability)
of issuers to make timely payment of interest and principal would likely make
the values of securities held by these Funds more volatile and could limit a
Fund's ability to sell its securities at prices approximating the values the
Fund had placed on such securities. In the absence of a liquid trading market
for the securities held by it, a Fund may be unable at times to establish the
fair value of such securities. The rating assigned to a security by Moody's
Investors Service, Inc. or S & P (or by any other nationally recognized
securities rating organization) does not reflect an assessment of the volatility
of the security's market value or the liquidity of an investment in the
security. See the Appendix to the Prospectus for a description of security
ratings.
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<PAGE>
Like those of other fixed income securities, the values of lower-rated
securities fluctuate in response to changes in interest rates. Thus, a decrease
in interest rates will generally result in an increase in the value of a Fund's
assets. Conversely, during periods of rising interest rates, the value of a
Fund's assets will generally decline. In addition, the values of such securities
are also affected by changes in general economic conditions and business
conditions affecting the specific industries of their issuers. Changes by
recognized rating services in their ratings of any fixed income security and in
the ability of an issuer to make payments of interest and principal may also
affect the value of these investments. Changes in the value of portfolio
securities generally will not affect cash income derived from such securities,
but will effect a Fund's net asset value. A Fund will not necessarily dispose of
a security when its rating is reduced below its rating at the time of purchase,
although Northstar will monitor the investment to determine whether its
retention will assist in meeting a Fund's investment objective.
Certain securities held by a Fund may permit the issuer at its option to
call, or redeem, its securities. If an issuer were to redeem securities held by
a Fund during a time of declining interest rates, the Fund may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
LOAN PARTICIPATIONS AND ASSIGNMENTS. Each Fund may invest in loan
participations and loan assignments. A Fund's investment in loan participations
typically will result in the Fund having a contractual relationship only with
the Lender and not with the borrower. The Fund will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participations and only upon receipt by the Lender of the
payments from the borrower. In connection with purchasing Participations, the
Fund generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan, nor any right of set-off
against the borrower, and the Fund may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund may be subject to the credit risk of both the borrower and the Lender
that is selling the Participation. In the event of the insolvency of the Lender
selling a Participation, the Fund may be treated as a general creditor of the
Lender and may not benefit from any set-off between the Lender and the borrower.
When a Fund purchases a loan assignment from Lenders, it will acquire
direct rights against the borrowers on the Loan. Because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender. Because there is no liquid market for such securities,
the Funds anticipate that such securities could be sold only to a limited number
of institutional investors. The lack of a liquid secondary market may have an
adverse impact on the value of such securities and a Fund's ability to dispose
of particular assignments or participations when necessary to meet redemptions
of Fund shares, to meet the Fund's liquidity needs or when necessary in response
to a specific economic event, such as deterioration in the creditworthiness of
the borrower. The lack of a liquid secondary market for assignments and
participations also may make it more difficult for a Fund to value these
securities for purposes of calculating its net asset value.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Northstar, and Subadviser in the case of Special Fund and Growth + Value
Fund, places orders for the purchase and sale of the Funds' securities,
supervises their execution and negotiates brokerage commissions on behalf of
each Fund. For purposes of the remainder of this section, "Portfolio
Transactions and Brokerage Allocation," discussion of Northstar includes the
Subadviser, but only with respect to Special Fund and Growth + Value Fund. It is
the practice of Northstar to seek the best prices and best execution of orders
and to negotiate brokerage commissions that in the Adviser's opinion, are
reasonable in relation to the value of the brokerage services provided by the
executing broker. Brokers who have executed orders for the Funds are asked to
quote a fair commission for their services. If the execution is satisfactory and
if the requested rate approximates rates currently being quoted by the other
brokers selected by Northstar, the rate is deemed by Northstar to be reasonable.
Brokers may ask for higher rates of commission if all or a portion of the
securities involved in the transaction are positioned by the broker, if the
broker believes it has brought a Fund an unusually favorable trading
opportunity, or if the broker regards its research services as being of
exceptional value and payment of such commissions is authorized by Northstar
after the transaction has been consummated. If Northstar more than occasionally
differs with the broker's appraisal of opportunity or value, the broker would
not be selected to execute trades in the future. Northstar believes that each
Fund benefits with a securities industry comprised of many and diverse firms and
that the longterm interest of shareholders of the Funds is best served by its
brokerage policies that include paying a fair commission, rather than seeking to
exploit its leverage to force the lowest possible commission rate.
Over-the-counter purchases and sales are transacted directly with principal
market-makers, except in those circumstances where, in the opinion of Northstar,
better prices and execution are available elsewhere.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income
11
<PAGE>
markets and equity markets, specific industry groups and individual
issues. Research services will vary from firm to firm, with broadest
coverage generally from the large full-line firms. Smaller firms, in
general, tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor federal,
state, local and foreign political developments; many of the brokers also
provide access to outside consultants. The outside research assistance is
particularly useful to the Adviser's staff, since the brokers, as a group, tend
to monitor a broader universe of securities and other matters than the Adviser's
staff can follow. In addition, the outside research provides Northstar with a
diverse perspective on financial markets. Research and investment information is
provided by these and other brokers at no cost to Northstar and is available for
the benefit of other accounts advised by Northstar and its affiliates; and not
all of this information will be used in connection with the Funds. While this
information may be useful in varying degrees and may tend to reduce the
Adviser's expenses, it is not possible to estimate its value, and, in the
opinion of Northstar, it does not reduce the Adviser's expenses by a
determinable amount. The extent to which Northstar makes use of statistical,
research and other services furnished by brokers is considered by Northstar in
the allocation of brokerage business, but there is no formula by which such
business is allocated. Northstar does so in accordance with its judgment of the
best interests of the Funds and their shareholders.
Purchases and sales of fixed income securities will usually be principal
transactions. Such securities often will be purchased or sold from or to dealers
serving as market makers for the securities at a net price. Each Fund will also
purchase such securities in underwritten offerings and will, on occasion,
purchase securities directly from the issuer. Generally, fixed income securities
are traded on a net basis and do not involve brokerage commissions. The cost of
executing fixed income securities transactions consists primarily of dealer
spreads and underwriting commissions.
In purchasing and selling fixed income securities, it is the policy of each
Fund to obtain the best results, while taking into account the dealer's general
execution and operational facilities, the type of transaction involved and other
factors, such as the dealer's risk in positioning the securities involved. While
Northstar generally seeks reasonably competitive spreads or commissions, the
Funds will not necessarily pay the lowest spread or commission available.
Each Fund may, under circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer that has
provided statistical or other research services to the Funds. By allocating
transactions in this manner, Northstar is able to supplement its research and
analysis with the views and information of other securities firms. During the
fiscal years ended October 31, 1996 and December 31, 1996, respectively, each of
the Funds listed below paid the total brokerage commissions indicated below,
including, in the case of the Special, Growth, Balance Sheet Opportunities,
Government Securities, Strategic Income, and High Yield Funds, commissions to
Advest, Inc. ("Advest"), an affiliate of the Funds' former investment adviser.
BROKERAGE COMMISSIONS PAID DURING MOST RECENT FISCAL YEARS
<TABLE>
<CAPTION>
OCTOBER 31,
1996 1995
<S> <C> <C>
Income and Growth Fund................................................................... $507,638 $249,474
High Total Return Fund................................................................... $ 11,433 $ 0
<CAPTION>
DECEMBER 31,
1996 1995
Special Fund............................................................................. $479,135 $ 87,375
Growth Fund.............................................................................. $124,024 $241,864
Balance Sheet Opportunities Fund......................................................... $ 90,283 $ 88,151
Government Securities Fund............................................................... $ 1,049 $ 0
Strategic Income Fund.................................................................... $ 0 $ 552
High Yield Fund.......................................................................... $ 16,591 $ 12,763
</TABLE>
A change in securities held in the portfolio of a Fund is known as
"Portfolio Turnover" and may involve the payment by a Fund of dealer markups or
brokerage or underwriting commissions and other transaction costs on the sale of
securities, as well as on the reinvestment of the proceeds in other securities.
Portfolio turnover rate for a fiscal year is the percentage determined by
dividing the lesser of the cost of purchases or proceeds from sales of portfolio
securities by the average of the value of portfolio securities during such year,
all excluding securities whose maturities at acquisition were one year or less.
Each Fund cannot accurately predict its portfolio turnover rate, but Northstar
anticipates that each Fund's rate will not exceed 100% under normal market
conditions. A 100% annual turnover rate would occur, for example, if all the
securities in the portfolio were replaced once in a period of one year. A Fund's
portfolio turnover rate may be higher than that described above if a Fund finds
it necessary to significantly change its portfolio to adopt a temporary
defensive position or respond to economic or market events. A high
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<PAGE>
turnover rate would increase commission expenses and may involve realization of
gains that would be taxable to shareholders. The ability of a Fund to make
purchases and sales of securities and to engage in options and futures
transactions will be limited by certain requirements of the Code, including a
requirement that less than 30% of the Fund's annual gross income be derived from
gains on the sale of securities and certain other assets held for less than
three months.
SERVICES OF NORTHSTAR, THE SUBADVISERS AND THE ADMINISTRATOR
Pursuant to an Investment Advisory Agreement with each Fund, Northstar
Investment Management Corporation acts as the investment adviser to each Fund.
In this capacity, Northstar, subject to the authority of the Trustees of the
Funds, and subject to delegation of certain responsibilities to Navellier Fund
Management, Inc. as the subadviser for the Special Fund and the Growth + Value
Fund and Wilson/Bennett Capital Management, Inc. as the subadviser for the
Income and Growth Fund, is responsible for furnishing continuous investment
supervision to the Funds and is responsible for the management of each Fund's
portfolio.
Northstar is an indirect, majority-owned subsidiary of ReliaStar Financial
Corp. ("ReliaStar"). Combined minority interests in Northstar held by members of
senior management of ReliaStar currently equal 20%. ReliaStar is a publicly
traded holding company whose subsidiaries specialize in the life insurance
business. Through ReliaStar Life Insurance Company ("ReliaStar Life") and other
subsidiaries, ReliaStar issues and distributes individual life insurance and
annuities, group life and health insurance and life and health reinsurance, and
provides related investment management services. The address of Northstar is Two
Pickwick Plaza, Greenwich, Connecticut 06830. The address of ReliaStar is 20
Washington Avenue South, Minneapolis, Minnesota 55401.
Northstar charges a fee under each advisory agreement to Government
Securities Fund, High Yield Fund, Balance Sheet Opportunities Fund, Strategic
Income Fund, Growth Fund, Special Fund and Growth + Value Fund at an annual
rate, after voluntary waivers or expense reimbursements, of 0.45%, 0.45%, 0.65%,
0.65%, 0.75%, 0.75% and 1.00% of such Fund's average daily net assets,
respectively. This fee is accrued daily and payable monthly.
Northstar charges a fee to the Income and Growth Fund and High Total Return
Fund at the annual rate of 0.75% on the first $250,000,000 of aggregate average
daily net assets of each Fund, 0.70% on the next $250,000,000 of such assets,
0.65% on the next $250,000,000 of such assets; 0.60% on the next $250,000,000 of
such assets, and 0.55% on the remaining aggregate daily net assets of each Fund
in excess of $1 billion.
Northstar has agreed that if, in any fiscal year, the aggregate expenses of
a Fund, exclusive of taxes, distribution fees, brokerage, interest and (with the
prior consent of any necessary state securities commissions) extraordinary
expenses, but including the management fee, exceed the most restrictive expense
limitations applicable to the Fund under state securities laws or published
regulations thereunder, Northstar will refund on a proportionate basis to the
Fund whose expenses exceeded such limitation the excess over such amount up to
the total fee received by Northstar. Currently, the most restrictive of such
limitations would require Northstar to reimburse such a Fund to the extent that
in any fiscal year such aggregate expenses exceed 2.5% of the first $30,000,000
of the average net assets, 2.0% of the next $70,000,000 of the average net
assets and 1.5% of any amount of the average net assets in excess of
$100,000,000.
The Investment Advisory Agreement for the Income and Growth Fund and High
Total Return Fund was originally approved by the Trustees of the Northstar Trust
on October 23, 1993, and by the sole Shareholder of the Northstar Income and
Growth Fund, and High Total Return Fund on November 8, 1993. The Investment
Advisory Agreement continued in effect for a period of two years and was renewed
by the Trustees for one year on October 31, 1995. It will continue in effect
from year to year if specifically approved annually by (a) the Trustees, acting
separately on behalf of each Fund, including a majority of the Disinterested
Trustees, or (b) a majority of the outstanding voting securities of each class
of each Fund as defined in the 1940 Act.
The Investment Advisory Agreement for the Growth + Value Fund was approved
by the Trustees on July 31, 1996. The Investment Advisory Agreement will
continue in effect for a period of two years and annually thereafter if
specifically approved annually by (a) the Trustees, acting separately on behalf
of the Fund, including a majority of the Disinterested Trustees, or (b) a
majority of the outstanding voting securities of each class of the Fund as
defined in the 1940 Act.
Each Investment Advisory Agreement for the remaining Funds was approved by
the Trustees of the affected Fund on March 1, 1995 and by the shareholders of
such Fund on June 2, 1995. Each such Investment Advisory Agreement will continue
in effect until June 2, 1997, and thereafter, will continue in effect from year
to year if specifically approved annually by (a) the Trustees, acting separately
on behalf of the particular Fund, including a majority of the Disinterested
Trustees, or (b) a majority of the outstanding voting securities of each class
of such Fund as defined in the 1940 Act.
A Fund's Investment Advisory Agreement may be terminated as to any class,
without penalty and at any time, by a similar vote upon not more than 60 days'
nor less than 30 days' written notice by Northstar, the Trustees, or a majority
of the outstanding
13
<PAGE>
voting securities of such class of such Fund as defined in the 1940 Act.
Such agreement will automatically terminate in the event of its assignment,
as defined in Section 2(a)(4) of the 1940 Act.
Pursuant to separate Subadvisory Agreements between Northstar and Navellier
Fund Management, Inc., dated February 1, 1996, and July 31, 1996, Navellier acts
as subadviser to Special Fund and Growth + Value Fund, respectively. In this
capacity, Navellier Fund Management, Inc., subject to the supervision and
control of Northstar and the Trustees of such Funds, will manage the Funds'
portfolio investments, consistently with their investment objective, and will
execute any of the Funds' investment policies that it deems appropriate to
utilize from time to time. Fees payable under the Subadvisory Agreement will
accrue daily and be paid monthly by Northstar. As compensation for its services,
Northstar will pay the Subadviser at the annual rate of 0.48% and 0.64% of the
average daily net assets of Special Fund and Growth + Value Fund, respectively.
The Subadviser is wholly-owned and controlled by its sole stockholder, Louis G.
Navellier. The Subadviser's address is: 1 East Liberty, Third Floor, Reno,
Nevada, 89501. The Subadvisory Agreement for Special Fund was approved by the
Trustees of the Fund on December 1, 1995, and by vote of the Shareholders of the
Fund on January 30, 1996. The Subadvisory Agreement for Growth + Value Fund was
approved by the Trustees of the Fund on July 31, 1996. Each Subadvisory
Agreement may be terminated without payment of any penalty by Northstar,
Navellier, the Trustees of such Fund, or the shareholders of such Fund on not
more than 60 days' and not less than 30 days' prior written notice. Otherwise,
each Subadvisory Agreement will remain in effect for two years and will,
thereafter, continue in effect from year to year, subject to the annual approval
of the Trustees of the applicable Fund, or the vote of a majority of the
outstanding voting securities of such Fund, and the vote, cast in person at a
meeting duly called and held, of a majority of the Trustees of such Fund who are
not parties to the Subadvisory Agreement or "interested persons" (as defined in
the 1940 Act) of any such Party.
Wilson/Bennett Capital Management, Inc. ("Wilson/Bennett"), serves as
subadviser with respect to the common stock portion of the Income and Growth
Fund pursuant to a Subadvisory Agreement dated July 31, 1996 between Northstar
and Wilson/Bennett. Northstar will make all determinations as to the allocation
of the Fund's assets, will direct all trades and will manage the portion of the
Fund's assets in convertible and fixed income securities. Wilson/Bennett's
principal address is Suite 250, 8260 Greensboro Drive, McLean, Virginia 22102.
Wilson/Bennett currently manages approximately $111 million of assets for
individuals, pension plans and corporations. For its services, Wilson/Bennett
will receive from Northstar, not the Funds, a monthly fee at an annual rate
equal to 0.20% of the first $125 million of average daily net assets of the Fund
managed by Wilson/Bennett, 0.25% of the next $125 million, and 0.30% for assets
in excess of $250 million. The Subadvisory Agreement for Income and Growth Fund
was approved by the Trustees of the Fund on April 25, 1996 , and by vote of the
shareholders of the Fund on July 15, 1996. The Subadvisory Agreement may be
terminated without payment of any penalty by Northstar, Wilson/Bennett, the
Trustees of the Fund, or the shareholders of the Fund on not more than 60 days'
and not less than 30 days' prior written notice. Otherwise, the Subadvisory
Agreement will remain in effect for two years and will, thereafter, continue in
effect from year to year, subject to the annual approval of the Trustees of the
Fund, or the vote of a majority of the outstanding voting securities of the
Fund, and the vote, cast in person at a meeting duly called and held, of a
majority of the Trustees of the Fund who are not parties to the Subadvisory
Agreement or "interested persons" (as defined in the 1940 Act) of any such
Party.
Northstar Administrators Corporation serves as administrator for the Funds,
pursuant to an Administrative Services Agreement with each Fund. Subject to the
supervision of the Board of Trustees, the Administrator provides the overall
business management and administrative services necessary to the proper conduct
of the Funds' business, except for those services performed by Northstar under
the Investment Advisory Agreements, the custodian for the Funds under the
Custodian Agreements, the transfer agent for the Funds under the Transfer Agency
Agreements, and such other service providers as may be retained by the Funds
from time to time. The Administrator acts as liaison among these service
providers to the Funds. The Administrator is also responsible for ensuring that
the Funds operate in compliance with applicable legal requirements and for
monitoring Northstar for compliance with requirements under applicable law and
with the investment policies and restrictions of the Funds. The Administrator is
an affiliate of Northstar. The address of the Administrator is: Two Pickwick
Plaza, Greenwich, Connecticut 06830.
The Administrative Services Agreement was approved by the Trustees of the
Trust on behalf of the Income and Growth Fund and High Total Return Fund on
October 23, 1993, and continued in effect for a period of two years. The
Agreement was renewed by the Trustees for one year on October 31, 1995 and will
continue in effect from year to year thereafter, provided such continuance is
approved annually by a majority of the Trustees of the Trust. The
Administrator's fee is accrued daily against the value of each Fund's net assets
and is payable by each Fund monthly at an annual rate of .10% of each Fund's
average daily net assets. In addition, the Administrator charges an annual
account fee of $5.00 for each account of beneficial owners of shares in a Fund
for providing certain shareholder services and assisting brokerdealer
shareholder accounts.
Each Administrative Services Agreement for the remaining Funds was approved
by the Trustees of the particular Fund on March 1, 1995. The Agreements provide
that until June 2, 1997, the Administrator will not receive any compensation
under such agreements and thereafter shall receive such compensation as the
Board of Trustees of the Funds may determine. The Agreements
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<PAGE>
will continue in effect until June 2, 1997, and from year to year thereafter,
provided such continuance is approved annually by a majority of the
Disinterested Trustees of the affected Fund.
During the fiscal years ended October 31, 1996 and 1995, the Funds listed
below paid Northstar and the Administrator the following investment advisory and
administrative fees, respectively:
TOTAL ADVISORY AND ADMINISTRATIVE FEES PAID
DURING FISCAL YEAR ENDED OCTOBER 31,
<TABLE>
<CAPTION>
1996 1996 1995 1995
ADVISORY FEES ADMIN. FEE ADVISORY FEE ADMIN. FEE
<S> <C> <C> <C> <C>
Income and Growth............................................... $ 1,548,967 $206,529 $1,158,432 $154,457
High Total Return Fund.......................................... 2,639,662 359,978 941,310 125,508
</TABLE>
Prior to June 5, 1995, the Special, Growth, Balance Sheet Opportunities,
Government Securities, Strategic Income and High Yield Funds were managed by
Boston Security Counselors, Inc. ("BSC") and did not utilize the services of an
administrator. During the fiscal years ended December 31, 1996, 1995, 1994 and
1993, the Funds listed below paid Northstar or BSC the following investment
advisory fees:
TOTAL ADVISORY FEES PAID
DURING FISCAL YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Special Fund (3)....................................................... 1,146,789 287,311(2) 268,139 145,178
Growth Fund (3)........................................................ 575,383 593,282 604,576 517,203
Balance Sheet Opportunities Fund (3)................................... 464,088 477,095 519,729 447,631
Government Securities Fund (1)(3)...................................... 923,929 678,996 747,846 767,370
Strategic Income Fund (3).............................................. 532,941 252,201 57,726 0
High Yield............................................................. 941,594 683,323 622,761 432,063
</TABLE>
(1) Net of waiver of investment advisory fees of $284,286, $301,776, $332,370
and $341,054 for the years ended December 31, 1996, 1995, 1994 and 1993,
respectively.
(2) Does not reflect expense reimbursement of $733.
(3) Does not reflect expense reimbursement of $20,615 for the Special Fund,
$34,126 for the Growth Fund, $41,925 for the Balance Sheet Opportunities
Fund, $15,175 for the Government Securities Fund, and $65,578 for the
Strategic Income Fund for the year ended December 31, 1996 and $57,336 for
the Strategic Income Fund for the year ended December 31, 1995.
NET ASSET VALUE
For each Fund in the Northstar Trust, equity securities are valued at the
last sale price on the exchange or in the principal OTC market in which such
securities are being valued, or lacking any sales, at the last available bid
price. Prices of long-term debt securities are valued on the basis of last
reported sales price, or if no sales are reported, the value is determined based
upon the mean of representative quoted bid or asked prices for such securities
obtained from a quotation reporting system or from established market makers, or
at prices for securities of comparable maturity, quality and type. For the
Northstar Special, Growth, Balance Sheet Opportunities, Government Securities,
Strategic Income and High Yield Funds, portfolio securities, options and futures
contracts and options thereon that are traded on national exchanges or in the
NASDAQ System are valued at the last sale or settlement price on the exchange or
market where primarily traded or, if none that day, at the mean of the last
reported bid and asked prices, using prices as of the close of trading on the
applicable exchange or market. Securities and options that are traded in the otc
market (other than on the NASDAQ System) are valued at the mean of the last
available bid and asked prices. Such valuations are based on quotations of one
or more dealers that make markets in the securities as obtained from such
dealers or from a pricing service. Securities (including OTC options) for which
market quotations are not readily available (which may constitute a major
portion of the High Yield Fund's portfolio) and other assets are valued at their
fair value as determined by or under the direction of the Trustees. Such fair
value may be determined by various methods, including utilizing information
furnished by pricing services that determine calculations for such securities
using methods based, among other things, upon market transactions for comparable
securities and various relationships between securities that are generally
recognized as relevant.
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<PAGE>
The net asset value of each Fund's shares fluctuates and is determined
separately for each class as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m. EST), on each business day that the Exchange
is open. Net asset value per share is computed by determining the value of a
Fund's assets (securities held plus cash and other assets, including dividend
and interest accrued but not received) less all liabilities of the Fund
(including accrued expenses other than class specific expenses), and dividing
the result by the total number of shares outstanding at such time. The specific
expenses borne by each class of shares will be deducted from that class and will
result in different net asset values and dividends. The net asset value per
share of the Class B, Class C and Class T shares of each Fund will generally be
lower than that of the Class A or Class I shares because of the higher
classspecific expenses borne by each of the Class B, Class C and Class T shares.
Under normal market conditions, daily prices for securities are obtained from
independent pricing services, determined by them in accordance with the
registration statement for each Fund. Securities are valued at market value or,
if a market quotation is not readily available, at their fair value, determined
in good faith under procedures established by and under the supervision of the
Trustees. Money market instruments maturing within 60 days are valued using the
amortized cost method of valuation. This involves valuing a security at cost on
the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a Fund
would receive if it sold the instrument. See "How Net Asset Value is Determined"
in the Prospectus.
PURCHASES AND REDEMPTIONS
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are not subject to a frontend or contingent deferred
sales load. There is no sales charge for qualified persons. "Qualified Persons"
are the following (a) active or retired Trustees, Directors, Officers, Partners
or Employees (including immediate family) of (i) Northstar or any of its
affiliated companies, (ii) the Funds or any Northstar affiliated investment
company or (iii) dealers having a sales agreement with the Underwriter, (b)
trustees or custodians of any qualified retirement plan or IRA established for
the benefit of a person in (a) above; (c) dealers, brokers or registered
investment advisers that have entered into an agreement with the Underwriter
providing for the use of shares of the Funds in particular investment products
such as "wrap accounts" or other similar managed accounts for the benefit of the
clients of such brokers, dealers and registered investment advisers, and (d)
pension, profit sharing or other benefit plans created pursuant to a plan
qualified under Section 401 of the Code or plans under Section 457 of the Code,
provided that such shares are purchased by an employer sponsored plan with at
least 50 eligible employees and (e) service providers of (i) Northstar or any
of its affiliated companies or (ii) the Funds or any Northstar affiliated
investment company. Class A shares of the Funds may be purchased at
net asset value, through a dealer, where the amount invested represents
redemption proceeds from another open-end fund sold with a sales load and
the same or similar investment objective, and PROVIDED the following
conditions are met: such redemption occurred no more than 60 days prior
to the purchase of shares of a Northstar Fund, the redeemed shares were
held for at least six months prior to redemption, and the proceeds of
the redemption are sent directly to Northstar or its agent, or maintained
in cash or a money market fund. No commissions will be paid to dealers
in connection with such purchases. There is also no initial sales charge
for "Purchasers" (defined below) if the initial amount invested in the Funds is
at least $1,000,000 or the Purchaser signs a $1,000,000 Letter of Intent, as
hereinafter defined.
REDUCED SALES CHARGES ON CLASS A SHARES. Investors choosing the initial
sales alternative may under certain circumstances be entitled to pay reduced
sales charges. The sales charge varies with the size of the purchase and reduced
charges apply to the aggregate of purchases of a Fund made at one time by any
"Purchaser," which term includes (i) an individual and his/her spouse and their
children under the age of 21, (ii) a trustee or fiduciary purchasing for a
single trust, estate or single fiduciary account (including IRAs, pension,
profit-sharing or other employee benefit trusts created pursuant to a plan
qualified under Section 401 of the Code, a Simplified Employee Pension ("SEP"),
Salary Reduction and other Elective Simplified Employee Pension Accounts
("SARSEP")) and 403(b) and 457 plans, although more than one beneficiary or
participant is involved; and (iii) any other organized group of persons, whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase at a discount of
redeemable securities of a registered investment company. The circumstances
under which "Purchasers" may pay reduced sales charges are described in the
Prospectus.
REDEMPTIONS. The right to redeem shares may be suspended and payment
therefor postponed during periods when the New York Stock Exchange is closed,
other than customary weekend and holiday closings, or, if permitted by rules of
the sec, during periods when trading on the Exchange is restricted, or during
any emergency that makes it impracticable for any Fund to dispose of its
securities or to determine fairly the value of its net assets or during any
other period permitted by order of the sec for the protection of investors.
Furthermore, the Transfer Agent will not mail redemption proceeds until checks
received for shares purchased have cleared, but payment will be forwarded
immediately upon the funds becoming available. Class B, Class C and Class T
shareholders will be subject to the applicable deferred sales charge, if any,
for their shares at the time of redemption.
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<PAGE>
The contingent deferred sales load will be waived with respect to Class T
shares in the following instances: (i) any partial or complete redemption of
shares of a shareholder who dies or becomes disabled, so long as the redemption
is requested within one year of death or the initial determination of
disability; (ii) any partial or complete redemption in connection with
distributions under Individual Retirement Accounts ("IRAS") or other qualified
retirement plans in connection with a lumpsum or other form of distribution
following retirement within the meaning of Section 72(t)(2)(A)(iv) or (v) of the
Code, disability or death, or after attaining the age of 59 1/2 in the case of
an IRA, Keogh Plan or custodial account pursuant to Section 403(b)(7) of the
Code, or on any redemption that results from a taxfree return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Code or Section 4979(f)
of the Code; (iii) redemptions effected pursuant to the Funds' right to
liquidate a shareholder's account if the aggregate net asset value of the shares
held in the account is less than $500; (iv) redemptions effected by (A)
employees of The Advest Group, Inc. ("AGI") and its subsidiaries, (B) IRAs,
Keogh plans and employee benefit plans for those employees, and (C) spouses and
minor children of those employees, so long as orders for shares are placed on
behalf of the spouses or children by the employees; (v) redemptions effected by
accounts managed by investment advisory subsidiaries of agi registered under the
Investment Advisers Act of 1940; and (vi) redemptions in connection with
exchanges of Fund Class T shares, including shares of the Class T account of the
Money Market Portfolio.
EXCHANGES. The following conditions must be met for all exchanges among the
Funds and the Money Market Portfolio: (i) the shares that will be acquired in
the exchange (the "Acquired Shares") are available for sale in the shareholder's
state of residence; (ii) the Acquired shares will be registered to the same
shareholder account as the shares to be surrendered (the "Exchanged Shares");
(iii) the Exchanged Shares must have been held in the shareholder's account for
at least 30 days prior to the exchange; (iv) except for exchanges into the Money
Market Portfolios, the account value of the Fund whose shares are to be acquired
must equal or exceed the minimum initial investment amount required by that Fund
after the exchange is implemented; and (v) a properly executed exchange request
has been received by the Transfer Agent.
Each Fund reserves the right to delay the actual purchase of the Acquired
Shares for up to five business days if it determines that it would be
disadvantaged by an immediate transfer of proceeds from the redemption of
Exchanged Shares. Normally, however, the redemption of Exchanged Shares and the
purchase of Acquired Shares will take place on the day that the exchange request
is received in proper form. Each Fund reserves the right to terminate or modify
its exchange privileges at any time upon prominent notice to shareholders. Such
notice will be given at least 60 days in advance. It is the policy of Northstar
to discourage and prevent frequent trading by shareholders among the Funds in
response to market fluctuations. Accordingly, in order to maintain a stable
asset base in each Fund and to reduce administrative expenses borne by each
Fund, Northstar generally restricts shareholders to a maximum of six exchanges
out of a Fund each calendar year. If a shareholder exceeds this limit, future
exchange requests may be denied.
CONVERSION FEATURE. Class B shares of each Fund will automatically convert
to Class A shares without a sales charge at the relative net asset values of
each of the classes after eight years from the acquisition of the Class B
shares, and as a result, will thereafter be subject to the lower distribution
fee (but same service fee) under the Class A Rule 12b-1 plan for each Fund.
Class T Shares convert to Class A shares at the end of the month that is the
later of (i) eight years after the Class T Shares were purchased or (ii) June 2,
1998.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to so qualify, the Fund must, among
other things, (i) derive each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in stock, securities or currencies;
(ii) derive less than 30% of its gross income each taxable year from the sale or
other disposition of certain assets, including securities, held for less than
three months (the "30% Limitation"); and (iii) at the end of each quarter of the
taxable year maintain at least 50% of the value of its total assets in cash,
government securities, securities of other regulated investment companies, and
other securities of issuers that represent, with respect to each issuer, no more
than 5% the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and with no more than 25% of its assets invested in
the securities (other than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or more issuers that the Fund
controls and that are engaged in the same, similar or related trades and
businesses. As a regulated investment company, each Fund generally will not be
subject to federal income tax on its income and gains that it distributes to
shareholders, if at least 90% of its investment company taxable income (which
includes dividends, interest and the excess of any short-term capital gains over
long-term capital losses) for the taxable year is distributed.
17
<PAGE>
An excise tax at the rate of 4% will be imposed on the excess, if any, of a
Fund's "required distribution" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of a Fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. Each Fund intends to make distributions sufficient to avoid imposition of
the excise tax. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund during October, November or
December of the year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be taxable as if
received on December 31 in the year they are declared by the Fund, rather than
the year in which they are received.
The taxation of equity options and OTC options on debt securities is
governed by Code section 1234. Pursuant to Code section 1234, the premium
received by a Fund for selling a put or call option is not included in income at
the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If the Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium received is
short-term capital gain or loss. If a call option written by a Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Certain options, futures contracts and forward contracts in which a Fund
may invest are "section 1256 contracts." Gains or losses on section 1256
contracts are generally considered 60% long-term and 40% short-term capital
gains or losses ("60/40 gains or losses"); however, foreign currency gains or
losses (as discussed below) arising from certain section 1256 contracts may be
treated as ordinary income or loss. Also, section 1256 contracts held by a Fund
at the end of each taxable year (and, generally, for purposes of the 4% excise
tax, on October 31 of each year) are treated as sold on such date at fair market
value, resulting in unrealized gains or losses being treated as though they were
realized.
Hedging transactions undertaken by a Fund may result in straddles for U.S.
federal income tax purposes. The straddle rules may accelerate income to a Fund,
defer losses to a Fund, and affect the character of gains (or losses) realized
by a Fund. Hedging transactions may increase the amount of short-term capital
gain realized by a Fund that is taxed as ordinary income when distributed to
shareholders. A Fund may make one or more of the various elections available
under the Code with respect to hedging transactions. If a Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected positions will be determined under rules that vary
according to the elections made. The 30% limitation may limit the extent to
which a Fund will be able to engage in transactions in options, futures
contracts and forward contracts.
Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time a Fund accrues interest or other receivables,
or accrues expenses or other liabilities, denominated in a foreign currency and
the time the Fund actually collects such receivables, or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and certain
options, futures and forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition
of the security or contract and the date of disposition also are treated
as ordinary gain or loss. These gains or losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its shareholders
as ordinary income.
A Fund will not realize gain or loss on a short sale of a security until it
closes the transaction by delivering the borrowed security to the lender. All or
a portion of any gain arising from a short sale may be treated as short-term
capital gain, regardless of the period for which he Fund held the security used
to close the short sale. In addition, the Fund's holding period for any security
that is substantially identical to that which is sold short may be reduced or
eliminated as a result of the short sale.
Investments by a Fund in zero coupon securities will result in income to
the Fund equal to a portion of the excess of the face value of the securities
over their issue price (the "original issue discount") each year that the
securities are held, even though the Fund receives no cash interest payments.
This income is included in determining the amount of income that the Fund must
distribute to maintain its status as a regulated investment company and to avoid
the payment of federal income tax and the 4% excise tax. If a Fund invests in
certain high yield original issue discount obligations issued by corporations, a
portion of the original issue discount accruing on the obligations may be
eligible for the deduction for dividends received by corporations. In
18
<PAGE>
such event, a portion of the dividends of investment company taxable income
received from the Fund by its corporate shareholders may be eligible for this
deduction.
Gain derived by a Fund from the disposition of any market discount bonds
(i.e., bonds purchased other than at original issue, where the face value of the
bonds exceeds their purchase price) held by the Fund will be taxed as ordinary
income to the extent of the accrued market discount on the bonds, unless the
Fund elects to include the market discount in income as it accrues.
If a Fund invests in stock of certain foreign corporations that generate
largely passive investment-type income, or which hold a significant percentage
of assets that generate such income (referred to as "passive foreign investment
companies" or "PFICs"), these investments would be subject to special tax rules
designed to prevent deferral of U.S. taxation of the Fund's share of the PFIC's
earnings. In the absence of certain elections to report these earnings on a
current basis, regardless of whether the Fund actually receives any
distributions from the PFIC, investors in the Fund would be required to report
certain "excess distributions" from, and any gain from the disposition of stock
of, the PFIC as ordinary income. This ordinary income would be allocated ratably
to the Fund's holding period for the stock. Any amounts allocated to prior years
would be taxable at the highest rate of tax applicable in that year, increased
by an interest charge determined as though the amounts were underpayments of
tax.
Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. If more than
50% of the value of a Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, the Fund will be eligible and
may elect to "pass through" to the Fund's shareholders the amount of foreign
taxes paid by the Fund. Pursuant to this election, a shareholder will be
required to include in gross income (in addition to dividends actually received)
its pro rata share of the foreign taxes paid by the Fund, and may be entitled
either to deduct its pro rata share of the foreign taxes in computing its
taxable income or to use the amount as a foreign tax credit against its U.S.
Federal income tax liability, subject to limitations. Each shareholder will be
notified within 60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will "pass through" for that year. If a Fund is
not eligible to make the election to "pass through" to its shareholders its
foreign taxes, the foreign taxes it pays will reduce its investment company
taxable income and distributions by the Fund will be treated as U.S. source
income.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to its foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its shareholders. With respect to
the Funds, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation gains
from foreign currency denominated debt securities, receivables and payables, and
options, futures and forward transactions, will be treated as ordinary income
derived from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax credit), including the foreign source passive income passed through
by the Funds.
The current position of the Internal Revenue Service (the "IRS") generally
is to treat a regulated investment company, such as the Special Fund, as owning
its proportionate share of the income and assets of any partnership in which it
is a partner, in applying the 90% qualifying income requirement, the 30%
Limitation and the asset diversification requirements that, as described above,
each Fund must satisfy to qualify as a regulated investment company under the
Code. These requirements may limit the extent to which the Special Fund may
invest in limited partnerships, especially in the case of limited partnerships
that do not primarily invest in a diversified portfolio of stocks and
securities.
Dividends paid out of a Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. If a portion of a Fund's
income consists of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate dividends-received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, designated as capital
gain dividends are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in each
such share equal to the net asset value of a share of the relevant Fund on the
reinvestment date. A distribution of an amount in excess of a Fund's current and
accumulated earnings and profits will be treated by a shareholder as a return of
capital that is applied against and reduces the shareholder's basis in his or
her shares. To the extent that the amount of any such distribution exceeds the
shareholder's basis in his or her shares, the excess will be treated by the
shareholder as gain from a sale or exchange of the shares. Shareholders will be
notified annually as to the U.S. federal tax status of distributions, and
shareholders receiving distributions in the form of additional shares will
receive a report as to the net asset value of those shares.
Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss that will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
19
<PAGE>
ending 30 days after disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
Under certain circumstances, the sales charge incurred in acquiring shares
of a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund originally
acquired with a sales charge are disposed of within 90 days after the date on
which they were acquired and new shares of a regulated investment company are
acquired without a sales charge or at a reduced sales charge. In that case, the
gain or loss realized on the disposition will be determined by excluding from
the tax basis of the shares all or a portion of the sales charge incurred in
acquiring those shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired shares is reduced as
a result of the shareholder having incurred a sales charge paid for the new
shares. This rule may be applied to successive acquisitions of shares of stock.
Distributions by a Fund reduce the net asset value of that particular
Fund's shares. Should a distribution reduce the net asset value of a share below
a shareholder's cost for the share, such a distribution nevertheless generally
would be taxable to the shareholder as ordinary income or long-term capital
gain, even though, from an investment standpoint, it may constitute a partial
return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution by a Fund. The
price of shares purchased at that time may include the amount of the forthcoming
distribution, but the distribution generally would be taxable to them.
Some shareholders may be subject to withholding of Federal income tax on
dividends and redemption payments from a Fund ("backup withholding") at the rate
of 31%. Corporate shareholders and certain other shareholders specified in the
Code generally are exempt from such backup withholding. Generally, shareholders
subject to backup withholding will be (i) those for whom a certified taxpayer
identification number is not on file with a Fund, (ii) those about whom
notification has been received (either by the shareholder or by a Fund) from the
IRS that they are subject to backup withholding or (iii) those who, to a Fund's
knowledge, have furnished an incorrect taxpayer identification number.
Generally, to avoid backup withholding, an investor must, at the time an account
is opened, certify under penalties of perjury that the taxpayer identification
number furnished is correct and that he or she is not subject to backup
withholding.
The foregoing discussion relates solely to U.S. Federal income tax law.
Dividends and distributions also may be subject to state, local and foreign
taxes. Dividends paid by a Fund from income attributable to interest on
obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states.
Shareholders should consult their tax advisers regarding the possible exclusion
of this portion of their dividends for state and local tax purposes. Non-U.S.
investors also should consult their tax advisers concerning the tax consequences
of ownership of shares of a Fund, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).
Shareholders of Class A, Class B and Class C shares may direct that income
dividends and capital gain distributions be paid to them through various options
listed in the "Dividends and Distributions Reinvestment Options" section of the
Funds' current Prospectus. If a shareholder selects either of two such options
(that: (a) income dividends be paid in cash and capital gain distributions be
paid in additional shares of the same class of a designated Fund at net asset
value; or (b) income dividends and capital gain distributions both be paid in
cash), and the dividend/distribution checks cannot be delivered, or, if such
checks remain uncashed for six months, each Fund reserves the right to
reinvest the dividend or distribution in the shareholder's account at the
then-current net asset value and to convert the shareholder's election to
automatic reinvestment in shares of the Fund from which the distributions
were made. Each Fund has received from the IRS, rulings to the effect that
(i) the implementation of the multiple class purchase arrangement will not
result in a Fund's dividends or distributions constituting "preferential
dividends" under the Code, and (ii) that any conversion feature associated
with a class of shares does not constitute a taxable event under federal
income tax law.
UNDERWRITER AND DISTRIBUTION SERVICES
Pursuant to Underwriting Agreements, Northstar Distributors, Inc. is the
Underwriter for each Fund and as such conducts a continuous offering pursuant to
a "best efforts" arrangement requiring it to take and pay for only such
securities as may be sold to the public. The Underwriter is an affiliate of the
Adviser and the Administrator.
The Underwriting Agreements may be terminated at any time on not more than
60 days' written notice, without payment of a penalty, by the Underwriter, by
vote of a majority of the outstanding class of voting securities of the affected
Fund, or by vote of a
20
<PAGE>
majority of the Trustees of such Fund, who are not "interested persons"
of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements. The Underwriting Agreements
will terminate automatically in the event of their assignment.
In addition to the amount paid to dealers pursuant to the sales charge
table in the Prospectus, the Underwriter from time to time pays, from its own
resources or pursuant to the Plans, a bonus or other incentive to dealers (other
than the Underwriter) that employ a registered representative who sells a
minimum dollar amount of the shares of a Fund during a specific period of time.
Dealers may not use sales of any of the Fund's shares to qualify for or
participate in such programs to the extent such may be prohibited by a dealer's
internal procedures or by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. Such bonuses or
other incentives take the form of payment for travel expenses, including
lodging, incurred in connection with trips taken by qualifying registered
representatives and members of their families to places within or without the
United States, or other bonuses such as certificates for airline tickets, dining
establishments or the cash equivalent of such bonuses. The Underwriter, from
time to time, reallows all or a portion of the sales charge on Class A shares,
which it normally reallows to individual selling dealers. However, such
additional reallowance generally will be made only when the selling dealer
commits to substantial marketing support such as internal wholesaling through
dedicated personnel, internal communications and mass mailings.
Each Fund has adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of the Fund (collectively the "Plans"). The
Plans permit each Fund to compensate the Underwriter in connection with
activities intended to promote the sale of shares of each class of shares of
each Fund.
Pursuant to the Plan for Class A shares, each Fund may compensate the
Underwriter up to 0.30% of average daily net assets of such Fund's Class A
shares. Under the Plans for Class B and Class C shares, each Fund may compensate
the Underwriter up to 1.00% of the average daily net assets attributable to the
respective class of such Fund. Pursuant to the Plan for Class T shares, each
Fund compensates the Underwriter in an amount equal to 0.95% (in the case of
Special Fund, Growth Fund, and Strategic Income Fund), 0.75% (in the case of
Balance Sheet Opportunities Fund) and 0.65% (in the case of Government
Securities Fund and High Yield Fund) of annual average daily net assets of such
Fund's Class T shares. However, each of the Class T Plans provides for
compensation of up to 1.00% of annual average daily net assets. Expenditures by
the Underwriter under the Plans shall consist of: (i) commissions to sales
personnel for selling shares of the Funds (including underwriting fees and
financing expenses incurred in connection with the sale of Class B and Class C
shares); (ii) compensation, sales incentives and payments to sales, marketing
and service personnel; (iii) payments to broker-dealers and other financial
institutions that have entered into agreements with the Underwriter in the form
of a Dealer Agreement for Northstar Funds for services rendered in connection
with the sale and distribution of shares of the Funds; (iv) payment of expenses
incurred in sales and promotional activities, including advertising expenditures
related to the Funds; (v) the costs of preparing and distributing promotional
materials; (vi) the cost of printing the Funds' Prospectus and SAI for
distribution to potential investors; and (vii) other activities that are
reasonably calculated to result in the sale of shares of the Funds. With respect
to each Class T Plan, it is anticipated that all of the payments received by the
Underwriter under the Plan will be paid to Advest as compensation for its prior
distribution related and current shareholder servicing related activities in
connection with the Class T Shares.
A portion of the fees paid to the Underwriter pursuant to the 12b-1 plans
not exceeding 0.25% annually of the average daily net assets of each Fund's
shares may be paid as compensation for providing services to each Fund's
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee"). In order to receive Service Fees
under the Plans, participants must meet such qualifications as are
established in the sole discretion of the Underwriter, such as services to
each Fund's shareholders; or services providing each Fund with more efficient
methods of offering shares to coherent groups of clients, members or
prospects of a participant; or services permitting purchases or sales of
shares, or transmission of such purchases or sales by computerized tape or
other electronic equipment; or other processing.
The Plans are designed to be compensation plans and therefore amounts spent
by the distributor in excess of plan limits are not carried over from year to
year for reimbursement. The Plans do, however, contemplate that amounts paid to
the distributor may compensate it for past distribution efforts without regard
to any particular time period.
If the Plans are terminated in accordance with their terms, the obligations
of a Fund to compensate the Underwriter for distribution related services
pursuant to the Plans will cease; however, subject to approval by the Trustees,
including a majority of the independent Trustees, a Fund may continue to make
payments past the date on which each Plan terminates up to the annual limits set
forth in each Plan for the purpose of compensating the Underwriter for services
that were incurred during the term of the Plan.
The Trustees have concluded that there is a reasonable likelihood that the
Plans will benefit each Fund and its shareholders and that the Plans should
result in greater sales and/or fewer redemptions of Fund shares. On a quarterly
basis, the Trustees will review a report on expenditures under the Plans and the
purposes for which expenditures were made. The Trustees will conduct an
additional, more extensive review annually in determining whether the Plans
shall be continued. By their terms, continuation of the Plans from year to year
is contingent on annual approval by a majority of the Trustees acting separately
on behalf of each Fund
21
<PAGE>
and by a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements (the
"Plan Trustees"). The Plans provide that they may not be amended to increase
materially the costs that a Fund may bear pursuant to the applicable Plan
without approval of the shareholders of the affected Fund and that other
material amendments to the Plans must be approved by a majority of the Plan
Trustees acting separately on behalf of each Fund, by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plans further
provide that while each plan is in effect, the selection and nomination of
Trustees who are not "interested persons" shall be committed to the discretion
of the Trustees who are not "interested persons." A Plan may be terminated at
any time by vote of a majority of the Plan Trustees or a majority of the
outstanding Class of shares of the affected Fund to which the Plan relates.
During their fiscal year-ended October 31, 1996, each class of shares of
the Funds listed below paid the following 12b-1 distribution and service fees
pursuant to the Plan of Distribution for each class:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Income and Growth Fund................................... $ 242,908 $ 671,688 $583,906
High Total Return Fund................................... $ 382,173 $2,028,953 $296,918
</TABLE>
For the year ended October 31, 1996, expenses incurred by the Distributor
for distribution related activities with respect to each class of shares of each
Fund listed below were as follows:
<TABLE>
<CAPTION>
INCOME AND GROWTH
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Salaries/Overrides..................................... $222,594 $ 29,916 $ 15,032
Commissions Paid....................................... $ 0 $ 626,730 $ 83,415
Marketing/Convention/RMM Expense.................... $210,884 $ 39,999 $ 24,168
Total.................................................. $433,478 $ 696,645 $122,615
</TABLE>
<TABLE>
<CAPTION>
HIGH TOTAL RETURN FUND
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EXPENSE
Salaries/Overrides..................................... $580,131 $ 605,403 $110,500
Commissions Paid....................................... $ 0 $10,186,696 $447,621
Marketing/Convention/RMM Expense.................... $335,210 $ 121,049 $ 12,601
Total.................................................. $915,341 $10,913,148 $570,722
</TABLE>
For the following Funds' fiscal year ended October 31, 1996, the
Distributor received the following amounts in sales charges, after reallowance
to Dealers:
<TABLE>
<CAPTION>
UNDERWRITING FEES
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Income and Growth Fund................................... $ 25,657 $216,133 $ 4,049
High Total Return Fund................................... $553,006 $466,013 $22,368
</TABLE>
During their fiscal year ended December 31, 1996, each class of shares of
the Funds listed below, paid the following 12b-1 distribution and service fees
pursuant to the Distribution Plan for each class:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
Special Fund.................................... $108,927 $630,676 $189,225 $328,758
Growth Fund..................................... $ 4,665 $ 33,508 $ 2,365 $679,967
Balance Sheet Fund.............................. $ 3,058 $ 30,311 $ 3,219 $502,693
Government Securities........................... $ 31,014 $ 59,149 $ 8,032 $813,064
Strategic Income Fund........................... $ 68,706 $273,868 $ 32,011 $270,759
High Yield Fund................................. $ 32,630 $575,358 $ 98,509 $851,368
</TABLE>
22
<PAGE>
During the fiscal year ended December 31, 1996, expenses incurred by the
Distributor (or Advest with respect to Class T Shares prior to June 2, 1995) for
certain distribution related activities with respect to each class of shares of
the Funds listed below were as follows:
<TABLE>
<CAPTION>
SPECIAL FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $202,492 $ 321,375 $103,940 $0
Commissions Paid................................. $ 0 $5,309,686 $425,317 $0
Marketing/Convention/RMM Expense................. $110,034 $ 41,232 $ 9,294 $0
Total............................................ $312,526 $5,672,293 $538,551 $0
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $ 5,428 $ 5,267 $ 626 $0
Commissions Paid................................. $ 0 $ 94,654 $2,353 $0
Marketing/Convention/RMM Expense................. $ 5,167 $ 2,182 $ 118 $0
Total............................................ $10,595 $102,103 $3,097 $0
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET OPPORTUNITIES FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $3,605 $ 4,924 $ 334 $0
Commissions Paid................................. $ 0 $86,309 $1,246 $0
Marketing/Convention/RMM Expense................. $2,855 $ 1,954 $ 153 $0
Total............................................ $6,460 $93,187 $1,733 $0
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $31,119 $ 16,558 $ 2,853 $0
Commissions Paid................................. $ 0 $284,212 $11,411 $0
Marketing/Convention/RMM Expense................. $30,446 $ 3,859 $ 378 $0
Total............................................ $61,565 $304,629 $14,642 $0
</TABLE>
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $ 67,162 $ 27,186 $ 6,101 $0
Commissions Paid................................. $ 0 $513,641 $27,670 $0
Marketing/Convention/RMM Expense................. $ 61,783 $ 17,684 $ 1,520 $0
Total............................................ $128,945 $ 55,854 $35,291 $0
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD FUND
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
EXPENSE
Salaries/Overrides............................... $43,187 $ 124,358 $ 27,973 $0
Commissions Paid................................. $ 0 $2,165,191 $120,421 $0
Marketing/Convention/RMM Expense................. $30,923 $ 37,394 $ 4,709 $0
Total............................................ $74,110 $2,326,943 $ 44,724 $0
</TABLE>
For the following Funds' fiscal year ended December 31, 1996, the
Distributor (or Advest) received the following amounts in sales charges, after
reallowance to Dealers:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
Special Fund.................................... $381,500 $152,531 $39,451 $228,166
Growth Fund..................................... $ 3,593 $ 7,731 $ 29 $ 95,746
Balance Sheet Fund.............................. $ 2,436 $ 6,780 $ 406 $ 65,812
Government Securities........................... $ 52,148 $ 19,375 $ 955 $234,689
Strategic Income................................ $ 13,924 $105,239 $ 2,944 $205,047
High Yield Fund................................. $ 9,722 $141,189 $ 9,752 $ 77,316
</TABLE>
TRUSTEES AND OFFICERS
The Trustees and principal Officers of each Fund and their business
affiliations for the past five years are set forth below. Unless otherwise
noted, the mailing address of the Trustees and Officers is Two Pickwick Plaza,
Greenwich, Connecticut 06830.
ROBERT B. GOODE, JR., Trustee. Age: 66. Currently retired. From 1990 to
1991, Chairman of The First Reinsurance Company of Hartford. From 1987 to
1989, President and Director of American Skandia Life Assurance Company.
Since October 1993, Trustee of the Northstar affiliated investment
companies.
PAUL S. DOHERTY, Trustee. Age: 62. President, Doherty, Wallace, Pillsbury
and Murphy, P.C., Attorneys. Director, Tambrands, Inc. Since October 1993,
Trustee of the Northstar affiliated investment companies.
DAVID W. WALLACE, Trustee. Age: 72. Chairman of Putnam Trust Company, Lone
Star Industries and FECO Engineered Systems, Inc. He is also President and
Trustee of Robert R. Young Foundation and Governor of the New York
Hospital. Director of UMC Electronics and Zurn Industries, Inc. Former
Chairman and Chief Executive Officer, Todd Shipyards and Bangor Punta
Corporation, and former Chairman and Chief Executive Officer of National
Securities & Research Corporation. Since October 1993, Trustee of the
Northstar affiliated investment companies.
*MARK L. LIPSON, Trustee and President. Age: 47. Director, Chairman and
Chief Executive Officer of Northstar and Northstar, Inc. Director and
President of Northstar Administrators Corporation and Director and Chairman
of Northstar Distributors, Inc., President and Trustee of the Northstar
affiliated investment companies since October 1993. Prior to August, 1993,
Director, President and Chief Executive Officer of National Securities &
Research Corporation and President and Director/Trustee of the National
Affiliated Investment Companies and certain of National's subsidiaries.
*JOHN G. TURNER, Trustee. Age: 57. Since May 1993, Chairman and CEO of
ReliaStar Financial Corporation and Northwestern NationalLife Insurance Co.
and Chairman of other ReliaStar Affiliated Insurance Companies since 1995.
Since October 1993, Director of Northstar and affiliates. Prior to May
1993, President and CEO of ReliaStar and Northwestern National.
ALAN L. GOSULE, Trustee. Age: 55. Partner, Rogers & Wells. Director, F.L.
Putnam Investment Management Co., Inc.
DAVID W.C. PUTNAM, Trustee. Age: 67. President, Clerk and Director of F.L.
Putnam Securities Company, Incorporated, F.L. Putnam Investment Management
Company, Incorporated, Interstate Power Company, Inc., Trust Realty Corp.
and Bow Ridge Mining Co.; Director of Anchor Investment Management
Corporation; President and Trustee of Anchor Capital Accumulation Trust,
Anchor International Bond Trust, Anchor Gold and Currency Trust, Anchor
Resources and Commodities Trust and Anchor Strategic Assets Trust.
*Deemed to be an "interested person" of the Trust, as defined by the 1940 Act.
24
<PAGE>
JOHN R. SMITH, Trustee. Age: 73. From 1970-1991, Financial Vice President
of Boston College; President of New England Fiduciary Company (financial
planning) since 1991; Chairman of Massachusetts Educational Financing
Authority since 1987; Vice Chairman of Massachusetts Health and Education
Authority.
WALTER H. MAY, Trustee. Age: 60. Retired. Former Senior Executive for Piper
Jaffrey, Inc.
THOMAS OLE DIAL, Vice President. Age: 40. Executive Vice President and
Chief Investment Officer-Fixed Income of Northstar and Principal, T.D. &
Associates, Inc. From 1989 to August 1993, Executive Vice President and
Chief Investment Officer-Fixed Income of National Securities and Research
Corporation, Vice President of National Affiliated Investment Companies,
and Vice President of NSR Asset Management Corporation. From 1988 to 1989,
President of Dial Captial Management.
GEOFFREY WADSWORTH, Vice President. Age: 53. Vice President of
Northstar.Former Vice President and Portfolio Manager with National
Securities & Research Corporation.
AGNES MULLADY, Vice President and Treasurer. Age: 38. Senior Vice President
and Chief Financial Officer of Northstar, Senior Vice President and
Treasurer of Northstar Administrators corporation, and Vice President and
Treasurer ofNorthstar Distributors, Inc. From 1987 to 1993, Vice President
and Treasurer of National Securities & Research Corporation.
Northstar and Northstar Administrators Corporation make their personnel
available to serve as Officers and "Interested Trustees" of the Funds. All
Officers and Interested Trustees of the Funds are compensated by Northstar or
Northstar Administrators Corporation. Trustees who are not "interested persons"
of the Adviser are paid an annual retainer fee of $6,000 for their combined
services as Trustees to the Funds and to retail funds sponsored or advised by
the Adviser, and a per meeting fee of $1,500 for attendance at each joint
meeting of the Funds and the other Northstar retail funds. The Funds also
reimburse Trustees for expenses incurred by them in connection with such
meetings.
Mone Anathan, III, Dr. Loring E. Hart, Reverend Bartley MacPhaidin and
Edward T. Sullivan, each of whom were previously Trustees of the Funds, serve on
an Advisory Board. The Advisory Board is expected to provide advice to the Board
of Trustees in order to facilitate a smooth management transition regarding the
advisory services to be provided by Northstar and to provide such other advise
as the Board of Trustees may request from time to time. The Advisory Board will
have no authority or control over the Funds. Northstar has agreed to assume all
expenses associated with the Advisory Board for three years.
As of December 31, 1996, all Trustees and executive officers of each Fund
as a group owned beneficially or of record less than 1% of the outstanding
securities of such Fund. To the knowledge of the Funds, as of December 31, 1996,
no shareholder owned beneficially (b) or of record (r) more than 5% of a Fund's
outstanding shares, except as set forth below:
(1) Income and Growth Fund
A
Norwest Bank 28% (r)
Minneapolis, Minnesota
B
Merrill Lynch Pierce Fenner & Smith 28.4% (r)
Jacksonville, Florida
(2) High Total Return Fund
A
Merrill Lynch Pierce Fenner & Smith 9.6% (r)
Jacksonville, Florida
B
Merrill Lynch Pierce Fenner & Smith 35.7% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 47% (r)
Jacksonville, Florida
(3) Growth + Value Fund
A
Merrill Lynch Pierce Fenner & Smith 33.5% (r)
Jacksonville, Florida
Norwest Bank 47.4% (r)
Minneapolis, MN
C
Merrill Lynch 11.8% (r)
Jacksonville, Florida
Bear Stearns Securities 6.5% (r)
Brooklyn, New York
Mrs. Ruth A. Samuels Trustee 5.9% (b)
Laguna Hills, California
Merrill Lynch 23.2% (r)
Jacksonville, Florida
(4) Special Fund
A
Merrill Lynch Pierce Fenner & Smith 29.5% (r)
Jacksonville, Florida
B
Merrill Lynch Pierce Fenner & Smith 38.5% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 64.9% (r)
Jacksonville, Florida
(5) Growth Fund
A
NWNL Ins Co Retirement Plan Div 26.2% (r)
Lifestyle II Separate Acct 3
Greenwich, Connecticut
NWNL Ins Co Retirement Plan Div 28.7% (r)
Lifestyle I
Greenwich, Connecticut
B
Merrill Lynch Pierce Fenner & Smith 15.8% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 15.3% (r)
Jacksonville, Florida
Gerald A. Mitchell 35.7% (b)
Ypsilanti, Michigan
Advest Inc. 6.4% (r)
Hartford, Connecticut
(6) Balance Sheet Opportunities Fund
A
Advest Inc 6.2% (r)
Hartford, Connecticut
Margaret M. Standring Trust 5.6% (b)
Weymouth, Massachusetts
Donaldson Lufkin Jenrette 6.4% (r)
Jersey City, New Jersey
Mildred J. Clark 10% (b)
Palatine, Illinois
Donaldson Lufkin Jenrette 6.5% (r)
Jersey City, New Jersey
Advest Inc 7.3% (r)
Hartford, Connecticut
B
Merrill Lynch Pierce Fenner & Smith 9.3% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 5.1% (r)
Jacksonville, Florida
Louise H. Fitzgerald 53.5% (b)
So. Attleboro, Massachusetts
(7) Government Securities Fund
A
Merrill Lynch Pierce Fenner & Smith 8% (r)
Jacksonville, Florida
Donaldson Lufkin Jenrette 16.4% (r)
Jersey City, New Jersey
Donaldson Lufkin Jenrette 17% (r)
Jersey City, New Jersey
Donaldson Lufkin Jenrette 16.9% (r)
Jersey City, New Jersey
Donaldson Lufkin Jenrette 17.6% (r)
Jersey City, New Jersey
Order of St. Benedict of New Jersey 5.2% (b)
Morristown, New Jersey
Order of St. Benedict of New Jersey 9.8% (b)
Morristown, New Jersey
B
Merrill Lynch Pierce Fenner & Smith 7.4% (r)
Jacksonville, Florida
Advest Inc. 5.1% (r)
Hartford, Connecticut
C
Merrill Lynch Pierce Fenner & Smith 96% (r)
Jacksonville, Florida
(8) Strategic Income Fund
A
Norwest Bank 29.8% (r)
Minneapolis, Minnesota
NWNL Ins Co Retirement Plan Div. 5.5% (r)
Lifestyle III Separate Acct 3
Greenwich, Connecticut
NWNL Ins Co Retirement Plan Div 6.9% (r)
Lifestyle II Separate Acct 3
Greenwich, Connecticut
B
Merrill Lynch Pierce Fenner & Smith 31.6% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 33.2% (r)
Jacksonville, Florida
(9) High Yield Fund
A
Merrill Lynch Pierce Fenner & Smith 15% (r)
Jacksonville, Florida
B
Merrill Lynch Pierce Fenner & Smith 40.3% (r)
Jacksonville, Florida
C
Merrill Lynch Pierce Fenner & Smith 58.5% (r)
Jacksonville, Florida
COMPENSATION TABLE
PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PENSION BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON FROM ALL FUNDS IN
FUND FUND EXPENSES RETIREMENT NORTHSTAR COMPLEX(B)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr...................... (a)13,000 0 0 13,500
Paul S. Doherty.......................... (a)14,000 0 0 14,500
David W. Wallace......................... (a)14,000 0 0 14,500
Mark L. Lipson........................... (a) 0 0 0 --
John G. Turner........................... (a) 0 0 0 --
Alan L. Gosule........................... (a)14,000 0 0 14,500
David W.C. Putnam........................ (a)10,000 0 0 10,000
John R. Smith............................ (a)14,000 0 0 14,500
Walter H. May............................ (a)13,000 0 0 13,500
</TABLE>
(a) See table below for Fund specific compensation.
(b) Compensation paid by the Northstar Trust funds, the Northstar Variable Trust
funds and the remaining six funds, Northstar Special, Growth, Balance Sheet
Opportunities, Government Securities, Strategic Income and High Yield Funds,
formerly advised by BSC.
26
<PAGE>
INDIVIDUAL FUND
FISCAL YEAR COMPENSATION TABLES
<TABLE>
<CAPTION>
INCOME AND GROWTH HIGH TOTAL RETURN GROWTH + VALUE SPECIAL(C) GROWTH(C)
<S> <C> <C> <C> <C> <C>
Robert B. Goode, Jr.................. 2,063 1,563 0 1,563 1,563
Paul S. Doherty...................... 2,313 1,813 0 1,646 1,646
David W. Wallace..................... 2,313 1,813 0 1,646 1,646
Mark L. Lipson....................... 0 0 0 0 0
John G. Turner....................... 0 0 0 0 0
Alan L. Gosule....................... 2,313 1,813 0 1,646 1,646
David W.C. Putnam.................... 2,063 1,563 0 1,188 1,188
John R. Smith........................ 2,312 2,312 0 1,646 1,646
Walter H. May....................... 2,000 1,500 0 1,583 1,583
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET GOVERNMENT
OPPORTUNITIES(C) SECURITIES(C) STRATEGIC INCOME(C) HIGH YIELD(C)
<S> <C> <C> <C> <C>
Robert B. Goode, Jr.................................. 1,563 1,563 1,563 1,563
Paul S. Doherty...................................... 1,646 1,646 1,646 1,646
David W. Wallace..................................... 1,646 1,646 1,646 1,646
Mark L. Lipson....................................... -- -- -- --
John G. Turner....................................... -- -- -- --
Alan L. Gosule....................................... 1,646 1,646 1,646 1,646
David W.C. Putnam.................................... 1,188 1,188 1,188 1,188
John R. Smith........................................ 1,646 1,646 1,646 1,646
Walter H. May........................................ 1,583 1,583 1,583 1,583
</TABLE>
(c) Prior to June 2, 1995 the Trustees who were not interested persons, other
than David Putnam, were paid a per fund fee of $500 for each full calendar
year during which services were rendered to the Funds. In addition, they
were paid a per fund fee of $250 for attending each of the Trustees'
meetings, $100 per fund for attending each audit committee meeting, $100
audit committee retainer per fund and were reimbursed for outofpocket
expenses. Mr. Putnam, former Chairman of these Funds, received a fee of
$30,000 per annum.
OTHER INFORMATION
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P. has been selected as the
independent accountants of the Northstar Trust and each of the remaining
Northstar Funds. Coopers & Lybrand L.L.P. audits the Funds' annual financial
statements and expresses an opinion thereon.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian, and fund accounting
agent for the Funds and the NorthStar Trust.
TRANSFER AGENT. Pursuant to a Transfer Agency Agreement with each Fund, First
Data (the "Transfer Agent") acts as the Transfer Agent for each Fund. Pursuant
to a Sub-Transfer Agency Agreement between Advest Transfer Services, Inc.
("ATS") and First Data, ats serves as the subtransfer agent for the Funds
offering Class T shares, and, prior to June 5, 1995, ats acted as transfer agent
to these Funds.
REPORTS TO SHAREHOLDERS. The fiscal year of the Northstar Trust ends on October
31. The fiscal year of each other Fund ends on December 31. Each Fund will send
financial statements to its shareholders at least semiannually. An annual report
containing financial statements audited by the independent accountants will be
sent to shareholders each year.
ORGANIZATIONAL AND RELATED INFORMATION. Special Fund (formerly The Advantage
Special Fund) was organized in 1986; Growth Fund (formerly The Advantage Growth
Fund) was organized in 1986; Balance Sheet Opportunities Fund (formerly The
Advantage Income Fund) was organized in 1986; Government Securities Fund
(formerly The Advantage Government Securities Fund) was organized in 1986;
Strategic Income Fund (formerly The Advantage Strategic Income Fund) was
organized in 1994; and
27
<PAGE>
High Yield Fund (formerly The Advantage High Yield Bond
Fund) was organized 1989. Northstar Trust (formerly Northstar Advantage Trust),
and two of its series Income and Growth Fund (formerly Northstar Advantage
Income and Growth Fund) and High Total Return Fund (formerly Northstar Advantage
High Total Return Fund), was organized in 1993. Northstar Growth + Value Fund
was organized in 1996.
The shares of each Fund, when issued, will be fully paid and
non-assessable, have no preference, preemptive, or similar rights, and will be
freely transferable. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. Shareholders may, in accordance with the Declaration of Trust,
cause a meeting of shareholders to be held for the purpose of voting on the
removal of Trustees. Meetings of the shareholders will be called upon written
request of shareholders holding in the aggregate not less than 10% of the
outstanding shares of the affected Fund or class having voting rights. Except as
set forth above and subject to the 1940 Act, the Trustees will continue to hold
office and appoint successor Trustees.
Under Massachusetts law, there is a remote possibility that shareholders of
a business trust could, under certain circumstances, be held personally liable
as partners for the obligations of such trust. The Amended and Restated
Declaration of Trust for each Fund contains provisions intended to limit such
liability and to provide indemnification out of Fund property of any shareholder
charged or held personally liable for obligations or liabilities of a Fund
solely by reason of being or having been a shareholder of a Fund and not because
of such shareholder's acts or omissions or for some other reason. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations.
PERFORMANCE INFORMATION
Performance information for the Funds may be compared in reports and
promotional literature to (1) the S&P 500, Dow Jones Industrial Average
("DJIA"), or other unmanaged indices, so that investors may compare each Fund's
results to those of a group of unmanaged securities that are widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm that ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications or persons who rank mutual funds on overall performance or other
criteria; (iii) the Consumer Price Index (measure for inflation) to assess the
real rate of return from an investment in a Fund; and (iv) well known monitoring
sources of cd performance rates, such as Solomon Brothers, Federal Reserve
Bulletin, American Bankers and Tower Data/The Wall Street Journal. Unmanaged
indices may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Performance
rankings are based on historical information and are not intended to indicate
future performance.
In addition, the Funds may, from time to time, include various measures of
a Fund's performance, including the current yield, the taxequivalent yield and
the average annual total return of shares of the Funds in advertisements,
promotional literature or reports to shareholders or prospective investors. Such
materials may occasionally cite statistics to reflect a Fund's volatility risk.
AVERAGE ANNUAL TOTAL RETURN. Standardized quotations of average annual
total return ("Standardized Return") for each class of shares will be expressed
in terms of the average annual compounded rate of return for a hypothetical
investment in such class of shares over periods of 1, 5 and 10 years or up to
the life of the class of shares, calculated for each class separately pursuant
to the following formula:
P(1+T) to the power of n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = the average annual total return
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the period).
All total return figures reflect the deduction of a proportional share of
each Class's expenses (on an annual basis), the deduction of the maximum initial
sales load (in the case of Class A shares) and the maximum contingent deferred
sales charge
28
<PAGE>
applicable to a complete redemption of the investment (in the case of Class
B, Class C and Class T shares), and assume that all dividends and
distributions are reinvested when paid.
YIELD. Quotations of yield for a specific class of shares of a Fund will be
based on all investment income attributable to that class earned during a
particular 30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and will be
computed by dividing the net investment income per share of that class earned
during the period by the maximum offering price per share on the last day of the
month, according to the following formula:
Yield = 2[(a-b + 1) to the power of 6 -1]
cd
Where:
a = dividends and interest earned during the period attributable to a
specific class of shares
b = expenses accrued for the period attributable to that class (net of
reimbursements)
c = the average daily number of shares of that class outstanding during the
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period
The maximum offering price includes a maximum contingent deferred
sales load of 4%, in the case of Class T shares, 5% for Class B shares, and
1%, for Class C shares.
All accrued expenses are taken into account as follows. Accrued
expenses include all recurring expenses that are charged to all shareholder
accounts in proportion to the length of the base period, including but not
limited to expenses under the Funds' distribution plans. Except as noted,
the performance results take the contingent deferred sales load into
account.
The yield for Class A, B, C and T shares of the Special Fund, Growth
Fund, Balance Sheet Opportunities Fund, Government Securities Fund,
Strategic Income Fund, and High Yield Fund for the month ended December 31,
1996, and the yield for Class A, B and C of the Income and Growth Fund and
High Total Return Fund for the month ended October 31, 1996 was as follows:
YIELD
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C CLASS T
<S> <C> <C> <C> <C>
Special Fund............................................................... 0.04% -0.70% -0.76% -0.51%
Growth Fund................................................................ -0.14% -0.69% -0.49% -0.31%
Balance Sheet Opportunities Fund........................................... 5.61% 5.01% 5.07% 5.57%
Government Securities Fund................................................. 6.55% 6.24% 6.43% 6.80%
Strategic Income Fund...................................................... 6.28% 5.88% 5.71% 6.08%
High Yield Fund............................................................ 7.98% 7.66% 7.64% 8.20%
Income and Growth.......................................................... 2.63% 2.04% 2.10% N/A
High Total Return Fund..................................................... 9.56% 9.28% 9.32% N/A
</TABLE>
NON-STANDARDIZED RETURN. In addition to the performance information
described above, the Funds may provide total return information that is not
calculated according to the formula set forth above ("Non-Standardized
Return"). Neither initial nor contingent deferred sales charges are taken
into account in calculating Non-Standardized Return. Excluding a Fund's
sales charge from a total return calculation produces a higher total return
figure.
The following tables summarize the calculation of Standardized and
Non-Standardized Return for Class A, Class B and Class C shares of each
Fund in the Northstar Trust and for Class A, Class B, Class C and Class T
shares of the other Funds for the periods indicated.
29
<PAGE>
NORTHSTAR TRUST. The following table summarizes the calculation of
Total Return for the periods indicated through October 31, 1996, assuming
the contingent deferred sales load HAS been assessed:
<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
<S> <C> <C>
INCOME AND GROWTH FUND
Class A......................................................... 9.08% 8.04%
Class B......................................................... 8.60% 6.52%
Class C......................................................... 12.68% 8.90%
HIGH TOTAL RETURN FUND
Class A......................................................... 12.62% 7.25%
Class B......................................................... 12.32% 5.75%
Class C......................................................... 16.28% 7.82%
</TABLE>
The following table summarizes the calculation of Total Return for the
periods indicated through October 31, 1996, assuming the contingent
deferred sales load HAS NOT been assessed:
<TABLE>
<CAPTION>
SINCE
ONE YEAR INCEPTION*
<S> <C> <C>
INCOME AND GROWTH FUND
Class A......................................................... 14.48% 9.82%
Class B......................................................... 13.60% 7.49%
Class C......................................................... 13.68% 8.90%
HIGH TOTAL RETURN FUND
Class A......................................................... 18.14% 9.02%
Class B......................................................... 17.32% 6.65%
Class C......................................................... 17.28% 7.82%
</TABLE>
*The inception date for Class A, Class B and Class C shares of Income and
Growth Fund and High Total Return Fund is November 8, 1993, February 9,
1994 and March 21, 1994, respectively.
THE REMAINING FUNDS. The following table summarizes the calculation of
Total Return for Class T shares of the remaining Funds for the periods
indicated through December 31, 1996, assuming the maximum sales charge HAS
been assessed:
<TABLE>
<CAPTION>
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
<S> <C> <C> <C> <C>
Special Fund......................................... 13.47% 11.36% 12.38% 10.13%
Growth Fund.......................................... 15.90% 10.43% 12.05% 11.86%
Balance Sheet Fund................................... 6.42% 9.98% 9.52% 9.71%
Government Securities Fund........................... -3.44% 7.66% 7.04% 7.23%
Strategic Income Fund................................ 6.39% N/A N/A 10.04%
High Yield Fund...................................... 10.49% 14.07% N/A 10.97%
</TABLE>
The following table summarizes the calculation of Total Return for
Class T shares of the remaining Funds for the periods indicated through
December 31, 1996, assuming the maximum sales charge HAS NOT been assessed:
<TABLE>
<CAPTION>
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
<S> <C> <C> <C> <C>
Special Fund......................................... 17.47% 11.36% 12.38% 10.13%
Growth Fund.......................................... 19.90% 10.43% 12.05% 11.86%
Balance Sheet Fund................................... 10.18% 9.98% 9.52% 9.71%
Government Securities Fund........................... 0.32% 7.66% 7.04% 7.23%
Strategic Income Fund................................ 10.39% N/A N/A 10.73%
High Yield Fund...................................... 14.49% 14.07% N/A 10.97%
</TABLE>
30
<PAGE>
*The inception date for Class T shares of Special, Growth, Balance Sheet
Opportunities and Government Securities Funds was February 1, 1986. The
inception date for Class T shares of the High Yield Fund was July 5, 1989.
The inception date for Class T shares of the Strategic Income Fund was
July 1, 1994.
The following table summarizes the calculation of Total
Return for Class A, Class B and Class C shares of the remaining Funds for
the period from commencement of operations of such classes (June 5, 1995)
through December 31, 1996, assuming the maximum sales charge HAS been
assessed:
<TABLE>
<CAPTION>
Since
1 Year Inception
<S> <C> <C>
Fund
Special
Class A 12.57% 15.90%
Class B 12.37% 16.46%
Class C 16.37% 18.76%
Growth
Class A 14.85% 16.94%
Class B 14.74% 17.62%
Class C 18.74% 19.85%
Balance Sheet
Class A 5.25% 11.00%
Class B 5.07% 11.56%
Class C 8.78% 13.66%
Government
Class A -4.19% 3.55%
Class B -4.86% 3.55%
Class C -1.15% 5.98%
Strategic Income
Class A 5.60% 7.45%
Class B 5.18% 7.61%
Class C 9.11% 9.93%
High Yield
Class A 9.25% 8.55%
Class B 8.93% 8.81%
Class C 12.93% 11.21%
</TABLE>
The following table summarizes the calculation of Total Return for
Class A, Class B and Class C shares of the remaining Funds for the period
from commencement of operations of such classes (June 5, 1995) through
December 31, 1996, assuming the maximum sales charge HAS NOT been assessed:
<TABLE>
<CAPTION>
Since
1 Year Inception
<S> <C> <C>
Fund
Special
Class A 18.16% 19.54%
Class B 17.37% 18.76%
Class C 17.37% 18.76%
Growth
Class A 20.54% 20.61%
Class B 19.74% 19.91%
Class C 19.74% 19.85%
Balance Sheet
Class A 10.54% 14.50%
Class B 9.76% 13.73%
Class C 9.72% 13.66%
Government
Class A 0.57% 6.77%
Class B -0.15% 6.01%
Class C -0.21% 5.98%
Strategic Income
Class A 10.88% 10.80%
Class B 10.18% 10.02%
Class C 10.11% 9.93%
High Yield
Class A 14.74% 11.91%
Class B 13.93% 11.21%
Class C 13.93% 11.21%
</TABLE>
A Fund may quote its performance in various ways, using various types
of comparisons to market indices, other funds or investment alternatives,
or to general increases in the cost of living. All performance information
supplied by the Funds in advertising is historical and is not intended to
indicate future returns. Each Fund's share prices and total returns
fluctuate in response to market conditions and other factors, and the value
of the Fund's shares when redeemed may be more or less than their original
cost.
Evaluations of Fund performance made by independent sources may also
be used in advertisements concerning the Funds, including reprints of, or
selections from, editorials or articles about a Fund. These editorials or
articles may include quotations of performance from other sources, such as
Lipper or Morningstar. Sources for Fund performance information and
articles about the Fund may include the following: BANXQUOTE, BARRON'S,
BUSINESS WEEK, CDA INVESTMENT TECHNOLOGIES, INC., CHANGING TIMES, CONSUMER
DIGEST, FINANCIAL WORLD, FORBES, FORTUNE, IBC/DONOGHUES'S MONEY FUND
REPORT, IBBOTSON ASSOCIATES, INC., INVESTMENT COMPANY DATA, INC.,
INVESTOR'S DAILY, LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND
PERFORMANCE ANALYSIS, MONEY, MUTUAL FUND VALUES, THE NEW YORK TIMES,
PERSONAL INVESTING NEWS, PERSONAL INVESTOR, SUCCESS, USA TODAY, U.S. NEWS
AND WORLD REPORT, WALL STREET JOURNAL, WIESENBERGER INVESTMENT COMPANIES
SERVICES, AND WORKING WOMAN.
When comparing yield, total return and investment risk of shares of a
Fund with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in
shares of the Fund. For example, certificates of deposit may have fixed
rates of return and may be insured as to principal and interest by the
FDIC, while a Fund's returns will fluctuate and its share values and
returns are not guaranteed. Money market accounts offered by banks also
may be insured by the FDIC and may offer stability of principal. U.S.
Treasury securities are guaranteed as to principal and interest by the
full faith and credit of the U.S. government. Money market mutual funds
may seek to offer a fixed price per share.
The performance of a Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representative of performance of
the Fund for any period in the future. The performance of a Fund is a
function of many factors including its earnings, expenses and number of
outstanding shares. Fluctuating market conditions; purchases, sales and
maturities of portfolio securities; sales and redemptions of shares of
beneficial interest, and changes in operating expenses are all examples of
items that can increase or decrease the Fund's performance.
31
<PAGE>
FINANCIAL STATEMENTS
The Northstar Trust's audited financial statements dated October 31,
1996 and the report of the independent accountants, Coopers & Lybrand
L.L.P. with respect to such financial statements, are hereby incorporated
by reference to the Annual Report to Shareholders of the Northstar Trust
for the fiscal year ended October 31, 1996.
The audited financial statements of Special Fund, Growth Fund, Balance
Sheet Opportunities Fund, Government Securities Fund, Strategic Income Fund
and High Yield Fund as of and for the fiscal period ended December 31, 1996
and the report of the independent accountants, Coopers & Lybrand L.L.P.,
with respect to such financial statements are hereby incorporated by
reference to the Annual Report to Shareholders of The NorthStar
Funds for the fiscal year ended December 31, 1996.
32
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: Included in Part A:
NORTHSTAR TRUST - Financial Highlights for a share outstanding throughout
the period November 8, 1993 (Class A) February 9, 1994 (Class B) and March 21,
1994 (Class C) (commencement of offering of each Class) through October 31,
1996.
SPECIAL, GROWTH, BALANCE SHEET OPPORTUNITIES AND GOVERNMENT SECURITIES
FUNDS: Financial Highlights for a share outstanding throughout the period
February 3, 1986 (commencement of operations) to December 31, 1996.
HIGH YIELD FUND: Financial Highlights for a share outstanding throughout
the period June 5, 1989 (commencement of operations) through December 31, 1996.
STRATEGIC INCOME FUND: Financial Highlights for a share outstanding
throughout the period July 1, 1994 (commencement of operations) to December 31,
1996.
Included in Part B: The audited financial statements for the year ended
October 31, 1996 for the Northstar Trust and for the year ended December 31,
1996 for the Special, Growth, Balance Sheet Opportunities, Government
Securities, Strategic Income and High Yield, and the report of the independent
accountants with respect to such financial statements are incorporated in the
Statement of Additional Information for the Trust and each Fund by reference to
the Annual Report to Shareholders for the Trust and each Fund for the fiscal
years ended October 31, 1996 and December 31, 1996, respectively. The
incorporated financial information for the years ended October 31, 1996 for the
Trust and December 31, 1996 for the other Funds includes the following:
Statement of Investments, Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, Notes to
Financial Statements, and report of independent accountants.
<PAGE>
(b) EXHIBITS - SPECIAL, GROWTH, BALANCE SHEET OPPORTUNITIES, GOVERNMENT
SECURITIES, STRATEGIC INCOME, AND HIGH YIELD FUNDS.
(1) Form of Amended and Restated Declaration of Trust (1)
(a) Amendment of Declaration of Trust
(2) By-Laws (1)
(3) N/A
(4) N/A
(5) (a) Form of Investment Advisory Agreement (1)
(b) Subadvisory Agreement for Northstar Advantage Special
Fund (4)
(6) (a)-(d) Form of Underwriting Agreements for Classes A, B,
C and T Shares (1)
(e) Form of Special Dealer Agreement between Northstar
Distributors and Advest, Inc. (1)
(7) N/A
(8) Form of Custody Agreement (1)
(9) (a) Form of Transfer Agency Agreement (1)
(b) Form of Sub-Transfer Agency Agreement (1)
(c) Form of Administrative Services Agreement (1)
(d) Administration Agreement (3)
(10) Opinion of Consent
(11) Consent of Independent Public Accountants
(12) Annual Report to Shareholders
(13) N/A
(14) N/A
(15) Form of Distribution Plan for Classes A, B, C and T
Shares (1)
(16) Performance Information
(17) Powers of Attorney (2)
(18) Multiple Class Plan Pursuant to Rule 18f-3
(27) Financial Data Schedules (EX-27)
- ----------------------------------
NOTES TO EXHIBIT LISTING
(1). Previously filed as an Exhibit to the Registrant's Post-Effecitve
Amendment as follows and incorporated herein by reference: Government
Securities Fund - PEA No. 16; Income Fund - PEA No. 15; Growth Fund -
PEA No. 15; Special Fund - PEA No. 15; High Yield Fund - PEA No. 11;
Strategic Income Fund - PEA No. 7.
(2). The Power of Attorney executed by Walter May was filed as an Exhibit to
the Registrant's Post-Effective Amendment as follows and is
incorporated herein by reference: Government Securities Fund - PEA No.
18; Balance Sheet Opportunities Fund - PEA No. 17; Growth Fund - PEA
No. 17; Special Fund - PEA No. 17; High Yield Fund - PEA No. 13; and
Strategic Income Fund - PEA No. 9. All other powers of attorney
<PAGE>
were filed as an Exhibit to the Registrant's Post-Effective Amendment
as follows and are incorporated herein by reference: Government
Securities Fund - PEA No. 15; Balance Sheet Opportunities Fund - PEA
No. 14; Growth Fund - PEA No. 14; Special Fund - PEA No. 14; High Yield
Fund - PEA No. 10; and Strategic Income Fund - PEA No. 6.
(3). Previously filed as an Exhibit to the Registrant's Post-Effective
Amendment as follows and incorporated herein by reference: Government
Securities Fund - PEA No. 17; Balance Sheet Opportunities Fund - PEA
No. 16; Growth Fund - PEA No. 16; Special Fund - PEA No. 16; High Yield
Fund - PEA No. 12; and Strategic Income Fund - PEA 8.
(4). Previously filed as an Exhibit to the Special Fund's Post- Effective
Amendment No. 16 and incorporated herein by reference.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
There are no persons controlled by or under common control with Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of December 31, 1996, the Registrant had the following number of record
security holders:
<TABLE>
<CAPTION>
Title of Class Fund Number of Shareholders
<S> <C> <C> <C> <C> <C>
Shares of Beneficial Income and Growth Fund (A) 1,448 (B) 2,477 (C) 1,569 (T) N/A
Interest High Total Return Fund (A) 5,685 (B) 10,789 (C) 1,324 (T) N/A
Growth + Value Fund (A) 57 (B) 151 (C) 36 (T) N/A
Special Fund (A) 4,043 (B) 6,932 (C) 1,118 (T) 3,956
Growth Fund (A) 216 (B) 656 (C) 43 (T) 6,218
Balance Sheet Opportunities Fund (A) 97 (B) 421 (C) 35 (T) 4,674
Government Securities Fund (A) 110 (B) 543 (C) 30 (T) 6,185
Strategic Income Fund (A) 351 (B) 1,184 (C) 104 (T) 1,870
High Yield Fund (A) 598 (B) 2,813 (C) 246 (T) 7,821
</TABLE>
<PAGE>
ITEM 27. INDEMNIFICATION
Section 5.4 of Registrant's Declaration of Trust provides the following:
(a) Subject to Paragraph (c) hereof every person who is, or has been, a Trustee,
Officer, employee or agent of the Trust shall be indemnified by the Trust to the
fullest extent permitted by law against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee, Officer, employee or agent and against amounts
paid or incurred by him in the settlement thereof in such manner, provided, that
to the extent any claim, action, suit or proceeding involves any particular
Series or Classes of Shares of the Trust or the assets or operations of one or
more Series or Classes of Shares, such indemnification shall be provided only
from the assets (or proceeds thereof or income therefrom of such one or more
Series or Classes of Shares and not from the assets (or proceeds thereof or
income therefrom) of any other Series or Class of Shares of the Trust.
(b) The words "claim", "action", "suit" or "proceeding" shall apply to all
claims, acitons, suits or proceedings ( civil, criminal, or other including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include without limitation, attorneys fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(c) No indemnification shall be provided hereunder to a Trustee or Officer:
(i) against any liability to the Trust, a series thereof, or the
Shareholders by reason of a final adjudication by a court or other body before
which a proceeding was brought or that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in reasonable belief that his action
was in the best interest of the Trust; and
(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraph (b)(i) or (b)(ii) resulting in a
payment by a Trustee or Officer, unless there has been a determination that such
Trustee or Officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office:
(A) by the court or other body approving the settlement or
other disposition; or
(B) based upon the review of readily available facts ( as
opposed to full trial-type inquiry) by (x) vote of a majority
of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office
act on the matter) or (y) written opinion of independent legal
counsel.
<PAGE>
(d) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to shich any Trustee or Officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or Officer and shall
inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and Officers may be entitled by
contract or otherwise under law.
(e) Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding of the character described in paragraph (a) of this Section
may be advanced by the Trust prior to final disposition therof upon receipt of
an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section, provided that either;
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees act on
the matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section, a "Disinterested Trustee" is one who is not (i) an
Interested Person of the Trust (including anyone who has been exempted from
being an Interested Person by any rule, regulation or order of the Commission),
or (ii) involved in the claim, action, suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Acto of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other that the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy, as expressed in the Act and be governed by final
adjudication of such issue.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Funds" in the Prospectus and Services of the Adviser and
Administrator" and "Trustees and Officers" in the Statement of Additional
Information, each of which is included in the Registration Statement. Set forth
is a list of each officer and director of the Adviser indicating each business,
profession, vocation or employment of a substantial nature in which each such
person has been engaged since January 31, 1994.
<TABLE>
<CAPTION>
POSITION WITH OTHER SUBSTANTIAL
INVESTMENT BUSINESS, PROFESSION
NAME ADVISER VOCATION OR EMPLOYMENT
- --------- --------------------------- --------------------------------------------
<S> <C> <C>
John Turner Director Chairman and CEO, ReliaStar
Financial Corp. and affiliates;
Director of Northstar Affiliates;
Trustee and Chairman, Northstar
Affiliated Investment Companies.
John Flittie Director President, ReliaStar Financial Corp.
and affiliates; Director, Northstar
Affilates.
Mark L. Lipson Chairman/CEO Director and Officer of Northstar
Director Distributors, Inc., Northstar
Administrators Corp. and Northstar,
Inc. Trustee and President, Northstar
Affiliated Investment Companies.
Robert J. Adler Executive President Northstar Distributors, Inc.
Vice
President,
Sales &
Marketing
Thomas Ole Dial Executive Vice President, Northstar Affiliated
Vice Investment Companies, and
President - Principal, TD Associates Inc.
Chief Investment Officer
Fixed Income
<PAGE>
Geoffrey Wadsworth Vice President/ Vice President - Northstar Affiliated
Investments Investment Companies.
and Portfolio
Manager
Peter Bakst Vice President - Vice President - Northstar Affiliated
Investments Investment Companies
and Portfolio Manager,
Director - High Yield
Debt Group for
CS First Boston Corp.,
President of Presidio Capital
Management and Managing
Director at Bankers Trust
Securities Corp.
Ryan Johanson Vice President - Vice President - Northstar Affiliated
Investments Investment Companies and Portfolio
Manager, Director of Global
Market Risk Management and
Senior Manager of
Banque Indosuez
Jeffrey Aurigemma Vice Vice President - Northstar Affiliated
President - Investment Companies.
Investments
Michael Graves Vice Vice President - Northstar Affiliated
President Investment Companies
Investments
Agnes Mullady Sr. Vice Vice President & Treasurer of
President Northstar Affiliates and the Northstar
and CFO Affiliated Investment Companies
Gertrude Purus Vice Vice President Northstar Distributors
President - and Northstar Administrators Corp.
Operations
Stephen Vondrak Vice Vice President - Northstar
President - Distributors, Inc., Former Regional
Sales & Marketing Marketing Manager with Roger
Engemann and Associates from
1991-1994.
Mark Sfarra Vice Vice President - Northstar
President - Distributors, Inc.
Marketing
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) "How the funds are organized and managed", "Meet the portfolio managers"
and "Your guide to buying, selling and exchanging shares of Northstar Funds"
in the Prospectus and "Underwriter and Distribution Services" in the Statement
of Additional Information, both of which are included in this Post-Effective
Amendment to the Registration Statement. Unless
<PAGE>
otherwise indicated, the principal business address for each person is c/o
Northstar, Two Pickwick Plaza, Greenwich, CT 06830.
<TABLE>
<CAPTION>
(b) (1) (2) (3)
Name and Principal Position and Offices Position and Offices
Address with Underwriter with Registrant
- ------------------ -------------------- --------------------
<S> <C> <C>
John Turner Director Trustee, Chairman
20 Washington Ave. South
Minneapolis, MN
John Flittie Director None
20 Washington Ave. South
Minneapolis, MN
Mark L. Lipson Chairman & Director Trustee and President
Robert J. Adler President None
Mark Blinder Reg. Vice President None
Scott Cassleberry Reg. Vice President None
Richard Frances Reg. Vice President None
Rick Galloway Reg. Vice President None
Daniel Leonard Reg. Vice President None
Stephen O'Brien Reg. Vice President None
David Linton Reg. Vice President None
Charles Dolce Reg. Vice President None
Hyman Glasman Reg. Vice President None
Stephen Vondrak Vice President None
Mark Sfarra Vice President None
Gertrude Purus Vice President None
Agnes Mullady Vice President Vice President
& Treasurer & Treasurer
</TABLE>
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
State Street Bank and Trust Co. maintains such records as Custodian and Fund
Accounting Agent for the Special, Growth, Balance Sheet Opportunities,
Government Securities, Strategic Income and High Yield Funds and the Northstar
Trust:
(1) Receipts and delivery of securities including certificate numbers;
(2) Receipts and disbursement of cash;
(3) Records of securities in transfer, securities in physical possession,
securities owned and securities loaned.
(4) Fund Accounting Records.
First Data Investor Services Group, ("First Data") maintains the following
records at One Exchange Place, 11th Floor, Boston, Massachusetts, 02109, as
Transfer Agent and Blue Sky Administrator for the Funds; and the Northstar
Trust.
(1) Shareholder Records;
(2) Share accumulation accounts: Details as to dates and number of shares
of each accumulation, price of each accumulation.
(3) Fund Accounting Records
(4) State Securities Regisitration Records
All other records required by item 30(a) are maintained at the office of the
Administrator, Two Pickwick Plaza, Greenwich, CT 06830.
ITEM 31. Management Services
Not Applicable.
ITEM 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees when
requested in writing to do so by the holders of at least 10% of the Trusts'
outstanding shares of beneficial interest and in connection with such meeting to
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
(b) Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Greenwich and the State of Connecticut on the 27th
day of February, 1997.
REGISTRANT
By: MARK L. LIPSON
------------------------------
Mark L. Lipson, President
SIGNATURES TITLE DATE
JOHN G. TURNER Chairman and February 27, 1997
John G. Turner* Trustee
MARK L. LIPSON Trustee February 27, 1997
Mark L. Lipson*
JOHN R. SMITH Trustee February 27, 1997
John R. Smith*
PAUL S. DOHERTY Trustee February 27, 1997
Paul S. Doherty*
DAVID W. WALLACE Trustee February 27, 1997
David W. Wallace*
ROBERT B. GOODE, JR. Trustee February 27, 1997
Robert B. Goode, Jr.*
ALAN L. GOSULE Trustee February 27, 1997
Alan L. Gosule*
DAVID W.C. PUTNAM Trustee February 27, 1997
David W.C. Putnam*
WALTER H. MAY, JR. Trustee February 27, 1997
Walter H. May, Jr.**
AGNES MULLADY Principal Financial February 27, 1997
Agnes Mullady and Accounting Officer
<PAGE>
By: AGNES MULLADY*
Agnes Mullady
Attorney-in-fact
* Executed pursuant to powers of attorney filed with Northstar Trust and
Strategic Income Fund - PEA No. 6; Northstar Government Securities Fund - PEA
No. 15; Northstar Balance Sheet Opportunities Fund - PEA No. 14; Northstar
Growth Fund - PEA No. 14; Northstar Special Fund - PEA No. 14; and Northstar
High Yield Fund - PEA No.10.
** Executed pursuant to power of attorney filed with Northstar Trust and
Strategic Income Fund - PEA No. 8; Northstar Government Securities Fund - PEA
No. 17; Northstar Balance Sheet Opportunities Fund - PEA No. 16; Northstar
Growth Fund - PEA No. 16; Northstar Special Fund - PEA No. 16; and Northstar
High Yield Fund - PEA No. 12 .
<PAGE>
INDEX TO EXHIBITS
---------------------
SPECIAL, GROWTH, BALANCE SHEET OPPORTUNITIES, STRATEGIC INCOME AND
HIGH YIELD FUNDS
<TABLE>
<CAPTION>
Exhibit No. Under
Part C of Form N1-A Name of Exhibit Page Number Herein
- ----------------- -------------- -----------------
<S> <C> <C>
(1) (a) Amendment of Declaration of Trust
(10) Opinion of Counsel
(11) Consent of Independent
Accountants
(12) Annual Report of Shareholders
(16) Performance Information
(18) Multiple Class Plan Pursuant to Rule 18f-3
(27) Financial Data Schedule EX-27
</TABLE>
- ------------------------
Exhibit 1(a)
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
CERTIFICATE OF AMENDMENT OF DECLARATION OF TRUST
The undersigned being all of the trustees of Northstar Advantage Strategic
Income Fund, a Massachusetts business trust (the "Trust"), acting pursuant
to Section 9.3 of the Trust's Declaration of Trust dated June 2, 1995, as
amended (the "Declaration of Trust"), hereby amend the Declaration of Trust
to change the name of the Trust set forth in Section 1.1 thereof as follows;
1. Section 1.1. of the Declaration of Trust, executed on June 2, 1995,
as amended, is hereby amended to read in its entirety as follows:
"Section 1.1 Name. The name of the Trust created hereby is "NORTHSTAR STRATEGIC
INCOME FUND".
IN WITNESS WHEREOF, the undersigned have this day signed this Certificate of
Amendment of Declaration of Trust.
Dated: August 1, 1996
___________________________ _____________________________
John G. Turner Mark L. Lipson
___________________________ _____________________________
Paul S. Doherty Robert B. Goode, Jr.
___________________________ _____________________________
David W. Wallace Walter May
___________________________ _____________________________
David W.C. Putnam Alan L. Gosule, Esq.
___________________________
John R. Smith
<PAGE>
<PAGE>
LAW OFFICES OF
DECHERT PRICE & RHOADS
1500 K STREET, N.W.
WASHINGTON, DC 20005-1208
TELEPHONE: (202) 626-3300
FAX: (202) 626-3334
Exhibit 10
February 28, 1997
Northstar Strategic Income Fund
Two Pickwick Plaza
Greenwich, Connecticut 06830
Ladies and Gentlemen:
As counsel to the Northstar Strategic Income Fund (the
"Fund"), we are familiar with the Fund's registration under the
Investment Company Act of 1940 and with the registration statement
relating to its shares of beneficial interest under the Securities
Act of 1933 (File No. 33-76574) (the "Registration Statement"). We
have also examined such other corporate records, agreements,
documents and instruments as we deemed appropriate.
On the basis of the foregoing, we are of the opinion that the shares of
beneficial interest of the Fund being registered under the Securities Act
of 1933 in the Registration Statement will be legally and validly issued,
fully paid and non-assessable by the Fund.
We hereby consent to the filing of this opinion with and as part of the
Registration Statement.
Very truly yours,
/s/ Dechert Price & Rhoads
<PAGE>
(Northstar Logo appears here
and reads as follows:
NORTHSTAR
THE NORTHSTAR FUNDS)
ANNUAL REPORT TO SHAREHOLDERS
December 31, 1996
(Graphics picture of Northstar brochure appears here)
<PAGE>
(Northstar logo appears here)
NORTHSTAR FUNDS
ANNUAL REPORT,
December 31, 1996
Dear Shareholders:
We are pleased to provide you with the annual report of the Northstar Funds for
the year ended December 31, 1996. We are gratified with your decision to entrust
your assets to the Northstar Funds and are confident that we can assist you in
reaching your financial objectives. Our goal is to provide you with consistent,
superior investment results through fundamental research, analysis, and
traditional investment disciplines. Following this letter is a summary of the
results of each Fund by their respective portfolio manager. We hope you will
find it informative.
During the past twelve months the U.S. financial markets have been strongly
supported by moderate growth in the economy, higher corporate profits, and
subdued inflation. Concerns that a slowdown late in 1995 would turn into a
recession in 1996 were dispelled as spending for housing and autos remained
strong bolstered by favorable interest rates, mortgage refinancing, increased
consumer borrowing, and tax refunds. The stock market began to reflect this in
February, rising sharply and broadening out to include small capitalization
stocks, not just the short list of blue chips that dominated late 1995 and early
1996. Likewise, the high yield bond market benefited from narrowing yield
spreads over U.S. Treasuries and rising confidence resulting in excellent
relative performance. A mid-year correction occurred, brought on by strong
second quarter growth igniting fears of inflation and profit margin pressure. It
proved short lived as the third quarter returned to a slower growth path with
subdued inflation. Also, the national election results preserved the political
balance reassuring the financial markets that neither extreme tax cuts nor
spending increases would derail progress towards balancing the budget.
Now in January, the Dow and S&P 500 are at record highs and long term government
bond yields have backed up slightly to 6.8%. Recent economic indicators have
been stronger than expected and initial December quarter earnings reports have
been good. The strength in equities since mid-year was again centered on
large-cap blue chips. Looking into 1997 the investment environment continues to
be favorable. There do not appear to be the type of excesses present which would
necessitate either a recession or an overheated inflationary condition. The
political situation suggests further progress on the federal deficit, restrained
spending, and possibly some tax cuts. Personal incomes are rising and consumer
sentiment is favorable. U.S. trading partners are expected to see faster growth
in 1997. Monetary policy is neutral and could be eased if necessary.
In closing, we reiterate once again that attempts to "time" the market often
prove counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to support this
philosophy and look forward to serving your investment needs in the future.
Sincerely,
Mark L. Lipson
President
January 1997
<PAGE>
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
(Bullet) Performance figures are historical and reflect reinvestment of all
distributions and changes in net asset value. Unless otherwise
indicated, the Fund's performance is computed without a sales
charge. When sales charges are included, Fund performance reflects
the maximum sales charge for each class of shares.
(Bullet) Class T shares of each Fund are no longer available for purchase by
new investors and may be purchased only under limited circumstances
by existing Class T shareholders. Since June 5, 1995, each Fund
began offering three new classes of shares (Class A, B, and C),
each representing a unique pricing structure for purchasing shares
of the Funds. Performance information relating to each Class of
shares of each Fund is contained in the performance graph for each
Fund.
(Bullet) Each Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less
than their original cost.
(Bullet) Each Fund's portfolio composition may change and there is no
assurance the Fund will continue to hold any particular securities.
(Bullet) Past performance is not indicative of future results.
ABOUT INDICES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
(Bullet) Standard & Poor's Corporation (S&P) is a credit-rating agency. The
unmanaged Standard & Poor's Composite Index of 500 Stocks is widely
regarded by investors as representative of the stock market in
general.
(Bullet) The CPI is an index of the prices paid by consumers for consumer
goods and services. The index is prepared by the Bureau of Labor
Statistics. The index is widely regarded by investors as the key
measure of inflation in the U.S. economy.
(Bullet) The unmanaged Russell 2000 Index is generally representative of the
performance of the stocks of small-capitalization companies.
(Bullet) Lehman Brothers, Inc. is the principal subsidiary of publicly-held
Lehman Brothers Holdings, Inc. It is engaged primarily in raising
and managing funds in capital markets worldwide. Lehman Brothers
indices measure the performance of fixed income securities over
various time periods and in various groupings. The indices are
unmanaged, but exclude small, illiquid and/or esoteric bonds from
the indices. We believe that about two-thirds of fixed income index
users rely on one or more of Lehman Brothers Fixed Income Indices.
(Bullet) An investment cannot be made in any indices listed. Unless
otherwise indicated, index results include reinvested dividends and
interest and do not reflect sales charges.
<PAGE>
(Photo of Thomas Ole Dial
appears here)
THOMAS OLE DIAL
(Northstar logo appears here)
NORTHSTAR
GOVERNMENT SECURITIES FUND
THE MARKETS
(Bullet) Moderate market interest rates and a federal funds rate that stayed
at 5.25% after January helped the U.S. economy maintain both GDP
growth and inflation at about 3% in 1996. The Federal Reserve Board
pleasantly surprised many market participants by not raising the
fed funds rate in 1996. However, periodic fears of too-rapid growth
in GDP, job creation and personal consumption expenditures caused
longer term interest rates to rise most of the year. Those fears
caused 10 and 30 year Treasury bond rates to end 1996 at 6.42% and
6.64%, respectively, 70-80 basis points higher than where they
started. The 4th quarter was a major exception. Lower interest
rates caused bond prices to rise, which eliminated losses
accumulated earlier in the year. Total returns on most bonds were
nonetheless below 4% in 1996.
(Bullet) The yields on most Treasury and U.S. government agency bonds traded
in a 100-120 basis points range. Rates fell between 20 and 40 basis
points in the 4th quarter of 1996, limiting the damage caused
mainly in the second quarter. While Government National Mortgage
Association bonds (GNMAs), were more attractive than Treasuries,
investors wanted even more yield. So other bond investments were
even more attractive than agency bonds. Fears of faster mortgage
prepayments increased as interest rates dropped during the 4th
quarter, which further limited investor's appetite for GNMAs
compared to domestic corporate bonds. Therefore, in 1996,
Treasuries and agencies were the poorest performing bonds.
(Bullet) There is a weakening consensus that the U.S. economy will maintain
annual GDP growth and CPI inflation rates below 3%. The short-run
outlook for U.S. debt markets nonetheless remains positive for
1997. (The U.S. dollar should help keep both inflation and interest
rates low as long as it remains strong, which we expect.)
THE FUND
(Bullet) From 12/31/95 to 12/31/96, the total returns of the Fund's Class A,
B, C and T shares were 0.57%, -0.15%, -0.21% and 0.32%,
respectively; the Lipper U.S. Government Fund average was 1.72%.
The Fund's net assets fell from $157 million to $137 million in
1996.
(Bullet) Due to the very long duration of the Fund's bond holdings, its
concentration in high yielding GNMAs and the fact that it had a
large investment in zero-coupon strips of a 23-year bond, the Fund
was particularly interest-rate sensitive. Since interest rates fell
during the quarter, the Fund's performance was outstanding in the
4th quarter. In that quarter, the Fund ranked 11th in total return
out of 179 similar Funds reported by Lipper.
CURRENT STRATEGY
(Bullet) Reduce the average duration of the Fund's holdings to a range of 5
to 7 years and eliminate the two zero-coupon positions to help
reduce the volatility of the Fund and lessen its downside risks.
(Bullet) Explore the risk/reward trade-offs of other U.S. government agency
bonds besides GNMAs with a view to increasing the diversification
of the Fund's holdings and boosting the fund's total return.
(Bullet) Maintain 100% of the portfolios' assets invested in obligations of
the U.S. government and its agencies in order to retain the Fund's
eligibility for share purchases by credit unions and institutions
with similar requirements.
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $136,592,506
TOP 10 HOLDINGS
NAME % FUND
1 GNMA 7.00% 57.4%
2 GNMA 6.50% 28.3
3 U.S. Treasury Strips '19 11.7
4 U.S. Treasury Strips '13 2.2
5 Cash Equivalents 0.4
100.0%
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
Class A 3.55% n/a -4.19%
Class B 3.55% n/a -4.86%
Class C 5.98% n/a -1.15%
Class T 7.23% 7.66 % -3.44%
CUMULATIVE TOTAL RETURNS
(does not reflect sales charge)
Inception 5 years 1 year
Class A 10.91% n/a 0.57%
Class B 9.66% n/a -0.15%
Class C 9.60% n/a -0.21%
Class T 114.23% 44.62 % 0.32%
3
<PAGE>
NORTHSTAR
GOVERNMENT SECURITIES FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
NORTHSTAR GOVERNMENT SECURITIES FUND AND COMPARATIVE INDICES
FROM INCEPTION OF EACH CLASS OF SHARES THROUGH THE FUND'S
FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1996, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 3.55% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 3.55% and 5.98% since inception on June 5,
1995 for Class B and Class C shares, respectively, and average annualized total
returns since inception on February 3, 1986 for Class T shares of 7.23%, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B shares of 5.00% declines to 0% and Class T shares of 4.00%
declines to 0% after five years; and maximum charge for Class C shares is 1.00%
during the first year of investment only). All performance data shown represents
past performance, and should not be considered indicative of future performance.
(Northstar Government Securities Fund--Class A
Chart appears here and reads as follows)
(Northstar Government Securities Fund--Class B
Chart appears here and reads as follows)
(Northstar Government Securities Fund--Class C
Chart appears here and reads as follows)
(Northstar Government Securities Fund--Class T
Chart appears here and reads as follows)
4
<PAGE>
NORTHSTAR GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
U.S. GOVERNMENT AND AGENCIES -- 99.60%
GNMA Pool #367856, 6.50%, due 9/15/23 $ 1,676,467 $ 1,610,984
GNMA Pool #367431, 6.50%, due 12/15/23 1,841,846 1,769,314
GNMA Pool #366750, 6.50%, due 3/15/24 4,055,199 3,896,803
GNMA Pool #376430, 6.50%, due 3/15/24 2,567,182 2,466,086
GNMA Pool #351481, 6.50%, due 4/15/24 3,638,906 3,495,606
GNMA Pool #352824, 6.50%, due 4/15/24 1,745,274 1,676,545
GNMA Pool #780035, 6.50%, due 7/15/24 3,564,960 3,424,572
GNMA Pool #411355, 6.50%, due 12/15/25 2,407,420 2,301,084
GNMA Pool #417514, 6.50%, due 12/15/25 2,134,345 2,040,071
GNMA Pool #420591, 6.50%, due 12/15/25 1,943,443 1,857,601
GNMA Pool #420596, 6.50%, due 12/15/25 1,971,194 1,884,127
GNMA Pool #420675, 6.50%, due 12/15/25 2,909,274 2,780,772
GNMA Pool #411385, 6.50%, due 4/15/26 4,956,845 4,727,591
GNMA Pool #413640, 6.50%, due 4/15/26 4,908,182 4,681,178
GNMA Pool #352081, 7.00%, due 9/15/23 4,779,465 4,701,799
GNMA Pool #369686, 7.00%, due 12/15/23 7,356,514 7,236,971
GNMA Pool #382159, 7.00%, due 1/15/24 3,576,203 3,522,560
GNMA Pool #362607, 7.00%, due 1/15/26 4,981,556 4,876,645
GNMA Pool #417832, 7.00%, due 1/15/26 3,490,785 3,417,269
GNMA Pool #420648, 7.00%, due 1/15/26 4,857,392 4,755,095
GNMA Pool #417276, 7.00%, due 2/15/26 6,839,780 6,695,734
GNMA Pool #413627, 7.00%, due 3/15/26 4,983,153 4,874,121
GNMA Pool #422307, 7.00%, due 3/15/26 4,500,441 4,405,662
GNMA Pool #426384, 7.00%, due 3/15/26 4,949,695 4,841,395
GNMA Pool #422324, 7.00%, due 4/15/26 4,982,663 4,873,642
GNMA Pool #430882, 7.00%, due 6/15/26 4,982,123 4,873,114
GNMA Pool #432878, 7.00%, due 6/15/26 4,983,516 4,874,476
GNMA Pool #412637, 7.00%, due 7/15/26 7,784,734 7,614,404
GNMA Pool #431008, 7.00%, due 7/15/26 3,485,262 3,409,004
GNMA Pool #431018, 7.00%, due 7/15/26 3,485,259 3,409,002
U. S. Treasury Strips, 0%, due 8/15/13 9,500,000 3,094,150
U. S. Treasury Strips, 0%, due 2/15/19 72,150,000 15,955,972
TOTAL INVESTMENT SECURITIES -- 99.60%
(cost $136,366,579) 136,043,349
REPURCHASE AGREEMENT -- 0.20%
Agreement with State Street Bank and Trust bearing interest
at 5.10% dated 12/31/96 to be repurchased 1/02/97 in the
amount of $279,079 and collateralized by $230,000 U.S.
Treasury Bonds, 8.50% due 2/15/20, value $286,602
(cost $279,000) 279,000 279,000
Other assets less liabilities -- 0.20% 270,157
NET ASSETS -- 100.00% $136,592,506
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
(Photo of Thomas Ole Dial
appears here)
THOMAS OLE DIAL
NORTHSTAR
STRATEGIC INCOME FUND
THE MARKETS
(Bullet) Moderate market interest rates and a federal funds rate that stayed
at 5.25% all year helped the U.S. economy maintain both GDP growth
and inflation at about 3%. However, persistent fears of higher
inflation, caused 10 and 30 year Treasury bond rates to end 1996 at
6.42% and 6.64%, respectively, 70-80 basis points higher than where
they started. That kept total returns on most bonds below 4%. In
contrast, sustained growth in the U.S. economy and in corporate
profits sent stock prices to record levels throughout 1996; all the
major stock averages returned 18% or more. Rising securities prices
here also boosted the value of the U.S. dollar.
(Bullet) Total returns for domestic and foreign high yield bonds were very
high last year, exceeding 12% and 28%, respectively. Both of those
groups benefited from broader institutional demand. Emerging market
bond prices also reflected continued economic progess by the
issuers. Since the credit profiles of domestic high yield bonds
improves with the amount of equity below them, those bonds' prices
were boosted by higher stock valuations.
(Bullet) There is a weakening consensus that the U.S. economy will maintain
annual GDP growth and CPI inflation rates below 3%. The short-run
outlook for U.S. debt and equity markets nonetheless remains
positive for 1997. The strong U.S. dollar limits the safe harbors
among foreign issuers; even those pursuing economic reforms.
THE FUND
(Bullet) From 12/31/95 to 12/31/96, the total returns of the Fund's Class A,
B, C and T shares were 10.88%, 10.18%, 10.11% and 10.39%,
respectively. The Fund's net assets rose 4.5% in 1996, from $76
million to nearly $80 million.
(Bullet) We continued to align high yield names with those in our two high
yield portfolios and replace some foreign sovereign names with
others that have better total return prospects. We replaced U.S.
Government bonds with GNMAs, high yield and foreign bonds.
Convertible bonds hurt the Fund's yield but boosted its total
return in the fourth quarter of 1996.
(Bullet) The Fund was able to perform well during the fourth quarter of 1996
despite the 60% limit on high yield investments and its limited
emerging market exposure due to its high exposure to
interest-sensitive bonds amidst declining rates.
CURRENT STRATEGY
(Bullet) Utilize the new latitude gained from the removal of minimum
allocation limits and from the ability to invest in domestic and
foreign investment grade corporates to optimize the Fund's results
over time.
(Bullet) Maximize high yield holdings, limit U.S. and foreign government
investments, and increase holdings of investment grade corporates
to increase the Fund's yield. Limit future holdings of convertible
bonds to those that have exceptional yields. Keep the Fund's
duration moderate and its credit quality at a minimum of BB+.
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $79,598,192
TOP 10 HOLDINGS
NAME % FUND
1 GNMA 7.00% '26 9.9%
2 GNMA, 6.50% '26 8.9
3 TheraTx, Inc. 4.4
4 Australia Govt., 10.00% '07 3.8
5 Province of Quebec, 7.50% '23 3.8
6 Republic of Poland, 3.75% '14 3.7
7 Republic of Italy, 6.875% '23 3.6
8 Commonwealth Alum. Corp. 3.3
9 Veritas DGC, Inc. 3.2
10 Healthsource, Inc. 3.0
47.6%
TOP 5 SECTORS
(by percentage of net assets)
High Yield 53%
Investment Grade 21%
U.S. Government 19%
Equity 4%
Cash 3%
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
Class A 7.45% n/a 5.60%
Class B 7.61% n/a 5.18%
Class C 9.93% n/a 9.11%
Class T 10.04% n/a 6.39%
CUMULATIVE TOTAL RETURNS
(does not reflect sales charge)
Inception 5 years 1 year
Class A 17.60% n/a 10.88%
Class B 16.29% n/a 10.18%
Class C 16.13% n/a 10.11%
Class T 29.15% n/a 10.39%
6
<PAGE>
NORTHSTAR
STRATEGIC INCOME FUND
(Northstar logo appears here)
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
NORTHSTAR STRATEGIC INCOME FUND AND COMPARATIVE INDICES FROM
INCEPTION OF EACH CLASS OF SHARES THROUGH THE FUND'S FISCAL
YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1996, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 7.45% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 7.61% and 9.93% since inception on June 5,
1995 for Class B and Class C shares, respectively, and average annualized total
returns since inception on July 1, 1994 for Class T shares of 10.04%, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B shares of 5.00% declines to 0% and Class T shares of 4.00%
declines to 0% after five years; and maximum charge for Class C shares is 1.00%
during the first year of investment only). All performance data shown represents
past performance, and should not be considered indicative of future performance.
(Northstar Strategic Income Fund--Class A
Chart appears here and reads as follows)
(Northstar Strategic Income Fund--Class B
Chart appears here and reads as follows)
(Northstar Strategic Income Fund--Class C
Chart appears here and reads as follows)
(Northstar Strategic Income Fund--Class T
Chart appears here and reads as follows)
7
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
INVESTMENT GRADE SECURITIES -- 20.68%
FOREIGN GOVERNMENT SECURITIES -- 20.68% (1)
Canadian Government Bonds
9.00%, due 6/01/25 2,000,000 $ 1,798,407
Commonwealth of Australia Government Bonds
10.00%, due 10/15/07 3,200,000 3,012,924
Province of British Columbia, Canada
9.50%, due 1/09/12 2,000,000 1,790,987
Province of Quebec, Canada
7.50%, due 7/15/23 (2) 3,000,000 3,000,900
Republic of Italy
6.875%, due 9/27/23 (2) 3,000,000 2,856,540
Republic of Poland
3.75%, due 10/27/14 (2) 3,500,000 2,966,250
Spanish Government Bonds
10.00%, due 2/28/05 112,000,000 1,037,914
TOTAL INVESTMENT GRADE SECURITIES
(cost $15,470,462) 16,463,922
HIGH YIELD SECURITIES -- 42.63%
DOMESTIC BONDS & NOTES -- 32.90%
AIRLINES -- 1.29%
Continental Airlines, Inc.
9.50%, Sr. Notes, 12/15/01 # $1,000,000 1,025,000
BROADCASTING & MEDIA -- 1.31%
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 500,000 512,500
Spanish Broadcasting System, Inc.
0/7.50%, Sr. Notes, 6/15/02 $ 500,000 532,500
1,045,000
CHEMICALS -- 0.70%
Synthetic Industries, Inc.
12.75%, Debentures, 12/01/02 500,000 553,750
CONSUMER PRODUCTS -- 2.91%
Jordan Industries, Inc.
10.375%, Sr. Notes, 8/01/03 1,000,000 995,000
Shop-Vac Corp.
10.625%, Sr. Notes, 9/01/03 # 1,250,000 1,321,875
2,316,875
ENTERTAINMENT -- 1.26%
LodgeNet Entertainment Corp.
10.25%, Sr. Notes, 12/15/06 # 1,000,000 1,005,000
FINANCE -- 2.54%
Riggs National Corp.
8.625%, Bonds, 12/31/26 # 2,000,000 2,020,000
FOREST & PAPER PRODUCTS -- 1.33%
Stone Container Corp.
10.75%, 1st Mortgage Notes, 10/01/02 1,000,000 1,057,500
</TABLE>
8
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Principal Amount/Units Value
<S> <C> <C>
GROCERY -- 1.34%
Ralphs Grocery Co.
10.45%, Sr. Notes, 6/15/04 $1,000,000 $ 1,065,000
INDUSTRIALS AND COMMERCIAL SERVICES -- 2.59%
Statia Terms International
11.75%, 1st Mortgage Notes, 11/15/03 # 2,000,000 2,060,000
INSURANCE -- 1.63%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 1,300,000 1,300,000
METALS & MINING -- 3.25%
Commonwealth Aluminum Corp.
10.75%, Sr. Subordinated Notes, 10/01/06 2,500,000 2,587,500
OIL & GAS -- 4.48%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 900,000 994,500
Veritas DGC, Inc.
9.75%, Sr. Notes, 10/15/03 2,500,000 2,575,000
3,569,500
PRINTING & PUBLISHING -- 0.69%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Notes, 7/01/04 500,000 547,500
TELECOMMUNICATIONS -- 3.93%
CS Wireless Systems, Inc.
0/11.375%, Units, 3/01/06 # $ (3) 3,000 1,095,000
RSL Communications Ltd./PLC
12.25%, Units, 11/15/06 # (4) 2,000 2,030,000
3,125,000
TRANSPORTATION -- 0.68%
Moran Transportation Co.
11.75%, Sr. Guaranteed Notes, 7/15/04 500,000 542,500
UTILITIES -- 2.97%
CE Casecnan Water & Energy Co.
11.95%, Sr. Notes, 11/15/10 2,000,000 2,365,000
TOTAL DOMESTIC BONDS & NOTES 26,185,125
FOREIGN BONDS & NOTES -- 9.73%
CABLE -- 2.31%
Le Groupe Videotron Ltee.
10.25%, Sr. Subordinated Notes, 10/15/02 500,000 533,750
Rogers Cablesystems Ltd.
9.65%, Sr. Debentures, 1/15/14 (1) 1,750,000 1,303,586
1,837,336
CHEMICALS -- 0.62%
Acetex Corp.
9.75%, Sr. Secured Notes, 10/01/03 500,000 493,750
</TABLE>
9
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Principal Amount/Shares/Units Value
<S> <C> <C>
FOREIGN GOVERNMENT SECURITIES -- 1.87%
Republic of Argentina
5.25/6.00%, Government Guarantee, 3/31/23 $ $1,000,000 $ 631,250
Republic of Argentina
6.625%, Government Guarantee, 3/31/05 (5) 980,000 857,500
1,488,750
FOREST & PAPER PRODUCTS -- 1.37%
Indah Kiat International Finance
12.50%, Guaranteed Notes, 6/15/06 500,000 556,250
Malette, Inc.
12.25%, Sr. Notes, 7/15/04 500,000 535,000
1,091,250
TELECOMMUNICATIONS -- 1.65%
Colt Telecom Group PLC
0/12.00%, Units, 12/15/06 $ (6) 500 298,750
Telecom Brazil Funding Corp.
11.09375%, Guaranteed Notes, 12/09/99 # (5) 1,000,000 1,015,000
1,313,750
TRANSPORTATION -- 1.91%
Transportacion Maritima Mexica
10.00%, Sr. Notes, 11/15/06 1,500,000 1,522,500
TOTAL FOREIGN BONDS & NOTES
7,747,336
TOTAL HIGH YIELD SECURITIES
(cost $32,686,613) 33,932,461
CONVERTIBLE BONDS -- 10.30%
HEALTHCARE -- 7.41%
Healthsource, Inc.
5.00%, Subordinated Notes, 3/01/03 3,000,000 2,394,780
TheraTx, Inc.
8.00%, Subordinated Debentures, 2/01/02 3,802,000 3,497,840
5,892,620
INSURANCE -- 2.89%
Penn Treaty America Corp.
6.25%, Subordinated Notes, 12/01/03 # 1,500,000 1,617,660
Sierra Health Services, Inc.
7.50%, Debentures, 9/15/01 750,000 683,437
2,301,097
TOTAL CONVERTIBLE BONDS
(cost $8,100,041) 8,193,717
PREFERRED STOCKS -- 4.46%
CABLE -- 0.65%
Cablevision Systems Corp., 11.75% & 5,456 511,500
COMPUTER SERVICES -- 2.34%
Vanstar Financing Trust, 6.75% # (7) 35,000 1,863,435
ENTERTAINMENT -- 1.47%
Time Warner, Inc., 10.25% 10,749 1,171,641
</TABLE>
10
<PAGE>
NORTHSTAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
TOTAL PREFERRED STOCKS
(cost $3,279,544) $ 3,546,576
WARRANTS -- 0.01% @
CONSUMER PRODUCTS -- 0.01%
Chattem, Inc., (expires 6/17/99) 500 10,125
RETAIL & WHOLESALE -- 0.00%
Dairy Mart Convenience Stores, Inc.,
(expires 12/01/01) 4,999 0
TOTAL WARRANTS
(cost $0) 10,125
RIGHTS -- 0.00%
FOREIGN GOVERNMENT -- 0.00%
United Mexican States 1,000,000 0
HEAVY EQUIPMENT -- 0.00%
Terex Corp. 2,000 0
TOTAL RIGHTS
(cost $0) 0
U.S. GOVERNMENT AND AGENCIES -- 18.83%
GNMA, 6.50%, due 4/15/26 $7,461,231 7,116,149
GNMA, 7.00%, due 7/15/26 8,050,176 7,874,038
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $14,810,999) 14,990,187
TOTAL INVESTMENT SECURITIES -- 96.91%
(cost $74,347,659) 77,136,988
REPURCHASE AGREEMENT -- 1.71%
Agreement with State Street Bank and Trust
bearing interest at 5.10% dated 12/31/96 to be
repurchased 1/02/97 in the amount of $1,362,386
and collateralized by $1,280,000 U.S. Treasury
Notes, 7.25% due 8/15/04, value $1,392,000
(cost $1,362,000) 1,362,000 1,362,000
Other assets less liabilities -- 1.38% 1,099,204
NET ASSETS -- 100.00% $ 79,598,192
</TABLE>
# Sale restricted to qualified institutional investors.
$ Step Bond.
@ Non-income producing security.
& Payment-in-kind security.
(1) The principal amount is shown in the respective country's currency.
(2) U.S. denominated security.
(3) A unit consists of $4,000 par value Sr. Discount Notes, 11.375% due 3/01/06
and 1.1 shares of common stock.
(4) A unit consists of $1,000 par value Sr. Notes, 12.25% due 11/15/06 and 1
warrant.
(5) Floating Rate Bond. Rate as of December 31, 1996.
(6) A unit consists of $1,000 par value Sr. Discount Notes, 12.00% due 12/15/06
and 1 warrant.
(7) Convertible Security.
See accompanying notes to financial statements.
11
<PAGE>
(Photo of Jeffrey Aurigemma (Photo of Peter A. Bakst
appears here) appears here)
JEFFREY AURIGEMMA PETER A. BAKST
NORTHSTAR
HIGH YIELD FUND
THE MARKETS
(Bullet) Moderate market interest rates and a federal funds rate that stayed
at 5.25% all year helped the U.S. economy maintain both GDP growth
and inflation at about 3%. However, persistent fears of higher
inflation, caused 10 and 30 year Treasury bond rates to end 1996 at
6.42% and 6.64%, respectively, 70-80 basis points higher than where
they started. That kept total returns on most bonds below 4%. In
contrast, sustained growth in the U.S. economy and in corporate
profits sent stock prices to record levels throughout 1996; all the
major stock averages returned 18% or more. Rising securities prices
also boosted the value of the U.S. dollar.
(Bullet) Total returns for domestic and foreign high yield bonds were very
high last year, exceeding 12% and 28%, respectively. Both of those
groups benefited from broader institutional demand. Emerging market
bond prices also reflected continued economic progress by the
issuers. Since the credit profiles of domestic high yield bonds
improves with the amount of equity below them, those bonds' prices
were boosted by higher stock valuations.
(Bullet) There is a weakening consensus that the U.S. economy will maintain
annual GDP growth and CPI inflation rates below 3%. The short-run
outlook for U.S. debt and equity markets nonetheless remains
positive for 1997. The strong U.S. dollar limits the safe harbors
among foreign issuers; even those pursuing economic reforms.
THE FUND
(Bullet) From 12/31/95 to 12/31/96, the total returns of the Fund's Class A,
B, C and T shares were 14.74%, 13.94%, 13.93% and 14.49%,
respectively. The Fund's superior performance promoted sales that
led its net assets to increase 28% in 1996, from $180 million to
over $231 million.
(Bullet) The Fund's performance was enhanced by changes in portfolio
allocations that anticipated changes in the markets. We
underweighted investments in cyclical industries (e.g., steel,
chemicals and paper). However, we increased returns by increasing
investments in the telecommunications, energy, broadcasting and
healthcare industries and in high-quality emerging market corporate
bonds. We raised cash to avoid year-end losses.
(Bullet) Bonds issued by companies that are high quality players in their
industries contributed significantly to the Fund's high returns
(e.g., APP, EchoStar, Grupo Televisa, MFS, Teleport and Time
Warner).
CURRENT STRATEGY
(Bullet) Continue to manage the Fund as a conservative "all-weather" high
yield fund with limited downside risk.
(Bullet) Focus on bonds rated B2/B or higher. Continue to invest in
companies with strong cash flows or asset protection whose
securities have the potential for credit upgrades.
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $231,051,719
TOP 10 HOLDINGS
NAME % FUND
1 MFS Communications, Inc. 2.1%
2 CE Casecnan Water & Energy 2.0
3 EchoStar Satellite Broadcasting 2.0
4 Grupo Televisa SA 2.0
5 Teleport Comm. Group, Inc. 2.0
6 Telewest PLC 2.0
7 Time Warner, Inc. 2.0
8 Americo Life, Inc. 1.8
9 APP International 1.8
10 Sweetheart Cup Co., Inc. 1.8
19.5%
TOP 5 INDUSTRIES
(by percentage of net assets)
Telecommunications 15%
Utility 7%
Broadcasting 7%
Cable 6%
Entertainment 6%
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
Class A 8.55% n/a 9.25%
Class B 8.81% n/a 8.93%
Class C 11.21% n/a 12.93%
Class T 10.97% 14.07% 10.49%
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 5 years 1 year
Class A 19.46% n/a 14.74%
Class B 18.28% n/a 13.94%
Class C 18.28% n/a 13.93%
Class T 120.40% 93.16% 14.49%
12
<PAGE>
NORTHSTAR
HIGH YIELD FUND
(Northstar logo appears here)
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
NORTHSTAR HIGH YIELD FUND AND COMPARATIVE INDICES FROM
INCEPTION OF EACH CLASS OF SHARES THROUGH THE FUND'S FISCAL
YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1996, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 8.55% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 8.81% and 11.21% since inception on June 5,
1995 for Class B and Class C shares, respectively, and average annualized total
returns since inception on May 30, 1989 for Class T shares of 10.97%, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B shares of 5.00% declines to 0% and Class T shares of 4.00%
declines to 0% after five years; and maximum charge for Class C shares is 1.00%
during the first year of investment only). All performance data shown represents
past performance, and should not be considered indicative of future performance.
(Northstar High Yield Fund--Class A
Chart appears here and reads as follows)
(Northstar High Yield Fund--Class B
Chart appears here and reads as follows)
(Northstar High Yield Fund--Class C
Chart appears here and reads as follows)
(Northstar High Yield Fund--Class T
Chart appears here and reads as follows)
13
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
DOMESTIC BONDS & NOTES -- 62.18%
AIRLINES -- 0.98%
SC International Services, Inc.
13.00%, Sr. Subordinated Notes, 10/01/05 $2,000,000 $ 2,265,000
AUTOMOTIVE -- 1.43%
Collins & Aikman Products Co.
11.50%, Sr. Subordinated Notes, 4/15/06 3,000,000 3,300,000
BROADCASTING & MEDIA -- 6.08%
American Radio Systems Corp.
9.00%, Sr. Subordinated Notes, 2/01/06 1,500,000 1,479,375
Jacor Communications Co.
9.75%, Sr. Subordinated Notes, 12/15/06 1,000,000 1,027,500
JCAC, Inc.
10.125%, Sr. Subordinated Notes, 6/15/06 3,000,000 3,112,500
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 2,500,000 2,693,750
SFX Broadcasting, Inc.
10.75%, Sr. Subordinated Notes, 5/15/06 3,000,000 3,172,500
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 1,250,000 1,281,250
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 9/30/05 1,250,000 1,281,250
14,048,125
CABLE -- 1.34%
Comcast Corp.
9.375%, Sr. Subordinated Debentures, 5/15/05 2,000,000 2,090,000
Heartland Wireless Communications, Inc.
13.00%, Sr. Notes, 4/15/03 1,000,000 995,000
3,085,000
CONGLOMERATES -- 0.72%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 1,500,000 1,672,500
CONSUMER PRODUCTS -- 2.91%
Rayovac Corp.
10.25%, Sr. Subordinated Notes, 11/01/06 # 2,400,000 2,493,000
Sweetheart Cup Co., Inc.
10.50%, Sr. Subordinated Notes, 9/01/03 4,000,000 4,230,000
6,723,000
ENVIRONMENTAL CONTROL -- 0.68%
Allied Waste North America, Inc.
10.25%, Sr. Subordinated Notes, 12/01/06 # 1,500,000 1,578,750
FINANCIAL SERVICES -- 0.73%
Homeside, Inc.
11.25%, Sr. Notes, 5/15/03 1,500,000 1,680,000
FOOD -- 0.68%
International Home Foods, Inc.
10.375%, Sr. Subordinated Notes, 11/01/06 # 1,500,000 1,567,500
</TABLE>
14
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
GROCERY -- 2.88%
Jitney-Jungle Stores of America, Inc.
12.00%, Sr. Notes, 3/01/06 $2,000,000 $ 2,122,500
Pathmark Stores, Inc.
9.625%, Sr. Subordinated Notes, 5/01/03 2,500,000 2,406,250
Ralphs Grocery Co.
10.45%, Sr. Notes, 6/15/04 2,000,000 2,130,000
6,658,750
HEALTHCARE -- 3.56%
Dade International, Inc.
11.125%, Sr. Subordinated Notes, 5/01/06 1,900,000 2,066,250
Imed Corp.
9.75%, Sr. Subordinated Notes, 12/01/06 # 2,900,000 2,961,625
Integrated Health Services, Inc.
10.25%, Sr. Subordinated Notes, 4/30/06 # 2,000,000 2,095,000
Tenet Healthcare Corp.
10.125%, Sr. Subordinated Notes, 3/01/05 1,000,000 1,110,000
8,232,875
HOTEL & GAMING -- 4.17%
Capital Gaming International, Inc.
0%, Promissory Notes, 8/01/95* 10,000 0
Courtyard By Marriott Ltd.
10.75%, Sr. Secured Notes, 2/01/08 2,000,000 2,125,000
Grand Casino, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 1,000,000 1,010,000
John Q. Hammons Hotels L.P.
9.75%, 1st Mortgage Notes, 10/01/05 1,000,000 1,022,500
John Q. Hammons Hotels, Inc.
8.875%, 1st Mortgage Notes, 2/15/04 1,500,000 1,496,250
Trump Atlantic City Funding, Inc.
11.25%, Company Guarantee, 5/01/06 4,000,000 3,980,000
9,633,750
INSURANCE -- 1.84%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 4,250,000 4,250,000
MANUFACTURING -- 0.62%
U.S. Can Corp.
10.125%, Sr. Subordinated Notes, 10/15/06 # 1,350,000 1,420,875
MISCELLANEOUS SERVICES -- 1.31%
Intertek Financial PLC
10.25%, Sr. Subordinated Notes, 11/01/06 # 2,900,000 3,030,500
OIL & GAS -- 2.09%
Benton Oil & Gas Co.
11.625%, Sr. Notes, 5/01/03 2,000,000 2,210,000
HS Resources, Inc.
9.875%, Sr. Subordinated Notes, 12/01/03 2,500,000 2,625,000
4,835,000
</TABLE>
15
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
PAPER PRODUCTS -- 1.17%
SD Warren Co.
12.00%, Sr. Subordinated Notes, 12/15/04 $2,500,000 $ 2,703,125
PRINTING & PUBLISHING -- 0.95%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Notes, 7/01/04 2,000,000 2,190,000
RETAIL & WHOLESALE -- 1.22%
Waban, Inc.
11.00%, Sr. Subordinated Notes, 5/15/04 2,500,000 2,812,500
STEEL -- 3.17%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 2,000,000 2,185,000
Bar Technologies, Inc.
13.50%, Sr. Secured Notes, 4/01/01 2,000,000 2,055,000
UCAR Global Enterprises, Inc.
12.00%, Sr. Subordinated Notes, 1/15/05 535,000 618,594
WCI Steel, Inc.
10.00%, Sr. Secured Notes, 12/01/04 # 2,400,000 2,454,000
7,312,594
TELECOMMUNICATIONS -- 13.42%
Alliant Computer Systems, Inc.
7.25%, Subordinated Debentures, 5/15/12 @* 528,000 0
Cellular, Inc.
0/11.75%, Sr. Subordinated Notes, 9/01/03 $ 3,000,000 2,715,000
EchoStar Satellite Broadcasting Corp.
0/13.125%, Sr. Discount Notes, 3/15/04 $ 6,000,000 4,560,000
MFS Communications, Inc.
0/8.875%, Sr. Discount Notes, 1/15/06 $ 6,500,000 4,769,375
Omnipoint Corp.
11.625%, Sr. Notes, 8/15/06 3,000,000 3,142,500
Paging Network, Inc.
10.125%, Sr. Subordinated Notes, 8/01/07 4,000,000 4,095,000
PriCellular Wireless Corp.
10.75%, Sr. Notes, 11/01/04 # 3,000,000 3,138,750
Teleport Communications Group, Inc.
0/11.125%, Sr. Discount Notes, 7/01/07 $ 6,500,000 4,501,250
Western Wireless Corp.
10.50%, Sr. Subordinated Notes, 6/01/06 1,900,000 1,992,625
Western Wireless Corp.
10.50%, Sr. Subordinated Notes, 2/01/07 2,000,000 2,095,000
31,009,500
TEXTILES -- 0.90%
Avondale Mills, Inc.
10.25%, Sr. Subordinated Notes, 5/01/06 2,000,000 2,080,000
</TABLE>
16
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
TRANSPORTATION -- 1.99%
Moran Transportation Co.
11.75%, Sr. Guaranteed Notes, 7/15/04 $2,200,000 $ 2,387,000
Sea Containers Ltd.
12.50%, Sr. Subordinated Debentures, 12/01/04 2,000,000 2,220,000
4,607,000
UTILITIES -- 7.34%
AES Corp.
10.25%, Sr. Subordinated Notes, 7/15/06 3,000,000 3,225,000
CalEnergy, Inc.
9.50%, Sr. Notes, 9/15/06 1,000,000 1,032,500
California Energy, Inc.
9.875%, Sr. Notes, 6/30/03 1,000,000 1,045,000
California Energy, Inc.
0/10.25%, Sr. Discount Notes, 1/15/04 $ 2,650,000 2,809,000
Calpine Corp.
10.50%, Sr. Notes, 5/15/06 2,000,000 2,130,000
CE Casecnan Water & Energy Co.
11.95%, Sr. Notes, 11/15/10 4,000,000 4,730,000
Long Island Lighting Co.
7.125%, Debentures, 6/01/05 2,100,000 1,995,588
16,967,088
TOTAL DOMESTIC BONDS & NOTES
(cost $135,125,280) 143,663,432
FOREIGN BONDS & NOTES -- 20.75%
BROADCASTING & MEDIA -- 0.70%
Bell Cablemedia PLC
0/11.875%, Sr. Discount Notes, 9/15/05 $ 2,000,000 1,625,000
CABLE -- 4.72%
Multicanal Participacoes SA
12.625%, Company Guarantee, 6/18/04 3,000,000 3,240,000
Rogers Cablesystems Ltd.
9.625%, Notes, 8/01/02 3,000,000 3,138,750
Telewest, PLC
0/11.00%, Sr. Discount Debentures, 10/01/07 $ 6,500,000 4,525,625
10,904,375
CHEMICALS -- 0.86%
Acetex Corp.
9.75%, Sr. Secured Notes, 10/01/03 2,000,000 1,975,000
</TABLE>
17
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
<S> <C> <C>
CONSUMER SERVICES -- 1.57%
Celestica International, Inc.
10.50%, Sr. Subordinated Notes, 12/31/06 # $3,450,000 $ 3,631,125
ENTERTAINMENT -- 3.69%
Globo Comunicacoes e Participacoes Ltda.
9.875%, Company Guarantee, 12/20/04 # 4,000,000 4,000,000
Grupo Televisa SA
11.375%, Sr. Notes, 5/15/03 4,200,000 4,525,500
8,525,500
METALS & MINING -- 1.32%
Royal Oaks Mines, Inc.
11.00%, Sr. Subordinated Notes, 8/15/06 3,000,000 3,060,000
PAPER PRODUCTS -- 4.43%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 3,900,000 4,221,750
Grupo Industrial Durango SA
12.00%, Sr. Notes, 7/15/01 2,600,000 2,795,000
Malette, Inc.
12.25%, Sr. Notes, 7/15/04 3,000,000 3,210,000
10,226,750
PRINTING & PUBLISHING -- 1.78%
Newsquest Capital PLC
11.00%, Sr. Subordinated Notes, 5/01/06 # 4,000,000 4,120,000
TELECOMMUNICATIONS -- 1.68%
Fonorola, Inc.
12.50%, Sr. Notes, 8/15/02 1,000,000 1,093,750
Telefonica de Argentina SA
11.875%, Notes, 11/01/04 2,500,000 2,775,000
3,868,750
TOTAL FOREIGN BONDS & NOTES
(cost $45,645,489) 47,936,500
COMMON STOCKS -- 0.00%
GAMING -- 0.00%
Capital Gaming International, Inc. @ 44,540 3,652
TOTAL COMMON STOCKS
(cost $274,102) 3,652
PREFERRED STOCKS -- 4.21%
BANKING -- 0.87%
First Nationwide Bank Corp., 11.50% 17,500 2,007,031
ENTERTAINMENT -- 2.03%
Time Warner, Inc., 10.25% 43,004 4,687,436
HEALTHCARE -- 0.88%
Fresenius Medical Care Capital Trust, 9.00% 2,000 2,045,000
PRINTING & PUBLISHING -- 0.43%
K III Communications Corp., 10.00% 10,000 982,500
</TABLE>
18
<PAGE>
NORTHSTAR HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
TOTAL PREFERRED STOCKS
(cost $8,749,130) $ 9,721,967
WARRANTS -- 0.05% @
GAMING -- 0.00%
Capital Gaming International, Inc., (expires 2/01/99) 36,318 1,271
STEEL -- 0.05%
Bar Technologies, Inc., (expires 4/01/01) 2,000 120,000
TOTAL WARRANTS
(cost $73,425) 121,271
RIGHTS -- 0.00%
FOREIGN GOVERNMENT -- 0.00%
United Mexican States 1,500,000 0
HEAVY EQUIPMENT -- 0.00%
Terex Corp. 8,000 0
TOTAL RIGHTS
(cost $0) 0
TOTAL INVESTMENT SECURITIES -- 87.19%
(cost $189,867,426) 201,446,822
REPURCHASE AGREEMENT -- 11.22%
Agreement with State Street Bank and Trust bearing
interest at 5.10% dated 12/31/96 to be repurchased
1/02/97 in the amount of $25,946,349 and
collateralized by $26,490,000 U.S. Treasury Notes,
5.75% due 12/31/98, value $26,461,020
(cost $25,939,000) $25,939,000 25,939,000
Other assets less liabilities -- 1.59% 3,665,897
NET ASSETS -- 100.00% $231,051,719
</TABLE>
@ Non-income producing security.
# Sale restricted to qualified institutional investors.
$ Step Bond.
* Bankrupt security.
See accompanying notes to financial statements.
19
<PAGE>
(Photo of Thomas Ole Dial (Photo of Peter Bakst
appears here) appears here)
THOMAS OLE DIAL PETER BAKST
NORTHSTAR
BALANCE SHEET
OPPORTUNITIES FUND
THE MARKETS
(Bullet) Yields on the 10 year and 30 year Treasury bonds were volatile
throughout the year, rising to 6.42% and 6.64% from 5.57% and
5.95%, respectively. Continued economic strength made market
participants wary of a Fed tightening, while benign inflation
numbers capped the rise on Treasury yields.
(Bullet) The stock market remained strong, with the Dow Industrial 30 rising
a remarkable 28.89%, while the S&P 500 rose 22.94%. As evidenced by
the Russell 2000 return of 16.54%, small cap stocks underperformed
severely, as investors sought large cap companies showing strong
earnings momentum.
(Bullet) The High Yield market performed strongly, with the Lipper average
up 13.67%, as a strong economy and high equity prices created
strong demand for high yield securities. As a result, high yield
spread to Treasuries narrowed to approximately 355 basis points
from 420 basis points.
THE FUND
(Bullet) The Fund's returns on class A, B, C, and T shares for 1996 were
10.54%, 9.76%, 9.72%, and 10.18%, respectively. An overexposure to
an eclectic group of convertible bonds such as TWA hurt the
performance of the Fund. In addition, an underweighting of high
yield bonds also prevented the Fund from taking advantage of the
strong performance of that asset class.
(Bullet) Holdings were increased in the telecommunications, broadcasting,
and utility sectors. Exposure was reduced in airlines,
pharmaceuticals and healthcare.
(Bullet) Towards the latter part of the year, we increased our holdings of
high yield bonds to 11.80% from 6.30% of assets. Convertible bonds
and preferreds were reduced to 23.40% and 21.30%, respectively. Our
cash position rose to 25%.
CURRENT STRATEGY
(Bullet) We will continue to restructure the portfolio, focusing on both
straight debt and equities. Exposure to convertible securities will
continue to be reduced, while seeking investments with either high
current income or greater capital appreciation potential. We will
continue to emphasize "bottom-up" security analysis rather than
macro economic strategy.
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $64,726,986
TOP 10 HOLDINGS
NAME % FUND
1 SA Telecommunications, Inc. 3.0%
2 Royal Oak Mines, Inc. 2.4
3 Trump Atlantic City 2.3
4 Comcast Corp. 2.2
5 Beverly Enterprises, Inc. 1.8
6 Roche Holdings, Inc. 1.8
7 Kaman Corp. 1.7
8 Multicanal Participacoes SA 1.7
9 Unocal Corp. 1.7
10 Alexander & Alexander 1.6
20.2%
TOP 5 INDUSTRIES
(by percentage of net assets)
Telecommunications 15%
Oil & Gas 7%
Finance 6%
Utility 5%
Broadcasting 5%
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
Class A 11.00% n/a 5.25%
Class B 11.56% n/a 5.07%
Class C 13.66% n/a 8.78%
Class T 9.71% 9.98% 6.42%
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 5 years 1 year
Class A 23.85% n/a 10.54%
Class B 22.55% n/a 9.76%
Class C 22.42% n/a 9.72%
Class T 174.85% 60.87% 10.18%
20
<PAGE>
NORTHSTAR
BALANCE SHEET
OPPORTUNITIES FUND
(Northstar logo appears here)
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND AND COMPARATIVE
INDICES FROM INCEPTION OF EACH CLASS OF SHARES THROUGH THE
FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1996, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 11.00% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 11.56% and 13.66% since inception on June 5,
1995 for Class B and Class C shares, respectively, and average annualized total
returns since inception on February 3, 1986 for Class T shares of 9.71%, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B shares of 5.00% declines to 0% and Class T shares of 4.00%
declines to 0% after five years; and maximum charge for Class C shares is 1.00%
during the first year of investment only). All performance data shown represents
past performance, and should not be considered indicative of future performance.
(Northstar Balance Sheet Opportunities Fund--Class A
Chart appears here and reads as follows)
(Northstar Balance Sheet Opportunities Fund--Class B
Chart appears here and reads as follows)
(Northstar Balance Sheet Opportunities Fund--Class C
Chart appears here and reads as follows)
(Northstar Balance Sheet Opportunities Fund--Class T
Chart appears here and reads as follows)
21
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
COMMON STOCKS -- 16.74%
BROADCASTING & MEDIA -- 0.68%
EchoStar Communications Corp. @ 20,000 $ 440,000
ENTERTAINMENT -- 1.16%
Time Warner, Inc. 20,000 750,000
ENVIRONMENTAL CONTROL -- 0.57%
Allied Waste Industries, Inc. @ 40,000 370,000
FINANCE -- 0.85%
Finova Group, Inc. 8,600 552,550
FOREST & PAPER PRODUCTS -- 1.58%
Buckeye Cellulose Corp. @ 38,300 1,019,738
INSURANCE -- 0.52%
Allmerica Financial Corp. 10,000 335,000
METALS & MINING -- 0.78%
U.S. Can Corp. @ 30,000 506,250
OIL & GAS -- 1.21%
KN Energy, Inc. 20,000 785,000
RETAILING -- 1.79%
Safeway, Inc. @ 15,000 641,250
Waban, Inc. @ 20,000 520,000
1,161,250
TELECOMMUNICATION -- 3.79%
MFS Communications, Inc. @ 10,000 545,000
Omnipoint Corp. @ 20,000 385,000
Paging Network, Inc. @ 30,000 457,500
Western Wireless Corp. @ 30,000 416,250
WorldCom, Inc. @ 25,000 651,562
2,455,312
TEXTILES -- 1.17%
Interface, Inc. 37,500 754,688
UTILITIES -- 2.64%
AES Corp. @ 15,000 697,500
CalEnergy, Inc. @ 30,000 1,008,750
1,706,250
TOTAL COMMON STOCKS
(cost $10,024,831) 10,836,038
PREFERRED STOCKS -- 2.26%
BROADCASTING & MEDIA -- 1.47%
Paxson Communications Corp., 12.50% 10,000 950,000
HEALTHCARE -- 0.79%
Fresenius Medical Care Capital Trust, 9.00% 500 511,250
TOTAL PREFERRED STOCKS
(cost $1,500,000) 1,461,250
CONVERTIBLE PREFERRED STOCKS -- 17.71%
AIRLINES -- 0.76%
Trans World Airlines, Inc., 8.00% # 20,000 495,000
</TABLE>
22
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Shares/Principal Amount/Units Value
<S> <C> <C>
BROADCASTING & MEDIA -- 2.32%
American Radio Systems Corp., 7.00% # 20,000 $ 943,340
Merrill Lynch Co., Inc. ("Cox Communications")
6.00% due 6/01/99 (1) 25,000 556,250
1,499,590
COMPUTER HARDWARE -- 1.53%
Wang Laboratories, Inc., 6.50% # 20,000 992,500
CONGLOMERATES -- 1.95%
Corning Delaware L.P., 6.00% 11,400 725,325
Pittston Mineral Group, 6.25% # 14,000 539,000
1,264,325
CONSUMER PRODUCTS -- 1.17%
Tyco Toys, Inc., $0.4125 75,000 759,375
FINANCE -- 1.63%
Alexander & Alexander Services, Inc., $3.625 # 22,200 1,054,500
MANUFACTURING -- 1.14%
Greenfield Capital Trust, 6.00% # 15,000 735,540
OIL & GAS -- 4.51%
Atlantic Richfield Co., 9.00% (2) 43,600 937,400
Tejas Gas Corp., 5.25% 15,000 896,250
Unocal Corp., 6.25% # 18,770 1,084,174
2,917,824
UTILITIES -- 2.70%
Kaman Corp., 6.50% 20,300 1,111,425
MCN Corp., 8.75% 23,000 635,375
1,746,800
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $11,259,821) 11,465,454
CORPORATE BONDS -- 11.83%
ENVIRONMENTAL CONTROL -- 1.39%
Allied Waste North America, Inc.
10.25%, Sr. Subordinated Notes, 12/01/06 # $400,000 421,000
ICF Kaiser International, Inc.
13.00%, Units, 12/31/03 # (3) 500 477,500
898,500
FINANCE -- 1.36%
Coinstar, Inc.
0/13.00%, Units, 10/01/06 # $ (4) 1,250 883,750
HOTEL & GAMING -- 2.31%
Trump Atlantic City Funding, Inc.
11.25%, Company Guarantee, 5/01/06 1,500,000 1,492,500
STEEL -- 0.79%
WCI Steel, Inc.
10.00%, Sr. Secured Notes, 12/01/04 # 500,000 511,250
</TABLE>
23
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
TELECOMMUNICATIONS -- 5.98%
EchoStar Satellite Broadcasting Corp.
0/13.125%, Sr. Discount Notes, 3/15/04 $ $1,000,000 $ 760,000
Omnipoint Corp.
11.625%, Sr. Notes, 8/15/06 1,000,000 1,047,500
Paging Network, Inc.
10.00%, Sr. Subordinated Notes, 10/15/08 # 1,000,000 1,016,250
Western Wireless Corp.
10.50%, Sr. Subordinated Notes, 2/01/07 1,000,000 1,047,500
3,871,250
TOTAL CORPORATE BONDS
(cost $7,320,594) 7,657,250
CONVERTIBLE BONDS -- 19.45%
AEROSPACE & DEFENSE -- 1.33%
Gencorp, Inc.
8.00%, Subordinated Debentures, 8/01/02 750,000 863,048
CHEMICALS -- 1.77%
Roche Holdings, Inc.
0%, LYONS, 4/20/10 # (5) 2,500,000 1,143,750
COMPUTER HARDWARE -- 1.39%
Apple Computer, Inc.
6.00%, Subordinated Notes, 6/01/01 # 900,000 896,499
ELECTRONICS -- 4.19%
Magnetek, Inc.
8.00%, Debentures, 9/15/01 841,000 864,127
Park Electrochemical Corp.
5.50%, Subordinated Notes, 3/01/06 1,000,000 867,500
Solectron Corp.
6.00%, Subordinated Notes, 3/01/06 # 900,000 982,764
2,714,391
FINANCE -- 1.60%
Equitable Cos., Inc.
6.125%, Subordinated Debentures, 12/15/24 900,000 1,037,250
HEALTHCARE -- 3.04%
Beverly Enterprises, Inc.
5.50%, Subordinated Debentures, 8/01/18 1,125,000 1,188,281
North American Vaccine, Inc.
6.50%, Subordinated Notes, 5/01/03 # 750,000 776,250
1,964,531
OIL & GAS -- 1.00%
Pogo Producing Co.
5.50%, Subordinated Notes, 3/15/04 300,000 645,783
TELECOMMUNICATION -- 5.13%
Comcast Corp.
3.375/5.50%, Subordinated Debentures, 9/09/05 $ 1,500,000 1,410,420
SA Telecommunications, Inc.
10.00%, Subordinated Notes, 8/15/06 # 2,000,000 1,910,000
3,320,420
</TABLE>
24
<PAGE>
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Principal Amount Value
<S> <C> <C>
TOTAL CONVERTIBLE BONDS
(cost $11,813,469) $12,585,672
FOREIGN CORPORATE BONDS -- 7.05%
CABLE -- 1.67%
Multicanal Participacoes SA
12.625%, Company Guarantee, 6/18/04 $1,000,000 1,080,000
CHEMICALS -- 0.99%
Acetex Corp.
9.75%, Sr. Secured Notes, 10/01/03 650,000 641,875
ENTERTAINMENT -- 1.39%
Globo Comunicacoes e Participacoes Ltda.
9.875%, Company Guarantee, 12/20/04 # 900,000 900,000
METALS & MINING -- 2.36%
Royal Oaks Mines, Inc.
11.00%, Sr. Subordinated Notes, 8/15/06 1,500,000 1,530,000
NEWSPAPERS -- 0.64%
Newsquest Capital PLC
11.00%, Sr. Subordinated Notes, 5/01/06 # 400,000 412,000
TOTAL FOREIGN CORPORATE BONDS
(cost $4,508,788) 4,563,875
TOTAL INVESTMENT SECURITIES -- 75.04%
(cost $46,427,503) 48,569,539
REPURCHASE AGREEMENT -- 24.41%
Agreement with State Street Bank and Trust bearing interest at
5.10% dated 12/31/96 to be repurchased 1/02/97 in the amount
of $15,806,477 and collateralized by $16,175,000 U.S. Treasury
Bills, 5.25% due 12/31/97, value $16,121,930
(cost $15,802,000) 15,802,000 15,802,000
Other assets less liabilities -- 0.55% 355,447
NET ASSETS -- 100.00% $64,726,986
</TABLE>
@ Non-income producing security.
# Sale restricted to qualified institutional investors.
$ Step bond.
(1) Strypes -- Structured Yield Product Exchangeable for Stock.
(2) Mandatory conversion on 9/15/97 into shares of Lyondell Petroleum Co. common
stock.
(3) A unit consists of $1,000 par value 13.00%, Sr. Subordinated Notes, 12/31/03
and 5 warrants.
(4) A unit consists of $1,000 par value 13.00%, Sr.. Subordinated Discount
Notes, 10/01/06 and 1 warrant.
(5) LYONS -- Liquid yield option notes. Convertible into 144A American
Depositary Shares.
See accompanying notes to the financial statements.
25
<PAGE>
(Photo of Geoffrey Wadsworth
appears here)
GEOFFREY WADSWORTH
NORTHSTAR
GROWTH FUND
THE MARKETS
(Bullet) During 1996 the Dow Industrials rose 28.89%, the S&P 500 gained
22.94%, and the Russell 2000 was up 16.54%.
(Bullet) The U.S. equity market was much stronger than most forecasters had
expected. It benefited from solid growth in the economy, good
corporate earnings increases, and very modest inflation and
interest rate increases.
(Bullet) Purchase demand for equities was strong all year as money flowed
into mutual funds, corporate mergers and buy-ins offset new
issuances, and foreign buying picked up.
(Bullet) At the start of 1996 concern over a slowdown due to a widespread
inventory correction was reversed after the Federal Reserve lowered
interest rates in January and better growth became evident. Small
cap growth stocks led the first half, but lagged the large blue
chips after June. The market suffered two brief corrections of 5%
or more, first during July and again in December as inflationary
fears were stirred by strong employment data.
THE FUND
(Bullet) From 12/31/95 to 12/31/96, the total returns of the Funds Class A,
B, C and T shares were 20.54%, 19.74%, 19.74% and 19.90%,
respectively. This compares to the Lipper Growth Fund Index at
17.50%.
(Bullet) The focus remains on high quality large and mid-cap companies.
Investments are made where earnings growth prospects are above
average and the equity valuation is reasonable or temporarily
depressed.
(Bullet) Areas that were particularly strong for the Fund included energy
stocks, (oil drilling and natural gas), computer technology,
financial, pharmaceuticals, aerospace, telecommunication services
and consumer staples. Computer services holdings were
disappointing. Consumer cyclicals, (monthly retailers), were strong
during the first half but lagged badly in the second half.
Conversely, semiconductor stocks which did poorly in the first
half, finished with strong gains late in the year.
CURRENT STRATEGY
(Bullet) The environment continues to be favorable for the financial markets
going into 1997. While economic growth now appears to have been
close to 4% in the fourth quarter of 1996, we think this will
moderate allowing the outlook of 2 to 3% GDP growth with moderate 3
to 3.5% inflation to be extended.
(Bullet) The Fund continues to favor holdings in technology, financial
services, energy, health care, and specialty retailing. We continue
to look for individual companies with consistent growth prospects
and for global leaders that will benefit from a more synchronized
worldwide expansion during 1997.
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $79,964,487
TOP 10 HOLDINGS
NAME % FUND
1 Global Marine, Inc. 4.5%
2 Citicorp 4.2
Philip Morris Cos.,
3 Inc. 3.8
Magna International,
4 Inc. 3.5
5 WorldCom, Inc. 3.4
6 Compaq Computer Corp. 3.2
7 Schlumberger, Ltd. 3.2
8 AMP, Inc. 2.9
9 Home Depot, Inc. 2.9
10 Microsoft Corp. 2.9
34.5%
TOP 5 INDUSTRIES
(by percentage of net assets)
Retailing 11%
Bank 8%
Pharmaceutical 6%
Financial Services 6%
Consumer Products 4%
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
Class A 16.94% n/a 14.85%
Class B 17.62% n/a 14.74%
Class C 19.85% n/a 18.74%
Class T 11.86% 10.43% 15.90%
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 5 years 1 year
Class A 34.45% n/a 20.54%
Class B 33.23% n/a 19.74%
Class C 33.12% n/a 19.74%
Class T 239.81% 64.22% 19.90%
26
<PAGE>
NORTHSTAR
GROWTH FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
NORTHSTAR GROWTH FUND AND COMPARATIVE INDICES FROM INCEPTION
OF EACH CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1996, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 16.94% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 17.62% and 19.85% since inception on June 5,
1995 for Class B and Class C shares, respectively, and average annualized total
returns since inception on February 3, 1986 for Class T shares of 11.86%,
reflect applicable contingent deferred sales charges (maximum contingent
deferred sales charge for Class B shares of 5.00% declines to 0% and Class T
shares of 4.00% declines to 0% after five years; and maximum charge for Class C
shares is 1.00% during the first year of investment only). All performance data
shown represents past performance, and should not be considered indicative of
future performance.
(Northstar Growth Fund--Class A
Chart appears here and reads as follows)
(Northstar Growth Fund--Class B
Chart appears here and reads as follows)
(Northstar Growth Fund--Class C
Chart appears here and reads as follows)
(Northstar Growth Fund--Class T
Chart appears here and reads as follows)
27
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
COMMON STOCKS -- 98.38%
AEROSPACE & DEFENSE -- 3.12%
Boeing Co. 14,000 $ 1,489,250
Northrop Grumman Corp. 12,200 1,009,550
2,498,800
ALUMINUM -- 0.76%
Century Aluminum Co. 35,000 603,750
AUTOMOTIVE -- 3.49%
Magna International, Inc. 50,000 2,787,500
BANKING -- 8.08%
Citicorp 32,300 3,326,900
Mellon Bank Corp. 21,300 1,512,300
Wells Fargo & Co. 6,000 1,618,500
6,457,700
BUSINESS SERVICES -- 3.60%
Ceridian Corp. @ 35,000 1,417,500
Electronic Data Systems Corp. 33,700 1,457,525
2,875,025
COMPUTER HARDWARE -- 5.81%
Bay Networks, Inc. @ 50,000 1,043,750
Cisco Systems, Inc. @ 16,000 1,018,000
Compaq Computer Corp. @ 34,800 2,583,900
4,645,650
COMPUTER SOFTWARE -- 2.89%
Microsoft Corp. @ 28,000 2,313,500
CONSTRUCTION -- 1.88%
Fluor Corp. 24,000 1,506,000
CONSUMER PRODUCTS -- 5.82%
Philip Morris Cos., Inc. 27,000 3,040,875
Procter & Gamble Co. 15,000 1,612,500
4,653,375
ELECTRICAL EQUIPMENT -- 2.86%
AMP, Inc. 59,600 2,287,150
ENERGY -- 5.53%
El Paso Natural Gas Co. 40,000 2,020,000
Enron Oil & Gas Co. 40,000 1,010,000
Sonat, Inc. 27,000 1,390,500
4,420,500
ENERGY SERVICES -- 4.78%
Baker Hughes, Inc. 23,000 793,500
Schlumberger, Ltd. 26,000 2,596,750
Seitel, Inc. @ 10,800 432,000
3,822,250
</TABLE>
28
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
FINANCIAL SERVICES -- 6.00%
Associates First Capital Corp. 22,000 $ 970,750
Capital One Financial Corp. 60,000 2,160,000
Federal National Mortgage Association 44,800 1,668,800
4,799,550
FOREST & PAPER PRODUCTS -- 2.68%
Kimberly-Clark Corp. 22,540 2,146,935
HEALTHCARE -- 2.11%
Columbia/HCA Healthcare Corp. 21,900 892,425
Healthsouth Corp. @ 20,600 795,675
1,688,100
HOTEL & RESTAURANTS -- 1.90%
Doubletree Corp. @ 3,000 135,000
La Quinta Inns, Inc. 72,500 1,386,563
1,521,563
MACHINERY -- 1.88%
Deere & Co. 37,000 1,503,125
MISCELLANEOUS TECHNOLOGY -- 1.68%
Millipore Corp. 32,500 1,344,688
OFFICE EQUIPMENT/SUPPLIES -- 3.38%
American Pad & Paper Co. @ 30,000 678,750
Xerox Corp. 38,400 2,020,800
2,699,550
OIL & GAS DRILLING -- 5.02%
Global Marine, Inc. @ 175,000 3,609,375
Parker Drilling Co. @ 42,300 407,137
4,016,512
PHARMACEUTICAL -- 6.02%
Bristol-Myers Squibb Co. 9,000 978,750
Genzyme Corp. @ 42,000 913,500
Merck & Co., Inc. 12,000 951,000
Pfizer, Inc. 11,000 911,625
Pharmacia & Upjohn, Inc. 26,800 1,061,950
4,816,825
RETAILING -- 11.40%
AutoZone, Inc. @ 59,800 1,644,500
General Nutrition Cos., Inc. @ 50,000 843,750
Home Depot, Inc. 46,000 2,305,750
Nine West Group, Inc. @ 25,000 1,159,375
Office Depot, Inc. @ 100,000 1,775,000
Pep Boys -- Manny, Moe & Jack 45,000 1,383,750
9,112,125
</TABLE>
29
<PAGE>
NORTHSTAR GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
SEMICONDUCTOR -- 4.32%
Intel Corp. 5,800 $ 759,438
National Semiconductor Corp. @ 41,500 1,011,562
Texas Instruments, Inc. 26,400 1,683,000
3,454,000
TELECOMMUNICATIONS -- 3.37%
WorldCom, Inc. @ 103,400 2,694,862
TOTAL COMMON STOCKS
(cost $61,811,638) 78,669,035
TOTAL INVESTMENT SECURITIES -- 98.38%
(cost $61,811,638) 78,669,035
REPURCHASE AGREEMENT -- 1.65%
Agreement with State Street Bank and Trust bearing
interest at 5.10% dated 12/31/96 to be repurchased
1/02/97 in the amount of $1,316,373 and collateralized
by $1,335,000 U.S. Treasury Notes, 6.25% due 6/30/98,
value $1,345,013
(cost $1,316,000) $1,316,000 1,316,000
Liabilities in excess of other assets -- (0.03%) (20,548)
NET ASSETS -- 100.00% $79,964,487
</TABLE>
@ Non-income producing security.
See accompanying notes to the financial statements.
30
<PAGE>
(Photo of Louis Navellier
appears here)
LOUIS NAVELLIER
NORTHSTAR
SPECIAL FUND
(Northstar logo appears here)
THE MARKETS
(Bullet) During 1996 the S&P 500 rose 22.94%, Russell 2000 gained 16.54% and
the Dow Industrials was up 28.89%.
(Bullet) The small cap sector led the way in the first two quarters of the
year. Wall Street responded very positively to the earnings
estimates and reports posted by much of the small to mid cap stocks
until the end of June. Analysts were quite pleased with the
economic environment until July, when inflation fears led to a
spike in interest rates. This prompted a rapid selloff in most
NASDAQ stocks. Technology and healthcare sectors, normally the
darlings of the small caps were punished and the more common
sectors like financial and energy stocks held their own. Most of
the NASDAQ Composite never recovered from this selloff. The strong
returns posted by the indexes for the year were driven by a
relatively small number of large cap stocks. According to a
Bloomberg report, if you removed the top 100 stocks from the NASDAQ
Composite (5,500 issues), it would have actually declined 2% on the
year. Under these conditions, the strength of the market was seen
to be very narrow. We are optimistic that the market will start to
reward strong earnings and begin to rotate back into growth stocks
in 1997.
THE FUND
(Bullet) From 12/31/95 to 12/31/96, the total returns of the Fund's Class A,
B, C and T shares were 18.16%, 17.37%, 17.37% and 17.47%,
respectively; compared to 17.50% for the Lipper Growth Fund Index
and 22.71% for the NASDAQ Composite.
(Bullet) The Fund's performance for the year was led by stocks like Iomega,
PairGain Technologies, Global Marine, Herman Miller, Inc. and
Chesapeake Energy.
CURRENT STRATEGY
(Bullet) We expect a strong "January Effect" to help boost our stocks as
fourth quarter earnings are released. It is likely that many
institutions will take profits and rotate out of the large cap
sector and into small to mid cap stocks. We anticipate the current
favorable economic environment to continue through the year. It
appears that the President is quite interested in working with
Congress to produce a balanced budget amendment. This would
certainly add some confidence to the market and lend itself to
interest rate stability. Although absolute gains for the market for
1997 may not be higher than 1996, relative gains for growth
portfolios should be much better.
(Bullet) Currently, our models are favoring the earnings surprise type
screens, such as standardized unexpected earnings (SUE). We are
optimistic that many of our NASDAQ stocks will release very strong
earnings that will drive their prices dramatically higher. We
believe that the stocks we are currently holding in our portfolio
have superior fundamental characteristics relative to the overall
market.
FUND INFORMATION (ALL DATA IS AS OF 12/31/96) TOTAL NET ASSETS: $265,531,464
TOP 10 EQUITY HOLDINGS
NAME % FUND
1 Tubos de Acero 2.1%
2 PanEnergy Corp. 2.0
3 Allstate Corp. 1.9
4 Plum Creek Timber 1.9
5 Atlantic Richfield
Co. 1.8
6 BMC Software, Inc. 1.8
7 Bristol-Myers Squibb 1.8
8 Commerce Bancshares 1.7
9 Paychex, Inc. 1.7
10 Camco International 1.6
18.3%
TOP 5 INDUSTRIES
(by percentage of net assets)
Natural Gas 14%
Banks 8%
Oil 8%
Oil & Gas 7%
Pharmaceuticals 6%
SEC AVERAGE ANNUAL RATES OF RETURN
(at maximum applicable sales charge)
Inception 5 years 1 year
Class A 15.90% n/a 12.57 %
Class B 16.46% n/a 12.37 %
Class C 18.76% n/a 16.37 %
Class T 10.13% 11.36% 13.47 %
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)
Inception 5 years 1 year
Class A 32.58% n/a 18.16 %
Class B 31.21% n/a 17.37 %
Class C 31.21% n/a 17.37 %
Class T 186.56% 71.25% 17.47 %
31
<PAGE>
NORTHSTAR
SPECIAL FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
NORTHSTAR SPECIAL FUND AND COMPARATIVE INDICES FROM INCEPTION
OF EACH CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1996, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 15.90% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 16.46% and 18.76% since inception on June 5,
1995 for Class B and Class C shares, respectively, and average annualized total
returns since inception on February 3, 1986 for Class T shares of 10.13%,
reflect applicable contingent deferred sales charges (maximum contingent
deferred sales charge for Class B shares of 5.00% declines to 0% and Class T
shares of 4.00% declines to 0% after five years; and maximum charge for Class C
shares is 1.00% during the first year of investment only). All performance data
shown represents past performance, and should not be considered indicative of
future performance.
(Northstar Special Fund--Class A
Chart appears here and reads as follows)
(Northstar Special Fund--Class B
Chart appears here and reads as follows)
(Northstar Special Fund--Class C
Chart appears here and reads as follows)
(Northstar Sepecial Fund--Class T
Chart appears here and reads as follows)
32
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
COMMON STOCKS -- 99.13%
ADVANCED MEDICAL DEVICES -- 1.02%
Synetic, Inc. @ 55,800 $ 2,706,300
AEROSPACE & DEFENSE -- 1.99%
AlliedSignal, Inc. 55,600 3,725,200
Oregon Metallurgical Corp. @ 48,100 1,551,225
5,276,425
AGRICULTURAL -- 1.44%
Grupo Industrial Maseca SA de CV ** 200,200 3,828,825
APPAREL/FABRIC -- 3.73%
Fruit of the Loom, Inc. @ 103,500 3,920,062
Jones Apparel Group, Inc. @ 105,200 3,931,850
St. John Knits, Inc. 47,100 2,048,850
9,900,762
BANKS -- 8.06%
Cal Fed Bancorp, Inc. @ 158,700 3,888,150
Commerce Bancshares, Inc. 96,165 4,447,631
Federal Home Loan Mortgage Corp. 35,400 3,898,425
First of America Bank Corp. 67,000 4,028,375
Northern Trust Corp. 49,400 1,790,750
Zions Bancorp. 32,200 3,348,800
21,402,131
BEVERAGES -- 1.11%
Anheuser-Busch Cos., Inc. 73,400 2,936,000
CHEMICALS -- 1.32%
Cytec Industries, Inc. @ 86,400 3,510,000
COMPUTER SOFTWARE -- 3.55%
BMC Software, Inc. @ 114,000 4,716,750
Paychex, Inc. 91,400 4,701,387
9,418,137
DATA COMMUNICATION/NETWORKING -- 0.34%
Ascend Communications, Inc. @ 14,500 900,813
DIVERSIFIED TECHNOLOGY -- 2.36%
Diebold, Inc. 54,400 3,420,400
Sanctuary Woods Multimedia Corp. @ 70,000 38,500
Zoltek Cos., Inc. @ 77,000 2,800,875
6,259,775
EDUCATION -- 0.82%
Apollo Group, Inc. @ 65,250 2,181,797
ELECTRONICS -- 1.36%
Hubbell, Inc. 83,400 3,607,050
FINANCIAL SERVICES -- 2.45%
Alliance Capital Management L.P. 139,300 3,708,863
Student Loan Marketing Association 30,000 2,793,750
6,502,613
</TABLE>
33
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
FOOD -- 4.54%
Campbell Soup Co. 45,600 $ 3,659,400
Hershey Foods Corp. 30,200 1,321,250
Safeway, Inc. @ 75,400 3,223,350
Vons Cos., Inc. @ 64,500 3,861,937
12,065,937
FOREST PRODUCTS -- 1.92%
Plum Creek Timber Co. 196,300 5,103,800
FUNERAL/CEMETARY SERVICES -- 0.36%
Stewart Enterprises, Inc. 28,000 952,000
HEAVY MACHINERY/CONSTRUCTION -- 1.29%
Smith International, Inc. @ 76,100 3,414,988
HOUSEHOLD PRODUCTS -- 1.35%
Fort Howard Corp. @ 130,000 3,599,375
INDUSTRIALS AND COMMERCIAL SERVICES -- 3.78%
Southdown, Inc. 139,700 4,348,163
Tubos de Acero de Mexico SA @ ** 357,900 5,681,662
10,029,825
INSURANCE -- 5.96%
Allstate Corp. 85,600 4,954,100
Conseco, Inc. 50,400 3,213,000
Jefferson-Pilot Corp. 73,800 4,178,925
Progressive Corp. 51,600 3,476,550
15,822,575
LODGING -- 2.36%
HFS, Inc. @ 46,500 2,778,375
Prime Hospitality Corp. @ 215,700 3,478,163
6,256,538
MEDIA -- 0.94%
Infinity Broadcasting Corp. @ 74,200 2,494,975
NATURAL GAS -- 3.63%
Noble Affiliates, Inc. 69,300 3,317,737
PanEnergy Corp. 119,700 5,386,500
Transocean Offshore, Inc. 15,000 939,375
9,643,612
OFFICE EQUIPMENT/SUPPLIES -- 2.72%
Avery Dennison Corp. 107,200 3,792,200
Herman Miller, Inc. 60,800 3,442,800
7,235,000
OIL -- 8.05%
Atlantic Richfield Co. 36,200 4,796,500
British Petroleum Co. PLC ** 27,700 3,916,087
ENSCO International, Inc. @ 28,100 1,362,850
Murphy Oil Corp. 71,400 3,971,625
Santa Fe Energy Resources, Inc. @ 247,700 3,436,838
Snyder Oil Corp. 224,700 3,904,162
21,388,062
</TABLE>
34
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Security Shares Value
<S> <C> <C>
OIL & GAS EXPLORATION -- 6.84%
Camco International, Inc. 94,700 $ 4,368,037
Global Marine, Inc. @ 84,100 1,734,563
Marine Drilling Cos., Inc. @ 120,400 2,370,375
Nabors Industries, Inc. @ 218,700 4,209,975
Reading & Bates Corp. @ 83,800 2,220,700
Tuboscope Vetco International Corp. @ 142,800 2,213,400
United Meridian Corp. @ 20,000 1,035,000
18,152,050
PHARMACEUTICAL -- 6.38%
American Home Products Corp. 57,200 3,353,350
Bristol-Myers Squibb Co. 43,800 4,763,250
Cardinal Health, Inc. 61,950 3,608,587
Jones Medical Industries, Inc. 80,000 2,930,000
Rhone-Poulenc Rorer, Inc. 29,400 2,296,875
16,952,062
PUBLISHING -- 1.50%
Houghton Mifflin Co. 70,400 3,986,400
RAILROADS -- 1.46%
Conrail, Inc. 38,900 3,875,413
REAL ESTATE INVESTMENT TRUST -- 1.37%
General Growth Properties 112,600 3,631,350
RECREATION PRODUCTS -- 2.42%
Callaway Golf Co. 82,600 2,374,750
Nike, Inc. 67,700 4,045,075
6,419,825
RETAILERS -- 1.25%
Nautica Enterprises, Inc. @ 90,000 2,272,500
Wet Seal, Inc. @ 49,100 1,049,513
3,322,013
SEMICONDUCTER & RELATED -- 1.08%
Vitesse Semiconductor Corp. @ 63,200 2,875,600
TELECOMMUNICATION -- 3.51%
Cascade Communications Corp. @ 47,200 2,601,900
Compania de Telecomunicaciones de Chile SA ** 38,400 3,883,200
PairGain Technologies, Inc. @ 93,600 2,848,950
9,334,050
TELEPHONE SYSTEMS -- 1.55%
Cincinnati Bell, Inc. 66,800 4,116,550
TOBACCO -- 1.56%
Universal Corp. 128,000 4,132,992
TOYS -- 0.54%
Galoob Toys, Inc. @ 102,200 1,430,800
VEHICLE PARTS & EQUIPMENT -- 2.00%
Gentex Corp. @ 64,400 1,296,050
Lancaster Colony Corp. 87,200 4,011,200
5,307,250
</TABLE>
35
<PAGE>
NORTHSTAR SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
<S> <C> <C>
WATER COMPANIES -- 1.22%
United Water Resources, Inc. 209,300 $ 3,244,150
TOTAL COMMON STOCKS
(cost $240,215,479) 263,217,820
TOTAL INVESTMENT SECURITIES -- 99.13%
(cost $240,215,479) 263,217,820
REPURCHASE AGREEMENT -- 6.70%
Agreement with State Street Bank and Trust bearing
interest at 5.10% dated 12/31/96 to be repurchased
1/02/97 in the amount of $17,787,038 and
collateralized by $18,200,000 U.S. Treasury Bills,
5.25% due 12/31/97, value $18,140,286 (cost
$17,782,000) $17,782,000 17,782,000
Liabilities in excess of other assets -- (5.83%) (15,468,356)
NET ASSETS -- 100.00% $265,531,464
</TABLE>
@ Non-income producing security.
** American Depositary Receipts.
See accompanying notes to financial statements.
PROXY RESULTS
During the year ended December 31, 1996, Special Fund shareholders voted on
the following proposal. The proposal was approved at a special meeting of
shareholders on January 30, 1996.
<TABLE>
<CAPTION>
Shares Shares
Voted Voted
For Against Abstentions
<S> <C> <C> <C>
To approve the Sub-Advisory agreement between Northstar Investment
Management Corp., adviser to the Fund, and Navellier Fund Management,
Inc. 1,582,187 25,031 30,973
</TABLE>
36
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Government Strategic Northstar Balance Sheet Northstar Northstar
Securities Income High Yield Opportunities Growth Special
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
(cost $136,366,579, $74,347,659,
$189,867,426, $46,427,503,
$61,811,638 and $240,215,479,
respectively) $136,043,349 $77,136,988 $201,446,822 $48,569,539 $78,669,035 $263,217,820
Repurchase agreements 279,000 1,362,000 25,939,000 15,802,000 1,316,000 17,782,000
Cash 583 358 270 560 1,576 291
Dividend and interest receivable 685,217 1,280,473 3,605,004 443,231 118,611 176,384
Receivable for shares of beneficial
interest sold 84,573 98,068 752,767 47,636 57,847 1,100,987
Prepaid expenses 18,709 71,689 22,601 18,317 17,881 19,967
Other Receivables 0 0 0 0 9,335 815
Total Assets 137,111,431 79,949,576 231,766,464 64,881,283 80,190,285 282,298,264
LIABILITIES:
Payable for shares of beneficial
interest reacquired 335,074 181,737 372,008 34,296 63,881 760,090
Distribution fee payable 75,326 56,656 149,601 41,857 62,133 179,590
Investment advisory fee payable 53,040 45,789 87,464 35,885 50,388 164,437
Foreign taxes payable 0 5,369 0 0 1,479 0
Payable for investments purchased 0 0 0 0 0 15,481,724
Accrued expenses 55,485 61,833 105,672 42,259 47,917 180,959
Total Liabilities 518,925 351,384 714,745 154,297 225,798 16,766,800
NET ASSETS $136,592,506 $79,598,192 $231,051,719 $64,726,986 $79,964,487 $265,531,464
NET ASSETS ARE COMPOSED OF:
Capital paid in for shares of
beneficial interest, $0.01 par value
outstanding (unlimited shares
authorized) $157,949,865 $79,630,685 $229,039,785 $61,057,069 $62,245,268 $248,471,934
Overdistributed net investment income 86,367 321,881 0 4,260 0 0
Accumulated net realized gain (loss)
on investments, foreign currency,
options, and futures (21,120,496) (3,141,195) (9,567,462) 1,523,621 861,822 (5,942,811)
Net unrealized appreciation
(depreciation) of investments and
foreign currency (323,230) 2,786,821 11,579,396 2,142,036 16,857,397 23,002,341
Net Assets $136,592,506 $79,598,192 $231,051,719 $64,726,986 $79,964,487 $265,531,464
CLASS A:
Net Assets $ 14,185,356 $17,292,883 $ 13,145,578 $ 1,100,090 $ 4,750,001 $ 65,660,263
Shares outstanding 1,497,010 1,364,833 1,470,230 93,369 265,015 2,656,605
Net asset value and redemption value
per share (net assets/shares
outstanding) $ 9.48 $ 12.67 $ 8.94 $ 11.78 $ 17.92 $ 24.72
Maximum offering price per share (net
asset value plus sales charge of
4.75% of offering price) $ 9.95 $ 13.30 $ 9.39 $ 12.37 $ 18.81 $ 25.95
CLASS B:
Net Assets $ 9,134,525 $30,733,233 $ 79,199,445 $ 3,764,917 $ 4,444,305 $126,858,662
Shares outstanding 963,441 2,425,929 8,850,723 320,596 250,224 5,186,621
Net asset value and offering price per
share $ 9.48 $ 12.67 $ 8.95 $ 11.74 $ 17.76 $ 24.46
CLASS C:
Net Assets $ 1,146,708 $ 4,221,598 $ 14,275,438 $ 371,532 $ 364,626 $ 37,342,048
Shares outstanding 121,075 333,654 1,595,776 31,608 20,530 1,526,794
Net asset value and offering price per
share $ 9.47 $ 12.65 $ 8.95 $ 11.75 $ 17.76 $ 24.46
CLASS T:
Net Assets $112,125,917 $27,350,478 $124,431,258 $59,490,447 $70,405,555 $ 35,670,491
Shares outstanding 11,832,201 2,159,071 13,913,455 5,044,149 3,950,769 1,456,844
Net asset value and offering price per
share $ 9.48 $ 12.67 $ 8.94 $ 11.79 $ 17.82 $ 24.48
</TABLE>
Redemption price per share varies with the length of time Class B, C, and T
shares are held.
See accompanying notes to financial statements.
37
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Northstar Northstar
Government Northstar Northstar Balance Sheet Northstar
Securities Strategic High Yield Opportunities Northstar Special
Fund Income Fund Fund Fund Growth Fund Fund
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $0,
$0, $0, $0, $10,603, and $703,
respectively) $ 0 $ 80,500 $ 337,730 $ 1,692,082 $ 1,156,921 $1,209,103
Interest (net of withholding tax of $0,
$12,487, $(31,838), $0, $0, and $0,
respectively) 10,946,366 7,256,034 19,999,495 2,363,933 140,188 578,269
Total investment income 10,946,366 7,336,534 20,337,225 4,056,015 1,297,109 1,787,372
EXPENSES:
Investment advisory and management fees 923,929 532,941 941,594 464,088 575,383 1,146,789
Distribution fees:
Class A 31,014 68,706 32,630 3,058 4,665 108,927
Class B 59,149 273,868 575,358 30,311 33,508 630,676
Class C 8,032 32,011 98,509 3,219 2,365 189,225
Class T 813,064 270,759 851,368 502,693 679,967 328,758
Transfer agent fees and expenses:
Class A 18,630 39,429 23,027 2,539 3,463 77,555
Class B 11,341 57,589 120,326 6,721 6,993 145,570
Class C 1,664 7,261 21,809 845 785 48,604
Class T 80,274 20,817 92,159 45,264 65,478 47,495
Accounting and custodian fees 100,410 120,076 133,700 94,277 94,013 122,443
Printing and postage expenses 31,286 18,054 57,728 20,614 25,310 33,151
Registration fees 27,950 47,392 51,976 28,393 27,066 96,520
Audit fees 17,462 34,328 20,300 28,774 28,288 30,632
Trustee expenses 12,834 11,440 13,864 11,860 12,183 11,507
Insurance expenses 10,790 4,794 13,363 6,368 4,372 2,844
Legal fees 4,598 6,567 6,787 4,830 1,128 6,432
Organization expenses 0 21,960 0 0 0 0
Miscellaneous expenses 8,100 4,897 3,909 5,513 2,728 28,036
2,160,527 1,572,889 3,058,407 1,259,367 1,567,695 3,055,164
Less expenses reimbursed/waived by
management company 299,461 65,578 0 41,925 34,126 20,615
Total expenses 1,861,066 1,507,311 3,058,407 1,217,442 1,533,569 3,034,549
Net investment income (loss) 9,085,300 5,829,223 17,278,818 2,838,573 (236,460) (1,247,177)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments 932,343 (250,042) (831,501) 8,721,311 4,346,067 (5,942,811)
Net realized gain (loss) on foreign
currency 0 297,066 18,211 0 (52) 1,712
Net change in unrealized appreciation
(depreciation) of investments (9,831,154) 2,773,999 11,649,652 (4,632,099) 9,888,907 15,617,585
Net change in unrealized depreciation of
foreign currency 0 (1,117) 0 0 0 0
Net realized and unrealized gain
(loss) on investments (8,898,811) 2,819,906 10,836,362 4,089,212 14,234,922 9,676,486
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 186,489 $ 8,649,129 $28,115,180 $ 6,927,785 $13,998,462 $8,429,309
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF CHANGES IN NET ASSETS
(Northstar logo appears here)
<TABLE>
<CAPTION>
Northstar Northstar
Government Strategic Northstar
Securities Fund Income Fund High Yield Fund
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 9,085,300 $ 9,388,002 $ 5,829,223 $ 3,118,984 $ 17,278,818 $ 14,681,196
Net realized gain (loss) on
investments 932,343 10,033,763 (250,042) 657,579 (831,501) (5,577,338)
Net realized gain (loss) on foreign
currency 0 0 297,066 (15,982) 18,211 (61,890)
Net realized loss on options and
futures 0 0 0 (84,957) 0 0
Net change in unrealized appreciation
(depreciation) of investments (9,831,154) 11,830,566 2,773,999 1,109,531 11,649,652 9,968,024
Net change in unrealized appreciation
(depreciation) of foreign currency 0 0 (1,117) 13,355 0 0
Increase in net assets resulting
from operations 186,489 31,252,331 8,649,129 4,798,510 28,115,180 19,009,992
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (727,805) (31,103) (1,854,931) (382,101) (941,693) (238,931)
Class B (357,791) (34,991) (2,062,659) (315,465) (4,644,718) (537,227)
Class C (50,912) (156) (242,856) (29,224) (796,850) (76,102)
Class T (7,862,425) (9,374,624) (2,172,688) (2,318,425) (10,913,768) (13,814,466)
In excess of net investment income 0 (328,169) 0 0 0 (37,974)
Tax return of capital 0 0 0 0 (1,706,413) 0
Total distributions (8,998,933) (9,769,043) (6,333,134) (3,045,215) (19,003,442) (14,704,700)
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 19,576,499 9,486,902 21,030,229 15,818,725 73,147,596 54,017,286
Net proceeds from merger 0 0 0 45,577,269 0 0
Net asset value of shares issued to
shareholders in reinvestment of
dividends 6,013,372 6,083,503 2,480,616 1,467,264 8,526,557 7,796,432
25,589,871 15,570,405 23,510,845 62,863,258 81,674,153 61,813,718
Cost of shares redeemed (37,168,170) (32,678,732) (22,562,072) (13,535,436) (39,383,908) (22,895,030)
Net increase (decrease) in net assets
derived from capital share
transactions (11,578,299) (17,108,327) 948,773 49,327,822 42,290,245 38,918,688
Net increase (decrease) in net assets (20,390,743) 4,374,961 3,264,768 51,081,117 51,401,983 43,223,980
NET ASSETS:
Beginning of period 156,983,249 152,608,288 76,333,424 25,252,307 179,649,736 136,425,756
End of period $136,592,506 $156,983,249 $79,598,192 $ 76,333,424 $231,051,719 $179,649,736
Undistributed (overdistributed) net
investment income: $86,367 $(328,169) $321,881 $104,844 $0 $(37,974)
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
NORTHSTAR FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Northstar
Balance Sheet
Opportunities Northstar Northstar
Income Fund Growth Fund Special Fund
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 2,838,573 $ 3,259,693 $ (236,460) $ 298,464 $ (1,247,177) $ (566,187)
Net realized gain (loss) on
investments 8,721,311 6,842,914 4,346,067 16,582,023 (5,942,811) 1,862,208
Net realized gain (loss) on foreign
currency 0 0 (52) (27,666) 1,712 21
Net change in unrealized appreciation
(depreciation) of investments (4,632,099) 6,328,209 9,888,907 160,556 15,617,585 2,669,199
Increase in net assets resulting from
operations 6,927,785 16,430,816 13,998,462 17,013,377 8,429,309 3,965,241
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (46,606) (16,747) 0 (5,272) 0 0
Class B (125,106) (35,496) 0 (330) 0 0
Class C (12,103) (3,103) 0 (5) 0 0
Class T (2,650,498) (3,228,817) 0 (265,197) 0 0
Distributions in excess of net
investment income 0 (50,342) 0 (27,660) 0 0
Net realized gain from investments (7,268,332) (6,865,265) (3,484,245) (16,582,008) 0 (1,761,465)
Total distributions (10,102,645) (10,199,770) (3,484,245) (16,880,472) 0 (1,761,465)
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 3,914,850 4,370,028 8,022,620 10,998,087 263,413,495 8,290,445
Net asset value of shares issued to
shareholders in reinvestment of
dividends 8,513,000 8,536,854 3,217,412 15,393,542 0 1,662,683
12,427,850 12,906,882 11,240,032 26,391,629 263,413,495 9,953,128
Cost of shares redeemed (19,784,271) (17,643,533) (21,542,815) (23,161,995) (43,756,330) (13,560,271)
Net increase (decrease) in net assets
derived from capital share
transactions (7,356,421) (4,736,651) (10,302,783) 3,229,634 219,657,165 (3,607,143)
Net increase (decrease) in net assets (10,531,281) 1,494,395 211,434 3,362,539 228,086,474 (1,403,367)
NET ASSETS:
Beginning of period 75,258,267 73,763,872 79,753,053 76,390,514 37,444,990 38,848,357
End of period $ 64,726,986 $ 75,258,267 $79,964,487 $ 79,753,053 $265,531,464 $ 37,444,990
Undistributed (overdistributed) net
investment income: $4,260 $(50,342) $0 $(27,666) $0 $0
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
NORTHSTAR FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT EACH PERIOD
(Northstar logo appears here)
<TABLE>
<CAPTION>
Net realized Dividends
Net Asset & unrealized declared Distributions
Value, Net gain (loss) Total from from net declared from
beginning investment on investment investment net realized Distributions
Period ended of period income investments operations income gain from Capital
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Government Securities Fund, Class A
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 $ 10.07 $ 0.63 $(0.60) $ 0.03 $(0.62) -- --
6/05/95-
12/31/95 9.51 0.34 0.59 0.93 (0.37) -- --
<CAPTION>
Government Securities Fund, Class B
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 10.07 0.57 (0.60) (0.03) (0.56) -- --
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- --
<CAPTION>
Government Securities Fund, Class C
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 10.07 0.58 (0.62) (0.04) (0.56) -- --
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- --
<CAPTION>
Government Securities Fund, Class T
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 10.07 0.60 (0.59) 0.01 (0.60) -- --
12/31/95 8.74 0.58 1.35 1.93 (0.60) -- --
12/31/94 10.32 0.56 (1.56) (1.00) (0.57) -- (0.01)
12/31/93 9.22 0.59 1.09 1.68 (0.58) -- --
12/31/92 8.99 0.61 0.23 0.84 (0.61) -- --
12/31/91 8.47 0.67 0.52 1.19 (0.67) -- --
12/31/90 8.47 0.68 -- 0.68 (0.68) -- --
<CAPTION>
Strategic Income Fund, Class A
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 12.40 0.93 0.35 1.28 (1.01) -- --
6/05/95-
12/31/95 12.24 0.63 0.13 0.76 (0.60) -- --
<CAPTION>
Strategic Income Fund, Class B
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 12.39 0.85 0.36 1.21 (0.93) -- --
6/05/95-
12/31/95 12.24 0.55 0.15 0.70 (0.55) -- --
<CAPTION>
Strategic Income Fund, Class C
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 12.38 0.85 0.35 1.20 (0.93) -- --
6/05/95-
12/31/95 12.24 0.55 0.14 0.69 (0.55) -- --
<CAPTION>
Strategic Income Fund, Class T
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 12.39 0.88 0.35 1.23 (0.95) -- --
12/31/95 11.71 0.98 0.66 1.64 (0.96) -- --
7/01/94-
12/31/94 12.00 0.51 (0.25) 0.26 (0.49) (0.05) (0.01)
<CAPTION>
High Yield Fund, Class A
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 8.56 0.76 0.44 1.20 (0.75) -- (0.07)
12/31/95 8.68 0.48 (0.10) 0.38 (0.50) -- --
<CAPTION>
High Yield Fund, Class B
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 8.57 0.71 0.43 1.14 (0.69) -- (0.07)
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- --
<CAPTION>
High Yield Fund, Class C
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 8.57 0.72 0.42 1.14 (0.69) -- (0.07)
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- --
<CAPTION>
High Yield Fund, Class T
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 8.56 0.73 0.45 1.18 (0.73) -- (0.07)
12/31/95 8.29 0.84 0.26 1.10 (0.83) -- --
12/31/94 9.31 0.81 (0.99) (0.18) (0.83) (0.01) --
12/31/93 9.09 0.85 0.80 1.65 (0.83) (0.60) --
12/31/92 7.94 0.92 1.19 2.11 (0.94) (0.02) --
12/31/91 6.27 1.08 1.67 2.75 (1.08) -- --
12/31/90 8.55 1.12 (2.30) (1.18) (1.10) -- --
<CAPTION>
Ratio of
Ratio of net
Net Net expenses Ratio of investment
Asset Assets, to expense income to
Value, end of average reimbursement average
Total end of Total period net to average net Portfolio
Period ended Distributions period Return (000's) assets(1) net assets(1) assets(1) turnover
<S> <C>
<S> <C>
12/31/96 $ (0.62) $ 9.48 0.57% $14,185 1.09% 0.20% 6.85% 101%
6/05/95
12/31/95 (0.37) 10.07 10.04 3,235 1.02 0.20 6.01 295
<S> <C>
12/31/96 (0.56) 9.48 (0.15) 9,135 1.80 0.20 6.05 101
6/05/95
12/31/95 (0.33) 10.07 9.61 2,790 1.70 0.20 5.20 295
<S> <C>
12/31/96 (0.56) 9.47 (0.21) 1,147 1.80 0.21 6.22 101
6/05/95
12/31/95 (0.33) 10.07 9.61 8 1.68 0.20 5.28 295
<S> <C>
12/31/96 (0.60) 9.48 0.32 112,126 1.30 0.21 6.37 101
12/31/95 (0.60) 10.07 22.90 150,951 1.30 0.20 6.23 295
12/31/94 (0.58) 8.74 (9.82) 152,608 1.29 0.20 6.00 315
12/31/93 (0.58) 10.32 18.48 184,156 1.31 0.20 5.83 81
12/31/92 (0.61) 9.22 9.77 144,144 1.39 0.20 6.81 120
12/31/91 (0.67) 8.99 14.73 121,389 1.44 0.20 7.68 87
12/31/90 (0.68) 8.47 8.57 108,420 1.43 0.20 8.23 17
<S> <C>
12/31/96 (1.01) 12.67 10.88 17,293 1.40 0.05 7.55 130
6/05/95
12/31/95 (0.60) 12.40 6.40 21,790 1.36 0.07 7.03 153
<S> <C>
12/31/96 (0.93) 12.67 10.18 30,733 2.10 0.09 6.82 130
6/05/95
12/31/95 (0.55) 12.39 5.89 22,143 2.06 0.06 6.47 153
<S> <C>
12/31/96 (0.93) 12.65 10.11 4,222 2.10 0.11 6.79 130
6/05/95
12/31/95 (0.55) 12.38 5.81 2,172 2.02 0.06 6.48 153
<S> <C>
12/31/96 (0.95) 12.67 10.39 27,350 1.90 0.09 7.07 130
12/31/95 (0.96) 12.39 14.54 30,228 1.90 0.28 6.86 153
7/01/94
12/31/94 (0.55) 11.71 2.14 25,252 1.90 0.63 7.92 156
<S> <C>
12/31/96 (0.82) 8.94 14.74 13,146 1.11 -- 8.60 128
12/31/95 (0.50) 8.56 4.48 7,466 1.02 -- 9.83 103
<S> <C>
12/31/96 (0.76) 8.95 13.94 79,199 1.81 -- 7.88 128
12/31/95 (0.46) 8.57 4.17 29,063 1.71 -- 9.18 103
<S> <C>
12/31/96 (0.76) 8.95 13.93 14,275 1.82 -- 7.85 128
12/31/95 (0.46) 8.57 4.17 3,410 1.72 -- 9.29 103
<S> <C>
12/31/96 (0.80) 8.94 14.49 124,431 1.31 -- 8.43 128
12/31/95 (0.83) 8.56 13.71 139,711 1.33 -- 9.69 103
12/31/94 (0.84) 8.29 (2.18) 136,426 1.34 -- 9.08 86
12/31/93 (1.43) 9.31 18.89 125,095 1.40 -- 8.84 176
12/31/92 (0.96) 9.09 27.57 64,063 1.50 0.05 10.30 122
12/31/91 (1.08) 7.94 46.49 25,651 1.50 0.46 14.84 57
12/31/90 (1.10) 6.27 (14.59) 11,342 1.44 0.81 15.15 156
<CAPTION>
Average
commission
Period ended Per Share(2)
12/31/96 --
6/05/95
12/31/95 --
12/31/96 --
6/05/95
12/31/95 --
12/31/96 --
6/05/95
12/31/95 --
12/31/96 --
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
12/31/96 --
6/05/95
12/31/95 --
12/31/96 --
6/05/95
12/31/95 --
12/31/96 --
6/05/95
12/31/95 --
12/31/96 --
12/31/95 --
7/01/94
12/31/94 --
12/31/96 0.0777
12/31/95 --
12/31/96 0.0777
12/31/95 --
12/31/96 0.0777
12/31/95 --
12/31/96 0.0777
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
</TABLE>
(1) Annualized
(2) For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
See accompanying notes to financial statements.
41
<PAGE>
NORTHSTAR FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net realized Dividends
Net Asset & unrealized declared Distributions
Value, Net gain (loss) Total from from net declared from
Period beginning investment on investment investment net realized Distributions
ended of period income investments operations income gain from Capital
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Balance Sheet Opportunities, Class A
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 $ 12.53 $ 0.56 $ 0.74 $ 1.30 $(0.57) $ (1.48) --
6/05/95-
12/31/95 12.77 0.43 1.06 1.49 (0.48) (1.25) --
<CAPTION>
Balance Sheet Opportunities, Class B
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 12.51 0.50 0.71 1.21 (0.50) (1.48) --
6/05/95-
12/31/95 12.77 0.35 1.09 1.44 (0.45) (1.25) --
<CAPTION>
Balance Sheet Opportunities, Class C
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 12.52 0.49 0.70 1.19 (0.48) (1.48) --
6/05/95-
12/31/95 12.77 0.38 1.07 1.45 (0.45) (1.25) --
<CAPTION>
Balance Sheet Opportunities, Class T
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 12.54 0.53 0.73 1.26 (0.53) (1.48) --
12/31/95 11.54 0.57 2.27 2.84 (0.59) (1.25) --
12/31/94 12.94 0.57 (1.25) (0.68) (0.54) (0.16) (0.02)
12/31/93 12.05 0.49 1.20 1.69 (0.49) (0.31) --
12/31/92 11.66 0.55 0.36 0.91 (0.52) -- --
12/31/91 10.13 0.57 1.53 2.10 (0.57) -- --
12/31/90 10.71 0.61 (0.54) 0.07 (0.63) -- (0.02)
<CAPTION>
Growth Fund, Class A
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 15.53 0.02 3.18 3.20 -- (0.81) --
6/05/95-
12/31/95 17.59 0.08 1.95 2.03 (0.10) (3.99) --
<CAPTION>
Growth Fund, Class B
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 15.50 (0.06) 3.13 3.07 -- (0.81) --
6/05/95-
12/31/95 17.59 0.06 1.92 1.98 (0.08) (3.99) --
<CAPTION>
Growth Fund, Class C
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 15.50 (0.05) 3.12 3.07 -- (0.81) --
6/05/95-
12/31/95 17.59 0.04 1.92 1.96 (0.06) (3.99) --
<CAPTION>
Growth Fund, Class T
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 15.53 (0.06) 3.16 3.10 -- (0.81) --
12/31/95 15.75 0.07 3.77 3.84 (0.07) (3.99) --
12/31/94 17.33 0.08 (1.41) (1.33) (0.08) (0.15) (0.02)
12/31/93 16.36 0.02 1.67 1.69 (0.04) (0.67) (0.01)
12/31/92 16.37 0.02 1.30 1.32 (0.02) (1.31) --
12/31/91 12.49 0.09 4.62 4.71 (0.08) (0.75) --
12/31/90 13.85 0.10 (0.83) (0.73) (0.10) (0.51) (0.02)
<CAPTION>
Special Fund, Class A
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 20.92 (0.04) 3.84 3.80 -- -- --
6/05/95-
12/31/95 19.56 (0.09) 2.48 2.39 -- (1.03) --
<CAPTION>
Special Fund, Class B
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 20.84 (0.12) 3.74 3.62 -- -- --
6/05/95-
12/31/95 19.56 (0.12) 2.43 2.31 -- (1.03) --
<CAPTION>
Special Fund, Class C
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 20.84 (0.13) 3.75 3.62 -- -- --
6/05/95-
12/31/95 19.56 (0.15) 2.46 2.31 -- (1.03) --
<CAPTION>
Special Fund, Class T
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/96 20.84 (0.21) 3.85 3.64 -- -- --
12/31/95 19.64 (0.34) 2.57 2.23 -- (1.03) --
12/31/94 20.79 (0.25) (0.76) (1.01) -- (0.14) --
12/31/93 17.40 (0.32) 3.83 3.51 -- (0.12) --
12/31/92 15.74 (0.33) 2.61 2.28 -- (0.62) --
12/31/91 10.64 (0.21) 6.24 6.03 -- (0.93) --
12/31/90 11.67 (0.20) (0.83) (1.03) -- -- --
<CAPTION>
Net Net Ratio of Ratio of Ratio of net
Asset Assets, to expense income
Value, end of average reimbursement (loss) to
Period Total end of Total period net to average average net Portfolio
ended Distributions period Return (000's) assets(1) net assets(1) assets(1) turnover
<S> <C>
<S> <C>
12/31/96 $ (2.05) $11.78 10.54% $1,100 1.40% 0.09% 4.30% 107%
6/05/95
12/31/95 (1.73) 12.53 11.95 797 1.27 -- 4.99 131
<S> <C>
12/31/96 (1.98) 11.74 9.76 3,765 2.10 0.07 3.64 107
6/05/95
12/31/95 (1.70) 12.51 11.56 1,759 1.95 -- 4.38 131
<S> <C>
12/31/96 (1.96) 11.75 9.72 372 2.10 0.10 3.61 107
6/05/95
12/31/95 (1.70) 12.52 11.49 231 1.91 -- 4.49 131
<S> <C>
12/31/96 (2.01) 11.79 10.18 59,490 1.69 0.06 3.99 107
12/31/95 (1.84) 12.54 25.11 72,472 1.68 -- 4.44 131
12/31/94 (0.72) 11.54 (5.33 ) 73,764 1.69 -- 4.36 59
12/31/93 (0.80) 12.94 14.08 80,841 1.77 -- 3.99 38
12/31/92 (0.52) 12.05 8.06 56,823 2.02 -- 4.73 59
12/31/91 (0.57) 11.66 21.17 49,367 2.06 -- 5.21 77
12/31/90 (0.65) 10.13 0.78 44,750 2.10 -- 5.73 57
<S> <C>
12/31/96 (0.81) 17.92 20.54 4,750 1.50 0.06 0.11 62
6/05/95
12/31/95 (4.09) 15.53 11.55 1,355 1.42 -- 0.63 134
<S> <C>
12/31/96 (0.81) 17.76 19.74 4,444 2.20 0.04 (0.55) 62
6/05/95
12/31/95 (4.07) 15.50 11.27 1,987 2.07 -- 0.06 134
<S> <C>
12/31/96 (0.81) 17.76 19.74 365 2.20 0.15 (0.57) 62
6/05/95
12/31/95 (4.05) 15.50 11.17 69 2.11 -- 0.02 134
<S> <C>
12/31/96 (0.81) 17.82 19.90 70,406 2.00 0.04 (3.05) 62
12/31/95 (4.06) 15.53 24.40 76,343 2.00 -- 0.37 134
12/31/94 (0.25) 15.75 (7.66 ) 76,391 2.00 -- 0.49 54
12/31/93 (0.72) 17.33 10.36 80,759 2.04 -- 0.13 42
12/31/92 (1.33) 16.36 8.05 56,759 2.15 -- 0.09 47
12/31/91 (0.83) 16.37 38.10 40,884 2.25 -- 0.66 64
12/31/90 (0.63) 12.49 (5.24 ) 24,927 2.33 -- 0.80 54
<S> <C>
12/31/96 -- 24.72 18.16 65,660 1.46 0.01 (0.30) 140
6/05/95
12/31/95 (1.03) 20.92 12.20 2,335 1.50 -- (0.91) 71
<S> <C>
12/31/96 -- 24.46 17.37 126,859 2.17 0.01 (1.01) 140
6/05/95
12/31/95 (1.03) 20.84 11.79 1,491 2.20 0.01 (1.64) 71
<S> <C>
12/31/96 -- 24.46 17.37 37,342 2.20 0.01 (1.03) 140
6/05/95
12/31/95 (1.03) 20.84 11.79 62 2.20 0.03 (1.60) 71
<S> <C>
12/31/96 -- 24.48 17.47 35,670 2.07 0.04 (0.89) 140
12/31/95 (1.03) 20.84 11.34 33,557 2.16 -- (1.50) 71
12/31/94 (0.14) 19.64 (4.86 ) 38,848 2.16 -- (1.25) 39
12/31/93 (0.12) 20.79 20.16 28,838 2.34 -- (1.66) 35
12/31/92 (0.62) 17.40 14.54 11,336 2.84 -- (2.12) 40
12/31/91 (0.93) 15.74 57.27 5,480 2.95 0.74 (1.57) 85
12/31/90 -- 10.64 (8.83 ) 3,024 2.95 2.03 (0.97) 72
<CAPTION>
Average
Period commission
ended Per share(2)
12/31/96 $ 0.0690
6/05/95
12/31/95 --
12/31/96 0.0690
6/05/95
12/31/95 --
12/31/96 0.0690
6/05/95
12/31/95 --
12/31/96 0.0690
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
12/31/96 0.0593
6/05/95
12/31/95 --
12/31/96 0.0593
6/05/95
12/31/95 --
12/31/96 0.0593
6/05/95
12/31/95 --
12/31/96 0.0593
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
12/31/96 0.0392
6/05/95
12/31/95 --
12/31/96 0.0392
6/05/95
12/31/95 --
12/31/96 0.0392
6/05/95
12/31/95 --
12/31/96 0.0392
12/31/95 --
12/31/94 --
12/31/93 --
12/31/92 --
12/31/91 --
12/31/90 --
</TABLE>
(1) Annualized
(2) For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
See accompanying notes to financial statements.
42
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1996
(Northstar logo appears here)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization -- Northstar Government Securities Fund (formerly Northstar
Advantage Government Securities Fund), Northstar Strategic Income Fund (formerly
Northstar Advantage Strategic Income Fund), Northstar High Yield Fund (formerly
Northstar Advantage High Yield Fund), Northstar Balance Sheet Opportuities Fund
(formerly Northstar Advantage Income Fund), Northstar Growth Fund (formerly
Northstar Advantage Growth Fund) and Northstar Special Fund (formerly Northstar
Advantage Special Fund) (collectively the "Funds") are organized under the laws
of the Commonwealth of Massachusetts and registered under the Investment Company
Act of 1940 as diversified open-end management investment companies. Each is a
separate investment company with its own investment objective and specific
investment goals set forth below:
NORTHSTAR GOVERNMENT SECURITIES FUND ("Government Securities Fund") seeks to
achieve a high level of current income and to conserve principal by investing in
debt obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities.
NORTHSTAR STRATEGIC INCOME FUND ("Strategic Income Fund") seeks to achieve
high current income by allocating its investments among the following three
sectors of the fixed income securities markets: debt obligations of the U.S.
Government, its agencies and instrumentalities; high yield-high risk,
lower-rated and nonrated U.S. and foreign fixed income securities, and
investment grade debt obligations of foreign governments, their agencies and
instrumentalities and obligations of supranational entities.
NORTHSTAR HIGH YIELD FUND ("High Yield Fund") seeks to achieve high current
income primarily through investments in long and intermediate-term high
yield-high risk, lower-rated and nonrated corporate debt instruments.
NORTHSTAR BALANCE SHEET OPPORTUNITIES FUND ("Balance Sheet Opportunities
Fund") seeks to realize income and secondarily, capital appreciation through
investments in a balance of debt securities, common and preferred stocks, and
securities convertible into common stock.
NORTHSTAR GROWTH FUND ("Growth Fund") seeks to achieve long-term growth of
capital by investing principally in common stocks selected for their prospects
for capital appreciation.
NORTHSTAR SPECIAL FUND ("Special Fund") seeks to achieve capital
appreciation through investment in a diversified portfolio of equity securities
selected for their potential for growth, primarily in small and
mid-capitalization companies.
Security Valuation -- Equity securities are valued at the closing sale
prices reported on recognized securities exchanges or lacking any sales, at the
last available bid price. Prices of long-term debt securities are valued on the
basis of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid or asked prices for
such securities, or, if such prices are not available, at prices provided by
market makers, or at prices for securities of comparable maturity, quality and
type. Short-term debt instruments with remaining maturities of less than 60 days
are valued at amortized cost, unless the Trustees determine that amortized cost
does not reflect the fair value of such obligations. Securities for which market
quotations are not readily available are valued at fair value determined in good
faith by or under direction of the Trustees of the Trust. The books and records
of the Funds are maintained in U.S. dollars. Securities quoted in foreign
currencies are translated into U.S. dollars based on the prevailing exchange
rates on that day. The Adviser uses independent pricing services to price the
Funds' securities.
Security Transactions, Investment Income and 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 accrual basis except when collection is not expected; discounts
are accrued, and premiums amortized to par at maturity; dividend income is
recorded on the ex-dividend dates. Income, expenses (except class specific
expenses), and realized/unrealized gains/losses, are allocated proportionately
to each Fund or class of shares based upon the relative net asset value.
Distributions to Shareholders -- Dividends from net investment income are
declared and paid monthly by the Government Securities, Strategic Income and
High Yield Funds, declared and paid quarterly by the Balance Sheet Opportunities
Fund and declared and paid annually
43
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1996
by the Growth and Special Funds. Distributions of net realized capital gains, if
any, are declared annually; however, to the extent that a net realized capital
gain can be reduced by a capital loss carryover, such gain will not be
distributed.
The Funds may periodically make reclassifications among certain of their
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulations which may differ from generally accepted accounting
principles. As of December 31, 1996, the following amounts have been
reclassified from undistributed net investment income to accumulated net
realized gain(loss) on investments and paid-in-capital.
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED NET
NET REALIZED
INVESTMENT GAIN ON PAID-IN-
INCOME INVESTMENTS CAPITAL
<S> <C> <C> <C>
Government
Securities
Fund 328,169 3,210,033 (3,538,202)
Strategic
Income Fund 720,948 (774,790 ) 53,842
High Yield Fund 1,762,598 (18,211 ) (1,744,387)
Balance Sheet
Opportunities
Fund 50,342 (69,694 ) 19,352
Growth Fund 264,126 (49,402 ) (214,724)
Special Fund 1,247,177 (1,712 ) (1,245,465)
</TABLE>
These restatements did not affect net investment income (loss), net realized
gain (loss) on investments, or net assets for the year ended December 31, 1996.
Foreign Currency -- The Funds 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 represent 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.
Forward Foreign Currency Contracts, Options and Futures -- The Funds may
enter into forward foreign currency contracts ("contracts") to purchase or sell
currencies at a specified rate at a future date. The Funds may enter into these
contracts solely for hedging purposes.
The Funds write and purchase put and call options on foreign currencies. The
premium paid by the Funds for the 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 the Funds have purchased expires
on the stipulated expiration date, the Funds realize a loss in the amount of the
cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a written
call option is the value (in U.S. dollars) of the currency sold, less the value
of the U.S. dollars received in exchange. The amount of potential gain or loss
to the Funds upon exercise of a written put option is the value (in U.S.
dollars) of the currency received, less the value of the U.S. dollars paid in
exchange.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contract and from unanticipated
movement in the value of a foreign currency relative to the U.S. dollar.
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker (the Fund's agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the contract
at the end of each day's trading.
Variation margin payments are received or made, depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
Repurchase Agreements -- The Funds' Custodian takes possession of collateral
pledged for investments in
44
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1996
(Northstar logo appears here)
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 of the obligation
to repurchase, the Funds have the right to liquidate the collateral and apply
the proceeds in satisfaction of the obligation. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the
Funds may be delayed or limited.
Federal Income Taxes -- The Funds intend 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 their respective shareholders.
Therefore, no Federal income tax provision or excise tax provision is required.
Organization Expenses -- Organization expenses have been capitalized by the
Funds and amortized on a straight-line basis over a 60 month period from the
commencement of operations of each Fund. Costs incurred by the Strategic Income
Fund in connection with its organization and its original registration amounted
to $105,074.
NOTE 2. INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
Northstar, Inc. (formerly NWNL Northstar, Inc.) (and its wholly owned
operating subsidiaries, Northstar Investment Management Corp., Northstar
Distributors, Inc. and Northstar Administrator Corp.) is an 80% owned subsidiary
of ReliaStar Financial Corp.
Northstar Investment Management Corp. (the "Adviser") serves as each Fund's
investment adviser. Each Fund pays the Adviser an investment advisory fee
calculated at an annual rate of 0.45% of average daily net assets for High Yield
Fund, 0.65% of average daily net assets for the Government Securities, Strategic
Income and Balance Sheet Opportunities Funds, and 0.75% of average daily net
assets for the Growth and Special Funds. The Adviser has agreed to waive 0.20%
of its advisory fee for the Government Securities Fund, therefore the rate paid
equals 0.45% of average daily net assets. For the year ended December 31, 1996,
the Adviser waived $284,286 of advisory fees for the Government Securities Fund.
For the year ended December 31, 1996, the Funds paid advisory fees to Northstar
Investment Management Corp. of $4,584,724. Navellier Fund Management,
Inc.("Navellier"), a registered investment adviser, serves as subadviser to the
Special Fund pursuant to a Subadvisory Agreement dated February 1, 1996, between
the Adviser and Navellier. For its services, Navellier receives an annual fee
equal to 0.48% of the average daily net assets of the Fund. For the period
February 1, 1996 through December 31, 1996, Navellier received $723,585 in
subadvisory fees from the Adviser.
The Adviser has voluntarily undertaken to limit the expenses through June,
1997 of the Government Securities Fund 1.20% (Class A), 1.90% (Class B & C), and
1.30% (Class T); Strategic Income Fund 1.40% (Class A), 2.10% (Class B & C), and
1.90% (Class T); Balance Sheet Opportunities Fund 1.40% (Class A), 2.10% (Class
B & C), and 1.69% (Class T); Growth Fund 1.50% (Class A), 2.20% (Class B & C),
and 2.00% (Class T), and Special Fund 1.50% (Class A), 2.20% (Class B & C), and
2.16% (Class T) of each respective class's average net assets. The Adviser will
reimburse the Funds for amounts in excess of such limits, up to the total amount
of fees received during the period. At December 31, 1996, the Advisor's
reimbursements aggregated $15,175, $65,578, $41,925, $34,126, and $20,615 for
the Government Securities, Strategic Income, Balance Sheet Opportunities,
Growth, and Special Funds, respectively.
The Adviser has agreed that the fee of a Fund will be reduced, or the
Adviser will reimburse the Fund (up to the amount of its fee) by an amount
necessary to prevent the total expenses of the Fund (excluding taxes, interest,
brokerage commissions or transaction costs, certain distribution fees and
extraordinary expenses) from exceeding limits applicable to the Fund in any
state in which its shares then are qualified for sale. Currently, the most
restrictive annual expense limitation is 2.50% of the first $30,000,000 of
average net assets, 2.00% of the next $70,000,000 and 1.50% of the excess.
Northstar Administrators Corp.(the "Administrator") serves as administrator
to the Funds pursuant to an Administrative Services Agreement.
Northstar Distributors, Inc. (the "Distributor") an affiliate of the Adviser
and the Administrator, is the distributor of each Fund's shares. Under separate
Plans of Distribution pertaining to Class A, Class B, Class C and Class T
shares, the Funds pay the Distributor monthly service fees at an annual rate of
0.25% of the average
45
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1996
(Northstar logo appears here)
daily net assets in the case of Class A, Class B, Class C and Class T shares,
and monthly distribution fees at the annual rate of 0.05% of the average daily
net assets of Class A shares and 0.75% of the average daily net assets of Class
B and Class C shares for all Funds. Class T shares pay monthly distribution fees
at an annual rate of 0.40% of average daily net assets for the Government
Securities and High Yield Funds, 0.50% of average daily net assets for the
Balance Sheet Opportunities Fund and 0.70% of average daily net assets for the
Strategic Income, Growth and Special Funds. At December 31, 1996, the Funds owed
the Distributor $565,163 in service and distribution fees.
The Distributor also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares, and the contingent deferred
sales charge paid by shareholders upon certain redemptions of Class A, Class B,
Class C and Class T shares. For the year ended December 31, 1996, the
Distributor earned the following amounts in sales charges:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
Initial Sales
Charges $435,061 $ 0 $ 0 $ 0
Contingent
Deferred Sales
Charges $ 28,262 $432,846 $53,537 $906,775
</TABLE>
NOTE 3. ACQUISITION
On the close of business June 2, 1995, the Adviser completed the acquisition
of certain assets related to the mutual fund business of The Advest Group, Inc.
At the time of the transaction, the Funds entered into new Investment Advisory
Agreements, Distribution Agreements and Transfer Agency and Service Agreements
with new service providers, the terms and provisions of which are substantially
identical to the agreements with the former service providers.
NOTE 4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended December 31, 1996, were as
follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
<S> <C> <C> <C>
Aggregate
Purchases $142,491,104 $104,473,610 $259,925,744
Aggregate
Sales $149,267,688 $101,434,264 $241,070,373
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate
Purchases $142,491,104 $26,747,714 $0
Aggregate
Sales $149,139,837 $21,730,678 $0
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET
OPPORTUNITIES GROWTH SPECIAL
FUND FUND FUND
<S> <C> <C> <C>
Aggregate
Purchases $ 71,650,363 $46,132,867 $417,198,900
Aggregate
Sales $102,597,115 $61,318,280 $198,773,469
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate
Purchases $0 $ 0 $0
Aggregate
Sales $0 $1,104,130 $0
</TABLE>
NOTE 5. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
<S> <C> <C> <C>
Cost (tax
basis) $136,366,579 $74,347,659 $189,867,426
Appreciated
Securities 1,784,947 3,404,376 12,032,286
Depreciated
Securities 2,108,177 615,047 452,890
Net Unrealized
Appreciation
(Depreciation) $ (323,230 ) 2,789,329 $ 11,579,396
</TABLE>
46
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
BALANCE SHEET
OPPORTUNITIES GROWTH SPECIAL
FUND FUND FUND
<S> <C> <C> <C>
Cost (tax
basis) $46,454,995 $61,822,648 $240,370,478
Appreciated
Securities 3,728,703 18,105,606 27,458,675
Depreciated
Securities 1,614,159 1,259,219 4,611,333
Net
Unrealized
Appreciation $ 2,114,544 $16,846,387 $ 22,847,342
</TABLE>
NOTE 6. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the year ended December 31,
1996, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,173,549 $ 10,970,069 741,529 $ 6,986,079 130,474 $ 1,220,625 42,726 $ 399,726
Reinvested
dividends 69,846 652,825 30,877 290,097 308 2,892 538,420 5,067,558
Shares redeemed (67,570) (639,341) (85,933) (814,043) (10,459) (98,119) (3,742,558) (35,616,667)
Net increase
(decrease) 1,175,825 $ 10,983,553 686,473 $ 6,462,133 120,323 $ 1,125,398 (3,161,412) $(30,149,383)
<CAPTION>
STRATEGIC INCOME FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 474,942 $ 5,738,010 1,003,182 $ 12,151,460 212,149 $ 2,571,465 45,952 $ 569,294
Reinvested
dividends 50,560 625,158 54,402 672,776 5,092 62,954 90,573 1,119,728
Shares redeemed (918,406) (11,512,407) (418,455) (5,172,202) (59,061) (727,367) (416,724) (5,150,096)
Net increase
(decrease) (392,904) $ (5,149,239) 639,129 $ 7,652,034 158,180 $ 1,907,052 (280,199) $ (3,461,074)
<CAPTION>
HIGH YIELD FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 827,729 $ 7,207,156 5,911,912 $ 51,482,500 1,413,571 12,306,310 248,508 $ 2,151,630
Reinvested
dividends 62,173 539,834 168,302 1,463,685 17,304 150,556 733,966 6,372,482
Shares redeemed (291,691) (2,549,211) (621,900) (5,398,570) (233,244) (2,046,070) (3,384,341) (29,390,057)
Net increase
(decrease) 598,211 $ 5,197,779 5,458,314 $ 47,547,615 1,197,631 $10,410,796 (2,401,867) $(20,865,945)
</TABLE>
47
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
BALANCE SHEET OPPORTUNITIES FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Shares sold 31,867 $ 409,691 161,646 $ 2,068,438 13,747 $ 174,866 99,979 $ 1,261,855
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reinvested
dividends 11,446 136,696 34,438 407,500 4,068 48,215 663,010 7,920,589
Shares redeemed (13,528) (172,359) (16,102) (205,751) (4,631) (59,861) (1,498,511) (19,346,300)
Net increase
(decrease) 29,785 $ 374,028 179,982 $ 2,270,187 13,184 $ 163,220 (735,522) $(10,163,856)
<CAPTION>
GROWTH FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 215,652 $ 3,898,525 145,699 $ 2,385,877 17,690 $ 291,243 90,737 $ 1,446,975
Reinvested
dividends 10,967 198,714 8,536 152,930 723 12,843 158,321 2,852,925
Shares redeemed (48,822) (803,512) (32,185) (531,632) (2,328) (39,672) (1,215,332) (20,167,999)
Net increase
(decrease) 177,797 $ 3,293,727 122,050 $ 2,007,175 16,085 $ 264,414 (966,274) $(15,868,099)
<CAPTION>
SPECIAL FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 3,480,949 $ 84,633,270 5,433,970 $131,453,623 1,739,092 $42,056,956 222,847 $ 5,269,646
Shares redeemed (935,948) (22,565,835) (318,902) (7,614,905) (215,261) (5,187,697) (376,467) (8,387,893)
Net increase
(decrease) 2,545,001 $ 62,067,435 5,115,068 $123,838,718 1,523,831 $36,869,259 (153,620) $ (3,118,247)
</TABLE>
Transactions in capital shares of each Fund for the twelve months ended
December 31, 1995, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 326,499 $ 3,175,556 278,689 $ 2,664,382 732 $ 6,973 403,851 $ 3,639,991
Reinvested
dividends 3,398 32,936 3,358 32,382 20 190 649,744 6,017,995
Shares redeemed (8,712) (83,280) (5,079) (50,119) 0 0 (3,526,879) (32,545,333)
Net increase
(decrease) 321,185 $ 3,125,212 276,968 $ 2,646,645 752 $ 7,163 (2,473,284) $(22,887,347)
<CAPTION>
STRATEGIC INCOME FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 147,505 $ 2,139,353 492,026 $ 6,234,501 51,547 $ 652,909 565,764 $ 6,791,962
Issued in merger 2,278,702 27,859,837 1,316,859 16,093,857 133,030 1,623,575 0 0
Reinvested
dividends 9,752 119,651 9,167 112,921 517 6,349 101,327 1,228,343
Shares redeemed (678,222) (8,374,357) (31,251) (383,568) (9,620) (118,119) (384,285) (4,659,392)
Net increase
(decrease) 1,757,737 $ 21,744,484 1,786,801 $ 22,057,711 175,475 $ 2,164,714 282,806 $ 3,360,913
</TABLE>
48
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1996
(Northstar logo appears here)
<TABLE>
<CAPTION>
HIGH YIELD FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Shares sold 910,824 $ 7,850,386 3,422,451 $ 29,521,715 439,743 $ 3,740,733 1,518,926 $ 12,904,451
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reinvested
dividends 21,104 181,582 24,757 213,414 2,911 25,009 862,636 7,376,428
Shares redeemed (59,909) (516,072) (54,799) (471,184) (44,509) (326,267) (2,517,197) (21,581,507)
Net increase
(decrease) 872,019 $ 7,515,896 3,392,409 $ 29,263,945 398,145 $ 3,439,475 (135,635) $ (1,300,628)
<CAPTION>
BALANCE SHEET OPPORTUNITIES FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 61,555 $ 803,879 131,744 $ 1,730,774 16,525 $ 219,651 127,572 $ 1,615,724
Reinvested
dividends 6,552 82,392 9,620 120,686 1,910 23,922 661,324 8,309,854
Shares redeemed (4,523) (61,195) (750) (9,931) (11) (142) (1,402,049) (17,572,265)
Net increase
(decrease) 63,584 $ 825,076 140,614 $ 1,841,529 18,424 $ 243,431 (613,153) $ (7,646,687)
<CAPTION>
GROWTH FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 294,621 $ 5,453,559 116,727 $ 2,205,716 3,902 $ 73,428 191,904 $ 3,265,384
Reinvested
dividends 17,194 267,392 20,122 312,150 704 10,926 951,457 14,803,074
Shares redeemed (224,597) (4,152,792) (8,675) (165,916) (161) (3,133) (1,077,114) (18,840,154)
Net increase
(decrease) 87,218 $ 1,568,159 128,174 $ 2,351,950 4,445 $ 81,221 66,247 $ (771,696)
<CAPTION>
SPECIAL FUND
CLASS A CLASS B CLASS C CLASS T
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 131,315 $ 2,798,032 70,725 $ 1,537,491 2,986 $ 64,085 199,543 $ 3,892,577
Reinvested
dividends 4,827 100,976 2,276 47,440 23 476 72,639 1,513,791
Shares redeemed (24,538) (536,495) (1,448) (31,326) (46) (1,008) (639,277) (12,993,182)
Net increase
(decrease) 111,604 $ 2,362,513 71,553 $ 1,553,605 2,963 $ 63,553 (367,095) $ (7,586,814)
</TABLE>
NOTE 7. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield and
Strategic Income Funds had 82.93% and 42.63%, respectively, of their portfolios
invested in lower rated and comparable quality unrated high yield securities.
Investments in higher yield securities are accompanied by a greater degree of
credit risk and such lower rated securities tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At December 31, 1996, the
High Yield Fund held Alliant Computer Systems, Inc. and Capital Gaming
International, Inc., bankrupt securities.
49
<PAGE>
THE NORTHSTAR FUNDS
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1996
For financial reporting purposes, it is each Fund's accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
NOTE 8. FEDERAL INCOME TAX -- CAPITAL LOSS CARRYFORWARD
At December 31, 1996, the Government Securities Fund had capital loss
carryforwards expiring December 31, 1997, 1998, and 2002 of $2,940,526,
$1,442,754, and $16,737,216, respectively. The Strategic Income Fund had capital
loss carryforwards expiring December 31, 2002 and 2003 of $1,293,025 and
$1,301,325, respectively. The High Yield Fund had capital loss carryforwards
expiring December 31, 2002, 2003, and 2004 of $3,158,623, $5,577,338, and
$570,896, respectively. The Special Fund had capital loss carryforwards expiring
December 31, 2004 of $2,281,884.
NOTE 9. COMPENSATING BALANCE ARRANGEMENT
The Funds have an informal compensating balance arrangement with the
Custodian whereby the Funds may have overdrafts in their respective accounts and
have no interest assessed on the overdrafts. In return, the Funds are required
to maintain positive balances to offset negative balances. The required deposits
are calculated by dividing the overdrawn amounts by 0.90. At December 31, 1996,
the Funds did not have any compensating balances.
NOTE 10. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date(s) of financial statements and the reported amounts of income and expenses
during the reporting period(s). Actual results could differ from those
estimates.
NOTE 11. TRANSFER OF NET ASSETS
At the close of business on October 27, 1995 (the "Closing"), the Northstar
Strategic Income Fund acquired the net assets of the Northstar Advantage
Multi-Sector Bond Fund, ("Multi-Sector Fund") pursuant to an Agreement and Plan
of Reorganization dated June 2, 1995. In accordance with the agreement, the
Strategic Income Fund, at the closing, issued 3,728,590 shares of the Strategic
Income Fund having an aggregate value of $45,577,269 which included unrealized
depreciation on investments of $535,327 and accumulated net realized loss of
$2,981,579. As a result the Strategic Income Fund issued .370703764 share for
each Multi-Sector Fund Class A and Class B share and .371826372 share for each
Multi-Sector Fund Class C share. The transaction was structured for tax purposes
to qualify as a tax-free reorganization under the Internal Revenue Code.
Directly after the merger the combined net assets in the Strategic Income Fund
were $79,737,813 with a net asset value of $12.22 for Class A and Class B shares
and $12.21 for Class C shares.
50
<PAGE>
NORTHSTAR FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
(Northstar logo appears here)
To The Shareholders and Board of Trustees of
the Northstar Funds:
We have audited the accompanying statements of assets and liabilities of the
Northstar Funds (formerly Northstar Advantage Funds), comprising Northstar
Government Securities Fund, Northstar Strategic Income Fund, Northstar High
Yield Fund, Northstar Balance Sheet Opportunities Fund, Northstar Growth Fund
and Northstar Special Fund (formerly Northstar Advantage Government Securities
Fund, Northstar Advantage Strategic Income Fund, Northstar Advantage High Yield
Fund, Northstar Advantage Income Fund, Northstar Advantage Growth Fund, and
Northstar Advantage Special Fund, respectively) (collectively the "Funds"),
including the portfolios of investments, as of December 31, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each period presented. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds constituting the Northstar Funds as of December 31,
1996, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods referred to above, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
January 31, 1997
51
[zz]
Exhibit 16
TOTAL RETURN CALCULATION--MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/ 1/96 1,000.00 12.3900 80.710 80.710 1.000.00
1/26/96 12.5000 81.240 0.082 6.63 0.000 0.00 0.530 1,015.50
2/23/96 12.5200 81.773 0.082 6.67 0.000 0.00 0.533 1,023.80
3/26/96 12.3200 82.320 0.082 6.74 0.000 0.00 0.547 1,014.18
4/25/96 12.2600 82.844 0.078 6.42 0.000 0.00 0.524 1,015.67
5/24/96 12.2800 83.370 0.078 6.46 0.000 0.00 0.526 1,023.78
6/25/96 12.1500 83.905 0.078 6.50 0.000 0.00 0.535 1,019.45
7/26/96 12.1700 84.442 0.078 6.54 0.000 0.00 0.537 1,027.66
8/27/96 12.1700 84.983 0.078 6.59 0.000 0.00 0.541 1,034.24
9/25/96 12.2400 85.525 0.078 6.63 0.000 0.00 0.542 1,046.83
10/25/96 12.4400 86.061 0.078 6.67 0.000 0.00 0.536 1,070.60
11/26/96 12.6700 86.591 0.078 6.71 0.000 0.00 0.530 1,097.11
12/27/96 12.6700 87.124 0.078 6.75 0.000 0.00 0.533 1,103.86
12/31/96 12.6700 87.124 1,103.86
12/31/96 Less: 4.000% Contingent Deferred Sales Charge 40.00
12/31/96 Net Ending Redeemable Value 1,063.86
FORMULA -- Average Annual Total Return: ERV = P (1+T) 'n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 6.39%
ERV = Ending Redeemable Value $1,063.86 Overall Total Return 6.39%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION--MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/ 1/94 1,000.00 12.0000 83.333 83.333 1.000.00
7/29/94 11.9900 83.889 0.080 6.67 0.000 0.00 0.556 1,005.83
8/31/94 12.1500 84.441 0.080 6.71 0.000 0.00 0.552 1,025.96
9/30/94 12.0500 85.002 0.080 6.76 0.000 0.00 0.561 1,024.27
10/31/94 11.9000 85.573 0.080 6.80 0.000 0.00 0.571 1,018.32
11/30/94 11.7700 86.155 0.080 6.85 0.000 0.00 0.582 1,014.04
12/28/94 11.7000 87.223 0.100 8.62 0.045 3.88 1.068 1,020.51
12/31/94 11.7100 87.223 1,021.38
1/31/95 11.7100 87.819 0.080 6.98 0.000 0.00 0.596 1,028.36
2/28/95 11.9600 88.407 0.080 7.03 0.000 0.00 0.588 1,057.35
3/31/95 11.9200 89.000 0.080 7.07 0.000 0.00 0.593 1,060.38
4/30/95 12.1100 89.588 0.080 7.12 0.000 0.00 0.588 1,084.91
5/31/95 12.2200 90.175 0.080 7.17 0.000 0.00 0.587 1,101.94
6/22/95 12.1700 90.767 0.080 7.21 0.000 0.00 0.592 1,104.63
7/25/95 12.1900 91.363 0.080 7.26 0.000 0.00 0.596 1,113.71
8/24/95 12.0800 91.968 0.080 7.31 0.000 0.00 0.605 1,110.97
9/26/95 12.2200 92.570 0.080 7.36 0.000 0.00 0.602 1,131.21
10/25/95 12.2800 93.173 0.080 7.41 0.000 0.00 0.603 1,144.16
11/22/95 12.2000 93.803 0.082 7.69 0.000 0.00 0.630 1,144.40
12/29/95 12.3900 94.424 0.082 7.70 0.000 0.00 0.621 1,169.91
12/31/95 12.3900 94.424 1,169.91
1/26/96 12.5000 95.045 0.082 7.76 0.000 0.00 0.621 1,888.06
2/23/96 12.5200 95.669 0.082 7.81 0.000 0.00 0.624 1,197.78
3/26/96 12.3200 96.309 0.082 7.89 0.000 0.00 0.640 1,186.53
4/25/96 12.2600 96.922 0.078 7.51 0.000 0.00 0.613 1,188.26
5/24/96 12.2800 97.538 0.078 7.56 0.000 0.00 0.616 1,197.77
6/25/96 12.1500 98.164 0.078 7.61 0.000 0.00 0.626 1,192.69
7/26/96 12.1700 98.793 0.078 7.66 0.000 0.00 0.629 1,202.31
8/27/96 12.1700 99.427 0.078 7.71 0.000 0.00 0.634 1,210.03
9/25/96 12.2400 100.061 0.078 7.76 0.000 0.00 0.634 1,224.75
10/25/96 12.4400 101.688 0.078 7.80 0.000 0.00 0.627 1,252.56
11/26/96 12.6700 101.308 0.078 7.85 0.000 0.00 0.620 1,283.57
12/27/96 12.6700 101.932 0.078 7.90 0.000 0.00 0.624 1,291.48
12/31/96 12.6700 101.932 1,291.48
12/31/96 Less: 2.000% Contingent Deferred Sales Charge 20.00
12/31/96 Net Ending Redeemable Value 1,271.48
FORMULA -- Average Annual Total Return: ERV = P (1+T) 'n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.04%
ERV = Ending Redeemable Value $1,271.48 Overall Total Return 27.15%
n = Number of Time Periods 2.51
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION--NO SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/ 1/96 1,000.00 12.3900 80.710 80.710 1.000.00
1/26/96 12.5000 81.240 0.082 6.63 0.000 0.00 0.530 1,015.50
2/23/96 12.5200 81.773 0.082 6.67 0.000 0.00 0.533 1,023.80
3/26/96 12.3200 81.320 0.082 6.74 0.000 0.00 0.547 1,014.18
4/25/96 12.2600 81.844 0.078 6.42 0.000 0.00 0.524 1,015.67
5/24/96 12.2800 83.370 0.078 6.46 0.000 0.00 0.526 1,023.78
6/25/96 12.1500 81.905 0.078 6.50 0.000 0.00 0.535 1,019.45
7/26/96 12.1700 81.442 0.078 6.54 0.000 0.00 0.537 1,027.66
8/27/96 12.1700 81.983 0.078 6.59 0.000 0.00 0.541 1,034.24
9/25/96 12.2400 81.525 0.078 6.63 0.000 0.00 0.542 1,046.83
10/25/96 12.4400 81.061 0.078 6.67 0.000 0.00 0.536 1,070.60
11/26/96 12.6700 81.591 0.078 6.71 0.000 0.00 0.530 1,097.11
12/27/96 12.6700 81.124 0.078 6.75 0.000 0.00 0.533 1,103.86
12/31/96 12.6700 81.124 1,103.86
FORMULA -- Average Annual Total Return: ERV = P (1+T) 'n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.39%
ERV = Ending Redeemable Value $1,103.86 Overall Total Return 10.39%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION--NO SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/ 1/94 1,000.00 12.0000 83.333 83.333 1.000.00
7/29/94 11.9900 83.889 0.080 6.67 0.000 0.00 0.556 1,005.83
8/31/94 12.1500 84.441 0.080 6.71 0.000 0.00 0.552 1,025.96
9/30/94 12.0500 85.002 0.080 6.76 0.000 0.00 0.561 1,024.27
10/31/94 11.9000 85.573 0.080 6.80 0.000 0.00 0.571 1,018.32
11/30/94 11.7700 86.155 0.080 6.85 0.000 0.00 0.582 1,014.04
12/28/94 11.7000 87.223 0.100 8.62 0.045 3.88 1.068 1,020.51
12/31/94 11.7100 87.223 1,021.38
1/31/95 11.7100 87.819 0.080 6.98 0.000 0.00 0.596 1,028.36
2/28/95 11.9600 88.407 0.080 7.03 0.000 0.00 0.588 1,057.35
3/31/95 11.9200 89.000 0.080 7.07 0.000 0.00 0.593 1,060.38
4/30/95 12.1100 89.588 0.080 7.12 0.000 0.00 0.588 1,084.91
5/31/95 12.2200 90.175 0.080 7.17 0.000 0.00 0.587 1,101.94
6/22/95 12.1700 90.767 0.080 7.21 0.000 0.00 0.592 1,104.63
7/25/95 12.1900 91.363 0.080 7.26 0.000 0.00 0.596 1,113.71
8/24/95 12.0800 91.968 0.080 7.31 0.000 0.00 0.605 1,110.97
9/26/95 12.2200 92.570 0.080 7.36 0.000 0.00 0.602 1,131.21
10/25/95 12.2800 93.173 0.080 7.41 0.000 0.00 0.603 1,144.16
11/22/95 12.2000 93.803 0.082 7.69 0.000 0.00 0.630 1,144.40
12/29/95 12.3900 94.424 0.082 7.70 0.000 0.00 0.621 1,169.91
12/31/95 12.3900 94.424 1,169.91
1/26/96 12.5000 95.045 0.082 7.96 0.000 0.00 0.621 1,888.06
2/23/96 12.5200 95.669 0.082 7.81 0.000 0.00 0.624 1,197.78
3/31/96 12.3200 96.309 0.082 7.89 0.000 0.00 0.640 1,186.53
4/25/96 12.2600 96.922 0.078 7.51 0.000 0.00 0.613 1,188.26
5/24/96 12.2800 97.538 0.078 7.56 0.000 0.00 0.616 1,197.77
6/25/96 12.1500 98.164 0.078 7.61 0.000 0.00 0.626 1,192.69
7/26/96 12.1700 98.793 0.078 7.66 0.000 0.00 0.629 1,202.31
8/27/96 12.1700 99.427 0.078 7.71 0.000 0.00 0.634 1,210.03
9/25/96 12.2400 100.061 0.078 7.76 0.000 0.00 0.634 1,224.75
10/25/96 12.4400 100.688 0.078 7.80 0.000 0.00 0.627 1,252.56
11/26/96 12.6700 101.308 0.078 7.85 0.000 0.00 0.620 1,283.57
12/27/96 12.6700 101.932 0.078 7.90 0.000 0.00 0.624 1,291.48
12/31/96 12.6700 101.932 1,291.48
FORMULA -- Average Annual Total Return: ERV = P (1+T) 'n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.73%
ERV = Ending Redeemable Value $1,291.48 Overall Total Return 29.15%
n = Number of Time Periods 2.51
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION--MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC A
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/ 1/96 1,000.00 13.0200 76.805 76.805 952.38
1/26/96 12.5000 77.343 0.088 6.73 0.000 0.00 0.538 966.79
2/23/96 12.5200 77.885 0.088 6.78 0.000 0.00 0.542 975.12
3/26/96 12.3300 78.439 0.088 6.83 0.000 0.00 0.554 967.15
4/25/96 12.2700 78.971 0.083 6.53 0.000 0.00 0.532 968.97
5/24/96 12.2900 79.506 0.083 6.57 0.000 0.00 0.535 977.13
6/25/96 12.1600 80.052 0.083 6.64 0.000 0.00 0.546 973.43
7/26/96 12.1800 80.604 0.084 6.72 0.000 0.00 0.552 981.76
8/27/96 12.1800 81.162 0.084 6.80 0.000 0.00 0.558 988.55
9/25/96 12.2500 81.713 0.083 6.75 0.000 0.00 0.551 1,000.98
10/25/96 12.4400 82.260 0.083 6.81 0.000 0.00 0.547 1,023.31
11/26/96 12.6700 82.801 0.083 6.86 0.000 0.00 0.541 1,049.09
12/27/96 12.6800 83.345 0.083 6.90 0.000 0.00 0.544 1,056.81
12/31/96 12.6700 83.345 1,055.98
FORMULA -- Average Annual Total Return: ERV = P (1+T) 'n
ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 5.60%
ERV = Ending Redeemable Value 1,055.98 Overall Total Return 5.60%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION--MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC B
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/ 1/96 1,000.00 12.3900 80.710 80.710 1.000.00
1/26/96 12.5000 81.229 0.080 6.49 0.000 0.00 0.519 1,015.36
2/23/96 12.5200 81.751 0.080 6.54 0.000 0.00 0.522 1,023.520
3/26/96 12.3200 82.286 0.081 6.59 0.000 0.00 0.535 1,013.76
4/25/96 12.2600 82.797 0.076 6.27 0.000 0.00 0.511 1,015.09
5/24/96 12.2900 83.310 0.076 6.30 0.000 0.00 0.513 1,023.88
6/25/96 12.1500 83.833 0.076 6.35 0.000 0.00 0.523 1,018.57
7/26/96 12.1700 84.357 0.076 6.38 0.000 0.00 0.524 1,026.62
8/27/96 12.1700 84.885 0.076 6.42 0.000 0.00 0.528 1,033.05
9/25/96 12.2400 85.412 0.076 6.45 0.000 0.00 0.527 1,045.44
10/25/96 12.4400 85.933 0.076 6.48 0.000 0.00 0.521 1,069.01
11/26/96 12.6700 86.448 0.076 6.52 0.000 0.00 0.515 1,095.30
12/27/96 12.6800 86.965 0.076 6.56 0.000 0.00 0.517 1,102.72
12/31/96 12.6700 86.965 1,101.85
12/31/96 Less: 5.000% Contingent Deferred Sales Charge 50.00
12/31/96 Net Ending Redeemable Value 1,051.85
FORMULA -- Average Annual Total Return: ERV = P (1+T) 'n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 5.18%
ERV = Ending Redeemable Value $1,051.85 Overall Total Return 5.18%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION--MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC C
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/ 1/96 1,000.00 12.3800 80.775 80.775 999.99
1/26/96 12.4800 81.301 0.081 6.56 0.000 0.00 0.526 1,014.64
2/23/96 12.5000 81.829 0.081 6.60 0.000 0.00 0.528 1,022.86
3/26/96 12.3100 82.366 0.081 6.61 0.000 0.00 0.537 1,013.93
4/25/96 12.2500 82.877 0.076 6.26 0.000 0.00 0.511 1,015.24
5/24/96 12.2700 83.391 0.076 6.31 0.000 0.00 0.514 1,023.21
6/25/96 12.1400 83.914 0.076 6.35 0.000 0.00 0.523 1,018.72
7/26/96 12.1600 84.435 0.076 6.34 0.000 0.00 0.521 1,026.73
8/27/96 12.1600 84.961 0.076 6.40 0.000 0.00 0.526 1,033.13
9/25/96 12.2300 85.488 0.076 6.44 0.000 0.00 0.527 1,045.52
10/25/96 12.4300 86.099 0.076 6.48 0.000 0.00 0.521 1,069.09
11/26/96 12.6500 86.524 0.076 6.52 0.000 0.00 0.515 1,094.53
12/27/96 12.6600 86.042 0.076 6.56 0.000 0.00 0.518 1,101.95
12/31/96 12.6500 86.042 1,101.08
12/31/96 Less: 1.000% Contingent Deferred Sales Charge 10.00
12/31/96 Net Ending Redeemable Value 1,091.08
FORMULA -- Average Annual Total Return: ERV = P (1+T) 'n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 9.11%
ERV = Ending Redeemable Value $1,091.08 Overall Total Return 9.11%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION--MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC B
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/ 5/95 1,000.00 12.2800 81.433 81.433 1,000.00
6/22/95 12.1700 81.959 0.079 6.40 0.000 0.00 0.526 997.44
7/25/95 12.1900 82.482 0.078 6.38 0.000 0.00 0.523 1,005.46
8/24/95 12.0800 83.014 0.078 6.43 0.000 0.00 0.532 1,002.81
9/26/95 12.2200 83.543 0.078 6.47 0.000 0.00 0.529 1,020.90
10/25/95 12.2800 84.073 0.078 6.51 0.000 0.00 0.530 1,032.42
11/22/95 12.2000 84.627 0.080 6.76 0.000 0.00 0.554 1,032.45
12/29/95 12.3900 85.181 0.081 6.86 0.000 0.00 0.554 1,055.39
12/31/95 12.3900 85.181 1,055.39
1/26/95 12.5000 85.729 0.080 6.85 0.000 0.00 0.548 1,071.61
2/23/95 12.5200 86.280 0.080 6.90 0.000 0.00 0.551 1,080.23
3/26/95 12.3200 86.844 0.081 6.95 0.000 0.00 0.564 1,069.92
4/25/95 12.2600 87.383 0.076 6.61 0.000 0.00 0.539 1,071.32
5/24/95 12.2900 87.924 0.076 6.65 0.000 0.00 0.541 1,080.59
6/25/95 12.1500 88.476 0.076 6.71 0.000 0.00 0.552 1,074.98
7/26/95 12.1700 89.030 0.076 6.74 0.000 0.00 0.554 1,083.50
8/27/95 12.1700 89.586 0.076 6.77 0.000 0.00 0.556 1,090.26
9/25/95 12.2400 90.142 0.076 6.80 0.000 0.00 0.556 1,103.34
10/25/95 12.4480 90.692 0.076 6.84 0.000 0.00 0.550 1,128.21
11/26/95 12.6700 91.235 0.076 6.88 0.000 0.00 0.543 1,155.95
12/27/95 12.6800 91.781 0.076 6.92 0.000 0.00 0.546 1,163.78
12/31/95 12.6700 91.781 1,162.87
12/31/96 Less: 4.000% Contingent Deferred Sales Charge 40.00
Net Ending Redeemable Value 1,122.87
FORMULA -- Average Annual Total Return: ERV = P (1+T) 'n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 7.61%
ERV = Ending Redeemable Value $1,122.87 Overall Total Return 12.29%
n = Number of Time Periods 1.58
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC C
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/5/95 1,000.00 12.2800 81.433 81.433 1,000.00
6/22/95 12.1700 81.959 0.079 6.40 0.000 0.00 0.526 997.44
7/25/95 12.1800 82.483 0.078 6.38 0.000 0.00 0.524 1,004.64
8/24/95 12.0700 83.016 0.078 6.43 0.000 0.00 0.533 1,002.00
9/26/95 12.2200 83.545 0.078 6.47 0.000 0.00 0.529 1,020.92
10/25/95 12.2700 84.076 0.078 6.51 0.000 0.00 0.531 1,031.61
11/22/95 12.1900 84.631 0.080 6.76 0.000 0.00 0.555 1,031.65
12/29/95 12.3800 85.190 0.082 6.92 0.000 0.00 0.559 1,054.65
12/31/95 12.3800 85.190 1,054.65
1/26/96 12.4800 85.744 0.081 6.91 0.000 0.00 0.554 1,070.09
2/23/96 12.5000 86.301 0.081 6.96 0.000 0.00 0.557 1,078.76
3/26/96 12.3100 86.867 0.081 6.97 0.000 0.00 0.566 1,069.33
4/25/96 12.2500 87.406 0.076 6.60 0.000 0.00 0.539 1,070.72
5/24/96 12.2700 87.948 0.076 6.65 0.000 0.00 0.542 1,079.12
6/25/96 12.1400 88.500 0.076 6.70 0.000 0.00 0.552 1,074.39
7/26/96 12.1600 89.050 0.076 6.69 0.000 0.00 0.550 1,082.85
8/27/96 12.1600 89.605 0.076 6.75 0.000 0.00 0.555 1,089.60
9/25/96 12.2300 90.160 0.076 6.79 0.000 0.00 0.555 1,102.66
10/25/96 12.4300 90.710 0.076 6.84 0.000 0.00 0.550 1,127.53
11/26/96 12.6500 91.254 0.076 6.88 0.000 0.00 0.544 1,154.36
12/27/96 12.6600 91.801 0.076 6.92 0.000 0.00 0.547 1,162.20
12/31/96 12.6500 91.801 1,161.28
FORMULA -- Average Annual Total Return: ERV = P(1+T)^n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 9.93%
ERV = Ending Redeemable Value $1,161.28 Overall Total Return 16.13%
n = Number of Time Periods 1.58
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC A
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/1/96 1,000.00 12.4000 80.645 80.645 1,000.00
1/26/96 12.5000 81.211 0.088 7.07 0.000 0.00 0.566 1,015.14
2/23/96 12.5200 81.780 0.088 7.12 0.000 0.00 0.569 1,023.89
3/26/96 12.3300 82.362 0.088 7.17 0.000 0.00 0.582 1,015.52
4/25/96 12.2700 82.920 0.083 6.85 0.000 0.00 0.558 1,017.43
5/24/96 12.2900 83.481 0.083 6.90 0.000 0.00 0.561 1,025.98
6/25/96 12.1600 84.054 0.083 6.97 0.000 0.00 0.573 1.022.10
7/26/96 12.1800 84.634 0.084 7.06 0.000 0.00 0.580 1,030.84
8/27/96 12.1800 85.220 0.084 7.14 0.000 0.00 0.586 1,037.98
9/25/96 12.2500 85.799 0.083 7.09 0.000 0.00 0.579 1,051.04
10/25/96 12.4400 86.374 0.083 7.15 0.000 0.00 0.575 1,074.49
11/26/96 12.6700 86.942 0.083 7.20 0.000 0.00 0.568 1,101.56
12/27/96 12.6800 87.514 0.083 7.25 0.000 0.00 0.572 1,109.68
12/31/96 12.6700 87.514 1,100.80
FORMULA -- Average Annual Total Return: ERV = P(1+T)^n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.88%
ERV = Ending Redeemable Value $1,108.80 Overall Total Return 10.88%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC B
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/1/96 1,000.00 12.3900 80.710 80.710 1,000.00
1/26/96 12.5000 81.229 0.080 6.49 0.000 0.00 0.519 1,015.36
2/23/96 12.5200 81.751 0.080 6.54 0.000 0.00 0.522 1,023.52
3/26/96 12.3200 82.286 0.081 6.59 0.000 0.00 0.535 1,013.76
4/25/96 12.2600 82.797 0.076 6.27 0.000 0.00 0.511 1,015.09
5/24/96 12.2900 83.310 0.076 6.30 0.000 0.00 0.513 1,023.88
6/25/96 12.1500 83.833 0.076 6.35 0.000 0.00 0.523 1,018.57
7/26/96 12.1700 84.357 0.076 6.38 0.000 0.00 0.524 1,026.62
8/27/96 12.1700 84.885 0.076 6.42 0.000 0.00 0.528 1,033.05
9/25/96 12.2400 85.412 0.076 6.45 0.000 0.00 0.527 1,045.44
10/25/96 12.4400 85.933 0.076 6.48 0.000 0.00 0.521 1,069.01
11/26/96 12.6700 86.448 0.076 6.52 0.000 0.00 0.515 1,095.30
12/27/96 12.6800 86.965 0.076 6.56 0.000 0.00 0.517 1,102.72
12/31/96 12.6700 86.965 1,101.85
FORMULA -- Average Annual Total Return: ERV = P(1+T)^n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.18%
ERV = Ending Redeemable Value $1,101.85 Overall Total Return 10.18%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC C
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/1/96 1,000.00 12.3800 80.775 80.775 999.99
1/26/96 12.4800 81.301 0.081 6.56 0.000 0.00 0.526 1,014.64
2/23/96 12.5000 81.829 0.081 6.60 0.000 0.00 0.528 1,022.86
3/26/96 12.3100 82.366 0.081 6.61 0.000 0.00 0.537 1,013.93
4/25/96 12.2500 82.877 0.076 6.26 0.000 0.00 0.511 1,015.24
5/24/96 12.2700 83.391 0.076 6.31 0.000 0.00 0.514 1,023.21
6/25/96 12.1400 83.914 0.076 6.35 0.000 0.00 0.523 1,018.72
7/26/96 12.1600 84.435 0.076 6.34 0.000 0.00 0.521 1,026.73
8/27/96 12.1600 84.961 0.076 6.40 0.000 0.00 0.526 1,033.13
9/25/96 12.2300 85.488 0.076 6.44 0.000 0.00 0.527 1,045.52
10/25/96 12.4300 86.009 0.076 6.48 0.000 0.00 0.521 1,069.09
11/26/96 12.6500 86.524 0.076 6.52 0.000 0.00 0.515 1,094.53
12/27/96 12.6600 87.042 0.076 6.56 0.000 0.00 0.518 1,101.95
12/31/96 12.6500 87.042 1,101.08
FORMULA -- Average Annual Total Return: ERV = P(1+T)^n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.11%
ERV = Ending Redeemable Value $1,101.08 Overall Total Return 10.11%
n = Number of Time Periods 1.00
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC A
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/5/95 1,000.00 12.2800 81.433 81.433 1,000.00
6/22/95 12.1700 82.007 0.086 6.98 0.000 0.00 0.574 998.03
7/25/95 12.1900 82.580 0.085 6.98 0.000 0.00 0.573 1,006.65
8/24/95 12.0800 83.162 0.085 7.03 0.000 0.00 0.582 1,004.60
9/26/95 12.2200 83.741 0.085 7.08 0.000 0.00 0.579 1,023.32
10/25/95 12.2800 84.322 0.085 7.14 0.000 0.00 0.581 1,035.47
11/22/95 12.2000 84.928 0.088 7.39 0.000 0.00 0.606 1,036.12
12/29/95 12.4000 85.529 0.088 7.45 0.000 0.00 0.601 1,060.56
12/31/95 12.4000 85.529 1,060.56
1/26/96 12.5000 86.129 0.088 7.50 0.000 0.00 0.600 1,076.61
2/23/96 12.5200 86.732 0.088 7.55 0.000 0.00 0.603 1,085.88
3/26/96 12.3300 87.348 0.088 7.60 0.000 0.00 0.616 1,077.00
4/25/96 12.2700 87.941 0.083 7.27 0.000 0.00 0.593 1,079.04
5/24/96 12.2900 88.537 0.083 7.32 0.000 0.00 0.596 1,088.12
6/25/96 12.1600 89.145 0.083 7.39 0.000 0.00 0.608 1,084.00
7/26/96 12.1800 89.760 0.084 7.49 0.000 0.00 0.615 1,093.28
8/27/96 12.1800 90.382 0.084 7.58 0.000 0.00 0.622 1,100.85
9/25/96 12.2500 90.996 0.083 7.52 0.000 0.00 0.614 1,114.70
10/25/96 12.4400 91.605 0.083 7.58 0.000 0.00 0.609 1,139.57
11/26/96 12.6700 92.208 0.083 7.64 0.000 0.00 0.603 1,168.28
12/27/96 12.6800 92.814 0.083 7.69 0.000 0.00 0.606 1,176.88
12/31/96 12.6700 92.814 1,175.95
FORMULA -- Average Annual Total Return: ERV = P(1+T)^n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.80%
ERV = Ending Redeemable Value $1,175.95 Overall Total Return 17.60%
n = Number of Time Periods 1.58
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC B
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/5/95 1,000.00 12.2800 81.433 81.433 1,000.00
6/22/95 12.1700 81.959 0.079 6.40 0.000 0.00 0.526 997.44
7/25/95 12.1900 82.482 0.078 6.38 0.000 0.00 0.523 1,005.46
8/24/95 12.0800 83.014 0.078 6.43 0.000 0.00 0.532 1,002.81
9/26/95 12.2200 83.543 0.078 6.47 0.000 0.00 0.529 1,020.90
10/25/95 12.2800 84.073 0.078 6.51 0.000 0.00 0.530 1,032.42
11/22/95 12.2000 84.627 0.080 6.76 0.000 0.00 0.554 1,032.45
12/29/95 12.3900 85.181 0.081 6.86 0.000 0.00 0.554 1,055.39
12/31/95 12.3900 85.181 1,055.39
1/26/96 12.5000 85.729 0.080 6.85 0.000 0.00 0.548 1,071.61
2/23/96 12.5200 86.280 0.080 6.90 0.000 0.00 0.551 1,080.23
3/26/96 12.3200 86.844 0.081 6.65 0.000 0.00 0.564 1,069.92
4/25/96 12.2600 87.383 0.076 6.61 0.000 0.00 0.539 1,071.32
5/24/96 12.2900 87.924 0.076 6.65 0.000 0.00 0.541 1,080.59
6/25/96 12.1500 88.476 0.076 6.71 0.000 0.00 0.552 1,074.98
7/26/96 12.1700 89.030 0.076 6.74 0.000 0.00 0.554 1,083.50
8/27/96 12.1700 89.586 0.076 6.77 0.000 0.00 0.556 1,090.26
9/25/96 12.2400 90.142 0.076 6.80 0.000 0.00 0.556 1,103.34
10/25/96 12.4400 90.692 0.076 6.84 0.000 0.00 0.550 1,128.21
11/26/96 12.6700 91.235 0.076 6.88 0.000 0.00 0.543 1,155.95
12/27/96 12.6800 91.781 0.076 6.92 0.000 0.00 0.546 1,163.78
12/31/96 12.6700 91.781 1,162.87
FORMULA -- Average Annual Total Return: ERV = P(1+T)^n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 10.02%
ERV = Ending Redeemable Value $1,162.87 Overall Total Return 16.29%
n = Number of Time Periods 1.58
</TABLE>
<PAGE>
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR STRATEGIC INC C
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/5/95 1,000.00 12.2800 81.433 81.433 1,000.00
6/22/95 12.1700 81.959 0.079 6.40 0.000 0.00 0.526 997.44
7/25/95 12.1800 82.483 0.078 6.38 0.000 0.00 0.524 1,004.64
8/24/95 12.0700 83.016 0.078 6.43 0.000 0.00 0.533 1,002.00
9/26/95 12.2200 83.545 0.078 6.47 0.000 0.00 0.529 1,020.92
10/25/95 12.2700 84.076 0.078 6.51 0.000 0.00 0.531 1,031.61
11/22/95 12.1900 84.631 0.080 6.76 0.000 0.00 0.555 1,031.65
12/29/95 12.3800 85.190 0.082 6.92 0.000 0.00 0.559 1,054.65
12/31/95 12.3800 85.190 1,054.65
1/26/96 12.4800 85.744 0.081 6.91 0.000 0.00 0.554 1,070.09
2/23/96 12.5000 86.301 0.081 6.96 0.000 0.00 0.557 1,078.76
3/26/96 12.3100 86.867 0.081 6.97 0.000 0.00 0.566 1,069.33
4/25/96 12.2500 87.406 0.076 6.60 0.000 0.00 0.539 1,070.72
5/24/96 12.2700 87.948 0.076 6.65 0.000 0.00 0.542 1,079.12
6/25/96 12.1400 88.500 0.076 6.70 0.000 0.00 0.552 1,074.39
7/26/96 12.1600 89.050 0.076 6.69 0.000 0.00 0.550 1,082.85
8/27/96 12.1600 89.605 0.076 6.75 0.000 0.00 0.555 1,089.60
9/25/96 12.2300 90.160 0.076 6.79 0.000 0.00 0.555 1,102.66
10/25/96 12.4300 90.710 0.076 6.84 0.000 0.00 0.550 1,127.53
11/26/96 12.6500 91.254 0.076 6.88 0.000 0.00 0.544 1,154.36
12/27/96 12.6600 91.801 0.076 6.92 0.000 0.00 0.547 1,162.20
12/31/96 12.6500 91.801 1,161.28
FORMULA -- Average Annual Total Return: ERV = P(1+T)^n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00 T = Average Annual Total Return 9.93%
ERV = Ending Redeemable Value $1,161.28 Overall Total Return 16.13%
n = Number of Time Periods 1.58
</TABLE>
<PAGE>
<PAGE>
C O M P O S I T E
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
FOR
THE NORTHSTAR FUNDS
AND
NORTHSTAR TRUST
I. INTRODUCTION
The Northstar Funds and the Northstar Trust hereby adopt this Multiple
Class Plan (the "Plan") pursuant to Rule 18f-3 under the Investment
Company Act of 1940 (the "1940 Act") on behalf of the current series of
The Northstar Funds: Northstar Special Fund, Northstar Growth Fund,
Northstar Balance Sheet Opportunities Fund, Northstar Government
Securities Fund, Northstar Strategic Income Fund, and Northstar High
Yield Fund; the current series of the Northstar Trust: Northstar Income
and Growth Fund, Northstar High Total Return Fund, Northstar Growth +
Value Fund and Northstar International Value Fund; and any series that
may be established in the future (referred to herein collectively as
the "Funds" and individually as a "Fund").
II. MULTIPLE CLASS STRUCTURE
Each of the Funds continuously offers three classes of shares: "Class A
Shares," "Class B Shares" and "Class C Shares." The Northstar Growth
Fund also offers a fourth class of shares designated "Class I Shares."
In addition, prior to June 5, 1995, the Northstar Special Fund,
Northstar Growth Fund, Northstar Balance Sheet Opportunities Fund,
Northstar Government Securities Fund, Northstar Strategic Income Fund
and Northstar High Yield Fund each offered only one class of shares,
which is currently designated as "Class T shares." Class T shares are
no longer offered for sale by the Funds, except in connection with
reinvestment of dividends and other distributions, upon exchanges of
Class T shares of another Fund, and upon exchange of shares from the
Class T Account of The Cash Management Fund of Salomon Brothers
Investment Series (the "Money Market Portfolio").
Shares of each class of a Fund shall represent an equal pro rata
interest in such Fund and, generally, shall have identical voting,
dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions,
except that: (a) each class shall have a different designation; (b)
each class shall bear any Class Expenses, as defined in Section C
below; and (c) each class shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its
distribution arrangement and each class shall have separate voting
rights on any matter submitted to
<PAGE>
shareholders in which the interests of one class differ from the
interests of any other class. In addition, Class A, Class B, Class C,
Class I and Class T shares shall have the features described below.
A. Sales Charge Structure
(1) Class A Shares. Class A shares of a Fund shall be
offered at net asset value plus an initial sales
charge. The front-end sales charge shall be in such
amount as is disclosed in the Funds' prospectus or
supplements thereto and shall be subject to
reductions for larger purchases and such waivers or
reductions as are disclosed in the Funds' prospectus
or supplements thereto. Class A shares generally
shall not be subject to a contingent deferred sales
charge; however, a contingent deferred sales charge
in such amount as may be described in the Funds'
prospectus or supplements thereto may be imposed on
redemptions of Class A shares acquired in a purchase
of over a million dollars that are redeemed within 18
months of their purchase. Additional contingent
deferred sales charges may be imposed in such other
cases as the Board may approve and as are disclosed
in the Funds' prospectus or supplements thereto.
(2) Class B Shares. Class B shares of a Fund shall be
offered at net asset value without the imposition of
an initial sales charge. A contingent deferred sales
charge in such amount as is described in the Funds'
prospectus or supplements thereto shall be imposed on
Class B shares, subject to such waivers or reductions
as are disclosed in the Funds' prospectus or
supplements thereto.
(3) Class C Shares. Class C shares of a Fund shall be
offered at net asset value without the imposition of
a sales charge at the time of purchase. A contingent
deferred sales charge in such amount as is described
in the Funds' prospectus or supplements thereto shall
be imposed on redemptions of Class C shares made
within one year from the first day of the month after
purchase, subject to waivers or reductions as are
disclosed in the Funds' prospectus or supplements
thereto.
(4) Class I Shares. Class I shares are offered to
certain institutional investors without the
- 2 -
<PAGE>
imposition of an initial sales charge or a
contingent deferred sales charge.
(5) Class T Shares. Class T shares are no longer offered
for sale by the Funds but may be obtained pursuant to
the methods described above. A contingent deferred
sales charge in such amount as is described in the
Funds' prospectus or supplements thereto shall be
imposed on redemptions of Class T shares made within
four years after their purchase, subject to waivers
or reductions as are disclosed in the Funds'
prospectus or supplements thereto.
B. Service and Distribution Plans
Each Fund has adopted a 12b-1 plan for each class of shares of
that Fund (other than Class I Shares of the Northstar Growth
Fund) with the following terms:
(1) Class A Shares. Class A shares of each Fund, shall
pay Northstar Distributors, Inc. (the "Underwriter")
0.25% annually of the average daily net assets of
each Fund's Class A shares for service activities, as
defined in the rules of the National Association of
Securities Dealers, and 0.05% annually of the average
daily net assets of each Fund's Class A shares for
distribution activities.
(2) Class B Shares. Class B shares of each Fund, shall
pay the Underwriter 0.25% annually of the average
daily net assets of each Fund's Class B shares for
service activities, as defined in the rules of the
National Association of Securities Dealers, and 0.75%
annually of the average daily net assets of each
Fund's Class B shares for distribution activities.
(3) Class C Shares. Class C shares of each Fund shall pay
the Underwriter 0.25% annually of the average daily
net assets of each Fund's Class C shares for service
activities, as defined in the rules of the National
Association of Securities Dealers, and 0.75% annually
of the average daily net assets of each Fund's Class
C shares for distribution activities.
(4) Class T Shares. Class T shares of the Northstar
Growth Fund, Northstar Special Fund and Northstar
- 3 -
<PAGE>
Strategic Income Fund shall pay the Underwriter 0.95%
annually of the average daily net assets of those
Funds' Class T shares; Class T shares of the
Northstar Balance Sheet Fund shall pay the
Underwriter 0.75% annually of the average daily net
assets of that Fund's Class T shares; and the
Northstar Government Securities Fund and Northstar
High Yield Fund shall pay 0.65% of the average daily
net assets of those Funds' Class T shares. In each
case, 0.25% of the average daily net assets of each
Fund's Class T shares, which is paid annually to the
Underwriter pursuant to the 12b-1 plans, shall be
allocated to pay for service activities, as defined
in the rules of the National Association of
Securities Dealers, with the remainder allocated
toward payment for distribution activities.
C. Allocation of Income and Expenses
(1) The gross income of each Fund shall, generally, be
allocated to each class on the basis of net assets.
To the extent practicable, certain expenses (other
than Class Expenses as defined below which shall be
allocated more specifically) shall be subtracted from
the gross income on the basis of the net assets of
each class of each Fund. These expenses include:
(a) Expenses incurred by each Trust (for
example, fees of Trustees, auditors and
legal counsel) not attributable to a
particular Fund or to a particular class of
shares of a Fund ("Trust Expenses"); and
(b) Expenses incurred by a Fund not attributable
to any particular class of the Fund's shares
(for example, advisory fees, custodial fees,
or other expenses relating to the management
of the Fund's assets) ("Fund Expenses").
(2) Expenses attributable to a particular class ("Class
Expenses") shall be limited to: (i) payments made
pursuant to a 12b-1 plan; (ii) transfer agency fees
and expenses, including any expenses of
broker-dealers and other third parties providing
shareholder services to shareholders of a specific
class; (iii) printing and postage expenses related to
preparing and distributing materials such as
shareholder reports,
- 4 -
<PAGE>
prospectuses and proxies to current shareholders of a
specific class; (iv) Blue Sky registration fees
incurred by a class; (v) SEC registration fees
incurred by a class; (vi) the expense of
administrative personnel and services to support the
shareholders of a specific class; (vii) litigation or
other legal expenses relating solely to one class;
and (viii) Trustees' fees incurred as a result of
issues relating to one class. Expenses in category
(i) and (ii) above must be allocated to the class for
which such expenses are incurred. All other "Class
Expenses" listed in categories (iii)-(viii) above may
be allocated to a class but only if the President and
Treasurer have determined, subject to Board approval
or ratification, which of such categories of expenses
will be treated as Class Expenses, consistent with
applicable legal principles under the Act and the
Internal Revenue Code of 1986, as amended.
Therefore, expenses of a Fund shall be apportioned to
each class of shares depending on the nature of the
expense item. Trust Expenses and Fund Expenses will
be allocated among the classes of shares based on
their relative net asset values. Approved Class
Expenses shall be allocated to the particular class
to which they are attributable.
In the event a particular expense is no longer
reasonably allocable by class or to a particular
class, it shall be treated as a Trust Expense or Fund
Expense, and in the event a Trust Expense or Fund
Expense becomes allocable at a different level,
including as a Class Expense, it shall be so
allocated, subject to compliance with Rule 18f-3 and
to approval or ratification by the Board of Trustees.
The initial determination of expenses that will be
allocated as Class Expenses and any subsequent
changes thereto shall be reviewed by the Board of
Trustees and approved by such Board and by a majority
of the Trustees who are not "interested persons," as
defined in the 1940 Act.
D. Exchange Privileges. Shareholders may exchange shares
of a Fund for the same class of shares of another Fund
or for shares of the Money Market Portfolio except that
Class I Shares of the Growth Fund do not provide for
any exchange privileges.
- 5 -
<PAGE>
Shareholders of a class who exchange shares of a Fund for
shares of the Money Market Portfolio may only exchange shares
of the Money Market Portfolio for shares of another Fund in
the same class as the shareholder originally held. Exchanges
are effected at net asset value per share next computed
following receipt of a properly executed exchange request,
without a sales charge, provided, however, that in the case of
a exchanges into Class A shares of a Fund after a direct
purchase into the Money Market Portfolio, the applicable sales
charge shall be imposed. Collection of the contingent deferred
sales charge shall be deferred on shares subject to a charge
that are exchanged for shares of the same class of another
Fund, or converted to shares of the Money Market Portfolio.
Under these circumstances, the combined holding period of
shares in each Fund or in a Fund and the Money Market
Portfolio, shall be used to calculate the conversion period
discussed below, if applicable, and to determine the deferred
sales charge due upon redemption. Each Fund reserves the right
to terminate or modify its exchange privileges at any time.
E. Conversion Features. Class B and Class T shares
automatically convert to Class A shares after eight
years from purchase in the case of Class B shares, and
on the later of May 31, 1998 or eight years after
purchase in the case of Class T shares.
For purposes of conversion to Class A shares, shares purchased
through the reinvestment of dividends and distributions paid
in respect of Class B or Class T shares in a shareholder's
Fund account will be considered to be held in a separate
subaccount. Each time any Class B or Class T shares in the
shareholder's Fund account (other than those in the
subaccount) convert to Class A, an equal pro rata portion of
the Class B or Class T shares in the subaccount will also
convert to Class A.
Shares shall be converted at the relative net asset values of
the two classes without the imposition of a sales charge, fee
or other charge. If the amount of Class A 12b-1 expenses of
any Fund is increased materially without the approval of the
Class B and Class T shareholders, any conversion will only
take place in a manner permitted by Rule 18f-3.
F. Waiver or Reimbursement of Expenses. Expenses may be
waived or reimbursed by any adviser, by the Underwriter
- 6 -
<PAGE>
or any other provider of services to the Funds without
the prior approval of the Board of Trustees.
III. BOARD REVIEW
A. Initial Approval
The Board of Trustees, including a majority of the Trustees
who are not "interested persons" of the Funds and the Trusts
as defined in the 1940 Act, at a meeting held October 29,
1996, initially approved the Plan based on a determination
that the Plan, including the expense allocation, is in the
best interests of each class and Fund individually and of the
Trusts. Their determination was based on their review of
information furnished to them which they deemed reasonably
necessary and sufficient to evaluate the Plan.
B. Approval of Amendments
The Plan may not be amended materially unless the Board of
Trustees, including a majority of the Trustees who are not
"interested persons" of the Funds and the Trusts as defined in
the 1940 Act, have found that the proposed amendment,
including any proposed related expense allocation, is in the
best interests of each class and Fund individually and of the
Trusts. Such finding shall be based on information requested
by the Board and furnished to them which the Board deems
reasonably necessary to evaluate the proposed amendment.
C. Periodic Review
The Board shall review reports of expense allocations and such
other information as they request at such times, or pursuant
to such schedule, as they may determine consistent with
applicable legal requirements.
IV. MISCELLANEOUS
A. Limitation of Liability
The Board of Trustees and the shareholders of each Fund shall
not be liable for any obligations of the Trusts or any Fund
under this Plan, and the Underwriter or any other person, in
asserting any rights or claims under this Plan, shall look
only to the assets and property
- 7 -
<PAGE>
of the Trusts or such Funds in settlement of such right or
claim, and not to such Trustees or shareholders.
IN WITNESS WHEREOF, the Trusts, on behalf of the Funds, have adopted
this Multiple Class Plan as of the 29 day of October, 1996, to be effective
10/29, 1996.
THE NORTHSTAR FUNDS
NORTHSTAR TRUST
By: /s/ AGNES MULLADY
Title: Vice President and
Treasurer
- 8 -
<PAGE>
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<PER-SHARE-NII> 0.85
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<PERIOD-START> JAN-01-1996
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