Star Select Funds
CROSS REFERENCE SHEET
FORM N-1A
FOR STAR SELECT REIT-PLUS FUND
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ITEM SECTION IN PROSPECTUS
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1.............................. Cover Page
2.............................. Summary of Fund Expenses
3.............................. None
4.............................. The Fund, Investment Objective and
Strategies and Risk Considerations,
Investment Policies and Techniques,
Operation of the Fund, General
Information
5.............................. Operation of the Fund
5A............................. None
6.............................. Cover Page, Dividends and
Distributions, Taxes, General
Information, Redeeming Shares
7.............................. Cover Page, How to Invest in the
Fund, Share Price Calculation,
Operation of the Fund, Redeeming
Shares
8.............................. Redeeming Shares
9.............................. None
13.............................. General Information
15.............................. General Information
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
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10.............................. Cover Page
11.............................. Table of Contents
12.............................. None
13.............................. Additional Information About Fund
Investments and Risk Considerations,
Investment Limitations
14.............................. Trustees and Officers
15.............................. None
16.............................. The Investment Adviser, Custodian,
Transfer Agent, Accountants,
Trustees and Officers
17.............................. Portfolio Transactions and Brokerage
18.............................. Description of the Trust
19.............................. Determination of Share Price
20.............................. None
21.............................. Distributor
22.............................. Investment Performance
23.............................. Financial Statements
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STAR SELECT REIT-PLUS FUND
PROSPECTUS June 1, 1997
429 North Pennsylvania Street
Indianapolis, Indiana 46204
For Information, Shareholder Services and Requests:
(800) 677-FUND
Star Select REIT-Plus Fund (the "Fund") is a diversified, open-end
mutual fund whose investment objective is to provide above average income and
long term growth of capital. The Fund seeks to achieve its objective by
investing primarily in REITs (real estate investment trusts) plus other real
estate related equity securities. The Fund is "no-load," which means there are
no sales charges or commissions.
This Prospectus provides the information a prospective investor ought
to know before investing and should be retained for future reference. A
Statement of Additional Information dated June 1, 1997 ("SAI") has been filed
with the Securities and Exchange Commission (the "SEC"), is incorporated herein
by reference, and can be obtained without charge by calling the Fund at the
phone number listed above. The SEC maintains a Web Site (htpp://www.sec.gov)
that contains the SAI, material incorporated by reference, and other information
regarding registrants that file electronically with the SEC.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF STAR BANK, N.A.
OR ITS AFFILIATES, ARE NOT ENDORSED OR GUARANTEED BY STAR BANK, N.A. OR ITS
AFFILIATES, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
(FDIC), THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY, ENTITY, OR
PERSON. THE PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
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.
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SUMMARY OF FUND EXPENSES
The tables below are provided to assist an investor in understanding
the direct and indirect expenses that an investor may incur as a shareholder in
the Fund. The expense information is based on estimated amounts for the current
fiscal year. The expenses are expressed as a percentage of average net assets.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE FUND PERFORMANCE
OR EXPENSES, BOTH OF WHICH MAY VARY.
Shareholders should be aware that the Fund is a no-load fund and,
accordingly, a shareholder does not pay any sales charge or commission upon
purchase or redemption of shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases............................................NONE
Sales Load Imposed on Reinvested Dividends.................................NONE
Maximum Contingent Deferred Sales Load.....................................NONE
Redemption Fee.............................................................NONE
Exchange Fees..............................................................NONE
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees...........................................0.75%
12b-1 Fees(1).............................................0.00%
Other Expenses............................................0.59%
Total Fund Operating Expenses.............................................1.34%
(1) The Trust has adopted a 12b-1 Plan which permits the Fund to pay up
to 0.25% of average net assets as a 12b-1 fee to the Fund's distributor. The
Fund's expenses will not be affected by the 12b-1 Plan because the Plan will not
be activated through July 31, 1998.
Example
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You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Years
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$14 $43
THE FUND
Star Select REIT-Plus Fund (the "Fund") was organized as a series of
Star Select Funds, an Ohio business trust (the "Trust") on February 28, 1997,
and commenced operations on June 1, 1997. This prospectus offers shares of the
Fund and each share represents an undivided, proportionate interest in the Fund.
The investment adviser to the Fund is Star Bank, N.A. (the "Adviser" or "Star
Bank").
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INVESTMENT OBJECTIVE AND STRATEGIES AND RISK CONSIDERATIONS
The investment objective of the Star Select REIT-Plus Fund is to
provide shareholders with above average income and long term growth of capital.
The Fund seeks to achieve its objective by investing primarily in real estate
investment trusts ("REITs") plus other real estate related equity securities
(including common stock, preferred stock and securities convertible into common
stock). Under normal circumstances, the Fund will invest at least 65% of its
total assets in real estate related equity securities, including at least 50% of
its total assets in REITs.
A REIT is a corporation or business trust that invests substantially
all of its assets in interests in real estate. Equity REITs are those which
purchase or lease land and buildings and generate income primarily from rental
income. Equity REITs may also realize capital gains (or losses) when selling
property that has appreciated (or depreciated) in value. Mortgage REITs are
those which invest in real estate mortgages and generate income primarily from
interest payments on mortgage loans. Hybrid REITs generally invest in both real
property and mortgages. It is anticipated that the Fund's investments in REITs
will be primarily those characterized as equity REITs. Real estate related
equity securities also include those issued by real estate developers, companies
with substantial real estate holdings (for investment or as part of their
operations), as well as companies whose products and services are directly
related to the real estate industry, such as building supply manufacturers,
mortgage lenders or mortgage servicing companies.
The Fund is not intended to be a complete investment program. The
concentration of the Fund's investments in the real estate industry will subject
the Fund to risks in addition to those that apply to the general equity market.
Economic, legislative or regulatory developments may occur which significantly
affect the entire real estate industry and thus may subject the Fund to greater
market fluctuations than a fund that does not concentrate in a particular
industry. In addition, the Fund will generally be subject to risks associated
with direct ownership of real estate, such as decreases in real estate values or
fluctuations in rental income caused by a variety of factors, including
increases in interest rates, increases in property taxes and other operating
costs, casualty or condemnation losses, possible environmental liabilities and
changes in supply and demand for properties.
Risks associated with REIT investments include the fact that equity
and mortgage REITs are dependent upon specialized management skills and are not
fully diversified. These characteristics subject REITs to the risks associated
with financing a limited number of projects. They are also subject to heavy cash
flow dependency, defaults by borrowers, and self-liquidation. Additionally,
equity REITs may be affected by any changes in the value of the underlying
property owned by the trusts, and mortgage REITs may be affected by the quality
of any credit extended. The Adviser seeks to mitigate these risks by selecting
REITs diversified by sector (shopping malls, apartment building complexes and
health care facilities) and geographic location.
Although the Fund will invest primarily in real estate related equity
securities (including REITs), the Fund may invest outside the real estate
industry. For temporary defensive purposes under abnormal market conditions (as
determined by the Adviser), the Fund may hold all or a portion of its assets in
money market instruments (high quality income securities with maturities of less
than one year), securities of money market funds or U.S. government repurchase
agreements. The Fund may also invest in such instruments at any time to maintain
liquidity or pending selection of investments in accordance with its policies.
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To the extent the Fund invests in money market funds, shareholders of the Fund
will be subject to duplicative management fees.
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, the Fund cannot give any assurance that its investment objective
will be achieved. While the Fund has no operating history, the investment
methodology used by the Adviser in managing the Fund's portfolio has been used
by the Adviser since 1987 in the management of an internal common trust fund.
Rates of total return quoted by the Fund may be higher or lower than past
quotations, and there can be no assurance that any rate of total return will be
maintained. See "Investment Policies and Techniques" for a more detailed
discussion of the Fund's investment practices.
HOW TO INVEST IN THE FUND
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000
($25 for Star Bank Connections Group banking customers and Star Bank employees
and members of their immediate family). The minimum subsequent investment is
$25. For customers of Star Bank, an institutional investor's minimum investment
will be calculated by combining all Fund accounts it maintains with Star Bank
and invests with the Fund.
SYSTEMATIC INVESTMENT PLAN
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $25. Under this plan, funds
may be withdrawn periodically from the shareholder's checking account and
invested in shares of the Fund at the net asset value next determined after an
order is received by Star Bank. A shareholder may apply for participation in
this plan through Star Bank.
SHARE PURCHASES
All shares are purchased Unified Management Corporation, the Fund's
distributor (the "Distributor") All purchases should be sent as indicated under
"Purchasing by Mail," except Texas residents must send purchase documents to
Unified Advisers, Inc., the Fund's transfer agent (the "Transfer Agent") and
agent for the Distributor, at 429 N. Pennsylvania Street, Indianapolis, Indiana
46204.
PURCHASING BY MAIL
New Account Additional Investments
Complete and sign the enclosed New Account Additional Investments should
Form. Please include the amount of your include your account number
initial investment on the New Account Form, and the name of the Fund.
make your check payable to THE STAR SELECT Make the check payable to THE
FUNDS and mail to: STAR SELECT FUNDS and mail to:
Star Select Funds
Client Services
Star Bank, N.A.
425 Walnut Street, ML 7135
Cincinnati, OH 45202
PURCHASING BY WIRE
You may also purchase shares of the Fund by wiring Federal Funds from
your bank, which may charge you a fee for doing so. The funds should be wired
to:
Star Bank, N.A.
ABA: 042000013
Account: 486464944
Credit to Unified Management Corporation
Star Select REIT-Plus Fund
Account Number (your account number)
Account Registration
To assure the proper receipt, please be sure your bank includes the Fund's name
and your mutual fund account number. Wire purchases will be accepted only when
the Fund and Custodian Bank are open for business. Funds must be received at the
Federal Reserve Bankl by 3:30 p.m. (Eastern time) in order to receive that day's
trade date.
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OTHER PURCHASE INFORMATION
Shares of the Fund also may be purchased through broker-dealers. Your
broker-dealer must notify Star Bank of your purchase by 3:30 p.m. (Eastern
time), and payment is normally required within three business days.
The Fund does not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Transfer Agent
for the account of the shareholder. The rights to limit the amount of purchases
and to refuse to sell to any person are reserved by the Fund. If your check or
wire does not clear, you will be responsible for any loss incurred by the Fund.
If you are already a shareholder, the Fund can redeem shares from any
identically registered account in the Fund as reimbursement for any loss
incurred. You may be prohibited or restricted from making future purchases in
the Fund.
REDEEMING SHARES
The Fund redeems shares at its net asset value next determined after
Star Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests cannot be
executed on days on which the New York Stock Exchange is closed or on federal
holidays restricting wire transfers. Requests for redemption for the Fund can be
made in person, by telephone or by mail.
BY TELEPHONE. Shareholders may redeem shares of the Fund by telephoning Star
Bank at 1-800-677-FUND. Redemption requests given by telephone may be
electronically recorded. For calls received by Star Bank before 3:30 p.m.
(Eastern time), proceeds will normally be wired the following day to the
shareholder's account at Star Bank or a check will be sent to the address of
record. In no event will proceeds be wired or a check mailed more than five
business days after a proper request for redemption has been received. If, at
any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders will be promptly notified.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone, although neither the Fund nor
the transfer agent has ever experienced difficulties in receiving and in a
timely fashion responding to telephone requests for redemptions. If such a case
should occur, another method of redemption should be considered.
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If reasonable procedures are not followed by the Fund, it may be
liable for losses, due to unauthorized or fraudulent telephone instructions.
BY MAIL. Shareholders may also redeem shares by sending a written request to
Star Select Funds Shareholder Services, Star Bank, N.A., 425 Walnut Street, ML
7135, Cincinnati, Ohio 45202. The written request must include the shareholder's
name, the Fund name, the account number, and the share or dollar amount
requested. Shareholders may call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of any amount to be
sent to an address other than that on record with the Fund or a redemption
payable other than to the shareholder of record must have signatures on written
redemption requests guaranteed by:
o a trust company or commercial bank whose deposits are insured
by the BIF, which is administered by the FDIC;
o a member of the New York, American, Boston, Midwest, or
Pacific Stock Exchange;
o a savings bank or savings and loan association whose deposits
are insured by the SAIF, which is administered by the FDIC; or
o any other "eligible guarantor institution" as defined in the
Securities Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Trust and its Transfer Agent have adopted standards for accepting
signature guarantees from the above institutions. The Trust may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Trust and its Transfer Agent reserve the
right to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no event more than five business days, after receipt of a proper written
redemption request.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders of the Fund may engage in a Systematic Withdrawal Plan.
Under this plan, shareholders may arrange for regular monthly or quarterly fixed
withdrawal payments. Each payment must be at least $25. Depending upon the
amount of the withdrawal payments and the amount of dividends paid with respect
to shares of the Fund, redemptions may reduce, and eventually deplete, the
shareholder's investment in the Fund. For this reason, payments under this plan
should not be considered as yield or income on the shareholder's investment in
the Fund.
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ADDITIONAL INFORMATION
If you are not certain of the requirements for a redemption please
call Star Bank at (800) 677-FUND. Redemptions specifying a certain date or share
price cannot be accepted and will be returned. You will be mailed the proceeds
on or before the fifth business day following the redemption. However, payment
for redemption made against shares purchased by check will be made only after
the check has been collected, which normally may take up to fifteen days.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund reserves the right to require any shareholder to redeem all
of his or her shares in the Fund on 30 days' written notice if the value of his
or her shares in the Fund is less than $1,000 due to redemption, or such other
minimum amount as the Fund may determine from time to time. An involuntary
redemption constitutes a sale. You should consult your tax adviser concerning
the tax consequences of involuntary redemptions. A shareholder may increase the
value of his or her shares in the Fund to the minimum amount within the 30 day
period. Each share of the Fund is subject to redemption at any time if the Board
of Trustees determines in its sole discretion that failure to so redeem may have
materially adverse consequences to all or any of the shareholders of the Fund.
SHARE PRICE CALCULATION
The value of an individual share in the Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 p.m., Eastern time) on each day that the exchange is open
for business, and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The net asset value
per share of the Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price. Lacking a last
sale price, a security is valued at its last bid price except when, in the
Adviser's opinion, the last bid price does not accurately reflect the current
value of the security. All other securities for which over-the-counter market
quotations are readily available are valued at their last bid price. When market
quotations are not readily available, when the Adviser determines the last bid
price does not accurately reflect the current value or when restricted
securities are being valued, such securities are valued as determined in good
faith by the Adviser, subject to review by the Board of Trustees of the Trust.
Fixed income securities generally are valued by using market
quotations, but may be valued on the basis of prices furnished by a pricing
service when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data processing
techniques based on yield spreads relating to securities with similar
characteristics to determine prices for normal institutional-size trading units
of debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities are valued at fair value as determined
in good faith by the Adviser, subject to review by the Board of Trustees. Short
term investments in fixed income securities with maturities of less than 60 days
when acquired, or which subsequently are within 60 days of maturity, are valued
by using the amortized cost method of valuation, which the Board has determined
will represent fair value.
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DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment
income as dividends to its shareholders on a quarterly basis, and intends to
distribute its net long term capital gains and its net short term capital gains
at least once a year.
Income dividends and capital gain distributions are paid in cash . An
election to have dividends and/or capital gain distributions automatically
reinvested in additional shares at the net asset value per share on the
distribution date may be made in the application to purchase shares or by
separate written notice to Star Bank. Shareholders will receive a confirmation
statement reflecting the payment and reinvestment of dividends and summarizing
all other transactions. Checks for cash payments normally will be mailed within
five business days after the payable date. Distributions on shares held in IRAs
and 403(b) plans may be paid in cash only if you are 59 1/2 years old or
permanently and totally disabled or if you otherwise qualify under the
applicable plan.
TAXES
The Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. By so qualifying,
the Fund will not be subject to federal income taxes to the extent that it
distributes substantially all of its net investment income and any realized
capital gains.
For federal income tax purposes, dividends paid by the Fund from
ordinary income are taxable to shareholders as ordinary income, but may be
eligible in part for the dividends received deduction for corporations. Pursuant
to the Tax Reform Act of 1986 (the "Tax Reform Act"), all distributions of net
capital gains to individuals are taxed at the same rate as ordinary income. All
distributions of net capital gains to corporations are taxed at regular
corporate rates. Any distributions designated as being made from net realized
long term capital gains are taxable to shareholders as long term capital gains
regardless of the holding period of the shareholder.
The Fund will mail to each shareholder after the close of the calendar
year a statement setting forth the federal income tax status of distributions
made during the year. Dividends and capital gains distributions may also be
subject to state and local taxes. Shareholders are urged to consult their own
tax advisers regarding specific questions as to federal, state or local taxes
and the tax effect of distributions and withdrawals from the Fund.
On the application or other appropriate form, the Fund will request
the shareholder's certified taxpayer identification number (social security
number for individuals) and a certification that the shareholder is not subject
to backup withholding. Unless the shareholder provides this information, the
Fund will be required to withhold and remit to the U.S. Treasury 31% of the
dividends, distributions and redemption proceeds payable to the shareholder.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, the Fund may be fined $50 annually for each account for which a
certified taxpayer identification number is not provided. In the event that such
a fine is imposed with respect to a specific account in any year, the Fund may
make a corresponding charge against the account.
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OPERATION OF THE FUND
The Fund is a diversified series of Star Select Funds, an open-end
management investment company organized as an Ohio business trust on February
28, 1997. The Board of Trustees supervises the business activities of the Fund.
Like other mutual funds, the Fund retains various organizations to perform
specialized services.
The Fund retains Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio
45201 (the "Adviser" or "Star Bank") to manage the Fund's investments. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund. The Fund is authorized to pay the
Adviser a monthly fee equal to an annual average rate of 0.75% of its average
daily net assets.
Star Bank, a national bank, was founded in 1863 and is the largest
bank and trust organization of Star Banc Corporation. As of December 31, 1996,
Star Bank had an asset base of $10.1 billion. Star Bank's expertise in trust
administration, investments, and estate planning ranks it among the most
predominant trust institutions in Ohio, with assets of $30.2 billion as of
December 31, 1996.
Star Bank has managed commingled funds since 1957. As of December 31,
1996, it managed one common trust funds and two collective investment funds
having a market value in excess of $65.9 million. Additionally, Star Bank has
managed the portfolios of the Star Funds, another registered investment company,
since 1989. As of December 31, 1996, the combined assets of the Star Funds and
the commingled funds managed by the Adviser exceeded $2 billion.
As part of its regular banking operations, Star Bank may make loans to
public companies. Thus, it may be possible, from time to time, for the Fund to
hold or acquire the securities of issuers which are also lending clients of Star
Bank. The lending relationship will not be a factor in the selection of
securities.
Peter Sorrentino and Carolyn A. Baril are primarily responsible for
the day-to-day management of the Fund's portfolio since its inception. Peter
Sorrentino is Vice President and Director of Portfolio Management and Research
for the Capital Management Division of Star Bank. Mr. Sorrentino has managed the
domestic equity component of Star Strategic Income Fund and The Stellar Fund
since January 1996. Prior to joining Star Bank in 1996, Mr. Sorrentino served as
Regional Director of Portfolio Management for Banc One Investment Advisors since
1987. Mr. Sorrentino earned a Bachelor of Business Administration degree in
Finance and Accounting from the University of Cincinnati. He also earned the
Chartered Financial Analyst designation.
Carolyn A. Baril is an Equity Research Analyst and Trust Investment
Officer for the Capital Management Division of Star Bank. She has assisted
portfolio managers in daily investment decisions since January 1997. Prior to
joining Star Bank, Ms. Baril was with Fifth Third Investment Advisors where she
served as a Research Analyst from June 1993. From May 1992 to June 1993, Ms.
Baril was a Financial Analyst for Beth Israel Hospital, in Boston,
Massachusetts. Ms. Baril earned a Bachelor of Business Administration from
Simmons College and is working towards her MBA at Xavier University.
The Fund also retains Star Bank to act as shareholder servicing agent
on its behalf. The Fund is authorized to pay Star Bank up to 0.25% of its
average daily net assets to provide shareholder support services and to maintain
shareholder accounts. Star Bank currently receives 0.05% of the Fund's average
daily net assets for shareholder services and it is anticipated that the fee
will remain at 0.05% for the foreseeable future. Star Bank also acts as the
Fund's custodian, for which it receives a monthly fee equal to an annual average
rate of 0.025% of its average daily net assets.
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The Fund retains Unified Advisers, Inc. ("Unified"), 429 N.
Pennsylvania Street, Indianapolis, Indiana 46204, to act as the Fund's
administrator and transfer agent. As administrator, Unified manages the Fund's
business affairs and provides the Fund with administrative services, including
compliance and accounting services and all regulatory reporting, and necessary
office equipment, personnel and facilities to operate the Fund. For these
administrative and transfer agency services, it receives a monthly fee from the
Fund equal to an annual average rate of 0.25% of the Fund's average daily net
assets. The Fund retains Unified Management Corporation, 429 N. Pennsylvania
Street, Indianapolis, Indiana 46204 (the "Distributor") to act as the principal
distributor of the Fund's shares.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions. The Adviser (not the Fund) may pay certain financial
institutions (which may include banks, securities dealers and other industry
professionals) a "servicing fee" for performing certain administrative functions
for Fund shareholders to the extent those institutions are allowed to do so by
applicable statute, rule or regulation. The servicing fee may amount to 0.25% of
the average daily net assets serviced by the institution for each calendar
quarter, although it is anticipated that no fee will be paid with respect to
assets invested for more than one year.
INVESTMENT POLICIES AND TECHNIQUES
This section contains general information about various types of
securities and investment techniques that the Fund may purchase or employ.
EQUITY SECURITIES
The Fund may invest in common stock, preferred stock and common stock
equivalents (such as convertible preferred stock and convertible debentures) of
real estate related companies (including REITs) and other companies. Convertible
preferred stock is preferred stock that can be converted into common stock
pursuant to its terms. Convertible debentures are debt instruments that can be
converted into common stock pursuant to their terms. The Adviser intends to
invest only in convertible debentures rated A or higher by Standard & Poor's
Corporation ("S&P") or by Moody's Investors Services, Inc. ("Moody's") or, if
unrated, are deemed to be of comparable quality by the Adviser. The Fund may
hold warrants and rights issued in conjunction with common stock, but in general
will sell any such warrants or rights as soon as practicable after they are
received. Warrants are options to purchase equity securities at a specified
price valid for a specific time period. Rights are similar to warrants, but
normally have a short duration and are distributed by the issuer to its
shareholders.
OPTION TRANSACTIONS
The Fund may engage in option transactions involving individual
securities and stock indexes. An option involves either (a) the right or the
obligation to buy or sell a specific instrument at a specific price until the
expiration date of the option, or (b) the right to receive payments or the
obligation to make payments representing the difference between the closing
price of a stock index and the exercise price of the option expressed in dollars
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times a specified multiple until the expiration date of the option. Options are
sold (written) on securities and stock indexes. The purchaser of an option on a
security pays the seller (the writer) a premium for the right granted but is not
obligated to buy or sell the underlying security. The purchaser of an option on
a stock index pays the seller a premium for the right granted, and in return the
seller of such an option is obligated to make the payment. A writer of an option
may terminate the obligation prior to expiration of the option by making an
offsetting purchase of an identical option. Options are traded on organized
exchanges and in the over-the-counter market. To cover the potential obligations
involved in writing options, the Fund will either (a) own the underlying
security, or in the case of an option on a market index, will hold a portfolio
of stocks substantially replicating the movement of the index, or (b) the Fund
will segregate with the Custodian high grade liquid debt obligations sufficient
to purchase the underlying security or equal to the market value of the stock
index option, marked to market daily.
The purchase and writing of options requires additional skills and
techniques beyond normal portfolio management, and involves certain risks. The
purchase of options limits the Fund's potential loss to the amount of the
premium paid and can afford the Fund the opportunity to profit from favorable
movements in the price of an underlying security to a greater extent than if
transactions were effected in the security directly. However, the purchase of an
option could result in the Fund losing a greater percentage of its investment
than if the transaction were effected directly. When the Fund writes a call
option, it will receive a premium, but it will give up the opportunity to profit
from a price increase in the underlying security above the exercise price as
long as its obligation as a writer continues, and it will retain the risk of
loss should the price of the security decline. When the Fund writes a put
option, it will assume the risk that the price of the underlying security or
instrument will fall below the exercise price, in which case the Fund may be
required to purchase the security or instrument at a higher price than the
market price of the security or instrument. In addition, there can be no
assurance that the Fund can effect a closing transaction on a particular option
it has written. Further, the total premium paid for any option may be lost if
the Fund does not exercise the option or, in the case of over-the-counter
options, the writer does not perform its obligations.
LOANS OF PORTFOLIO SECURITIES
The Fund may make long and short term loans of its portfolio
securities. Under the lending policy authorized by the Board of Trustees and
implemented by the Adviser in response to requests of broker-dealers or
institutional investors which the Adviser deems qualified, the borrower must
agree to maintain collateral, in the form of cash or U.S. government
obligations, with the Fund on a daily mark-to-market basis in an amount at least
equal to 100% of the value of the loaned securities. The Fund will continue to
receive dividends or interest on the loaned securities and may terminate such
loans at any time or require such securities in time to vote on any matter which
the Adviser determines to be important. With respect to loans of securities,
there is the risk that the borrower may fail to return the loaned securities or
that the borrower may not be able to provide additional collateral.
GENERAL
Under normal circumstances, the Fund may invest up to 5% of its net
assets in U.S. government obligations, and up to 5% of its net assets in
corporate bonds and notes. The Fund intends to invest only in fixed income
securities rated A or higher by Moody's Investors Services, Inc. or by Standard
and Poor's Corporation or, if unrated, are deemed to be of comparable quality by
the Adviser. See "Additional Information About Fund Investments and Risk
Considerations" in the Statement of Additional Information.
GENERAL INFORMATION
FUNDAMENTAL POLICIES. The investment limitations set forth in the
Statement of Additional Information as fundamental policies may not be changed
without the affirmative vote of the majority of the outstanding shares of the
Fund. The investment objective of the Fund may be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. Any such
- 11 -
<PAGE>
change may result in the Fund having an investment objective different from the
objective which the shareholders considered appropriate at the time of
investment in the Fund.
PORTFOLIO TURNOVER. The Fund does not intend to purchase or sell
securities for short term trading purposes. The Fund will, however, sell any
portfolio security (without regard to the length of time it has been held) when
the Adviser believes that market conditions, creditworthiness factors or general
economic conditions warrant such action. It is anticipated that the Fund will
have a portfolio turnover rate of less than 100%.
SHAREHOLDER RIGHTS. Any Trustee of the Trust may be removed by vote of
the shareholders holding not less than two-thirds of the outstanding shares of
the Trust. The Trust does not hold an annual meeting of shareholders. The Trust
will, if requested to do so by the holders of at least 10% of the Trust's
outstanding shares, call a meeting of shareholders for the purpose of voting
upon the question of removal of a trustee or trustees and will assist in
communications with other shareholders. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each whole
share he owns and fractional votes for fractional shares he owns. All shares of
the Fund have equal voting rights and liquidation rights. The Declaration of
Trust can be amended by the Trustees, except that any amendment that adversely
effects the rights of shareholders must be approved by the shareholders
affected. Prior to the offering made by this Prospectus, the Maxwell C. Weaver
Foundation purchased for investment all of the outstanding shares of the Fund.
As a result, the Maxwell C. Weaver Foundation may be deemed to control the Fund.
EFFECT OF BANKING LAWS. The Glass-Steagall Act and other banking laws
and regulations presently prohibit a bank holding company registered under the
Bank Holding Company Act of 1956 or any affiliate thereof from sponsoring,
organizing, or controlling a registered, open-end management investment company
continuously engaged in the issuance of its shares, and from issuing,
underwriting, selling, or distributing securities in general. Such laws and
regulations do not prohibit such a holding company or affiliate from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from purchasing shares of such a company as agent for and upon the order of
their customers. The Fund's investment adviser, Star Bank, is subject to such
banking laws and regulations.
Star Bank believes that it may perform the investment advisory
services for the Fund contemplated by its advisory agreement with the Trust
without violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
Star Bank from continuing to perform all or a part of the above services for its
customers and/or the Fund.
In such event, changes in the operation of the Fund may occur,
including the possible alteration or termination of any automatic or other Fund
share investment and redemption services then being provided by Star Bank, and
the Trustees would consider alternative investment advisers and other means of
continuing available investment services. It is not expected that shareholders
would suffer any adverse financial consequences (if another adviser with
equivalent abilities to Star Bank is found) as a result of any of these
occurrences.
- 12 -
<PAGE>
PERFORMANCE INFORMATION
The Fund may periodically advertise "average annual total return." The
"average annual total return" of the Fund refers to the average annual
compounded rate of return over the stated period that would equate an initial
amount invested at the beginning of a stated period to the ending redeemable
value of the investment. The calculation of "average annual total return"
assumes the reinvestment of all dividends and distributions.
The Fund may also periodically advertise its total return over various
periods in addition to the value of a $10,000 investment (made on the date of
the initial public offering of the Fund's shares) as of the end of a specified
period. The "total return" for the Fund refers to the percentage change in the
value of an account between the beginning and end of the stated period, assuming
no activity in the account other than reinvestment of dividends and capital
gains distributions.
The Fund may also include in advertisements data comparing
performance with other mutual funds as reported in non-related investment media,
published editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Fortune or
Barron's). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the NAREIT
(National Association of Real Estate Investment Trusts) Index, the Standard &
Poor's (S&P) 500 Index or the Dow Jones Industrial Average.
The Fund is the successor to the portfolio of a common trust fund
managed by the Adviser. It is anticipated that, at the Fund's commencement of
operations, the assets from the common trust fund will be transferred to the
Fund in exchange for Fund shares. The Adviser has represented that the Fund's
investment objective, policies and limitations are in all material respects
identical to those of the common trust fund.
The Fund's average annual total return for the one, five, and ten-year
periods ended May 30, 1997 was 27.04%, 14.44%, and 8.87%, respectively. The
quoted performance data includes the performance of the common trust fund for
periods before the Fund's registration statement became effective, as adjusted
to reflect the Fund's anticipated expenses as set forth under "Summary of Fund
Expenses" in this prospectus. The common trust fund was not registered under the
Investment Company Act of 1940 ("1940 Act") and therefore was not subject to
certain investment restrictions that are imposed by the 1940 Act. If the common
trust fund had been registered under the 1940 Act, the performance may have been
adversely affected.
THE ADVERTISED PERFORMANCE DATA OF THE FUND IS BASED ON HISTORICAL
PERFORMANCE AND IS NOT INTENDED TO INDICATE FUTURE PERFORMANCE. RATES OF TOTAL
RETURN QUOTED BY THE FUND MAY BE HIGHER OR LOWER THAN PAST QUOTATIONS, AND THERE
CAN BE NO ASSURANCE THAT ANY RATE OF TOTAL RETURN WILL BE MAINTAINED. THE
PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT A
SHAREHOLDER'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
SHAREHOLDER'S ORIGINAL INVESTMENT.
- 13 -
<PAGE>
INVESTMENT ADVISER TRANSFER AGENT AND ADMINISTRATOR
Star Bank, N.A. Unified Advisers, Inc.
425 Walnut Street 429 N. Pennsylvania Street
Cincinnati, Ohio 45201 Indianapolis, Indiana 46204
CUSTODIAN AND SHAREHOLDER SERVICING AGENT AUDITORS
Star Bank, N.A. McCurdy & Associates CPA's, Inc.
P.O. Box 641083 27955 Clemens Road
Cincinnati, Ohio 45264 Westlake, Ohio 44145
DISTRIBUTOR
Unified Management Corporation
429 N. Pennsylvania Street
Indianapolis, Indiana 46204
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the Fund to sell its
shares in any state to any person to whom it is unlawful to make such offer in
such state.
- 14 -
<PAGE>
TABLE OF CONTENTS PAGE
SUMMARY OF FUND EXPENSES ......................................... 2
Shareholder Transaction Expenses ....................... 2
Annual Fund Operating Expenses ......................... 2
THE FUND ......................................................... 2
INVESTMENT OBJECTIVE AND STRATEGIES AND RISK CONSIDERATIONS ...... 3
HOW TO INVEST IN THE FUND ........................................ 4
Minimum Investment Required ............................ 4
Systematic Investment Plan ............................. 4
Share Purchases ........................................ 4
REDEEMING SHARES ................................................. 5
Systematic Withdrawal Plan ............................. 6
Additional Information ................................. 7
SHARE PRICE CALCULATION .......................................... 7
DIVIDENDS AND DISTRIBUTIONS ...................................... 8
TAXES ............................................................ 8
OPERATION OF THE FUND ............................................ 9
INVESTMENT POLICIES AND TECHNIQUES ............................... 10
Equity Securities ...................................... 10
Option Transactions .................................... 10
Loans of Portfolio Securities........................... 11
General ................................................ 11
GENERAL INFORMATION .............................................. 11
Fundamental Policies ................................... 11
Portfolio Turnover ..................................... 12
Shareholder Rights ..................................... 12
Effect of Banking Laws ................................. 12
PERFORMANCE INFORMATION .......................................... 13
<PAGE>
STAR SELECT REIT-PLUS FUND
STATEMENT OF ADDITIONAL INFORMATION
June 1, 1997
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of Star Select REIT-Plus Fund dated
June 1, 1997. A copy of the Prospectus can be obtained by writing the Transfer
Agent at 429 N. Pennsylvania Street, Indianapolis, Indiana 46204, or by calling
1- 800-677-FUND.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
TABLE OF CONTENTS
-----------------
PAGE
----
DESCRIPTION OF THE TRUST.................................................... 1
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
AND RISK CONSIDERATIONS..................................................... 1
INVESTMENT LIMITATIONS...................................................... 2
THE INVESTMENT ADVISER...................................................... 5
TRUSTEES AND OFFICERS....................................................... 6
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 7
DISTRIBUTION PLAN........................................................... 8
SHAREHOLDER SERVICES PLAN................................................... 9
CONVERSION TO FEDERAL FUNDS................................................. 9
DETERMINATION OF SHARE PRICE................................................ 9
INVESTMENT PERFORMANCE...................................................... 9
CUSTODIAN................................................................... 10
TRANSFER AGENT AND ADMINISTRATOR............................................ 10
ACCOUNTANTS................................................................. 11
DISTRIBUTOR................................................................. 11
FINANCIAL STATEMENTS........................................................ 11
- i -
<PAGE>
DESCRIPTION OF THE TRUST
Star Select REIT-Plus Fund (the "Fund") was organized as a series of
Star Select Funds (the "Trust"). The Trust is an open-end investment company
established under the laws of Ohio by an Agreement and Declaration of Trust
dated February 28, 1997 (the "Trust Agreement"). The Trust Agreement permits the
Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value. The Fund is the only series currently
authorized by the Trustees.
Each share of a series represents an equal proportionate interest in
the assets and liabilities belonging to that series with each other share of
that series and is entitled to such dividends and distributions out of income
belonging to the series as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any series into a greater or lesser number of shares of that series so long as
the proportionate beneficial interest in the assets belonging to that series and
the rights of shares of any other series are in no way affected. In case of any
liquidation of a series, the holders of shares of the series being liquidated
will be entitled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to that series. Expenses attributable to any series
are borne by that series. Any general expenses of the Trust not readily
identifiable as belonging to a particular series are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable. No shareholder is liable to further calls or to assessment by the
Trust without his or her express consent.
The Fund has filed an election with the Securities and Exchange
Commission which permits the Fund to make redemption payments in whole or in
part in securities or other property if the Trustees determine that existing
conditions make cash payments undesirable. However, the Fund has committed to
pay in cash all redemptions for any shareholder, limited in amount with respect
to each shareholder during any ninety day period to the lesser of (a) $250,000
or (b) one percent of the net asset value of the Fund at the beginning of such
period. For other information concerning the purchase and redemption of shares
of the Fund, see "How to Invest in the Fund" and "Redeeming Shares" in the
Fund's Prospectus. For a description of the methods used to determine the share
price and value of the Fund's assets, see "Share Price Calculation" in the
Fund's Prospectus.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments the Fund may make and some of the techniques it may use, as
described in the Prospectus (see "Investment Objective and Strategies and Risk
Considerations" and "Investment Policies and Techniques").
A. Corporate Debt Securities. Corporate debt securities are bonds or
notes issued by corporations and other business organizations, including
business trusts, in order to finance their credit needs. Corporate debt
securities include commercial paper which consists of short term (usually from
one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations.
-1-
<PAGE>
B. U.S. Government Obligations. U.S. government obligations may be
backed by the credit of the government as a whole or only by the issuing agency.
U.S. Treasury bonds, notes, and bills and some agency securities, such as those
issued by the Federal Housing Administration and the Government National
Mortgage Association (GNMA), are backed by the full faith and credit of the U.S.
government as to payment of principal and interest and are the highest quality
government securities. Other securities issued by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the agency that issued them, and not by the U.S. government. Securities issued
by the Federal Farm Credit System, the Federal Land Banks, and the Federal
National Mortgage Association (FNMA) are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances, but are not
backed by the full faith and credit of the U.S. government.
C. Repurchase Agreements. The Fund may invest in repurchase agreements
fully collateralized by U.S. Government obligations. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Fund) acquires ownership
of a U.S. Government obligation (which may be of any maturity) and the seller
agrees to repurchase the obligation at a future time at a set price, thereby
determining the yield during the purchaser's holding period (usually not more
than seven days from the date of purchase). Any repurchase transaction in which
the Fund engages will require full collateralization of the seller's obligation
during the entire term of the repurchase agreement. In the event of a bankruptcy
or other default of the seller, the Fund could experience both delays in
liquidating the underlying security and losses in value. However, the Fund
intends to enter into repurchase agreements only with banks with assets of $1
billion or more and registered securities dealers determined by the Advisor
(subject to review by the Board of Trustees) to be creditworthy. The Advisor
monitors the creditworthiness of the banks and securities dealers with which the
Fund engages in repurchase transactions.
INVESTMENT LIMITATIONS
Fundamental. The investment limitations described below have been
adopted by the Trust with respect to the Fund and are fundamental
("Fundamental"), i.e., they may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. As used in the Prospectus and
this Statement of Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
-2-
<PAGE>
2. Senior Securities. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is (a) consistent with or permitted by the
Investment Company Act of 1940, as amended, the rules and regulations
promulgated thereunder or interpretations of the Securities and Exchange
Commission or its staff and (b) as described in the Prospectus and this
Statement of Additional Information.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. The Fund will not invest 25% or more of its total
assets in any particular industry other than the real estate industry. This
limitation is not applicable to investments in obligations issued or guaranteed
by the U.S. government, its agencies and instrumentalities or repurchase
agreements with respect thereto.
-3-
<PAGE>
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
Non-Fundamental. The following limitations have been adopted by the
Trust with respect to the Fund and are Non-Fundamental (see "Investment
Limitations" above).
1. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. Borrowing. The Fund will not purchase any security while borrowings
(including reverse repurchase agreements) representing more than 5% of its total
assets are outstanding. The Fund will not engage in borrowing or enter into
reverse repurchase agreements.
3. Margin Purchases. The Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short term credit obtained by the Fund for the clearance of purchases and sales
or redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
4. Options. The Fund will not purchase or sell puts, calls, options or
straddles, except as described in the Prospectus and this Statement of
Additional Information.
5. Short Sales. The Fund will not effect short sales of securities.
6. Illiquid Securities. The Fund will not purchase securities that are
restricted as to resale or otherwise illiquid. For this purpose, illiquid
securities generally include securities which cannot be disposed of within seven
days in the ordinary course of business without taking a reduced price.
7. Money Market Funds. The Fund will not purchase shares of any money
market fund if immediately after such purchase more than 3 percent of the total
outstanding shares of the money market fund would be owned by the Fund and its
affiliates.
-4-
<PAGE>
THE INVESTMENT ADVISER
The Fund's investment adviser is Star Bank, N.A., 425 Walnut Street,
Cincinnati, Ohio 45201 ("Star Bank" or the "Adviser"). The Adviser is a wholly
owned subsidiary of StarBanc Corporation. Because of internal controls
maintained by the Adviser to restrict the flow of non-public information, Fund
investments are typically made without any knowledge of Star Bank's or its
affiliates' lending relationships with an issuer.
Under the terms of the management agreement (the "Agreement"), the
Adviser manages the Fund's investments subject to approval of the Board of
Trustees. As compensation for its management services, the Fund is obligated to
pay the Adviser a fee computed and accrued daily and paid monthly at an annual
rate of 0.75% of the average daily net assets of the Fund. The Adviser may waive
all or part of its fee, at any time, and at its sole discretion, but such action
shall not obligate the Adviser to waive any fees in the future.
The Adviser retains the right to use the names "Star," "Star Select,"
"Star Select REIT-Plus" or any variation thereof in connection with another
investment company or business enterprise with which the Adviser is or may
become associated. The Trust's right to use the names "Star," "Star Select," and
"Star Select REIT-Plus" or any variation thereof automatically ceases ninety
days after termination of the Agreement and may be withdrawn by the Adviser on
ninety days written notice.
The Adviser will, and other banks and financial institutions may,
provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass- Steagall Act should not preclude a bank from providing shareholder
and shareholder account services. However, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law. If a bank were prohibited from continuing to perform all or a part of
such services, management of the Fund believes that there would be no material
impact on the Fund or its shareholders. Banks may charge their customers fees
for offering these services to the extent permitted by applicable regulatory
authorities, and the overall return to those shareholders availing themselves of
the bank services will be lower than to those shareholders who do not. The Fund
may from time to time purchase securities issued by banks which provide such
services; however, in selecting investments for the Fund, no preference will be
shown for such securities. The Fund will not purchase securities issued by
StarBanc Corporation, the Adviser, or any of its affiliates.
-5-
<PAGE>
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below.
<TABLE>
Name, Address and Age Positions with the Trust and Principal Occupation
--------------------- -------------------------------------------------
<S> <C>
* Timothy L. Ashburn (46) Trustee (Chairman of the Board) and President of the
429 N. Pennsylvania St. Trust and The Vintage Funds; Chairman of the Board
Indianapolis, IN 46204 and President, Vintage Advisers, Inc. (December 1994 to
present); Chairman of the Board, Unified Corporation,
Unified Management Corporation and Unified Advisers, Inc.
(December 1989 to present); Trust Division Manager and Senior
Trust Officer, Vine Street Trust Company
(July 1991 to April 1994).
Daniel J. Condon (46) Trustee of the Trust and The Vintage Funds; Vice
101 Carley Court President and Officer, International Crankshaft Inc.
Georgetown, KY 40324 (1990 to present); General Manager, Van Leer
Containers, Inc. (1988 through 1990).
Philip L. Conover (50) Trustee of the Trust and The Vintage Funds; Adjunct
8218 Cypress Hollow Professor of Finance, University of South Florida
Sarasota, FL 34238 (August 1994 to present); Managing Director and Chief
Operating Officer, Federal Housing Finance Board
(November 1990 through April 1994); President and
CEO, Trustcorp Bank (February 1989 through November
1990).
David E. LaBelle (47) Trustee of the Trust and The Vintage Funds; Vice
5005 LBJ Freeway President of Compensation and Benefits, Occidental
Dallas, TX 76092 Chemical Corporation (May 1993 to present); Vice
President of Human Resources, Island Creek Coal Company
(A subsidiary of Occidental Petroleum) (June 1990 to
April 1993); Director of Human Resources, Occidental
Chemical Corporation (March 1989 to May 1990).
* Jack R. Orben (58) Trustee of the Trust and The Vintage Funds; Director,
40 Wall St. Unified Holdings, Inc.; Chairman and CEO,
New York, NY 10005 Associated Family Services(January 1980 to present);
Chairman and CEO, Starwood Corporation (March 1984 to
present); Chairman, Fiduciary Counsel, Inc.(April 1979
to present); Chairman, Estate Management Company (January
1978 to present).
Thomas G. Napurano (55) Treasurer of the Trust and The Vintage Funds; Executive
429 N. Pennsylvania St. Vice President and Chief Financial Officer, Vintage
Indianapolis, IN 46204 Advisers, Inc. (January 1995 to present; Executive Vice
President and Chief Financial Officer of Unified
Corporation, Unified Management Corporation and
Unified Advisers, Inc. (1990 to present).
-6-
<PAGE>
Carol J. Highsmith (32) Secretary of the Trust and The Vintage Funds; Secretary
429 N. Pennsylvania St. of Unified Holdings, Inc. and Vintage Advisers, Inc.
Indianapolis, IN 46204 (October 1996 to present); employed by Unified
Advisers, Inc. (November 1994 to present).
</TABLE>
* Unified Advisers, Inc. is the Fund's transfer agent and administrator, and
Unified Management Corporation is the Fund's principal underwriter. Unified
Advisers, Inc. and Unified Management Corporation are subsidiaries of Unified
Holdings, Inc. Mr. Ashburn and Mr. Orben may each be deemed to be an "interested
person" of the Trust, as defined in the Investment Company Act of 1940, because
of their respective positions with Unified Holdings, Inc. and its subsidiaries.
Trustee fees are Trust expenses. The following table estimates the
Trustees' compensation for the first full year of the Trust ending March 31,
1998.
================================================================================
Total Compensation
from Trust (the Trust is
Name not in a Fund Complex)
- --------------------------------------------------------------------------------
Timothy L. Ashburn $0
- --------------------------------------------------------------------------------
Daniel J. Condon $4,000
- --------------------------------------------------------------------------------
Philip L. Conover $4,000
- --------------------------------------------------------------------------------
David E. LaBelle $4,000
- --------------------------------------------------------------------------------
Jack R. Orben $0
================================================================================
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Adviser is responsible for the Fund's portfolio decisions and the placing of
the Fund's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Fund and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
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<PAGE>
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Fund effects securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Adviser in connection with its services to the
Fund. Although research services and other information are useful to the Fund
and the Adviser, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Adviser that the review and study of the research and other information will not
reduce the overall cost to the Adviser of performing its duties to the Fund
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid and
asked prices.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type the
Fund may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the Adviser are prepared to invest in, or desire
to dispose of, the same security, available investments or opportunities for
sales will be allocated in a manner believed by the Adviser to be equitable to
each. In some cases, this procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and the ability
to participate in volume transactions will be to the benefit of the Fund.
When the Fund and another of the Adviser's clients seek to purchase or
sell the same security at or about the same time, the Adviser may execute the
transaction on a combined ("blocked") basis. Blocked transactions can produce
better execution for the Fund because of the increased volume of the
transaction. If the entire blocked order is not filled, the Fund may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Fund may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. In the event that the entire blocked order
is not filled, the purchase or sale will normally be allocated on a pro rata
basis.
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule
12b-1 which was promulgated by the Securities and Exchange Commission pursuant
to the Investment Company Act of 1940 (the "Plan"). The Plan provides for
payment of fees to Unified Management Corporation to finance any activity which
is principally intended to result in the sale of the Fund's shares subject to
the Plan. Such activities may include the advertising and marketing of shares of
the Fund; preparing, printing, and distributing prospectuses and sales
literature to prospective shareholders, brokers, or administrators; and
implementing and operating the Plan. Pursuant to the Plan, Unified Management,
Inc. may pay fees to brokers and others for such services. The Trustees expect
that the adoption of the Plan will result in the sale of a sufficient number of
shares so as to allow the Fund to achieve economic viability. It is also
anticipated that an increase in the size of the Fund will facilitate more
efficient portfolio management and assist the Fund in seeking to achieve its
investment objective.
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<PAGE>
SHAREHOLDER SERVICES PLAN
This arrangement permits the payment of fees to the Fund and,
indirectly, to financial institutions to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to, providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing divided options, account designations, and addresses.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from shareholders must
be in federal funds or be converted into federal funds. Star Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of the Fund is determined as
of 4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. For a description of the methods used to determine
the net asset value (share price), see "Share Price Calculation" in the
Prospectus.
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return for the period indicated that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable period of
the hypothetical $1,000 investment made at the beginning of the
applicable period.
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<PAGE>
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
The Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or to prospective shareholders, the performance of the Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Fund or
considered to be representative of the stock market in general. The Fund may use
the NAREIT (National Association of Real Estate Investment Trusts) Index, the
Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average.
In addition, the performance of the Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the Fund. Performance rankings and ratings
reported periodically in national financial publications such as Barron's and
Fortune also may be used. The Fund's average annual total return for the one,
five and ten year periods ended April 30, 1997 was 27.36%, 14.50% and 8.90%,
respectively.
CUSTODIAN
In addition to acting as the Fund's Adviser, Star Bank, is Custodian of
the Fund's investments. As Custodian, Star Bank acts as the Fund's depository,
safekeeps its portfolio securities, collects all income and other payments with
respect thereto, disburses funds at the Fund's request and maintains records in
connection with its duties. As Custodian, Star Bank receives a monthly fee at
the annual rate of 0.025% of the total assets of the Fund on the last business
day of each month.
TRANSFER AGENT AND ADMINISTRATOR
Unified Advisers, Inc., 429 N. Pennsylvania, Indianapolis, Indiana
46204, acts as the Fund's transfer agent and, in such capacity, maintains the
records of each shareholder's account, answers shareholders' inquiries
concerning their accounts, processes purchases and redemptions of the Fund's
shares, acts as dividend and distribution disbursing agent and performs other
accounting and shareholder service functions. In addition, Unified Advisers,
Inc., in its capacity as Fund Administrator, provides the Fund with certain
monthly reports, record-keeping and other management-related services. For a
description of the fees paid by the Adviser on behalf of the Fund for these
administrative services, see "Operation of the Fund" in the Fund's Prospectus.
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<PAGE>
ACCOUNTANTS
The firm of McCurdy & Associates, CPA's, 27955 Clemens Road, Westlake,
Ohio 44145, has been selected as independent public accountants for the Trust
for the fiscal year ending March 31, 1998. McCurdy & Associates performs an
annual audit of the Fund's financial statements and provides financial, tax and
accounting consulting services as requested.
DISTRIBUTOR
Unified Management, Inc., 429 N. Pennsylvania, Indianapolis, Indiana
46204, is the exclusive agent for distribution of shares of the Fund. The
Distributor is obligated to sell shares of the Fund on a best efforts basis only
against purchase orders for the shares. Shares of the Fund are offered to the
public on a continuous basis.
FINANCIAL STATEMENTS
STAR SELECT REIT-PLUS FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 29, 1997
ASSETS: $100,000
--------
Cash in Bank
Total Assets $100,000
--------
NET ASSETS $100,000
--------
NET ASSETS CONSIST OF:
Capital Paid In $100,000
--------
OUTSTANDING SHARES
Unlimited Number of Shares
Authorized Without Par Value 10,000
NET ASSET VALUE PER SHARE $ 10
OFFERING PRICE PER SHARE $ 10
See Accountants' Audit Report
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<PAGE>
STAR SELECT REIT-PLUS FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Star Select REIT-Plus Fund (the "Fund") was organized as a series of
Star Select Funds (The "Trust"). The Trust is an open-end investment
company establis shed under the laws of Ohio by an Agreement and
Declaration of Trust dated February 28, 1997 which was amended and
restated effective as of May 20, 1997 (the "Trust Agreement"). The
Trust Agreement permits the Trustees to issue an unlimited number of
shares of beneficial interest of separate series without par value. The
Fund is the only series currently authorized by the Trustees.
The Fund uses an independent administrator, transfer agent, and
dividend paying agent. No transactions other than those relating to
organizational matters and the sale of 10,000 shares of Star Select
REIT-Plus Fund have taken place to date.
2. RELATED PARTY TRANSACTIONS
The initial purchase of registrant's shares was made by the Maxwell C.
Weaver Foundation. As a result of this purchase, the registrant may be
controlled by the Maxwell C. Weaver Foundation.
The Fund's investment adviser is Star Bank N.A., 425 Walnut Street,
Cincinnati, Ohio 45201 ("Star Bank" or the "Adviser"). The Adviser is a
wholly owned subsidiary of StarBanc Corporation. Because of internal
controls maintained by the Adviser to restrict the flow of non-public
information, Fund investments are typically made without any knowledge
of Star Bank's or its affiliates' lending relationships with an issuer.
Under the terms of the management agreement (the "Agreement"), the
Adviser manages the Fund's investments subject to approval of the Board
of Trustees. As compensation for its management services, the Fund is
obligated to pay the Adviser a fee computed and accrued daily and paid
monthly at an annual rate of 0.75% of the average daily net assets of
the Fund. The Adviser may waive all or part of its fee, at any time,
and at its sole discretion, but such action shall not obligate the
Adviser to waive any fees in the future.
In addition to acting as the Fund's adviser, Star Bank is Custodian of
the Fund's investments. As Custodian, Star Bank acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and
other payments with respect thereto, disburses funds at the Fund's
request and maintains records in connection with its duties. As
Custodian, Star Bank receives a monthly fee at the annual rate of
0.025% of the total assets of the Fund on the last business day of each
month.
3. CAPITAL STOCK AND DISTRIBUTION
At May 29, 1997, an unlimited number of shares were authorized and paid
in capital amounted to $100,000 for Star Select REIT-Plus Fund.
Transactions in capital stock were as follows:
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<PAGE>
STAR SELECT REIT-PLUS FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Star Select
REIT-Plus Fund
--------------
Shares Sold 10,000
Shares Redeemed 0
------
Net Increase 10,000
------
Share Outstanding:
Beginning of Period 0
End of Period 10,000
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<PAGE>
To The Shareholders and Trustees
Star Select REIT-Plus Fund
We have audited the accompanying statement of assets and liabili ties of Star
Select REIT-Plus Fund (one of the portfolios constituting the Star Select
Funds), as of May 29, 1997. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. Our procedures included
confirmation of cash held by the custodian as of May 29, 1997, by correspondence
with the custodian. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Star
Select REIT-Plus Fund portfolio of the Star Select Funds as of May 29, 1997, in
conformity with generally accepted accounting principles.
/s/ McCurdy & Associates, CPA's, Inc.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
May 29, 1997
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