To Our Shareholders:
We would like to take this opportunity to welcome you as shareholders of the
Star Select REIT-Plus Fund and to recognize the achievements of the Star Select
REIT- Plus Fund over its first six months. As investment advisor to the
REIT-Plus Fund, Star Bank is able to bring over 10-years of Real Estate
Investment Trust (REIT) experience to the management of the REIT-Plus Fund. We
continually strive to generate above-average income and to achieve long-term
growth of capital as well as maintain the strong performance of the Fund.
We believe that REITs are the best way for many investors to invest in
commercial real estate. As an investment vehicle, REITs combine the best
features of both real estate and the stock market. Investing in the REIT-Plus
Fund gives you the chance to invest in a professionally managed, diversified
real estate portfolio, yet retain a high degree of liquidity.
Since the Fund's inception on June 24, 1997, the share price has risen from
$10.00 a share to $11.04 a share on September 30, 1997, and paid a quarterly
distribution of $0.1008 per share. That is a total return of 11.43% since the
inception of the Fund or an annualized return of 49.63%! In addition to the
increase in share price, the fund's assets have grown to a level in excess of
$34 million.
I would like to offer a glimpse of some recent changes to the Fund. Based on
several economic indicators, such as unemployment rates, geographic population
growth rates and supply and demand fundamentals, the Northwest, Northeast and
Southwest markets are currently the most attractive areas for REITs. These areas
are in a growth/recovery phase where there is a lack of supply to satiate
growing demand for various types of properties. Several REIT sectors, including
apartments, office and industrial parks and hotels, are experiencing the good
fortune of higher rents, and increasing occupancy rates. We have diversified the
REIT-Plus Fund to emphasize a variety of REIT's located in these geographic and
industrial sectors. While this is only one example of our effort to remain
competitive, you should know that we make our security selection decisions based
on our continuous monitoring of macroeconomic indicators for opportunity and
considerable analysis of company specifics.
We again thank you for investing in the REIT-Plus Fund and look forward to a
rewarding relationship.
Sincerely,
Carolyn Baril
Fund Manager
<PAGE>
INVESTMENTS-STAR SELECT REIT-PLUS FUND
- --------------------------------------
Statement of Net Assets September 30, 1997 (Unaudited)
Number Market
of Shares Value
--------- -----
Real Estate Investment Trusts - 94.64%
- --------------------------------------
Arden Realty Group, Inc. REIT 13,251 $ 415,750
Avalon Properties, Inc. REIT 28,000 833,000
Bay Apartment Communities, Inc. REIT 15,800 631,013
Beacon Properties Corp. REIT 22,471 1,029,453
BRE Properties, Inc. REIT 27,200 770,100
Cali Realty Corp. REIT 16,500 686,813
Camden Property Trust REIT 22,000 673,750
CarrAmerica Realty Corp. REIT 32,900 1,052,800
CenterPoint Properties Corp. REIT 22,975 834,280
Chelsea GCA Realty, Inc. REIT 9,000 375,750
Developers Diversified
Realty Corp. REIT 19,000 760,000
Duke Realty Investments, Inc. REIT 15,000 342,187
EastGroup Properties, Inc. REIT 18,000 393,750
Equity Residential Properties Trust REIT 11,800 643,837
Excel Realty Trust, Inc. REIT 12,194 382,587
Federal Realty Investment Trust REIT 25,600 644,800
Felcor Suite Hotels, Inc. REIT 30,000 1,231,875
Highwood Properties, Inc. REIT 29,000 1,025,875
Hospitality Properties Trust REIT 21,000 742,875
Irvine Apartment
Communities, Inc. REIT 26,700 891,112
JDN Realty Corp. REIT 22,579 753,574
Kilroy Realty Corp. REIT 23,000 621,000
Kimco Realty Corp. REIT 23,070 803,124
Liberty Property Trust REIT 17,750 478,141
LTC Properties, Inc. REIT 37,050 703,950
Manufactured Home
Communities, Inc. REIT 38,000 988,000
Meditrust Share REIT 17,000 705,500
Merry Land & Investment Co., Inc. REIT 16,000 353,000
New Plan Realty Trust REIT 18,500 437,062
Omega Healthcare Investors, Inc. REIT 19,253 693,108
Pacific Gulf Properties, Inc. REIT 20,000 475,000
Patriot American Hospitality, Inc. REIT 22,998 733,061
Post Properties, Inc. REIT 8,700 345,825
Prentiss Properties Trust REIT 18,000 519,750
Public Storage, Inc. REIT 15,000 444,375
Realty Income Corp. REIT 18,000 484,875
Reckson Associates Realty Corp. REIT 15,000 399,375
RFS Hotel Investors, Inc. REIT 41,100 801,450
Security Capital Pacific, Inc. REIT 32,000 752,000
Simon DeBartolo Group, Inc. REIT 34,040 1,123,320
Sizeler Property Investors, Inc. REIT 76,300 882,219
Spieker Properties, Inc. REIT 16,800 681,450
Starwood Lodging Trust REIT 26,500 1,522,094
Storage Trust Realty REIT 14,000 365,750
Storage USA, Inc. REIT 15,240 619,125
Summit Properties, Inc. REIT 25,800 564,375
United Dominion Realty Trust REIT 18,400 276,000
Weingarten Realty Investors REIT 15,500 621,028
Total Real Estate Investment Trusts
(Cost $25,330,260) 32,509,138
----------
<PAGE>
Money Markets - 6.34%
- ---------------------
Flex Institutional Money
Market Fund 637,543 637,543
Government Money
Market Fund 570,669 570,669
Aim Inst. Treasury 970,262 970,262
Total Money Markets
(Cost $2,178,474) 2,178,474
---------
Total Investments
(Cost $27,508,734) 34,687,612
Other Assets and Liabilities,Net - (0.98%) (333,564)
- ----------------------------------------- ---------
Net Assets - 100% $34,352,048
===========
<PAGE>
STAR SELECT REIT-PLUS FUND
- --------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- ------------------------------------
September 30, 1997 (Unaudited)
ASSETS
Investments, at value (Note 2) .......................... $ 34,687,612
Cash ................................................... 13,100
Dividend receivable ..................................... 143,143
Interest receivable .................................. 13,319
Receivable for investments sold ......................... 272,161
Deferred organization costs (Note 2) ................ 35,038
Prepaid expenses......................................... 34,030
------
Total assets ............................................ 35,198,403
LIABILITIES
Payable for investments purchased ...................... 795,974
Accrued expenses ........................................ 50,381
------
Total liabilities...................................... 846,355
-------
NET ASSETS ................................................... $ 34,352,048
============
Net assets consist of:
Paid-in capital ......................................... 26,571,931
Undistributed net investment income ..................... 66,868
Net realized gain on investments ........................ 534,371
Net unrealized appreciation in
value of investments ............................. 7,178,878
---------
Net assets ................................................... $ 34,352,048
============
Shares of capital stock
outstanding (no par value,
unlimited shares authorized)............................. 3,110,753
Net asset value per share, offering
and redemption price .................................... $ 11.04
The accompanying notes are an integral part of these financial statements.
<PAGE>
STAR SELECT REIT-PLUS FUND
- --------------------------
STATEMENTS OF OPERATIONS
- ------------------------
For the Period June 24, 1997(commemcement of operations) through September
30, 1997 (Unaudited)
INVESTMENT INCOME
Income:
Interest ................................................ $ 36,784
Dividends ............................................... 449,346
-------
Total net income ................................... 486,130
-------
EXPENSES:
Administrative service fees (Note 3) .................... 8,571
Auditing fees ........................................... 3,255
Custodian fees (Note 3) ................................. 1,786
Fund accounting fees .................................... 5,714
Insurance ............................................... 2,374
Servicing fees .......................................... 3,571
Legal fees .............................................. 4,883
Investment adviser fees (Note 3) ........................ 53,570
Trustee's fees .......................................... 5,424
Amortization of organization expenses ................... 1,988
Postage ................................................. 407
Registration and filing fees ............................ 8,290
Printing ................................................ 1,357
Transfer agent fees (Note 3) ............................ 3,571
Other expenses .......................................... 2,034
-----
Total net expenses.................................. 106,795
-------
NET INVESTMENT INCOME ....................................... 379,335
-------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments ........................ 534,371
Change in net unrealized
appreciation of investments ........................ 7,178,878
---------
Net gain on investments ................................. 7,713,249
---------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 8,092,584
===========
The accompaying notes are an integral part of these financial statements.
<PAGE>
STAR SELECT REIT-PLUS FUND
- --------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------
For the Period June 24, 1997(commencement of operations) through September
30, 1997 (Unaudited)
INCREASE IN NET ASSETS
Operations:
Net investment income ................................... $ 379,335
Net realized gain on investments ........................ 534,371
Change in net unrealized appreciation of investments..... 7,178,878
---------
Increase in net assets resulting from operations ........ 8,092,584
---------
Dividends and distributions to shareholders from:
Net investment Income ................................... (312,467)
TOTAL INCREASE ............................................... 7,780,117
Capital share transactions:
Proceeds from shares sold ............................... 26,908,193
Value of shares issued to shareholders in
reinvestment of dividends and distributions ........ 32,675
Cost of shares redeemed ................................. (368,937)
...............Net increase in net assets resulting from
capital share transactions ......................... 26,571,931
...................................................
TOTAL INCREASE IN NET ASSETS ................................. 34,352,048
----------
NET ASSETS:
Beginning of period ..................................... ---
End of period (including undistributed net
realized gains on investments) ..................... $ 34,352,048
============
Shares of capital stock of the Fund sold and redeemed:
Shares sold ............................................. 3,142,849
Shares issued to shareholders in reinvestment
dividends and distributions......................... 3,014
Shares redeemed ......................................... (35,110)
-------
NET INCREASE IN NUMBER
OF SHARES OUTSTANDING ................................... 3,110,753
=========
The accompanying notes are an integral part of these financial statements.
<PAGE>
STAR SELECT REIT-PLUS FUND
- --------------------------
FINANCIAL HIGHLIGHTS (Unaudited)
- --------------------------------
1997(a)
-------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning ................................ $ 10.00
Income from investment
Operations:
Net investment income ................................ 0.14
Net realized and unrealized
gain (loss) on investments....................... 1.02
----
Total from investment income .............................. 1.16
Less distributions:
Dividends from net
investment income ............................... (0.12)
-----
Total from distributions ..................................... (0.12)
-----
Net asset value at end of period ............................. $ 11.04
=======
TOTAL RETURN (b).............................................. 49.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)..................... 34.3
Ratio of total expenses to
average net assets (b).............................. 1.19%
Ratio of net investment
income to average net assets (b).................... 4.22%
Portfolio turnover (b)................................... 11.71%
Average commission rate paid ............................ $ 0.0737
(a) For the period June 24, 1997 (commencement of operations) to September 30,
1997.
(b) Annualized.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
Note 1 - General
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. The investment
objective of the Fund is to provide shareholders with above average income and
long term growth of capital.
Note 2 - Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A) Security Valuations
Portfolio securities are valued using the current market valuations: either the
last reported sales price, or in the case of securities for which there is no
reported last sale, the mean of the closing bid and asked prices. Bid price is
used when no ask price is available.
B) Securities Transactions
Securities transactions are recorded on a trade date-plus-one basis. Realized
gains and losses from securities transactions are recorded on the identified
cost basis.
C) Dividends and Distributions to Shareholders
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 capital gains at least once a year. However, to the extent that net
realized gains of the Fund can be reduced by any capital loss carry-overs, such
gains will not be distributed.
D) Federal Income Taxes
It is the policy of the Fund to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders.
E) Expenses
Organizational costs represent costs incurred in connection with the
organization and the initial public offering of the shares of the Fund.
Organizational costs are deferred and will be amortized on a straight-line basis
over five years. In the event that the original shareholders (or any subsequent
transferee) redeems any of its original capital (seed capital) prior to these
organizational costs being fully amortized, the redemption proceeds will be
reduced by a pro-rata portion of any then unamortized organizational costs. At
September 30, 1997, the unamortized balance was $35,038.
F) Estimates
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
G) Repurchase Agreement
Under the terms of a typical repurchase agreement, a Portfolio writes a
financial contract with a counterparty and takes possession of a government debt
obligation as collateral. The Portfolio also agrees with the counterparty to
allow the counterparty to repurchase the financial contract at a specific date
and price, thereby determining the yield during the Portfolio's holding period.
This arrangement will result in a fixed-rate of return not subject to the
market's fluctuation during the holding period indicated in the contract. The
value of the collateral is at least equal to the total amount of the repurchase
obligation, including interest. In the event of a default by the counterparty, a
Fund has the right to use the collateral to offset any losses incurred.
H) Investments
Interest income is recorded on the accrual basis and dividend income is recorded
on the ex-dividend date.
Note 3 - Agreements and Other Transactions with Affiliates
The Fund retains Star Bank, N.A. (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.
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.
The Fund retains Unified Advisers, Inc. ("Unified") 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, Unified 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 to act as the
principal distributor of the Fund's shares.
Note 4- Securities Transactions
For the period ending September 30, 1997, purchases and sales of investment
securities, excluding short-term investments were as follows:
Purchases Sales
--------- -----
The Star Select REIT-Plus Fund $ 27,967,301 $ 3,120,976
Note 5- Unrealized Appreciation(Depreciation)
At September 30, 1997, the composition of unrealized appreciation(depreciation)
of investment securities were as follows:
Appreciation Depreciation Net
------------ ------------ ---
The Star Select REIT-Plus Fund $ 7,215,266 $ 36,388 $7,178,878
