A Message from the FIRSTAR Select REIT-Plus Fund
Dear Shareholder:
The FIRSTAR Select REIT-Plus Fund is an actively managed mutual fund which
invests primarily in real estate investment trusts and real estate operating
companies which are traded on active stock exchanges (eg. NYSE and NASDAQ). The
Fund is focused on providing consistent total rates of return for shareholders
by seeking attractive real estate investments to generate both capital
appreciation and income.
Performance for the REIT sector over the first half of the 1999/2000 fiscal year
beginning April 1, 1999 was turbulent as the REIT sector rose strongly during
the three months ending June, posting nearly double digit returns. Many
investors were attracted to the sector as word spread that the price/earning
multiples, dividend yields and growth rates for these securities were at
historically attractive levels. Many state and public employee retirement plans
started positions in these vehicles, as did prominent investor Warren Buffett.
However, the ride up was short-lived as many investors on the speculative side
pulled out their short-term profits and shifted back to the large growth segment
of the U.S. stock market. The liquidity, or lack thereof, makes this sector
vulnerable to major outflows. Thus, during the second quarter of the current
fiscal year, the REIT sector witnessed a large pullback in price levels which
nearly erased most of the gains generated during the quarter ending June 1999.
During the first half of the 1999/2000 fiscal year the FIRSTAR Select REIT-Plus
Fund performed slightly better than the Morgan Stanley REIT Index due to strong
performance by the REIT-Plus Fund in the first quarter ending June relative to
the passively managed Morgan Stanley Index. The FIRSTAR Select REIT-Plus Fund
rose 1.66% during the first half of this fiscal year as compared to a rise of
1.02% for the Morgan Stanley REIT Index. The Morgan Stanley REIT Index is a
total-return index comprised of the most actively traded real estate investment
trusts. It is designed to be a measure of real estate equity performance. The
index was developed as of December 31, 1994 and is currently comprised of 129
real estate investment trusts. The FIRSTAR Select REIT-Plus Fund outperformed
the Lipper Real Estate Average which rose 1.42% during the first half of the
1999/2000 fiscal year. A slightly higher exposure to the more stable residential
and office property sectors coupled with no health care exposure assisted in the
Fund's outperformance of the Lipper Real Estate Average.
The FIRSTAR Select REIT-Plus Fund is managed using both quantitative and
fundamental analysis to aid us in meeting investors' long-term goals of both
price appreciation and income. These tools allow us to focus on those sectors
that will most benefit our investors in achieving these objectives. Above
average earnings growth rates, low levels of debt to capital and attractive
income yields coupled with low levels of new supply in this sector offer
attractive reasons for investors to consider REIT's in achieving their
investment objectives.
Karen L. Bowie, CFA
Vice President, Fund Manager
<PAGE>
Year 2000 Issue: (Unaudited)
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Adviser, Administrator or other service providers to the Fund do not
properly process and calculate date-related information and data from January 1,
2000. This is commonly known as the "Year 2000 Issue". The Adviser and
Administrator have taken steps that they believe are reasonably designed to
address the Year 2000 Issue with respect to computer systems that are used and
to obtained reasonable assurances that comparable steps are being taken by the
Fund's major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund. In
addition, the Adviser cannot make any assurances that the Year 2000 issue will
not affect the companies in which the Fund invests or worldwide markets and
economies.
<PAGE>
INVESTMENTS-FIRSTAR SELECT REIT-PLUS FUND
- -----------------------------------------
Statement of Net Assets September 30, 1999 (Unaudited)
Number Market
of Shares Value
--------- -----
COMMON STOCKS - 97.80%
- ----------------------
Real Estate Investment Trusts - 97.80%
- --------------------------------------
Apartment Investment and
Management Co. REIT 22,000 $ 841,500
Archstone Communities, Trust REIT 45,000 869,063
Arden Realty Group, Inc. REIT 13,251 288,209
Avalon Properties, Inc. REIT 24,512 830,344
BRE Properties, Inc. REIT 32,200 770,788
Bedford Property Investors, Inc. REIT 21,000 354,375
Brandywine Realty Trust REIT 25,000 406,250
CBL & Associates Properties, REIT 20,500 500,969
Cadillac Fairview Corp. * 40,000 865,000
Camden PPTY TR SBI 30,000 806,250
CarrAmerica Realty Corp. REIT 17,900 392,681
Catellus Development * 35,000 411,250
Chelsea GCA Realty Inc. REIT 26,200 828,575
Crescent Real Estate Equities
Trust REIT 20,000 360,000
Developers Diversified
Realty Corp. REIT 48,000 672,000
Duke Rlty Invts INC 45,000 877,500
EastGroup Properties, Inc. REIT 48,000 870,000
Equity Office Properties Trust REIT 36,600 850,950
Equity Residential Properties Trust REIT21,000 889,875
Felcor Suite Hotels, Inc. REIT 32,500 568,750
Hospitality Properties Trust REIT 21,000 463,313
JDN Realty Corp. REIT 28,868 591,794
Kilroy Realty Corp. REIT 23,000 485,875
Kimco Realty Corp. REIT 28,070 1,003,503
Koger Equity, Inc. REIT 20,000 320,000
Lasalle Hotel Properties REIT 55,000 711,563
Lexington Corp. Properties, Inc. REIT 20,400 228,225
Liberty Property Trust REIT 24,450 554,710
MGI properties REIT 18,500 166,500
Mack-Cali Reality Corp. REIT 24,500 656,906
Meristar Hospitality REIT 33,162 505,703
New Plan Realty Trust REIT 38,500 685,781
Pacific Gulf Properties, Inc. REIT 42,000 837,375
Prentice PPTYS TR SBI 24,000 532,500
<PAGE>
Number Market
of Shares Value
--------- -----
Prime Retail, Inc. REIT 25,000 $ 184,375
Public Storage Inc. REIT 22,660 570,749
RFS Hotel Investors, Inc. REIT 41,100 472,650
Realty Income Corp. REIT 23,000 531,875
Reckson Associates Realty Corp. REIT 45,000 936,563
Simon DeBartolo Group, Inc. REIT 34,040 763,773
Sizeler Property Investors, Inc. REIT 41,300 358,794
Spieker Properties, Inc. REIT 22,000 763,125
Starwood Lodging Trust 23,300 519,881
Storage USA, Inc. REIT 15,240 419,100
Trizec Hahn Corp. 36,000 681,750
Vornado Realty Trust REIT 20,000 650,000
-------
Total Common Stocks
(Cost $32,337,065) 27,850,726
----------
Preferred Stock - .80%
- ----------------------
Realty Income Corp. REIT 10,000 230,000
(Cost $250,000)
Repurchase Agreements - 1.29%
Donaldson (DLJ) ($369,000, 5.45% FNMA 31359CAF2, 10/12/03) Purchase Date
09/30/99, Maturity Date 10/01/99 Amount Payable at Maturity $369,055
Total Repurchase Agreements
(Cost $369,000) 369,000
-----------
Total Investments
(Cost $32,956,065) 28,449,726
Other Assets and Liabilities, Net - .91% 260,188
- ---------------------------------------- -------
Net Assets - 100% $ 28,709,914
==========
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
<PAGE>
FIRSTAR SELECT REIT-PLUS FUND
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------
September 30, 1999 (Unaudited)
ASSETS
Investments, at value (cost $32,956,065) ................ $ 28,449,726
Cash .................................................... 337
Dividend receivable ..................................... 240,143
Interest receivable ..................................... 55
Receivable for shares of beneficial interest sold........ ----
Deferred organization costs (Note 2) .................... 19,891
Prepaid expenses......................................... 21,364
------------
Total assets ............................................ 28,731,516
LIABILITIES
Payable for shares of beneficial interest redeemed....... 128,497
Accrued expenses ........................................ 21,602
-------------
Total liabilities........................................ 150,099
-------------
ASSETS ...................................................... $ 28,581,417
===========
Net assets consist of:
Paid-in capital ......................................... 33,933,097
Accumulated net realized gain on investments ............ (1,297,413)
Net unrealized depreciation in
value of investments.................................... (4,054,267)
Net assets ................................................... $ 28,581,417
===========
NET ASSET VALUE PER SHARE
Class B Shares:
Net asset value and offering price per share (based on net assets of
$89,557 and 11,432 shares of beneficial interest outstanding). $7.83
Minimum redemption price per share (net asset value x 95%).... $7.44
Class Y Shares:
Net asset value, offering and redemption price per share (based on net assets of
$28,491,860 and 3,649,274 shares of beneficial interest outstanding) $7.81
The accompanying notes are an integral part of these financial statements.
<PAGE>
FIRSTAR SELECT REIT-PLUS FUND
STATEMENT OF OPERATIONS
- -----------------------
For the Six Months ended September 30, 1999 (Unaudited)
INVESTMENT INCOME
Income:
Interest ................................................ $ 16,678
Dividends ............................................... 1,397,397
-----------
Total income ...................................... 1,414,075
-----------
EXPENSES:
Administrative service fees (Note 3)
Class B............................................... 3,012
Class Y............................................... 16,598
Auditing fees ........................................... 6,017
Custodian fees (Note 3) ................................. 6,657
Fund accounting fees
Class B............................................... 3,012
Class Y............................................... 13,278
Insurance ............................................... 1,781
Servicing fees .......................................... 10,139
Legal fees .............................................. 9,026
Investment adviser fees (Note 3) ........................ 124,487
Trustee's fees .......................................... 6,519
24f-2 fees expense
Class B............................................... ----
Class Y............................................... 2,507
Amortization of organization expenses ................... 3,713
Postage ................................................. 752
Pricing fees............................................. 2507
Registration and filing fees
Class B............................................... 1,039
Class Y............................................... 8,793
Printing ................................................ 18,300
Transfer agent fees (Note 3)
Class B............................................... 3,012
Class Y............................................... 11,618
Other expenses........................................... 1,254
-------------
Total net expenses 254,021
--------
Less Expense Reimbursement from adviser (Note 2)........... 9,037
--------------
NET INVESTMENT INCOME ....................................... 1,169,091
---------
REALIZED AND UNREALIZED GAIN/LOSS
ON INVESTMENTS
Net realized gain on investments ........................ 89,289
Change in net unrealized
appreciation of investments ........................ (713,097)
---------
Net loss on investments ................................. (623,808)
------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 545,283
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
FIRSTAR SELECT REIT-PLUS FUND
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
(Unaudited)
<S> <C> <C>
Six Months Year
Ended Ended
September 30, March 31,
1999 1999
---- ----
DECREASE IN NET ASSETS
Operations:
Net investment income ................................... $ 1,169,091 $ 1,627,343
Net realized gain (loss) on investments ................. 89,289 (978,775)
Change in net unrealized appreciation of investments..... (713,097) (9,338,684)
------------ ------------
Increase (Decrease) in net assets resulting from operations 545,283 (8,690,116)
------------ ------------
Dividends and distributions to shareholders from:
Net investment Income
Class B.......................................... (3,362) (4,932)
Class Y.......................................... (1,155,372) (1,622,429)
Realized Capital Gain
Class B.......................................... --- (995)
Class Y.......................................... --- (338,154)
Total Distributions......................... (1,158,734) (1,966,510)
------------ -----------
TOTAL INCREASE (DECREASE) .................................. (613,451) (10,656,626)
--------- -------------
Capital share transactions:
Proceeds from shares sold
Class B.......................................... 1,162 135,414
Class Y.......................................... 3,783,775 8,402,387
Value of shares issued to shareholders in
reinvestment of dividends and distributions
Class B.......................................... 2,200 5,927
Class Y.......................................... 158,994 406,984
Cost of shares redeemed
Class B.......................................... (2,760) (18,491)
Class Y.......................................... (5,405,856) (11,598,765)
----------- -------------
Net decrease in net assets resulting from
capital share transactions ........................ (1,462,485) (2,666,544)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................... (2,075,936) (13,323,170)
----------- --------------
NET ASSETS:
Beginning of period .................................... $ 30,657,353 $ 43,980,523
End of period ......................................... 28,581,417 30,657,353
========== =============
Shares of capital stock of the Fund sold and redeemed:
Shares sold
Class B.......................................... 132 12,909
Class Y.......................................... 433,811 936,347
Shares issued to shareholders in reinvestment dividends and
distributions:
Class B.......................................... 284 677
Class Y.......................................... 20,568 46,905
Shares redeemed
Class B.......................................... (323) (2,246)
Class Y.......................................... (645,439) (1,296,991)
--------- --------------
NET INCREASE (DECREASE) IN NUMBER OF SHARES OUTSTANDING (190,967) (302,399)
============= ===============
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
FIRSTAR SELECT REIT-PLUS FUND
FINANCIAL HIGHLIGHTS
- --------------------
(Unaudited)
<TABLE>
<S> <C> <C>
Class B
-------
Six Months Year
Ended Ended
September 30, March 31,
1999 1999
---- ----
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning ................................... $ 7.99 $ 10.59
Income from investment
Operations:
Net investment income ................................... 0.30 0.40
Net realized and unrealized
gain (loss) on investments.......................... (0.16) (2.54)
-------- ------
Total from investment income ................................. 0.14 (2.14)
Less distributions:
Dividends from net
investment income .................................. (0.30) (0.38)
Distributions from net realized
Gains on investments................................ (0.00) (0.08)
------ ------
Total from distributions ..................................... (0.30) (0.46)
------- ------
Net asset value at end of period ............................. $ 7.83 $ 7.99
===== =====
TOTAL RETURN.................................................. (19.53%) (20.65%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands).................... 89 91
Ratio of total expenses to
average net assets ................................. 20.69% 13.38%
Ratio of total expenses to
average net assets (after reimbursement) ........... 1.47% 1.45%
Ratio of net investment
income to average net assets........................ (12.22%) (7.53%)
Ratio of net investment
income to average net assets (after reimbursement) . 6.99% 4.39%
Portfolio turnover ...................................... 7.29% 45.48%
(a) Annualized.
</TABLE>
<PAGE>
FIRSTAR SELECT REIT-PLUS FUND
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Class Y
-------
Six Months Year Period
Ended Ended Ended
September 30, March 31, March 31,
1999 1999 1998(a)
---- ---- -------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning ................................... $ 7.96 $ 10.59 $10.00
Income from investment
Operations:
Net investment income ................................... 0.30 0.40 0.35
Net realized and unrealized
gain (loss) on investments.......................... (0.14) (2.55) 0.86
-------- ------ ----
Total from investment income ................................. 0.14 (2.15) 1.21
Less distributions:
Dividends from net
investment income .................................. (0.31) (0.40) (0.35)
Distributions from net realized
Gains on investments............................. (0.00) (0.08) (0.27)
------ ------ ------
Total from distributions ..................................... (0.31) (0.48) (0.62)
------- ------ ------
Net asset value at end of period ............................. $ 7.81 $ 7.96 $ 10.59
===== ===== ======
TOTAL RETURN.................................................. (21.21%) (20.59%) 14.96%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands).................... 28,492 30,566 43,981
Ratio of total expenses to
average net assets ................................. 1.47% 1.47% 1.52%(b)
Ratio of total expenses to
average net assets (after reimbursement) ........... ------ ------ ------
Ratio of net investment
income to average net assets........................ 4.26% 4.35% 4.29%(b)
Ratio of net investment
income to average net assets (after reimbursement) . ------ ------ ------
Portfolio turnover ...................................... 7.29% 45.48% 29.50%(b)
(a) For the period June 24, 1997 (commencement of operations) to March 31, 1999.
(b) Annualized.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1 - General
Firstar 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. On
March 1, 1999 Star Select REIT-Plus Fund was changed to Firstar Select REIT-Plus
Fund. The investment objective of the Fund is to provide shareholders with above
average income and long term growth of capital. The Fund offers Class B and
Class Y shares. Class B shares may be subject to a contingent deferred sales
charge. Class Y shares are no-load where there is no sales charges or
commissions. All classes of shares have indentical rights to earnings, assets
and voting privileges, except that each class has its own expenses directly
attributable to that class. Effective August 1, 1999 the Firstar Class C shares
were changed to Class Y shares.
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
The procedures and pricing service used to value securities are established and
approved by the Board of Trustees. 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 and Related Income
Securities transactions are recorded on a trade date basis. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Interest income is recorded on the accrual basis and dividend income is recorded
on the ex-dividend date.
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 Class Y 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 shareholder (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, 1999, the unamortized balance was $19,891.
The Adviser has committed to reimburse other expenses of class B shares through
July 31, 2000 to the extent necessary to maintain total operating expense as
indicated in the prospectus. Total reimbursement for the period ended September
30, 1999 is $9,037.
F) Distribution
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 expenses
will not be affected by the 12b-1 plan because the Adviser does not intend to
activate the plan through July 31, 2000.
G) Allocation of Income, Expenses, and Gains and Losses
Income, expenses (other than those attributable to a specific class) and gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
H) 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.
I) Repurchase Agreement
Under the terms of a typical repurchase agreement, a Fund writes a financial
contract with a counterparty and takes possession of a government debt
obligation as collateral. The Fund 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 Fund'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.
Note 3 - Agreements and Other Transactions with Affiliates
The Fund retains Firstar Bank (formerly Star Bank), N.A. (the "Adviser" or
"Firstar 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 Firstar Bank to act as shareholder servicing agent on its
behalf. The Fund is authorized to pay Firstar Bank up to 0.25% of its average
daily net assets to provide shareholder support services and to maintain
shareholder accounts. Firstar Bank currently receives 0.10% of the Fund's
average daily net assets for shareholder services and it is anticipated that the
fee will remain at 0.10% for the foreseeable future. Firstar 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 Fund Services, 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.
For the six months ended September 30, 1999, there were no commissions (sales
charges paid by investors) paid on the Class B shares.
Note 3 - Agreements and Other Transactions with Affiliates (continued)
Certain Trustees and officers of the Trust are "interested persons" (as defined
in the Act) of the Trust. Each "non-interested" Trustee is entitled to receive a
quarterly Board of Trustees meeting fee of $1,000 plus expenses for services
relating to the Trust.
Note 4- Securities Transactions
For the period ended September 30, 1999, purchases and sales of investment
securities, excluding short-term investments were as follows:
Purchases Sales
The Firstar Select REIT-Plus Fund $ 2,337,378 $3,866,094
Note 5- Unrealized Appreciation (Depreciation)
At September 30, 1999, the composition of unrealized appreciation (depreciation)
of investment securities was as follows:
Appreciation Depreciation Net
The Firstar Select REIT-Plus Fund $ 899,875 ($ 5,406,214) ($4,506,339)
