Dear Shareholder:
The Firstar Select REIT-Plus Fund is an actively managed mutual fund which
invests primarily in real estate investment trusts (REIT's) and real estate
operating companies which are traded on active stock exchanges (e.g. NYSE and
NASDAQ). The Fund is focused on providing consistent total rates of return for
shareholders by seeking attractive real estate investment opportunities that
generate both capital appreciation and income.
Performance for the REIT sector over the first half of the 2000/2001 Fiscal Year
beginning April 1, 2000 has been strong as investors renewed their interest in
the real estate sector. The strongest month occurred in July as the REIT market
rose nearly 8%, as indicated by the Morgan Stanley REIT Index. A volatile
technology sector coupled with renewed interest in consistent earnings growth
companies which trade at low valuations and offer attractive levels of income
were key in bringing positive inflows into REIT's and REIT mutual funds.
During the first half of the 2000/2001 Fiscal Year the Firstar Select REIT-Plus
Fund rose 17.83% consisting of a strong 11% return in the first quarter of the
fiscal year coupled with a 6.2% increase during the second quarter. The Firstar
Select REIT-Plus Fund's results were slightly behind the 18.99% return of the
Morgan Stanley REIT Index results for the same time period. The Morgan Stanley
REIT Index achieved 10.37% return for the first quarter of the fiscal year and a
7.81% return for the second quarter of the fiscal year. Strength in large cap
REIT's versus small cap REIT's aided the results of the Index as compared to the
diversified capitalization REIT stock exposure held in the Firstar Select
REIT-Plus Fund.
The Morgan Stanley REIT Index is a total-return index comprised of over 125 real
estate investment trusts.
The Firstar Select REIT-Plus Fund also lagged the 19.38% return experienced over
the first half of the 2000/2001 Fiscal Year by the Lipper Real Estate Average.
Diversification was key in the performance differential between the Fund and the
Lipper Real Estate Average as the Fund held exposure to small, middle and large
cap REIT's and continued to be diversified across property lines (e.g. office,
retail, residential).
The Firstar Select REIT-Plus Fund is managed using both quantitative and
fundamental analysis to aid 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 investors in achieving these objectives. Above average
earnings growth rates, low levels of debt to capital and attractive income
yields offer attractive reasons for investors to consider REIT's in achieving
their investment objectives.
Karen L. Bowie, CFA
Vice President, Fund Manager
<PAGE>
INVESTMENTS-FIRSTAR SELECT REIT-PLUS FUND
-----------------------------------------
Schedule of Investments September 30, 2000 (unaudited)
Number Market
of Shares Value
COMMON STOCKS - 97.75%
INTERNET - 0.03%
VelocityHIS Inc. 4,440 $ 11,100
LODGING - 1.95%
Starwood Hotels & Resorts Worldwide Inc. 23,300 728,125
REAL ESTATE DEVELOPMENT - 5.80%
Catellus Development Corp.* 75,000 1,317,188
Trizec Hahn Corp. 50,000 840,625
REAL ESTATE INVESTMENT TRUSTS - 89.97%
Apartment Investment and
Management Co. REIT 33,000 1,520,063
Archstone Communities, Trust REIT 29,000 712,313
Arden Realty Group, Inc. REIT 13,251 355,292
Avalon Bay Communities, Inc. REIT 24,512 1,168,916
Bedford Property Investors, Inc. REIT 31,000 629,688
Boston Properties, Inc. REIT 10,000 429,375
Brandywine Realty Trust REIT 35,000 708,750
BRE Properties Inc. REIT 22,200 710,400
Camden Properties Trust REIT 25,000 775,000
CBL & Associates Properties, REIT 25,500 639,094
Chelsea GCA Realty Inc. REIT 26,200 920,275
Developers Diversified Rlty Trust REIT 48,000 612,000
Duke Weeks Realty Corp. REIT 70,000 1,688,750
EastGroup Properties, Inc. REIT 48,000 1,068,000
Equity Office Properties Trust REIT 62,000 1,929,750
Equity Residential Properties Trust REIT 38,000 1,826,375
Essex Property Trust REIT 9,000 498,375
Franchise Fin. Corp. REIT 23,000 517,500
General Growth Properties, Inc. REIT 19,000 612,750
Healthcare Realty Trust REIT 30,000 633,750
Home Properties NY Inc. REIT 15,000 448,125
Hospitality Properties Trust REIT 15,000 348,750
Host Marriott Corp. 30,000 337,500
Kilroy Realty Corp. REIT 23,000 613,813
Kimco Realty Corp. REIT 20,070 847,958
Number Market
of Shares Value
Lasalle Hotel Properties REIT 55,000 $ 831,875
Liberty Property Trust REIT 24,450 672,375
Macerich Corp. REIT 35,000 743,750
Mack-Cali Reality Corp. REIT 10,000 281,875
Merristar Hospitality 33,162 671,530
Mills Corp. REIT 43,000 814,312
Pacific Gulf Properties, Inc. REIT 32,000 856,000
Pinnacle Holdings, Inc. REIT 6,000 159,750
Prentiss Properties Trust REIT 24,000 627,000
Public Storage Inc. REIT 22,660 542,423
Realty Income Corp. REIT 1,000 23,312
Reckson Associates Realty Corp. REIT 45,000 1,147,500
Simon Property Group, Inc. REIT 77,040 1,800,810
Spieker Properties, Inc. REIT 31,000 1,784,437
Storage USA, Inc. REIT 15,240 464,820
Summit Properties Inc. REIT 28,000 675,500
Sun Communities Inc. REIT 9,000 284,625
Vornado Realty Trust REIT 15,000 556,875
-------
TOTAL COMMON STOCKS
(Cost $33,245,168) 36,388,369
----------
REPURCHASE AGREEMENTS - 1.91%
Donaldson (DLJ) ($755,000, 6.52% Federal Natl. Mtg. Assn.
31359MEM1, 02/13/04) Purchase Date 09/29/00, Maturity Date
10/02/00 Amount Payable at Maturity $710,386
TOTAL REPURCHASE AGREEMENTS
(Cost $710,000) 710,000
-----------
TOTAL INVESTMENTS - 99.66%
(Cost $33,955,168) 37,098,369
OTHER ASSETS AND LIABILITIES, NET - 0.34% 127,286
----------------------------------------- -----------
NET ASSETS - 100% $37,225,655
===========
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRSTAR SELECT REIT-PLUS FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000 (unaudited)
<S> <C> <C>
ASSETS
Investments, at value (cost $33,955,168) ................ $ 37,098,369
Dividend receivable ..................................... 260,821
Interest receivable ..................................... 257
Receivable for shares of beneficial interest sold ....... 21,000
Deferred organization costs (Note 2) .................... 12,385
Prepaid expenses ........................................ 10,049
------------
Total assets ............................................ 37,402,881
LIABILITIES
Payable for overdrafts .................................. 126,442
Payable for shares of beneficial interest redeemed ...... 5,121
Accrued expenses ........................................ 45,663
------------
Total liabilities ....................................... 177,226
------------
NET ASSETS ................................................... $ 37,225,655
===========
Net assets consist of:
Paid-in capital ......................................... 37,868,745
Accumulated undistributed income ........................ 50,491
Accumulated net realized gain (loss) on investments ..... (3,836,782)
Net unrealized appreciation in
value of investments ................................. 3,143,201
-----------
Net assets ................................................... $ 37,225,655
===========
NET ASSET VALUE PER SHARE
Class B Shares:
Net asset value and offering price per share (based on net assets
of $104,209 and 11,526 shares of beneficial interest outstanding) $9.04
Minimum redemption price per share (net asset value x 95%).... $8.59
Class Y Shares:
Net asset value, offering and redemption price per share (based
on net assets of $37,121,446 and 4,117,252 shares of beneficial
interest outstanding) ........................................ $9.02
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRSTAR SELECT REIT-PLUS FUND
STATEMENT OF OPERATIONS
For the six months ended September 30, 2000 (unaudited)
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest ................................................ $ 63,801
Dividends ............................................... 1,083,442
-----------
Total income ...................................... 1,147,243
-----------
EXPENSES:
Administrative service fees (Note 3)
Class B .............................................. 3,012
Class Y .............................................. 17,317
Auditing fees ........................................ 10,027
Custodian fees (Note 3) ................................. 6,849
Fund accounting fees
Class B .............................................. 3,012
Class Y .............................................. 13,853
Insurance ............................................... 2,372
Servicing fees .......................................... 17,367
Legal fees .............................................. 15,041
Investment adviser fees (Note 3) ........................ 130,255
Trustee's fees .......................................... 10,027
Pricing fees ............................................ 2,106
Amortization of organization expenses ................... 3,713
Postage ................................................. 1,755
Registration and filing fees
Class B .............................................. 216
Class Y .............................................. 9,586
Printing ................................................ 16,455
Transfer agent fees (Note 3)
Class B .............................................. 3,012
Class Y .............................................. 12,122
Other expenses .......................................... 375
---------
Total net expenses ................................... 278,472
---------
Less Expense Reimbursement from adviser (Note 2)............ 9,037
---------
NET INVESTMENT INCOME ....................................... 877,808
---------
REALIZED AND UNREALIZED GAIN/LOSS
ON INVESTMENTS
Net realized loss on investments ........................ (1,733,918)
Change in net unrealized
appreciation of investments ........................ 6,666,620
----------
Net gain on investments ................................. 4,932,702
----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $5,810,510
==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRSTAR SELECT REIT-PLUS FUND
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C> <C>
Six Months Year
Ended Ended
September 30, March 31,
2000 2000
---- ----
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ............................................. $ 877,808 $ 1,989,915
Net realized gain (loss) on investments ........................... (1,733,918) (748,536)
Change in net unrealized appreciation (depreciation) of investments 6,666,620 (101,216)
------------ ------------
Increase (Decrease) in net assets resulting from operations........ 5,810,510 1,140,163
------------ ------------
Dividends and distributions to shareholders from:
Net investment Income
Class B ........................................................ (2,431) (6,000)
Class Y ........................................................ (863,189) (1,983,915)
Realized Capital Gain
Class B ........................................................ --- ---
Class Y ........................................................ --- ---
------------- ------------
Total Distributions ...................................... (865,620) (1,989,915)
------------- ------------
TOTAL INCREASE (DECREASE) .............................................. 4,944,890 (849,752)
------------- ------------
Capital share transactions:
Proceeds from shares sold
Class B ........................................................ --- 2,362
Class Y......................................................... 4,683,965 10,071,675
Value of shares issued to shareholders in
reinvestment of dividends and distributions
Class B......................................................... 2,431 4,835
Class Y......................................................... 160,867 402,148
Cost of shares redeemed
Class B......................................................... (2,777) (5,520)
Class Y......................................................... (1,466,929) (11,379,893)
Net increase (decrease) in net assets resulting from ------------- ------------
capital share transactions ................................... 3,377,557 (904,393)
------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................... 8,322,447 (1,754,145)
------------- ------------
NET ASSETS:
Beginning of period ............................................... $ 28,903,208 $ 30,657,353
End of period .................................................... $ 37,225,655 $ 28,903,208
============= =============
Shares of capital stock of the Fund sold and redeemed:
Shares sold
Class B......................................................... --- 287
Class Y......................................................... 549,512 1,252,567
Shares issued to shareholders in reinvestment dividends and distributions:
Class B......................................................... 274 631
Class Y......................................................... 18,164 52,735
Shares redeemed
Class B......................................................... (320) (686)
Class Y......................................................... (169,513) (1,426,547)
------------- ------------
NET INCREASE (DECREASE) IN NUMBER OF SHARES OUTSTANDING 398,117 (121,013)
============= ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRSTAR SELECT REIT-PLUS FUND
FINANCIAL HIGHLIGHTS
<S> <C> <C> <C> <C> <C>
CLASS Y (C)
Six Months Year Year Period
Ended Ended Ended Ended
September 30, March 30, March 31, March 31,
2000 2000 1999 1998(a)
---- ---- ----- ------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning ................................... $ 7.75 $7.96 $10.59 $10.00
Income from investment operations:
Net investment income ................................... 0.22 0.53 0.40 0.35
Net realized and unrealized
gain (loss) on investments ........................... 1.27 (0.21) (2.55) 0.86
------ ------ ------- ------
Total from investment income ................................. 1.49 0.32 (2.15) 1.21
Less distributions:
Dividends from net
investment income .................................... (0.22) (0.53) (0.40) (0.35)
Distributions from net realized
gains on investments.................................. 0.00 (0.00) (0.08) (0.27)
------ ------ ------ ------
Total from distributions ..................................... (0.22) (0.53) (0.48) (0.62)
------ ------ ------ ------
Net asset value at end of period ............................. $ 9.02 $ 7.75 $ 7.96 $ 10.59
====== ====== ====== ======
TOTAL RETURN.................................................. 19.20% 4.22% (20.59)% 14.96%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands).................... 37,121 28,813 30,566 43,981
Ratio of total expenses to
average net assets ................................... 1.55% 1.61% 1.47% 1.52%(b)
Ratio of net investment
income to average net assets.......................... 5.07% 6.53% 4.35% 4.29%(b)
Portfolio turnover ...................................... 14.65% 18.57% 45.48% 29.50%(b)
(a) For the period June 24, 1997 (commencement of operations) to March 31, 1998.
(b) Annualized.
(c) Class C shares changed to class Y shares.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRSTAR SELECT REIT-PLUS FUND
FINANCIAL HIGHLIGHTS
<S> <C> <C> <C> <C>
CLASS B
Six Months Year Year
Ended Ended Ended
September 30, March 31, March 31,
2000 2000 1999
---- ---- ----
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning ................................... $ 7.77 $ 7.99 $10.59
Income from investment operations:
Net investment income ................................... 0.21 0.53 0.40
Net realized and unrealized
gain (loss) on investments ......................... 1.27 (0.22) (2.54)
------ ------ ------
Total from investment income ................................. 1.48 0.31 (2.14)
Less distributions:
Dividends from net
investment income .................................. (0.21) (0.53) (0.38)
Distributions from net realized
gains on investments ............................... 0.00 0.00 (0.08)
------ ------ ------
Total from distributions ..................................... (0.21) (0.53) (0.46)
------ ------ ------
Net asset value at end of period ............................. $ 9.04 $ 7.77 $ 7.99
====== ====== ======
TOTAL RETURN ................................................. 19.16% 3.97% (20.65%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands).................... 104 90 91
Ratio of total expenses to
average net assets ................................. 19.71% 21.55% 13.38%
Ratio of total expenses to
average net assets (after reimbursement) ........... 1.55% 1.60% 1.45%
Ratio of net investment
income to average net assets ....................... (13.12)% (12.11)% (7.53)%
Ratio of net investment
income to average net assets (after reimbursement).. 4.94% 7.84% 4.39%
Portfolio turnover ...................................... 14.65% 18.57% 45.48%
The accompanying notes are an integral part of these financial statements.
</TABLE>
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 are 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.
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, 2000, the unamortized balance was $12,385.
The Adviser has committed to reimburse other expenses of class B shares through
July 31, 2001 to the extent necessary to maintain total operating expense as
indicated in the prospectus. Total reimbursement for the period ended September
30, 2000 was $9,037. For the six months ended September 30, 2000 the Fund paid
the Advisor $130,255.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 2001.
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.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
For the six months ended September 30, 2000, there were no commissions (sales
charges paid by investors) paid on the Class B shares.
Certain trustees and officers of the Trust are "interested persons" (as defined
in the Investment Company Act of 1940) 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 six months ended September 30, 2000, purchases and sales of investment
securities, excluding short-term investments were as follows:
Purchases Sales
The Firstar Select REIT-Plus Fund $9,198,033 $4,741,817
NOTE 5 - UNREALIZED APPRECIATION (DEPRECIATION)
At September 30, 2000, the composition of unrealized appreciation (depreciation)
of investment securities was as follows:
Appreciation Depreciation Net
The Firstar Select REIT-Plus Fund $4,447,368 ($1,304,167) $3,143,201
