1933 Act File No. 33-26915
1940 Act File No. 811-5762
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 21 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 22
STAR FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on January 18, 1994; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and, pursuant to Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of the Star Funds,
which is comprised of six portfolios: (1) Star Prime Obligations Fund,
(2) Star Tax-Free Money Market Fund, (3) Star Treasury Fund, (4) Star
Relative Value Fund, (5) The Stellar Fund, (a) Investment Shares and
(b) Trust Shares, and (6) Star U.S. Government Income Fund, relates only
to one of the portfolios, The Stellar Fund, and is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-6) Cover Page.
Item 2. Synopsis (1-3) Synopsis; (1-6) Summary of
Fund Expenses.
Item 3. Condensed Financial
Information (1-6) Financial Highlights; (1-6)
Performance Information.
Item 4. General Description of
Registrant (4-6) General Information; (4-6)
Investment Information; (1-3)
Objective and Investment Policies of
Each Fund; (1-3) Money Market Funds;
(4-6) Investment Objective(s); (4-6)
Investment Policies; (1-6)
Investment Limitations.
Item 5. Management of the Trust (1-6) Star Funds Information; (1-6)
Management of the Trust; (1,2,3,4,6)
Distribution of Fund Shares; (5a)
Distribution of Investment Shares;
(5b) Distribution of Trust Shares;
(1-6) Administrative Arrangements;
(1,2,3,4,5a,6) Distribution Plan;
(1-6) Administration of the Fund(s);
(5a) Expenses of the Fund and
Investment Shares; (5b) Expenses of
the Fund and Trust Shares; (4-6)
Brokerage Transactions.
Item 6. Capital Stock and Other
Securities (1-3) Dividends; (1-3) Capital
Gains; (4-6) Dividends and Capital
Gains; (1-6) Shareholder
Information; (1-6) Voting Rights;
(1-6) Massachusetts Partnership Law;
(1-6) Effect of Banking Laws;
(16) Tax Information; (1-6) Federal
Income Tax; (2) Additional Tax
Information; (5) Other Classes of
Shares.
Item 7. Purchase of Securities
Being Offered (1-6) Net Asset Value; (1,2,3,4,6)
Investing in the Fund; (5a)
Investing in Investment Shares; (5b)
Investing in Trust Shares; (1-6)
Share Purchases; (1-6) Minimum
Investment Required; (1-6) What
Shares Cost; (4,5a,6) Systematic
Investment Plan; (4,5a,6) Reducing
the Sales Charge; (1-6) Exchanging
Securities for Fund Shares; (1-6)
Certificates and Confirmations;
(1-6) Exchange Privilege.
Item 8. Redemption or Repurchase (1,2,3,4,6) Redeeming Shares; (5a)
Redeeming Investment Shares; (5b)
Redeeming Trust Shares; (1-3)
Automatic Redemptions; (4-6)
Redemption Before Purchase
Instruments Clear; (4,5a,6)
Systematic Withdrawal Plan; (1-6) By
Telephone; (1-6) Accounts with Low
Balances; (1,2,3,4,6) Redemption in
Kind.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-6) Cover Page.
Item 11. Table of Contents (1-6) Table of Contents.
Item 12. General Information and
History (1-6) General Information About the
Fund; (1-6) Investment Limitations.
Item 13. Investment Objectives and
Policies (1-6) Investment Objective(s) and
Policies.
Item 14. Management of the Fund (1-6) Trust Management.
Item 15. Control Persons and Principal
Holders of Securities (1-6) Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-6) Investment Advisory Services;
(1-6) Administrative Services; (1-6)
Custodian.
Item 17. Brokerage Allocation (1-6) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered (1-6) Purchasing Shares; (1-6)
Exchange Privilege; (1-6)
Determining Net Asset Value;
(1-6) Redeeming Shares.
Item 20. Tax Status (1-6) Tax Status; (1-6) Yield; (1-3)
Effective Yield; (2) Tax-Equivalent
Yield; (4-6) Total Return.
Item 21. Underwriters (1-6) Administrative Arrangements;
(1,2,3,4,5a,6) Distribution Plan.
Item 22. Calculation of Performance
Data (1-6) Performance Comparisons.
Item 23. Financial Statements (1-6) Filed in Part A.
THE STELLAR FUND
(A PORTFOLIO OF THE STAR FUNDS)
INVESTMENT SHARES
PROSPECTUS
The Investment Shares offered by this prospectus represent interests in The
Stellar Fund (the "Fund"), which is a diversified investment portfolio in the
Star Funds (the "Trust"), an open-end management investment company (a mutual
fund).
The investment objective of the Fund is to maximize total return, a combination
of dividend income and capital appreciation. The Fund pursues this investment
objective by investing in the following security categories: domestic equity
securities, domestic fixed income securities, international securities (equity
and fixed income), real estate securities, precious metal securities, and money
market securities.
THE INVESTMENT SHARES OFFERED BY THIS PROSPECTUS 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, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE INVESTMENT SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Investment Shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Statement of Additional Information for Investment
Shares dated , 1994, with the Securities and Exchange Commission. The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of the
Statement of Additional Information free of charge, obtain other information or
make inquiries about the Fund by writing to the Fund or calling 1-800-677-FUND.
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.
Prospectus dated , 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- -------------------------------------
FINANCIAL HIGHLIGHTS--INVESTMENT
SHARES 2
- -------------------------------------
GENERAL INFORMATION 3
- -------------------------------------
INVESTMENT INFORMATION 3
- -------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Repurchase Agreements 5
When-Issued and Delayed Delivery
Transactions 5
Options Transactions 5
Writing Covered Options 5
The Fund May Only Write Covered
Options 5
Purchasing Options 5
Options Trading Markets 5
Restricted and Illiquid Securities 5
Risk Considerations 6
Foreign Securities 6
Foreign Companies 6
U.S. Government Policies 6
Real Estate Securities 6
Precious Metal Securities and
Precious Metals 7
Fixed Income Securities 7
Investment Limitations 7
STAR FUNDS INFORMATION 7
- -------------------------------------
Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Investment Shares 8
Distribution Plan 8
Administrative Arrangements 9
Administration of the Fund 9
Administrative Services 9
Custodian 9
Transfer Agent, Dividend
Disbursing Agent, and Portfolio
Accounting Services 9
Legal Counsel 9
Independent Public Accountants 9
Brokerage Transactions 9
Expenses of the Fund and Investment
Shares 9
NET ASSET VALUE 10
- -------------------------------------
INVESTING IN INVESTMENT SHARES 10
- -------------------------------------
Minimum Investment Required 10
What Shares Cost 10
Purchases at Net Asset Value 11
Sales Charge Reallowance 11
Reducing the Sales Charge 11
Quantity Discounts and
Accumulated Purchases 11
Letter of Intent 11
Reinvestment Privilege 11
Concurrent Purchases 11
Systematic Investment Plan 12
Share Purchases 12
Through Star Bank 12
By Mail 12
Exchanging Securities for Fund
Shares 12
Certificates and Confirmations 13
Dividends and Capital Gains 13
EXCHANGE PRIVILEGE 13
- -------------------------------------
Star Funds 13
Exchanging Investment Shares 13
Exchange-by-Telephone 13
REDEEMING INVESTMENT SHARES 14
- -------------------------------------
By Telephone 14
Systematic Withdrawal Plan 14
Accounts with Low Balances 14
SHAREHOLDER INFORMATION 14
- -------------------------------------
Voting Rights 14
Massachusetts Partnership Law 15
EFFECT OF BANKING LAWS 15
- -------------------------------------
TAX INFORMATION 15
- -------------------------------------
Federal Income Tax 15
PERFORMANCE INFORMATION 16
- -------------------------------------
OTHER CLASSES OF SHARES 16
- -------------------------------------
FINANCIAL STATEMENTS 17
- -------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 29
- -------------------------------------
ADDRESSES Inside Back Cover
- -------------------------------------
THE STELLAR FUND
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................................. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................................. None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)................ None
Redemption Fees (as a percentage of amount
redeemed, if applicable)............................................. None
Exchange Fee.......................................................... None
<CAPTION>
ANNUAL INVESTMENT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C>
Management Fees....................................................... %
12b-1 Fees (1)........................................................ %
Other Expenses........................................................ %
Total Investment Shares Operating Expenses........................ %
</TABLE>
(1) The maximum 12b-1 distribution fee is 0.25%.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INVESTMENT SHARES OF THE FUND
WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "STAR FUNDS INFORMATION" AND "INVESTING IN
INVESTMENT SHARES."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
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 pe-
riod. As noted in the table above, the Fund
charges no redemption fees for Investment
Shares......................................... $ $ $ $
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Investment Shares of the Fund. The Fund also offers another class of shares
called Trust Shares. Investment Shares and Trust Shares are subject to certain
of the same expenses; however, Trust Shares are not subject to a 12b-1 fee or a
sales charge. See "Other Classes of Shares."
THE STELLAR FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
REFERENCE IS MADE TO THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON PAGE 29.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------
1993 1992 1991*
- ---------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.52 $ 9.80 $10.00
- ----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------
Net investment income 0.24 0.2955 0.05
- ----------------------------------------------
Net realized and unrealized gain (loss) on 0.99 0.7387 (0.25)
investments -------- -------- --------
- ----------------------------------------------
Total from investment operations 1.23 1.0342 (0.20)
- ----------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------
Dividends to shareholders from net investment
income (0.28) (0.3120) --
- ----------------------------------------------
Distributions to shareholders from net real-
ized gain on investment transactions (0.10) (0.0022) --
- ----------------------------------------------
Distributions in excess of net investment in- (0.03)(a) -- --
come -------- -------- --------
- ----------------------------------------------
Total distributions (0.41) (0.3142) --
- ---------------------------------------------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $11.34 $10.52 $ 9.80
- ---------------------------------------------- -------- -------- --------
TOTAL RETURN** 11.99% 10.68% (2.00%)
- ----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------
Expenses 1.45% 1.53% 1.44%(b)
- ----------------------------------------------
Net investment income 1.87% 3.03% 5.32%(b)
- ----------------------------------------------
Expense waiver/reimbursement (c) 0.25% 0.33% 0.29%(b)
- ----------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------
Net assets, end of period (000 omitted) $73,197 $35,544 $13,942
- ----------------------------------------------
Portfolio turnover rate 87% 98% 18%
- ----------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1991 (date of initial
public investment) to November 30, 1991.
** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Distributions in excess of net investment income for the year ended
November 30, 1993 were a result of certain book and tax differences. These
distributions did not represent a return of capital for federal income tax
purposes for the year ended November 30, 1993.
(b) Computed on an annualized basis.
(c) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated January 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Star Funds was established as a Massachusetts business trust under a
Declaration of Trust dated January 23, 1989. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. With respect to the Fund, as
of the date of this prospectus, the Board of Trustees ("Trustees") has
established two classes of shares known as Investment Shares and Trust Shares.
This prospectus relates only to Investment Shares ("Shares") of the Fund.
Shares of the Fund are designed primarily for individual customers of StarBanc
Corporation and its subsidiaries as a convenient means of accumulating an
interest in a professionally managed, diversified portfolio of preferred and
common stocks, bonds, notes, and short-term obligations. A minimum initial
investment of $1,000 ($25 for Star Bank Connections Group Banking customers and
Star Bank employees and members of their immediate family) is required.
Except as otherwise noted in this prospectus, Shares are sold at net asset
value plus an applicable sales charge and redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to maximize total return, a combination
of dividend income and capital appreciation. The Fund pursues this investment
objective by investing in the following securities categories: domestic equity
securities, domestic fixed income securities, international securities (equity
and fixed income), real estate securities, precious metal securities, and money
market securities. As a non-fundamental policy, the Fund will attempt to
minimize overall portfolio risk by limiting investments in any one securities
category (as defined in this prospectus) to not more than 25% of net assets.
The Fund's adviser also believes that by spreading the investment portfolio
across multiple securities categories, the Fund can reduce the impact of
drastic market movements affecting any one securities type. The Fund's adviser
further attempts to reduce risk within each securities category through careful
investment analysis including, but not limited to, the following: the
employment of disciplined value measures (such as price/earnings ratios) when
selecting equity securities; use of ratings assigned by nationally recognized
statistical rating organizations (where applicable); credit research; review of
issuer's historical performance; examination of issuer's dividend growth
record; and consideration of market trends. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing approximately 20% of its
assets, in roughly equal weightings, in each of the following securities
categories: domestic equity securities, domestic fixed income securities,
international securities, and real estate securities. The remaining 20% of its
assets will be invested in cash equivalent securities and/or precious metal
securities. Positions in these categories of securities may vary from as high
as 25% of its assets to as low as 15% of its assets depending on market
factors. Unless indicated otherwise, the investment policies of the Fund may be
changed by the Trustees without the approval of shareholders. Shareholders will
be notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. Consistent with the above, the Fund expects to invest
primarily in domestic equity securities, domestic fixed income securities,
international securities, real estate securities, precious metal securities,
and money market securities. Each category allocation will be made based on the
definitions described below.
. Domestic Equity Securities. The equity portion of the Fund will consist
of U.S. common and preferred stocks. The stocks chosen will, in the
opinion of the Fund's investment adviser, be undervalued relative to
stocks contained in the Standard & Poor's 500 Composite Stock Price
Index. Real estate and precious metal securities of domestic issuers will
not be considered domestic equity securities for purposes of the asset
allocation policy described above.
. Domestic Fixed Income Securities. The fixed income portion of the Fund
will include domestic corporate debt obligations, obligations of the
United States, and notes, bonds, and discount notes of U.S. government
agencies or instrumentalities. Bonds are selected based on the outlook
for interest rates and their yield in relation to other bonds of similar
quality and maturity. The Fund will only invest in bonds, including
convertible bonds, which are rated Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or BBB or higher by Standard & Poor's
Corporation ("Standard & Poor's"), or which, if unrated, are deemed to be
of comparable quality by the investment adviser. In the event that a bond
which had an eligible rating when purchased is downgraded below BBB or
Baa, the Fund's adviser will promptly reassess whether continued holding
of the security is consistent with the Fund's objective.
. International Securities. The international portion of the Fund will
include equity securities of non-U.S. companies and corporate and
government fixed income securities denominated in currencies other than
U.S. dollars. The international equity securities in which the Fund
invests include international stocks traded domestically or abroad
through various stock exchanges, American Depositary Receipts, or
International Depositary Receipts ("ADRs" and "IDRs," respectively). The
international fixed income securities will include ADRs, IDRs, and
government securities of other nations. No ratings for international
fixed income securities are available from Moody's or Standard & Poor's;
however, the Fund will invest in international fixed income securities
which are deemed by the investment adviser to be of a quality comparable
to domestic bonds rated at least Baa or BBB by Moody's or Standard &
Poor's, respectively. The Fund may also invest in shares of open-end and
closed-end management investment companies which invest primarily in
international equity securities described above.
. Real Estate Securities. The real estate portion of the Fund will include
equity securities, including convertible debt securities, of real estate
related companies, and real estate investment trusts. All real estate
securities will be publicly traded, primarily on an exchange. Real estate
securities are not considered domestic equity securities for purposes of
the Fund's asset allocation limitation.
. Precious Metal Securities. The precious metal securities in which the
Fund invests include domestic and international equity securities of
companies that explore for, extract, process, or deal in precious metals,
such as gold, silver, palladium, and platinum. The Fund may also invest
up to 5% of its net assets in domestic and international asset-based
securities, including debt securities, preferred stock, or convertible
securities for which the principal amount, redemption terms, or
conversion terms are related to the market price of some precious metals,
such as gold bullion. The Fund may purchase only asset-based securities
that are rated Baa or better by Moody's or BBB or better by Standard &
Poor's, or, if unrated, are of equal quality in the determination of the
investment adviser. Precious metal securities of foreign issuers will not
be aggregated with other international securities for purposes of
calculating the Fund's investment in international securities under the
allocation policy described above.
. Money Market Securities. The Fund may invest in U.S. and foreign short-
term money market instruments, including:
--commercial paper rated A-1 or A-2 by Standard & Poor's, Prime-1 or
Prime-2 by Moody's, or F-1 or F-2 by Fitch Investors Service, Inc., and
Europaper (dollar-denominated commercial paper issued outside the
United States) rated A-1, A-2, Prime-1, or Prime-2. In the case where
commercial paper or Europaper has received different ratings from
different rating services, such commercial paper or Europaper is an
acceptable temporary investment so long as at least one rating is in
the two highest rating categories of the nationally recognized
statistical rating organizations described above;
--instruments of domestic and foreign banks and savings and loans (such as
certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances) if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount of the
instrument is insured by the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation ("FDIC"), or
the Savings Association Insurance Fund ("SAIF"), which is also
administered by the FDIC. These instruments may include Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs"), and Eurodollar Time Deposits ("ETDs");
--obligations of the U.S. government or its agencies or instrumentalities;
--repurchase agreements; and
--other short-term instruments which are not rated but are determined by
the investment adviser to be of comparable quality to the other
temporary obligations in which the Fund may invest.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them at
a mutually agreed upon time and price. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could
receive less than the repurchase price on any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. In when-issued and
delayed delivery transactions, the Fund relies on the seller to complete
the transaction. The seller's failure to complete the transaction may
cause the Fund to miss a price or yield considered to be advantageous.
OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS. The Fund may write (i.e., sell) covered call and put
options. By writing a call option, the Fund becomes obligated during the term
of the option to deliver the securities underlying the option upon payment of
the exercise price. By writing a put option, the Fund becomes obligated during
the term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised. The Fund also may write straddles
(combinations of covered puts and calls on the same underlying security).
THE FUND MAY ONLY WRITE "COVERED" OPTIONS. This means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills.
The Fund will be considered "covered" with respect to a put option it writes
if, so long as it is obligated as the writer of the put option, it deposits
and maintains with its custodian in a segregated account liquid assets having
a value equal to or greater than the exercise price of the option. The
aggregate value of the obligations underlying the puts will not exceed 50% of
the Fund's net assets.
The principal reason for writing call or put options is to obtain, through a
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. The Fund receives a premium from writing a call
or put option which it retains whether or not the option is exercised. By
writing a call option, the Fund might lose the potential for gain on the
underlying security while the option is open, and by writing a put option, the
Fund might become obligated to purchase the underlying security for more than
its current market price upon exercise.
PURCHASING OPTIONS. The Fund may purchase call and put options for the purpose
of offsetting previously written call and put options of the same series. If
the Fund is unable to effect a closing purchase transaction with respect to
covered options it has written, the Fund will not be able to sell the
underlying securities or dispose of assets held in a segregated account until
the options expire or are exercised.
The Fund currently does not intend to invest more than 5% of its net assets in
options transactions.
Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be
no assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair the Fund's ability
to use such options to achieve its investment objectives.
OPTIONS TRADING MARKETS. Options which the Fund will trade must be listed on
national securities exchanges. Exchanges on which such options currently are
traded are the Chicago Board Options Exchange and the New York, American,
Pacific and Philadelphia Stock Exchanges.
RESTRICTED AND ILLIQUID SECURITIES
The Fund intends to invest in restricted securities. Restricted securities are
any securities in which the Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restrictions on
resale under federal securities law. However, the Fund will limit investments
in illiquid securities, including restricted securities not determined by the
Trustees to be liquid, non-negotiable time deposits, over-the-counter options,
and repurchase agreements providing for settlement in more than seven days
after notice, to 15% of its net assets.
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Fund believes that Section 4(2)
commercial paper and possibly certain other restricted securities which meet
the criteria for liquidity established by the Trustees are quite liquid. The
Fund intends, therefore, to treat the restricted securities which meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Fund's investment adviser, as liquid
and not subject to the investment limitations applicable to illiquid
securities. In addition, because Section 4(2) commercial paper is liquid, the
Fund intends to not subject such paper to the limitation applicable to
restricted securities.
RISK CONSIDERATIONS
FOREIGN SECURITIES. Investing in foreign securities carries substantial risks
in addition to those associated with domestic investments. Foreign securities
may be denominated in foreign currencies. Therefore, the value in U.S. dollars
of the Fund's assets and income may be affected by changes in exchange rates
and regulations. Although considered separate securities categories for
purposes of the Fund's investment policies, the Fund's investment in money
market securities issued by foreign banks and international securities could
result in up to 50% of the Fund's net assets being invested in securities of
foreign issuers. In addition, the Fund's investment in precious metal
securities of foreign issuers (when aggregated with the above) could result in
greater than 50% of the Fund's net assets being invested in securities of
foreign issuers.
Although the Fund values its assets daily in U.S. dollars, it will not convert
its holding of foreign currencies to U.S. dollars daily.
When the Fund converts it holdings to another currency, it may incur currency
conversion costs. Foreign exchange dealers realize a profit on the difference
between the prices at which they buy and sell currencies.
FOREIGN COMPANIES. Other differences between investing in foreign and U.S.
companies include:
. less publicly available information about foreign companies;
. the lack of uniform financial accounting standards applicable to foreign
companies;
. less readily available market quotations on foreign companies;
. differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
. generally lower foreign stock market volume;
. the likelihood that foreign securities may be less liquid or more
volatile;
. generally higher foreign brokerage commissions;
. unreliable mail service between countries; and
. political or financial changes which adversely affect investments in
some countries.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as the
Fund. Although the Fund is unaware of any current restrictions which would
materially adversely affect its ability to meet its investment objective and
policies, investors are advised that these U.S. government policies could be
reinstituted.
REAL ESTATE SECURITIES. Although the Fund's investments in real estate will be
limited to publicly traded securities secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein, the Fund may be subject to risks associated with direct ownership of
real estate. These include declines in the value of real estate, risks related
to general and local economic conditions and increases in interest rates.
Other risks associated with real estate investments include the fact that
equity and mortgage real estate investment trusts are dependent upon
management skill, are not diversified, and are, therefore, subject to the risk
of financing single projects or a limited number of projects. They are also
subject to heavy cash flow dependency, defaults by borrowers, and self-
liquidation.
Additionally, equity real estate investment trusts may be affected by any
changes in the value of the underlying property owned by the trusts, and
mortgage real estate investment trusts may be affected by the quality of any
credit extended.
PRECIOUS METAL SECURITIES AND PRECIOUS METALS. The prices of precious metal
securities and precious metals have historically been subject to high
volatility. The earnings and financial condition of precious metal companies
may be adversely affected by volatile precious metal prices.
FIXED INCOME SECURITIES. Bonds rated BBB by Standard & Poor's or Baa by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money, or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets and
pledge up to 10% of the value of its total assets to secure such
borrowings;
. invest more than 5% of its total assets in the securities of one issuer
(except cash and cash items, repurchase agreements, and U.S. government
securities);
. invest more than 5% of its total assets in securities of issuers that
have records of less than three years of continuous operations;
. acquire more than 10% of the voting securities of any one issuer; or
. invest more than 10% of its assets in securities of other investment
companies. (It should be noted that investment companies incur certain
expenses, such as management fees, and, therefore, any investment in
these securities would be subject to duplicate expenses.)
The above investment limitations cannot be changed without shareholder
approval.
STAR FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising
all the Trust's powers except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Star Bank,
N.A., the Fund's investment adviser (the "Adviser" or "Star Bank"), subject to
direction by the Trustees. 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.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.95 of 1% of the Fund's average daily net assets. The Adviser
has undertaken to reimburse the Fund, up to the amount of the advisory
fee, for operating expenses in excess of limitations established by
certain states. The Adviser may voluntarily choose to waive a portion of
its fee or reimburse the Fund for certain operating expenses.
ADVISER'S BACKGROUND. Star Bank, a national bank, was founded in 1863 and
is the largest bank and trust organization of StarBanc Corporation. As of
December 31, 1993, Star Bank had an asset base of $7.6 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 $12.5 billion as of December 31, 1993.
Star Bank has managed commingled funds since 1957. As of December 31,
1993, it manages 12 common trust funds and collective investment funds
having a market value in excess of$394 million. Additionally, Star Bank
has advised the portfolios of the Trust since 1989.
Peter P. Baden has been employed by Star Bank as an Equity Analyst since
March, 1992, and has been responsible for managing the real estate
securities component of the Fund since that date. From 1987 through March,
1992, Mr. Baden was a Vice President of Pacholder Associates, an
investment adviser located in Cincinnati, Ohio.
B. Randolph Bateman is Senior Vice President and Chief Investment Officer
of Star Bank's Trust Financial Services Group and Manager of its Capital
Asset Management Division. Mr. Bateman has managed the international
securities component of the Fund since May, 1993. Mr. Bateman joined Star
Bank in 1988.
Fred A. Brink has been a Fund Manager for the Capital Management Division
of Star Bank since July, 1991, and has managed the cash equivalent
securities component of the Fund since that date. Prior to July, 1991, Mr.
Brink was in college.
Donald A. Keller has served as a Vice President and the Director of
Research of the Capital Management Division of Star Bank since October,
1993, and has managed the domestic equity securities component of the Fund
since that date. From February, 1989, through October, 1993,Mr. Keller
served as Director of Portfolio Management of Star Bank.
Kirk F. Mentzer is a Fixed Income Manager for the Capital Management
Division of Star Bank. He has managed the domestic fixed income component
of the Fund since its inception inOctober, 1991. Mr. Mentzer joined Star
Bank in May, 1989, as a micro systems analyst and has served as an
investment analyst since June, 1990. From 1989 through June, 1990, Mr.
Mentzer was employed by Star Bank as a systems analyst. From May, 1988,
through 1989, Mr. Mentzer was employed by Great American Insurance as a
management trainee.
DISTRIBUTION OF INVESTMENT SHARES
Federated Securities Corp. is the distributor for Shares of the Fund. It is a
Pennsylvania corporation organized on November 14, 1969, and is the
distributor for a number of investment companies. Federated Securities Corp.
is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan adopted
in accordance with the Investment Company Act Rule 12b-1 (the "Plan"), the
Fund will pay to Federated Securities Corp. an amount computed at an annual
rate of 0.25 of 1% of the average daily net assets to finance any activity
which is principally intended to result in the sale of Shares subject to the
Plan.
Federated Securities Corp. may from time to time, and for such periods as it
deems appropriate, voluntarily reduce its compensation under the Plan to the
extent the expenses attributable to the Shares exceed such lower expense
limitation as the distributor may, by notice to the Trust, voluntarily declare
to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to
provide sales and/or administrative services as agents for their clients or
customers who beneficially own Shares. Administrative services may include,
but are not limited to, the following functions: providing office space,
equipment, telephone facilities, and various personnel (including clerical,
supervisory, and computer) 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 regarding the Fund; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests.
Financial institutions will receive fees from the distributor based upon
Shares owned by their clients or customers. The schedules of such fees and the
basis upon which such fees will be paid will be determined from time to time
by the distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Plan.
The Glass-Steagall Act limits the ability of a depository institution (such as
a commercial bank or a savings and loan association) to become an underwriter
or distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state law.
ADMINISTRATIVE ARRANGEMENTS. The distributor may select brokers and dealers to
provide distribution and administrative services. The distributor may also
select administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide administrative services.
These administrative services include distributing prospectuses and other
information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of Shares.
Brokers, dealers, and administrators will receive fees from the distributor
based upon Shares of the Fund owned by their clients or customers. The fees
are calculated as a percentage of the average aggregate net asset value of
shareholder accounts during the period for which the brokers, dealers, and
administrators provide services. The current annual rate of such fees is up to
0.30 of 1% for the Fund. Any fees paid for these services by the distributor
will be reimbursed by the Adviser. Payments made here are in addition to any
payments made under the Fund's Rule 12b-1 Distribution Plan.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with
certain administrative personnel and services necessary to operate the Fund
and the separate classes, such as legal and accounting services. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS
FEE OF THE TRUST
-------------- -----------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$50,000 per Fund. Federated Administrative Services may voluntarily waive a
portion of its fee.
CUSTODIAN. Star Bank, N.A., Cincinnati, Ohio, is custodian for the securities
and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of
Federated Investors, is transfer agent and dividend disbursing agent for the
Fund. It also provides certain accounting and recordkeeping services with
respect to the Fund's portfolio investments.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin,
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the
Fund are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the Adviser will generally utilize
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling shares of the Fund
and other funds distributed by Federated Securities Corp. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
EXPENSES OF THE FUND AND INVESTMENT SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The Fund expenses for which holders of Shares each pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees, and such non-recurring and extraordinary items as may
arise from time to time.
At present, the only expenses allocated to the Shares as a class are expenses
under the Fund's Rule 12b-1 Plan which relate to the Shares. However, the
Trustees reserve the right to allocate certain other expenses to holders of
Shares as they deem appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: distribution fees; transfer agent fees as identified by
the transfer agent as attributable to holders of Shares; printing and postage
expenses related to preparing and distributing materials such as shareholder
reports, prospectuses and proxies to current shareholders; registration fees
paid to the Securities and Exchange Commission and to state securities
commissions; expenses related to administrative personnel and services as
required to support holders of Shares; legal fees relating solely to Shares;
and Trustees' fees incurred as a result of issues relating solely to Shares.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of Investment Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of
Investment Shares in the liabilities of the Fund and those attributable to
Investment Shares, and dividing the remainder by the number of Investment
Shares outstanding. The net asset value for Trust Shares will differ from that
of Investment Shares due to the variance in net income realized by each class.
Such variance will reflect only accrued net income to which the shareholders of
a particular class are entitled.
INVESTING IN INVESTMENT SHARES
- --------------------------------------------------------------------------------
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000 ($25 for
Star Connections Group Banking customers and Star Bank employees and members of
their immediate family). Subsequent investments may be in any amounts. For
customers of Star Bank, an institutional investor's minimum investment will be
calculated by combining all mutual fund accounts it maintains with Star Bank
and invests with the Fund.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge, as follows:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A AS A
PERCENTAGE OF PERCENTAGE
PUBLIC OFFERING OF NET AMOUNT
AMOUNT OF TRANSACTION PRICE INVESTED
--------------------- --------------- -------------
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million or more 0.25% 0.25%
</TABLE>
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
PURCHASES AT NET ASSET VALUE. The following persons may purchase Shares at net
asset value, without a sales charge: employees and retired employees of Star
Bank, Federated Securities Corp., or their affiliates, or any bank or
investment dealer who has a sales agreement with Federated Securities Corp.
with regard to the Fund, and members of the families (including parents,
grandparents, siblings, spouses, children, aunts, uncles, and in-laws) of such
employees or retired employees.
SALES CHARGE REALLOWANCE. For sales of Shares, Star Bank or any authorized
dealer will normally receive up to 89% of the applicable sales charge. Any
portion of the sales charge which is not paid to Star Bank or a dealer will be
retained by the distributor. However, the distributor, in its sole discretion,
may uniformly offer to pay all dealers selling Shares additional amounts, all
or a portion of which may be paid from the sales charge it normally retains or
any other source available to it. Such additional payments, if accepted by the
dealer, may be in the form of cash or promotional incentives and will be
predicated upon the amount of Shares sold by the dealer.
The sales charge for Shares sold other than through Star Bank or registered
broker/dealers will be retained by the distributor. The distributor may pay
fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Shares.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent;
. using the reinvestment privilege; or
. concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the previous table,
larger purchases reduce the sales charge paid. The Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age
21 when it calculates the sales charge.
If an additional purchase of Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Shares having a current value at the net asset value of $90,000
and he purchases $10,000 more at the current net asset value, the sales charge
on the additional purchase according to the schedule now in effect would be
3.75%, not 4.50%.
To receive the sales charge reduction, Star Bank or the distributor must be
notified by the shareholder in writing at the time the purchase is made that
Shares are already owned or that purchases are being combined. The Fund will
reduce the sales charge after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
Shares over the next 13 months, the sales charge may be reduced by signing a
letter of intent to that effect. This letter of intent includes a provision
for a sales charge adjustment depending on the amount actually purchased
within the 13-month period and a provision for the Fund's custodian to hold
4.50% of the total amount intended to be purchased in escrow (in Shares) until
such purchase is completed.
The 4.50% held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed Shares may
be redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase Shares,
but if the shareholder does, each purchase during the period will be at the
sales charge applicable to the total amount intended to be purchased. This
letter may be dated as of a prior date to include any purchases made within
the past 90 days.
REINVESTMENT PRIVILEGE. If Shares have been redeemed, the shareholder has a
one-time right, within 30 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. Star Bank or the
distributor must be notified by the shareholder in writing or by his financial
institution of the reinvestment in order to eliminate a sales charge. If the
shareholder redeems his Shares, there may be tax consequences. Shareholders
contemplating such transactions should consult their own tax advisers.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction, a
shareholder has the privilege of combining concurrent purchases of two or more
funds in the Trust, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in Shares of this Fund, the
sales charge would be reduced.
To receive this sales charge reduction, Star Bank or the distributor must be
notified by the shareholder in writing at the time the concurrent purchases
are made. The Fund will reduce the sales charge after it confirms the
purchases.
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 $100. Under this plan, funds may be
withdrawn periodically from the shareholder's checking account and invested in
Shares at the net asset value next determined after an order is received by
Star Bank, plus the applicable sales charge. A shareholder may apply for
participation in this plan through Star Bank.
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve Wire System are open for business.
A customer of Star Bank may purchase Shares through Star Bank. Texas residents
must purchase Shares through Federated Securities Corp. at 1-800-356-2805. In
connection with the sale of Shares, the distributor may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request.
THROUGH STAR BANK. To place an order to purchase Shares, a customer of Star
Bank may telephone Star Bank at 1-800-677-FUND or place the order in person.
Purchase orders given by telephone may be electronically recorded.
Payment may be made to Star Bank either by check or federal funds. When
payment is made with federal funds, the order is considered received when
federal funds are received by Star Bank. Purchase orders must be telephoned to
Star Bank by 4:00 p.m. (Eastern time) and payment by federal funds must be
received by Star Bank before 3:00 p.m. (Eastern time) on the following day.
Orders are considered received after payment by check is converted into
federal funds and received by Star Bank.
For purchases by employees, individual investors, or through registered
broker/dealers, requests must be received by Star Bank by 4:00 p.m. (Eastern
time) and payment is normally required in five business days.
Shares cannot be purchased on days on which the New York Stock Exchange is
closed or on federal holidays restricting wire transfers.
BY MAIL. To purchase Shares by mail, individual investors may send a check
made payable to The Stellar Fund--Investment Shares to Star Shareholder
Services, Star Bank, N.A., 425 Walnut Street, ML 7135, Cincinnati, Ohio 45202.
Orders by mail are considered received after payment by check is converted by
Star Bank into federal funds. This is normally five business days after Star
Bank receives the check.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Shares. The Fund will allow
such exchanges only upon the prior approval of the Fund and a determination by
the Fund and the Adviser that the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of
the Fund, must have a readily ascertainable market value, must be liquid, and
must not be subject to restrictions on resale. The Fund acquires the exchanged
securities for investment and not for resale. The market value of any
securities exchanged in an initial investment, plus any cash, must be at least
$25,000.
Securities accepted by the Fund will be valued in the same manner as the Fund
values its assets. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One Share of the Fund
will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, or other
rights attached to the securities become the property of the Fund, along with
the securities.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder of record. Share certificates are not issued.
Detailed confirmations of each purchase or redemption are sent to each
shareholder and dividend confirmations are sent to each shareholder to report
dividends paid.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid quarterly. Capital gains realized by the Fund,
if any, will be distributed at least once every 12 months. Dividends and
capital gains will be automatically reinvested in additional Shares on payment
dates at the ex-dividend date net asset value, unless cash payments are
requested by writing to the Fund or Star Bank.
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
STAR FUNDS
All shareholders of the Fund are shareholders of the Star Funds. Star Funds
currently consists of the Fund, Star Prime Obligations Fund, Star Treasury
Fund, Star Relative Value Fund, Star Tax-Free Money Market Fund, and Star U.S.
Government Income Fund. Until further notice, through a telephone exchange
program, shareholders invested in the money market funds can exchange only
among the other money market funds of the Trust, and shareholders invested in
the non-money market funds can exchange only among the other non-money market
funds of the Trust. Each portfolio in the Star Funds is advised by Star Bank
and distributed by Federated Securities Corp.
EXCHANGING INVESTMENT SHARES
Shareholders of the Fund may exchange Shares for shares of the other Funds in
the Star Funds. In addition, Shares may also be exchanged for certain other
funds distributed by Federated Securities Corp. that are not advised by Star
Bank, N.A. ("Federated Funds"). For further information on the availability of
Federated Funds for exchanges, call Star Bank at 1-800-677-FUND. Shareholders
who exercise this exchange privilege must exchange Shares having a total net
asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the fund into which an exchange is
to be effected.
Shares may be exchanged at net asset value, plus the difference between the
Fund's sales charge (if any) already paid and any sales charge of the fund
into which Shares are to be exchanged, if higher.
When an exchange is made from a fund with a sales charge to a fund with no
sales charge, the shares exchanged and additional shares which have been
purchased by reinvesting dividends on such shares retain the character of the
exchanged shares for purposes of exercising further exchange privileges; thus,
an exchange of such shares for shares of a fund with a sales charge would be
at net asset value.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of
proper instructions and all necessary supporting documents, Shares submitted
for exchange will be redeemed at the next-determined net asset value.
Written exchange instructions may require a signature guarantee. Exercise of
this privilege is treated as a sale for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may
be realized. The exchange privilege may be terminated at any time.
Shareholders will be notified of the termination of the exchange privilege. A
shareholder may obtain further information on the exchange privilege by
calling Star Bank at 1-800-677-FUND.
EXCHANGE-BY-TELEPHONE
Instructions for exchanges between funds which are part of the Star Funds may
be given by telephone to Star Bank at 1-800-677-FUND or to the distributor.
Shares may be exchanged by telephone only between fund accounts having
identical shareholder registrations. Exchange instructions given by telephone
may be electronically recorded.
Telephone exchange instructions must be received before 3:00 p.m. (Eastern
time) in order for Shares to be exchanged the same day. The telephone exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of such modification or termination. Shareholders of the Fund may
have difficulty in making exchanges by telephone through brokers, banks, or
other financial institutions during times of drastic economic or market
changes. If a shareholder cannot contact his broker, bank, or financial
institution by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
REDEEMING INVESTMENT SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their 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 can be made in person or by
telephone through Star Bank.
BY TELEPHONE. A shareholder who is a customer of Star Bank may redeem Shares 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 4:00
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 seven
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 would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Star Bank.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
SYSTEMATIC WITHDRAWAL PLAN
Under a Systematic Withdrawal Plan, accounts may arrange for regular monthly or
quarterly fixed withdrawal payments. Each payment must be at least $100 and may
be as much as 1.50% per month or 4.50% per quarter of the total net asset value
of the Shares in the account when the Systematic Withdrawal Plan is opened.
Depending upon the amount of the withdrawal payments and the amount of
dividends paid with respect to Shares, 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. Due to the fact that Shares are sold with
a sales charge, it is not advisable for shareholders to be purchasing Shares
while participating in this plan.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections
and other matters submitted to shareholders for vote. All shares of all classes
of each portfolio in the Trust have equal voting rights, except that, in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust or the Fund's operation and for the election of
Trustees under certain circumstances. As of January 6, 1994, Firstcinco,
Cincinnati, Ohio, owned 36.59% of the voting securities of the Fund, and
therefore, may, for certain purposes, be deemed to control the Fund and be able
to affect the outcome of certain matters presented to a vote of shareholders.
Trustees may be removed by a two-thirds vote of the number of Trustees prior
to such removal or by a two-thirds vote of the shareholders of the Trust at a
special meeting. A special meeting of shareholders shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
Trust's outstanding shares of all series entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust. To protect
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders for such acts or obligations
of the Trust. These documents require notice of this disclaimer to be given in
each agreement, obligation, or instrument the Trust or its Trustees enter into
or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required, by the Declaration of Trust, to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or obligation of the Trust. Therefore, financial loss resulting from liability
as a shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from its assets.
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 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 customer. 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 agreements 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 Fund 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.
TAX INFORMATION
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. The Fund will provide detailed tax information for
reporting purposes.
Shareholders are urged to consult their own tax advisers regarding the status
of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield for Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
Share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
Total return and yield will be calculated separately for Investment Shares and
Trust Shares. Because Investment Shares are subject to a Rule 12b-1 fee, the
total return and yield for Trust Shares, for the same period, will exceed that
of Investment Shares.
The performance information for Shares normally reflects the effect of the
maximum sales load which, if excluded, would increase the total return and
yield. Occasionally, performance information for Shares which does not reflect
the effect of the sales load may be quoted in advertising.
From time to time the Fund may advertise the performance of Investment Shares
using certain financial publications and/or compare the performance of
Investment Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Trust Shares are sold primarily to trust and private banking customers of
StarBanc Corporation and its subsidiaries. Trust Shares are sold at net asset
value. Investments in Trust Shares are subject to a minimum initial investment
of $1,000.
Trust Shares are not sold pursuant to a Rule 12b-1 Plan.
The amount of dividends payable to Trust Shares will exceed that of Investment
Shares by the difference between Class Expenses and distribution expenses borne
by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
THE STELLAR FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- --------------------------------- -----------
<C> <S> <C>
U.S. EQUITIES--17.9%
-------------------------------------------
BASIC INDUSTRY--3.6%
---------------------------------
BUILDING--0.8%
---------------------------------
30,700 Elcor Corp. (a) $ 575,625
--------------------------------- -----------
CHEMICALS & FERTILIZERS--0.6%
---------------------------------
8,500 duPont (E.I) de Nemours 404,813
--------------------------------- -----------
METALS--0.6%
---------------------------------
26,600 Worthington Industries Inc. 458,850
--------------------------------- -----------
MINING--1.2%
---------------------------------
14,000 Newmont Mining Corp. 890,750
--------------------------------- -----------
TIMBER--0.4%
---------------------------------
6,400 Weyerhauser Co. 280,000
--------------------------------- -----------
TOTAL BASIC INDUSTRY 2,610,038
--------------------------------- -----------
CAPITAL GOODS--3.9%
---------------------------------
APPLIANCES--0.7%
---------------------------------
9,000 Whirlpool Corp. 534,375
--------------------------------- -----------
ELECTRONICS--1.9%
---------------------------------
12,300 Honeywell, Inc. 401,287
---------------------------------
9,000 Intel Corp. 553,500
---------------------------------
7,500 Raytheon Co. 459,375
---------------------------------
-----------
Total 1,414,162
--------------------------------- -----------
OFFICE & BUSINESS EQUIPMENT--1.3%
---------------------------------
7,100 Hewlett Packard Co. 523,625
---------------------------------
18,000 Novell Inc. (a) 423,000
--------------------------------- -----------
Total 946,625
--------------------------------- -----------
TOTAL CAPITAL GOODS 2,895,162
--------------------------------- -----------
-----------
CONSUMER CYCLICAL--3.0%
---------------------------------
AUTOMOTIVE & RELATED--1.9%
---------------------------------
10,400 Cummins Engine Inc. 491,400
---------------------------------
10,000 Goodyear Tire & Rubber 445,000
---------------------------------
9,000 Johnson Controls Inc. 479,250
--------------------------------- -----------
Total 1,415,650
--------------------------------- -----------
RETAILING & APPAREL--1.1%
---------------------------------
5,000 Best Buy Co. Inc. (a) 248,750
---------------------------------
10,600 Penney (J.C.), Inc. 565,775
--------------------------------- -----------
Total 814,525
--------------------------------- -----------
TOTAL CONSUMER CYCLICAL 2,230,175
--------------------------------- -----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -------------------------------------------------- -----------
<C> <S> <C>
U.S. EQUITIES--CONTINUED
------------------------------------------------------------
CONSUMER STAPLES--0.7%
--------------------------------------------------
HOUSEHOLD--0.7%
--------------------------------------------------
9,900 Clorox Co. $ 514,800
-------------------------------------------------- -----------
TOTAL CONSUMER STAPLES 514,800
-------------------------------------------------- -----------
ENERGY--1.6%
--------------------------------------------------
OIL--1.6%
--------------------------------------------------
4,500 Atlantic Richfield Co. 466,875
--------------------------------------------------
17,400 Horsham Corp. 237,075
--------------------------------------------------
5,700 Mobil Corp. 434,625
-------------------------------------------------- -----------
TOTAL ENERGY 1,138,575
-------------------------------------------------- -----------
-----------
FINANCE--1.7%
--------------------------------------------------
BANKS--1.2%
--------------------------------------------------
15,000 First Tenn National Corp. 558,750
--------------------------------------------------
5,000 Morgan (J.P.) & Co., Inc. 354,375
-------------------------------------------------- -----------
Total 913,125
-------------------------------------------------- -----------
INSURANCE--0.5%
--------------------------------------------------
7,400 Aon Corp. 366,300
-------------------------------------------------- -----------
TOTAL FINANCE 1,279,425
-------------------------------------------------- -----------
HEALTH CARE--1.1%
--------------------------------------------------
HOSPITAL SUPPLY--0.4%
--------------------------------------------------
12,500 Allergan, Inc. 278,125
-------------------------------------------------- -----------
DRUGS--0.7%
--------------------------------------------------
8,100 Schering Plough Corp. 541,688
-------------------------------------------------- -----------
TOTAL HEALTH CARE 819,813
-------------------------------------------------- -----------
UTILITIES--2.3%
--------------------------------------------------
ELECTRIC--0.8%
--------------------------------------------------
13,000 Southern Co. 562,250
-------------------------------------------------- -----------
MISCELLANEOUS--0.6%
--------------------------------------------------
13,500 Pentair Inc. 475,875
-------------------------------------------------- -----------
TELECOMMUNICATIONS--0.9%
--------------------------------------------------
11,600 American Telephone & Telegraph Co. 633,650
--------------------------------------------------
-----------
TOTAL UTILITIES 1,671,775
-------------------------------------------------- -----------
TOTAL U.S. EQUITIES (IDENTIFIED COST $13,376,298) 13,159,763
-------------------------------------------------- -----------
INTERNATIONAL SECURITIES--20.3%
------------------------------------------------------------
BASIC INDUSTRY--0.5%
--------------------------------------------------
17,000 Alcan Aluminum Ltd. 352,750
-------------------------------------------------- -----------
TOTAL BASIC INDUSTRY 352,750
-------------------------------------------------- -----------
CONSUMER CYCLICAL--2.1%
--------------------------------------------------
ENTERTAINMENT & LEISURE--0.4%
--------------------------------------------------
8,400 PolyGram N.V. 324,450
-------------------------------------------------- -----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -------------------------------- ----------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
---------------------------------------
PUBLISHING--1.3%
--------------------------------
11,000 News Corp. Ltd. $ 565,125
--------------------------------
4,700 Reuters Holdings PLC 356,025
-------------------------------- ----------
Total 921,150
-------------------------------- ----------
RETAILING & APPAREL--0.4%
--------------------------------
10,000 Luxottica Group SPA 255,000
-------------------------------- ----------
TOTAL CONSUMER CYCLICAL 1,500,600
-------------------------------- ----------
CONSUMER STAPLES--1.8%
--------------------------------
FOOD & BEVERAGE--1.4%
--------------------------------
25,000 Sara Lee Corp. 650,000
--------------------------------
12,500 Seagram, Ltd. 345,313
-------------------------------- ----------
Total 995,313
-------------------------------- ----------
HOUSEHOLD PRODUCTS--0.4%
--------------------------------
2,800 Unilever N.V. 313,950
-------------------------------- ----------
TOTAL CONSUMER STAPLES 1,309,263
-------------------------------- ----------
ENERGY--3.4%
--------------------------------
ENERGY SERVICE & EQUIPMENT--0.3%
--------------------------------
3,600 Schlumberger, Ltd. 207,000
-------------------------------- ----------
INTERNATIONAL OIL--1.4%
--------------------------------
5,000 Chevron Corp. 434,375
--------------------------------
11,700 Repsol SA 334,912
--------------------------------
2,800 Royal Dutch Petroleum 282,800
-------------------------------- ----------
Total 1,052,087
-------------------------------- ----------
NATURAL GAS--1.7%
--------------------------------
7,300 Burlington Northern Inc. 418,838
--------------------------------
17,000 Enron Corp. 529,125
--------------------------------
22,000 TransCanada Pipelines Ltd. 327,250
-------------------------------- ----------
Total 1,275,213
-------------------------------- ----------
TOTAL ENERGY 2,534,300
-------------------------------- ----------
HEALTHCARE--1.5%
--------------------------------
DRUGS--1.5%
--------------------------------
18,500 Rhone-Poulenc Rorer, Inc. 703,000
--------------------------------
15,600 SmithKline Beecham PLC 413,400
-------------------------------- ----------
TOTAL HEALTH CARE 1,116,400
-------------------------------- ----------
UTILITIES--2.0%
--------------------------------
TELECOMMUNICATIONS--2.0%
--------------------------------
20,000 *Cable & Wireless Ltd. 437,500
--------------------------------
10,000 Hong Kong Telecommunications 556,250
--------------------------------
9,000 *Telefonos de Mexico 501,750
-------------------------------- ----------
TOTAL UTILITIES 1,495,500
-------------------------------- ----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------------------------------------------ -----------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
-------------------------------------------------------
MISCELLANEOUS--9.0%
------------------------------------------------
DIVERSIFIED--6.0%
------------------------------------------------
16,250 Asia Pacific Fund, Inc. $ 296,563
------------------------------------------------
21,000 Canadian Pacific, Ltd. 341,250
------------------------------------------------
8,000 Chile Fund, Inc. 283,000
------------------------------------------------
5,333 Emerging Mexico Fund, Inc. 118,659
------------------------------------------------
15,000 First Philippine Fund, Inc. 251,250
------------------------------------------------
33,000 France Growth Fund, Inc. 363,000
------------------------------------------------
10,000 Future Germany Fund, Inc. 143,750
------------------------------------------------
12,000 Greater China Fund, Inc. (a) 237,000
------------------------------------------------
26,000 Japan Equity Fund, Inc. (a) 315,250
------------------------------------------------
15,000 Latin America Equity Fund, Inc. 313,125
------------------------------------------------
13,424 Mexico Fund, Inc. 411,110
------------------------------------------------
15,000 New Germany Fund, Inc. 180,000
------------------------------------------------
26,600 Philips Electronics (a) 518,700
------------------------------------------------
24,000 Swiss Helvetia Fund, Inc. 450,000
------------------------------------------------
10,000 Thai Capital Fund, Inc. 160,000
------------------------------------------------ -----------
Total Diversified 4,382,657
------------------------------------------------ -----------
OTHER--3.0%
------------------------------------------------
3,800 British Airways 239,875
------------------------------------------------
4,300 British Petroleum 254,775
------------------------------------------------
5,000 Fuji Photo Film Co., Ltd. 210,000
------------------------------------------------
3,500 Hitachi Ltd. 245,437
------------------------------------------------
10,400 National Australia Bank Ltd. 412,100
------------------------------------------------
9,000 Pioneer Electric Corp. 191,250
------------------------------------------------
10,000 Thomson CSF 263,750
------------------------------------------------
5,000 Vodaphone Group PLC 405,000
------------------------------------------------ -----------
Total Other 2,222,187
------------------------------------------------ -----------
TOTAL MISCELLANEOUS 6,604,844
------------------------------------------------ -----------
TOTAL INTERNATIONAL SECURITIES (IDENTIFIED COST
$13,187,447) 14,913,657
------------------------------------------------ -----------
REAL ESTATE--18.7%
-------------------------------------------------------
INVESTMENT TRUST--16.9%
------------------------------------------------
20,100 American Health Properties, Inc. 515,063
------------------------------------------------
21,500 Avalon Property, Inc. 419,250
------------------------------------------------
14,000 BRE Properties Inc. 491,750
------------------------------------------------
15,900 Burnham Pacific Properties, Inc. 282,225
------------------------------------------------
18,500 Camden Property, Inc. 444,000
------------------------------------------------
14,000 Chateau Property, Inc. 269,500
------------------------------------------------
18,000 Developers Diversified 486,000
------------------------------------------------
29,000 Federal Realty Investment Trust 764,875
------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- -----------
<C> <S> <C>
REAL ESTATE SECURITIES--CONTINUED
---------------------------------------------------------------
22,000 Health Care Property Investment, Inc. $ 610,500
----------------------------------------------------
23,500 Kimco Realty Corp. 749,062
----------------------------------------------------
47,000 LTC Properties 599,250
----------------------------------------------------
10,000 Manufactured Home Communities Inc. 398,750
----------------------------------------------------
20,000 Meditrust 652,500
----------------------------------------------------
23,000 Merry Land & Investment Co. 428,375
----------------------------------------------------
16,000 Nationwide Health Properties Inc. 604,000
----------------------------------------------------
9,100 Omega Healthcare investors 222,950
----------------------------------------------------
19,000 Pennsylvania Real Estate Inc. 465,500
----------------------------------------------------
29,800 Santa Anita Realty Enterprises 536,400
----------------------------------------------------
53,500 Sizeler Property Investments Inc. 688,812
----------------------------------------------------
60,000 Southwestern Properties 765,000
----------------------------------------------------
48,300 Taubman Centers, Inc. 609,788
----------------------------------------------------
47,200 United Dominion Realty Trust Inc. 649,000
----------------------------------------------------
11,000 Webb Del Corp. 143,000
----------------------------------------------------
16,000 Weingarten Realty Investment 610,000
---------------------------------------------------- -----------
Total 12,405,550
---------------------------------------------------- -----------
HOMEBUILDERS--1.8%
----------------------------------------------------
33,350 Kaufman & Broad Home Corp. 671,169
----------------------------------------------------
17,500 Pulte Corp. 647,500
---------------------------------------------------- -----------
Total 1,318,669
---------------------------------------------------- -----------
TOTAL REAL ESTATE (IDENTIFIED COST $11,837,787) 13,724,219
---------------------------------------------------- -----------
FIXED INCOME OBLIGATIONS--20.0%
---------------------------------------------------------------
U.S. GOVERNMENT--11.5%
----------------------------------------------------
$5,900,000 U.S. Treasury Notes, 3.88%-8.63%, 8/15/94-08/15/2001 6,254,664
----------------------------------------------------
1,850,000 U.S. Treasury Bonds, 7.88%-8.13%, 08/15/2019-
02/15/2021 2,190,067
---------------------------------------------------- -----------
Total U.S. Government 8,444,731
---------------------------------------------------- -----------
U.S. AGENCY--3.9%
----------------------------------------------------
250,000 Federal Home Loan Mortgage Corp. 254,535
----------------------------------------------------
1,300,000 Federal National Mortgage Association 1,323,335
----------------------------------------------------
255,000 FNMA Pool 256,912
----------------------------------------------------
1,000,000 Student Loan Marketing Association 998,140
---------------------------------------------------- -----------
Total U.S. Agency 2,832,922
---------------------------------------------------- -----------
AUTOMOTIVE & RELATED--0.8%
----------------------------------------------------
500,000 Cincinnati Gas & Electric Co. 569,430
---------------------------------------------------- -----------
TOBACCO--0.6%
----------------------------------------------------
400,000 Phillip Morris Cos., Inc. 453,008
---------------------------------------------------- -----------
INDUSTRIAL--0.4%
----------------------------------------------------
250,000 Motorola, Inc. 297,755
---------------------------------------------------- -----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ------------------------------------------------- -----------
<C> <S> <C>
FIXED INCOME OBLIGATIONS--CONTINUED
------------------------------------------------------------
OIL--0.7%
-------------------------------------------------
500,000 Union Pacific Corp. $ 486,610
------------------------------------------------- -----------
ELECTRIC--0.7%
-------------------------------------------------
500,000 Georgia Power Co. 505,325
------------------------------------------------- -----------
FINANCE--1.0%
-------------------------------------------------
250,000 General Electric Capital Corp. 276,325
-------------------------------------------------
250,000 International Lease Finance Co. 258,758
-------------------------------------------------
150,000 Morgan JP & Co. Inc. 162,381
------------------------------------------------- -----------
Total 697,464
------------------------------------------------- -----------
RETAIL--0.6%
-------------------------------------------------
250,000 Kmart Corp. 275,212
-------------------------------------------------
130,000 Wal Mart Stores Inc. 146,212
------------------------------------------------- -----------
Total 421,424
------------------------------------------------- -----------
TOTAL FIXED INCOME OBLIGATIONS (IDENTIFIED COST
$14,625,355) 14,708,669
------------------------------------------------- -----------
**CASH EQUIVALENT & REPURCHASE AGREEMENT--23.3%
------------------------------------------------------------
17,088,000 Donaldson, Lufkin & Jenrette Securities Corp.,
3.22%, dated 11/30/93, due 12/01/93 (at amortized
cost) 17,088,000
------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $70,114,887) $73,594,308+
------------------------------------------------- -----------
</TABLE>
(a) Non-income producing.
* American Depository Receipts.
** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ The cost for federal tax purposes amounts to $70,137,736. The net unrealized
appreciation of investments on a federal tax basis amounts to $3,456,572
which is comprised of $4,504,327 appreciation and $1,047,755 depreciation at
November 30, 1993.
Note: The categories of investments are shown as a percentage of total net
assets ($73,196,884) at November 30, 1993.
(See Notes which are an integral part of the financial statements)
THE STELLAR FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------
Investments in securities $56,506,308
- ----------------------------------------------
Investments in repurchase agreements (Note 2B) 17,088,000
- ---------------------------------------------- -----------
Total investments, at amortized cost and value
(identified cost, $70,114,887 and tax cost,
$70,137,736) (Note 2A) $73,594,308
- -----------------------------------------------------------
Cash 732
- -----------------------------------------------------------
Receivable for Fund shares sold 1,859,636
- -----------------------------------------------------------
Receivable for investment sold 879,551
- -----------------------------------------------------------
Dividends and interest receivable 323,385
- -----------------------------------------------------------
Receivable from administrator 7,985
- -----------------------------------------------------------
Deferred expenses (Note 2F) 2,653
- ----------------------------------------------------------- -----------
Total assets 76,668,250
- -----------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------
Payable for investments purchased 3,381,003
- ----------------------------------------------
Options written, at value (premium received,
$50,978) (Note 2H) 36,189
- ----------------------------------------------
Payable for Fund shares repurchased 4,530
- ----------------------------------------------
Accrued expenses 49,644
- ---------------------------------------------- -------
Total liabilities 3,471,366
- ----------------------------------------------------------- -----------
NET ASSETS for 6,457,063 shares of beneficial interest $73,196,884
outstanding -----------
- -----------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------
Paid-in capital $69,202,605
- -----------------------------------------------------------
Unrealized appreciation of investments and options (in-
cludes $14,789 on options) 3,494,210
- -----------------------------------------------------------
Accumulated net realized gain on investments 714,412
- -----------------------------------------------------------
Accumulated distributions in excess of net investment in- (214,343)
come -----------
- -----------------------------------------------------------
Total $73,196,884
- ----------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Price Per Share:
($73,196,884 / 6,457,063 shares of beneficial interest $11.34
outstanding) -----------
- -----------------------------------------------------------
Computation of Offering Price:
Offering Price Per Share (100/95.5) of $11.34* $11.87
- ----------------------------------------------------------- -----------
</TABLE>
* On sales of $100,000 or more, the offering price is reduced as stated under
"What Shares Cost" in the prospectus.
(See Notes which are an integral part of the financial statements)
THE STELLAR FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------
Interest income (Note 2C) $1,009,091
- -------------------------------------------------------------
Dividend income (Note 2C) 615,646
- ------------------------------------------------------------- ----------
Total investment income 1,624,737
- -------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------
Investment advisory fee (Note 5) $465,417
- ----------------------------------------------------
Trustees' fees 1,729
- ----------------------------------------------------
Administrative personnel and services (Note 5) 62,298
- ----------------------------------------------------
Custodian fees (Note 5) 12,248
- ----------------------------------------------------
Recordkeeping, transfer and dividend disbursing
agent fees (Note 5) 66,937
- ----------------------------------------------------
Fund share registration costs 22,881
- ----------------------------------------------------
Legal fees 7,164
- ----------------------------------------------------
Printing and postage 42,581
- ----------------------------------------------------
Distribution fees (Note 5) 122,478
- ----------------------------------------------------
Insurance premiums 5,413
- ----------------------------------------------------
Auditing fees 18,505
- ----------------------------------------------------
Miscellaneous 3,840
- ---------------------------------------------------- --------
Total expenses 831,491
- ----------------------------------------------------
Deduct--
- ----------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 1,248
- ------------------------------------------
Waiver of distribution fees (Note 5) 122,478 123,726
- ------------------------------------------ -------- --------
Net expenses 707,765
- ------------------------------------------------------------- ----------
Net investment income 916,972
- ------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------
Net realized gain on investment transactions (identified
cost basis)-- 722,961
- -------------------------------------------------------------
Net change in unrealized appreciation/(depreciation) of in- 2,975,694
vestments and options ----------
- -------------------------------------------------------------
Net realized and unrealized gain on investments 3,698,655
- ------------------------------------------------------------- ----------
Change in net assets resulting from operations $4,615,627
- ------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the financial statements)
THE STELLAR FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------
1993 1992
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------
OPERATIONS--
- ----------------------------------------------------
Net investment income $ 916,972 $ 749,915
- ----------------------------------------------------
Net realized gain on investment transactions
($737,312 and $366,379 net gain, respectively, as
computed for federal income tax purposes)
(Note 2D) 722,961 357,882
- ----------------------------------------------------
Change in unrealized appreciation of investments &
options 2,975,694 884,031
- ---------------------------------------------------- ----------- -----------
Change in net assets resulting from operations 4,615,627 1,991,828
- ---------------------------------------------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ----------------------------------------------------
Dividends to shareholders from net investment income (1,062,322) (689,243)
- ----------------------------------------------------
Distributions to shareholders from net realized gain
on investment
transactions (366,287) (3,361)
- ----------------------------------------------------
Distributions in excess of net investment income (214,343) --
- ---------------------------------------------------- ----------- -----------
Change in net assets resulting from distributions (1,642,952) (692,604)
to shareholders ----------- -----------
- ----------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ----------------------------------------------------
Proceeds from sale of shares 45,217,754 23,246,223
- ----------------------------------------------------
Net asset value of shares issued to shareholders
electing to receive
payment of distribution in Fund shares 1,594,012 691,507
- ----------------------------------------------------
Cost of shares redeemed (12,132,012) (3,634,928)
- ---------------------------------------------------- ----------- -----------
Change in net assets from Fund share transactions 34,679,754 20,302,802
- ---------------------------------------------------- ----------- -----------
Change in net assets 37,652,429 21,602,026
- ----------------------------------------------------
NET ASSETS:
- ----------------------------------------------------
Beginning of period 35,544,455 13,942,429
- ---------------------------------------------------- ----------- -----------
End of period (including undistributed net invest-
ment income of
$0 and $145,350, respectively) $73,196,884 $35,544,455
- ---------------------------------------------------- ----------- -----------
</TABLE>
(See Notes which are an integral part of the financial statements)
THE STELLAR FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Star Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Trust
consists of six portfolios. The financial statements included herein present
only those of The Stellar Fund (the "Fund"). The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held.
Effective on or about April 5, 1994 (the effective date for the Trust Shares of
The Stellar Fund), The Stellar Fund will provide two classes of shares ("Trust
Shares" and "Investment Shares"). Trust Shares will be identical in all
respects to Investment Shares except that Investment Shares will be sold
pursuant to a distribution plan ("Plan") adopted in accordance with Investment
Company Act Rule 12b-1. Under the Plan, the Fund may pay Federated Securities
Corp. (the "distributor") a fee at an annual rate up to .25 of 1% of the
average net asset value of Investment Shares to finance any activity which is
principally intended to result in the sale of Investment Shares. In addition,
Investment Shares are sold subject to a sales charge of up to 4.50%.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed securities are valued at the last sale price
reported on national security exchanges. Unlisted securities, or securities
in which there are no sales, and private placement securities are valued on
the basis of prices provided by independent pricing services. Short-term
obligations are valued at the mean between the bid and asked prices as
furnished by an independent pricing service; however, such issues with
maturities of sixty days or less are valued at amortized cost, which
approximates market value.
Although the Fund has invested 20.3% of its securities internationally, the
Fund's management believes that there is no significant concentration of
investments in any one country.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System or to have segregated within the custodian bank's vault,
all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying securities to ensure the existence of a proper level of
collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Fund's adviser to be creditworthy pursuant to guidelines established by
the Board of Trustees. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INCOME--Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis. Interest income includes interest, and
discount earned (net of premium) on short-term obligations, and interest
earned on all other debt securities including original issue discount as
required by the Internal Revenue Code. Dividends to shareholders and capital
gain distributions, if any, are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code, as amended, applicable to investment companies and to
distribute to shareholders each year all of its net taxable income,
including any net realized gains on investments. Accordingly, no provision
for federal tax is necessary.
THE STELLAR FUND
- -------------------------------------------------------------------------------
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-
issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not
for the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. EXPENSES--Expenses incurred by the Trust which do not specifically relate
to an individual Fund are allocated among all Funds based on a Fund's
relative daily average net assets or as deemed appropriate by the
administrator.
H. OPTION CONTRACTS--The Fund may write or purchase option contracts.
Purchased options are accounted for as investment securities. A written
option obligates the Fund to deliver (a call), or to receive (a put), the
contract amount upon exercise by the holder of the option. The value of the
option contract is recorded as a liability and unrealized gain or loss is
measured by the difference between the current value and the premium
received.
The following covered call options were written and outstanding as of
November 30, 1993:
<TABLE>
<S> <C> <C> <C> <C>
STRIKE EXPIRATION
SHARE VALUE PRICE DATE
Best Buy Co. Inc. 5000 $14,064 60 3-19-94
Telefonos de Mexico 9000 9,000 60 1-22-94
J.P. Morgan & Co. 5000 13,125 70 1-22-94
</TABLE>
J. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are paid from the net investment income of
the Fund. Net investment income consists of all dividends or interest received
by the Fund less its expenses. Capital gains realized by the Fund, if any, are
distributed at least once every twelve months. The amounts shown in the
financial statements for net investment income for the year ended November 30,
1993 differ from those determined for tax purposes because of certain book and
tax differences. This resulted in distributions to shareholders in excess of
net investment income. These distributions did not represent a return of
capital for federal income tax purposes for the year ended November 30, 1993.
THE STELLAR FUND
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
---------------------
1993 1992
- ------------------------------------------------------ ---------- ---------
<S> <C> <C>
Shares outstanding, beginning of period 3,377,871 1,423,154
- ------------------------------------------------------
Shares sold 4,030,527 2,236,543
- ------------------------------------------------------
Shares issued to shareholders electing to receive pay-
ments
of distribution in Fund shares 147,387 67,376
- ------------------------------------------------------
Shares redeemed (1,098,722) (349,202)
- ------------------------------------------------------ ---------- ---------
Shares outstanding, end of period 6,457,063 3,377,871
- ------------------------------------------------------ ---------- ---------
</TABLE>
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Star Bank, N.A., the Fund's investment adviser ("Adviser"), receives for its
services an annual investment advisory fee equal to .95 of 1% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive a portion
of its fee or reimburse certain operating expenses of the Fund. For the year
ended November 30, 1993, the Adviser earned an investment advisory fee of
$465,417, of which $1,248 was voluntarily waived.
Federated Administrative Services ("FAS") provides the Fund with certain
administrative personnel and services at an annual rate of .15 of 1% on the
first $250 million of average aggregate daily net assets of the Trust; .125 of
1% on the next $250 million; .10 of 1% on the next $250 million; and .075 of 1%
on average aggregate daily net assets in excess of $750 million. FAS may
voluntarily waive a portion of its fee. For the year ended November 30, 1993,
FAS earned $62,298, none of which was voluntarily waived.
Expenses of organizing the Fund ($23,641) were borne initially by FAS. The Fund
has agreed to pay FAS, at an annual rate of .005 of 1% of average daily net
assets, until the organization expenses are reimbursed, or five years from July
31, 1991, the date the Trust's portfolio became effective, whichever occurs
earlier. Pursuant to this agreement, the Fund reimbursed $2,306 in organization
expenses for the year ended November 30, 1993.
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended. The Fund will compensate
Federated Securities Corp. ("FSC"), the principal distributor, from the assets
of the Fund, for fees it paid which relate to the distribution and
administration of the Fund's shares. The Plan provides that the Fund will incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Fund annually to pay commissions, maintenance fees and to compensate the
distributor. FSC may voluntarily waive all or a portion of its fee. For the
year ended November 30, 1993, FSC earned $122,478 in distribution fees, all of
which were voluntarily waived.
Star Bank, N.A., is the Fund's custodian. Federated Services Company, is the
Fund's transfer and dividend disbursing agent. It also provides certain
accounting and recordkeeping services with respect to the Fund's portfolio of
investments.
Certain Officers and Trustees of the Trust are also Officers and Directors of
the above corporations.
(6) INVESTMENT TRANSACTIONS
Purchases, and sales excluding securities subject to repurchase agreements, of
investments for the year ended November 30, 1993, were as follows:
<TABLE>
<S> <C>
- -------------------
PURCHASES: $60,342,773
- ------------------- -----------
SALES $33,125,046
- ------------------- -----------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of STAR FUNDS (The Stellar Fund):
We have audited the accompanying statement of assets and liabilities of The
Stellar Fund (an investment portfolio of STAR Funds, a Massachusetts business
trust), including the schedule of portfolio investments, as of November 30,
1993, the related statement of operations for the year then ended, and the
statement of changes in net assets and financial highlights (see page 2 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1993 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Stellar Fund, an investment portfolio of STAR Funds, as of November 30, 1993
and the results of its operations for the year then ended, and the changes in
its net assets, and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
January 14, 1994
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The Stellar Fund
Investment Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------
Investment Adviser
Star Bank, N.A. 425 Walnut Street
Cincinnati, Ohio 45202
- ---------------------------------------------------------------------------------
Custodian
Star Bank, N.A. 425 Walnut Street
Cincinnati, Ohio 45202
- ---------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------
</TABLE>
---------------------------
STAR BANK, N.A.
Investment Adviser
---------------------------
FEDERATED SECURITIES CORP.
Distributor
1072404A-R (1/94)
THE STELLAR FUND
(A PORTFOLIO OF THE STAR FUNDS)
TRUST SHARES
PROSPECTUS
The Trust Shares offered by this prospectus represent interests in The Stellar
Fund (the "Fund"), which is a diversified investment portfolio in the Star
Funds (the "Trust"), an open-end management investment company (a mutual fund).
The investment objective of the Fund is to maximize total return, a combination
of dividend income and capital appreciation. The Fund pursues this investment
objective by investing in the following security categories: domestic equity
securities, domestic fixed income securities, international securities (equity
and fixed income), real estate securities, precious metal securities, and money
market securities.
THE TRUST SHARES OFFERED BY THIS PROSPECTUS 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, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THESE TRUST SHARES INVOLVES INVESTMENT RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Trust Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Trust Shares
dated , 1994, with the Securities and Exchange Commission. The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of the
Statement of Additional Information free of charge, obtain other information or
make inquiries about the Fund by writing to the Fund or calling 1-800-677-FUND.
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.
Prospectus dated , 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- -------------------------------------
GENERAL INFORMATION 2
- -------------------------------------
INVESTMENT INFORMATION 2
- -------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Repurchase Agreements 4
When-Issued and Delayed Delivery
Transactions 4
Options Transactions 4
Writing Covered Options 4
The Fund May Only Write Covered
Options 4
Purchasing Options 4
Options Trading Markets 4
Restricted and Illiquid Securities 4
Risk Considerations 5
Foreign Securities 5
Foreign Companies 5
U.S. Government Policies 5
Real Estate Securities 5
Precious Metal Securities and
Precious Metals 6
Fixed Income Securities 6
Investment Limitations 6
STAR FUNDS INFORMATION 6
- -------------------------------------
Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 6
Distribution of Trust Shares 7
Administrative Arrangements 7
Administration of the Fund 7
Administrative Services 7
Custodian 7
Transfer Agent, Dividend
Disbursing Agent, and Portfolio
Accounting Services 7
Legal Counsel 8
Independent Public Accountants 8
Brokerage Transactions 8
Expenses of the Fund and Trust
Shares 8
NET ASSET VALUE 8
- -------------------------------------
INVESTING IN TRUST SHARES 8
- -------------------------------------
Minimum Investment Required 8
What Shares Cost 8
Share Purchases 9
Through Star Bank 9
Exchanging Securities for Fund
Shares 9
Certificates and Confirmations 9
Dividends and Capital Gains 9
EXCHANGE PRIVILEGE 10
- -------------------------------------
Star Funds 10
Exchanging Trust Shares 10
Exchange-by-Telephone 10
REDEEMING TRUST SHARES 10
- -------------------------------------
By Telephone 11
Accounts with Low Balances 11
SHAREHOLDER INFORMATION 11
- -------------------------------------
Voting Rights 11
Massachusetts Partnership Law 11
EFFECT OF BANKING LAWS 12
- -------------------------------------
TAX INFORMATION 12
- -------------------------------------
Federal Income Tax 12
PERFORMANCE INFORMATION 12
- -------------------------------------
OTHER CLASSES OF SHARES 13
- -------------------------------------
Financial Highlights--Investment
Shares 14
FINANCIAL STATEMENTS 15
- -------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 27
- -------------------------------------
ADDRESSES Inside Back Cover
- -------------------------------------
THE STELLAR FUND
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRUST SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)................. None
Redemption Fees (as a percentage of amount
redeemed, if applicable).............................................. None
Exchange Fee........................................................... None
<CAPTION>
ANNUAL TRUST SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
<S> <C>
Management Fees........................................................ %
12b-1 Fees............................................................. None
Other Expenses......................................................... %
Total Trust Shares Operating Expenses.............................. %
</TABLE>
*Total Trust Shares Operating Expenses are estimated based on average
expenses expected to be incurred during the period ending November 30, 1994.
During the course of this period, expenses may be more or less than the average
amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF TRUST SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "STAR FUNDS INFORMATION" AND "INVESTING IN
TRUST SHARES."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment as-
suming (1) 5% annual return and (2) redemption at the end of
each time period. As noted in the table above, the Fund charges
no redemption fees for Trust Shares............................. $ $
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Trust Shares of the Fund. The Fund also offers another class of shares called
Investment Shares. Trust Shares and Investment Shares are subject to certain of
the same expenses; however, Investment Shares are subject to a 12b-1 fee of up
to 0.25% and a sales charge. See "Other Classes of Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Star Funds was established as a Massachusetts business trust under a
Declaration of Trust dated January 23, 1989. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. With respect to the Fund, as
of the date of this prospectus, the Board of Trustees ("Trustees") has
established two classes of shares known as Trust Shares and Investment Shares.
This prospectus relates only to Trust Shares ("Shares") of the Fund.
Shares of the Fund are designed primarily for trust or private banking
customers of StarBanc Corporation and its subsidiaries as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
preferred and common stocks, bonds, notes, and short-term obligations. A
minimum initial investment of $1,000 is required.
Shares are sold and redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to maximize total return, a combination
of dividend income and capital appreciation. The Fund pursues this investment
objective by investing in the following securities categories: domestic equity
securities, domestic fixed income securities, international securities (equity
and fixed income), real estate securities, precious metal securities, and money
market securities. As a non-fundamental policy, the Fund will attempt to
minimize overall portfolio risk by limiting investments in any one securities
category (as defined in this prospectus) to not more than 25% of net assets.
The Fund's adviser also believes that by spreading the investment portfolio
across multiple securities categories, the Fund can reduce the impact of
drastic market movements affecting any one securities type. The Fund's adviser
further attempts to reduce risk within each securities category through careful
investment analysis including, but not limited to, the following: the
employment of disciplined value measures (such as price/earnings ratios) when
selecting equity securities; use of ratings assigned by nationally recognized
statistical rating organizations (where applicable); credit research; review of
issuer's historical performance; examination of issuer's dividend growth
record; and consideration of market trends. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing approximately 20% of its
assets, in roughly equal weightings, in each of the following securities
categories: domestic equity securities, domestic fixed income securities,
international securities, and real estate securities. The remaining 20% of its
assets will be invested in cash equivalent securities and/or precious metal
securities. Positions in these categories of securities may vary from as high
as 25% of its assets to as low as 15% of its assets depending on market
factors. Unless indicated otherwise, the investment policies of the Fund may be
changed by the Trustees without the approval of shareholders. Shareholders will
be notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. Consistent with the above, the Fund expects to invest
primarily in domestic equity securities, domestic fixed income securities,
international securities, real estate securities, precious metal securities,
and money market securities. Each category allocation will be made based on the
definitions described below.
. Domestic Equity Securities. The equity portion of the Fund will consist
of U.S. common and preferred stocks. The stocks chosen will, in the
opinion of the Fund's investment adviser, be undervalued relative to
stocks contained in the Standard & Poor's 500 Composite Stock Price
Index. Real estate and precious metal securities of domestic issuers will
not be considered domestic equity securities for purposes of the asset
allocation policy described above.
. Domestic Fixed Income Securities. The fixed income portion of the Fund
will include domestic corporate debt obligations, obligations of the
United States, and notes, bonds, and discount notes
of U.S. government agencies or instrumentalities. Bonds are selected
based on the outlook for interest rates and their yield in relation to
other bonds of similar quality and maturity. The Fund will only invest in
bonds, including convertible bonds, which are rated Baa or higher by
Moody's Investors Service, Inc. ("Moody's") or BBB or higher by Standard
& Poor's Corporation ("Standard & Poor's"), or which, if unrated, are
deemed to be of comparable quality by the investment adviser. In the
event that a bond which had an eligible rating when purchased is
downgraded below BBB or Baa, the Fund's adviser will promptly reassess
whether continued holding of the security is consistent with the Fund's
objective.
. International Securities. The international portion of the Fund will
include equity securities of non-U.S. companies and corporate and
government fixed income securities denominated in currencies other than
U.S. dollars. The international equity securities in which the Fund
invests include international stocks traded domestically or abroad
through various stock exchanges, American Depositary Receipts, or
International Depositary Receipts ("ADRs" and "IDRs," respectively). The
international fixed income securities will include ADRs, IDRs, and
government securities of other nations. No ratings for international
fixed income securities are available from Moody's or Standard & Poor's;
however, the Fund will invest in international fixed income securities
which are deemed by the investment adviser to be of a quality comparable
to domestic bonds rated at least Baa or BBB by Moody's or Standard &
Poor's, respectively. The Fund may also invest in shares of open-end and
closed-end management investment companies which invest primarily in
international equity securities described above.
. Real Estate Securities. The real estate portion of the Fund will include
equity securities, including convertible debt securities, of real estate
related companies, and real estate investment trusts. All real estate
securities will be publicly traded, primarily on an exchange. Real estate
securities are not considered domestic equity securities for purposes of
the Fund's asset allocation limitation.
. Precious Metal Securities. The precious metal securities in which the
Fund invests include domestic and international equity securities of
companies that explore for, extract, process, or deal in precious metals,
such as gold, silver, palladium, and platinum. The Fund may also invest
up to 5% of its net assets in domestic and international asset-based
securities, including debt securities, preferred stock, or convertible
securities for which the principal amount, redemption terms, or
conversion terms are related to the market price of some precious metals,
such as gold bullion. The Fund may purchase only asset-based securities
that are rated Baa or better by Moody's or BBB or better by Standard &
Poor's, or, if unrated, are of equal quality in the determination of the
investment adviser. Precious metal securities of foreign issuers will not
be aggregated with other international securities for purposes of
calculating the Fund's investment in international securities under the
allocation policy described above.
. Money Market Securities. The Fund may invest in U.S. and foreign short-
term money market instruments, including:
--commercial paper rated A-1 or A-2 by Standard & Poor's, Prime-1 or
Prime-2 by Moody's, or F-1 or F-2 by Fitch Investors Service, Inc., and
Europaper (dollar-denominated commercial paper issued outside the
United States) rated A-1, A-2, Prime-1, or Prime-2. In the case where
commercial paper or Europaper has received different ratings from
different rating services, such commercial paper or Europaper is an
acceptable temporary investment so long as at least one rating is in
the two highest rating categories of the nationally recognized
statistical rating organizations described above;
--instruments of domestic and foreign banks and savings and loans (such as
certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances) if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount of the
instrument is insured by the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation ("FDIC"), or
the Savings Association Insurance Fund ("SAIF"), which is also
administered by the FDIC. These instruments may include Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs"), and Eurodollar Time Deposits ("ETDs");
--obligations of the U.S. government or its agencies or instrumentalities;
--repurchase agreements; and
--other short-term instruments which are not rated but are determined by
the investment adviser to be of comparable quality to the other
temporary obligations in which the Fund may invest.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them at
a mutually agreed upon time and price. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could
receive less than the repurchase price on any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. In when-issued and
delayed delivery transactions, the Fund relies on the seller to complete
the transaction. The seller's failure to complete the transaction may
cause the Fund to miss a price or yield considered to be advantageous.
OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS. The Fund may write (i.e., sell) covered call and put
options. By writing a call option, the Fund becomes obligated during the term
of the option to deliver the securities underlying the option upon payment of
the exercise price. By writing a put option, the Fund becomes obligated during
the term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised. The Fund also may write straddles
(combinations of covered puts and calls on the same underlying security).
THE FUND MAY ONLY WRITE "COVERED" OPTIONS. This means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills.
The Fund will be considered "covered" with respect to a put option it writes
if, so long as it is obligated as the writer of the put option, it deposits
and maintains with its custodian in a segregated account liquid assets having
a value equal to or greater than the exercise price of the option. The
aggregate value of the obligations underlying the puts will not exceed 50% of
the Fund's net assets.
The principal reason for writing call or put options is to obtain, through a
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. The Fund receives a premium from writing a call
or put option which it retains whether or not the option is exercised. By
writing a call option, the Fund might lose the potential for gain on the
underlying security while the option is open, and by writing a put option, the
Fund might become obligated to purchase the underlying security for more than
its current market price upon exercise.
PURCHASING OPTIONS. The Fund may purchase call and put options for the purpose
of offsetting previously written call and put options of the same series. If
the Fund is unable to effect a closing purchase transaction with respect to
covered options it has written, the Fund will not be able to sell the
underlying securities or dispose of assets held in a segregated account until
the options expire or are exercised.
The Fund currently does not intend to invest more than 5% of its net assets in
options transactions.
Options on some securities are relatively new and it is impossible to predict
the amount of trading interest that will exist in such options. There can be
no assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair the Fund's ability
to use such options to achieve its investment objectives.
OPTIONS TRADING MARKETS. Options which the Fund will trade must be listed on
national securities exchanges. Exchanges on which such options currently are
traded are the Chicago Board Options Exchange and the New York, American,
Pacific and Philadelphia Stock Exchanges.
RESTRICTED AND ILLIQUID SECURITIES
The Fund intends to invest in restricted securities. Restricted securities are
any securities in which the Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restrictions on
resale under federal securities law. However, the Fund will limit investments
in illiquid securities, including restricted securities not determined by the
Trustees to be liquid, non-negotiable time deposits, over-the-counter options,
and repurchase agreements providing for settlement in more than seven days
after notice, to 15% of its net assets.
The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law and is generally sold to institutional investors, such as the Fund, who
agree that they are purchasing the paper for investment purposes and not with a
view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Fund believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Fund intends,
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Fund's investment adviser, as liquid and not subject to the
investment limitations applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Fund intends to not subject such
paper to the limitation applicable to restricted securities.
RISK CONSIDERATIONS
FOREIGN SECURITIES. Investing in foreign securities carries substantial risks
in addition to those associated with domestic investments. Foreign securities
may be denominated in foreign currencies. Therefore, the value in U.S. dollars
of the Fund's assets and income may be affected by changes in exchange rates
and regulations. Although considered separate securities categories for
purposes of the Fund's investment policies, the Fund's investment in money
market securities issued by foreign banks and international securities could
result in up to 50% of the Fund's net assets being invested in securities of
foreign issuers. In addition, the Fund's investment in precious metal
securities of foreign issuers (when aggregated with the above) could result in
greater than 50% of the Fund's net assets being invested in securities of
foreign issuers.
Although the Fund values its assets daily in U.S. dollars, it will not convert
its holding of foreign currencies to U.S. dollars daily.
When the Fund converts it holdings to another currency, it may incur currency
conversion costs. Foreign exchange dealers realize a profit on the difference
between the prices at which they buy and sell currencies.
FOREIGN COMPANIES. Other differences between investing in foreign and U.S.
companies include:
. less publicly available information about foreign companies;
. the lack of uniform financial accounting standards applicable to foreign
companies;
. less readily available market quotations on foreign companies;
. differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
. generally lower foreign stock market volume;
. the likelihood that foreign securities may be less liquid or more
volatile;
. generally higher foreign brokerage commissions;
. unreliable mail service between countries; and
. political or financial changes which adversely affect investments in
some countries.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as the
Fund. Although the Fund is unaware of any current restrictions which would
materially adversely affect its ability to meet its investment objective and
policies, investors are advised that these U.S. government policies could be
reinstituted.
REAL ESTATE SECURITIES. Although the Fund's investments in real estate will be
limited to publicly traded securities secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein, the Fund may be subject to risks associated with direct ownership of
real estate. These include declines in the value of real estate, risks related
to general and local economic conditions and increases in interest rates.
Other risks associated with real estate investments include the fact that
equity and mortgage real estate investment trusts are dependent upon
management skill, are not diversified, and are, therefore, subject to the risk
of financing single projects or a limited number of projects. They are also
subject to heavy cash flow dependency, defaults by borrowers, and self-
liquidation.
Additionally, equity real estate investment trusts may be affected by any
changes in the value of the underlying property owned by the trusts, and
mortgage real estate investment trusts may be affected by the quality of any
credit extended.
PRECIOUS METAL SECURITIES AND PRECIOUS METALS. The prices of precious metal
securities and precious metals have historically been subject to high
volatility. The earnings and financial condition of precious metal companies
may be adversely affected by volatile precious metal prices.
FIXED INCOME SECURITIES. Bonds rated BBB by Standard & Poor's or Baa by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money, or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets and
pledge up to 10% of the value of its total assets to secure such
borrowings;
. invest more than 5% of its total assets in the securities of one issuer
(except cash and cash items, repurchase agreements, and U.S. government
securities);
. invest more than 5% of its total assets in securities of issuers that
have records of less than three years of continuous operations;
. acquire more than 10% of the voting securities of any one issuer; or
. invest more than 10% of its assets in securities of other investment
companies. (It should be noted that investment companies incur certain
expenses, such as management fees, and, therefore, any investment in
these securities would be subject to duplicate expenses.)
The above investment limitations cannot be changed without shareholder
approval.
STAR FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising
all the Trust's powers except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Star Bank,
N.A., the Fund's investment adviser (the "Adviser" or "Star Bank"), subject to
direction by the Trustees. 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.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.95 of 1% of the Fund's average daily net assets. The Adviser
has undertaken to reimburse the Fund, up to the amount of the advisory
fee, for operating expenses in excess of limitations established by
certain states. The Adviser may voluntarily choose to waive a portion of
its fee or reimburse the Fund for certain operating expenses.
ADVISER'S BACKGROUND. Star Bank, a national bank, was founded in 1863 and
is the largest bank and trust organization of StarBanc Corporation. As of
December 31, 1993, Star Bank had an asset base of $7.6 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 $12.5 billion as of December 31, 1993.
Star Bank has managed commingled funds since 1957. As of December 31,
1993, it manages 12 common trust funds and collective investment funds
having a market value in excess of$394 million. Additionally, Star Bank
has advised the portfolios of the Trust since 1989.
Peter P. Baden has been employed by Star Bank as an Equity Analyst since
March, 1992, and has been responsible for managing the real estate
securities component of the Fund since that date. From 1987 through March,
1992, Mr. Baden was a Vice President of Pacholder Associates, an
investment adviser located in Cincinnati, Ohio.
B. Randolph Bateman is Senior Vice President and Chief Investment Officer
of Star Bank's Trust Financial Services Group and Manager of its Capital
Asset Management Division. Mr. Bateman has managed the international
securities component of the Fund since May, 1993. Mr. Bateman joined Star
Bank in 1988.
Fred A. Brink has been a Fund Manager for the Capital Management Division
of Star Bank since July, 1991, and has managed the cash equivalent
securities component of the Fund since that date. Prior to July, 1991, Mr.
Brink was in college.
Donald A. Keller has served as a Vice President and the Director of
Research of the Capital Management Division of Star Bank since October,
1993, and has managed the domestic equity securities component of the Fund
since that date. From February, 1989, through October, 1993,Mr. Keller
served as Director of Portfolio Management of Star Bank.
Kirk F. Mentzer is a Fixed Income Manager for the Capital Management
Division of Star Bank. He has managed the domestic fixed income component
of the Fund since its inception inOctober, 1991. Mr. Mentzer joined Star
Bank in May, 1989, as a micro systems analyst and has served as an
investment analyst since June, 1990. From 1989 through June, 1990, Mr.
Mentzer was employed by Star Bank as a systems analyst. From May, 1988,
through 1989, Mr. Mentzer was employed by Great American Insurance as a
management trainee.
DISTRIBUTION OF TRUST SHARES
Federated Securities Corp. is the distributor for Shares of the Fund. It is a
Pennsylvania corporation organized on November 14, 1969, and is the
distributor for a number of investment companies. Federated Securities Corp.
is a subsidiary of Federated Investors.
ADMINISTRATIVE ARRANGEMENTS. The distributor may select brokers and dealers to
provide distribution and administrative services. The distributor may also
select administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide administrative services.
These administrative services include distributing prospectuses and other
information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of Shares.
Brokers, dealers, and administrators will receive fees from the distributor
based upon Shares of the Fund owned by their clients or customers. The fees
are calculated as a percentage of the average aggregate net asset value of
shareholder accounts during the period for which the brokers, dealers, and
administrators provide services. The current annual rate of such fees is up to
0.30 of 1% for the Fund. Any fees paid for these services by the distributor
will be reimbursed by the Adviser.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with
certain administrative personnel and services necessary to operate the Fund
and the separate classes, such as legal and accounting services. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS
FEE OF THE TRUST
-------------- -----------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$50,000 per Fund. Federated Administrative Services may voluntarily waive a
portion of its fee.
CUSTODIAN. Star Bank, N.A., Cincinnati, Ohio, is custodian for the securities
and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of
Federated Investors, is transfer agent and dividend disbursing agent for the
Fund. It also provides certain accounting and recordkeeping services with
respect to the Fund's portfolio investments.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin,
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the
Fund are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the Adviser will generally utilize
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling shares of the Fund
and other funds distributed by Federated Securities Corp. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
EXPENSES OF THE FUND AND TRUST SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and
continuing its existence; registering the Trust with federal and state
securities authorities; Trustees' fees; auditor's fees; the cost of meetings
of Trustees; legal fees of the Trust; association membership dues; and such
non-recurring and extraordinary items as may arise from time to time.
The Fund expenses for which holders of Shares each pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as
may arise from time to time.
In addition, the Trustees reserve the right to allocate certain other expenses
to holders of Shares as they deem appropriate ("Class Expenses"). In any case,
Class Expenses would be limited to: distribution fees; transfer agent fees as
identified by the transfer agent as attributable to holders of Shares;
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Shares; legal fees relating solely
to Shares; and Trustees' fees incurred as a result of issues relating solely
to Shares.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for
Shares is determined by adding the interest of Trust Shares in the market
value of all securities and other assets of the Fund, subtracting the interest
of Trust Shares in the liabilities of the Fund and those attributable to Trust
Shares, and dividing the remainder by the number of Trust Shares outstanding.
The net asset value for Trust Shares will differ from that of Investment
Shares due to the variance in net income realized by each class. Such variance
will reflect only accrued net income to which the shareholders of a particular
class are entitled.
INVESTING IN TRUST SHARES
- -------------------------------------------------------------------------------
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000.
Subsequent investments may be in any amounts. For customers of Star Bank, an
institutional investor's minimum investment will be calculated by combining
all mutual fund accounts it maintains with Star Bank and invests with the
Fund.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed on Shares.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve Wire System are open for business.
A customer of Star Bank may purchase Shares through Star Bank. Texas residents
must purchase Shares through Federated Securities Corp. at 1-800-356-2805. In
connection with the sale of Shares, the distributor may from time to time offer
certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request.
THROUGH STAR BANK. To place an order to purchase Shares, a customer of Star
Bank may telephone Star Bank at 1-800-677-FUND or place the order in person.
Purchase orders given by telephone may be electronically recorded.
Payment may be made to Star Bank either by check or federal funds. When payment
is made with federal funds, the order is considered received when federal funds
are received by Star Bank. Purchase orders must be telephoned to Star Bank by
4:00 p.m. (Eastern time) and payment by federal funds must be received by Star
Bank before 3:00 p.m. (Eastern time) on the following day. Orders are
considered received after payment by check is converted into federal funds and
received by Star Bank.
Shares cannot be purchased on days on which the New York Stock Exchange is
closed or on federal holidays restricting wire transfers.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Shares. The Fund will allow such
exchanges only upon the prior approval of the Fund and a determination by the
Fund and the Adviser that the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of the
Fund, must have a readily ascertainable market value, must be liquid, and must
not be subject to restrictions on resale. The Fund acquires the exchanged
securities for investment and not for resale. The market value of any
securities exchanged in an initial investment, plus any cash, must be at least
$25,000.
Securities accepted by the Fund will be valued in the same manner as the Fund
values its assets. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One Share of the Fund
will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, or other
rights attached to the securities become the property of the Fund, along with
the securities.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued.
Detailed confirmations of each purchase or redemption are sent to each
shareholder and dividend confirmations are sent to each shareholder to report
dividends paid.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid quarterly. Capital gains realized by the Fund,
if any, will be distributed at least once every 12 months. Dividends and
capital gains will be automatically reinvested in additional Shares on payment
dates at the ex-dividend date net asset value, unless cash payments are
requested by writing to the Fund or Star Bank.
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
STAR FUNDS
All shareholders of the Fund are shareholders of the Star Funds. Star Funds
currently consists of the Fund, Star Prime Obligations Fund, Star Treasury
Fund, Star Relative Value Fund, Star Tax-Free Money Market Fund, and Star U.S.
Government Income Fund. Until further notice, through a telephone exchange
program, shareholders invested in the money market funds can exchange only
among the other money market funds of the Trust, and shareholders invested in
the non-money market funds can exchange only among the other non-money market
funds of the Trust. Each portfolio in the Star Funds is advised by Star Bank
and distributed by Federated Securities Corp.
EXCHANGING TRUST SHARES
Shareholders of the Fund may exchange Shares for shares of the other Funds in
the Star Funds. In addition, Shares may also be exchanged for certain other
funds distributed by Federated Securities Corp. that are not advised by Star
Bank, N.A. ("Federated Funds"). For further information on the availability of
Federated Funds for exchanges, call Star Bank at 1-800-677-FUND. Shareholders
who exercise this exchange privilege must exchange Shares having a total net
asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the fund into which an exchange is
to be effected.
Shares may be exchanged at net asset value, plus the difference between the
Fund's sales charge (if any) already paid and any sales charge of the fund
into which Shares are to be exchanged, if higher.
When an exchange is made from a fund with a sales charge to a fund with no
sales charge, the shares exchanged and additional shares which have been
purchased by reinvesting dividends on such shares retain the character of the
exchanged shares for purposes of exercising further exchange privileges; thus,
an exchange of such shares for shares of a fund with a sales charge would be
at net asset value.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of
proper instructions and all necessary supporting documents, Shares submitted
for exchange will be redeemed at the next-determined net asset value.
Written exchange instructions may require a signature guarantee. Exercise of
this privilege is treated as a sale for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may
be realized. The exchange privilege may be terminated at any time.
Shareholders will be notified of the termination of the exchange privilege. A
shareholder may obtain further information on the exchange privilege by
calling Star Bank at 1-800-677-FUND.
EXCHANGE-BY-TELEPHONE
Instructions for exchanges between funds which are part of the Star Funds may
be given by telephone to Star Bank at 1-800-677-FUND or to the distributor.
Shares may be exchanged by telephone only between fund accounts having
identical shareholder registrations. Exchange instructions given by telephone
may be electronically recorded.
Telephone exchange instructions must be received before 3:00 p.m. (Eastern
time) in order for Shares to be exchanged the same day. The telephone exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of such modification or termination. Shareholders of the Fund may
have difficulty in making exchanges by telephone through brokers, banks, or
other financial institutions during times of drastic economic or market
changes. If a shareholder cannot contact his broker, bank, or financial
institution by telephone, it is recommended that an exchange request be made
in writing and sent by overnight mail.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
REDEEMING TRUST SHARES
- -------------------------------------------------------------------------------
The Fund redeems Shares at their 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 can be made in person or by
telephone through Star Bank.
BY TELEPHONE. A shareholder who is a customer of Star Bank may redeem Shares 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 4:00
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 seven
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 would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Star Bank.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that, in matters
affecting only a particular fund or class, only shares of that fund or class
are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust or the Fund's operation and for
the election of Trustees under certain circumstances. As of January 6, 1994,
Firstcinco, Cincinnati, Ohio, owned 36.59% of the voting securities of the
Fund, and therefore, may, for certain purposes, be deemed to control the Fund
and be able to affect the outcome of certain matters presented to a vote of
shareholders.
Trustees may be removed by a two-thirds vote of the number of Trustees prior to
such removal or by a two-thirds vote of the shareholders of the Trust at a
special meeting. A special meeting of shareholders shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
Trust's outstanding shares of all series entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust. To protect
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders for such acts or obligations
of the Trust. These documents require notice of this disclaimer to be given in
each agreement, obligation, or instrument the Trust or its Trustees enter into
or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required, by the Declaration of Trust, to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or obligation of the Trust. Therefore, financial loss resulting from liability
as a shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from its assets.
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 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 customer. 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 agreements 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 Fund 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.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and
to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. The Fund will provide detailed tax information for
reporting purposes.
Shareholders are urged to consult their own tax advisers regarding the status
of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield for Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
Share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
Total return and yield will be calculated separately for Trust Shares and
Investment Shares. Because Investment Shares are subject to a Rule 12b-1 fee,
the total return and yield for Trust Shares, for the same period, will exceed
that of Investment Shares.
From time to time the Fund may advertise the performance of Trust Shares using
certain financial publications and/or compare the performance of Trust Shares
to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Investment Shares are sold primarily to individual customers of StarBanc
Corporation and its subsidiaries. Investment Shares are sold at net asset value
with a maximum sales charge of 4.50%. Investments in Investment Shares are
subject to a minimum initial investment of $1,000 ($25 for Star Bank
Connections Group Banking customers and Star Bank employees and members of
their immediate family).
Investment Shares are distributed pursuant to a Rule 12b-1 Plan adopted by the
Trust whereby the distributor is paid a fee of up to 0.25 of 1% of the average
daily net asset value of Investment Shares.
The amount of dividends payable to Trust Shares will exceed that of Investment
Shares by the difference between Class Expenses and distribution expenses borne
by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
THE STELLAR FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
REFERENCE IS MADE TO THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON PAGE 27.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------
1993 1992 1991*
- ------------------------------------------- ------- -------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.52 $ 9.80 $10.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.24 0.2955 0.05
- -------------------------------------------
Net realized and unrealized gain (loss) on 0.99 0.7387 (0.25)
investments ------- -------- -------
- -------------------------------------------
Total from investment operations 1.23 1.0342 (0.20)
- -------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------
Dividends to shareholders from net invest-
ment
income (0.28) (0.3120) --
- -------------------------------------------
Distributions to shareholders from net
realized gain on investment transactions (0.10) (0.0022) --
- -------------------------------------------
Distributions in excess of net investment (0.03)(a) -- --
income ------- -------- -------
- -------------------------------------------
Total distributions (0.41) (0.3142) --
- ------------------------------------------- ------- -------- -------
NET ASSET VALUE, END OF PERIOD $11.34 $10.52 $ 9.80
- ------------------------------------------- ------- -------- -------
TOTAL RETURN** 11.99% 10.68% (2.00%)
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 1.45% 1.53% 1.44%(b)
- -------------------------------------------
Net investment income 1.87% 3.03% 5.32%(b)
- -------------------------------------------
Expense waiver/reimbursement (c) 0.25% 0.33% 0.29%(b)
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $73,197 $35,544 $13,942
- -------------------------------------------
Portfolio turnover rate 87% 98% 18%
- -------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1991 (date of initial
public investment) to November 30, 1991.
** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Distributions in excess of net investment income for the year ended
November 30, 1993 were a result of certain book and tax differences. These
distributions did not represent a return of capital for federal income tax
purposes for the year ended November 30, 1993.
(b) Computed on an annualized basis.
(c) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated January 31, 1994, which can be obtained free of charge.
THE STELLAR FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- --------------------------------- -----------
<C> <S> <C>
U.S. EQUITIES--17.9%
-------------------------------------------
BASIC INDUSTRY--3.6%
---------------------------------
BUILDING--0.8%
---------------------------------
30,700 Elcor Corp. (a) $ 575,625
--------------------------------- -----------
CHEMICALS & FERTILIZERS--0.6%
---------------------------------
8,500 duPont (E.I) de Nemours 404,813
--------------------------------- -----------
METALS--0.6%
---------------------------------
26,600 Worthington Industries Inc. 458,850
--------------------------------- -----------
MINING--1.2%
---------------------------------
14,000 Newmont Mining Corp. 890,750
--------------------------------- -----------
TIMBER--0.4%
---------------------------------
6,400 Weyerhauser Co. 280,000
--------------------------------- -----------
TOTAL BASIC INDUSTRY 2,610,038
--------------------------------- -----------
CAPITAL GOODS--3.9%
---------------------------------
APPLIANCES--0.7%
---------------------------------
9,000 Whirlpool Corp. 534,375
--------------------------------- -----------
ELECTRONICS--1.9%
---------------------------------
12,300 Honeywell, Inc. 401,287
---------------------------------
9,000 Intel Corp. 553,500
---------------------------------
7,500 Raytheon Co. 459,375
--------------------------------- -----------
Total 1,414,162
--------------------------------- -----------
OFFICE & BUSINESS EQUIPMENT--1.3%
---------------------------------
7,100 Hewlett Packard Co. 523,625
---------------------------------
18,000 Novell Inc. (a) 423,000
--------------------------------- -----------
Total 946,625
--------------------------------- -----------
TOTAL CAPITAL GOODS 2,895,162
--------------------------------- -----------
CONSUMER CYCLICAL--3.0%
---------------------------------
AUTOMOTIVE & RELATED--1.9%
---------------------------------
10,400 Cummins Engine Inc. 491,400
---------------------------------
10,000 Goodyear Tire & Rubber 445,000
---------------------------------
9,000 Johnson Controls Inc. 479,250
--------------------------------- -----------
Total 1,415,650
--------------------------------- -----------
RETAILING & APPAREL--1.1%
---------------------------------
5,000 Best Buy Co. Inc. (a) 248,750
---------------------------------
10,600 Penney (J.C.), Inc. 565,775
--------------------------------- -----------
Total 814,525
--------------------------------- -----------
TOTAL CONSUMER CYCLICAL 2,230,175
--------------------------------- -----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -------------------------------------------------- -----------
<C> <S> <C>
U.S. EQUITIES--CONTINUED
------------------------------------------------------------
CONSUMER STAPLES--0.7%
--------------------------------------------------
HOUSEHOLD--0.7%
--------------------------------------------------
9,900 Clorox Co. $ 514,800
-------------------------------------------------- -----------
TOTAL CONSUMER STAPLES 514,800
-------------------------------------------------- -----------
ENERGY--1.6%
--------------------------------------------------
OIL--1.6%
--------------------------------------------------
4,500 Atlantic Richfield Co. 466,875
--------------------------------------------------
17,400 Horsham Corp. 237,075
--------------------------------------------------
5,700 Mobil Corp. 434,625
-------------------------------------------------- -----------
TOTAL ENERGY 1,138,575
-------------------------------------------------- -----------
FINANCE--1.7%
--------------------------------------------------
BANKS--1.2%
--------------------------------------------------
15,000 First Tenn National Corp. 558,750
--------------------------------------------------
5,000 Morgan (J.P.) & Co., Inc. 354,375
-------------------------------------------------- -----------
Total 913,125
-------------------------------------------------- -----------
INSURANCE--0.5%
--------------------------------------------------
7,400 Aon Corp. 366,300
-------------------------------------------------- -----------
TOTAL FINANCE 1,279,425
-------------------------------------------------- -----------
HEALTH CARE--1.1%
--------------------------------------------------
HOSPITAL SUPPLY--0.4%
--------------------------------------------------
12,500 Allergan, Inc. 278,125
-------------------------------------------------- -----------
DRUGS--0.7%
--------------------------------------------------
8,100 Schering Plough Corp. 541,688
-------------------------------------------------- -----------
TOTAL HEALTH CARE 819,813
-------------------------------------------------- -----------
UTILITIES--2.3%
--------------------------------------------------
ELECTRIC--0.8%
--------------------------------------------------
13,000 Southern Co. 562,250
-------------------------------------------------- -----------
MISCELLANEOUS--0.6%
--------------------------------------------------
13,500 Pentair Inc. 475,875
-------------------------------------------------- -----------
TELECOMMUNICATIONS--0.9%
--------------------------------------------------
11,600 American Telephone & Telegraph Co. 633,650
-------------------------------------------------- -----------
TOTAL UTILITIES 1,671,775
-------------------------------------------------- -----------
TOTAL U.S. EQUITIES (IDENTIFIED COST $13,376,298) 13,159,763
-------------------------------------------------- -----------
INTERNATIONAL SECURITIES--20.3%
------------------------------------------------------------
BASIC INDUSTRY--0.5%
--------------------------------------------------
17,000 Alcan Aluminum Ltd. 352,750
-------------------------------------------------- -----------
TOTAL BASIC INDUSTRY 352,750
-------------------------------------------------- -----------
CONSUMER CYCLICAL--2.1%
--------------------------------------------------
ENTERTAINMENT & LEISURE--0.4%
--------------------------------------------------
8,400 PolyGram N.V. 324,450
-------------------------------------------------- -----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -------------------------------- ----------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
---------------------------------------
PUBLISHING--1.3%
--------------------------------
11,000 News Corp. Ltd. $ 565,125
--------------------------------
4,700 Reuters Holdings PLC 356,025
-------------------------------- ----------
Total 921,150
-------------------------------- ----------
RETAILING & APPAREL--0.4%
--------------------------------
10,000 Luxottica Group SPA 255,000
-------------------------------- ----------
TOTAL CONSUMER CYCLICAL 1,500,600
-------------------------------- ----------
CONSUMER STAPLES--1.8%
--------------------------------
FOOD & BEVERAGE--1.4%
--------------------------------
25,000 Sara Lee Corp. 650,000
--------------------------------
12,500 Seagram, Ltd. 345,313
-------------------------------- ----------
Total 995,313
-------------------------------- ----------
HOUSEHOLD PRODUCTS--0.4%
--------------------------------
2,800 Unilever N.V. 313,950
-------------------------------- ----------
TOTAL CONSUMER STAPLES 1,309,263
-------------------------------- ----------
ENERGY--3.4%
--------------------------------
ENERGY SERVICE & EQUIPMENT--0.3%
--------------------------------
3,600 Schlumberger, Ltd. 207,000
-------------------------------- ----------
INTERNATIONAL OIL--1.4%
--------------------------------
5,000 Chevron Corp. 434,375
--------------------------------
11,700 Repsol SA 334,912
--------------------------------
2,800 Royal Dutch Petroleum 282,800
-------------------------------- ----------
Total 1,052,087
-------------------------------- ----------
NATURAL GAS--1.7%
--------------------------------
7,300 Burlington Northern Inc. 418,838
--------------------------------
17,000 Enron Corp. 529,125
--------------------------------
22,000 TransCanada Pipelines Ltd. 327,250
-------------------------------- ----------
Total 1,275,213
-------------------------------- ----------
TOTAL ENERGY 2,534,300
-------------------------------- ----------
HEALTHCARE--1.5%
--------------------------------
DRUGS--1.5%
--------------------------------
18,500 Rhone-Poulenc Rorer, Inc. 703,000
--------------------------------
15,600 SmithKline Beecham PLC 413,400
-------------------------------- ----------
TOTAL HEALTH CARE 1,116,400
-------------------------------- ----------
UTILITIES--2.0%
--------------------------------
TELECOMMUNICATIONS--2.0%
--------------------------------
20,000 *Cable & Wireless Ltd. 437,500
--------------------------------
10,000 Hong Kong Telecommunications 556,250
--------------------------------
9,000 *Telefonos de Mexico 501,750
-------------------------------- ----------
TOTAL UTILITIES 1,495,500
-------------------------------- ----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------------------------------------------ -----------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
-------------------------------------------------------
MISCELLANEOUS--9.0%
------------------------------------------------
DIVERSIFIED--6.0%
------------------------------------------------
16,250 Asia Pacific Fund, Inc. $ 296,563
------------------------------------------------
21,000 Canadian Pacific, Ltd. 341,250
------------------------------------------------
8,000 Chile Fund, Inc. 283,000
------------------------------------------------
5,333 Emerging Mexico Fund, Inc. 118,659
------------------------------------------------
15,000 First Philippine Fund, Inc. 251,250
------------------------------------------------
33,000 France Growth Fund, Inc. 363,000
------------------------------------------------
10,000 Future Germany Fund, Inc. 143,750
------------------------------------------------
12,000 Greater China Fund, Inc. (a) 237,000
------------------------------------------------
26,000 Japan Equity Fund, Inc. (a) 315,250
------------------------------------------------
15,000 Latin America Equity Fund, Inc. 313,125
------------------------------------------------
13,424 Mexico Fund, Inc. 411,110
------------------------------------------------
15,000 New Germany Fund, Inc. 180,000
------------------------------------------------
26,600 Philips Electronics (a) 518,700
------------------------------------------------
24,000 Swiss Helvetia Fund, Inc. 450,000
------------------------------------------------
10,000 Thai Capital Fund, Inc. 160,000
------------------------------------------------ -----------
Total Diversified 4,382,657
------------------------------------------------ -----------
OTHER--3.0%
------------------------------------------------
3,800 British Airways 239,875
------------------------------------------------
4,300 British Petroleum 254,775
------------------------------------------------
5,000 Fuji Photo Film Co., Ltd. 210,000
------------------------------------------------
3,500 Hitachi Ltd. 245,437
------------------------------------------------
10,400 National Australia Bank Ltd. 412,100
------------------------------------------------
9,000 Pioneer Electric Corp. 191,250
------------------------------------------------
10,000 Thomson CSF 263,750
------------------------------------------------
5,000 Vodaphone Group PLC 405,000
------------------------------------------------ -----------
Total Other 2,222,187
------------------------------------------------ -----------
TOTAL MISCELLANEOUS 6,604,844
------------------------------------------------ -----------
TOTAL INTERNATIONAL SECURITIES (IDENTIFIED COST
$13,187,447) 14,913,657
------------------------------------------------ -----------
REAL ESTATE--18.7%
-------------------------------------------------------
INVESTMENT TRUST--16.9%
------------------------------------------------
20,100 American Health Properties, Inc. 515,063
------------------------------------------------
21,500 Avalon Property, Inc. 419,250
------------------------------------------------
14,000 BRE Properties Inc. 491,750
------------------------------------------------
15,900 Burnham Pacific Properties, Inc. 282,225
------------------------------------------------
18,500 Camden Property, Inc. 444,000
------------------------------------------------
14,000 Chateau Property, Inc. 269,500
------------------------------------------------
18,000 Developers Diversified 486,000
------------------------------------------------
29,000 Federal Realty Investment Trust 764,875
------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- -----------
<C> <S> <C>
REAL ESTATE SECURITIES--CONTINUED
---------------------------------------------------------------
22,000 Health Care Property Investment, Inc. $ 610,500
----------------------------------------------------
23,500 Kimco Realty Corp. 749,062
----------------------------------------------------
47,000 LTC Properties 599,250
----------------------------------------------------
10,000 Manufactured Home Communities Inc. 398,750
----------------------------------------------------
20,000 Meditrust 652,500
----------------------------------------------------
23,000 Merry Land & Investment Co. 428,375
----------------------------------------------------
16,000 Nationwide Health Properties Inc. 604,000
----------------------------------------------------
9,100 Omega Healthcare investors 222,950
----------------------------------------------------
19,000 Pennsylvania Real Estate Inc. 465,500
----------------------------------------------------
29,800 Santa Anita Realty Enterprises 536,400
----------------------------------------------------
53,500 Sizeler Property Investments Inc. 688,812
----------------------------------------------------
60,000 Southwestern Properties 765,000
----------------------------------------------------
48,300 Taubman Centers, Inc. 609,788
----------------------------------------------------
47,200 United Dominion Realty Trust Inc. 649,000
----------------------------------------------------
11,000 Webb Del Corp. 143,000
----------------------------------------------------
16,000 Weingarten Realty Investment 610,000
---------------------------------------------------- -----------
Total 12,405,550
---------------------------------------------------- -----------
HOMEBUILDERS--1.8%
----------------------------------------------------
33,350 Kaufman & Broad Home Corp. 671,169
----------------------------------------------------
17,500 Pulte Corp. 647,500
---------------------------------------------------- -----------
Total 1,318,669
---------------------------------------------------- -----------
TOTAL REAL ESTATE (IDENTIFIED COST $11,837,787) 13,724,219
---------------------------------------------------- -----------
FIXED INCOME OBLIGATIONS--20.0%
---------------------------------------------------------------
U.S. GOVERNMENT--11.5%
----------------------------------------------------
$5,900,000 U.S. Treasury Notes, 3.88%-8.63%, 8/15/94-08/15/2001 6,254,664
----------------------------------------------------
1,850,000 U.S. Treasury Bonds, 7.88%-8.13%, 08/15/2019-
02/15/2021 2,190,067
---------------------------------------------------- -----------
Total U.S. Government 8,444,731
---------------------------------------------------- -----------
U.S. AGENCY--3.9%
----------------------------------------------------
250,000 Federal Home Loan Mortgage Corp. 254,535
----------------------------------------------------
1,300,000 Federal National Mortgage Association 1,323,335
----------------------------------------------------
255,000 FNMA Pool 256,912
----------------------------------------------------
1,000,000 Student Loan Marketing Association 998,140
---------------------------------------------------- -----------
Total U.S. Agency 2,832,922
---------------------------------------------------- -----------
AUTOMOTIVE & RELATED--0.8%
----------------------------------------------------
500,000 Cincinnati Gas & Electric Co. 569,430
---------------------------------------------------- -----------
TOBACCO--0.6%
----------------------------------------------------
400,000 Phillip Morris Cos., Inc. 453,008
---------------------------------------------------- -----------
INDUSTRIAL--0.4%
----------------------------------------------------
250,000 Motorola, Inc. 297,755
---------------------------------------------------- -----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ------------------------------------------------- -----------
<C> <S> <C>
FIXED INCOME OBLIGATIONS--CONTINUED
------------------------------------------------------------
OIL--0.7%
-------------------------------------------------
500,000 Union Pacific Corp. $ 486,610
------------------------------------------------- -----------
ELECTRIC--0.7%
-------------------------------------------------
500,000 Georgia Power Co. 505,325
------------------------------------------------- -----------
FINANCE--1.0%
-------------------------------------------------
250,000 General Electric Capital Corp. 276,325
-------------------------------------------------
250,000 International Lease Finance Co. 258,758
-------------------------------------------------
150,000 Morgan JP & Co. Inc. 162,381
------------------------------------------------- -----------
Total 697,464
------------------------------------------------- -----------
RETAIL--0.6%
-------------------------------------------------
250,000 Kmart Corp. 275,212
-------------------------------------------------
130,000 Wal Mart Stores Inc. 146,212
------------------------------------------------- -----------
Total 421,424
------------------------------------------------- -----------
TOTAL FIXED INCOME OBLIGATIONS (IDENTIFIED COST
$14,625,355) 14,708,669
------------------------------------------------- -----------
**CASH EQUIVALENT & REPURCHASE AGREEMENT--23.3%
------------------------------------------------------------
17,088,000 Donaldson, Lufkin & Jenrette Securities Corp.,
3.22%, dated 11/30/93, due 12/01/93 (at amortized
cost) 17,088,000
------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $70,114,887) $73,594,308+
------------------------------------------------- -----------
</TABLE>
(a) Non-income producing.
* American Depository Receipts.
** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ The cost for federal tax purposes amounts to $70,137,736. The net unrealized
appreciation of investments on a federal tax basis amounts to $3,456,572
which is comprised of $4,504,327 appreciation and $1,047,755 depreciation at
November 30, 1993.
Note: The categories of investments are shown as a percentage of total net
assets ($73,196,884) at November 30, 1993.
(See Notes which are an integral part of the financial statements)
THE STELLAR FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------
Investments in securities $56,506,308
- ----------------------------------------------
Investments in repurchase agreements (Note 2B) 17,088,000
- ---------------------------------------------- -----------
Total investments, at amortized cost and value
(identified cost, $70,114,887 and tax cost,
$70,137,736) (Note 2A) $73,594,308
- -----------------------------------------------------------
Cash 732
- -----------------------------------------------------------
Receivable for Fund shares sold 1,859,636
- -----------------------------------------------------------
Receivable for investment sold 879,551
- -----------------------------------------------------------
Dividends and interest receivable 323,385
- -----------------------------------------------------------
Receivable from administrator 7,985
- -----------------------------------------------------------
Deferred expenses (Note 2F) 2,653
- ----------------------------------------------------------- -----------
Total assets 76,668,250
- -----------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------
Payable for investments purchased 3,381,003
- ----------------------------------------------
Options written, at value (premium received,
$50,978) (Note 2H) 36,189
- ----------------------------------------------
Payable for Fund shares repurchased 4,530
- ----------------------------------------------
Accrued expenses 49,644
- ---------------------------------------------- ---------
Total liabilities 3,471,366
- ----------------------------------------------------------- -----------
NET ASSETS for 6,457,063 shares of beneficial interest $73,196,884
outstanding -----------
- -----------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------
Paid-in capital $69,202,605
- -----------------------------------------------------------
Unrealized appreciation of investments and options (in-
cludes $14,789 on options) 3,494,210
- -----------------------------------------------------------
Accumulated net realized gain on investments 714,412
- -----------------------------------------------------------
Accumulated distributions in excess of net investment in- (214,343)
come -----------
- -----------------------------------------------------------
Total $73,196,884
- ----------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Price Per Share:
($73,196,884 / 6,457,063 shares of beneficial interest $11.34
outstanding) -----------
- -----------------------------------------------------------
Computation of Offering Price:
Offering Price Per Share (100/95.5) of $11.34* $11.87
- ----------------------------------------------------------- -----------
</TABLE>
* On sales of $100,000 or more, the offering price is reduced as stated under
"What Shares Cost" in the prospectus.
(See Notes which are an integral part of the financial statements)
THE STELLAR FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------
Interest income (Note 2C) $1,009,091
- -------------------------------------------------------------
Dividend income (Note 2C) 615,646
- ------------------------------------------------------------- ----------
Total investment income 1,624,737
- -------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------
Investment advisory fee (Note 5) $465,417
- ----------------------------------------------------
Trustees' fees 1,729
- ----------------------------------------------------
Administrative personnel and services (Note 5) 62,298
- ----------------------------------------------------
Custodian fees (Note 5) 12,248
- ----------------------------------------------------
Recordkeeping, transfer and dividend disbursing
agent fees (Note 5) 66,937
- ----------------------------------------------------
Fund share registration costs 22,881
- ----------------------------------------------------
Legal fees 7,164
- ----------------------------------------------------
Printing and postage 42,581
- ----------------------------------------------------
Distribution fees (Note 5) 122,478
- ----------------------------------------------------
Insurance premiums 5,413
- ----------------------------------------------------
Auditing fees 18,505
- ----------------------------------------------------
Miscellaneous 3,840
- ---------------------------------------------------- --------
Total expenses 831,491
- ----------------------------------------------------
Deduct--
- ----------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 1,248
- ------------------------------------------
Waiver of distribution fees (Note 5) 122,478 123,726
- ------------------------------------------ -------- --------
Net expenses 707,765
- ------------------------------------------------------------- ----------
Net investment income 916,972
- ------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------
Net realized gain on investment transactions (identified
cost basis)-- 722,961
- -------------------------------------------------------------
Net change in unrealized appreciation/(depreciation) of in-
vestments and options 2,975,694
- ------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 3,698,655
- ------------------------------------------------------------- ----------
Change in net assets resulting from operations $4,615,627
- ------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the financial statements)
THE STELLAR FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------
1993 1992
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------
OPERATIONS--
- ----------------------------------------------------
Net investment income $ 916,972 $ 749,915
- ----------------------------------------------------
Net realized gain on investment transactions
($737,312 and $366,379 net gain, respectively, as
computed for federal income tax purposes)
(Note 2D) 722,961 357,882
- ----------------------------------------------------
Change in unrealized appreciation of investments &
options 2,975,694 884,031
- ---------------------------------------------------- ----------- -----------
Change in net assets resulting from operations 4,615,627 1,991,828
- ---------------------------------------------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ----------------------------------------------------
Dividends to shareholders from net investment income (1,062,322) (689,243)
- ----------------------------------------------------
Distributions to shareholders from net realized gain
on investment
transactions (366,287) (3,361)
- ----------------------------------------------------
Distributions in excess of net investment income (214,343) --
- ---------------------------------------------------- ----------- -----------
Change in net assets resulting from distributions (1,642,952) (692,604)
to shareholders ----------- -----------
- ----------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ----------------------------------------------------
Proceeds from sale of shares 45,217,754 23,246,223
- ----------------------------------------------------
Net asset value of shares issued to shareholders
electing to receive
payment of distribution in Fund shares 1,594,012 691,507
- ----------------------------------------------------
Cost of shares redeemed (12,132,012) (3,634,928)
- ---------------------------------------------------- ----------- -----------
Change in net assets from Fund share transactions 34,679,754 20,302,802
- ---------------------------------------------------- ----------- -----------
Change in net assets 37,652,429 21,602,026
- ----------------------------------------------------
NET ASSETS:
- ----------------------------------------------------
Beginning of period 35,544,455 13,942,429
- ---------------------------------------------------- ----------- -----------
End of period (including undistributed net invest-
ment income of
$0 and $145,350, respectively) $73,196,884 $35,544,455
- ---------------------------------------------------- ----------- -----------
</TABLE>
(See Notes which are an integral part of the financial statements)
THE STELLAR FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Star Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Trust
consists of six portfolios. The financial statements included herein present
only those of The Stellar Fund (the "Fund"). The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held.
Effective on or about April 5, 1994 (the effective date for the Trust Shares of
The Stellar Fund), The Stellar Fund will provide two classes of shares ("Trust
Shares" and "Investment Shares"). Trust Shares will be identical in all
respects to Investment Shares except that Investment Shares will be sold
pursuant to a distribution plan ("Plan") adopted in accordance with Investment
Company Act Rule 12b-1. Under the Plan, the Fund may pay Federated Securities
Corp. (the "distributor") a fee at an annual rate up to .25 of 1% of the
average net asset value of Investment Shares to finance any activity which is
principally intended to result in the sale of Investment Shares. In addition,
Investment Shares are sold subject to a sales charge of up to 4.50%.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed securities are valued at the last sale price
reported on national security exchanges. Unlisted securities, or securities
in which there are no sales, and private placement securities are valued on
the basis of prices provided by independent pricing services. Short-term
obligations are valued at the mean between the bid and asked prices as
furnished by an independent pricing service; however, such issues with
maturities of sixty days or less are valued at amortized cost, which
approximates market value.
Although the Fund has invested 20.3% of its securities internationally, the
Fund's management believes that there is no significant concentration of
investments in any one country.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System or to have segregated within the custodian bank's vault,
all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying securities to ensure the existence of a proper level of
collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Fund's adviser to be creditworthy pursuant to guidelines established by
the Board of Trustees. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INCOME--Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis. Interest income includes interest, and
discount earned (net of premium) on short-term obligations, and interest
earned on all other debt securities including original issue discount as
required by the Internal Revenue Code. Dividends to shareholders and capital
gain distributions, if any, are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code, as amended, applicable to investment companies and to
distribute to shareholders each year all of its net taxable income,
including any net realized gains on investments. Accordingly, no provision
for federal tax is necessary.
THE STELLAR FUND
- -------------------------------------------------------------------------------
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-
issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not
for the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. EXPENSES--Expenses incurred by the Trust which do not specifically relate
to an individual Fund are allocated among all Funds based on a Fund's
relative daily average net assets or as deemed appropriate by the
administrator.
H. OPTION CONTRACTS--The Fund may write or purchase option contracts.
Purchased options are accounted for as investment securities. A written
option obligates the Fund to deliver (a call), or to receive (a put), the
contract amount upon exercise by the holder of the option. The value of the
option contract is recorded as a liability and unrealized gain or loss is
measured by the difference between the current value and the premium
received.
The following covered call options were written and outstanding as of
November 30, 1993:
<TABLE>
<S> <C> <C> <C> <C>
STRIKE EXPIRATION
SHARE VALUE PRICE DATE
Best Buy Co. Inc. 5000 $14,064 60 3-19-94
Telefonos de Mexico 9000 9,000 60 1-22-94
J.P. Morgan & Co. 5000 13,125 70 1-22-94
</TABLE>
J. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are paid from the net investment income of
the Fund. Net investment income consists of all dividends or interest received
by the Fund less its expenses. Capital gains realized by the Fund, if any, are
distributed at least once every twelve months. The amounts shown in the
financial statements for net investment income for the year ended November 30,
1993 differ from those determined for tax purposes because of certain book and
tax differences. This resulted in distributions to shareholders in excess of
net investment income. These distributions did not represent a return of
capital for federal income tax purposes for the year ended November 30, 1993.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
---------------------
1993 1992
- ------------------------------------------------------ ---------- ---------
<S> <C> <C>
Shares outstanding, beginning of period 3,377,871 1,423,154
- ------------------------------------------------------
Shares sold 4,030,527 2,236,543
- ------------------------------------------------------
Shares issued to shareholders electing to receive pay-
ments
of distribution in Fund shares 147,387 67,376
- ------------------------------------------------------
Shares redeemed (1,098,722) (349,202)
- ------------------------------------------------------ ---------- ---------
Shares outstanding, end of period 6,457,063 3,377,871
- ------------------------------------------------------ ---------- ---------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Star Bank, N.A., the Fund's investment adviser ("Adviser"), receives for its
services an annual investment advisory fee equal to .95 of 1% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive a portion
of its fee or reimburse certain operating expenses of the Fund. For the year
ended November 30, 1993, the Adviser earned an investment advisory fee of
$465,417, of which $1,248 was voluntarily waived.
Federated Administrative Services ("FAS") provides the Fund with certain
administrative personnel and services at an annual rate of .15 of 1% on the
first $250 million of average aggregate daily net assets of the Trust; .125 of
1% on the next $250 million; .10 of 1% on the next $250 million; and .075 of 1%
on average aggregate daily net assets in excess of $750 million. FAS may
voluntarily waive a portion of its fee. For the year ended November 30, 1993,
FAS earned $62,298, none of which was voluntarily waived.
Expenses of organizing the Fund ($23,641) were borne initially by FAS. The Fund
has agreed to pay FAS, at an annual rate of .005 of 1% of average daily net
assets, until the organization expenses are reimbursed, or five years from July
31, 1991, the date the Trust's portfolio became effective, whichever occurs
earlier. Pursuant to this agreement, the Fund reimbursed $2,306 in organization
expenses for the year ended November 30, 1993.
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended. The Fund will compensate
Federated Securities Corp. ("FSC"), the principal distributor, from the assets
of the Fund, for fees it paid which relate to the distribution and
administration of the Fund's shares. The Plan provides that the Fund will incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Fund annually to pay commissions, maintenance fees and to compensate the
distributor. FSC may voluntarily waive all or a portion of its fee. For the
year ended November 30, 1993, FSC earned $122,478 in distribution fees, all of
which were voluntarily waived.
Star Bank, N.A., is the Fund's custodian. Federated Services Company, is the
Fund's transfer and dividend disbursing agent. It also provides certain
accounting and recordkeeping services with respect to the Fund's portfolio of
investments.
Certain Officers and Trustees of the Trust are also Officers and Directors of
the above corporations.
(6) INVESTMENT TRANSACTIONS
Purchases, and sales excluding securities subject to repurchase agreements, of
investments for the year ended November 30, 1993, were as follows:
<TABLE>
<S> <C>
- --------------------
PURCHASES: $60,342,773
- -------------------- -----------
SALES $33,125,046
- -------------------- -----------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of STAR FUNDS (The Stellar Fund):
We have audited the accompanying statement of assets and liabilities of The
Stellar Fund (an investment portfolio of STAR Funds, a Massachusetts business
trust), including the schedule of portfolio investments, as of November 30,
1993, the related statement of operations for the year then ended, and the
statement of changes in net assets and financial highlights (see page 14 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1993 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Stellar Fund, an investment portfolio of STAR Funds, as of November 30, 1993
and the results of its operations for the year then ended, and the changes in
its net assets, and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
January 14, 1994
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The Stellar Fund
Trust Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------
Investment Adviser
Star Bank, N.A. 425 Walnut Street
Cincinnati, Ohio 45202
- ---------------------------------------------------------------------------------
Custodian
Star Bank, N.A. 425 Walnut Street
Cincinnati, Ohio 45202
- ---------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------
</TABLE>
---------------------------
STAR BANK, N.A.
Investment Adviser
---------------------------
FEDERATED SECURITIES CORP.
Distributor
1072404A-I (1/94)
THE STELLAR FUND
INVESTMENT SHARES
TRUST SHARES
(A PORTFOLIO OF THE STAR FUNDS)
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information should be read with
the respective prospectus for Investment Shares and Trust Shares of The
Stellar Fund (the "Fund") dated , 1994. This Combined Statement is
not a prospectus itself. To receive a copy of either prospectus, write
to the Fund or call 1-800-677-FUND.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated , 1994
- ----------------------
STAR BANK, N.A.
Investment Adviser
- ----------------------
FEDERATED SECURITIES CORP.
Distributor
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- --------------------------------------
Types of Investments 1
Convertible Securities 1
When-Issued and Delayed Delivery
Transactions 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Portfolio Turnover 2
INVESTMENT LIMITATIONS 2
- --------------------------------------
TRUST MANAGEMENT 4
- --------------------------------------
Officers and Trustees 4
The Funds 6
Fund Ownership 7
Trustee Liability 7
INVESTMENT ADVISORY SERVICES 7
- --------------------------------------
Adviser to the Fund 7
Advisory Fees 7
ADMINISTRATIVE SERVICES 8
- --------------------------------------
CUSTODIAN 8
- --------------------------------------
BROKERAGE TRANSACTIONS 8
- --------------------------------------
PURCHASING SHARES 8
- --------------------------------------
Distribution Plan (Investment Shares
Only) 8
Administrative Arrangements 9
Conversion to Federal Funds 9
DETERMINING NET ASSET VALUE 9
- --------------------------------------
Determining Market Value of
Securities 9
Trading in Foreign Securities 9
EXCHANGE PRIVILEGE 9
- --------------------------------------
Requirements for Exchange 9
Making an Exchange 10
REDEEMING SHARES 10
- --------------------------------------
Redemption in Kind 10
TAX STATUS 10
- --------------------------------------
The Fund's Tax Status 10
Shareholders' Tax Status 10
TOTAL RETURN 10
- --------------------------------------
YIELD 11
- --------------------------------------
PERFORMANCE COMPARISONS 11
- --------------------------------------
APPENDIX 13
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio of the Star Funds (the "Trust"). The Trust was
established as a Massachusetts business trust under a Declaration of Trust
dated January 23, 1989. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest representing interests in
separate portfolios of securities. On May 1, 1993, the Board of Trustees (the
"Trustees") approved changing the name of the Trust, effective May 1, 1993,
from Losantiville Funds to Star Funds.
Shares of the Fund are offered in two classes, Investment Shares and Trust
Shares (individually and collectively referred to as "Shares" as the context
may require). This Combined Statement of Additional Information relates to both
classes of the above-mentioned Shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to maximize total return, a combination of
dividend income and capital appreciation. The investment objective cannot be
changed without the approval of shareholders. The policies described below may
be changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
TYPES OF INVESTMENTS
Below are securities in which the Fund may invest from time to time.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities. These securities
are backed by:
. the full faith and credit of the U.S. Treasury;
. the issuer's right to borrow from the U.S. Treasury;
. the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
. the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
. Federal Farm Credit Banks;
. Federal Home Loan Banks;
. Federal National Mortgage Association;
. Student Loan Marketing Association; and
. Federal Home Loan Mortgage Corporation.
CONVERTIBLE SECURITIES
Convertible bonds and convertible preferred stocks are fixed income securities
that generally retain the investment characteristics of fixed income securities
until they have been converted but also react to movements in the underlying
equity securities. The holder is entitled to receive the fixed income of a bond
or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Usable bonds are corporate bonds that can be
used, in whole or in part, customarily at full face value, in lieu of cash to
purchase the issuer's common stock. When owned as part of a unit along with
warrants, which are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before the
bond's maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar nonconvertible securities of the same
company. The interest income and dividends from convertible bonds and preferred
stocks provide a stable stream of income with generally higher yields than
common stocks, but lower than non-convertible securities of similar quality.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances in which, in
the adviser's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective. Otherwise,
the Fund will hold or trade the convertible securities. In selecting
convertible securities for the Fund, the adviser evaluates the investment
characteristics of the convertible security as a fixed income instrument and
the investment potential of the underlying equity security for capital
appreciation. In evaluating these matters with respect to a particular
convertible security, the adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to other
investment alternatives, trends in the determinants of the issuer's profits,
and the issuer's management capability and practices.
- --------------------------------------------------------------------------------
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. These transactions are made
to secure what is considered to be an advantageous price and yield for the
Fund. Settlement dates may be a month or more after entering into these
transactions, and the market values of the securities purchased may vary from
the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the
securities to be purchased are segregated at the trade date. These securities
are marked to market daily and are maintained until the transaction is settled.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of the total value of its assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Fund in a
dollar amount sufficient to make payment for the obligations to be purchased
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled.
During the period any reverse repurchase agreements are outstanding, but only
to the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio instruments to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreement.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking short-
term profits, securities in its portfolio will be sold whenever the Fund's
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. For the fiscal years ended November 30, 1993, and 1992, the Fund's
portfolio turnover rates were 87% and 98%, respectively.
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund will not change any of the investment limitations described below
without approval of shareholders.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities.
BORROWING MONEY
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets or in an amount up to one-
third of the value of its total assets, including the amount borrowed, in
order to meet redemption requests without immediately selling portfolio
securities. This borrowing provision is not for investment leverage but
solely to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation
- --------------------------------------------------------------------------------
of portfolio securities would be inconvenient or disadvantageous.
Interest paid on borrowed funds will not be available for investment. The
Fund will liquidate any such borrowings as soon as possible and may not
purchase any portfolio securities while any borrowings are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value
of total assets at the time of the borrowing.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of its total assets in the
securities of any one issuer, except in cash or cash investments,
securities guaranteed by the U.S. government, its agencies or
instrumentalities and repurchase agreements collateralized by such
securities nor will it purchase more than 10% of any class of voting
securities of any one issuer.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management. However, the Fund will acquire no more
than 10% of the voting securities of an issuer and may exercise its
voting power in the Fund's best interest. From time to time, the Fund,
together with other investment companies advised by affiliates or
subsidiaries of Star Bank, may together buy and hold substantial amounts
of a company's voting stock. All such stock may be voted together. In
some cases, the Fund and the other investment companies might
collectively be considered to be in control of the company in which they
have invested. Officers or affiliates of the Fund might possibly become
directors of companies in which the Fund holds stock.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers with records of less than three years of continuous
operations, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Fund's investment adviser
owning individually more than 1/2 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies and limitations.
INVESTING IN REAL ESTATE
The Fund will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate.
INVESTING IN COMMODITIES OR MINERALS
The Fund will not purchase or sell commodities or commodity contracts.
The Fund will not purchase or sell oil, gas, or other mineral development
programs, except for precious metal securities as described in the
prospectus.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold corporate or government bonds, debentures, notes, certificates of
indebtedness or other debt securities permitted by its investment
objective and policies.
CONCENTRATION OF INVESTMENTS IN ONE INDUSTRY
The Fund will not invest 25% or more of the value of its total assets in
any one industry.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except as permitted by its
investment objective and policies.
DEALING IN PUTS AND CALLS
The Fund will not sell puts, calls, straddles or spreads or any
combination of them, except as permitted by its investment policies as
described in the prospectus.
- --------------------------------------------------------------------------------
RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities subject to restrictions on resale under the Securities Act of
1933 except for commercial paper issued under Section 4(2) of the
Securities Act of 1933 and certain other restricted securities which meet
the criteria for liquidity as established by the Trustees.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, invest no more than 5% of its total assets in any one investment
company, or invest more than 10% of its total assets in investment
companies in general. The Fund will not purchase or acquire any security
issued by a registered closed-end investment company if immediately after
the purchase or acquisition 10% or more of the voting securities of the
closed-end investment company would be owned by the Fund and other
investment companies having the same adviser and companies controlled by
these investment companies. The Fund will purchase securities of closed-
end investment companies only in open market transactions involving only
customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation,
reorganization, or acquisition of assets. It should be noted that
investment companies incur certain expenses, such as management fees,
and, therefore, any investment by the Fund in these securities would be
subject to duplicate expenses.
The following investment limitations may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable fixed
time deposits with maturities over seven days, over-the-counter options,
and certain restricted securities not determined by the Trustees to be
liquid.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of the value of its net assets in
warrants. No more than 2% of this 5% may be warrants which are not listed
on the New York Stock Exchange or the American Stock Exchange.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
The Fund does not expect to borrow money, pledge securities, or purchase
restricted securities in excess of 5% of the value of its total assets in the
coming fiscal year.
In connection with investing in shares of other investment companies, it should
be noted that investment companies incur certain expenses such as management
fees, and, therefore, any investment by the Fund in such shares would be
subject to customary expenses.
In addition, to comply with requirements of a particular state, the Fund (i)
will not invest in real estate limited partnerships and (ii) will not purchase
interests in oil, gas, and mineral leases, except it may purchase the
securities of issuers which invest in or sponsor such programs.
TRUST MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions. Except as listed below, none of the Trustees or officers
are affiliated with Star Bank, N.A., Federated Investors, Federated Securities
Corp., Federated Services Company, Federated Administrative Services, or the
Funds (as defined below).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <S>
John F. Donahue +* Chairman and Chairman and Trustee,
Federated Investors Tower Trustee Federated Investors; Chairman
Pittsburgh, PA and Trustee, Federated
Advisers, Federated
Management, and Federated
Research; Director, AEtna Life
and Casualty Company; Chief
Executive Officer and
Director, Trustee, or Managing
General Partner of the Funds;
formerly, Director, The
Standard Fire Insurance
Company.
- -------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment
Wood/IPC Commercial Properties Corporation; Senior
Department Vice-President, John R. Wood
John R. Wood and and Associates, Inc.,
Associates, Inc., Realtors Realtors; President, Northgate
3255 Tamiami Trail North Village Development
Naples, FL Corporation; General Partner
or Trustee in private real
estate ventures in Southwest
Florida; Director, Trustee, or
Managing General Partner of
the Funds; formerly,
President, Naples Property
Management, Inc.
- -------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the
One PNC Plaza--23rd Floor Executive Committee, Michael
Pittsburgh, PA Baker, Inc.; Director,
Trustee, or Managing General
Partner of the Funds;
formerly, Vice Chairman and
Director, PNC Bank, N.A., and
PNC Bank Corp. and Director,
Ryan Homes, Inc.
- -------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The
571 Hayward Mill Road Emerging Germany Fund, Inc.;
Concord, MA Director, Trustee, or Managing
General Partner of the Funds;
formerly, Director, Blue Cross
of Massachusetts, Inc.
- -------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and
3471 Fifth Avenue Internist, Presbyterian and
Suite 1111 Montefiore Hospitals; Clinical
Pittsburgh, PA Professor of Medicine and
Trustee, University of
Pittsburgh; Director, Trustee,
or Managing General Partner of
the Funds.
- -------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner,
5916 Penn Mall Meyer and Flaherty; Director,
Pittsburgh, PA Eat'N Park Restaurants, Inc.,
and Statewide Settlement
Agency, Inc.; Director,
Trustee, or Managing General
Partner of the Funds;
formerly, Counsel, Horizon
Financial, F.A., Western
Region.
- -------------------------------------------------------------------------------
Edward C. Gonzales* President, Vice President, Treasurer, and
Federated Investors Tower Treasurer, Trustee, Federated Investors;
Pittsburgh, PA and Trustee Vice President and Treasurer,
Federated Advisers, Federated
Management, and Federated
Research; Executive Vice
President, Treasurer, and
Director, Federated Securities
Corp.; Trustee, Federated
Services Company; Chairman,
Treasurer, and Director,
Federated Administrative
Services; Trustee or Director
of some of the Funds; Vice
President and Treasurer of the
Funds.
- -------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State
225 Franklin Street Representative, Commonwealth
Boston, MA of Massachusetts; Director,
Trustee, or Managing General
Partner of the Funds;
formerly, President, State
Street Bank and Trust Company
and State Street Boston
Corporation and Trustee, Lahey
Clinic Foundation, Inc.
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <S>
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer
5916 Penn Mall and Flaherty; Chairman,
Pittsburgh, PA Meritcare, Inc.; Director,
Eat'N Park Restaurants, Inc.;
Director, Trustee, or Managing
General Partner of the Funds;
formerly, Vice Chairman,
Horizon Financial, F.A.
- -------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and
1202 Cathedral of Learning Management Consultant; Trustee,
University of Pittsburgh Carnegie Endowment for
Pittsburgh, PA International Peace, RAND
Corporation, Online Computer
Library Center, Inc., and U.S.
Space Foundation; Chairman,
Czecho Slovak Management
Center; Director, Trustee, or
Managing General Partner of the
Funds; President Emeritus,
University of Pittsburgh;
formerly, Chairman, National
Advisory Council for
Environmental Policy and
Technology.
- -------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing
4905 Bayard Street consultant; Director, Trustee,
Pittsburgh, PA or Managing General Partner of
the Funds.
- -------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and
Federated Investors Tower Trustee, Federated Investors;
Pittsburgh, PA Chairman and Director,
Federated Securities Corp.;
President or Vice President of
the Funds; Director or Trustee
of some of the Funds.
- -------------------------------------------------------------------------------
Joseph S. Machi Vice President Vice President, Federated
Federated Investors Tower and Assistant Administrative Services; Vice
Pittsburgh, PA Treasurer President and Assistant
Treasurer of some of the Funds.
- -------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary,
Federated Investors Tower and Secretary General Counsel, and Trustee,
Pittsburgh, PA Federated Investors; Vice
President, Secretary, and
Trustee, Federated Advisers,
Federated Management, and
Federated Research; Trustee,
Federated Services Company;
Executive Vice President,
Secretary, and Director,
Federated Administrative
Services; Director and
Executive Vice President,
Federated Securities Corp.;
Vice President and Secretary of
the Funds.
- -------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee,
Federated Investors Tower Federated Investors; Executive
Pittsburgh, PA Vice President, Federated
Securities Corp.; President and
Trustee, Federated Advisers,
Federated Management, and
Federated Research; Vice
President of the Funds;
Director, Trustee, or Managing
General Partner of some of the
Funds; formerly, Vice
President, The Standard Fire
Insurance Company and President
of its Federated Research
Division.
- -------------------------------------------------------------------------------
</TABLE>
*This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio Tax-
Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; FT Series, Inc.; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust;
Federated Growth Trust; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust;
- --------------------------------------------------------------------------------
Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate
Government Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility
Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
Term Trust, Inc.-1999; Liberty U.S. Government Money Market Trust; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short-
Term Municipal Trust; Signet Select Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; and Trust for U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding Shares.
Prior to the creation of separate classes of Shares, as of January 6, 1994, the
following shareholder of record owned 5% or more of the outstanding Shares of
the Fund: Firstcinco, Cincinnati, Ohio, owned approximately 2,512,039 Shares
(36.59%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Star Bank, N.A. ("Star Bank" or "Adviser").
Star Bank is a wholly-owned subsidiary of StarBanc Corporation. Star Bank shall
not be liable to the Trust, the Fund, or any shareholder of the Fund for any
losses that may be sustained in the purchase, holding, or sale of any security,
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Star Bank receives an annual investment advisory fee
as described in the prospectus. For the fiscal years ended November 30, 1993,
and 1992, and for the period from the Fund's date of initial public investment
(October 18, 1991) to November 30, 1991, prior to the creation of separate
classes of Shares, the Adviser earned $465,417, $235,165, and $15,126,
respectively, of which $1,248, $18,156, and $2,485, respectively, were
voluntarily waived. All advisory fees were computed on the same basis as
described in the prospectus.
STATE EXPENSE LIMITATIONS
The Fund has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the Adviser has agreed to
reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the fiscal years ended November 30, 1993, and
1992, and for the period from October 18, 1991 (date of initial public
investment), to November 30, 1991, prior to the creation of separate classes of
Shares, the Fund incurred administrative service fees of $62,298, $32,167, and
$2,103, respectively, of which $0, $787, and $2,103, respectively, were
voluntarily waived.
In addition, John A. Staley, IV, an officer of the Trust, holds approximately
15% of the outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services. For the fiscal years ended November 30,
1993, 1992, and 1991, Federated Administrative Services paid approximately
$164,324, $186,144, and $193,178, respectively, for services provided by
Commercial Data Services, Inc.
CUSTODIAN
- --------------------------------------------------------------------------------
Star Bank is custodian for the securities and cash of the Fund. Under the
Custodian Agreement, Star Bank holds the Fund's portfolio securities in
safekeeping and keeps all necessary records and documents relating to its
duties. The custodian receives an annual fee equal to 0.025 of 1% of the Fund's
average daily net assets.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include:
. advice as to the advisability of investing in securities;
. security analysis and reports;
. economic studies;
. industry studies;
. receipt of quotations for portfolio evaluations; and
. similar services.
The Adviser exercises reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions. It
determines in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided.
Research services provided by brokers and dealers may be used by the Adviser in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser might otherwise have paid,
it would tend to reduce its expenses.
For the fiscal years ended November 30, 1993, and 1992, and for the period
ended November 30, 1991, prior to the creation of separate classes of Shares,
the Fund paid total brokerage commissions of $195,196, $212,801, and $37,018,
respectively.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Except under certain circumstances described in the respective prospectuses,
Shares are sold at their net asset value plus a sales charge, if any, on days
the New York Stock Exchange and the Federal Reserve Wire System are open for
business. Except under the circumstances described in the respective
prospectuses, the minimum initial investment in the Fund by an investor is
$1,000. With respect to the Investment Shares, the minimum initial investment
may be waived from time to time for employees and retired employees of Star
Bank, N.A., and for members of the families (including parents, grandparents,
siblings, spouses, children, aunts, uncles, and in-laws) of such employees or
retired employees. The procedure for purchasing Shares is explained in the
respective prospectus under "Investing in Investment Shares" or "Investing in
Trust Shares."
DISTRIBUTION PLAN (INVESTMENT SHARES ONLY)
With respect to Investment Shares of 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 Federated Securities Corp. to finance any
activity which is principally intended to result in the sale of Shares subject
to the Plan. Such activities may include the advertising and marketing of
Shares; preparing, printing, and distributing prospectuses and sales literature
to prospective shareholders, brokers, or administrators; and implementing and
operating the Plan. Pursuant to the Plan, Federated Securities Corp. may pay
fees to brokers for distribution and administrative services and to
administrators for administrative services as to Shares. The administrative
services are provided by a representative who has knowledge of the shareholder's
particular circumstances and goals, and include, but are not limited to:
communicating account openings; communicating account closings; entering
purchase transactions; entering redemption transactions; providing or arranging
to provide accounting support for all transactions, wiring funds and receiving
funds for Share purchases and redemptions, confirming and reconciling all
transactions, reviewing the activity in Fund accounts, and providing training
and supervision of broker personnel; posting and reinvesting dividends to Fund
accounts or arranging for this service to be performed by the Fund's transfer
agent; and maintaining and distributing current copies of prospectuses and
shareholder reports to the beneficial owners of Shares and prospective
shareholders. 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 objectives.
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to, providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records, process purchase and
redemption transactions, process automatic investments of client account cash
balances, answer routine client inquiries regarding the Fund, assist clients in
changing dividend options, account designations, and addresses, and providing
such other services as the Fund may reasonably request.
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.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value generally changes each day. The days on which the net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the Fund's portfolio securities are determined as
follows:
. for equity securities and bonds and other fixed income securities, according
to the last sale price on a national securities exchange, if available;
. in the absence of recorded sales of equity securities, according to the mean
between the last closing bid and asked prices and for bonds and other fixed
income securities as determined by an independent pricing services;
. for unlisted equity securities, the latest bid prices; or
. for all other securities, at fair value as determined in good faith by the
Trustees.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Trust values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of
portfolio securities, these securities may be valued at their fair value as
determined in good faith by the Trustees, although the actual calculation may
be done by others.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
REQUIREMENTS FOR EXCHANGE
Shareholders using the exchange privilege must exchange Shares having a net
asset value of at least $1,000. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed
and the proceeds invested in shares of the other fund. Further information on
the exchange privilege and prospectuses may be obtained by calling Star Bank at
the number on the cover of this Statement.
MAKING AN EXCHANGE
Instructions for exchanges may be given in writing. Written instructions may
require a signature guarantee.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at the next computed net asset value 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. Redemption procedures are explained in the
respective prospectus under "Redeeming Investment Shares" or "Redeeming Trust
Shares."
REDEMPTION IN KIND
Although the Trust intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part by
a distribution of securities from the respective fund's portfolio. To satisfy
registration requirements in a particular state, redemption in kind will be
made in readily marketable securities to the extent that such securities are
available. If this state's policy changes, the Fund reserves the right to
redeem in kind by delivering those securities it deems appropriate.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 under the Investment Company
Act of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the respective
class' net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must, among
other requirements:
. derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
. derive less than 30% of its gross income from the sale of securities held
less than three months;
. invest in securities within certain statutory limits; and
. distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. The dividends received deduction for
corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends received
deduction to the Fund if the Fund were a regular corporation, and to the extent
designated by the Fund as so qualifying. These dividends and any short-term
capital gains are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
Shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
Prior to the creation of separate classes of Shares, the Fund's average annual
total returns for the fiscal year ended November 30, 1993, and for the period
from October 18, 1991 (date of initial public investment), to November 30,
1993, were 6.90%, and 7.07%, respectively.
- --------------------------------------------------------------------------------
The average annual total return for both classes of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of Shares owned
at the end of the period by the maximum offering price per Share at the end of
the period. The number of Shares owned at the end of the period is based on the
number of Shares purchased at the beginning of the period with $1,000, less any
applicable sales load, adjusted over the period by any additional Shares,
assuming the quarterly reinvestment of all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
Prior to the creation of separate classes of Shares, the Fund's yield for the
thirty-day period ended November 30, 1993, was 2.03%.
The yield for both classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the Securities and Exchange
Commission) earned by either class of Shares over a thirty-day period by the
maximum offering price per Share of either class of Shares on the last day of
the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve-month period and is reinvested
every six months. The yield does not necessarily reflect income actually earned
by either class of Shares because of certain adjustments required by the
Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of Shares, the performance will be reduced for those shareholders paying
those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of both classes of Shares depends upon such variables as:
. portfolio quality;
. average portfolio maturity;
. type of instruments in which the portfolio is invested;
. changes in interest rates and market value of portfolio securities;
. changes in the Fund's or either class of Shares' expenses; and
. various other factors.
Either class of Shares' performance fluctuates on a daily basis largely because
net earnings and the maximum offering price per Share fluctuate daily. Both net
earnings and offering price per Share are factors in the computation of yield
and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of either class of Shares' performance. When comparing
performance, investors should consider all relevent factors such as the
composition of any index used, prevailing market conditions, portfolio
compositions of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which the
Fund uses in advertising may include:
. LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "balanced"
category in advertising and sale literature.
. DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of selected
blue-chip industrial corporations, as well as public utility and
transportation companies. The DJIA indicates daily changes in the average
price of stocks in any of its categories. It also reports total sales for
each group of industries. Because it represents the top corporations of
America, the DJIA's index movements are leading economic indicators for the
stock market as a whole.
. SHEARSON LEHMAN GOVERNMENT/CORPORATE TOTAL INDEX is comprised of
approximately 5,000 issues which include non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed by
the U.S. government and quasi-federal corporations; and publicly issued,
fixed-rate, non-convertible domestic bonds of companies in industry, public
utilities, and finance. Tracked by Shearson Lehman, the index has an average
maturity of nine years. It calculates total return for one-month, three-
month, twelve-month, and ten-year periods, and year-to-date.
- --------------------------------------------------------------------------------
. STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the Standard
& Poor's index assumes reinvestments of all dividends paid by stocks listed
on its index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in Standard & Poor's figures.
Advertisements and other sales literature for either class of Shares may quote
total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an investment
in either class of Shares based on quarterly reinvestment of dividends over a
specified period of time.
Advertisements for Investment Shares may quote performance information which
does not reflect the effect of the sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
PLUS (+) OR MINUS (-):--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
NR--Not rated by Moody's.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment.
NR--NR indicates that Fitch does not rate the specific issue.
1072404B (1/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) Conformed copy of Declaration of Trust of the
Registrant (15);
(i) Conformed copy of Amendment No. 1 to
Declaration of Trust (2);
(ii) Conformed copy of Amendment No. 2 to
Declaration of Trust (2);
(iii) Conformed copy of Amendment No. 3 to
Declaration of Trust (2);
(iv) Conformed copy of Amendment No. 4 to
Declaration of Trust (4);
(v) Conformed copy of Amendment No. 5 to
Declaration of Trust (12);
(vi) Conformed copy of Amendment No. 6 to
Declaration of Trust (12);
(vii) Conformed copy of Amendment No. 7 to
Declaration of Trust (12);
(viii) Conformed copy of Amendment No. 8 to
Declaration of Trust (15);
(ix) Conformed copy of Amendment No. 9 to
Declaration of Trust (15);
(x) Conformed copy of Amendment No. 10 to
Declaration of Trust (15);
(xi) Conformed copy of Amendment No. 11 to
Declaration of Trust (15);
(xii) Form of Amendment No. 12 to Declaration of
Trust;+
(2) Copy of By-Laws of the Registrant (1);
(3) Not applicable;
(4) Not applicable;
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed February 3, 1989. (File
Nos. 33-26915 and 811-5762)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A filed
April 10, 1989. (File Nos. 33-26915 and 811-5762)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 to the Registration Statement on Form N-1A filed
December 6, 1989. (File Nos. 33-26915 and 811-5762)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 to the Registration Statement on Form N-1A filed
January 29, 1992. (File Nos. 33-26915 and 811-5762)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 to the Registration Statement on form N-1A filed
July 2, 1993. (File Nos. 33-26915 and 811-5762)
(5) Conformed copy of Investment Advisory Contract between
Losantiville Funds and Star Bank, N.A. (13);
(6) (i) Conformed copy of Distributor's
Contract of the Registrant (13);
(ii) Conformed copy of Exhibit F to
Distributor's Contract of the Registrant;+
(iii) Form of Exhibit G to Distributor's
Contract of the Registrant;+
(7) Not applicable;
(8) Conformed copy of Custodian Contract of the
Registrant (15);
(9) (i) Conformed copy of Fund Accounting and
Shareholder Recordkeeping Agreement (16);
(ii) Copy of Amendment No. 1 to Fund Accounting and
Shareholder Recordkeeping Agreement (15);
(iii) Conformed copy of Administrative Services
Agreement;+
(10) Paper copy of Opinion and Consent of
Counsel as to Legality of Shares being Issued
(2);
(11) (i) Conformed copy of Consent of
Independent Public Accountants;+
(ii) Opinion and Consent of Special Counsel (9);
(12) Not applicable;
(13) Conformed copy of Initial Capital
Understanding (2);
(14) Not applicable;
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A filed
April 10, 1989. (File Nos. 33-26915 and 811-5762)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A filed
March 12, 1991. (File Nos. 33-26915 and 811-5762)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 to the Registration Statement on Form N-1A filed
November 20, 1992. (File Nos. 33-26915 and 811-5762)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 to the Registration Statement on form N-1A filed
July 2, 1993. (File Nos. 33-26915 and 811-5762)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 to the Registration Statement on Form N-1A filed
January 21, 1993.
(15) (i) Conformed copy of Distribution Plan
(13);
(ii) Copy of Rule 12b-1 Agreement (7);
(iii) Copy of Amendment No. 2 to Exhibit A to 12b-1
Agreement (11);
(iv) Copy of Amendment No. 3 to Exhibit A to 12b-1
Agreement (11);
(v) Copy of Amendment No. 4 to Exhibit A to 12b-1
Agreement (13);
(vi) Conformed copy of Exhibit E to the Distribution
Plan;+
(16) (i) Schedule for Computation of Fund
Performance Data (11);
(ii) Copy of Schedule for Computation of Fund
Performance Data, The Stellar Fund (12);
(iii) Copy of Schedule for Computation of
Fund Performance Data, Star U.S.
Government Income Fund (15);
(17) Conformed copy of Power of Attorney (15);
(18) Not applicable;
(19) Paper copy of New Account and Shareowner
Options Form for The Stellar Fund (12).
Item 25. Persons Controlled by or Under Common Control with Registrant:
None.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of December 31, 1993
Shares of beneficial interest
(no par value)
Star Treasury Fund 12
Star Prime Obligations Fund 12
Star Relative Value Fund 144
Star Tax-Free Money Market Fund 8
The Stellar Fund 4077
Star U.S. Government Income Fund 188
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A filed
December 4, 1990. (File Nos. 33-26915 and 811-5762)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A filed
August 29, 1991. (File Nos. 33-26915 and 811-5762)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 to the Registration Statement on Form N-1A filed
January 29, 1992. (File Nos. 33-26915 and 811-5762)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 to the Registration Statement on Form N-1A filed
November 20, 1992. (File Nos. 33-26915 and 811-5762)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 to the Registration Statement on Form N-1A filed
July 2, 1993. (File Nos. 33-26915 and 811-5762)
Item 27. Indemnification: (3)
Item 28. Business and Other Connections of Investment Adviser:
(a) Star Bank, N.A. ("Star Bank"), a national bank, was founded
in 1863 and is the largest bank and trust organization of
StarBanc Corporation. Star Bank had an asset base of $7.6
billion as of December 31, 1993, and trust assets of
$12.5 billion as of December 31, 1993.
Star Bank has managed commingled funds since 1957. It
currently manages eleven common trust funds and collective
investment funds having a market value in excess of $303
million.
The officers and directors of the Star Bank any other
business, profession, vocation, or employment of a
substantial nature in which each such officer and director is
or has been engaged during the past two years, is set forth
below. Unless otherwise noted, the position listed under
"Other Business, Profession, Vocation or Employment" is with
Star Bank.
(b)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
Samuel M. Cassidy President and Chief N/A
Executive Officer
Jerry A. Grundhofer Chairman of the Board N/A
Oliver W. Waddell Vice Chairman of the Board N/A
David M. Moffett Executive Vice President N/A
Richard K. Davis Executive Vice President N/A
Joseph A. Campanella Executive Vice President N/A
Thomas J. Lakin Executive Vice President N/A
Timothy J. Fogarty Senior Vice President N/A
Stephen E. Smith Senior Vice President N/A
F. Kristen Koepcke Vice President and Secretary N/A
J. R. Bridgeland, Jr. Director Partner, Taft, Stetinius
& Hollister
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 to the Registration Statement on Form N-1A filed
July 26, 1989. (File Nos. 33-26915 and 811-5762)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
L. L. Browning, Jr. Director Emerson Electric Co.
V. B. Buyniski Director United Medical
Resources, Inc.
Samuel M. Cassidy Director President & CEO, Star
Bank, N.A.
Raymond R. Clark Director Cincinnati Bell
Telephone Company
V. Anderson Coombe Director Wm. Powell Company
John C. Dannemiller Director Bearings, Inc.
Jerry A. Grundhofer Director President and CEO, Star
Banc Corp.
J. P. Hayden, Jr. Director The Midland Company
Roger L. Howe Director U.S. Precision Lens,
Inc.
T. J. Klinedinst, Jr. Director Thomas E. Wood, Inc.
Chares S. Mechem, Jr. Director Ladies Professional Golf
Association
Daniel J. Meyer Director Cincinnati Milacron,
Inc.
O. M. Owens, M.D., M. Director Christ Hospital
Thomas E. Petry Director Eagle-Picher Industries,
Inc.
William C. Portman Director Portman Equipment
Company
Oliver W. Waddell Director Star Banc Corporation
Bradley L. Warnemunde Director Ohio National Life
Insurance Company
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares
of the Registrant, also acts as principal underwriter for
the following open-end investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity
Management Series; Automated Cash Management Trust;
Automated Government Money Trust; BankSouth Select Funds;
BankSouth Select Funds; BayFunds; The Biltmore Funds; The
Biltmore Municipal Funds; The Biltmore Municipal Funds; The
Boulevard Funds; California Municipal Cash Trust; Cambridge
Series Trust; Cash Trust Series, Inc.; Cash Trust Series II;
DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; FT Series, Inc.; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High
Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated
Stock Trust; Federated Tax-Free Trust; Federated U.S.
Government Bond Fund; Financial Reserves Fund; First
Priority Funds; First Union Funds; Fixed Income Securities,
Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.; Fountain Square Funds; Fund for U.S. Government
Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Independence One Mutual Funds; Insurance
Management Series; Intermediate Municipal Trust; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity
Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Mark Twain Funds; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; The Monitor Funds; Municipal
Securities Income Trust; New York Municipal Cash Trust; 111
Corcoran Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal
Trust; Signet Select Funds; SouthTrust Vulcan Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; Tower Mutual Funds; Trademark
Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations;
Vision Fiduciary Funds, Inc.; and Vision Group of Funds,
Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment company:
Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief, Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President,
Federated Investors Tower President, and Treasurer, Treasurer, and
Pittsburgh, PA 15222-3779 Federated Securities Corp. Trustee
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
John A. Staley, IV Executive Vice President Vice President
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer; --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Coombs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffery Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian L. Sullivan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Sharon M. Morgan Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records: (3)
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 to the Registration Statement on Form N-1A filed
July 26, 1989. (File Nos. 33-26915 and 811-5762)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, STAR FUNDS, has duly
caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 4th day of February,
1994.
STAR FUNDS
BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
February 4, 1994
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ C. Grant Anderson
C. Grant Anderson Attorney In Fact February 4,
1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President, Treasurer, and Trustee
(Principal Financial and
Accounting Officer)
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 11(i) under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
ARTHUR ANDERSEN & CO.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in
Post-Effective Amendment No. 21 to Form N-1A Registration Statement of the
Star Funds of our report dated January 14, 1994, on the financial
statements of The Stellar Fund (one of the portfolios comprising the Star
Funds), included in or made a part of this registration statement.
By: ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania,
February 3, 1994
Exhibit 1(xii) under Form N-1A
Exhibit 3(a) under Item 601/Reg. S-K
STAR FUNDS
(formerly: Losantiville Funds)
Amendment No. 12
DECLARATION OF TRUST
dated January 23, 1989
THIS Declaration of Trust is amended as follows:
Strike the first paragraph of Section 5 of Article III from
the Declaration of Trust and substitute in its place the
following:
"Section 5. Establishment and Designation of Series
or Class. Without limiting the authority of the
Trustees set forth in Article XII, Section 8, inter
alia, to establish and designate any additional
Series or Class or to modify the rights and
preferences of any existing Series or Class, the
Series and Classes of the Trust are established and
designated as:
Star Prime Obligations Fund
Star Relative Value Fund
Star Tax-Free Money Market Fund
Star Treasury Fund
Star U.S. Government Income Fund
The Stellar Fund
Investment Shares
Trust Shares"
The undersigned Assistant Secretary of Star Funds hereby
certifies that the above stated Amendment is a true and
correct Amendment to the Declaration of Trust, as adopted by
the Board of Trustees on the __th day of February, 1994.
WITNESS the due execution hereof this __th day of February,
1994.
C. Grant Anderson,
Assistant Secretary
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit F
LOSANTIVILLE FUNDS
Distributor's Contract
Losantiville U.S. Government Income Fund
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 15th day of November 1990, between
Losantiville Funds and Federated Securities Corp. with respect to the
above-listed Fund:
1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of Shares of the Classes. Pursuant to this
appointment FSC is authorized to to select a group of brokers ("Brokers") to
sell shares of the above-listed Classes ("Shares"), at the current offering
price thereof as described and set forth in the respective prospectuses of
the Trust, and to render administrative support services to the Trust and
its shareholders. In addition, FSC is authorized to select a group of
Administrators ("Administrators") to render administrative support services
to the Trust and its shareholders.
2. Administrative support services may include, but are not limited
to, the following eleven functions: (1) account openings: the Broker or
Administrator communicates account openings via computer terminals located
on the Broker or Administrator's premises; (2) account closings: the Broker
or Administrator communicates account closings via computer terminals; (3)
enter purchase transactions: purchase transactions are entered through the
Broker or Administrator's own personal computer or through the use of a
toll-free telephone number; (4) enter redemption transactions: Broker or
Administrator enters redemption transactions in the same manner as
purchases; (5) account maintenance: Broker or Administrator provides or
arranges to provide accounting support for all transactions. Broker or
Administrator also wires funds and receives funds for Trust share purchases
and redemptions, confirms and reconciles all transactions, reviews the
activity in the Trust's accounts, and provides training and supervision of
its personnel; (6) interest posting: Broker or Administrator posts and
reinvests dividends to the Trust's accounts; (7) prospectus and shareholder
reports: Broker or Administrator maintains and distributes current copies
of prospectuses and shareholder reports; (8) advertisements: the Broker or
Administrator continuously advertises the availability of its services and
products; (9) customer lists: the Broker or Administrator continuously
provides names of potential customers; (10) design services: the Broker or
Administrator continuously designs material to send to customers and
develops methods of making such materials accessible to customers; and (11)
consultation services: the Broker or Administrator continuously provides
information about the product needs of customers.
3. During the term of this Agreement, the Trust will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual
rate of up to 0.25% of the average aggregate net asset value of the shares
of the Losantiville U.S. Government Income Fund held during the month. For
the month in which this Agreement becomes effective or terminates, there
shall be an appropriate proration of any fee payable on the basis of the
number of days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any classes expenses
exceed such lower expense limitation as FSC may, by notice to the Trust,
voluntarily declare to be effective.
5. FSC will enter into separate written agreements with various firms
to provide certain of the services set forth in Paragraph 1 herein. FSC, in
its sole discretion, may pay Brokers and Administrators a periodic fee in
respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid
shall be determined from time to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees of the Trust on
a quarterly basis showing amounts expended hereunder including amounts paid
to Brokers and Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated November 15, 1990 between Losantiville Funds and Federated
Securities Corp., Losantiville Funds executes and delivers this Exhibit on
behalf of the Funds, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 23rd day of November, 1992.
ATTEST: LOSANTIVILLE FUNDS
/s/ John W. McGonigle By: /s/ E. C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit 6(iii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit G
STAR FUNDS
The Stellar Fund
Trust Shares
In consideration of the mutual covenants set forth in the Distributor's
Contract dated November 15, 1990 between Star Funds and Federated Securities
Corp., Star Funds executes and delivers this Exhibit on behalf of the Funds,
and with respect to the separate Classes of Shares thereof, first set forth
in this Exhibit.
Witness the due execution hereof this day of , 1994.
ATTEST: STAR FUNDS
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit 9(iii) under Form
N-1A
Exhibit 10 under Item
601/Reg. S-K
Star Funds
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this
19th day of November, 1993, between Star Funds, a
Massachusetts business trust (herein called the "Fund"),
and Federated Administrative Services, a Delaware business
trust (herein called "FAS").
WHEREAS, the Fund is a Massachusetts business trust
consisting of one or more portfolios, which operates as an
open-end management investment company and has so
registered under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain FAS as its
Administrator to provide it with Administrative Services
(as herein defined), and FAS is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and
mutual covenants set forth herein, the parties hereto agree
as follows:
1. Appointment of Administrator. The Fund hereby
appoints FAS as Administrator of the Fund on the terms and
conditions set forth in this Agreement; and FAS hereby
accepts such appointment and agrees to perform the services
and duties set forth in Section 2 of this Agreement in
consideration of the compensation provided for in Section 4
hereof.
2. Services and Duties. As Administrator, and subject
to the supervision and control of the Fund's Board of
Trustees, FAS will provide facilities, equipment, and
personnel to carry out the following administrative
services for operation of the business and affairs of the
Fund and each of its portfolios:
(a) prepare, file, and maintain the Fund's governing
documents and any amendments thereto, including the
Declaration of Trust (which has already been
prepared and filed), the By-laws and minutes of
meetings of Trustees and shareholders;
(b) prepare and file with the Securities and Exchange
Commission and the appropriate state securities
authorities the registration statements for the
Fund and the Fund's shares and all amendments
thereto, reports to regulatory authorities and
shareholders, prospectuses, proxy statements, and
such other documents all as may be necessary to
enable the Fund to make a continuous offering of
its shares;
(c) prepare, negotiate, and administer contracts on
behalf of the Fund with, among others, the Fund's
investment adviser, distributor, custodian, and
transfer agent;
(d) supervise the Fund's custodian in the maintenance
of the Fund's general ledger and in the preparation
of the Fund's financial statements, including
oversight of expense accruals and payments, of the
determination of the net asset value of the Fund
and of the declaration and payment of dividends and
other distributions to shareholders;
(e) calculate performance data of the Fund for
dissemination to information services covering the
investment company industry;
(f) prepare and file the Fund's tax returns;
(g) examine and review the operations of the Fund's
custodian and transfer agent;
(h) coordinate the layout and printing of publicly
disseminated prospectuses and reports;
(i) perform internal audit examinations in accordance
with a charter to be adopted by FAS and the Fund;
(j) assist with the design, development, and operation
of the Fund;
(k) provide individuals reasonably acceptable to the
Fund's Board of Trustees for nomination,
appointment, or election as officers of the Fund,
who will be responsible for the management of
certain of the Fund's affairs as determined by the
Fund's Board of Trustees; and
(l) consult with the Fund and its Board of Trustees on
matters concerning the Fund and its affairs.
The foregoing, along with any additional services that FAS
shall agree in writing to perform for the Fund hereunder,
shall hereafter be referred to as "Administrative
Services." Administrative Services shall not include any
duties, functions, or services to be performed for the Fund
by the Fund's investment adviser, distributor, custodian,
or transfer agent pursuant to their respective agreements
with the Fund.
3. Expenses. FAS shall be responsible for expenses
incurred in providing office space, equipment, and
personnel as may be necessary or convenient to provide the
Administrative Services to the Fund, including the
compensation of FAS employees who serve as Trustees or
officers of the Fund. The Fund shall be responsible for
all other expenses incurred by FAS on behalf of the Fund,
including without limitation postage and courier expenses,
printing expenses, travel expenses, registration fees,
filing fees, fees of outside counsel and independent
auditors, insurance premiums, fees payable to Trustees who
are not FAS employees, and trade association dues.
4. Compensation. For the Administrative Services
provided, the Fund hereby agrees to pay and FAS hereby
agrees to accept as full compensation for its services
rendered hereunder an administrative fee at an annual rate
per portfolio of the Fund's shares, payable daily, as
specified below:
Maximum Administrative Average Daily Net Assets
Fee of the Fund
.15% on the first $250 million
.125% on the next $250 million
100% on the next $250 million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received
during any year of this Agreement be less than, or be paid
at a rate less than would aggregate, $50,000, per
portfolio.
5. Responsibility of Administrator.
(a) FAS shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this
Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or
from reckless disregard by it of its obligations
and duties under this Agreement. FAS shall be
entitled to rely on and may act upon advice of
counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such
advice. Any person, even though also an officer,
trustee, partner, employee or agent of FAS, who may
be or become an officer, Trustee, employee or agent
of the Fund, shall be deemed, when rendering
services to the Fund or acting on any business of
the Fund (other than services or business in
connection with the duties of FAS hereunder) to be
rendering such services to or acting solely for the
Fund and not as an officer, trustee, partner,
employee or agent or one under the control or
direction of FAS even though paid by FAS.
(b) FAS shall be kept indemnified by the Fund and be
without liability for any action taken or thing
done by it in performing the Administrative
Services in accordance with the above standards.
In order that the indemnification provisions
contained in this Section 5 shall apply, however,
it is understood that if in any case the Fund may
be asked to indemnify or save FAS harmless, the
Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in
question, and it is further understood that FAS
will use all reasonable care to identify and notify
the Fund promptly concerning any situation which
presents or appears likely to present the
probability of such a claim for indemnification
against the Fund. The Fund shall have the option
to defend FAS against any claim which may be the
subject of this indemnification. In the event that
the Fund so elects, it will so notify FAS and
thereupon the Fund shall take over complete defense
of the claim, and FAS shall in such situation
initiate no further legal or other expenses for
which it shall seek indemnification under this
Section. FAS shall in no case confess any claim or
make any compromise in any case in which the Fund
will be asked to indemnify FAS except with the
Fund's written consent.
6. Duration and Termination.
(a) The initial term of this Agreement shall commence
on the date hereof, and extend for a period of five
years following the first date upon which each of
the Fund's existing portfolios and the presently
contemplated municipal bond fund has sufficient
average daily net assets, in each case, such that
FAS will begin to earn a sum not less than its
minimum ("annualized") administrative fee per
portfolio, pursuant to the second paragraph of
Section 4 of this Agreement.
(b) Upon the expiration of the initial term, this
Agreement shall be automatically renewed each year
for an additional term of one year, unless notice
of termination has been delivered by either party
to the other no less than one year before the
beginning of any such additional term.
7. Amendment. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only
by an instrument in writing signed by the party against
which an enforcement of the change, waiver, discharge or
termination is sought.
8. Limitations of Liability of Trustees or Officers,
Employees, Agents and Shareholders of the Fund. FAS is
expressly put on notice of the limitation of liability as
set forth in the Fund's Declaration of Trust and agrees
that the obligations assumed by the Fund pursuant to this
Agreement shall be limited in any case to the Fund and its
assets and that FAS shall not seek satisfaction of any such
obligations from the shareholders of the Fund, the
Trustees, Officers, Employees or Agents of the Fund, or any
of them.
9. Limitations of Liability of Trustees and
Shareholders of FAS. The execution and delivery of this
Agreement have been authorized by the Trustees of FAS and
signed by an authorized officer of FAS, acting as such, and
neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of
this Agreement are not binding upon any of the Trustees or
shareholders of FAS, but bind only the trust property of
FAS as provided in the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder
shall be in writing (including facsimile communication) and
shall be duly given if delivered to the Fund and to its
investment adviser at the following address: Star Bank,
425 Walnut Street, Cincinnati, Ohio 45202. Attention:
Randy Bateman, Senior Vice President and if delivered to
FAS at Federated Investors Tower, Pittsburgh, PA
15222-3779, Attention: President.
11. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section 5 hereof, this
Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed
in a manner inconsistent with the Investment Company Act of
1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by
different parties on separate counterparts, each of which,
when so executed and delivered, shall be an original, and
all such counterparts shall together constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated
below as of the day and year first above written.
Star Funds
By: /s/ E. C. Gonzales
President
Attest: /s/ J. W. McGonigle
Federated Administrative Services
By: /s/ James J. Dolan
President
Attest: /s/ J. W. McGonigle
Exhibit 15(vi) under Form N-1A
Exhibit EX-1 under Item 601/Reg. S-K
EXHIBIT E
LOSANTIVILLE FUNDS
Losantiville U.S. Government Income Fund
The Plan is adopted by Losantiville Funds with respect to the Fund or
class of Shares of the Fund of the Trust set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of 0.25 of 1% of the
average aggregate net asset value of shares of Losantiville U.S. Government
Income Fund held during the month.
Witness the due execution hereof this 23rd day of November 1992.
LOSANTIVILLE FUNDS
BY: /s/ E. C. Gonzales
Edward C. Gonzales
