YAR01!.doc
STAR PRIME OBLIGATIONS FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Dear Shareholder:
The Board of Trustees and management of Star Prime Obligations Fund ("Prime
Obligations Fund") are pleased to submit for your vote a proposal to transfer
all of the assets of Prime Obligations Fund to Star Treasury Fund ("Treasury
Fund"). Prime Obligations Fund and Treasury Fund (collectively "the Funds")
are both portfolios of the Star Funds (the "Trust"). As part of the
transaction, shareholders in Prime Obligations Fund would receive shares of
the Treasury Fund equal in value to their shares of the Prime Obligations
Fund. The Prime Obligations Fund would then be dissolved.
The Funds are money market mutual funds with similar investment objectives.
The Board of Trustees of the Trust, as well as Star Bank, N.A., the adviser of
the Funds, believe the proposed agreement and plan of reorganization offers
the shareholders of Prime Obligations Fund the opportunity to pursue similar
investment objectives with a potentially lower expense ratio due to improved
economies of scale.
We believe the transfer of Prime Obligations Fund's assets in this
transaction will present an excellent investment opportunity for our
shareholders. Your vote on the transaction is critical to its success. The
transfer will be effected only if approved by the holders of a majority of
Prime Obligations Fund's outstanding shares on the record date. We hope you
share our enthusiasm and will participate by casting your vote in person, or
by proxy if you are unable to attend the meeting. Please read the enclosed
prospectus/proxy statement carefully before you vote. If you have any
questions, please feel free to call us at (513) 632-2005.
Thank you for your prompt attention and participation.
Sincerely,
Prime Obligations Fund
[LOGO]
Edward C. Gonzales President
STAR FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF STAR PRIME OBLIGATIONS FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Star Prime
Obligations Fund ("Prime Obligations Fund"), a portfolio of Star Funds (the
"Trust"), will be held at 2:00 p.m. on April 20, 1995 at Federated Investors
Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for the following
purposes:
1. To approve or disapprove a proposed Agreement and Plan of Reorganization
between Prime Obligations Fund and Star Treasury Fund ("Treasury Fund"),
portfolios of the Trust, whereby Treasury Fund would acquire all of the
assets of Prime Obligations Fund in exchange for Treasury Fund shares to
be distributed pro rata by Prime Obligations Fund to its shareholders in
complete liquidation and termination of Prime Obligations Fund; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
By Order of the Board of Trustees,
John W. McGonigle
Secretary
Dated: March 17, 1995
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS MARCH 6, 1995 ARE ENTITLED
TO VOTE AT THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD. YOUR VOTE IS IMPORTANT.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF
FURTHER MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
YOU MAY REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR VOTE IN
PERSON IF YOU ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
MARCH 17, 1995
Acquisition of the Assets of
STAR PRIME OBLIGATIONS FUND
a Portfolio of STAR FUNDS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: (513) 632-2005
By and in exchange for shares of
STAR TREASURY FUND
a Portfolio of STAR FUNDS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: (513) 632-2005
This Prospectus/Proxy Statement describes the proposed Agreement and Plan of
Reorganization (the "Plan") whereby Star Treasury Fund ("Treasury Fund"),
would acquire all of the assets of Star Prime Obligations Fund ("Prime
Obligations Fund"), in exchange for Treasury Fund shares to be distributed pro
rata by Prime Obligations Fund to its shareholders in complete liquidation and
dissolution of Prime Obligations Fund. As a result of the Plan, each
shareholder of Prime Obligations Fund will become the owner of Treasury Fund
shares having a total net asset value equal to the total net asset value of
his or her holdings in Prime Obligations Fund. Prime Obligations Fund and
Treasury Fund (the "Funds") are portfolios of Star Funds (the "Trust").
The Trust is an open-end management investment company which currently
includes several portfolios, each of which has a distinct investment
objective. Prime Obligations Fund is a portfolio of the Trust whose investment
objective is to provide current income with stability of principal. Prime
Obligations Fund pursues this investment objective by investing in a portfolio
of high-quality money market instruments maturing in 397 days or less at the
time of purchase. Treasury Fund has a similar investment objective, which it
pursues by investing in a portfolio consisting exclusively of short-term U.S.
Treasury obligations. The Funds are money market mutual funds which seek to
stabilize their offering and redemption prices at $1.00 per share, although
there can be no assurance that either of the Funds will be able to do so. An
investment in the Funds is neither insured nor guaranteed by the United States
government. For a comparison of the investment policies of the Funds, see
"Summary-Investment Objectives and Policies".
This Prospectus/Proxy Statement should be retained for future reference. It
sets forth concisely the information about the Trust and Treasury Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Combined Prospectus of Treasury Fund and Prime
Obligations Fund dated January 31, 1994, and the Combined Annual Report to
Shareholders of Treasury Fund and Prime Obligations Fund for the year ended
November 30, 1994, both of which are incorporated herein by reference.
Statements of Additional Information for Treasury Fund and Prime Obligations
Fund, each dated January 31, 1994 (relating to the Combined Prospectus of
Treasury Fund and Prime Obligations Fund of the same date), and March 17, 1995
(relating to this Prospectus/Proxy Statement) containing additional
information have been filed with the Securities and Exchange Commission and
are incorporated herein by reference. Copies of the Statements of Additional
Information may be obtained without charge by writing or calling the Trust at
the address and telephone number shown above.
INVESTMENTS IN PRIME OBLIGATIONS FUND AND TREASURY FUND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT. PRIME OBLIGATIONS FUND AND TREASURY FUND
ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THEY WILL BE ABLE TO DO SO.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT 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.
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.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary..................................................................... 1
Risk Factors................................................................ 4
Information About the Reorganization........................................ 4
Information About the Trust, Prime Obligations Fund, and Treasury Fund...... 7
Voting Information.......................................................... 7
</TABLE>
SUMMARY
ABOUT THE PROPOSED REORGANIZATION
The Board of Trustees of Star Funds (the "Trust") has voted to recommend to
shareholders of Star Prime Obligations Fund ("Prime Obligations Fund"), a
portfolio of the Trust, the approval of an Agreement and Plan of
Reorganization (the "Plan") whereby Star Treasury Fund ("Treasury Fund"), also
a portfolio of the Trust, would acquire all of the assets of Prime Obligations
Fund in exchange for shares of Treasury Fund to be distributed pro rata by
Prime Obligations Fund to its shareholders in complete liquidation and
termination of Prime Obligations Fund (the "Reorganization"). As a result of
the Reorganization, each shareholder of Prime Obligations Fund will become the
owner of Treasury Fund shares having a total net asset value equal to the
total net asset value of his or her holdings in Prime Obligations Fund on the
date of the Reorganization, i.e., the Closing Date.
As a condition to the Reorganization transactions, the Trust will receive an
opinion of counsel that the Reorganization will be considered a tax-free
"reorganization" under applicable provisions of the Internal Revenue Code so
that no gain or loss will be recognized by either the Treasury Fund or Prime
Obligations Fund or their shareholders. The tax cost basis of the Treasury
Fund shares received by Prime Obligations Fund shareholders will be the same
as the tax cost basis of their shares in Prime Obligations Fund.
After the acquisition is completed, Prime Obligations Fund will be
terminated.
The following Summary of Fund Expenses shows the current fees for Treasury
Fund and Prime Obligations Fund and pro forma fees for Treasury Fund after
giving effect to the Reorganization.
<TABLE>
<CAPTION>
ACTUAL
SUMMARY OF FUND EXPENSES --------------------
SHAREHOLDER TRANSACTION EXPENSES PRIME TREASURY
OBLIGATIONS TREASURY FUND
FUND FUND PRO FORMA
----------- -------- ---------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............ None None None
Maximum Sales Load Imposed on Reinvested
Dividends
(as a percentage of offering price)............ None None None
Contingent Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable)............ None None None
Redemption Fees (as a percentage of amount
redeemed,
if applicable)................................. None None None
Exchange Fees................................... None None None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees................................. 0.55% 0.50% 0.50%
12b-1 Fees (1).................................. 0.00% 0.00% 0.00%
Total Other Expenses............................ 0.30% 0.20% 0.19%
Total Fund Operating Expenses................... 0.85% 0.70% 0.69%
</TABLE>
(1) As of the date of this prospectus, the Funds are not paying or accruing
12b-1 fees. The Funds can pay up to 0.25% as a 12b-1 fee to the
distributor. Trust and Investment agency clients of Star Bank or its
affiliates will not be affected by the Plan because the Plan will not be
activated unless and until a second "Trust" class of shares of the Funds
(which would not have a 12b-1 Plan) is created and trust and investment
agency clients' investments in the Fund are converted to such Trust class.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of a Fund will bear, either
dirctly or indirectly. For more complete descriptions of the various costs and
expenses, see "Star Fund Information" in the Combined Prospectus of Treasury
Fund and Prime Obligations Fund dated January 31, 1994.
EXAMPLE
The following sets forth the expenses on a $1,000 investment which would be
incurred by a shareholder of Prime Obligations Fund and Treasury Fund,
respectively, and expenses which would be incurred by a shareholder of
Treasury Fund on a pro forma basis after giving effect to the Reorganization
under the existing and proposed fees and the expenses stated above assuming
(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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Fund.......................... $9 $27 $47 $105
Treasury Fund................................... $7 $22 $39 $ 87
Treasury Fund (after merger).................... $7 $22 $38 $ 86
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
INVESTMENT OBJECTIVES, POLICIES, AND LIMITATIONS
The investment objective of both Prime Obligations Fund and Treasury Fund is
current income consistent with stability of principal.
Prime Obligations Fund pursues its investment objective by investing
exclusively in a portfolio of money market instruments, maturing in 397 days
or less, which are either rated in the highest short-term rating category by
one or more nationally recognized statistical rating organizations or are of
comparable quality. Such money market instruments include, but are not limited
to, domestic issues of corporate debt obligations, commercial paper,
certificates of deposit, demand and time deposits and other bank instruments,
and government securities. Treasury Fund pursues its investment objective by
investing in a portfolio consisting exclusively of short-term U.S. Treasury
obligations the average maturity of which, computed on a dollar weighted
basis, will be 120 days or less. Prior to the date of the Reorganization,
Prime Obligations Fund will restructure its portfolio so that its investments
will conform at the effective time of the Reorganization to those permitted to
be held by Treasury Fund. Both Prime Obligations Fund and Treasury Fund may
enter into repurchase agreements, reverse repurchase agreements and may
purchase securities on a when-issued or delayed delivery basis. In general,
Treasury Fund enters into repurchase agreements to a greater extent than does
Prime Obligations Fund.
Prime Obligations Fund and Treasury Fund are subject to certain investment
limitations. The investment limitations of the two funds are substantially
identical. These limitations include provisions that, in effect, prohibit
either fund from: selling any securities short or purchasing any securities on
margin; issuing senior securities, except that each fund may borrow up to one-
third of the value of its total assets; mortgaging, pledging, or hypothecating
any assets except to secure permitted borrowings; lending any of their
respective assets; or investing more than 10% of the value of their respective
net assets in illiquid securities.
Reference is hereby made to the Combined Prospectus and the Statements of
Additional Information of Prime Obligations Fund and Treasury Fund, all dated
January 31, 1994, which set forth in full the investment objectives and
policies and investment limitations of both funds.
DISTRIBUTION ARRANGEMENTS
Federated Securities Corp. is the principal distributor for shares of the
Trust. Under a distribution plan adopted in accordance with the Investment
Company Act Rule 12b-1 (the "12b-1 Plan"), Prime
Obligations Fund and Treasury Fund may each pay to Federated Securities Corp.
an amount computed at an annual rate of 0.25 of 1% of each respective Funds
average daily net assets to finance any activity which is principally intended
to result in the sale of shares subject to the 12b-1 Plan. Currently neither
Fund is paying or accruing fees under the 12b-1 Plan.
ADVISORY AND OTHER FEES
Star Bank N.A. is the investment adviser (the "Adviser") to Prime
Obligations Fund and Treasury Fund. The Adviser receives an annual investment
advisory fee equal to 0.55 of 1% of Prime Obligations Fund's average daily net
assets, and 0.50 of 1% of Treasury Fund's average daily net assets. The
Adviser has undertaken to reimburse each fund, up to the amount of its
advisory fee, for operating expenses in excess of limitations established by
certain states. The Adviser may further voluntarily waive a portion of its fee
or reimburse either fund for certain operating expenses. This agreement to
waive fees or reimburse expenses may be terminated by the Adviser at any time
at its discretion.
Federated Administrative Services, a subsidiary of Federated Investors,
provides the Funds with certain administrative personnel and services
necessary to operate the Funds. The rate charged is 0.15 of 1% of the first
$250 million of the Trust's average aggregate daily net assets, 0.125 of 1% on
the next $250 million, 0.10 of 1% on the next $250 million and 0.075 of 1% of
all of the Trust's average aggregate daily net assets in excess of $750
million. The administrative fee received during any fiscal year shall be at
least $50,000 per fund. The administrative fee expense for Prime Obligations
Fund's most recent fiscal year was .12 of 1% of its average aggregate daily
net assets. Prime Obligations Fund estimates that its administrative fee
expense for the current fiscal year will be .11 of 1% of its average aggregate
daily net assets. The administrative fee expense for Treasury Fund's most
recent fiscal year was .12 of 1% of its average aggregate daily net assets.
Treasury Fund estimates that its administrative fee expense for the current
fiscal year will be .11 of 1% of its average aggregate daily net assets.
The total annual operating expenses for Prime Obligations Fund is expected
to be .85 of 1% of average daily net assets and would be 1.10% of average
daily net assets absent the voluntary waiver of the 12b-1 fee by the
distributor. The total annual operating expenses for Treasury Fund is expected
to be .70 of 1% of average daily net assets and would be .95 of 1% of average
daily net assets absent the voluntary waiver of the 12b-1 fee by the
distributor.
PURCHASE AND REDEMPTION PROCEDURES
Procedures for the purchase and redemption of shares of Prime Obligations
Fund are identical to procedures applicable to the purchase and redemption of
Treasury Fund shares. For a complete description of the purchase and
redemption procedures applicable to purchases and redemptions of shares, refer
to the Combined Prospectus of the Funds dated January 31, 1994, which is
incorporated herein by reference. Any questions about such procedures may be
directed to, and assistance in effecting purchases, redemptions, or exchanges
of shares may be obtained from Star Bank at (513) 632-2005.
Shares of Prime Obligations Fund and Treasury Fund are sold on days that the
New York Stock Exchange and the Federal Reserve Wire System are open for
business. Shares are sold at their net asset value next determined after an
order is received. The net asset value is calculated at 12:00 noon and 4:00
p.m. (Eastern time) on days shares are sold. Purchases of shares of either
fund may be made by wire or by check. Orders are considered received after
payment is converted into federal funds and received by Star Bank, the
custodian for the Funds. Payment by federal funds must be received by Star
Bank before 3:00 p.m. (Eastern time) on the same day as the order to earn
dividends for that day. The minimum initial investment in each of the Funds is
$1,000 ($25 for Star Bank Connections Group Banking customers and Star Bank
employees and members of their immediate family).
Redemptions may be made on days that the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Shares are redeemed at
their net asset value next determined after the redemption request is
received. Proceeds will be distributed by wire or check. Requests for
redemption can be made in person or by telephone through Star Bank.
EXCHANGE PRIVILEGES
The Trust currently has three money market portfolios, Treasury Fund, Prime
Obligations Fund, and Star Tax-Free Money Market Fund (the "Money Market
Funds"). Shareholders of one Money Market Fund may exchange shares of that
fund for shares of the other Money Market Funds at net asset value. In
addition shares of Prime Obligations Fund and Treasury Fund may be exchanged
for certain other funds distributed by Federated Securities Corp. Shareholders
who exercise this exchange privilege must exchange shares having a net asset
value of at least $1,000.
TAX CONSEQUENCES
As a condition to the Reorganization transactions, the Trust will receive an
opinion of counsel that the Reorganization will be considered a tax-free
"reorganization" under applicable provisions of the Internal Revenue Code so
that no gain or loss will be recognized by either the Prime Obligations Fund
or the Treasury Fund or their respective shareholders. The tax cost basis of
Treasury Fund shares received by Prime Obligations Fund shareholders will be
the same as the tax cost basis of their shares in Prime Obligations Fund.
RISK FACTORS
Investments in Prime Obligations Fund and Treasury Fund are not insured and
are not guaranteed by the United States government or any other entity. As set
forth in the Funds' Combined Prospectus dated January 31, 1994 and
incorporated herein by reference, certain instruments issued by foreign banks,
in which Prime Obligations Fund (but not Treasury Fund) may invest, are
subject to different risks than are domestic obligations of domestic banks.
INFORMATION ABOUT THE REORGANIZATION
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
Like Treasury Fund, Prime Obligations Fund was established as a portfolio of
the Trust for the primary purpose of providing an investment vehicle that
provides current income consistent with stability of principal. At the time
the Prime Obligations Fund was established, it was believed that yields of
commercial paper and bankers acceptances would generally exceed those of U.S.
Treasury securities, thus distinguishing the Prime Obligations Fund from the
Treasury Fund on the basis of its potentially higher yield. The ensuing lack
of market demand for commercial paper and bankers acceptances, however,
lessened these instruments' yield advantage relative to U.S. Treasury
securities, so that at present there is virtually no advantage to investing in
Prime Obligations Fund rather than in a Treasury money market fund such as
Treasury Fund. The Board of Trustees and the Adviser have concluded that
economies of scale, and potentially lower expense ratios, could be realized by
transferring the assets of Prime Obligations Fund into Treasury Fund, although
there can be no assurance that this will be the case. The Trustees also noted
that shareholders of Prime Obligations Fund would continue to receive the same
quality investment management services from the Adviser as shareholders of
Treasury Fund.
The Trustees of the Trust, including the independent Trustees, have
unanimously concluded that consummation of the Reorganization is in the best
interests of the Trust and the shareholders of Prime
Obligations Fund and Treasury Fund and that the interests of Prime Obligations
Fund and Treasury Fund shareholders would not be diluted as a result of
effecting the Reorganization and have unanimously approved the Plan.
DESCRIPTION OF THE PLAN OF REORGANIZATION
The Plan provides that Treasury Fund will acquire all of the assets of Prime
Obligations Fund in exchange for Treasury Fund shares to be distributed pro
rata by Prime Obligations Fund to its shareholders in complete liquidation and
termination of Prime Obligations Fund on or about April 24, 1995 (the "Closing
Date"). Because both Prime Obligations Fund and Treasury Fund seek to maintain
a constant net asset value of $1.00 per share, it is expected that Prime
Obligations Fund shareholders will receive the same number of Treasury Fund
shares as they held in Prime Obligations Fund immediately prior to the Closing
Date. Shareholders of Prime Obligations Fund will become shareholders of
Treasury Fund as of 4:00 p.m. (Eastern time) on the Closing Date and will
begin accruing dividends on the next day. Shareholders of Prime Obligations
Fund will earn their last dividend from that fund on the Closing Date.
Consummation of the Reorganization is subject to the conditions set forth in
the Plan, including receipt of an opinion in form and substance satisfactory
to the Trust, as described under the caption "Federal Income Tax Consequences"
below. The Plan may be terminated and the Reorganization may be abandoned at
any time before or after approval by shareholders of Prime Obligations Fund
prior to the Closing Date by either party if it believes that consummation of
the Reorganization would not be in the best interests of its shareholders.
The Adviser is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, legal fees,
registration fees, transfer taxes (if any), the fees of banks and transfer
agents and the costs of preparing, printing, copying and mailing proxy
solicitation materials to shareholders of Prime Obligations Fund and the costs
of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between Prime Obligations
Fund and Treasury Fund is qualified in its entirety by the terms and
provisions of the Plan, a copy of which is attached hereto as Exhibit A and
incorporated herein by reference.
DESCRIPTION OF TREASURY FUND SHARES
Shares of Treasury Fund to be issued to shareholders of Prime Obligations
Fund under the Plan will be fully paid and nonassessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Combined Prospectus of the Funds dated
January 31, 1994 provided herewith for additional information about Treasury
Fund shares.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization transactions, the Trust will receive an
opinion from Dickstein, Shapiro & Morin, L.L.P., counsel to the Trust, to the
effect that, on the basis of the existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), current administrative rules and court
decisions, for federal income tax purposes: (1) the Reorganization as set
forth in the Plan will constitute a tax-free reorganization under section
368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by Treasury
Fund upon its receipt of Prime Obligations Fund's assets solely in exchange
for Treasury Fund shares; (3) no gain or loss will be recognized by Prime
Obligations Fund upon the transfer of its assets to Treasury Fund in exchange
for Treasury Fund shares or upon the distribution (whether actual or
constructive) of Treasury Fund shares to Prime Obligations Fund
shareholders in exchange for their shares of Prime Obligations Fund; (4) no
gain or loss will be recognized by shareholders of the Prime Obligations Fund
upon the exchange of their Prime Obligations Fund shares for Treasury Fund
shares; (5) the tax basis of Prime Obligations Fund's assets acquired by
Treasury Fund will be the same as the tax basis of such assets to Prime
Obligations Fund immediately prior to the Reorganization; (6) the tax basis of
Treasury Fund shares received by each shareholder of Prime Obligations fund
pursuant to the Plan will be the same as the tax basis of Prime Obligations
Fund shares held by such shareholder immediately prior to the Reorganization;
(7) the holding period of the assets of Prime Obligations Fund in the hands of
Treasury Fund will include the period during which those assets were held by
Prime Obligations Fund; and (8) the holding period of Treasury Fund shares
received by each shareholder of Prime Obligations Fund pursuant to the Plan
will include the period during which the Prime Obligations Fund shares
exchanged therefor were held by such shareholder, provided the Prime
Obligations Fund shares were held as capital assets on the date of the
Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS
The Trust is organized as a business trust pursuant to a Declaration of
Trust under the laws of the Commonwealth of Massachusetts. The rights of
shareholders of Prime Obligations Fund and Treasury Fund as set forth in the
Declaration of Trust are substantially identical. Set forth below is a brief
summary of the significant rights of shareholders of Prime Obligations Fund
and Treasury Fund.
Neither fund is required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees under certain circumstances. A special meeting of
shareholders of either fund for any permissible purpose is required to be
called by the Trustees upon the written request of the holders of at least 10%
of the outstanding shares of the relevant Fund.
Under certain circumstances, shareholders of Prime Obligations Fund,
Treasury Fund, or any other portfolio of the Trust ("Trust Portfolios"), may
be held personally liable as partners under Massachusetts law for obligations
of the Trust. To protect shareholders of all Trust Portfolios, the Trust has
filed legal documents with the Commonwealth of Massachusetts that expressly
disclaim the liability of shareholders of Trust Portfolios for such acts or
obligations of the Trust. These documents require that notice of this
disclaimer be given in each agreement, obligation or instrument that the Trust
or its trustees enter into or sign on behalf of the Trust.
In the unlikely event a shareholder of a Trust Portfolio is held personally
liable for the Trust's obligations, the Trust is required to use its property
to protect or compensate the shareholder. On request, the Trust will defend
any claims made and pay any judgment against a shareholder of a Trust
Portfolio for any act or obligation of the Trust. Therefore, financial loss
resulting from liability as a shareholder of a Trust Portfolio will occur only
if the Trust cannot meet its obligations to indemnify shareholders and pay
judgments against them from the assets of the Trust.
CAPITALIZATION
The following table sets forth the capitalization of Prime Obligations Fund
and Treasury Fund as of March 6, 1995, and on a pro forma basis as of that
date:
<TABLE>
<CAPTION>
PRIME
TREASURY OBLIGATIONS PRO FORMA
FUND FUND COMBINED
------------ ----------- ------------
<S> <C> <C> <C>
Net Assets................................ $383,581,400 $94,628,060 $478,209,460
Price Per Share........................... $1.00 $1.00 $1.00
</TABLE>
INFORMATION ABOUT THE TRUST, PRIME OBLIGATIONS FUND, AND TREASURY FUND
Information about the Trust, Prime Obligations Fund, and Treasury Fund is
contained in the Combined Prospectus dated January 31, 1994, a copy of which
is included herewith and incorporated by reference herein. Additional
information about the Trust and Prime Obligations Fund is included in the
Statement of Additional Information of Prime Obligations Fund dated January
31, 1994, which is incorporated herein by reference. Additional information
about the Trust and Treasury Fund is included in the Statement of Additional
Information of Treasury Fund dated January 31, 1994, which is incorporated
herein by reference. Additional information about the Trust, Prime Obligations
Fund and Treasury Fund relating to information contained in this
Prospectus/Proxy statement is contained in the Statement of Additional
Information of the Trust, Prime Obligations Fund and Treasury Fund dated March
17, 1995, which is incorporated herein by reference. Copies of the Statements
of Additional Information, which have been filed with the Securities and
Exchange Commission (the "SEC"), may be obtained without charge by contacting
the Trust at (513)632-2005 or by writing the Trust at Federated Investors
Tower, Pittsburgh, PA 15222-3779.
The Trust, on behalf of the Funds, is subject to the informational
requirements of the Securities Act of 1933 (the "1933 Act"), the Securities
Exchange Act of 1934 (the "1934 Act") and the Investment Company Act of 1940
(the "1940 Act") and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and other
information filed by the Trust, on behalf of the Funds, can be obtained by
calling or writing the Trust and can also be inspected and copied by the
public at the public reference facilities maintained by the SEC in Washington,
D.C. located at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at certain of its regional offices located at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, IL 60621 and 13th Floor, Seven World
Trade Center, New York, NY 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement and the related Statement of Additional
Information do not contain all of the information set forth in the
registration statement that the Trust has filed with the SEC under the 1933
Act and the 1940 Act, to which reference is hereby made. Statements contained
herein concerning the provisions of documents are necessarily summaries of
such documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable documents filed with the SEC. The SEC
file number for the Star Funds prospectuses and related Statements of
Additional Information which are incorporated by reference herein is
Registration No. 33-26915.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of Prime Obligations Fund of proxies for
use at the Special Meeting of Shareholders (the "Meeting") to be held on April
20, 1995 and at any adjournment thereof. The proxy confers discretionary
authority on the persons designated therein to vote on other business not
currently contemplated which may properly come before the Meeting. A proxy, if
properly executed, duly returned and not revoked, will be voted in accordance
with the specifications thereon; if no instructions are given, such proxy will
be voted in favor of the Plan. A shareholder may revoke a proxy at any time
prior to use by filing with the Secretary of the Trust an instrument revoking
the proxy, by submitting a proxy bearing a later date or by attending and
voting at the Meeting.
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by the Adviser. In addition to solicitations through
the mails, proxies may be solicited by officers, employees and agents of the
Trust and the Adviser at no additional cost to the Trust. Such solicitations
may be by telephone. The Adviser will reimburse custodians, nominees and
fiduciaries for the
reasonable costs incurred by them in connection with forwarding solicitation
materials to the beneficial owners of shares held of record by such persons.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on March 6, 1995 as
the record date for the determination of shareholders entitled to notice of,
and to vote at, the Special Meeting of Shareholders and any adjournment
thereof. As of the record date, there were 94,628,060 shares of Prime
Obligations Fund outstanding. Each Prime Obligations Fund share is entitled to
one vote and fractional shares have proportionate voting rights. On the record
date, Star Bank, N.A. owned of record 88,631,262 shares, or 93.7% of the Prime
Obligations Fund's outstanding shares and such shareholder will own the same
number of shares of Treasury Fund after the consummation of the Reorganization
if no further purchases or redemptions are made by such shareholder. On such
date, no other person owned of record, or to the knowledge of the Adviser,
beneficially owned, 5% or more of Prime Obligations Fund's outstanding shares.
On the record date, the trustees and officers of the Trust as a group owned
less than 1% of the outstanding shares of Prime Obligations Fund.
The votes of the shareholders of Treasury Fund are not being solicited,
since their approval or consent is not necessary for approval of the
Reorganization. As of the record date, there were 383,581,400 shares of
Treasury Fund outstanding. On the record date, Star Bank, N.A. owned of record
355,429,154 shares, or 92.7% of the Treasury Fund's outstanding shares. On
such date, no other person owned of record, or to the knowledge of the
Adviser, beneficially owned, 5% or more of Treasury Fund's outstanding shares.
Approval of the Plan requires the affirmative vote of a majority of Prime
Obligations Fund's outstanding shares.
A majority of the outstanding shares of Prime Obligations Fund, represented
in person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For purposes
of determining the presence of a quorum, shares represented by abstentions and
"broker non-votes" will be counted as present, but not as votes cast, at the
Special Meeting.
DISSENTERS' RIGHT OF APPRAISAL
Shareholders of Prime Obligations Fund objecting to the Reorganization have
no appraisal rights under the Declaration of Trust or Massachusetts law. Under
the Plan, if approved by Prime Obligations Fund shareholders, each Prime
Obligations Fund shareholder will become the owner of Treasury Fund shares
having a total net asset value equal to the total net asset value of his or
her holdings in Prime Obligations Fund at the Closing Date.
OTHER MATTERS
Management of Prime Obligations Fund knows of no other matters that may
properly be, or which are likely to be, brought before the meeting. However,
if any other business shall properly come before the meeting, the persons
named in the proxy intend to vote thereon in accordance with their best
judgment.
So far as management is presently informed, there is no litigation pending
or threatened against the Trust.
WHETHER OR NOT SHAREHOLDERS EXPECT TO ATTEND THE MEETING, ALL SHAREHOLDERS
ARE URGED TO SIGN, FILL IN AND RETURN THE ENCLOSED PROXY FORM PROMPTLY.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated February 3, 1995 (the
"Agreement"), between STAR TREASURY FUND (hereinafter called the "Acquiring
Fund"), and STAR PRIME OBLIGATIONS FUND (hereinafter called the "Acquired
Fund"). Both the Acquiring Fund and the Acquired Fund are portfolios of STAR
FUNDS, a Massachusetts business trust (the "Trust").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1)(C) of the United
States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of beneficial
interest of the Acquiring Fund (the "Acquiring Fund Shares") and the
distribution, after the Closing Date hereinafter referred to, of the Acquiring
Fund Shares to the shareholders of the Acquired Fund in liquidation of the
Acquired Fund as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-end
management investment companies and the Acquired Fund owns securities in which
the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized to
issue their shares of beneficial interest;
WHEREAS, the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined under the Investment Company Act of 1940,
as amended (the "1940 Act")), of the Trust has determined that the exchange of
all of the assets of the Acquired Fund for Acquiring Fund Shares is in the
best interests of the Acquiring Fund shareholders and that the interests of
the existing shareholders of the Acquiring Fund would not be diluted as a
result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined under the 1940 Act), of the Trust has
determined that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquired Fund
shareholders and that the interests of the existing shareholders of the
Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired Fund
agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired
Fund the number of Acquiring Fund Shares, including fractional Acquiring
Fund Shares, determined as set forth in paragraph 2.3. Such transaction
shall take place at the closing (the "Closing") on the closing date (the
"Closing Date") provided for in paragraph 3.1. In lieu of delivering
certificates for the Acquiring Fund Shares, the Acquiring Fund shall credit
the Acquiring Fund Shares to the Acquired Fund's account on the stock
record books of the Acquiring Fund and shall deliver a confirmation thereof
to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and obligations
prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred shall be
made on the Closing Date and shall be delivered to Star Bank, N.A.,
Cincinnati, Ohio, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims. All
cash delivered shall be in the form of currency and immediately available
funds payable to the order of the Custodian for the account of the
Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring Fund
any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund hereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such assets
shall be deemed included in assets transferred to the Acquiring Fund on the
Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro
rata to the Acquired Fund's shareholders of record, determined as of the
close of business on the Closing Date (the "Acquired Fund Shareholders"),
the Acquiring Fund Shares received by the Acquired Fund pursuant to
paragraph 1.1. Such liquidation and distribution will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the account of
the Acquired Fund on the books of the Acquiring Fund to open accounts on
the share record books of the Acquiring Fund in the names of the Acquired
Fund Shareholders and representing the respective pro rata number of the
Acquiring Fund Shares due such shareholders. All issued and outstanding
shares of the Acquired Fund will simultaneously be canceled on the books of
the Acquired Fund. Share certificates representing interests in the
Acquired Fund will represent a number of Acquiring Fund Shares after the
Closing Date as determined in accordance with Section 2.3. The Acquiring
Fund shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on
the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring
Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Acquired Fund up to and including the Closing
Date and such later dates, with respect to liquidation and termination of
the Acquired Fund, on which the Acquired Fund is liquidated and terminated.
2. VALUATION
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
1:00 p.m. (Eastern time) on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures
set forth in the Acquiring Fund's then-current prospectus or statement of
additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of 1:00 p.m. (Eastern time) on the Valuation
Date, using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1 by the net asset value of one Acquiring Fund Share determined
in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the regular
practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be April 24, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at 1:00
p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to
trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the Acquired
Fund and Acquiring Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses
of the Acquired Fund Shareholders and the number and percentage ownership
of outstanding shares owned by each such shareholder immediately prior to
the Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to
the Secretary of the Acquired Fund, or provide evidence satisfactory to the
Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the Closing,
each party shall deliver to the other such bills of sale, checks,
assignments, assumption agreements, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts
and has power to own all of its properties and assets and to carry out
this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-end
management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which
the Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other commitments
outstanding (other than this Agreement) which will result in liability
to it after the Closing Date.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its
knowledge threatened against the Acquired
Fund or any of its properties or assets which, if adversely determined,
would materially and adversely affect its financial condition or the
conduct of its business. The Acquired Fund knows of no facts which
might form the basis for the institution of such proceedings, and is
not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities
and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein as necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statements of Assets and Liabilities of the Acquired Fund at
November 30, 1994 have been audited by Arthur Anderson & Co. LLP,
independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and
such statements (copies of which have been furnished to the Acquiring
Fund) fairly reflect the financial condition of the Acquired Fund as of
such dates, and there are no known contingent liabilities of the
Acquired Fund as of such dates not disclosed therein.
(h) Since November 30, 1994, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns and reports
of the Acquired Fund required by law to have been filed by such dates
shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge no such
return is currently under audit and no assessment has been asserted
with respect to such returns.
(j) For each fiscal year of its operation, the Acquired Fund has met
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund are, and at
the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares
of the Acquired Fund will, at the time of the Closing, be held by the
persons and in the amounts set forth in the records of the transfer
agent as provided in paragraph 3.3. The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full right, power
and authority to sell, assign, transfer and deliver the assets to be
transferred by it hereunder.
(m) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action
on the part of the Acquired Fund's Trustees and, subject to the
approval of the Acquired Fund Shareholders, this Agreement will
constitute the valid and legally binding obligation of the Acquired
Fund
enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and to
general principles of equity and the discretion of the court
(regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein
that relates to the Acquiring Fund) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
(o) The Acquired Fund has entered into an agreement under which Star
Bank, N.A. will assume the expense of the reorganization including
accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the
Acquiring Fund's shareholders and the costs of holding the Special
Meeting of Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Trust is a business trust duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts
and the Acquiring Fund has the power to carry on its business as it is
now being conducted and to carry out this Agreement.
(b) The Trust is registered under the 1940 Act as an open-end
management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which
the Acquiring Fund is a party or by which it is bound.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its
knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings, and is not a party to or
subject to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated
herein.
(f) The Statement of Assets and Liabilities of the Acquiring Fund at
November 30, 1994, have been audited by Arthur Andersen & Co. LLP,
independent auditors, and have been prepared
in accordance with generally accepted accounting principles,
consistently applied, and such statements (copies of which have been
furnished to the Acquired Fund) fairly reflect the financial condition
of the Acquiring Fund as of such date.
(g) Since November 30, 1994, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns and reports
of the Acquiring Fund required by law then to be filed shall have been
filed, and all Federal and other taxes shown as due on said returns and
reports shall have been paid or provision shall have been made for the
payment thereof.
(i) For each fiscal year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring Fund are, and at
the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other right to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action,
if any, on the part of the Acquiring Fund's Trustees, and this
Agreement will constitute the valid and legally binding obligation of
the Acquiring Fund enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto,
and to general principles of equity and the discretion of the court
(regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) will, on
the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
such statements were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under which Star
Bank will assume the expenses of the reorganization including
accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the
Acquired Fund's shareholders and the costs of holding the Special
Meeting of Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund Shareholders
to consider and act upon this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement.
5.4 As promptly as practicable, but in any case within sixty days after the
Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax
purposes which will be carried over to the Acquiring Fund as a result of
Section 381 of the Code and which will be certified by the Acquired Fund's
President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(n),
all to be included in a Registration Statement on Form N-14 of the
Acquiring Fund (the "Registration Statement"), in compliance with the 1933
Act, the Securities Exchange Act of 1934, as amended, and the 1940 Act in
connection with the meeting of the Acquired Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer or Assistant Treasurer of the
Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund, to the effect that the representations
and warranties of the Acquired Fund made in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions provided
herein shall be subject, at its election, to the performance by the Acquiring
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Acquired Fund, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as the Acquired Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND AND
THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Fund's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Trust shall have received an opinion of Dickstein, Shapiro & Morin,
L.L.P., substantially to the effect that for Federal income tax purposes:
(a) The transfer of all or substantially all of the Acquired Fund
assets in exchange for the Acquiring Fund Shares and the distribution
of the Acquiring Fund Shares to the shareholders of the Acquired Fund
in liquidation of the Acquired Fund will constitute a "reorganization"
within the meaning of Section 368(a)(1)(C) of the Code; (b) No gain or
loss will be recognized by the Acquiring Fund upon the receipt of the
assets of the Acquired Fund solely in exchange for the Acquiring Fund
Shares; (c) No gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the distribution
(whether actual or constructive) of the Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired
Fund Shareholders upon the exchange of their Acquired Fund shares for
the Acquiring Fund Shares; (e) The tax basis of the Acquired Fund
assets acquired by the Acquiring Fund will be the same as the tax basis
of such assets to the Acquired Fund immediately prior to the
Reorganization; (f) The tax basis of the Acquiring Fund Shares received
by each of the Acquired Fund Shareholders pursuant to the
Reorganization will be the same as the tax basis of the Acquired Fund
shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired
Fund in the hands of the Acquiring Fund will include the period during
which those assets were held by the Acquired Fund; and (h) The holding
period of the Acquiring Fund Shares to be received by each Acquired
Fund Shareholder will include the period during which the Acquired Fund
shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the
Trust at any time prior to the Closing Date if circumstances should develop
that, in their opinion, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated hereby is
abandoned pursuant to the provisions of this Section 9, this Agreement
shall become void and have no effect, without any liability on the part of
any party hereto or the trustees, officers or shareholders of the Acquiring
Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions may
be waived by the Board of Trustees of the Trust, if, in their judgment, such
waiver will not have a material adverse effect on the benefits intended under
this Agreement to the shareholders of the Acquiring Fund or of the Acquired
Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof, and merges
and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound
thereby.
11.3 This Agreement shall be governed and construed in accordance with the
internal laws of the Commonwealth of Massachusetts, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations
hereunder shall be made by any party without the written consent of the
other party. Nothing herein expressed or implied is intended or shall be
construed to confer upon or give any person, firm or corporation, other
than the parties hereto and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
11.6 The Acquired Fund is hereby expressly put on notice of the limitation
of liability as set forth in Article XI of the Declaration of Trust of the
Acquiring Fund and agrees that the obligations assumed by the Acquiring
Fund pursuant to this Agreement shall be limited in any case to the
Acquiring Fund and its assets and the Acquired Fund shall not seek
satisfaction of any such obligation from the shareholders of the Acquiring
Fund, the trustees, officers, employees or agents of the Acquiring Fund or
any of them.
11.7 The Acquiring Fund is hereby expressly put on notice of the limitation
of liability as set forth in Article XI of the Declaration of Trust of the
Acquired Fund and agrees that the obligations assumed by the Acquired Fund
pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of
any such obligation from the shareholders of the Acquired Fund, the
trustees, officers, employees or agents of the Acquired Fund or any of
them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have caused
this Agreement and Plan of Reorganization to be executed and attested on its
behalf by its duly authorized representatives as of the date first above
written.
Acquired Fund:
STAR FUNDS, on behalf of its
Portfolio, STAR PRIME OBLIGATIONS FUND
Attest:
By: /s/ Joseph A. Machi
---------------------
/s/ C. Grant Anderson
- ------------------------
Assistant Secretary Name: Joseph A. Machi
---------------------
Title: Vice President
---------------------
Acquiring Fund:
STAR FUNDS, on behalf of its Portfolio,
STAR TREASURY FUND
Attest:
By: /s/ Joseph A. Machi
----------------------
/s/ C. Grant Anderson
- -----------------------
Assistant Secretary Name: Joseph A. Machi
----------------------
Title: Vice President
----------------------
[LOGO] FEDERATED SECURITIES CORP.
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
G01063-01 (3/95)
ACQUISITION OF THE ASSETS OF
STAR PRIME OBLIGATIONS FUND
BY AND IN EXCHANGE FOR SHARES OF
STAR TREASURY FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information dated March 17, 1995 is not a
prospectus. A Prospectus/Proxy Statement dated March 17, 1995 related
to the above-referenced matter may be obtained from Star Funds, on
behalf of its portfolio, Star Treasury Fund, Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779. This Statement of
Additional Information should be read in conjunction with such
Prospectus/Proxy Statement.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement Dated March 17, 1995
[logo] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION OF
STAR TREASURY FUND, DATED JANUARY 31, 1994 1
- ---------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION OF
STAR PRIME OBLIGATIONS FUND,
DATED JANUARY 31, 1994 1
- ---------------------------------------------------------------
FINANCIAL STATEMENTS OF STAR TREASURY FUND,
DATED NOVEMBER 30, 1994 1
- ---------------------------------------------------------------
FINANCIAL STATEMENTS OF STAR PRIME
OBLIGATIONS FUND DATED NOVEMBER 30, 1994 1
- ---------------------------------------------------------------
STAR TREASURY FUND AND STAR PRIME
OBLIGATIONS FUND PRO FORMA FINANCIAL
STATEMENTS DATED NOVEMBER 30, 1994 1
- ---------------------------------------------------------------
The Statement of Additional Information of Star Treasury Fund dated January 31,
1994, is incorporated herein by reference to Post-Effective Amendment No. 20 to
the Star Fund's Registration Statement on Form N-1A
(File No. 33-26915) which was filed with the Securities and Exchange Commission
on or about January 31, 1994.
The Statement of Additional Information of Star Prime Obligations Fund dated
January 31, 1994, is incorporated herein by reference to Post-Effective
Amendment No. 20 to the Star Fund's Registration Statement on Form N-1A (File
No. 33-26915) which was filed with the Securities and Exchange Commission on or
about January 31, 1994. A copy may be obtained from Star Funds at Federated
Investors Tower, Pittsburgh, PA 15222-3279.
Telephone Number: 1-800-235-4669.
The financial statements of Star Treasury Fund and Star Prime Obligations Fund
dated November 30, 1994 are incorporated herein by reference to the Combined
Annual Report to shareholders dated November 30, 1994 of Star Treasury Fund and
Star Prime Obligations Fund, and filed with the Securities and Exchange
Commission on or about January 31, 1995.
Shareholders may obtain, without charge, a copy of the most recent annual
reports of the Funds which contain, audited financial statements of the Funds by
writing the address shown above or calling the Trust at
1-800-245-5000.
PRO FORMA FINANCIAL STATEMENTS
The following pro forma financial statements give effect to the proposed
acquisition of all of the assets of Star Prime Obligations Fund, by Star
Treasury Fund accounted for by the method of accounting for tax-free
reorganizations of investment companies. These pro forma financial statements
should be read in conjunction with the historical financial statements of Star
Prime Obligations Fund and Star Treasury Fund appearing in the Combined Annual
Report to Shareholders of Treasury Fund and Prime Obligations Fund incorporated
by reference herein.
The following pro forma statements assume that the transaction was consummated
on November 30, 1994. The acquisition would be accomplished by an exchange of
shares of Star Treasury Fund for Star Prime Obligations Fund at net asset value.
The pro forma financial statements are required by rules of the Securities and
Exchange Commission and are provided for comparative purposes only. The pro
forma combining schedule of portfolio investments does not purport to be
indicative of the actual investments which will be owned by the Star Treasury
Fund upon consummation of the acquisition of the assets of Star Prime
Obligations Fund.
STAR TREASURY FUND
STAR PRIME OBLIGATIONS FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
STAR PRIME STAR STAR PRIME STAR
OBLIGATIONS TREASURY PRO FORMA OBLIGATIONS TREASURY
FUND FUND COMBINED FUND FUND
- ----------- ----------- ----------- ---------------------------------------------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
*COMMERCIAL PAPER--2.5%
----------------------------------------------------------
FINANCE--COMMERCIAL
----------------------------------------------------------
$3,000,000 $ 3,000,000 Chevron Oil Finance Co., 5.65%, 1/17/95 $2,977,871
----------------------------------------------------------
3,000,000 3,000,000 Exxon Credit Corp., 5.50%, 1/3/95 2,984,875
----------------------------------------------------------
2,000,000 2,000,000 Ford Motor Credit Corp., 5.95%, 2/13/95 1,975,539
----------------------------------------------------------
3,000,000 3,000,000 General Electric Capital Corp., 5.02%, 12/23/94 2,990,797
---------------------------------------------------------- -----------
TOTAL COMMERCIAL PAPER 10,929,082
---------------------------------------------------------- -----------
U.S. GOVERNMENT OBLIGATIONS--28.5%
----------------------------------------------------------
2,900,000 2,900,000 Federal Farm Credit Bank, 5.375%-5.60%, 2/14/95-8/1/95 2,905,922
----------------------------------------------------------
6,500,000 6,500,000 Federal Home Loan Bank, 3.81%-8.875%, 1/18/95-6/26/95 6,471,781
----------------------------------------------------------
2,000,000 2,000,000 Federal Home Loan Mortgage Assoc., 4.73%, 12/27/94 1,993,168
----------------------------------------------------------
1,000,000 1,000,000 Student Loan Marketing Assoc., 5.315%, 6/30/95 1,000,000
----------------------------------------------------------
19,000,000 19,000,000 Student Loan Marketing Assoc., Variable Rate Notes, 19,013,181
12/6/94
----------------------------------------------------------
$24,000,000 24,000,000 U.S. Treasury Bills, 1/5/95-2/16/95 $23,779,024
----------------------------------------------------------
5,000,000 5,000,000 U.S. Treasury Bond, 7.875%, 2/15/95 5,024,899
----------------------------------------------------------
64,000,000 64,000,000 U.S. Treasury Notes, 3.875%-4.625%, 12/31/94-10/31/95 63,591,525
----------------------------------------------------------
3,000,000 3,000,000 U.S. Treasury Notes, 4.125%, 5/31/95 2,970,631
---------------------------------------------------------- ----------- -----------
TOTAL U.S. GOVERNMENT OBLIGATIONS 34,354,683 92,395,448
---------------------------------------------------------- ----------- -----------
SHORT-TERM CORPORATE BONDS--1.2%
----------------------------------------------------------
1,000,000 1,000,000 American Express Credit Co., 5.95%, 1/27/95 1,003,204
----------------------------------------------------------
1,000,000 1,000,000 Associates Corp. North America, 6.375%, 4/15/95 1,003,992
----------------------------------------------------------
1,000,000 1,000,000 Citizens Southern Corp., 11.70%, 2/1/95 1,013,177
----------------------------------------------------------
1,000,000 1,000,000 Ford Motor Co., 9.65%, 12/9/94 1,001,235
----------------------------------------------------------
1,500,000 1,500,000 Pepsico, Inc., 5.875%, 12/15/94 1,501,175
---------------------------------------------------------- -----------
TOTAL SHORT-TERM CORPORATE BONDS 5,522,783
---------------------------------------------------------- -----------
**VARIABLE RATE INSTRUMENTS--0.4%
----------------------------------------------------------
2,000,000 2,000,000 Pepsico, Inc., 5.715%, 12/7/94 2,000,000
---------------------------------------------------------- -----------
***REPURCHASE AGREEMENTS--67.5%
----------------------------------------------------------
87,000,000 87,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.70%, 87,000,000
dated 11/30/94, due 12/1/94
----------------------------------------------------------
20,000,000 20,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.72%, 20,000,000
dated 11/30/94, due 12/1/94
----------------------------------------------------------
16,500,000 16,500,000 First Boston Corp., 5.65%, dated 11/30/94, due 12/1/94 16,500,000
----------------------------------------------------------
17,000,000 17,000,000 Fuji Securities, 5.70%, dated 11/30/94, due 12/1/94 17,000,000
----------------------------------------------------------
15,500,000 15,500,000 HSBC Securities, Inc., 5.55%, dated 11/30/94, due 12/1/94 15,500,000
----------------------------------------------------------
4,000,000 4,000,000 HSBC Securities, Inc., 5.60%, dated 11/30/94, due 12/1/94 4,000,000
----------------------------------------------------------
<CAPTION>
PRO FORMA
COMBINED
- ---------------------------------------------------------- -----------
<S> <C>
*COMMERCIAL PAPER--2.5%
- ----------------------------------------------------------
FINANCE--COMMERCIAL
- ----------------------------------------------------------
Chevron Oil Finance Co., 5.65%, 1/17/95 $ 2,977,871
- ----------------------------------------------------------
Exxon Credit Corp., 5.50%, 1/3/95 2,984,875
- ----------------------------------------------------------
Ford Motor Credit Corp., 5.95%, 2/13/95 1,975,539
- ----------------------------------------------------------
General Electric Capital Corp., 5.02%, 12/23/94 2,990,797
- ---------------------------------------------------------- -----------
TOTAL COMMERCIAL PAPER 10,929,082
- ---------------------------------------------------------- -----------
U.S. GOVERNMENT OBLIGATIONS--28.5%
- ----------------------------------------------------------
Federal Farm Credit Bank, 5.375%-5.60%, 2/14/95-8/1/95 2,905,922
- ----------------------------------------------------------
Federal Home Loan Bank, 3.81%-8.875%, 1/18/95-6/26/95 6,471,781
- ----------------------------------------------------------
Federal Home Loan Mortgage Assoc., 4.73%, 12/27/94 1,993,168
- ----------------------------------------------------------
Student Loan Marketing Assoc., 5.315%, 6/30/95 1,000,000
- ----------------------------------------------------------
Student Loan Marketing Assoc., Variable Rate Notes,
12/6/94 19,013,181
- ----------------------------------------------------------
U.S. Treasury Bills, 1/5/95-2/16/95 23,779,024
- ----------------------------------------------------------
U.S. Treasury Bond, 7.875%, 2/15/95 5,024,899
- ----------------------------------------------------------
U.S. Treasury Notes, 3.875%-4.625%, 12/31/94-10/31/95 63,591,525
- ----------------------------------------------------------
U.S. Treasury Notes, 4.125%, 5/31/95 2,970,631
- ---------------------------------------------------------- ----------
TOTAL U.S. GOVERNMENT OBLIGATIONS 126,750,131
- ---------------------------------------------------------- ----------
SHORT-TERM CORPORATE BONDS--1.2%
- ----------------------------------------------------------
American Express Credit Co., 5.95%, 1/27/95 1,003,204
- ----------------------------------------------------------
Associates Corp. North America, 6.375%, 4/15/95 1,003,992
- ----------------------------------------------------------
Citizens Southern Corp., 11.70%, 2/1/95 1,013,177
- ----------------------------------------------------------
Ford Motor Co., 9.65%, 12/9/94 1,001,235
- ----------------------------------------------------------
Pepsico, Inc., 5.875%, 12/15/94 1,501,175
- ---------------------------------------------------------- ---------
TOTAL SHORT-TERM CORPORATE BONDS 5,522,783
- ---------------------------------------------------------- --------
**VARIABLE RATE INSTRUMENTS--0.4%
- ----------------------------------------------------------
Pepsico, Inc., 5.715%, 12/7/94 2,000,000
- ---------------------------------------------------------- ---------
***REPURCHASE AGREEMENTS--67.5%
- ----------------------------------------------------------
Donaldson, Lufkin & Jenrette Securities Corp., 5.70%,
dated 11/30/94, due 12/1/94 87,000,000
- ----------------------------------------------------------
Donaldson, Lufkin & Jenrette Securities Corp., 5.72%,
dated 11/30/94, due 12/1/94 20,000,000
- ----------------------------------------------------------
First Boston Corp., 5.65%, dated 11/30/94, due 12/1/94 16,500,000
- ----------------------------------------------------------
Fuji Securities, 5.70%, dated 11/30/94, due 12/1/94 17,000,000
- ----------------------------------------------------------
HSBC Securities, Inc., 5.55%, dated 11/30/94, due 12/1/94 15,000,000
- ----------------------------------------------------------
HSBC Securities, Inc., 5.60%, dated 11/30/94, due 12/1/94 4,000,000
- ----------------------------------------------------------
STAR TREASURY FUND
STAR PRIME OBLIGATIONS FUND
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
STAR PRIME STAR STAR PRIME STAR
OBLIGATIONS TREASURY PRO FORMA OBLIGATIONS TREASURY
FUND FUND COMBINED FUND FUND
- ----------- ----------- ----------- ---------------------------------------------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
***REPURCHASE AGREEMENTS--CONTINUED
----------------------------------------------------------
$16,500,000 $16,500,000 Kidder, Peabody & Co., Inc., 5.65%, dated 11/30/94, $16,500,000
due 12/1/94
----------------------------------------------------------
16,500,000 16,500,000 Morgan Stanley & Co., Inc., 5.65%, dated 11/30/94, 16,500,000
due 12/1/94
----------------------------------------------------------
$3,000,000 3,000,000 Morgan Stanley & Co., Inc., 5.68%, dated 11/30/94, $3,000,000
due 12/1/94
----------------------------------------------------------
82,554,000 82,554,000 National Westminster Securities, 5.65%, dated 11/30/94, 82,554,000
due 12/1/94
----------------------------------------------------------
2,420,000 2,420,000 National Westminster Securities, 5.66%, dated 11/30/94, 2,420,000
due 12/1/94
----------------------------------------------------------
15,500,000 15,500,000 Sanwa Bank, 5.55%, dated 11/30/94, due 12/1/94 15,500,000
----------------------------------------------------------
4,000,000 4,000,000 Sanwa Bank, 5.70%, dated 11/30/94, due 12/1/94 4,000,000
---------------------------------------------------------- ----------- -----------
TOTAL REPURCHASE AGREEMENTS 33,420,000 267,054,000
---------------------------------------------------------- ----------- -----------
TOTAL INVESTMENTS (AT AMORTIZED COST) $86,226,548+ $359,449,448+
---------------------------------------------------------- ----------- -----------
<CAPTION>
PRO FORMA
COMBINED
- ---------------------------------------------------------- -----------
<S> <C>
***REPURCHASE AGREEMENTS--CONTINUED
----------------------------------------------------------
Kidder, Peabody & Co., Inc., 5.65%, dated 11/30/94, $16,500,000
due 12/1/94
----------------------------------------------------------
Morgan Stanley & Co., Inc., 5.65%, dated 11/30/94, 16,500,000
due 12/1/94
----------------------------------------------------------
Morgan Stanley & Co., Inc., 5.68%, dated 11/30/94, 3,000,000
due 12/1/94
----------------------------------------------------------
National Westminster Securities, 5.65%, dated 11/30/94, 82,554,000
due 12/1/94
----------------------------------------------------------
National Westminster Securities, 5.66%, dated 11/30/94, 2,420,000
due 12/1/94
----------------------------------------------------------
Sanwa Bank, 5.55%, dated 11/30/94, due 12/1/94 15,500,000
----------------------------------------------------------
Sanwa Bank, 5.70%, dated 11/30/94, due 12/1/94 4,000,000
---------------------------------------------------------- ----------
TOTAL REPURCHASE AGREEMENTS 300,474,000
---------------------------------------------------------- ----------
TOTAL INVESTMENTS (AT AMORTIZED COST) $445,675,996+
---------------------------------------------------------- ----------
+ Also represents cost for federal tax purposes.
* Each issue shows the rate of discount at time of purchase.
** Current date and next demand date shown.
*** Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
Note: The categories of investments are shown as a percentage of net assets
($445,109,393) at November 30, 1994.
(See Notes to Pro Forma Financial Statements)
STAR TREASURY FUND
STAR PRIME OBLIGATIONS FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STAR PRIME STAR
OBLIGATIONS TREASURY PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
ASSETS:
- -------------------------------------------------------------------
Investments in other securities $52,806,548 $ 92,395,448 $ 145,201,996
- -------------------------------------------------------------------
Investments in repurchase agreements 33,420,000 267,054,000 300,474,000
- ------------------------------------------------------------------- ------------- -------------- --------------
Total investments, at amortized cost 86,226,548 359,449,448 445,675,996
- -------------------------------------------------------------------
Interest receivable 456,081 659,405 1,115,486
- -------------------------------------------------------------------
Cash 398 721 78,110(A) 79,229
- -------------------------------------------------------------------
Deferred expenses 309 -- (309)(B) --
- ------------------------------------------------------------------- ------------- -------------- --------------- --------------
Total assets 86,683,336 360,109,574 77,801 446,870,711
- ------------------------------------------------------------------- ------------- -------------- --------------- --------------
LIABILITIES:
- -------------------------------------------------------------------
Dividends payable 299,509 1,297,328 151,974(A) 1,748,811
- -------------------------------------------------------------------
Payable for Fund shares redeemed 12,507 -- 12,507
- -------------------------------------------------------------------
Accrued expenses 27,898 46,275 (74,173)(A) --
- ------------------------------------------------------------------- ------------- -------------- --------------- --------------
Total liabilities 339,914 1,343,603 77,801 1,761,318
- ------------------------------------------------------------------- ------------- -------------- --------------- --------------
Total Net Assets $86,343,422 $ 358,765,971 $ 445,109,393
- ------------------------------------------------------------------- ------------- -------------- --------------
Shares Outstanding 86,343,422 358,765,971 445,109,393
- ------------------------------------------------------------------- ------------- -------------- --------------
NET ASSET VALUE, Offering Price, and Redemption
Proceeds Per Share: $1.00 $1.00 $1.00
- ------------------------------------------------------------------- ------------- -------------- --------------
</TABLE>
(A) Adjustment to reflect the cumulative effect of the adjustments on the Pro
Forma Combining Statement of Operations.
(B) Adjustment to write off deferred organizational cost of Star Prime
Obligations Fund.
(See Notes to Pro Forma Financial Statements)
STAR TREASURY FUND
STAR PRIME OBLIGATIONS FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STAR PRIME STAR
OBLIGATIONS TREASURY PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------
Interest income $ 3,425,718 $ 13,166,763 $ -- $ 16,592,481
- --------------------------------------------------------------------- ------------- ------------ -------------- ------------
EXPENSES:
- ---------------------------------------------------------------------
Investment advisory fee 469,874 1,672,434 (42,716)(A) 2,099,592
- ---------------------------------------------------------------------
Trustees' fees 2,426 6,166 (2,092)(B) 6,500
- ---------------------------------------------------------------------
Administrative personnel and services fees 104,792 409,841 -- 514,633
- ---------------------------------------------------------------------
Custodian fees 17,504 82,649 -- 100,153
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 31,114 33,704 (24,000)(C) 40,818
- ---------------------------------------------------------------------
Fund share registration fees 17,624 18,764 (13,972)(D) 22,416
- ---------------------------------------------------------------------
Auditing fees 18,232 18,250 (18,082)(E) 18,400
- ---------------------------------------------------------------------
Legal fees 2,947 4,300 (1,247)(F) 6,000
- ---------------------------------------------------------------------
Printing and postage 9,716 9,506 (9,222)(G) 10,000
- ---------------------------------------------------------------------
Portfolio accounting fees 42,627 66,046 (30,457)(H) 78,216
- ---------------------------------------------------------------------
Insurance premiums 8,954 10,275 (6,729)(I) 12,500
- ---------------------------------------------------------------------
Amortization of deferred organizational cost -- -- 309(J) 309
- ---------------------------------------------------------------------
Miscellaneous 4,036 4,730 (3,766)(K) 5,000
- --------------------------------------------------------------------- ------------- ------------ -------------- ------------
Total expenses 729,846 2,336,665 (151,974) 2,914,537
- --------------------------------------------------------------------- ------------- ------------ -------------- ------------
Net investment income $ 2,695,872 $ 10,830,098 $ 151,974 $ 13,677,944
- --------------------------------------------------------------------- ------------- ------------ -------------- ------------
</TABLE>
(A) Star Bank, N.A., Star Funds' investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to .50 of 1% of
the Star Treasury Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
(B) Adjustment to reflect Trustees fees for Star Treasury Fund only.
(C) Federated Services Company ("FServ") serves as transfer and dividend
disbursing agent for the Funds. The FServ fee is based on the size, type,
and number of accounts and transactions made by shareholders. This
adjustment reflects the $2,000 minimum per month for Star Treasury Fund
only.
(D) Adjustment to reflect state registration costs for Star Treasury Fund only.
(E) Adjustment to reflect audit charge for one portfolio only.
(F) Pro forma combined legal fees are adjusted to include legal retainers, plus
estimated out-of-pocket charges, for one portfolio only. This adjustment
reflects the legal costs associated with Star Treasury Fund.
(G) Printing and postage expenses are adjusted to reflect estimated savings to
be realized by combining two portfolios into a single portfolio.
(H) FServ also maintains the Funds' accounting records. The FServ fee is based
on the level of each Fund's average net assets for the period, plus
out-of-pocket expenses. This adjustment reflects additional asset based
charges associated with Star Treasury Fund and to reflect the decrease of
the minimum charge associated with Star Prime Obligations Fund.
(I) Insurance premiums are allocated from a group coverage, the allocation is
comprised of a base amount, plus a portion based on average net assets. The
pro forma combined insurance premium equals the base premium of a single
portfolio, plus an allocation based on combined assets.
(J) Adjustment to write off deferred organizational cost of Star Prime
Obligations Fund.
(K) Pro forma combined miscellaneous expenses are adjusted to reflect estimated
savings to be realized by combining two portfolios into a single portfolio.
(See Notes to Pro Forma Financial Statements)
STAR TREASURY FUND
STAR PRIME OBLIGATIONS FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
NOVEMBER 30, 1994
(UNAUDITED)
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(1) BASIS OF COMBINATION
The unaudited Pro Forma Combining Portfolio of Investments, Statement of Assets
and Liabilities and Statement of Operations reflect the accounts of Star Prime
Obligations Fund and Star Treasury Fund, two of nine portfolios offered by the
Star Funds (the "Funds") for the year ended November 30, 1994. These statements
have been derived from the books and records utilized in calculating daily net
asset value at November 30, 1994.
The Pro Forma Combining Portfolio of Investments, Statement of Assets and
Liabilities and Statement of Operations should be read in conjunction with the
historical financial statements of the Funds incorporated by reference in the
Statement of Additional Information. The Funds follow generally accepted
accounting principles applicable to management investment companies which are
disclosed in the historical financial statements dated November 30, 1994.
The Pro Forma statements give effect to the proposed transfer of the assets of
Star Prime Obligations Fund in exchange for shares of Star Treasury Fund. Under
generally accepted accounting principles, Star Treasury Fund will be the
surviving entity for accounting purposes with its historical cost of investment
securities and results of operations being carried forward.
The Pro Forma financial statements have been adjusted to reflect the anticipated
advisory and administration fee arrangements for the surviving entity, including
anticipated voluntary fee waivers. Certain other operating costs have also been
adjusted to reflect anticipated expenses of the combined entity. Other costs
which may change as a result of the reorganization are currently undeterminable.
For the fiscal year ended November 30, 1994, the Star Prime Obligations Fund and
Star Treasury Fund paid investment advisory fees computed at the annual rate of
0.55% and 0.50%, respectively, of average daily net assets.
The advisor and administrator may voluntarily choose to waive a portion of their
fees and reimburse certain operating expenses of Star Prime Obligations Fund and
Star Treasury Fund.
(2) SHARES OF BENEFICIAL INTEREST
The Pro Forma net asset value per share assumes the issuance of 445,109,393
shares of Star Treasury Fund (86,343,422 shares from Star Prime Obligations
Fund) which would have been issued at November 30, 1994, in connection with the
proposed reorganization.
G01063-02
STAR PRIME OBLIGATIONS FUND
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
STAR PRIME OBLIGATIONS FUND
CUSIP NO. 854911203 FOR SPECIAL MEETING OF SHAREHOLDERS APRIL 20, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Star Prime Obligations Fund hereby appoint C. Grant Anderson, Patricia
Conner, Mason Douglas, Scott A. Tretter, and Stephen Newcamp and or any
of them true and lawful attorneys, with power of substitution of each,
to vote all shares of Prime Obligations Fund, which the undersigned is
entitled to vote, at the Special Meeting of Shareholders to be held on
April 20, 1995, at Federated Investors Tower, Pittsburgh, Pennsylvania,
at 1:00 p.m. (Eastern Time) and at any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The
attorneys named will vote the shares represented by this proxy in
accordance with the choices made on this card. IF NO CHOICE IS
INDICATED AS TO ANY ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT
MATTER.
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE A PLAN OF REORGANIZATION IN WHICH THE ASSETS OF STAR
PRIME OBLIGATIONS FUND WOULD BE TRANSFERRED TO STAR TREASURY FUND
IN EXCHANGE FOR SHARES OF STAR TREASURY FUND WHICH WOULD BE
DISTRIBUTED TO STAR PRIME OBLIGATIONS FUND SHAREHOLDERS IN COMPLETE
LIQUIDATION AND TERMINATION OF STAR PRIME OBLIGATIONS FUND.
STAR PRIME OBLIGATIONS FUND PROXY VOTING MAIL-IN STUB
RECORD DATE SHARES
PROPOSAL 1: TO APPROVE OR DISAPPROVE AN
AGREEMENT AND PLAN OF
REORGANIZATION
o FOR the Agreement and Plan of
Reorganization
o AGAINST the Agreement and
Plan of
Reorganization
o ABSTAIN
Please sign EXACTLY as your name(s) appear above. When signing as
attorney, executor, administrator, guardian, trustee, custodian, etc.,
please give your full title as such. If a corporation or partnership,
please sign the full name by an authorized officer or partner. If stock
is owned jointly, all owners should sign.
_______________________________________________________
_______________________________________________________
Signature(s) of Shareholder(s)
Date:___________________________________________________
