THE STELLAR FUND
[LOGO OF ANNUAL REPORT
STAR BANK, N.A.] TO SHAREHOLDERS
November 30, 1994
------------------------------
Star Bank, N.A.
Investment Adviser
------------------------------
Federated Securities Corp.
Distributor
------------------------------
854911708
854911609
G00299-07 (1/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for The Stellar Fund
(the "Fund"), for the fiscal year ended November 30, 1994. This Report provides
you with complete financial information for the Fund, including a Management
Discussion & Analysis written by the portfolio manager, a Portfolio of
Investments, and Financial Statements. In addition, Financial Highlights have
been included for Trust Shares and Investment Shares.
Over the twelve-month reporting period, net assets in the Fund grew to more than
$111.4 million. The Fund paid more than $2.6 million in dividends.
Thank you for your confidence in the Fund as a way to put your money to work
through stocks, bonds, real estate investments and international securities. We
will continue to keep you informed of your investment, and remain committed to
delivering the highest level of personal service.
Sincerely,
Edward C. Gonzales
President
January 13, 1995
THE STELLAR FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR FISCAL YEAR ENDED NOVEMBER 30, 1994
MANAGEMENT DISCUSSION & ANALYSIS
---------------------------------------------------------------------------
The Fund was established in 1991 to provide its customers with a
unique portfolio comprised of five equally weighted asset classes: U.S.
equities, fixed income obligations, international securities, real estate
securities, and cash equivalents and precious metal securities. This Fund
seeks to produce annual returns near that of common stocks with reduced
price volatility. This phenomenon can occur because the covariance of the
portfolio's five components is sufficiently unrelated to allow an overall
reduction in volatility.
The 12 months ended November 30, 1994 were a volatile and tough time
for investors across the market spectrum. It was a time when the bond
market underwent one of its worst years, from a total return standpoint
since the depression. The Lehman Bond Index* returned
(3.7%) over the year. Stocks, while better than bonds, were only able to
muster a return of 1.2%, which is well below the historical averages. Real
estate securities were negative. International securities proved to be the
only true bastion of strength. The Fund performed about as expected, given
these returns. For the period from April 6, 1994 (start of performance) to
November 30, 1994, the Fund's Trust Shares had a total return of (1.81%)**
before any load charges. For the fiscal year ended November 30, 1994, the
Fund's Investment Shares had a total return of (1.22%)** before any load
charges.*** This was a year which helped to define the financial markets as
being for investors who take a long-term approach to investing.
The markets were strongly influenced by the course of action taken by
the Federal Reserve Board (the "Fed") starting in February 1994. Since then
we saw the Fed enter the market and raise rates six times. This was in an
effort to slow the economy and prevent any re-emergence of inflation, which
Greenspan has vowed to fight. As rates were raised at the short end of the
curve, a similar reaction occurred at the longer end, driving those rates
higher and producing the overall negative return for bonds. We anticipated
such a move by the Fed and therefore, kept our average maturities shorter
than the norm.
Stocks found the sledding very difficult in this rising rate
environment. Earnings were extremely strong, up over 25% on a reported
basis, but could not overcome the interest rate factor. Historically, as
interest rates rise, the Price/Earnings ratio on stocks decline. Thus, as
investors began to find other alternatives for short-term cash, the market
found it difficult to work higher. This same interest rate concern spilled
over into real estate stocks, which are sensitive to rates for two reasons.
One, these are yield play investments. Two, a potential economic slowdown
will hurt occupancy and lease rates, lowering profitability. International
markets, which have been emerging from recessions, found investors more
willing to pursue their stocks. This helped to push this market higher and
reinforced the logic in having exposure to international stocks in The
Stellar Fund portfolio.
* This index is unmanaged.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
*** For the fiscal year ended November 30, 1994, the Fund's Investment
Shares had a total return of (5.63%) with load charges. The Fund's
Trust Shares are sold without a sales load.
While we suspect that 1995 will be another difficult environment for
the financial markets, we feel strongly that the Fund offers an alternative
to investors who wish to reduce their risk through diversification. With a
steady investment in the five different asset classes, investors can take
the guesswork out of their investment portfolio, knowing that they have
exposure to many different asset classes. We believe this may continue to
lead to lower volatility and in the long run reward the patient investor.
THE STELLAR FUND--TRUST SHARES
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE STELLAR FUND--TRUST SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Stellar Fund--Trust Shares (the "Fund") from April 6, 1994 (start of
performance) to November 30, 1994, compared to the Standard and Poor's
500/Lehman Government Corporate (50/50 Split) ("S&P G/C").+
[GRAPHIC REPRESENTATION "A1" OMITTED. SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P G/C has been adjusted to reflect reinvestment of
dividends on securities in the index.
+The S&P G/C is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. These indices
are unmanaged.
THE STELLAR FUND--INVESTMENT SHARES
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE STELLAR FUND--INVESTMENT SHARES
The graph below illustrates the hypothetical investment of $10,000 in The
Stellar Fund-- Investment Shares (the "Fund") from October 18, 1991 (start of
performance) to November 30, 1994, compared to the Standard and Poor's
500/Lehman Government Corporate (50/50 Split)
("S&P G/C").+
[GRAPHIC REPRESENTATION "A2" OMITTED. SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Represents a hypothetical investment of $10,000 in the Fund after deducting the
maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge =
$9,550). The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P G/C has been adjusted to reflect reinvestment of
dividends on securities in the index.
+The S&P G/C is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. These indices
are unmanaged.
THE STELLAR FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
U.S. EQUITIES--20.1%
- -------------------------------------------------------------------------------------------------
BASIC INDUSTRY--1.9%
- -------------------------------------------------------------------------------------------------
CHEMICALS & FERTILIZERS--1.0%
----------------------------------------------------------------------------------
7,000 DuPont E.I. De Nemours & Co. $ 377,125
----------------------------------------------------------------------------------
10,000 Lyondell Petrochemical Co. 242,500
----------------------------------------------------------------------------------
7,500 Monsanto Co. 540,000
---------------------------------------------------------------------------------- --------------
Total 1,159,625
---------------------------------------------------------------------------------- --------------
METALS & MINING--0.5%
----------------------------------------------------------------------------------
6,000 Aluminum Co. of America 489,750
---------------------------------------------------------------------------------- --------------
PAPER--0.4%
----------------------------------------------------------------------------------
6,000 International Paper Co. 429,000
---------------------------------------------------------------------------------- --------------
TOTAL BASIC INDUSTRY 2,078,375
---------------------------------------------------------------------------------- --------------
CAPITAL GOODS--4.9%
- -------------------------------------------------------------------------------------------------
AEROSPACE--0.4%
----------------------------------------------------------------------------------
10,000 Boeing Co. 447,500
---------------------------------------------------------------------------------- --------------
ELECTRICAL EQUIPMENT--1.2%
----------------------------------------------------------------------------------
6,000 Emerson Electric Co. 354,000
----------------------------------------------------------------------------------
13,000 General Electric Co. 598,000
----------------------------------------------------------------------------------
12,300 Honeywell, Inc. 359,775
---------------------------------------------------------------------------------- --------------
Total 1,311,775
---------------------------------------------------------------------------------- --------------
ELECTRONICS--0.9%
----------------------------------------------------------------------------------
16,000 Intel Corp. 1,010,000
---------------------------------------------------------------------------------- --------------
INDUSTRIAL PRODUCTS--0.8%
----------------------------------------------------------------------------------
8,000 Deere & Co. 514,000
----------------------------------------------------------------------------------
11,000 Varity Corp. 409,750
---------------------------------------------------------------------------------- --------------
Total 923,750
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
U.S. EQUITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
CAPITAL GOODS--CONTINUED
- -------------------------------------------------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT--1.6%
----------------------------------------------------------------------------------
18,000 *Cisco Systems, Inc. $ 580,500
----------------------------------------------------------------------------------
7,100 Hewlett Packard Co. 695,800
----------------------------------------------------------------------------------
20,000 Intelligent Electronics, Inc. 257,500
----------------------------------------------------------------------------------
4,000 *Microsoft Corp. 251,500
---------------------------------------------------------------------------------- --------------
Total 1,785,300
---------------------------------------------------------------------------------- --------------
TOTAL CAPITAL GOODS 5,478,325
---------------------------------------------------------------------------------- --------------
CONSUMER CYCLICAL--2.1%
- -------------------------------------------------------------------------------------------------
AUTOMOTIVE & RELATED--0.9%
----------------------------------------------------------------------------------
15,000 Goodyear Tire & Rubber 508,125
----------------------------------------------------------------------------------
10,000 Johnson Controls, Inc. 485,000
---------------------------------------------------------------------------------- --------------
Total 993,125
---------------------------------------------------------------------------------- --------------
ENTERTAINMENT & LEISURE--0.8%
----------------------------------------------------------------------------------
5,000 Capital Cities ABC Corp. 408,750
----------------------------------------------------------------------------------
10,000 Disney (Walt) Co. 436,250
---------------------------------------------------------------------------------- --------------
Total 845,000
---------------------------------------------------------------------------------- --------------
RETAILING & APPAREL--0.4%
----------------------------------------------------------------------------------
10,600 Penney (J.C.), Inc. 487,600
---------------------------------------------------------------------------------- --------------
TOTAL CONSUMER CYCLICAL 2,325,725
---------------------------------------------------------------------------------- --------------
CONSUMER STAPLES--2.1%
- -------------------------------------------------------------------------------------------------
HOUSEHOLD--1.0%
----------------------------------------------------------------------------------
6,000 Gillette Co. 441,000
----------------------------------------------------------------------------------
11,000 Procter & Gamble Co. 687,500
---------------------------------------------------------------------------------- --------------
Total 1,128,500
---------------------------------------------------------------------------------- --------------
FOOD & BEVERAGE--0.8%
----------------------------------------------------------------------------------
20,000 Premark International, Inc. 910,000
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
U.S. EQUITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
CONSUMER STAPLES--CONTINUED
- -------------------------------------------------------------------------------------------------
TOBACCO--0.3%
----------------------------------------------------------------------------------
8,000 American Brands, Inc. $ 283,000
---------------------------------------------------------------------------------- --------------
TOTAL CONSUMER STAPLES 2,321,500
---------------------------------------------------------------------------------- --------------
ENERGY--1.6%
- -------------------------------------------------------------------------------------------------
DOMESTIC OIL--0.9%
----------------------------------------------------------------------------------
6,500 Ashland Oil, Co. 221,000
----------------------------------------------------------------------------------
17,000 Chevron Corp. 741,625
---------------------------------------------------------------------------------- --------------
Total 962,625
---------------------------------------------------------------------------------- --------------
ENERGY SERVICE & EQUIPMENT--0.3%
----------------------------------------------------------------------------------
30,000 *Energy Service, Inc. 360,000
---------------------------------------------------------------------------------- --------------
NATURAL GAS & COAL--0.4%
----------------------------------------------------------------------------------
20,000 Panhandle Eastern Corp. 422,500
---------------------------------------------------------------------------------- --------------
TOTAL ENERGY 1,745,125
---------------------------------------------------------------------------------- --------------
EQUITY MUTUAL FUNDS--0.9%
- -------------------------------------------------------------------------------------------------
100,000 Gateway Trust 978,000
---------------------------------------------------------------------------------- --------------
FINANCE--1.9%
- -------------------------------------------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS--1.3%
----------------------------------------------------------------------------------
4,000 Citicorp 464,028
----------------------------------------------------------------------------------
15,000 NationsBank Corp. 673,125
----------------------------------------------------------------------------------
12,500 Signet Banking Corp. 373,437
---------------------------------------------------------------------------------- --------------
Total 1,510,590
---------------------------------------------------------------------------------- --------------
INSURANCE--0.6%
----------------------------------------------------------------------------------
7,000 American International Group, Inc. 641,375
---------------------------------------------------------------------------------- --------------
TOTAL FINANCE 2,151,965
---------------------------------------------------------------------------------- --------------
HEALTH CARE--1.6%
- -------------------------------------------------------------------------------------------------
DRUGS--0.4%
----------------------------------------------------------------------------------
12,000 Merck & Co. 447,000
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
U.S. EQUITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
HEALTH CARE--CONTINUED
- -------------------------------------------------------------------------------------------------
HOSPITAL MANAGEMENT--1.2%
----------------------------------------------------------------------------------
18,000 Columbia/HCA Healthcare Corp. $ 681,750
----------------------------------------------------------------------------------
16,000 U.S. Healthcare, Inc. 716,000
---------------------------------------------------------------------------------- --------------
Total 1,397,750
---------------------------------------------------------------------------------- --------------
TOTAL HEALTH CARE 1,844,750
---------------------------------------------------------------------------------- --------------
MISCELLANEOUS--0.9%
- -------------------------------------------------------------------------------------------------
DIVERSIFIED--0.9%
----------------------------------------------------------------------------------
20,000 Allied Signal, Inc. 652,500
----------------------------------------------------------------------------------
4,000 ITT Corp. 318,500
---------------------------------------------------------------------------------- --------------
TOTAL MISCELLANEOUS 971,000
---------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.3%
- -------------------------------------------------------------------------------------------------
RAILROADS--0.3%
----------------------------------------------------------------------------------
7,300 Burlington Northern, Inc. 355,875
---------------------------------------------------------------------------------- --------------
TOTAL TRANSPORTATION 355,875
---------------------------------------------------------------------------------- --------------
UTILITIES--1.9%
- -------------------------------------------------------------------------------------------------
ELECTRIC--1.1%
----------------------------------------------------------------------------------
15,000 Duke Power Co. 611,250
----------------------------------------------------------------------------------
24,600 General Public Utilities Corp. 633,450
---------------------------------------------------------------------------------- --------------
Total 1,244,700
---------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS--0.8%
----------------------------------------------------------------------------------
11,600 American Telephone & Telegraph Co. 569,850
----------------------------------------------------------------------------------
10,000 Pacific Telesis Group 290,000
---------------------------------------------------------------------------------- --------------
Total 859,850
---------------------------------------------------------------------------------- --------------
TOTAL UTILITIES 2,104,550
---------------------------------------------------------------------------------- --------------
TOTAL U.S. EQUITIES (IDENTIFIED COST, $22,882,254) 22,355,190
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
INTERNATIONAL SECURITIES--18.1%
- -------------------------------------------------------------------------------------------------
AUSTRALIA--1.3%
- -------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL--0.6%
----------------------------------------------------------------------------------
PUBLISHING--0.6%
----------------------------------------------------------------------------------
40,000 News Corp. Ltd. $ 630,000
---------------------------------------------------------------------------------- --------------
TOTAL CONSUMER CYCLICAL 630,000
---------------------------------------------------------------------------------- --------------
FINANCE--0.7%
----------------------------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS--0.7%
----------------------------------------------------------------------------------
20,000 National Australia Bank Ltd. 820,000
---------------------------------------------------------------------------------- --------------
TOTAL FINANCE 820,000
---------------------------------------------------------------------------------- --------------
TOTAL AUSTRALIA 1,450,000
---------------------------------------------------------------------------------- --------------
CANADA--2.8%
- -------------------------------------------------------------------------------------------------
BASIC INDUSTRY--1.2%
----------------------------------------------------------------------------------
METALS & MINING--1.2%
----------------------------------------------------------------------------------
30,000 Alcan Aluminum Ltd. 742,500
----------------------------------------------------------------------------------
30,000 Rio Algom Ltd. 536,250
---------------------------------------------------------------------------------- --------------
TOTAL BASIC INDUSTRY 1,278,750
---------------------------------------------------------------------------------- --------------
CONSUMER STAPLES--0.3%
----------------------------------------------------------------------------------
FOOD & BEVERAGE--0.3%
----------------------------------------------------------------------------------
12,500 Seagram Ltd. 364,063
---------------------------------------------------------------------------------- --------------
TOTAL CONSUMER STAPLES 364,063
---------------------------------------------------------------------------------- --------------
ENERGY--0.7%
----------------------------------------------------------------------------------
DOMESTIC OIL--0.3%
----------------------------------------------------------------------------------
30,000 Total Petroleum North American Ltd 382,500
---------------------------------------------------------------------------------- --------------
NATURAL GAS & COAL--0.4%
----------------------------------------------------------------------------------
32,000 TransCanada Pipelines Ltd. 404,000
---------------------------------------------------------------------------------- --------------
TOTAL ENERGY 786,500
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
CANADA--CONTINUED
- -------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.6%
----------------------------------------------------------------------------------
DIVERSIFIED--0.6%
----------------------------------------------------------------------------------
41,000 Canadian Pacific Ltd. $ 635,500
---------------------------------------------------------------------------------- --------------
TOTAL MISCELLANEOUS 635,500
---------------------------------------------------------------------------------- --------------
TOTAL CANADA 3,064,813
---------------------------------------------------------------------------------- --------------
CHILE--0.8%
- -------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.8%
----------------------------------------------------------------------------------
DIVERSIFIED--0.8%
----------------------------------------------------------------------------------
20,000 Chile Fund, Inc. 935,000
---------------------------------------------------------------------------------- --------------
TOTAL CHILE 935,000
---------------------------------------------------------------------------------- --------------
DENMARK--0.6%
- -------------------------------------------------------------------------------------------------
CAPITAL GOODS--0.6%
----------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS--0.6%
----------------------------------------------------------------------------------
30,000 Novo Nordisk A S 678,750
---------------------------------------------------------------------------------- --------------
TOTAL DENMARK 678,750
---------------------------------------------------------------------------------- --------------
FRANCE--1.6%
- -------------------------------------------------------------------------------------------------
CAPITAL GOODS--0.7%
----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.7%
----------------------------------------------------------------------------------
25,000 Thomson CSF 771,875
---------------------------------------------------------------------------------- --------------
TOTAL CAPITAL GOODS 771,875
---------------------------------------------------------------------------------- --------------
HEALTHCARE--0.6%
----------------------------------------------------------------------------------
DRUGS--0.6%
----------------------------------------------------------------------------------
18,500 Rhone Poulene Rorer, Inc. 721,500
---------------------------------------------------------------------------------- --------------
TOTAL HEALTHCARE 721,500
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
FRANCE--CONTINUED
- -------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.3%
----------------------------------------------------------------------------------
DIVERSIFIED--0.3%
----------------------------------------------------------------------------------
33,000 France Growth Fund, Inc. $ 325,875
---------------------------------------------------------------------------------- --------------
TOTAL MISCELLANEOUS 325,875
---------------------------------------------------------------------------------- --------------
TOTAL FRANCE 1,819,250
---------------------------------------------------------------------------------- --------------
GERMANY--1.1%
- -------------------------------------------------------------------------------------------------
CAPITAL GOODS--0.7%
----------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS--0.7%
----------------------------------------------------------------------------------
15,000 Daimler Benz A.G. 712,500
---------------------------------------------------------------------------------- --------------
TOTAL CAPITAL GOODS 712,500
---------------------------------------------------------------------------------- --------------
MISCELLANEOUS--0.4%
----------------------------------------------------------------------------------
DIVERSIFIED--0.4%
----------------------------------------------------------------------------------
20,053 Future Germany Fund, Inc. 285,755
----------------------------------------------------------------------------------
15,072 New Germany Fund, Inc. 178,980
---------------------------------------------------------------------------------- --------------
TOTAL MISCELLANEOUS 464,735
---------------------------------------------------------------------------------- --------------
TOTAL GERMANY 1,177,235
---------------------------------------------------------------------------------- --------------
GREAT BRITAIN--3.5%
- -------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL--0.7%
----------------------------------------------------------------------------------
PUBLISHING--0.7%
----------------------------------------------------------------------------------
18,000 Reuters Holdings PLC 825,750
---------------------------------------------------------------------------------- --------------
TOTAL CONSUMER CYCLICAL 825,750
---------------------------------------------------------------------------------- --------------
ENERGY--0.7%
----------------------------------------------------------------------------------
INTERNATIONAL OIL--0.7%
----------------------------------------------------------------------------------
10,000 British Petroleum PLC 793,750
---------------------------------------------------------------------------------- --------------
TOTAL ENERGY 793,750
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
GREAT BRITAIN--CONTINUED
- -------------------------------------------------------------------------------------------------
HEALTHCARE--0.6%
----------------------------------------------------------------------------------
DRUGS--0.6%
----------------------------------------------------------------------------------
20,600 SmithKline Beecham PLC $ 641,175
---------------------------------------------------------------------------------- --------------
TOTAL HEALTHCARE 641,175
---------------------------------------------------------------------------------- --------------
UTILITIES--1.5%
----------------------------------------------------------------------------------
TELECOMMUNICATIONS--1.5%
----------------------------------------------------------------------------------
40,000 Cable & Wireless Ltd. 725,000
----------------------------------------------------------------------------------
30,000 **Vodaphone Group PLC 975,000
---------------------------------------------------------------------------------- --------------
TOTAL UTILITIES 1,700,000
---------------------------------------------------------------------------------- --------------
TOTAL GREAT BRITAIN 3,960,675
---------------------------------------------------------------------------------- --------------
HOLLAND--1.3%
- -------------------------------------------------------------------------------------------------
CAPITAL GOODS--0.7%
----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.7%
----------------------------------------------------------------------------------
23,300 Philips Electronics N.V. 704,825
---------------------------------------------------------------------------------- --------------
TOTAL CAPITAL GOODS 704,825
---------------------------------------------------------------------------------- --------------
CONSUMER CYCLICAL--0.3%
----------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE--0.3%
----------------------------------------------------------------------------------
8,400 PolyGram N.V. 350,700
---------------------------------------------------------------------------------- --------------
TOTAL CONSUMER CYCLICAL 350,700
---------------------------------------------------------------------------------- --------------
ENERGY--0.3%
----------------------------------------------------------------------------------
INTERNATIONAL OIL--0.3%
----------------------------------------------------------------------------------
3,300 Royal Dutch Petroleum Co. 358,463
---------------------------------------------------------------------------------- --------------
TOTAL ENERGY 358,463
---------------------------------------------------------------------------------- --------------
TOTAL HOLLAND 1,413,988
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
ITALY--0.2%
- -------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL--0.2%
----------------------------------------------------------------------------------
RETAILING & APPAREL--0.2%
----------------------------------------------------------------------------------
8,000 Luxottica Group SPA $ 282,000
---------------------------------------------------------------------------------- --------------
TOTAL ITALY 282,000
---------------------------------------------------------------------------------- --------------
JAPAN--0.9%
- -------------------------------------------------------------------------------------------------
CAPITAL GOODS--0.7%
----------------------------------------------------------------------------------
OFFICE & BUSINESS EQUPMENT--0.7%
----------------------------------------------------------------------------------
8,500 Hitachi Ltd. 828,750
---------------------------------------------------------------------------------- --------------
TOTAL CAPITAL GOODS 828,750
---------------------------------------------------------------------------------- --------------
MISCELLANEOUS--0.2%
----------------------------------------------------------------------------------
DIVERSIFIED--0.2%
----------------------------------------------------------------------------------
12,500 *Japan Equity Fund, Inc. 178,125
---------------------------------------------------------------------------------- --------------
TOTAL MISCELLANEOUS 178,125
---------------------------------------------------------------------------------- --------------
TOTAL JAPAN 1,006,875
---------------------------------------------------------------------------------- --------------
LATIN AMERICA--0.5%
- -------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.5%
----------------------------------------------------------------------------------
DIVERSIFIED--0.5%
----------------------------------------------------------------------------------
25,000 Latin America Equity Fund, Inc. 518,750
---------------------------------------------------------------------------------- --------------
TOTAL LATIN AMERICA 518,750
---------------------------------------------------------------------------------- --------------
MEXICO--0.9%
- -------------------------------------------------------------------------------------------------
UTILITIES--0.5%
----------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.5%
----------------------------------------------------------------------------------
10,000 **Telefonos de Mexico SA 530,000
---------------------------------------------------------------------------------- --------------
TOTAL UTILITIES 530,000
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
MEXICO--CONTINUED
- -------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.4%
----------------------------------------------------------------------------------
DIVERSIFIED--0.4%
----------------------------------------------------------------------------------
13,508 Mexico Fund, Inc. $ 427,190
---------------------------------------------------------------------------------- --------------
TOTAL MISCELLANEOUS 427,190
---------------------------------------------------------------------------------- --------------
TOTAL MEXICO 957,190
---------------------------------------------------------------------------------- --------------
NORWAY--0.9%
- -------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.9%
----------------------------------------------------------------------------------
DIVERSIFIED--0.9%
----------------------------------------------------------------------------------
25,000 Norsk Hydro AS 953,125
---------------------------------------------------------------------------------- --------------
TOTAL NORWAY 953,125
---------------------------------------------------------------------------------- --------------
SPAIN--1.0%
- -------------------------------------------------------------------------------------------------
ENERGY--0.5%
----------------------------------------------------------------------------------
INTERNATIONAL OIL--0.5%
----------------------------------------------------------------------------------
21,700 Repsol SA 626,587
---------------------------------------------------------------------------------- --------------
TOTAL ENERGY 626,587
---------------------------------------------------------------------------------- --------------
FINANCE--0.5%
----------------------------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS--0.5%
----------------------------------------------------------------------------------
40,000 Espirito Santo Financial Holdings SA 525,000
---------------------------------------------------------------------------------- --------------
TOTAL FINANCE 525,000
---------------------------------------------------------------------------------- --------------
TOTAL SPAIN 1,151,587
---------------------------------------------------------------------------------- --------------
SWITZERLAND--0.6%
- -------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.6%
----------------------------------------------------------------------------------
MUTUAL FUNDS--0.6%
----------------------------------------------------------------------------------
34,000 Swiss Helvetia Fund, Inc. 633,250
---------------------------------------------------------------------------------- --------------
TOTAL SWITZERLAND 633,250
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
INTERNATIONAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
THAILAND--0.1%
- -------------------------------------------------------------------------------------------------
MISCELLANEOUS--0.1%
----------------------------------------------------------------------------------
MUTUAL FUNDS--0.1%
----------------------------------------------------------------------------------
9,200 Thai Capital Fund, Inc. $ 154,100
---------------------------------------------------------------------------------- --------------
TOTAL THAILAND 154,100
---------------------------------------------------------------------------------- --------------
TOTAL INTERNATIONAL SECURITIES (IDENTIFIED COST, $19,133,745) 20,156,588
---------------------------------------------------------------------------------- --------------
REAL ESTATE--20.0%
- -------------------------------------------------------------------------------------------------
INVESTMENT TRUST--20.0%
----------------------------------------------------------------------------------
21,500 Avalon Properties, Inc. 392,375
----------------------------------------------------------------------------------
30,500 Camden Property Trust 667,188
----------------------------------------------------------------------------------
39,300 Centerpoint Properties Corp. 712,313
----------------------------------------------------------------------------------
19,000 Chateau Properties, Inc. 356,250
----------------------------------------------------------------------------------
40,000 Crown American Realty 500,000
----------------------------------------------------------------------------------
42,700 Debartolo Realty Corp. 603,138
----------------------------------------------------------------------------------
23,500 Developers Diversified Realty 643,312
----------------------------------------------------------------------------------
50,000 Equity Inns, Inc. 512,500
----------------------------------------------------------------------------------
34,400 Federal Realty Investment Trust 722,400
----------------------------------------------------------------------------------
34,000 Glimcher Realty Trust 654,500
----------------------------------------------------------------------------------
41,000 Haagen Alexander Properties, Inc. 604,750
----------------------------------------------------------------------------------
23,000 Health Care Properties Investments, Inc. 615,250
----------------------------------------------------------------------------------
36,400 Highwoods Properties, Inc. 687,050
----------------------------------------------------------------------------------
14,100 Horizen Outlet Centers 313,725
----------------------------------------------------------------------------------
23,500 Kimco Realty Corp. 813,688
----------------------------------------------------------------------------------
29,700 Liberty Property 523,463
----------------------------------------------------------------------------------
23,500 LTC Properties 284,937
----------------------------------------------------------------------------------
40,640 Manufactured Home Communities, Inc. 690,880
----------------------------------------------------------------------------------
29,000 Meditrust 862,750
----------------------------------------------------------------------------------
37,000 Merry Land & Investment Co. 689,125
----------------------------------------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
REAL ESTATE--CONTINUED
- -------------------------------------------------------------------------------------------------
INVESTMENT TRUST--CONTINUED
----------------------------------------------------------------------------------
14,000 National Health Investors, Inc. $ 378,000
----------------------------------------------------------------------------------
20,000 Nationwide Health Properties, Inc. 655,000
----------------------------------------------------------------------------------
40,000 New Plan Realty Trust 795,000
----------------------------------------------------------------------------------
32,100 Omega Healthcare Investors 774,412
----------------------------------------------------------------------------------
25,000 Post Properties, Inc. 721,875
----------------------------------------------------------------------------------
66,200 RFS Hotel Investors, Inc. 926,800
----------------------------------------------------------------------------------
21,000 Simon Property Group, Inc. 496,125
----------------------------------------------------------------------------------
53,500 Sizeler Property Investments, Inc. 601,875
----------------------------------------------------------------------------------
60,000 Southwestern Property Trust, Inc. 675,000
----------------------------------------------------------------------------------
19,840 Storage USA, Inc. 500,960
----------------------------------------------------------------------------------
31,800 Summit Properties, Inc. 524,700
----------------------------------------------------------------------------------
21,000 Sun Communities, Inc. 443,625
----------------------------------------------------------------------------------
23,520 Tanger Factory Outlet Centers, Inc. 494,467
----------------------------------------------------------------------------------
65,700 United Dominion Realty Trust, Inc. 862,312
----------------------------------------------------------------------------------
22,500 Weingarten Realty Investment 742,500
----------------------------------------------------------------------------------
76,800 Winston Hotels 748,800
---------------------------------------------------------------------------------- --------------
TOTAL REAL ESTATE (IDENTIFIED COST, $23,290,074) 22,191,045
---------------------------------------------------------------------------------- --------------
FIXED INCOME OBLIGATIONS--21.2%
- -------------------------------------------------------------------------------------------------
CASH--5.3%
----------------------------------------------------------------------------------
$ 4,400,000 U.S. Treasury Note, 6.875%, 10/31/96 4,364,316
----------------------------------------------------------------------------------
1,500,000 U.S. Treasury, 7.50%, 2/29/96 1,507,245
---------------------------------------------------------------------------------- --------------
Total 5,871,561
---------------------------------------------------------------------------------- --------------
FINANCE--2.0%
----------------------------------------------------------------------------------
600,000 Associates Corp. of North America, 6.375%, 4/15/95 600,744
----------------------------------------------------------------------------------
500,000 Associates Corp. of North America, 6.44%, 4/25/2003 441,560
----------------------------------------------------------------------------------
500,000 Citicorp, 8.625%, 12/01/2002 500,870
----------------------------------------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
FIXED INCOME OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------------------------------
FINANCE--CONTINUED
----------------------------------------------------------------------------------
$ 250,000 General Electric Capital Corp., 8.75%, 11/26/96 $ 254,840
----------------------------------------------------------------------------------
200,000 General Motors Acceptance Corp., 7.25%, 6/22/99 191,164
----------------------------------------------------------------------------------
250,000 International Lease Finance Corp. 4.73%, 3/24/99 249,053
---------------------------------------------------------------------------------- --------------
Total 2,238,231
---------------------------------------------------------------------------------- --------------
FOREIGN--0.5%
----------------------------------------------------------------------------------
500,000 Alcan Aluminum Ltd., 9.20%, 3/15/2001 509,715
---------------------------------------------------------------------------------- --------------
INDUSTRIAL--1.6%
----------------------------------------------------------------------------------
250,000 Consolidated Rail Corp., 5.70%, 3/24/97 238,515
----------------------------------------------------------------------------------
250,000 Enron Corp., 7.625%, 9/10/2004 235,508
----------------------------------------------------------------------------------
750,000 General Motors Corp., 9.75%, 5/15/99 767,250
----------------------------------------------------------------------------------
400,000 Philip Morris Cos., Inc., 9.75%, 5/1/97 414,880
----------------------------------------------------------------------------------
130,000 Wal Mart Stores, Inc., 10.875%, 8/15/2000 136,502
---------------------------------------------------------------------------------- --------------
Total 1,792,655
---------------------------------------------------------------------------------- --------------
RAILROAD & ETC.--0.4%
----------------------------------------------------------------------------------
500,000 Union Pacific Corp., 6.00%, 9/1/2003 422,060
---------------------------------------------------------------------------------- --------------
U.S. AGENCY--4.2%
----------------------------------------------------------------------------------
500,000 Federal Home Loan Mortgage Corp., 6.50%, 8/15/2020 449,290
----------------------------------------------------------------------------------
750,000 Federal Home Loan Mortgage Corp., 7.48%, 4/22/99 729,496
----------------------------------------------------------------------------------
220,480 Federal Home Loan Mortgage Corp., 7.50%, 8/15/2016 219,611
----------------------------------------------------------------------------------
500,000 Federal Home Loan Mortgage Corp., 8.24%, 9/23/2004 482,735
----------------------------------------------------------------------------------
1,084,439 Federal Home Loan Mortgage Corp., 9.00%, 11/15/2019 1,095,847
----------------------------------------------------------------------------------
500,000 Federal National Mortgage Association, 7.25%, 1/25/2019 485,720
----------------------------------------------------------------------------------
498,894 FNMA Pool, 5.878%, 10/1/2024 495,247
----------------------------------------------------------------------------------
729,849 FNMA Pool, 8.50%, 8/1/2024 715,480
---------------------------------------------------------------------------------- --------------
Total 4,673,426
---------------------------------------------------------------------------------- --------------
U.S. GOVERNMENT--6.4%
----------------------------------------------------------------------------------
500,000 U.S. Treasury Bonds, 6.25%, 8/15/2023 401,530
----------------------------------------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
FIXED INCOME OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------------------------------
U.S. GOVERNMENT--CONTINUED
----------------------------------------------------------------------------------
$ 3,000,000 U.S. Treasury Bonds, 7.50%, 11/15/2024 $ 2,836,964
----------------------------------------------------------------------------------
500,000 U.S. Treasury Bonds, 7.50%, 11/15/2024 474,806
----------------------------------------------------------------------------------
500,000 U.S. Treasury Bonds, 7.62%, 2/15/2007 483,325
----------------------------------------------------------------------------------
1,300,000 U.S. Treasury Bonds, 8.125%, 8/15/2019 1,304,251
----------------------------------------------------------------------------------
750,000 U.S. Treasury Bonds, 8.875%, 2/15/2019 811,425
----------------------------------------------------------------------------------
850,000 U.S. Treasury Notes, 7.50%, 5/15/2002 827,757
---------------------------------------------------------------------------------- --------------
Total 7,140,058
---------------------------------------------------------------------------------- --------------
UTILITY--0.8%
----------------------------------------------------------------------------------
500,000 Cincinnati Gas & Electric Co., 8.95%, 12/15/2021 490,210
----------------------------------------------------------------------------------
500,000 Georgia Power Co., 6.625%, 4/1/2003 444,545
---------------------------------------------------------------------------------- --------------
Total 934,755
---------------------------------------------------------------------------------- --------------
TOTAL FIXED INCOME OBLIGATIONS (IDENTIFIED COST, $24,628,402) 23,582,461
---------------------------------------------------------------------------------- --------------
CASH EQUIVALENT & PRECIOUS METALS--19.2%
- -------------------------------------------------------------------------------------------------
18,937,000 ***Donaldson, Lufkin & Jenrette Securities Corp., 5.72%, dated 11/30/94, due
12/1/94 (at amortized cost) 18,937,000
----------------------------------------------------------------------------------
1,000,000 Federal Home Loan Mortgage Corp., Floating Rate Note 993,300
----------------------------------------------------------------------------------
500,000 General Electric Capital Corp., 8.52%, (PUT 12/15/94), 12/15/2007 501,420
----------------------------------------------------------------------------------
14,000 Newmont Mining Corp. 749,000
----------------------------------------------------------------------------------
250,000 U.S. Treasury Note, 4.625%, 8/15/95 246,632
---------------------------------------------------------------------------------- --------------
TOTAL CASH EQUIVALENT & PRECIOUS METALS
(IDENTIFIED COST, $21,558,150) 21,427,352
---------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $111,492,625) $ 109,712,636+
---------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
* Non-income producing.
** American Depositary Receipts.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
The cost of investments for federal tax purposes amounts to $111,634,731. The
net unrealized depreciation of investments on a federal tax basis amounts to
$1,922,095, which is comprised of $3,551,067 appreciation and $5,473,162
depreciation at November 30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($111,469,990) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investment in repurchase agreement $ 18,937,000
- -------------------------------------------------------------------------------------
Investments in securities 90,775,636
- ------------------------------------------------------------------------------------- ------------
Total investments, at amortized cost and value
(identified cost, $111,492,625; tax cost $111,634,731) $ 109,712,636
- ---------------------------------------------------------------------------------------------------
Cash 334
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 2,079,071
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 451,030
- ---------------------------------------------------------------------------------------------------
Interest receivable 311,734
- ---------------------------------------------------------------------------------------------------
Dividends receivable 212,074
- ---------------------------------------------------------------------------------------------------
Deferred expenses 1,702
- --------------------------------------------------------------------------------------------------- -------------
Total assets 112,768,581
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased 974,164
- -------------------------------------------------------------------------------------
Payable for Fund shares redeemed 190,166
- -------------------------------------------------------------------------------------
Options written, at value (premium received $88,269) 76,862
- -------------------------------------------------------------------------------------
Accrued expenses 57,399
- ------------------------------------------------------------------------------------- ------------
Total liabilities 1,298,591
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 10,228,253 shares of beneficial interest outstanding $ 111,469,990
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 112,270,494
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments and options
(includes $11,407 appreciation on options) (1,768,582)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments 633,162
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 334,916
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 111,469,990
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE and Redemption Proceeds Per Share:
- ---------------------------------------------------------------------------------------------------
Trust Shares ($60,822,073 / 5,580,682 shares of beneficial interest outstanding) $10.90
- --------------------------------------------------------------------------------------------------- -------------
Investment Shares ($50,647,917 / 4,647,571 shares of beneficial interest outstanding) $10.90
- --------------------------------------------------------------------------------------------------- -------------
OFFERING PRICE PER SHARE:
- --------------------------------------------------------------------------------------------------- -------------
Trust Shares $10.90
- --------------------------------------------------------------------------------------------------- -------------
Investment Shares (100/95.5 of $10.90) $11.41*
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
* See 'What Shares Cost' in the prospectus.
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income $ 2,257,007
- ---------------------------------------------------------------------------------------------------
Dividend income 1,887,397
- --------------------------------------------------------------------------------------------------- -------------
Total income 4,144,404
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------
Investment advisory fee $ 923,344
- -------------------------------------------------------------------------------------
Trustees' fees 2,532
- -------------------------------------------------------------------------------------
Administrative personnel and services fees 118,964
- -------------------------------------------------------------------------------------
Custodian fees 23,826
- -------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 103,220
- -------------------------------------------------------------------------------------
Fund share registration costs 42,738
- -------------------------------------------------------------------------------------
Auditing fees 20,924
- -------------------------------------------------------------------------------------
Legal fees 2,893
- -------------------------------------------------------------------------------------
Printing and postage 58,546
- -------------------------------------------------------------------------------------
Portfolio accounting fees 64,558
- -------------------------------------------------------------------------------------
Insurance premiums 6,807
- -------------------------------------------------------------------------------------
Taxes 8,402
- -------------------------------------------------------------------------------------
Distribution services fee 157,982
- -------------------------------------------------------------------------------------
Miscellaneous 6,813
- ------------------------------------------------------------------------------------- ------------
Total expenses 1,541,549
- -------------------------------------------------------------------------------------
Deduct--waiver of distribution services fee 78,451
- ------------------------------------------------------------------------------------- ------------
Net expenses 1,463,098
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 2,681,306
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and options (identified cost basis)
(includes $265,720 gain on options) 429,048
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments and options (5,262,792)
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain (loss) on investments and options (4,833,744)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ (2,152,438)
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
- --------------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------
Net investment income $ 2,681,306 $ 916,972
- ---------------------------------------------------------------------------------
Net realized gain (loss) on investment and option transactions ($548,306 and
$737,312 net gain, respectively, as computed for federal tax purposes) 429,048 722,961
- ---------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments and options (5,262,792) 2,975,694
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations (2,152,438) 4,615,627
- --------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ---------------------------------------------------------------------------------
Trust Shares (820,750) (1,062,322)
- ---------------------------------------------------------------------------------
Investment Shares (1,311,297) --
- ---------------------------------------------------------------------------------
Distributions to shareholders from net realized gain
on investment transactions:
- ---------------------------------------------------------------------------------
Trust Shares -- (366,287)
- ---------------------------------------------------------------------------------
Investment Shares (510,297) --
- ---------------------------------------------------------------------------------
Distribution in excess of net investment income:
- ---------------------------------------------------------------------------------
Trust Shares -- (214,343)
- ---------------------------------------------------------------------------------
Investment Shares -- --
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets from distributions to shareholders (2,642,344) (1,642,952)
- --------------------------------------------------------------------------------- -------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ---------------------------------------------------------------------------------
Proceeds from sale of shares 110,084,241 45,217,754
- ---------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of dividends declared 2,379,550 1,594,012
- ---------------------------------------------------------------------------------
Cost of shares redeemed (69,395,903) (12,132,012)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets from Fund share transactions 43,067,888 34,679,754
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets 38,273,106 37,652,429
- ---------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------
Beginning of period 73,196,884 35,544,455
- --------------------------------------------------------------------------------- -------------- --------------
End of period (including undistributed net investment
income of $334,916 and $0, respectively) $ 111,469,990 $ 73,196,884
- --------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994*
- ---------------------------------------------------------------------------------------- ------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.34
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.21
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.48)
- ---------------------------------------------------------------------------------------- --------
Total from investment operations (0.27)
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.17)
- ---------------------------------------------------------------------------------------- --------
NET ASSET VALUE, END OF PERIOD $ 10.90
- ---------------------------------------------------------------------------------------- --------
TOTAL RETURN** (1.81%)
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 1.43%(b)
- ----------------------------------------------------------------------------------------
Net investment income 3.57%(b)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.00%(b)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $60,822
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 79 %
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 11, 1994 (date of initial
public investment) to November 30, 1994. For the period from April 5, 1994
(start of business) to April 10, 1994, all income was distributed to the
Administrator.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------------------
1994 1993 1992 1991*
- ------------------------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.34 $ 10.52 $ 9.80 $ 10.00
- ------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------
Net investment income 0.29 0.24 0.29 0.05
- ------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.41) 0.99 0.74 (0.25)
- ------------------------------------------------------------------ --------- --------- --------- ---------
Total from investment operations (0.12) 1.23 1.03 (0.20)
- ------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------
Dividends to shareholders from net investment income (0.24) (0.28) (0.31) --
- ------------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (0.08) (0.10) (0.00) --
- ------------------------------------------------------------------
Distributions in excess of net investment income -- (0.03)(a) -- --
- ------------------------------------------------------------------ --------- --------- --------- ---------
Total distributions (0.32) (0.41) (0.31) --
- ------------------------------------------------------------------ --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.90 $ 11.34 $ 10.52 $ 9.80
- ------------------------------------------------------------------ --------- --------- --------- ---------
TOTAL RETURN** (1.22%) 11.99% 10.68% (2.00%)
- ------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------
Expenses 1.55% 1.45% 1.53% 1.44%(b)
- ------------------------------------------------------------------
Net investment income 2.32% 1.87% 3.03% 5.32%(b)
- ------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.12% 0.25% 0.33% 0.29%(b)
- ------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------
Net assets, end of period (000 omitted) $50,648 $73,197 $35,544 $13,942
- ------------------------------------------------------------------
Portfolio turnover rate 79% 87% 98% 18%
- ------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1991 (date of initial
public investment) to November 30, 1991. For the period from July 30, 1991
(start of business) to October 17, 1991, all income was distributed to the
administrator.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions did not represent a return of capital for federal income tax
purposes for the year ended November 30, 1993.
(b) Computed on an annualized basis.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Star Funds (the "Trust") is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end, management investment company. The Trust
consists of nine, diversified portfolios. The financial statements included
herein present only those of The Stellar Fund (the "Fund"). The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. As of November 30, 1994, Star Strategic
Income Fund and Star Growth Equity Fund were effective but did not have public
investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds, other
fixed income securities, and asset backed securities are valued at the last
sales price reported on national securities exchanges. U.S. government
obligations are generally valued at the mean between the over-the-counter
bid and asked prices as furnished by an independent pricing service.
Unlisted bonds and securities and short-term obligations are valued at the
prices provided by an independent pricing service. Short-term securities
with remaining maturities of sixty days or less may be stated at amortized
cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees (the "Trustees"). Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the repurchase
price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued
THE STELLAR FUND
- --------------------------------------------------------------------------------
daily. Bond premium and discount, if applicable, are amortized as required
by the Internal Revenue Code, as amended (the "Code"). Distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These distributions do not
represent a return of capital for federal income tax purposes.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994*
TRUST SHARES SHARES DOLLARS
- --------------------------------------------------------------------------------- ----------- --------------
<S> <C> <C>
Shares sold 6,530,935 $ 73,925,771
- ---------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 58,141 653,321
- ---------------------------------------------------------------------------------
Shares redeemed (1,008,394) (11,355,619)
- --------------------------------------------------------------------------------- ----------- --------------
Net change resulting from Trust
share transactions 5,580,682 $ 63,223,473
- --------------------------------------------------------------------------------- ----------- --------------
</TABLE>
*For the period from April 5, 1994 (start of business) to November 30, 1994.
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
INVESTMENT SHARES SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------------------- ----------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold 3,150,588 $ 36,158,470 4,030,527 $ 45,217,755
- -------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 151,340 1,726,229 147,387 1,594,012
- -------------------------------------------------------
Shares redeemed (5,111,420) (58,040,284) (1,098,722) (12,132,012)
- ------------------------------------------------------- ----------- -------------- ------------ -------------
Net change resulting from Investment share
transactions (1,809,492) $ (20,155,585) 3,079,192 $ 34,679,755
- ------------------------------------------------------- ----------- -------------- ------------ -------------
Net change resulting from Fund
share transactions 3,771,190 $ 43,067,888 3,079,192 $ 34,679,755
- ------------------------------------------------------- ----------- -------------- ------------ -------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Star Bank, N.A., the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.95 of 1% of the Fund's average daily net assets.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION SERVICES FEE--The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the terms of the Plan, the Fund will compensate Federated Securities Corp.
("FSC"), the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Investment shares. The
Plan provides that the Fund may incur distribution expenses up to .25 of 1% of
the average daily net assets of the Investment shares, annually, to compensate
FSC. FSC may voluntarily choose to waive a portion of its fee. FSC can modify or
terminate this voluntary waiver at anytime at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT, PORTFOLIO ACCOUNTING AND CUSTODY
FEES--Federated Services Company ("FServ") serves as transfer and dividend
disbursing agent for the Fund. The FServ fee is based on the size, type, and
number of accounts and transactions made by shareholders.
FServ also maintains the Fund's accounting records. The FServ fee is based on
the level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
Star Bank, N.A. is the Fund's custodian. The fee is based on the level of the
Fund's average net assets for the period, plus out-of-pocket expenses.
THE STELLAR FUND
- --------------------------------------------------------------------------------
ORGANIZATIONAL EXPENSES--Organizational expenses ($23,641) were borne initially
by FAS. The Fund has agreed to reimburse FAS at an annual rate of .005 of 1% of
average daily net assets for organizational expenses, until expenses initially
borne by FAS are fully reimbursed or the expiration of five years after July 31,
1991, date the Trust's portfolio first became effective, whichever occurs
earlier. For the year ended November 30, 1994, the Fund paid $4,711 pursuant to
this agreement.
Certain of the Officers and Trustees of the Trust are also Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended November 30, 1994, were as follows:
<TABLE>
<CAPTION>
<S> <C>
PURCHASES $ 101,348,451
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 61,893,765
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(6) OPTIONS CONTRACTS WRITTEN
The Fund may write option contracts. A written option obligates the Fund to
deliver (a call), or to receive (a put), the contract amount upon exercise by
the holder of the option. The value of the option contract is recorded as a
liability and unrealized gain or loss is measured by the difference between the
current value and the premium received. The Fund had four options outstanding at
November 30, 1994.
At November 30, 1994, the Fund had the following outstanding options:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION EXERCISE NUMBER OF APPRECIATION MARKET
ISSUER TYPE DATE PRICE CONTRACTS (DEPRECIATION) VALUE
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Bond Call 12/19/94 $ 805/32 5,000 $ 78 $ 3,437
- -----------------------------------
CISCO Call 1/20/95 $ 35 180 $ (1,845) $ 19,124
- -----------------------------------
U.S. Health Call 1/20/95 $ 45 160 $ 7,165 $ 43,874
- -----------------------------------
Hewlett Packard Call 1/20/95 $ 105 71 $ 6,009 $ 10,427
- ----------------------------------- ----------------- -----------
Total $ 11,407 $ 76,862
- ----------------------------------- ----------------- -----------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
The following is a summary of the Fund's written options activity:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PROCEEDS*
<S> <C> <C>
Outstanding at November 30, 1993 190 $ 50,978
- ------------------------------------------------------------------------------------
Contracts opened 69,489 280,613
- ------------------------------------------------------------------------------------
Contracts expired (51,233) (217,547)
- ------------------------------------------------------------------------------------
Contracts exercised (13,035) (25,775)
- ------------------------------------------------------------------------------------ ------------- ------------
Outstanding at November 30, 1994 5,411 $ 88,269
- ------------------------------------------------------------------------------------ ------------- ------------
</TABLE>
*Represents premium received less commissions paid.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
STAR FUNDS
(The Stellar Fund):
We have audited the accompanying statement of assets and liabilities of The
Stellar Fund (an investment portfolio of Star Funds, a Massachusetts business
trust), including the schedule of portfolio investments, as of November 30,
1994, the related statement of operations for the year then ended, and the
statement of changes in net assets and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Stellar Fund (an investment portfolio of Star Funds) as of November 30, 1994,
and the results of its operations for the year then ended, and the changes in
its net assets and its financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
January 13, 1995
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonazles
William J. Copeland President and Treasurer
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr. Joseph S. Machi
Edward C. Gonzales Vice President and Assistant Treasurer
Peter E. Madden John W. McGonigle
Gregor F. Meyer Vice President and Secretary
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts Assistant Treasurer
C. Grant Anderson
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or
any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
STAR
RELATIVE VALUE FUND
[LOGO OF ANNUAL REPORT
STAR BANK, N.A.] TO SHAREHOLDERS
November 30, 1994
------------------------------
Star Bank, N.A.
Investment Adviser
------------------------------
Federated Securities Corp.
Distributor
------------------------------
854911401
G00299-02 (1/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Star Relative
Value Fund (the "Fund"), for the fiscal year ended November 30, 1994. This
Report provides you with complete financial information for the Fund, including
a Portfolio of Investments, Financial Statements, and a Management Discussion
and Analysis written by the portfolio manager.
Over the twelve-month reporting period, net assets in the Fund grew to $74
million. The Fund paid $1.4 million in distributions, or $0.27 per share.
Thank you for your confidence in the Fund as a way to take advantage of more
than 33 different common stocks. We will continue to keep you informed of your
investment, and remain committed to delivering the highest level of personal
service.
As always, we welcome your comments and questions.
Sincerely,
Edward C. Gonzales
President
January 13, 1995
STAR RELATIVE VALUE FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR FISCAL YEAR ENDED NOVEMBER 30, 1994
MANAGEMENT DISCUSSION & ANALYSIS
---------------------------------------------------------------------------
The Fund was established in 1990 to provide the opportunity for
investment in a diversified portfolio of stocks which seek to maximize
total return through capital appreciation combined with dividend and
interest income. The stock selection process for the Fund utilizes
investment disciplines which the Star Capital Management Division has used
successfully for several years. The investment emphasis is on stocks that
have potential favorable value and earnings momentum characteristics as
well as quality analyst and credit scores.
During the 12 months ending November 30, 1994, performance of U.S.
stocks was basically flat. Rising interest rates, concern over inflation, a
falling U.S. dollar and Mexican peso, and a slowing of corporate earnings
contributed to the difficult year for financial markets. The Standard &
Poor's 500 Index ("S&P 500")* recorded a total return of 1.2% for the year
ended November 30, 1994. The Fund had a total return of (1.54%) on a
no-load, net asset value basis ((6.01%) on a load basis) for the same
period of time.**
The outlook for 1995 calls for the economy to continue its expansion
and accommodative monetary policy of 1992 and 1993, yet be tempered by
rising inflation and higher interest rates in the first half of the year.
We believe equities should continue to find it difficult to compete with
the money market and short-term Treasury rates which are available. Capital
goods continue to remain our favorite sector.
The Fund's stock selection approach is designed to allow the Fund to
invest in stocks which are undervalued relative to the stocks comprising
the S&P 500. These stocks tend to be medium to high capitalization
companies spread amongst ten different sectors of the market. When stocks
offer more potential total return than bonds or cash, the Fund will attempt
to remain fully invested in stocks to take advantage of the opportunity to
participate in up markets, thus seeking to generate capital appreciation.
*This index is unmanaged.
**Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
STAR RELATIVE VALUE FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN STAR RELATIVE VALUE FUND
The graph below illustrates the hypothetical investment of $10,000 in Star
Relative Value Fund (the "Fund") from June 5, 1991 (start of performance) to
November 30, 1994, compared to the Standard & Poor's 500 Index ("S&P 500").+
[GRAPHIC REPRESENTATION "B" OMITTED. SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Represents a hypothetical investment of $10,000 in the Fund after deducting the
maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge =
$9,550). The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 has been adjusted to reflect reinvestment of
dividends on securities in the index.
+The S&P 500 is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged.
STAR RELATIVE VALUE FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--81.2%
- ---------------------------------------------------------------------------------------------------
BASIC INDUSTRY--7.7%
-------------------------------------------------------------------------------------
12,000 Aluminum Co. of America $ 979,500
-------------------------------------------------------------------------------------
42,000 Dow Chemical Co. 2,688,000
-------------------------------------------------------------------------------------
28,000 International Paper Co. 2,002,000
------------------------------------------------------------------------------------- -------------
Total 5,669,500
------------------------------------------------------------------------------------- -------------
CAPITAL GOODS--15.8%
-------------------------------------------------------------------------------------
52,000 General Electric Company 2,392,000
-------------------------------------------------------------------------------------
42,000 Intel Corp. 2,651,250
-------------------------------------------------------------------------------------
55,000 Martin Marietta Corp. 2,385,625
-------------------------------------------------------------------------------------
31,000 Motorola, Inc. 1,747,625
-------------------------------------------------------------------------------------
40,500 Raytheon Co. 2,546,438
------------------------------------------------------------------------------------- -------------
Total 11,722,938
------------------------------------------------------------------------------------- -------------
CONSUMER CYCLICAL--8.3%
-------------------------------------------------------------------------------------
25,000 Eastman Kodak Co. 1,140,625
-------------------------------------------------------------------------------------
83,000 Goodyear Tire and Rubber Co. 2,811,625
-------------------------------------------------------------------------------------
48,000 Penney (J.C.), Inc. 2,208,000
------------------------------------------------------------------------------------- -------------
Total 6,160,250
------------------------------------------------------------------------------------- -------------
CONSUMER STAPLES--9.7%
-------------------------------------------------------------------------------------
28,500 Gillette Co. 2,094,750
-------------------------------------------------------------------------------------
31,000 Philip Morris Cos., Inc. 1,852,250
-------------------------------------------------------------------------------------
52,000 Procter & Gamble Co. 3,250,000
------------------------------------------------------------------------------------- -------------
Total 7,197,000
------------------------------------------------------------------------------------- -------------
ENERGY--9.8%
-------------------------------------------------------------------------------------
42,000 Ashland Oil, Inc. 1,428,000
-------------------------------------------------------------------------------------
13,000 Mobil Corporation 1,108,250
-------------------------------------------------------------------------------------
66,000 Nicor, Inc. 1,485,000
-------------------------------------------------------------------------------------
</TABLE>
STAR RELATIVE VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
ENERGY--CONTINUED
-------------------------------------------------------------------------------------
30,000 Royal Dutch Petroleum $ 3,258,750
------------------------------------------------------------------------------------- -------------
Total 7,280,000
------------------------------------------------------------------------------------- -------------
FINANCE--3.7%
-------------------------------------------------------------------------------------
29,700 Banc One Corp. 798,187
-------------------------------------------------------------------------------------
22,500 Mellon Bank Corp. 745,312
-------------------------------------------------------------------------------------
27,000 NationsBank Corp. 1,211,625
------------------------------------------------------------------------------------- -------------
Total 2,755,124
------------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--1.0%
-------------------------------------------------------------------------------------
24,000 American Express Co. 711,000
------------------------------------------------------------------------------------- -------------
HEALTH CARE--7.7%
-------------------------------------------------------------------------------------
10,000 American Home Products Corp. 651,250
-------------------------------------------------------------------------------------
58,000 Bristol Myers Squibb Co. 3,349,500
-------------------------------------------------------------------------------------
45,000 Merck & Co., Inc. 1,676,250
------------------------------------------------------------------------------------- -------------
Total 5,677,000
------------------------------------------------------------------------------------- -------------
INSURANCE--2.2%
-------------------------------------------------------------------------------------
21,000 Cincinnati Financial Corp. 1,002,750
-------------------------------------------------------------------------------------
21,000 Ohio Casualty Corp. 598,500
------------------------------------------------------------------------------------- -------------
Total 1,601,250
------------------------------------------------------------------------------------- -------------
MISCELLANEOUS--5.0%
-------------------------------------------------------------------------------------
84,000 Horsham Corp. 1,144,500
-------------------------------------------------------------------------------------
32,000 ITT Corp. 2,548,000
------------------------------------------------------------------------------------- -------------
Total 3,692,500
------------------------------------------------------------------------------------- -------------
TRANSPORTATION--0.9%
-------------------------------------------------------------------------------------
13,500 Conrail, Inc. 702,000
------------------------------------------------------------------------------------- -------------
UTILITIES--9.4%
-------------------------------------------------------------------------------------
44,000 AT&T Co. 2,161,500
-------------------------------------------------------------------------------------
83,000 GTE Corp. 2,541,875
-------------------------------------------------------------------------------------
</TABLE>
STAR RELATIVE VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
UTILITIES--CONTINUED
-------------------------------------------------------------------------------------
43,000 Telefonos de Mexico SA $ 2,279,000
------------------------------------------------------------------------------------- -------------
Total 6,982,375
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $55,876,959) 60,150,937
------------------------------------------------------------------------------------- -------------
PRINCIPAL
AMOUNT
- ------------ -------------------------------------------------------------------------------------
*REPURCHASE AGREEMENT--11.6%
- ---------------------------------------------------------------------------------------------------
$ 8,619,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.72%, dated 11/30/94, due 12/1/94 (AT
AMORTIZED COST) 8,619,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $64,495,959) $ 68,769,937+
------------------------------------------------------------------------------------- -------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S government and/or
agency obligations based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $64,495,959. The
net unrealized appreciation of investments on a federal tax basis amounts to
$4,273,978, which is comprised of $5,597,970 appreciation and $1,323,992
depreciation at November 30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($74,093,896) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
STAR RELATIVE VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investment in repurchase agreement $ 8,619,000
- -----------------------------------------------------------------------------------
Investments in securities 60,150,937
- ----------------------------------------------------------------------------------- -------------
Total investments, at amortized cost and value
(identified and tax cost, $64,495,959) $ 68,769,937
- --------------------------------------------------------------------------------------------------
Cash 421
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 4,983,807
- --------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 484,123
- --------------------------------------------------------------------------------------------------
Dividends receivable 232,738
- --------------------------------------------------------------------------------------------------
Interest receivable 1,369
- --------------------------------------------------------------------------------------------------
Deferred expenses 4,798
- -------------------------------------------------------------------------------------------------- -------------
Total assets 74,477,193
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed 354,726
- -----------------------------------------------------------------------------------
Accrued expenses 28,571
- ----------------------------------------------------------------------------------- -------------
Total liabilities 383,297
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 6,520,168 shares of beneficial interest outstanding $ 74,093,896
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $ 70,344,038
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 4,273,978
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (731,161)
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 207,041
- -------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 74,093,896
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE and Redemption Proceeds Per Share:
($74,093,896 / 6,520,168 shares of beneficial interest outstanding) $11.36
- -------------------------------------------------------------------------------------------------- -------------
Computation of Offering Price:
Offering Price Per Share (100/95.5 of $11.36) $11.90*
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
STAR RELATIVE VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Dividend income $ 1,775,769
- ---------------------------------------------------------------------------------------------------
Interest income 215,993
- --------------------------------------------------------------------------------------------------- -------------
Total income 1,991,762
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 471,665
- ---------------------------------------------------------------------------------------
Trustees' fees 2,539
- ---------------------------------------------------------------------------------------
Administrative personnel and services fees 76,966
- ---------------------------------------------------------------------------------------
Custodian fees 15,716
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 37,733
- ---------------------------------------------------------------------------------------
Fund share registration costs 25,834
- ---------------------------------------------------------------------------------------
Auditing fees 19,979
- ---------------------------------------------------------------------------------------
Legal fees 3,158
- ---------------------------------------------------------------------------------------
Printing and postage 12,154
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 47,081
- ---------------------------------------------------------------------------------------
Insurance premiums 3,626
- ---------------------------------------------------------------------------------------
Miscellaneous 4,451
- --------------------------------------------------------------------------------------- ----------
Total expenses 720,902
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 1,270,860
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (731,359)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (1,941,545)
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain (loss) on investments (2,672,904)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations ($ 1,402,044)
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR RELATIVE VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $ 1,270,860 $ 737,423
- --------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($731,359 net
loss and $686,144 net gain, respectively, as computed for federal
tax purposes) (731,359) 686,144
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (1,941,545) 4,000,888
- -------------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from operations (1,402,044) 5,424,455
- -------------------------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income (1,198,281) (816,026)
- --------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (158,063) --
- -------------------------------------------------------------------------------- ------------- -------------
Change in net assets from distributions to shareholders (1,356,344) (816,026)
- -------------------------------------------------------------------------------- ------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- --------------------------------------------------------------------------------
Proceeds from sale of shares 35,499,767 15,216,931
- --------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 239,448 26,210
- --------------------------------------------------------------------------------
Cost of shares redeemed (8,587,617) (8,304,775)
- -------------------------------------------------------------------------------- ------------- -------------
Change in net assets from Fund share transactions 27,151,598 6,938,366
- -------------------------------------------------------------------------------- ------------- -------------
Change in net assets 24,393,210 11,546,795
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 49,700,686 38,153,891
- -------------------------------------------------------------------------------- ------------- -------------
End of period (including undistributed net investment income of $207,041 and
$134,462, respectively) $ 74,093,896 $ 49,700,686
- -------------------------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR RELATIVE VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993 1992 1991*
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 10.52 $ 9.43 $ 10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.23 0.20 0.30 0.22
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.40) 1.30 1.12 (0.66)
- ---------------------------------------------------------------------- --------- --------- --------- ---------
Total from investment operations (0.17) 1.50 1.42 (0.44)
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.23) (0.22) (0.33) (0.13)
- ----------------------------------------------------------------------
Distributions to shareholders from net realized
gain on investment transactions (0.04) -- -- --
- ---------------------------------------------------------------------- --------- --------- --------- ---------
Total distributions (0.27) (0.22) (0.33) (0.13)
- ---------------------------------------------------------------------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 11.36 $ 11.80 $ 10.52 $ 9.43
- ---------------------------------------------------------------------- --------- --------- --------- ---------
TOTAL RETURN** (1.54%) 14.47% 15.39% (4.31%)
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.15% 1.19% 0.47% 0.40%(b)
- ----------------------------------------------------------------------
Net investment income 2.02% 1.79% 3.01% 4.75%(b)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.00% 0.31% 1.00% 0.93%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $74,094 $49,701 $38,154 $33,015
- ----------------------------------------------------------------------
Portfolio turnover rate 30% 59% 45% 38%
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from June 5, 1991 (date of initial public
investment) to November 30, 1991. For the period from January 31, 1989
(start of business) to June 4, 1991, all income was distributed to the
Administrator.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
STAR RELATIVE VALUE FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Star Funds (the "Trust") is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company. The Trust
consists of nine, diversified portfolios. The financial statements included
herein present only those of Star Relative Value Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held. As of November 30, 1994, Star
Strategic Income Fund and Star Growth Equity Fund were effective but did not
have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities and
short-term obligations (and private placement securities) are generally
valued at the prices provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
STAR RELATIVE VALUE FUND
- --------------------------------------------------------------------------------
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
At November 30, 1994, the Fund, for federal tax purposes, had a capital
loss carryforward of $731,359, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1994 1993
<S> <C> <C>
Shares sold 3,021,454 1,350,233
- -------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 20,475 2,318
- -------------------------------------------------------------------------------------
Shares redeemed (734,612) (765,703)
- ------------------------------------------------------------------------------------- ---------- ----------
Net change resulting from Fund share transactions 2,307,317 586,848
- ------------------------------------------------------------------------------------- ---------- ----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Star Bank, N.A., the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets.
STAR RELATIVE VALUE FUND
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The FServ fee is based on
the level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
Star Bank, N.A., is the Fund's custodian. The fee is based on the level of the
Fund's average net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($33,500) were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following December 5, 1990 (date the Fund first
became effective). For the year ended November 30, 1994, the Fund paid $3,046
pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended November 30, 1994, were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PURCHASES $ 32,504,690
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 17,295,728
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
STAR FUNDS
(Star Relative Value Fund):
We have audited the accompanying statement of assets and liabilities of Star
Relative Value Fund (an investment portfolio of Star Funds, a Massachusetts
business trust), including the schedule of portfolio investments, as of November
30, 1994, the related statement of operations for the year then ended, and the
statement of changes in net assets and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Star
Relative Value Fund (an investment portfolio of Star Funds) as of November 30,
1994, and the results of its operations for the year then ended, and the changes
in its net assets and its financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
January 13, 1995
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr. Joseph S. Machi
Edward C. Gonzales Vice President and Assistant Treasurer
Peter E. Madden John W. McGonigle
Gregor F. Meyer Vice President and Secretary
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts Assistant Treasurer
C. Grant Anderson
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or
any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
STAR
U.S. GOVERNMENT
INCOME FUND
[LOGO OF ANNUAL REPORT
STAR BANK, N.A.] TO SHAREHOLDERS
November 30, 1994
------------------------------
Star Bank, N.A.
Investment Adviser
------------------------------
Federated Securities Corp.
Distributor
------------------------------
854911500
G00299-06 (1/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Star U.S.
Government Income Fund (the "Fund"), for the fiscal year ended November 30,
1994. This Report provides you with complete financial information for the Fund,
including a Portfolio of Investments, Financial Statements, and a Management
Discussion & Analysis written by the portfolio manager.
Over the twelve-month reporting period, net assets in the Fund grew to $87.9
million. The Fund paid more than $4.1 million in dividends, or $0.66 per share.
Thank you for your confidence in the Fund as a way to take advantage of the
potential of corporate bonds and U.S. government obligations. As always, we will
continue to keep you informed of your investment.
We welcome your questions and comments.
Sincerely,
Edward C. Gonzales
President
January 13, 1995
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR FISCAL YEAR ENDED NOVEMBER 30, 1994
MANAGEMENT DISCUSSION & ANALYSIS
---------------------------------------------------------------------------
The 12 months ended November 30, 1994 were a volatile period for
investors across the market spectrum. It was a time when the bond market
underwent one of its worst years, from a total return standpoint since the
Great Depression. The Lehman Bond Index* returned (3.7%) over the reporting
period. The markets were strongly influenced by the course of action taken
by the Federal Reserve Board (the "Fed") starting in February 1994. From
their initial policy shift, the Fed has raised the Federal Funds' rate six
times from 3.0% to 5.50%. Fed Chairman Greenspan commented that tightening
monetary policy was necessary to slow the economy and prevent any
re-emergence of inflation. In addition to the Fed's actions, economic
growth expanded strongly causing yields across the maturity spectrum to
rise rapidly. For instance, Treasury 2-year note yields rose from 4.22% to
7.40% and 30-year bond yields rose from 6.30% to 8.00%. In addition, the
gap between long- and short-term interest rates narrowed dramatically. In
1993, the difference between 30- and 2-year Treasury issues was over 200
basis points. By November 1994, the yield gap had narrowed to 60 basis
points. We anticipated a difficult year for bonds and positioned the Fund
in a defensive manner to protect principal investment.
Looking ahead to 1995, economic fundamentals suggest a bias towards
more Fed tightening and higher interest rates. We expect real Gross
Domestic Product growth to average 3.5% for the year which is still above
the Fed's perceived non-inflationary growth rate of 2.5%. Capacity
utilization at 85% portends inflationary pressures. Employment costs and
raw materials prices are rising. Leading indicators such as the Commodity
Research Bureau point towards higher inflation in the near future. While
interest rates are expected to rise in 1995, the magnitude should be much
less damaging than last year. Higher coupons will help buffer the negative
effects of higher interest rates. We anticipate a peak in bond yields in
late 1995. The Fund is being positioned somewhat defensively in
anticipation of higher interest rates. Higher coupon bonds, adjustable rate
securities, hedging strategies and callable bonds will be utilized to
protect against market downturns.
*This index is unmanaged.
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN STAR U.S. GOVERNMENT INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Star U.S. Government Income Fund (the "Fund") from January 5, 1993 (start of
performance) to November 30, 1994, compared to the Lehman Government/Corporate
Total Index ("LBG/C TOT").+
[GRAPHIC REPRESENTATION "C" OMITTED. SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Represents a hypothetical investment of $10,000 in the Fund after deducting the
maximum sales charge of 3.50% ($10,000 investment minus $350 sales charge =
$9,650). The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBG/C TOT has been adjusted to reflect reinvestment of
dividends on securities in the index.
+The LBG/C TOT is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged.
STAR U.S. GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- ----------------------------------------------------------------------------------- -------------
<C> <S> <C>
CORPORATE BONDS--24.5%
- --------------------------------------------------------------------------------------------------
$ 100,000 Alabama Power Co., 8.75%, 12/1/2021 $ 97,583
-----------------------------------------------------------------------------------
1,500,000 Alcan Aluminum, 9.20%, 3/15/2001 1,529,145
-----------------------------------------------------------------------------------
500,000 Associates Corp. of North America, 6.44%, 4/25/2003 441,560
-----------------------------------------------------------------------------------
1,000,000 Cincinnati Gas & Electric Co., 8.95%, 12/15/2021 980,420
-----------------------------------------------------------------------------------
1,000,000 Citicorp, 8.625%, 12/1/2002 1,001,740
-----------------------------------------------------------------------------------
1,000,000 Consolidated Rail Corp., 5.70%, 3/24/97 954,060
-----------------------------------------------------------------------------------
2,500,000 Enron Corp., 7.625%, 9/10/2004 2,355,075
-----------------------------------------------------------------------------------
150,000 Ford Motor Credit Corp., 5.81%, 7/19/96, LIBOR Floater 149,987
-----------------------------------------------------------------------------------
600,000 Ford Motor Credit Corp., 9.63%, 12/1/97 624,012
-----------------------------------------------------------------------------------
250,000 General Electric Capital Corp., 8.75%, 11/26/96 254,840
-----------------------------------------------------------------------------------
1,855,000 General Electric Capital Corp., 8.52%, 12/15/2007 1,860,268
-----------------------------------------------------------------------------------
1,500,000 General Motors Acceptance Corp., 7.25%, 6/22/99 1,433,730
-----------------------------------------------------------------------------------
1,500,000 General Motors Corp., 9.75%, 5/15/99 1,534,500
-----------------------------------------------------------------------------------
2,250,000 Georgia Power Co., 6.625%, 4/1/2003 2,000,452
-----------------------------------------------------------------------------------
125,000 Georgia Power Co., 6.03%, 7/1/2032 124,434
-----------------------------------------------------------------------------------
500,000 International Lease Finance Co., 5.75%, 3/15/98 464,900
-----------------------------------------------------------------------------------
1,750,000 International Lease Finance Co., 6.90%, 3/24/99 1,743,368
-----------------------------------------------------------------------------------
750,000 NationsBank Corp., 6.875%, 2/15/2005 655,072
-----------------------------------------------------------------------------------
300,000 Pacific Telephone & Telegraph Co., 7.25%, 2/1/2008 267,087
-----------------------------------------------------------------------------------
1,100,000 Philip Morris Cos., Inc., 9.75%, 5/1/97 1,140,920
-----------------------------------------------------------------------------------
1,000,000 Procter & Gamble Co., 7.375%, 3/1/2023 860,870
-----------------------------------------------------------------------------------
62,000 Southern California Edison Co., 8.375%, 12/1/2017 57,620
-----------------------------------------------------------------------------------
150,000 Southern California Edison Co., 9.25%, 6/15/2021 148,601
-----------------------------------------------------------------------------------
1,000,000 Union Pacific Corp., 6.00%, 9/1/2003 844,120
----------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $22,958,920) 21,524,364
----------------------------------------------------------------------------------- -------------
</TABLE>
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- ----------------------------------------------------------------------------------- -------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--21.3%
- --------------------------------------------------------------------------------------------------
$ 400,000 Federal Home Loan Banks, 7.26%, 5/26/99 $ 388,384
-----------------------------------------------------------------------------------
2,000,000 Federal Home Loan Mortgage Corp., 6.15%, 10/4/96 1,986,600
-----------------------------------------------------------------------------------
1,500,000 Federal Home Loan Mortgage Corp., 7.83%, 8/11/2004 1,419,090
-----------------------------------------------------------------------------------
750,000 Federal Home Loan Mortgage Corp., 8.24%, 9/23/2004 724,103
-----------------------------------------------------------------------------------
661,441 Federal Home Loan Mortgage Corp., 7.50%, 8/15/2016 658,835
-----------------------------------------------------------------------------------
3,614,796 Federal Home Loan Mortgage Corp., 9.00%, 11/15/2019 3,652,823
-----------------------------------------------------------------------------------
3,000,000 Federal Home Loan Mortgage Corp., 6.50%, 10/15/2020 2,695,740
-----------------------------------------------------------------------------------
1,500,000 Federal National Mortgage Association, 7.25%, 1/25/2019, REMIC 1,457,160
-----------------------------------------------------------------------------------
3,162,679 Federal National Mortgage Association--Pool Pound250111, 8.50%,
8/1/2024, Passthrough 3,100,414
-----------------------------------------------------------------------------------
1,496,682 Federal National Mortgage Association--Pool Pound295782, 5.878%,
10/1/2024, ARM 1,485,741
-----------------------------------------------------------------------------------
180,000 Student Loan Marketing Association, 5.89%, 12/30/94 179,996
-----------------------------------------------------------------------------------
1,000,000 Student Loan Marketing Association, 5.81%, 8/2/99 1,000,360
----------------------------------------------------------------------------------- -------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST, $19,244,533) 18,749,246
----------------------------------------------------------------------------------- -------------
U.S. TREASURY OBLIGATIONS--50.9%
- --------------------------------------------------------------------------------------------------
U.S. TREASURY BILL--1.1%
-----------------------------------------------------------------------------------
1,000,000 1/5/95 995,051
----------------------------------------------------------------------------------- -------------
U.S. TREASURY BONDS--27.0%
-----------------------------------------------------------------------------------
1,500,000 6.25%, 8/15/2023 1,204,590
-----------------------------------------------------------------------------------
12,500,000 7.50%, 11/15/2024 11,827,750
-----------------------------------------------------------------------------------
1,250,000 7.625%, 2/15/2007 1,208,313
-----------------------------------------------------------------------------------
9,450,000 8.125%, 8/15/2019 9,480,901
----------------------------------------------------------------------------------- -------------
Total 23,721,554
----------------------------------------------------------------------------------- -------------
U.S. TREASURY NOTES--22.8%
-----------------------------------------------------------------------------------
4,200,000 6.75%, 5/31/99 4,039,098
-----------------------------------------------------------------------------------
12,950,000 6.875%, 10/31/96 12,844,976
-----------------------------------------------------------------------------------
</TABLE>
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- ----------------------------------------------------------------------------------- -------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--CONTINUED
- --------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES--CONTINUED
-----------------------------------------------------------------------------------
$ 3,150,000 7.50%, 2/29/96 $ 3,165,214
----------------------------------------------------------------------------------- -------------
Total 20,049,288
----------------------------------------------------------------------------------- -------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST, $47,102,930) 44,765,893
----------------------------------------------------------------------------------- -------------
*REPURCHASE AGREEMENT--4.1%
- --------------------------------------------------------------------------------------------------
3,639,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.72% dated 11/30/94, due 12/1/94
(AT AMORTIZED COST) 3,639,000
----------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $92,945,383) $ 88,678,503+
----------------------------------------------------------------------------------- -------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $93,099,488. The
net unrealized depreciation of investments on a federal tax basis amounts to
$4,420,985, which is comprised of $4,392 appreciation and $4,425,377
depreciation at November 30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($87,924,132) at November 30, 1994.
The following abbreviations are used in this portfolio:
ARM--Adjustable Rate Mortgage
LIBOR--London Interbank Offered Rate
REMIC--Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
STAR U.S. GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost, $92,945,383; tax cost, $93,099,488) $ 88,678,503
- ---------------------------------------------------------------------------------------------------
Cash 775
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 1,353,153
- ---------------------------------------------------------------------------------------------------
Interest receivable 1,052,020
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 14,945
- ---------------------------------------------------------------------------------------------------
Deferred expenses 22,262
- --------------------------------------------------------------------------------------------------- -------------
Total assets 91,121,658
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 2,922,491
- -------------------------------------------------------------------------------------
Payable for Fund shares redeemed 139,942
- -------------------------------------------------------------------------------------
Dividends payable 82,275
- -------------------------------------------------------------------------------------
Option written, at value (premium received, $10,547) 10,312
- -------------------------------------------------------------------------------------
Accrued expenses 42,506
- ------------------------------------------------------------------------------------- ------------
Total liabilities 3,197,526
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 9,514,891 shares of beneficial interest outstanding $ 87,924,132
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 93,798,723
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments and options
(includes $235 appreciation on options) (4,266,645)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (1,607,946)
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 87,924,132
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE and Redemption Proceeds Per Share:
($87,924,132 / 9,514,891 shares of beneficial interest outstanding) $9.24
- --------------------------------------------------------------------------------------------------- -------------
Computation of Offering Price:
Offering Price per Share (100/96.5 of $9.24) $9.58*
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
STAR U.S. GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income $ 4,209,678
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 368,975
- ---------------------------------------------------------------------------------------
Trustees' fees 2,942
- ---------------------------------------------------------------------------------------
Administrative personnel and services fees 75,082
- ---------------------------------------------------------------------------------------
Custodian fees 13,912
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 36,578
- ---------------------------------------------------------------------------------------
Fund share registration costs 32,309
- ---------------------------------------------------------------------------------------
Auditing fees 18,192
- ---------------------------------------------------------------------------------------
Legal fees 1,794
- ---------------------------------------------------------------------------------------
Printing and postage 10,949
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 47,919
- ---------------------------------------------------------------------------------------
Insurance premiums 4,397
- ---------------------------------------------------------------------------------------
Miscellaneous 1,653
- --------------------------------------------------------------------------------------- ----------
Total expenses 614,702
- ---------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 16,353
- --------------------------------------------------------------------------------------- ----------
Net expenses 598,349
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 3,611,329
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and options (identified cost basis)
(includes $169,247 gain on options) (1,609,209)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments and options (3,895,379)
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain (loss) on investments and options (5,504,588)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations ($1,893,259)
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR U.S. GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 3,611,329 $ 1,335,153
- -------------------------------------------------------------------------------
Net realized gain (loss) on investment and option transactions
($1,455,104 net loss and $461,719 net gain, respectively, as computed for
federal tax purposes) (1,609,209) 462,635
- -------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments
and options (3,895,379) (371,266)
- ------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations (1,893,259) 1,426,522
- ------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (3,611,329) (1,335,153)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (461,372) --
- ------------------------------------------------------------------------------- -------------- --------------
Change in net assets from distributions to shareholders (4,072,701) (1,335,153)
- ------------------------------------------------------------------------------- -------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 66,524,387 47,885,941
- -------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 1,313,490 133,549
- -------------------------------------------------------------------------------
Cost of shares redeemed (18,135,243) (3,923,401)
- ------------------------------------------------------------------------------- -------------- --------------
Change in net assets from Fund share transactions 49,702,634 44,096,089
- ------------------------------------------------------------------------------- -------------- --------------
Change in net assets 43,736,674 44,187,458
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 44,187,458 --
- ------------------------------------------------------------------------------- -------------- --------------
End of period $ 87,924,132 $ 44,187,458
- ------------------------------------------------------------------------------- -------------- --------------
</TABLE>
*Reflects operations for the period from November 23, 1992 (start of business)
to November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
STAR U.S. GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1994 1993*
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.25 $ 10.00
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment income 0.55 0.51
- ---------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and options (0.90) 0.25
- --------------------------------------------------------------------------------------------- --------- ---------
Total from investment operations (0.35) 0.76
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.55) (0.51)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (0.11) --
- --------------------------------------------------------------------------------------------- --------- ---------
Total distributions (0.66) (0.51)
- --------------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.24 $ 10.25
- --------------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN** (3.53%) 7.63%
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------
Expenses 0.97% 1.12%(b)
- ---------------------------------------------------------------------------------------------
Net investment income 5.87% 5.55%(b)
- ---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.03% 0.30%(b)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $87,924 $44,187
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 148% 105%
- ---------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from January 5, 1993 (date of initial
public investment) to November 30, 1993. For the period from November 23,
1992 (start of business) to January 4, 1993, all income was distributed to
the Administrator.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
STAR U.S. GOVERNMENT INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Star Funds (the "Trust") is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company. The Trust
consists of nine, diversified portfolios. The financial statements included
herein present only those of Star U.S. Government Income Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held. As of November 30, 1994, Star
Strategic Income Fund and Star Growth Equity Fund were effective but did not
have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value. Listed corporate bonds (and other fixed-income and
asset backed securities) are valued at the sale price reported on national
securities exchanges. Unlisted bonds and securities and short-term
obligations are valued at the price provided by an independent pricing
service. Short-term securities with remaining maturities of sixty days or
less may be stated at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
At November 30, 1994, the Fund, for federal tax purposes, had a capital
loss carryforward of $1,445,104 which will reduce the Fund taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002.
Additionally, net capital losses of $1,445,104 attributable to security
transactions incurred after October 31, 1993 are treated as arising on
December 1, 1994, the first day of the Fund's next taxable year.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1994 1993*
<S> <C> <C>
- ------------------------------------------------------------------------------------- ----------- ----------
Shares sold 6,950,021 4,681,976
- -------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 138,234 12,892
- -------------------------------------------------------------------------------------
Shares redeemed (1,885,603) (382,629)
- ------------------------------------------------------------------------------------- ----------- ----------
Net change resulting from Fund share transactions 5,202,652 4,312,239
- ------------------------------------------------------------------------------------- ----------- ----------
</TABLE>
*For the period from November 23, 1992 (start of business) to November 30, 1993.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Star Bank, N.A., the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.60 of 1% of the 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.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT, PORTFOLIO ACCOUNTING AND CUSTODY
FEES--Federated Services Company ("FServ") serves as transfer and dividend
disbursing agent for the Fund. The FServ fee is based on the size, type, and
number of accounts and transactions made by shareholders.
FServ also maintains the Fund's accounting records. The FServ fee is based on
the level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
Star Bank, N.A., is the Fund custodian. The fee is based on the level of the
Fund's average net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($25,000) were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following November 23, 1992, the date the Trust's
portfolio first became effective. For the year ended November 30, 1994, the Fund
paid $4,479 pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors of
the above companies.
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended November 30, 1994, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 134,030,489
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 86,427,308
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(6) OPTIONS CONTRACTS WRITTEN
The Fund may write option contracts. A written option obligates the Fund to
deliver (a call), or to receive (a put), the contract amount upon exercise by
the holder of the option. The value of the option contract is recorded as a
liability and unrealized gain or loss is measured by the difference between the
current value and the premium received. The Fund had one option outstanding at
November 30, 1994.
At November 30, 1994, the Fund had the following outstanding option:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION EXERCISE NUMBER OF APPRECIATION MARKET
ISSUER TYPE DATE PRICE CONTRACTS (DEPRECIATION) VALUE
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Bond Call 12/19/94 $ 80 5/32 15,000 $ 235 $ 10,312
</TABLE>
The following is a summary of the Fund's written option activity:
<TABLE>
<CAPTION>
NUMBER
OF
CONTRACTS PROCEEDS*
<S> <C> <C>
Outstanding at November 30, 1993 0 $ 0
- --------------------------------------------------------------------------------------
Contracts opened 247,000 197,122
- --------------------------------------------------------------------------------------
Contracts expired (190,000) (130,918)
- --------------------------------------------------------------------------------------
Contracts exercised (35,000) (42,969)
- --------------------------------------------------------------------------------------
Contracts closed (7,000) (12,688)
- -------------------------------------------------------------------------------------- ----------- ------------
Outstanding at November 30, 1994 15,000 $ 10,547
- -------------------------------------------------------------------------------------- ----------- ------------
</TABLE>
*Represents premium received less commissions paid.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
STAR FUNDS
(Star U.S. Government Income Fund):
We have audited the accompanying statement of assets and liabilities of Star
U.S. Government Income Fund (an investment portfolio of Star Funds, a
Massachusetts business trust), including the schedule of portfolio investments,
as of November 30, 1994, the related statement of operations for the year then
ended, and the statement of changes in net assets and the financial highlights
for the periods presented. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Star
U.S. Government Income Fund (an investment portfolio of Star Funds) as of
November 30, 1994, and the results of its operations for the year then ended,
and the changes in its net assets and its financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
January 13, 1995
Trustees Officers
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr. Joseph S. Machi
Edward C. Gonzales Vice President and Assistant Treasurer
Peter E. Madden John W. McGonigle
Gregor F. Meyer Vice President and Secretary
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts Assistant Treasurer
C. Grant Anderson
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
STAR
COMBINED
MONEY MARKET FUND
[LOGO OF ANNUAL REPORT
STAR BANK, N.A.] TO SHAREHOLDERS
November 30, 1994
------------------------------
Star Bank, N.A.
Investment Adviser
------------------------------
Federated Securities Corp.
Distributor
------------------------------
G00299-08 (1/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for the Star Money
Market Funds (collectively referred to as the "Funds" or individually as the
"Fund"), for the fiscal year ended November 30, 1994. For each Fund, you will
find complete financial information, including Portfolios of Investments and
Financial Statements.
Please note the following highlights:
Net assets in Star Prime Obligations Fund amounted to $86.3 million. The Fund
paid more than $2.6 million in dividends, or $0.03 per share. Net assets in Star
Tax-Free Money Market Fund grew slightly to $135.4 million at the end of the
reporting period. The Fund paid dividends of $2.9 million, or $0.02 per share.
Net assets in Star Treasury Fund totaled $359 million, and the Fund posted a
dividend of $10.8 million, or $0.03 per share.
Thank you for putting your confidence in the Star Money Market Funds as a way to
put your cash to work--every day. We will continue to keep you informed of your
investment as we remain committed to delivering the highest level of personal
service.
As always, we welcome your questions and comments.
Sincerely,
Edward C. Gonzales
President
January 13, 1995
STAR PRIME OBLIGATIONS FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- ----------------------------------------------------------------------------------- -------------
<C> <S> <C>
*COMMERCIAL PAPER--12.7%
- --------------------------------------------------------------------------------------------------
FINANCE--COMMERCIAL
-----------------------------------------------------------------------------------
$ 3,000,000 Chevron Oil Finance Co., 5.65%, 1/17/95 $ 2,977,871
-----------------------------------------------------------------------------------
3,000,000 Exxon Credit Corp., 5.50%, 1/3/95 2,984,875
-----------------------------------------------------------------------------------
2,000,000 Ford Motor Credit Corp., 5.95%, 2/13/95 1,975,539
-----------------------------------------------------------------------------------
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--39.8%
- --------------------------------------------------------------------------------------------------
2,900,000 Federal Farm Credit Bank, 5.375%-5.60%, 2/14/95-8/1/95 2,905,922
-----------------------------------------------------------------------------------
6,500,000 Federal Home Loan Bank, 3.81%-8.875%, 1/18/95-6/26/95 6,471,781
-----------------------------------------------------------------------------------
2,000,000 Federal Home Loan Mortgage Assoc., 4.73%, 12/27/94 1,993,168
-----------------------------------------------------------------------------------
1,000,000 Student Loan Marketing Assoc., 5.315%, 6/30/95 1,000,000
-----------------------------------------------------------------------------------
19,000,000 Student Loan Marketing Assoc., Variable Rate Notes, 12/6/94 19,013,181
-----------------------------------------------------------------------------------
3,000,000 U.S. Treasury Notes, 4.125%, 5/31/95 2,970,631
----------------------------------------------------------------------------------- -------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 34,354,683
----------------------------------------------------------------------------------- -------------
SHORT-TERM CORPORATE BONDS--6.4%
- --------------------------------------------------------------------------------------------------
1,000,000 American Express Credit Co., 5.95%, 1/27/95 1,003,204
-----------------------------------------------------------------------------------
1,000,000 Associates Corp. North America, 6.375%, 4/15/95 1,003,992
-----------------------------------------------------------------------------------
1,000,000 Citizens Southern Corp., 11.70%, 2/1/95 1,013,177
-----------------------------------------------------------------------------------
1,000,000 Ford Motor Co., 9.65%, 12/9/94 1,001,235
-----------------------------------------------------------------------------------
1,500,000 Pepsico, Inc., 5.875%, 12/15/94 1,501,175
----------------------------------------------------------------------------------- -------------
TOTAL SHORT-TERM CORPORATE BONDS 5,522,783
----------------------------------------------------------------------------------- -------------
**VARIABLE RATE INSTRUMENTS--2.3%
- --------------------------------------------------------------------------------------------------
2,000,000 Pepsico, Inc., Variable Rate, 12/7/94 2,000,000
----------------------------------------------------------------------------------- -------------
</TABLE>
STAR PRIME OBLIGATIONS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- ----------------------------------------------------------------------------------- -------------
<C> <S> <C>
***REPURCHASE AGREEMENTS--38.7%
- --------------------------------------------------------------------------------------------------
$ 20,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.72%, dated 11/30/94, due 12/1/94 $ 20,000,000
-----------------------------------------------------------------------------------
4,000,000 HSBC Securities, Inc., 5.60%, dated 11/30/94, due 12/1/94 4,000,000
-----------------------------------------------------------------------------------
3,000,000 Morgan Stanley & Co., 5.68%, dated 11/30/94, due 12/1/94 3,000,000
-----------------------------------------------------------------------------------
2,420,000 National Westminster Securities, 5.66%, dated 11/30/94, due 12/1/94 2,420,000
-----------------------------------------------------------------------------------
4,000,000 Sanwa Bank, 5.70%, dated 11/30/94, due 12/1/94 4,000,000
----------------------------------------------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS 33,420,000
----------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $ 86,226,548+
----------------------------------------------------------------------------------- -------------
</TABLE>
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
($86,343,422) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
STAR PRIME OBLIGATIONS FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities $ 52,806,548
- -----------------------------------------------------------------------------------
Investments in repurchase agreements 33,420,000
- ----------------------------------------------------------------------------------- -------------
Total investments, at amortized cost and value $ 86,226,548
- --------------------------------------------------------------------------------------------------
Interest receivable 456,081
- --------------------------------------------------------------------------------------------------
Cash 398
- --------------------------------------------------------------------------------------------------
Deferred expenses 309
- -------------------------------------------------------------------------------------------------- -------------
Total assets 86,683,336
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Dividends payable 299,509
- -----------------------------------------------------------------------------------
Payable for Fund shares redeemed 12,507
- -----------------------------------------------------------------------------------
Accrued expenses 27,898
- ----------------------------------------------------------------------------------- -------------
Total liabilities 339,914
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 86,343,422 shares of beneficial interest outstanding $ 86,343,422
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($86,343,422 / 86,343,422 shares of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR PRIME OBLIGATIONS FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest income $ 3,425,718
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $ 469,874
- ----------------------------------------------------------------------------------------
Trustees' fees 2,426
- ----------------------------------------------------------------------------------------
Administrative personnel and services fees 104,792
- ----------------------------------------------------------------------------------------
Custodian fees 17,504
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 31,114
- ----------------------------------------------------------------------------------------
Fund share registration costs 17,624
- ----------------------------------------------------------------------------------------
Auditing fees 18,232
- ----------------------------------------------------------------------------------------
Legal fees 2,947
- ----------------------------------------------------------------------------------------
Printing and postage 9,716
- ----------------------------------------------------------------------------------------
Portfolio accounting fees 42,627
- ----------------------------------------------------------------------------------------
Insurance premiums 8,954
- ----------------------------------------------------------------------------------------
Miscellaneous 4,036
- ---------------------------------------------------------------------------------------- ----------
Total expenses 729,846
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income $ 2,695,872
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR PRIME OBLIGATIONS FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 2,695,872 $ 2,515,354
- ------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (2,695,872) (2,515,354)
- ------------------------------------------------------------------------------- --------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 474,598,081 483,797,019
- -------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 1,181 50,696
- -------------------------------------------------------------------------------
Cost of shares redeemed (480,707,574) (504,033,551)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from Fund share transactions (6,108,312) (20,185,836)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets (6,108,312) (20,185,836)
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 92,451,734 112,637,570
- ------------------------------------------------------------------------------- --------------- ---------------
End of period $ 86,343,422 $ 92,451,734
- ------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR PRIME OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993 1992 1991 1990*
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------
Net investment income 0.03 0.02 0.03 0.05 0.06
- ------------------------------------------------------------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.02) (0.03) (0.05) (0.06)
- ------------------------------------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN** 3.22% 2.48% 3.37% 5.62% 6.31%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses 0.85% 0.82% 0.80% 0.87% 0.78%(b)
- -------------------------------------------------------------
Net investment income 3.16% 2.45% 3.33% 5.31% 7.50%(b)
- -------------------------------------------------------------
Expense waiver/reimbursement (a) 0.00% 0.25% 0.25% 0.10% 0.03%(b)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------
Net assets, end of period (000 omitted) $86,343 $92,452 $112,638 $107,164 $54,441
- -------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 5, 1990 (date of initial
public investment) to November 30, 1990. For the period from January 12,
1990 (start of business) to February 4, 1990, all income was distributed to
the Administrator.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
STAR TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ------------ ----------------------------------------------------------------- ---------------- --------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--101.0%
- -------------------------------------------------------------------------------
ALABAMA--0.9%
-----------------------------------------------------------------
$ 1,200,000 BMC Special Care Facilities Financing Authority of Montgomery,
AL, Weekly VRDNs (VHA of Alabama, Inc. Capital Asset Financing
Program)/(AMBAC Insured) A-1 $ 1,200,000
----------------------------------------------------------------- --------------
CALIFORNIA--3.7%
-----------------------------------------------------------------
3,000,000 California Higher Education Loan Authority, Inc., 3.90% (Series
B)/(SLMA LOC), 7/1/95 VMIG1/A-1+ 3,000,000
-----------------------------------------------------------------
2,000,000 California State, 3.75% Revenue Anticipation Warrants (Series A),
12/21/94 MIG1/SP1 2,000,801
----------------------------------------------------------------- --------------
Total 5,000,801
----------------------------------------------------------------- --------------
COLORADO--1.0%
-----------------------------------------------------------------
720,000 Loveland, CO, 3.40% Industrial Development Revenue Bonds (Bankers
Trust Co. LOC), Mandatory Tender
12/1/94 A-1+ 720,000
-----------------------------------------------------------------
720,000 Loveland, CO, 4.45% Industrial Development Revenue Bonds (Bankers
Trust Co. LOC), Mandatory Tender
6/1/95 A-1+ 720,000
----------------------------------------------------------------- --------------
Total 1,440,000
----------------------------------------------------------------- --------------
FLORIDA--5.3%
-----------------------------------------------------------------
2,000,000 Escambia County, FL, IDA Weekly VRDNs (Series 1991)/(Pacer
Industries, Inc.)/(Trust Company Bank LOC) Aa3 2,000,000
-----------------------------------------------------------------
5,200,000 University Athletic Association, FL, Daily VRDNs (University of
Florida Stadium Project)/(Sun Bank Orlando LOC) VMIG1 5,200,000
----------------------------------------------------------------- --------------
Total 7,200,000
----------------------------------------------------------------- --------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ------------ ----------------------------------------------------------------- ---------------- --------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
GEORGIA--0.2%
-----------------------------------------------------------------
$ 225,000 Georgia State Municipal Electric Authority, 6.50% Revenue Bonds,
1/1/07 (Pre-refunded 1/1/95 @ 100) AAA $ 225,692
----------------------------------------------------------------- --------------
ILLINOIS--22.1%
-----------------------------------------------------------------
2,000,000 Cook County, IL, Adjustable Demand Revenue Bonds Weekly VRDNs
(Series 1988A-1)/(Catholic Charities Development
Corporation)/(National Westminster LOC) VMIG1 2,000,000
-----------------------------------------------------------------
2,300,000 Chicago, IL, Weekly VRDNs (Series B)/(Societe Generale LOC) VMIG1/A-1+ 2,300,000
-----------------------------------------------------------------
1,500,000 Illinois Development Finance Authority 3.90%
(Series C)/(Illinois Power Company)/(Canadian Imperial Bank LOC),
Mandatory Tender 3/2/95 VMIG1/A-1+ 1,500,000
-----------------------------------------------------------------
3,000,000 Illinois Development Finance Authority Weekly VRDNs (St. Ignatius
College)/(Northern Trust Co. LOC) A-1+ 3,000,000
-----------------------------------------------------------------
2,200,000 Illinois Educational Facilities Authority Weekly VRDNs (Newberry
Library)/(Northern Trust Co. LOC) VMIG1 2,200,000
-----------------------------------------------------------------
4,000,000 Illinois Health Facilities Authority 3.85% (Gottlieb Health
Resources, Inc.)/(Harris Trust and Savings Bank LOC), 2/9/95 VMIG1 4,000,000
-----------------------------------------------------------------
2,600,000 Illinois Health Facilities Authority Weekly VRDNs (Revolving Fund
Pooled Financing Program)/(Swiss Bank LOC) VMIG1/A-1+ 2,600,000
-----------------------------------------------------------------
4,000,000 Illinois Health Facilities Authority Weekly VRDNs (West Suburban
Hospital Medical Center)/(First National Bank of Chicago LOC) VMIG1 4,000,000
-----------------------------------------------------------------
4,000,000 Illinois Health Facilities Authority 3.90% (Series C)/ (Victory
Health Services Project)/(First National Bank of Chicago LOC),
Mandatory Tender 1/25/95 VMIG1 4,000,000
-----------------------------------------------------------------
2,000,000 Illinois State, 4.75% GO Bonds, 6/15/95 MIG1/SP1+ 2,007,694
-----------------------------------------------------------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ------------ ----------------------------------------------------------------- ---------------- --------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
ILLINOIS--CONTINUED
-----------------------------------------------------------------
$ 1,830,000 Schamburg, IL, IDR Weekly VRDNs (La Quinta MTR
Inns)/(NationsBank, FT Worth, TX LOC) AA-3 $ 1,830,000
-----------------------------------------------------------------
450,000 Springfield, IL, Community Improvement Weekly VRDNs (Kent Family,
Inc.)/ (PNC Bank LOC) AA-1 450,000
----------------------------------------------------------------- --------------
Total 29,887,694
----------------------------------------------------------------- --------------
INDIANA--11.6%
-----------------------------------------------------------------
3,195,000 City of Logansport, IN, Weekly VRDNs (MMMs Investment
Project)/(Bank One, Indianapolis LOC) NR(B) 3,195,000
-----------------------------------------------------------------
3,000,000 Indiana Bank Bond, 3.03% (Series 1993A-2), 1/17/95 SP-1+/MIG1 3,001,050
-----------------------------------------------------------------
4,000,000 Indianapolis, IN, EDR Weekly VRDNs (Rand McNally Project)/(First
Union National Bank LOC) A-1 4,000,000
-----------------------------------------------------------------
5,500,000 Purdue University Student Fee, Weekly VRDNs
(Series H) VMIG1/A-1+ 5,500,000
----------------------------------------------------------------- --------------
Total 15,696,050
----------------------------------------------------------------- --------------
KENTUCKY--2.8%
-----------------------------------------------------------------
2,000,000 City of Fulton, KY, IDA Weekly VRDNs (United Health Care of
Kentucky, Inc.)/(First Union National Bank, Charlotte LOC) VMIG1 2,000,000
-----------------------------------------------------------------
1,800,000 City of Louisville, KY, IDA Weekly VRDNs (222 Project)/(PNC Bank,
KY LOC) A-1 1,800,000
----------------------------------------------------------------- --------------
Total 3,800,000
----------------------------------------------------------------- --------------
MARYLAND--0.7%
-----------------------------------------------------------------
1,000,000 Maryland IDA EDR, Weekly VRDNs (Maryland Academy of Sciences
Project)/(NationsBank, NC LOC) VMIG1 1,000,000
----------------------------------------------------------------- --------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ------------ ----------------------------------------------------------------- ---------------- --------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
MICHIGAN--0.6%
-----------------------------------------------------------------
$ 875,000 Economic Development Corp. of Lenawee, MI, Weekly VRDNs (Series
1989)/(Hardwoods of Michigan, Inc.)/ (National City Bank,
Cleveland LOC) VMIG1 $ 875,000
----------------------------------------------------------------- --------------
MISSOURI--9.0%
-----------------------------------------------------------------
2,000,000 Forest, MO, IDR Weekly VRDNs (Sara Lee Corporation) AA 2,000,000
-----------------------------------------------------------------
800,000 Independence, MO, IDA Weekly VRDNs (Shoney's Inn of
Independence)/(Wachovia Bank LOC) NR(B) 800,000
-----------------------------------------------------------------
2,000,000 Independence, MO, 3.15% Water Utility Revenue Bonds (National
Westminster LOC), Mandatory Tender 12/1/94 VMIG1 2,000,000
-----------------------------------------------------------------
2,100,000 Independence, MO, 3.45% Water Utility Revenue Bonds (National
Westminster LOC), Mandatory Tender 12/15/94 VMIG1 2,100,000
-----------------------------------------------------------------
3,000,000 State of Missouri, Environmental Improvement and Energy Resources
Authority Weekly VRDNs (Kansas City Power & Light Co.) VMIG1/A-1 3,000,000
-----------------------------------------------------------------
2,366,000 State of Missouri, Environmental Improvement and Energy Resources
Authority 3.45% (Kansas City Power & Light Co.), Mandatory Tender
12/7/94 VMIG1/A-1 2,366,000
----------------------------------------------------------------- --------------
Total 12,266,000
----------------------------------------------------------------- --------------
NEW MEXICO--1.7%
-----------------------------------------------------------------
2,300,000 City of Belen, NM, IDA Weekly VRDNs (United Desiccants,
Inc.)/(National City Bank, KY LOC) NR(B) 2,300,000
----------------------------------------------------------------- --------------
OHIO--8.9%
-----------------------------------------------------------------
1,000,000 Butler County, OH, 4.50% BANs, 5/29/95 NR(C) 1,003,570
-----------------------------------------------------------------
750,000 Butler County, OH, 4.80% BANs, 11/3/95 NR(C) 752,865
-----------------------------------------------------------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ------------ ----------------------------------------------------------------- ---------------- --------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
OHIO--CONTINUED
-----------------------------------------------------------------
$ 500,000 Centerville, OH, Health Care Revenue Bonds, Weekly VRDNs (Bethany
Village Continuing Care Facility)/ (PNC Bank LOC) VMIG1 $ 500,000
-----------------------------------------------------------------
900,000 Columbus, OH, Sewer Revenue Bonds, Weekly VRDNs VMIG1/A-1+ 900,000
-----------------------------------------------------------------
1,265,000 Marion County, OH, Hospital Revenue Bonds Weekly VRDNs (Pooled
Lease Program)/(Bank One, Columbus, N.A. LOC) A-1+ 1,265,000
-----------------------------------------------------------------
1,965,000 Ohio State, IDR Weekly VRDNs (Cincinnati Riverfront
Coliseum)/(PNC Bank LOC) AA3 1,965,000
-----------------------------------------------------------------
600,000 Ohio State University, Weekly VRDNs (Series 1992B)/ (General
Receipts) VMIG1/A-1+ 600,000
-----------------------------------------------------------------
2,000,000 University of Cincinnati, OH, 4.00% BANs, 3/23/95 MIG1/SP-1+ 2,004,456
-----------------------------------------------------------------
3,000,000 University of Cincinnati, OH, 4.75% BANs, 8/30/95 MIG1/SP-1+ 3,015,061
----------------------------------------------------------------- --------------
Total 12,005,952
----------------------------------------------------------------- --------------
PENNSYLVANIA--7.6%
-----------------------------------------------------------------
6,000,000 Allegheny County, PA, IDR 3.45% (Duquesne Light
Company)/(Canadian Imperial Bank LOC), Mandatory Tender 1/18/95 P1/A-1+ 6,000,000
-----------------------------------------------------------------
1,100,000 Allegheny County, PA, Hospital Development Revenue Bonds Daily
VRDNs (Series A)/(Presbyterian University Hospital)/(SPA--Credit
Suisse)/(MBIA Insured) VMIG1/A-1+ 1,100,000
-----------------------------------------------------------------
100,000 Allegheny County, PA, Hospital Development Revenue Bonds Daily
VRDNs (Series B-1)/(Presbyterian University Hospital)/(PNC Bank
LOC) VMIG1 100,000
-----------------------------------------------------------------
1,075,000 Allegheny County, PA, Hospital Development Revenue Bonds Daily
VRDNs (Series B-3)/(Presbyterian University Hospital)/(PNC Bank
LOC) VMIG1 1,075,000
-----------------------------------------------------------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ------------ ----------------------------------------------------------------- ---------------- --------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
-----------------------------------------------------------------
$ 300,000 Allegheny County, PA, Hospital Development Revenue Bonds Daily
VRDNs (Series C)/(Presbyterian University Hospital)/(SPA--Credit
Suisse)/(MBIA Insured) VMIG1/A-1+ $ 300,000
-----------------------------------------------------------------
700,000 Allegheny County, PA, Hospital Development Revenue Bonds Daily
VRDNs (Series D)/(Presbyterian University Hospital)/(SPA--Credit
Suisse)/(MBIA Insured) VMIG1/A-1+ 700,000
-----------------------------------------------------------------
1,000,000 East Penn, PA, Industrial & Commercial Development Authority
Weekly VRDNs (Electronic Data System Corp.)/(Wachovia Bank, GA
LOC) AA2 1,000,000
----------------------------------------------------------------- --------------
Total 10,275,000
----------------------------------------------------------------- --------------
TENNESSEE--6.4%
-----------------------------------------------------------------
1,000,000 Greenville, TN, IDR Weekly VRDNs (Ball Corporation)/(Wachovia
Bank, GA LOC) A-1+ 1,000,000
-----------------------------------------------------------------
1,000,000 State of Tennessee, BANs Weekly VRDNs (Series A) VMIG1/A-1+ 1,000,000
-----------------------------------------------------------------
2,600,000 State of Tennessee, BANs Weekly VRDNs (Series B) VMIG1/A-1+ 2,600,000
-----------------------------------------------------------------
4,020,000 Sullivan, TN, HEFA Weekly VRDNs (Asbury Center)/ (NationsBank, NC
LOC) NR(C) 4,020,000
----------------------------------------------------------------- --------------
Total 8,620,000
----------------------------------------------------------------- --------------
TEXAS--13.7%
-----------------------------------------------------------------
2,580,000 Bexar County, TX, HFDC Retirement Community Weekly VRDNs (Army
Retirement-Residence Foundation)/(Banque Paribas LOC) A-1 2,580,000
-----------------------------------------------------------------
2,000,000 Greater East, TX, Higher Education Authority, Weekly VRDNs
Student Loan Revenue Bonds (Series 1992A)/ (SLMA LOC) VMIG1/A-1+ 2,000,000
-----------------------------------------------------------------
3,200,000 Gulf Coast, TX, IDA Weekly VRDNs (Bay Tank, Inc.)/ (Morgan
Guaranty Trust Co. LOC) NR(A) 3,200,000
-----------------------------------------------------------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ------------ ----------------------------------------------------------------- ---------------- --------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
TEXAS--CONTINUED
-----------------------------------------------------------------
$ 900,000 Harris County, TX, HFDC Methodist Hospital Daily VRDNs
(SPA--Morgan Guaranty Trust Co.) A-1+ $ 900,000
-----------------------------------------------------------------
1,500,000 Harris County, TX, HFDC St. Lukes Episcopal Hospital Daily VRDNs
(Series D)/(SPA--Morgan Guaranty Trust Co.) A-1+ 1,500,000
-----------------------------------------------------------------
1,100,000 Houston, TX, Weekly VRDNs (Series A) VMIG1/A-1+ 1,100,000
-----------------------------------------------------------------
2,000,000 Houston, TX, ISD 4.50% TRANs (Series A), 8/31/95 MIG1/SP1+ 2,007,812
-----------------------------------------------------------------
2,200,000 Lone Star, TX, Airport Improvement Authority 3.35% (Series
B-3)/(American Airlines)/(Bank of New York LOC) 12/5/94 VMIG1 2,200,000
-----------------------------------------------------------------
1,100,000 Lone Star, TX, Airport Improvement Authority 3.75% (Series
B-4)/(American Airlines)/(Bank of New York LOC) 12/5/94 VMIG1 1,100,000
-----------------------------------------------------------------
2,000,000 San Antonio, TX, IDA Weekly VRDNs (San Antonio Rivercenter
Association)/(PNC Bank LOC) AA3 2,000,000
----------------------------------------------------------------- --------------
Total 18,587,812
----------------------------------------------------------------- --------------
UTAH--0.3%
-----------------------------------------------------------------
400,000 Castle Dale, UT, IDR 3.60% (Safeway, Inc.)/(Bankers Trust Co.
LOC), Mandatory Tender 2/1/95 A-1+ 400,000
----------------------------------------------------------------- --------------
VIRGINIA--3.6%
-----------------------------------------------------------------
1,920,000 Charlottesville, VA, IDA 3.40% (Safeway, Inc.)/(Bankers Trust Co.
LOC), Mandatory Tender 12/1/94 A-1+ 1,920,000
-----------------------------------------------------------------
1,920,000 Charlottesville, VA, IDA 4.45% (Safeway, Inc.)(Bankers Trust Co.
LOC), Mandatory Tender 6/1/95 A-1+ 1,920,000
-----------------------------------------------------------------
1,000,000 Roanoke, VA, IDA Daily VRDNs (Series A)/(Roanoke Memorial
Hospital)/(Morgan Guaranty LOC) VMIG1/A-1+ 1,000,000
----------------------------------------------------------------- --------------
Total 4,840,000
----------------------------------------------------------------- --------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL RATING:
AMOUNT MOODY'S
OR SHARES OR S&P* VALUE
- ------------ ----------------------------------------------------------------- ---------------- --------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
WYOMING--0.9%
-----------------------------------------------------------------
$ 1,200,000 Gillette, WY, 3.40% Pollution Control Revenue Bonds (Pacific
Corp.)/(Deutsche Bank, A.G., NY LOC), 12/9/94 P-1/A-1+ $ 1,200,000
----------------------------------------------------------------- --------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 136,820,001
----------------------------------------------------------------- --------------
OTHER--0.6%
- -------------------------------------------------------------------------------
24,658 Dreyfus Tax Exempt Money Market Fund 24,658
-----------------------------------------------------------------
750,657 Vanguard Municipal Bond Fund, Inc. 750,657
----------------------------------------------------------------- --------------
TOTAL OTHER 775,315
----------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $ 137,595,316+
----------------------------------------------------------------- --------------
</TABLE>
+ Also represents cost for federal tax purposes.
* Please refer to the appendix of the "Statement of Additional Information" for
an explanation of the credit ratings (unaudited).
Note: The categories of investment are shown as a percentage of net assets
($135,426,653) at November 30, 1994.
The following abbreviations are used in this portfolio:
AMBAC--American Municipal Bond Assurance Corp.
BANs--Bond Anticipation Notes
EDR--Economic Development Revenue
GO--General Obligation
HEFA--Health and Education Facility Authority
HFDC--Health Facilities Development Corporation
IDA--Industrial Development Authority
IDR--Industrial Development Revenue
ISD--Independent School District
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance
MMMs--Money Market Municipals
SLMA--Student Loan Marketing Association
SPA--Standby Purchase Agreement
TRANs--Tax Revenue Anticipation Notes
VHA--Veterans Housing Administration
VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
STAR TAX-FREE MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $ 137,595,316
- -------------------------------------------------------------------------------------------------
Interest receivable 852,452
- -------------------------------------------------------------------------------------------------
Deferred expenses 9,727
- ------------------------------------------------------------------------------------------------- --------------
Total assets 138,457,495
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Payable for investments purchased $ 2,680,000
- -----------------------------------------------------------------------------------
Dividends payable 320,751
- -----------------------------------------------------------------------------------
Accrued expenses 30,091
- ----------------------------------------------------------------------------------- ------------
Total liabilities 3,030,842
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 135,426,653 shares of beneficial interest outstanding $ 135,426,653
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(135,426,653 / 135,426,653 shares of beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TAX-FREE MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest income $ 3,811,748
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $ 756,063
- --------------------------------------------------------------------------------------
Trustees' fees 2,970
- --------------------------------------------------------------------------------------
Administrative personnel and services fees 168,559
- --------------------------------------------------------------------------------------
Custodian fees 34,690
- --------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 29,418
- --------------------------------------------------------------------------------------
Fund share registration costs 21,940
- --------------------------------------------------------------------------------------
Auditing fees 18,287
- --------------------------------------------------------------------------------------
Legal fees 4,759
- --------------------------------------------------------------------------------------
Printing and postage 16,369
- --------------------------------------------------------------------------------------
Portfolio accounting fees 34,921
- --------------------------------------------------------------------------------------
Insurance premiums 7,299
- --------------------------------------------------------------------------------------
Miscellaneous 9,918
- -------------------------------------------------------------------------------------- ------------
Total expenses 1,105,193
- --------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 206,199
- -------------------------------------------------------------------------------------- ------------
Net expenses 898,994
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income $ 2,912,754
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TAX-FREE MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 2,912,754 $ 2,517,686
- ------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (2,912,754) (2,517,686)
- ------------------------------------------------------------------------------- --------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 431,948,243 361,101,526
- -------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 42 --
- -------------------------------------------------------------------------------
Cost of shares redeemed (431,543,978) (370,566,359)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from Fund share transactions 404,307 (9,464,833)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets 404,307 (9,464,833)
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 135,022,346 144,487,179
- ------------------------------------------------------------------------------- --------------- ---------------
End of period $ 135,426,653 $ 135,022,346
- ------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVENBER 30,
1994 1993 1992 1991*
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.02 0.02 0.03 0.03
- ------------------------------------------------------------------------ --------- --------- --------- ---------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02) (0.02) (0.03) (0.03)
- ------------------------------------------------------------------------ --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------ --------- --------- --------- ---------
TOTAL RETURN** 2.15% 1.91% 2.59% 2.84%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.65% 0.65% 0.66% 0.55%(b)
- ------------------------------------------------------------------------
Net investment income 2.12% 1.90% 2.54% 3.95%(b)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.15% 0.40% 0.40% 0.48%(b)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $135,427 $135,022 $144,487 $113,731
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from March 15, 1991 (date of initial
public investment) to November 30, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
STAR TREASURY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- ---------------------------------------------------------------------------------- --------------
<C> <S> <C>
SHORT-TERM OBLIGATIONS--25.8%
- -------------------------------------------------------------------------------------------------
$ 24,000,000 U.S. Treasury Bills, 1/5/95-2/16/95 $ 23,779,024
----------------------------------------------------------------------------------
5,000,000 U.S. Treasury Bond, 7.875%, 2/15/95 5,024,899
----------------------------------------------------------------------------------
64,000,000 U.S. Treasury Notes, 3.875%-4.625% ,12/31/94-10/31/95 63,591,525
---------------------------------------------------------------------------------- --------------
TOTAL SHORT-TERM OBLIGATIONS 92,395,448
---------------------------------------------------------------------------------- --------------
*REPURCHASE AGREEMENTS--74.4%
- -------------------------------------------------------------------------------------------------
87,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.70%, dated 11/30/94, due 12/1/94 87,000,000
----------------------------------------------------------------------------------
16,500,000 First Boston Corp., 5.65%, dated 11/30/94, due 12/1/94 16,500,000
----------------------------------------------------------------------------------
17,000,000 Fuji Securities, Inc., 5.70%, dated 11/30/94, due 12/1/94 17,000,000
----------------------------------------------------------------------------------
15,500,000 HSBC Securities, Inc., 5.55%, dated 11/30/94, due 12/1/94 15,500,000
----------------------------------------------------------------------------------
16,500,000 Kidder, Peabody & Co., Inc., 5.65%, dated 11/30/94, due 12/1/94 16,500,000
----------------------------------------------------------------------------------
16,500,000 Morgan Stanley & Co., Inc., 5.65%, dated 11/30/94, due 12/1/94 16,500,000
----------------------------------------------------------------------------------
82,554,000 National Westminster Securities, 5.65%, dated 11/30/94, due 12/1/94 82,554,000
----------------------------------------------------------------------------------
15,500,000 Sanwa Bank, 5.55%, dated 11/30/94, due 12/1/94 15,500,000
---------------------------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS 267,054,000
---------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $ 359,449,448+
---------------------------------------------------------------------------------- --------------
</TABLE>
+ Also represents cost for federal tax purposes.
* 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
($358,765,971) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
STAR TREASURY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in repurchase agreements $ 267,054,000
- ---------------------------------------------------------------------------------
Investments in securities 92,395,448
- --------------------------------------------------------------------------------- --------------
Total investments, at amortized cost and value $ 359,449,448
- -------------------------------------------------------------------------------------------------
Cash 721
- -------------------------------------------------------------------------------------------------
Interest receivable 659,405
- ------------------------------------------------------------------------------------------------- --------------
Total assets 360,109,574
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Dividends payable 1,297,328
- ---------------------------------------------------------------------------------
Accrued expenses 46,275
- --------------------------------------------------------------------------------- --------------
Total liabilities 1,343,603
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 358,765,971 shares of beneficial interest outstanding $ 358,765,971
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($358,765,971 / 358,765,971 shares of beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TREASURY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income $ 13,166,763
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee $ 1,672,434
- -------------------------------------------------------------------------------------
Trustees' fees 6,166
- -------------------------------------------------------------------------------------
Administrative personnel and services fees 409,841
- -------------------------------------------------------------------------------------
Custodian fees 82,649
- -------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 33,704
- -------------------------------------------------------------------------------------
Fund share registration costs 18,764
- -------------------------------------------------------------------------------------
Auditing fees 18,250
- -------------------------------------------------------------------------------------
Legal fees 4,300
- -------------------------------------------------------------------------------------
Printing and postage 9,506
- -------------------------------------------------------------------------------------
Portfolio accounting fees 66,046
- -------------------------------------------------------------------------------------
Insurance premiums 10,275
- -------------------------------------------------------------------------------------
Miscellaneous 4,730
- ------------------------------------------------------------------------------------- ------------
Total expenses 2,336,665
- --------------------------------------------------------------------------------------------------- -------------
Net investment income $ 10,830,098
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TREASURY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 10,830,098 $ 8,718,009
- ---------------------------------------------------------------------------- ----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (10,830,098) (8,718,009)
- ---------------------------------------------------------------------------- ----------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 4,438,594,909 6,480,157,946
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 2,753 --
- ----------------------------------------------------------------------------
Cost of shares redeemed (4,465,851,804) (6,440,645,468)
- ---------------------------------------------------------------------------- ----------------- -----------------
Change in net assets from Fund share transactions (27,254,142) 39,512,478
- ---------------------------------------------------------------------------- ----------------- -----------------
Change in net assets (27,254,142) 39,512,478
- ----------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period 386,020,113 346,507,635
- ---------------------------------------------------------------------------- ----------------- -----------------
End of period $ 358,765,971 $ 386,020,113
- ---------------------------------------------------------------------------- ----------------- -----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TREASURY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993 1992 1991 1990 1989*
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------
Net investment income 0.03 0.03 0.03 0.06 0.07 0.05
- ------------------------------------------------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------------------------------
Dividends to shareholders from net investment
income (0.03) (0.03) (0.03) (0.06) (0.07) (0.05)
- ------------------------------------------------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN** 3.30% 2.56% 3.41% 5.72% 7.72% 5.36%
- -------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------
Expenses 0.70% 0.70% 0.71% 0.71% 0.73% 0.77%(b)
- -------------------------------------------------
Net investment income 3.24% 2.53% 3.33% 5.51% 7.44% 8.28%(b)
- -------------------------------------------------
Expense waiver/reimbursement (a) 0.00% 0.25% 0.25% 0.10% 0.03% 0.01%(b)
- -------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------
Net assets, end of period
(000 omitted) $358,766 $386,020 $346,508 $307,278 $226,519 $174,062
- -------------------------------------------------
</TABLE>
* Reflects operations for the period from April 14, 1989 (date of initial
public investment) to November 30, 1989.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
STAR FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Star Funds (the "Trust"), is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company. The
Trust consists of nine, diversified portfolios (individually referred to as the
"Fund", or collectively as the "Funds"): Star Capital Appreciation Fund, Star
Relative Value Fund, The Stellar Fund, Star U.S. Government Income Fund, Star
Prime Obligations Fund ("Prime Obligations"), Star Tax-Free Money Market Fund
("Tax-Free"), and Star Treasury Fund ("Treasury"). The assets of each portfolio
are segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The financial statements included herein are only those of
Prime Obligations, Tax-Free, and Treasury. The financial statements of the other
portfolios of the Trust are presented separately. As of November 30, 1994, Star
Strategic Income Fund and Star Growth Equity Fund were effective but did not
have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Each Fund's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act. Investments in other regulated investment companies are valued at net
asset value.
B. REPURCHASE AGREEMENTS--It is the policy of the Funds to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Funds to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Funds' adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees (the "Trustees"). Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Funds could receive less than the repurchase
price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal
STAR FUNDS
- --------------------------------------------------------------------------------
Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
D. FEDERAL TAXES--It is each Fund's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable or tax-exempt
income. Accordingly, no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by each Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from each Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
November 30, 1994, capital paid-in for Prime Obligations, Tax-Free, and Treasury
aggregated $86,343,422, $135,426,653, and $358,765,971, respectively.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PRIME OBLIGATIONS
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
Shares sold 474,598,081 483,797,019
- -------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,181 50,696
- -------------------------------------------------------------------------------
Shares redeemed (480,707,574) (504,033,551)
- ------------------------------------------------------------------------------- -------------- --------------
Net change resulting from Fund share transactions (6,108,312) (20,185,836)
- ------------------------------------------------------------------------------- -------------- --------------
</TABLE>
STAR FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
Shares sold 431,948,243 361,101,526
- -------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 42 --
- -------------------------------------------------------------------------------
Shares redeemed (431,543,978) (370,566,359)
- ------------------------------------------------------------------------------- -------------- --------------
Net change resulting from Fund share transactions 404,307 (9,464,833)
- ------------------------------------------------------------------------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
TREASURY
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
Shares sold 4,438,594,909 6,480,157,946
- ---------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,753 --
- ---------------------------------------------------------------------------
Shares redeemed (4,465,851,804) (6,440,645,468)
- --------------------------------------------------------------------------- ---------------- ----------------
Net change resulting from Fund share transactions (27,254,142) 39,512,478
- --------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Star Bank, N.A., the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee based on
a percentage of each Fund's average daily net assets (see below). 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.
<TABLE>
<CAPTION>
ANNUAL
FUND RATE
<S> <C>
Prime Obligations 0.55%
- -------------------------------------------------------------------------------------------------------
Tax-Free 0.55%
- -------------------------------------------------------------------------------------------------------
Treasury 0.50%
- -------------------------------------------------------------------------------------------------------
</TABLE>
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides each Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT, PORTFOLIO ACCOUNTING AND CUSTODY
FEES--Federated Services Company ("FServ") serves as transfer and dividend
disbursing agent for the Funds. The
STAR FUNDS
- --------------------------------------------------------------------------------
FServ fee is based on the size, type, and number of accounts and transactions
made by shareholders.
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.
Star Bank, N.A., is the Funds' custodian. The fee is based on the level of each
Funds' average net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of the Funds ($15,129 for Prime
Obligations, $17,739 for Tax-Free, and $35,260 for Treasury) were borne
initially by FAS. The Funds have agreed to reimburse FAS at an annual rate of
.005 of 1% of average daily net assets, until expenses initially borne by FAS
are fully reimbursed or the expiration of five years from the date the Portfolio
became effective, whichever occurs earlier. For Tax-Free, the portfolio's
effective date is March 14, 1991. For the year ended November 30, 1994, Tax-Free
paid $6,900 pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
STAR FUNDS
(Star Prime Obligations Fund, Star Tax-Free
Money Market Fund and Star Treasury Fund):
We have audited the accompanying statements of assets and liabilities of Star
Prime Obligations Fund, Star Tax-Free Money Market Fund and Star Treasury Fund
(investment portfolios of Star Funds, a Massachusetts business trust), including
the schedules of portfolio investments, as of November 30, 1994, the related
statements of operations for the year then ended, and the statements of changes
in net assets and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Star
Prime Obligations Fund, Star Tax-Free Money Market Fund and Star Treasury Fund
(investment portfolios of Star Funds) as of November 30, 1994, and the results
of their operations for the year then ended, and the changes in their net assets
and their financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
January 13, 1995
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr. Joseph S. Machi
Edward C. Gonzales Vice President and Assistant Treasurer
Peter E. Madden John W. McGonigle
Gregor F. Meyer Vice President and Secretary
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts Assistant Treasurer
C. Grant Anderson
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance
that they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
A1. The graphic presentation here displayed consists of a legend in the
upper left corner indicating the components of the corresponding line
graph. The Trust Shares of The Stellar Fund (the "Fund") is represented
by a broken line. The Standard & Poor's 500/Lehman Government Corporate
(50/50 Split) is represented by a solid line. The line graph is a
visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and Standard & Poor's
500/Lehman Government Corporate (50/50 Split). The "y" axis reflects
the cost of the investment. The "x" axis reflects computation periods
from the Fund's start of performance, April 6, 1994, through November
30, 1994. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to Standard & Poor's
500/Lehman Government Corporate (50/50 Split); the ending values are
$9,819 and $10,140, respectively. There is also a legend underneath the
graphic presentation which indicates the Average Annual Total Return for
the period ended November 30, 1994, beginning with the inception date of
the Fund (April 6, 1994); the Average Annual Total Return is (1.81%).
A2. The graphic presentation here displayed consists of a legend in the
upper left corner indicating the components of the corresponding line
graph. The Investment Shares of The Stellar Fund is represented by a
broken line. The Standard & Poor's 500/Lehman Government Corporate
(50/50 Split) is represented by a solid line. The line graph is a
visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and Standard & Poor's
500/Lehman Government Corporate (50/50 Split). The "y" axis reflects
the cost of the investment. The "x" axis reflects computation periods
from the Fund's start of performance, October 18, 1991, through November
30, 1994. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to Standard & Poor's
500/Lehman Government Corporate (50/50 Split); the ending values are
$11,743 and $12,472, respectively. There is also a legend underneath
the graphic presentation which indicates the Average Annual Total
Returns for the period ended November 30, 1994, beginning with the
inception date of the Fund (October 18, 1991), and the one-year period;
the Average Annual Total Returns are 4.46% and (5.63%), respectively.
B. The graphic presentation here displayed consists of a legend in the
upper left corner indicating the components of the corresponding line
graph. Star Relative Value Fund (the "Fund") is represented by a broken
line. The Standard & Poor's 500 Index is represented by a solid line.
The line graph is a visual comparison of change in value of a
hypothetical $10,000 purchase in the Fund and Standard & Poor's 500
Index. The "y" axis reflects the cost of the investment. The "x" axis
reflects computation periods from the Fund's start of performance, June
5, 1991, through November 30, 1994. The right margin reflects the
ending value of the hypothetical investment in the Fund as compared to
Standard & Poor's 500 Index; the ending values are $11,884 and $12,883,
respectively. There is also a legend underneath the graphic
presentation which indicates the Average Annual Total Return for the
period ended November 30, 1994, beginning with the inception date of the
Fund (June 5, 1991), and the one-year period; the Average Annual Total
Returns are 5.08% and (6.01%), respectively.
C. The graphic presentation here displayed consists of a legend in the
upper left corner indicating the components of the corresponding line
graph. Star U.S. Government Income Fund (the "Fund") is represented by
a broken line. The Lehman Government/Corporate Total Index is
represented by a solid line. The line graph is a visual representation
of a comparison of change in value of a hypothetical $10,000 purchase in
the Fund and Lehman Government/Corporate Total Index. The "y" axis
reflects the cost of the investment. The "x" axis reflects computation
periods from the Fund's start of performance, January 5, 1993, through
November 30, 1994. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to Lehman
Government/Corporate Total Index; the ending values are$10,023 and
$10,646, respectively. There is also a legend underneath the graphic
presentation which indicates the Average Annual Total Return for the
period ended November 30, 1994, beginning with the inception date of the
Fund (January 5, 1993) and the one-year period; the Average Annual Total
Returns are 0.32% and (6.89%), respectively.
