STOCK AND
BOND FUNDS
[STAR FUNDS LOGO]
COMBINED
SEMI-ANNUAL
REPORT
May 31, 1996
Portfolio of Star Funds
Star Capital Appreciation Fund
Star Growth Equity Fund
Star Relative Value Fund
The Stellar Fund
Star Strategic Income Fund
Star U.S. Government Income Fund
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the combined Semi-Annual Report to shareholders for the
Star Stock and Bond Funds. The report covers the six-month period from December
1, 1995 through May 31, 1996. It includes a discussion with each fund's
portfolio manager, which covers economic and market conditions and their impact
on fund performance and strategy. Following the discussion are shareholder
voting results regarding the approval of Board members, a complete list of each
fund's investments and the financial statements.
Of course, the Star Stock and Bond Funds are managed to bring shareholders
long-term investment opportunities in key financial markets. As a result, it's
important to remember that the true measure of their performance is clearly in
years rather than months. As the U.S. bond market has shown during the report
period--when rates rose and bond prices fell early in 1996--there will be
periods of short-term fluctuation in all financial markets in which these funds
invest. With that in mind, fund highlights over the six-month period are as
follows:
STAR CAPITAL APPRECIATION FUND
Managed to pursue growth over time through a diversified portfolio of domestic
stocks, the fund's portfolio of stocks achieved a six-month total return of
10.43%, or 5.43% taking into account the sales charge.* The share price rose
from $11.82 on the first day of the period to $12.72 at the period's end.
Shareholders received a total of $0.29 per share in dividends. Fund assets ended
the period at $80.9 million.
STAR GROWTH EQUITY FUND
This fund pursues classic growth through high-quality stocks that, at the end of
the period, included companies like Boeing, Dow, IBM, Microsoft, Merck, General
Electric, Intel, Pepsico, Gillette, Allstate, Procter & Gamble, Eastman Kodak,
Exxon, and McDonald's. During the six months, Star Growth Equity Fund delivered
a strong six-month total return of 11.64%, or 6.38% taking into account the
sales charge.* The share price rose 5% to reach $13.37 at the period's end.
Shareholders received a total of $0.08 per share in dividends and $0.66 in
capital gains. Fund assets reached $59.3 million at the period's end.
STAR RELATIVE VALUE FUND
The fund pursues a high level of total return, a combination of income and
capital appreciation, through a portfolio of stocks that appear to be
undervalued and offer above-average yields with low volatility. Over the period,
the fund delivered a strong six-month total return of 9.72%, or 4.76% taking
into account the sales charge.* The fund's share price rose from $15.04 on the
first day of the period to $16.34 on the last day. Shareholders received
dividends totaling $0.12 per share and capital gains totaling $0.01 per share.
Fund assets increased 27% to end the period at $167.8 million.
THE STELLAR FUND
To maximize total return the fund invests in approximately equal weightings in
U.S. stocks, U.S. bonds, international securities, real estate securities,
precious metal securities and money market securities. This highly diversified
approach produced total returns of 6.21% for Trust Shares, and 6.07% for
Investment Shares, or 1.33% taking into account the sales charge.* Shareholders
of Trust Shares received dividends totaling $0.19 per share and capital gains
totaling $0.20 per share, while share price increased 2%. Shareholders of
Investment Shares received dividends totaling $0.17 per share and capital gains
totaling $0.20 per share, while share price increased 2%. On the last day of the
period, fund assets stood at $113.8 million.
- ---------
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
STAR STRATEGIC INCOME FUND
The fund's diversified portfolio of income-producing securities was invested in
corporate bonds (35.0%), common stocks (21.0%), government agency bonds (20.2%),
preferred stocks (12.8%), and U.S. Treasury bonds and notes (4.0%). The fund
paid dividends totaling $0.37 per share. Due to rising rates that caused bond
prices to fall, the fund's total return was -0.25%, or -5.27% taking into
account the sales charge.* At the end of the period, fund assets reached $68.4
million, an increase of more than 40% over the asset total at the beginning of
the period.
STAR U.S. GOVERNMENT INCOME FUND
Managed to pursue current income and capital appreciation through a diversified
portfolio that consists primarily of U.S. government bonds, this fund provided
shareholders with $0.29 per share in dividends. However, due to rising rates
that caused bond prices to fall, the fund experienced a total return of -2.45%,
or -5.84% reflecting the sales charge.* The fund's net assets stood at $111
million at the end of the period.
Thank you for pursuing your long-term goals through the Star Stock and Bond
Funds. We will continue to keep you up-to-date on the details of your investment
on a regular basis, through the highest level of service possible.
Sincerely,
Edward C. Gonzales
Edward C. Gonzales
President
July 15, 1996
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
INVESTMENT REVIEWS
- --------------------------------------------------------------------------------
STAR CAPITAL APPRECIATION FUND
Q In the wake of a spectacular 1995, the stock market continued to deliver
reasonably solid performance. Over the six-month period, how did the Star
Capital Appreciation Fund perform?
A Over the six-month reporting period, the Star Capital Appreciation Fund
returned 10.43%, or 5.43% taking into account sales charge*, vs. the S&P 400
return of 10.87%.**
Q What particular strategies influenced the fund's
performance?
A The Star Capital Appreciation Fund selects securities and attempts to
maintain an acceptable level of risk largely through the use of a quantitative
model. The quantitative model is used in conjunction with the Star Bank's
Capital Management Division's economic forecast, appropriate sector weightings
and recommended cash positions. The combination of these elements comprises the
investment discipline utilized by the Capital Appreciation Fund since its
inception. The fund will continue to utilize this disciplined approach of
investing in stocks which display above average earnings growth potential.
Q Do you still expect the capital goods, transportation, consumer staples,
health care and miscellaneous sectors to have the greatest growth opportunities
through 1996?
A Based upon our continually refined economic outlook we expect the health
care and miscellaneous groups will continue to present strong earnings growth
opportunities. Additionally, the earnings growth potential in the technology
sector makes it a very attractive area. These stocks are typically considered
to be more volatile than other stocks. The assessment of risk levels for
individuals stocks is done in the context of the investment discipline
described above. Certain industry groups within capital goods still display
positive earnings potential, while the more interest sensitive industries came
under pressure as interest rates moved higher. The transportation area
experienced weakness, due primarily by rising fuel expenses and labor costs.
Consumer staples are a more defensive play and their relative earnings growth
rates will suffer comparatively in a somewhat stronger economy.
Q In the fund's previous report, you cited the mid-cap market as offering
more pronounced growth opportunities in a slowing economy. How was the fund's
asset allocation between mid-cap stocks and small-cap stocks at the end of the
period?
A The Star Capital Appreciation Fund will invest in securities that
typically have market capitalization of $200 million to $2 billion. These
companies exhibit characteristics of strong earnings growth due to the nature
of their product line, or their stage in the product life cycle. During periods
of economic slow down, the relative earnings growth levels become more
pronounced when compared to their larger capitalization counterparts. It is
this earning growth level that makes these stocks more attractive. Star Bank
believes that the second quarter of 1996 will experience the highest level of
Gross Domestic Product for the year and the economy will slow from that point
forward. In this economic environment, mid-cap stocks should have significantly
higher earnings growth rates, which should translate into better price
performance for these stocks.
* 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.
** Standard & Poor's Daily Stock Price Indices of 400 Common Stocks are
composite indices of common stocks in industry, transportation, and financial
and public utility companies that can be used to compare to the total returns
of funds whose portfolios are invested primarily in common stocks. The S&P
400 is an unmanaged index. Actual investments may not be made in an index.
STAR GROWTH EQUITY FUND
Q In the wake of a spectacular 1995, the stock market continued to deliver
reasonably solid performance. Over the six-month reporting period, how did Star
Growth Equity Fund perform?
A The Star Growth Equity Fund performed very well for the six-month period
ending May 31, 1996. During this period the fund returned 11.64%*, based on net
asset value, which was in line with the return on the S&P 500 of 11.78%.** We
remained fully invested during the period carrying on average 2-3% in cash. We
believe this small cash component accounted in part for the shortfall versus
the index. In general, during this period, the fund has been underweighted in
utilities and slightly overweighted in the technology area. Otherwise, there
have been no large deviations versus the index. We believed 1996 would be a
volatile year when stock selection would be critical. So far that has been the
case and the fund has done fairly well.
Q Were the fund's technology and financial sectors--which led its performance
in 1995--still responsible for the majority of its performance?
A The technology sector, during this time frame, continued to show very
strong performance. Stocks such as Hewlett Packard, Cisco Systems, Intel, and
Microsoft have been strong performers and have helped the fund. As mentioned
above, the fund remains slightly overweighted in this segment. The financial
sector, on the other hand, has struggled for the most part this year, due
primarily to rising interest rates. While the stocks we have in this financial
segment have performed in line, the group clearly has not shown the market
leadership of 1995. During the past six months we have lowered our exposure to
the financial sector to a market weight.
Q As we approach mid-1996, do you see a relatively flat year ahead, or one of
greater volatility?
A With the continued fluctuation in interest rates, the current higher
levels for price/earnings ratios, the expectation for slower earnings, and the
political landscape, we expect this to be a period with increased volatility.
Our expectations remain for a positive market, but the increased volatility
should continue to make this a year when security selection will be very
important. It will also be a period when investors will have to be patient and
concentrate on their long term objectives.
Q In this environment, what sectors appear to offer growth opportunities?
A The continued expansion of technology throughout the world and the
substitution of technology for labor still leads us to overweight the
technology group. The continued instability of economic numbers leads us to
remain fairly close to the index weightings in most other groups at this time.
* 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. The total return,
including sales charge, for the six-month period ended May 31, 1996 was
6.38%.
** Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. The S&P 500 is an
unmanaged index. Actual Investments may not be made in an index.
STAR RELATIVE VALUE FUND
Q In 1996, the stock market continued to deliver reasonably solid
performance in the wake of a spectacular 1995. Over the six-month reporting
period, how did Star Relative Value Fund perform?
A For the six-month reporting period ended May 31, 1996, Star Relative Value
Fund had a total return of 9.72%,* based on net asset value compared to the
Standard and Poor's 500 Index return of 11.78% for the same period.**
Q What particular holdings helped account for the fund's performance?
A During the last six-months the top performing stocks included Intel Corp
up 24.0%, General Electric 23.2%, Premark International 21.3%, Raytheon Company
19.6%, Goodyear Tire and Rubber Company 19.1% and Citicorp 18.7%. Going forward
we favor healthcare, technology and interest sensitive stocks.
Q Are you keeping the fund as fully invested as possible?
A The fund had a cash position of less than 4% as of May 31, 1996. The fund
attempts to stay as fully invested as possible by purchasing "value" oriented
stocks relative to the Standard and Poor's 500 Composite Stock Price Index.**
Q Do you see a relatively flat market ahead--or one of greater volatility?
A Over the balance of 1996 we continue to anticipate increased volatility
with concerns over corporate earnings and the direction of interest rates
controlling the markets. The upcoming election in November and an economy
struggling to recover from extreme weakness early this year will also influence
the financial markets. Despite all of the above, we think the market will trend
marginally higher in the second half of the year.
* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares when redeemed may be worth more or less than the
original cost. The total return, including sales charges for the six-month
period ended May 31, 1996 was 4.76%.
** Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. The S&P 500 is an
unmanaged index. Actual investment may not be made in an index.
THE STELLAR FUND
Q During the period, how did The Stellar Fund's multi-asset approach perform
overall for shareholders?
A During the six-month period just ended we witnessed a dramatic increase in
the volatility of both the domestic stock and bond markets. The multi-asset
approach of the Stellar Fund insulated investors from much of this price
fluctuation while providing solid returns. The decline in bond prices caused by
the return of higher interest rates was more than offset by positive returns
from the other asset categories.
Q The U.S. stock market remained relatively strong. How did the fund's stock
holdings perform?
A Year-to-date, the domestic and international equities have outperformed the
Standard & Poor's 500 and the Dow Jones World indices, respectively.*
Q While 1995 was a favorable year for the U.S. bond market, 1996 has
introduced a measure of volatility. Can you comment on the fund's domestic bond
holdings?
A The rise in U.S. interest rates sent bond prices lower. These price
declines have cost the fund in terms of absolute performance, yet Stellar has
achieved better performance from the fixed income sector. We believe that this
is solely attributable to the active fixed income management style employed by
the fund. Timely response to changing market conditions is a trademark of the
Stellar Fund.
Q Turning to the international market, international stocks improved overall
in the wake of a very poor 1995 while international bond performance varied
widely from country to country. Can you comment on the fund's international
holdings?
A The Stellar Fund continues to focus on global companies, whose stock
trades on stock exchanges in the U.S. To gain access to those markets which we
rank as attractive but where market leadership is highly fragmented, we employ
single country closed end mutual funds. One of the keys to Stellar's success in
the international arena is the focus on a highly diversified approach to select
markets.**
Q How did the fund's real estate holdings perform, and what is your outlook
for this sector.
A Real estate exposure has been a key stabilizing force in both the net
asset value and income generation of the Stellar Fund. The increase in
distribution from this area has helped to offset declining yields on stocks and
cash equivalents. Unlike other interest sensitive sectors, real estate values
have not been adversely affected by the recent increase in interest rates.+
* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares when redeemed may be worth more or less than the
original cost. Standard & Poor's Daily Stock Price Indices of 500 Common
Stocks are composite indices of common stocks in industry, transportation,
and financial and public utility companies that can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stock. Dow Jones World Industry Index or its component indices, including,
among others, utility sector. These indexes are unmanaged and actual
investments cannot be made in an index.
** International investing involves special risks such as currency risk,
increased volatility of foreign securities and differences in auditing and
other financial standards.
+ Real estate involves additional risks including fluctuations in interest
rates, volatility in property values, and depreciation.
STAR STRATEGIC INCOME FUND
Q Compared to an extremely favorable 1995, the interest rate environment in
1996 has turned the tables on the bond market. Can you comment?
A Perceptions regarding the economy, and thus direction of interest rates,
have swayed dramatically in the past six months. The Boeing and General Motors
strikes, bad weather, the government shutdown, the drought and the general
reaction of politics in an election year have provided enough diversion to
impact any economic forecast. The Federal Reserve Board had become concerned
over the course of economic growth and decided to lower short-term interest
rates in February as "insurance" to keep the economy afloat. Ultimately, many
economists were surprised at the strong 2.8% growth rate in the first quarter
and altered their forecasts, anticipating rising interest rates and higher
inflation. With rising energy costs and grain prices, stimulative monetary and
fiscal policies and an emerging consumer, economists ratcheted up expectations
for the expansion. As a result of the unexpected economic strength, yields rose
dramatically by the end of May, 1996. In fact, since our last report, yields
are higher and volatility has likewise moved higher. Star Bank, however, views
these circumstances as a short-term deviation from the overall course of the
weak cycle which we have long asserted. We continue to believe that the second
quarter of 1996 will represent the peak in Gross Domestic Product growth for
the year and economic performance will gradually diminish until we enter a
recession in 1997. As these events become clearer, interest rates and
volatility should decline moderately.
Q How did Star Strategic Income Fund's diversified income portfolio perform
in this environment?
A The diversification has served to cushion the volatility of bond prices
while still achieving its investment objective of high current income.
Theoretically, the risks that are presented in each class of investments are so
different that they tend to offset one another. For example, equity securities
tend to do well when the economy is strong, while the Treasury bond market
usually performs best in a weak economy. As we have found through both up and
down bond markets, the Star Strategic Income fund can help insulate investors
from the volatility of one particular market that may be suffering poor
performance because another asset class is able to compensate in the other
direction.
Q Did you make any significant changes to the allocations of the fund's
assets? How were the fund's assets allocated at the end of the reporting
period?
A In terms of asset allocation, we made a few tactical shifts in the fund's
asset mix. First, the equity component was increased modestly through direct
investment and options that efficiently provide the fund with more equity
exposure. Within the "core" investments, the allocation remained at 40%.
However, the Treasury holdings were reduced modestly and corporate bonds were
increased in order to generate a higher level of income. Lastly, the
international allocation was increased to 6% to take advantage of attractive
yields in Australia. No change was made in allocation towards mortgage-backed
securities or Real Estate Investment Trust's (REIT's) which both remain at
approximately 20% each.
STAR U.S. GOVERNMENT INCOME FUND
Q While 1995 was a strong year for bonds, 1996 has been a year of increased
volatility. Can you comment?
A Volatility has indeed increased in the past few months, because
perceptions regarding the economy, and thus the direction of interest rates,
swayed so dramatically. The Boeing and General Motors strikes, bad weather, the
government shutdown, the drought and the general reaction of politics in an
election year have provided enough diversion to impact any economic forecast.
The Federal Reserve Board (the "Fed") had become concerned over the course of
economic growth and decided to lower short-term interest rates in February as
"insurance" to keep the economy afloat. Ultimately, many economists were
surprised at the strong 2.8% growth rate in the first quarter and altered their
forecasts, anticipating rising interest rates and higher inflation. With rising
energy costs and grain prices, stimulative monetary and fiscal policies and an
emerging consumer, economists ratcheted up expectations for the expansion. As a
result of the unexpected economic strength, yields rose dramatically by the end
of May, 1996. In fact, since our last report, dated November 30, 1995, yields
are higher and volatility has likewise moved higher. Star Bank, however, views
these circumstances as a short-term deviation from the overall course of the
weak cycle which we have long asserted. We continue to believe that the second
quarter of 1996 will represent the peak in Gross Domestic Product ("GDP")
growth for the year and economic performance will gradually diminish until we
enter a recession in 1997. As these events become clearer, interest rates and
volatility should decline moderately.
Q In this environment, how did Star U.S. Government Income Fund perform?
A Our outlook has been neutral over the course of the past six months. We
avoided the pitfalls associated with "chasing" the market and have thus tracked
both market indices and peer group averages very closely. Thus, the Star U.S.
Government Income Fund has returned a competitive rate of return. For those
customers comparing the fund to purchasing securities themselves, the Star U.S.
Government Income Fund has done an outstanding job of conserving principal,
while delivering an attractive level of current income. Consider the investor
who can choose between the Star U.S. Government Income Fund and a comparable
maturity Treasury (10-year). Since the last report, November 30, 1995, total
returns for the six months ended, were -4.1% for the Treasury and - 2.45% for
the Star U.S. Government Income Fund on a net asset value basis.*
Q What has been your strategy in allocating the fund's assets among
Treasury, mortgage-backed, and corporate securities? In the fund's previous
report, dated November 30, 1995, you singled out mortgage-backed holdings as
offering a high degree of opportunity for 1996.
A At the beginning of 1996, we stated our belief that, ". . . mortgage
backed securities ("MBS") will be at least market performers and could
significantly outperform." That is exactly what has happened this year as MBS
have been the best performing fixed income asset class. While we still believe
MBS can still generate respectable returns, we have reduced the overweighting
to a more neutral level. We will retain a 25% allocation to the Agency/MBS
sector, but shifted 10% of the assets into the non-callable agency debenture
sector. Agency bonds in the 10-year sector offer comparable yields to "AA"
rated industrial bonds, but without the associated credit risk.
Corporate bond performance was excellent during 1995, but has begun to show
signs of strain. The combination of increased issuance, diminished corporate
earnings' growth, and the economic growth uncertainty has produced mild
underperformance in corporate bonds for 1996. We are advocating a cautious
approach and remain market weighted in corporate bonds, at 25% compared
* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares when redeemed may be worth more or less than the
original cost. The total return, including sales charges, for the six-month
period ended May 31, 1996 was -5.84%.
to 23.9% for the Lehman Government/Corporate Index.** Favored industries include
chemical, energy, utilities, and health care issuers to the exclusion of
automobile, retail, and paper issuers. Given that we are forecasting a recession
for 1997, we will be seeking a more defensive corporate bond posture later in
the year.
Q Given what we've seen so far in 1996, what's your outlook for the
government bond market for the rest of the year?
A With the Federal funds standing at 5.25%, we believe the Fed will continue
to leave monetary policy unchanged for the near-term. Policy officials do not
seem alarmed by the stronger than expected GDP or inflation reports issued
during the first half of 1996. If the Fed remains focused on the "core"
inflation data that removes food and energy components, their view will
probably be moderated in favor of waiting to make changes. In the market place,
there seems to be a dichotomy between inflation data and perception. Reality
indicates some up-tick in price pressures, while perceptions seem to indicate a
1970's-style reflation fear. Over the next several months, those differences
should close and we believe most of the adjustment will come from the
perception side. Inflation measures such as the Consumer Price Index (CPI)
should continue showing only mild price pressures for the rest of 1996. For the
remainder of 1996, we expect the Federal funds rate to remain at 5.25% until
the fourth quarter. If our economic outlook is correct and recession appears
likely early next year, expect the Fed to trim interest rates from 5.25% to
5.00% shortly after the Presidential elections.
As for the bond market, we view the bonds as being slightly undervalued.
Assuming 2.5% inflation, real bond yields stand at a level of 3.5%+ that has
been historically attractive. Our proprietary "Bond Market Barometer" model
confirms this view with a neutral reading of +3 (-13 signals higher yields and
+13 signals lower yields). Bond yields should remain within the recent 6.5% to
7.0% trading range, but could fall dramatically over the next few years. We
think bond yields could re-test the bottom of the range at 6.5% within the next
several months. Some negatives, as always, remain in the market, but we feel
many of the negative factors are already recognized in current yield levels.
+ Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics--a statistical measure of change, over time, in the price
of goods and services in major expenditure groups.
** Lehman Brothers Government/Corporate Index is comprised of approximately
5,000 issues which include nonconvertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed rate,
non-convertible domestic bonds of companies in industry, public utilities,
and finance. The average maturity of these bonds approximates nine years.
This index is unmanaged and actual investment cannot be made in an index.
SHAREHOLDER VOTING RESULTS
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A Special Meeting of Fund sharheolders was held on February 9, 1996. On February
9, 1996, the record date for shareholders voting at the meeting, there were
847,602,955 total outstanding shares. The following item was considered by
shareholders and the results of their voting were as follows:
Agenda Item
To approve or disapprove the following individuals as Board Members:
Ralph R. Burchenal, Thomas L. Conlan, Jr., Edward C. Gonzales, Alfred
Gottschalk, Ph.D., Robert J. Hill, D.O., Barry L. Larkin and William H. Zimmer,
III.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
566,241,945 448,459 --
565,737,927 952,810 --
566,293,940 396,464 --
566,423,929 1,266,476 --
566,069,006 621,398 --
561,770,620 4,919,785 --
566,459,083 231,320 --
</TABLE>
STAR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------ -------------
COMMON STOCKS--94.6%
- --------------------------------------------------------------------------------------------------
APPLIANCE & FURNITURE--0.0%
------------------------------------------------------------------------------------
1,000 Leggett and Platt, Inc. $ 28,375
------------------------------------------------------------------------------------ -------------
AUTOMOTIVE & RELATED--0.0%
------------------------------------------------------------------------------------
100 (a)Lear Corp. 3,862
------------------------------------------------------------------------------------ -------------
BANKING--1.3%
------------------------------------------------------------------------------------
20,000 Cullen Frost Bankers, Inc. 1,030,000
------------------------------------------------------------------------------------ -------------
CHEMICALS--2.9%
------------------------------------------------------------------------------------
30,000 Albemarle Corp. 675,000
------------------------------------------------------------------------------------
22,000 Goodrich (B.F.) Co. 871,750
------------------------------------------------------------------------------------
14,000 NCH Corp. 794,500
------------------------------------------------------------------------------------ -------------
Total 2,341,250
------------------------------------------------------------------------------------ -------------
COMMERCIAL SERVICES--2.0%
------------------------------------------------------------------------------------
18,000 (a)DeVRY, Inc. 715,500
------------------------------------------------------------------------------------
20,000 Omnicom Group, Inc. 872,500
------------------------------------------------------------------------------------ -------------
Total 1,588,000
------------------------------------------------------------------------------------ -------------
COMPUTER SERVICES--7.8%
------------------------------------------------------------------------------------
18,000 (a)CDW Computer Centers, Inc. 1,480,500
------------------------------------------------------------------------------------
52,000 (a)Data General Corp. 663,000
------------------------------------------------------------------------------------
17,000 (a)In Focus Systems, Inc. 977,500
------------------------------------------------------------------------------------
30,000 (a)Komag, Inc. 1,038,750
------------------------------------------------------------------------------------
35,000 (a)Microcom, Inc. 678,125
------------------------------------------------------------------------------------
11,000 (a)Seagate Technology, Inc. 646,250
------------------------------------------------------------------------------------
30,000 (a)Structural Dynamics Research Corp. 855,000
------------------------------------------------------------------------------------ -------------
Total 6,339,125
------------------------------------------------------------------------------------ -------------
ELECTRONICS--9.0%
------------------------------------------------------------------------------------
24,000 (a)Applied Materials, Inc. 894,000
------------------------------------------------------------------------------------
22,000 (a)Atmel Corp. 781,000
------------------------------------------------------------------------------------
40,000 (a)International Rectifier Corp. 1,040,000
------------------------------------------------------------------------------------
20,000 (a)Kemet Corp. 445,000
------------------------------------------------------------------------------------
29,000 (a)KLA Instruments Corp. 783,000
------------------------------------------------------------------------------------
22,000 (a)Lam Research Corp. 874,500
------------------------------------------------------------------------------------
20,000 (a)Maxim Integrated Products, Inc. 680,000
------------------------------------------------------------------------------------
62,000 (a)Sierra Semiconductor Corp. 914,500
------------------------------------------------------------------------------------
20,000 (a)Solectron Corp. 867,500
------------------------------------------------------------------------------------ -------------
Total 7,279,500
------------------------------------------------------------------------------------ -------------
ENERGY--1.2%
------------------------------------------------------------------------------------
35,000 (a)Calenergy, Inc. 936,250
------------------------------------------------------------------------------------ -------------
</TABLE>
STAR CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------ -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE--4.6%
------------------------------------------------------------------------------------
48,000 Callaway Golf Co. $ 1,446,000
------------------------------------------------------------------------------------
36,000 (a)Grand Casinos, Inc. 1,260,000
------------------------------------------------------------------------------------
34,000 (a)GTECH Holdings Corp. 1,020,000
------------------------------------------------------------------------------------ -------------
Total 3,726,000
------------------------------------------------------------------------------------ -------------
FINANCIAL SERVICES--9.2%
------------------------------------------------------------------------------------
50,400 Bear Stearns Companies, Inc. 1,215,900
------------------------------------------------------------------------------------
30,000 Frontier Corp. 960,000
------------------------------------------------------------------------------------
35,000 Green Tree Financial Corp. 1,146,250
------------------------------------------------------------------------------------
60,000 Money Store, Inc. 1,575,000
------------------------------------------------------------------------------------
42,500 (a)Olympic Financial Ltd. 1,004,063
------------------------------------------------------------------------------------
100,000 Reliance Group Holdings, Inc. 775,000
------------------------------------------------------------------------------------
26,000 Union Planters Corp. 796,250
------------------------------------------------------------------------------------ -------------
Total 7,472,463
------------------------------------------------------------------------------------ -------------
FOOD & BEVERAGE--1.5%
------------------------------------------------------------------------------------
21,000 Richfood Holdings, Inc. 703,500
------------------------------------------------------------------------------------
17,000 Robert Mondavi Corporation 505,750
------------------------------------------------------------------------------------ -------------
Total 1,209,250
------------------------------------------------------------------------------------ -------------
HEALTH SERVICES--1.4%
------------------------------------------------------------------------------------
42,000 Integrated Health Services, Inc. 1,097,250
------------------------------------------------------------------------------------ -------------
HOME BUILDING--0.7%
------------------------------------------------------------------------------------
30,000 Clayton Homes, Inc. 577,500
------------------------------------------------------------------------------------ -------------
HOSPITAL MANAGEMENT--5.5%
------------------------------------------------------------------------------------
20,000 (a)HEALTHSOUTH Corp. 700,000
------------------------------------------------------------------------------------
22,000 (a)HealthCare COMPARE Corp. 1,064,250
------------------------------------------------------------------------------------
20,000 (a)Maxicare Health Plans, Inc. 490,000
------------------------------------------------------------------------------------
27,000 (a)Ornda HealthCorp 678,375
------------------------------------------------------------------------------------
28,000 (a)PHP Healthcare Corp. 927,500
------------------------------------------------------------------------------------
22,000 (a)Quorum Health Group, Inc. 563,750
------------------------------------------------------------------------------------ -------------
Total 4,423,875
------------------------------------------------------------------------------------ -------------
HOSPITAL SUPPLIES--2.2%
------------------------------------------------------------------------------------
32,000 (a)Physician Sales & Service, Inc. 1,032,000
------------------------------------------------------------------------------------
30,000 Vital Signs, Inc. 720,000
------------------------------------------------------------------------------------ -------------
Total 1,752,000
------------------------------------------------------------------------------------ -------------
HOUSEHOLD PRODUCTS--0.7%
------------------------------------------------------------------------------------
22,000 First Brands Corp. 544,500
------------------------------------------------------------------------------------ -------------
INSURANCE--2.4%
------------------------------------------------------------------------------------
20,000 CMAC Investment Corp. 1,090,000
------------------------------------------------------------------------------------
20,000 Reliastar Financial Corp. 857,500
------------------------------------------------------------------------------------ -------------
Total 1,947,500
------------------------------------------------------------------------------------ -------------
</TABLE>
STAR CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------ -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
MACHINERY & EQUIPMENT--4.1%
------------------------------------------------------------------------------------
30,000 (a)Credence Systems Corp. $ 607,500
------------------------------------------------------------------------------------
20,000 Duriron, Inc. 565,000
------------------------------------------------------------------------------------
35,000 (a)Global Industrial Technologies, Inc. 647,500
------------------------------------------------------------------------------------
20,000 Harnischfeger Industries, Inc. 700,000
------------------------------------------------------------------------------------
17,000 (a)Novellus Systems, Inc. 833,000
------------------------------------------------------------------------------------ -------------
Total 3,353,000
------------------------------------------------------------------------------------ -------------
MANUFACTURING--2.4%
------------------------------------------------------------------------------------
30,000 Exide Corp. 705,000
------------------------------------------------------------------------------------
12,500 (a)Lydall, Inc. 290,625
------------------------------------------------------------------------------------
28,000 (a)Sealed Air Corp. 994,000
------------------------------------------------------------------------------------ -------------
Total 1,989,625
------------------------------------------------------------------------------------ -------------
MULTI-INDUSTRY--2.5%
------------------------------------------------------------------------------------
30,000 Eastern Enterprises 1,023,750
------------------------------------------------------------------------------------
40,000 (a)Fibreboard Corp. 1,000,000
------------------------------------------------------------------------------------ -------------
Total 2,023,750
------------------------------------------------------------------------------------ -------------
OFFICE & BUSINESS EQUIPMENT--1.0%
------------------------------------------------------------------------------------
13,000 Wallace Computer Service, Inc. 780,000
------------------------------------------------------------------------------------ -------------
OIL-INTERNATIONAL--5.0%
------------------------------------------------------------------------------------
42,000 (a)Reading & Bates Corp. 924,000
------------------------------------------------------------------------------------
44,000 (a)Smith International, Inc. 1,386,000
------------------------------------------------------------------------------------
15,000 Sonat Offshore Drilling Co. 795,000
------------------------------------------------------------------------------------
22,000 Tidewater, Inc. 907,500
------------------------------------------------------------------------------------ -------------
Total 4,012,500
------------------------------------------------------------------------------------ -------------
PERSONAL CARE PRODUCTS--2.1%
------------------------------------------------------------------------------------
56,000 (a)General Nutrition Companies, Inc. 868,000
------------------------------------------------------------------------------------
30,000 Natures Sunshine Products, Inc. 847,500
------------------------------------------------------------------------------------ -------------
Total 1,715,500
------------------------------------------------------------------------------------ -------------
PHARMACEUTICALS--1.4%
------------------------------------------------------------------------------------
25,000 (a)Watson Pharmaceuticals, Inc. 1,125,000
------------------------------------------------------------------------------------ -------------
RESTAURANTS--2.4%
------------------------------------------------------------------------------------
34,000 Applebee's International, Inc. 964,750
------------------------------------------------------------------------------------
25,000 (a)Outback Steakhouse, Inc. 946,875
------------------------------------------------------------------------------------ -------------
Total 1,911,625
------------------------------------------------------------------------------------ -------------
RETAIL--2.8%
------------------------------------------------------------------------------------
22,000 (a)Kohl's Corp. 728,750
------------------------------------------------------------------------------------
40,000 (a)Staples, Inc. 800,000
------------------------------------------------------------------------------------
20,000 (a)Vons Companies, Inc. 730,000
------------------------------------------------------------------------------------ -------------
Total 2,258,750
------------------------------------------------------------------------------------ -------------
</TABLE>
STAR CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------ -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
SECURITIES--1.4%
------------------------------------------------------------------------------------
52,000 PaineWebber Group, Inc. $ 1,137,500
------------------------------------------------------------------------------------ -------------
SERVICES--1.3%
------------------------------------------------------------------------------------
32,000 (a)CDI Corp. 1,088,000
------------------------------------------------------------------------------------ -------------
TELECOMMUNICATIONS--7.5%
------------------------------------------------------------------------------------
20,000 (a)ADC Telecommunications, Inc. 920,000
------------------------------------------------------------------------------------
12,000 (a)Aspect Telecommunications Corp. 681,000
------------------------------------------------------------------------------------
32,400 Century Telephone Enterprises, Inc. 1,053,000
------------------------------------------------------------------------------------
37,500 ECI Telecommunications, Ltd. 993,750
------------------------------------------------------------------------------------
25,000 (a)Glenayre Technologies, Inc. 1,231,250
------------------------------------------------------------------------------------
30,000 (a)Picturetel Corp. 1,177,500
------------------------------------------------------------------------------------ -------------
Total 6,056,500
------------------------------------------------------------------------------------ -------------
TRANSPORTATION--2.4%
------------------------------------------------------------------------------------
39,000 Expeditors International Washington, Inc. 1,204,125
------------------------------------------------------------------------------------
40,000 (a)USAir Group, Inc. 790,000
------------------------------------------------------------------------------------ -------------
Total 1,994,125
------------------------------------------------------------------------------------ -------------
UTILITIES--5.9%
------------------------------------------------------------------------------------
17,000 Cilcorp, Inc. 724,625
------------------------------------------------------------------------------------
40,000 Illinova Corp. 1,050,000
------------------------------------------------------------------------------------
20,000 NIPSCO Industries, Inc. 745,000
------------------------------------------------------------------------------------
32,000 Sierra Pacific Resources 760,000
------------------------------------------------------------------------------------
28,000 TECO Energy, Inc. 661,500
------------------------------------------------------------------------------------
40,000 Washington Gas Light Co. 830,000
------------------------------------------------------------------------------------ -------------
Total 4,771,125
------------------------------------------------------------------------------------ -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $67,102,803) 76,513,700
------------------------------------------------------------------------------------ -------------
(B) REPURCHASE AGREEMENT--5.3%
- --------------------------------------------------------------------------------------------------
$ 4,275,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.30%,
dated 5/31/1996, due 6/3/1996 (at amortized cost) 4,275,000
------------------------------------------------------------------------------------ -------------
TOTAL INVESTMENTS (IDENTIFIED COST $71,377,803)(C) $ 80,788,700
------------------------------------------------------------------------------------ -------------
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $71,403,908.
The net unrealized appreciation of investments on a federal tax basis
amounts to $9,384,792 which is comprised of $11,313,779 appreciation and
$1,928,987 depreciation at May 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($80,881,672) at May 31, 1996.
(See Notes which are an integral part of the Financial Statements)
STAR CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value
(identified cost $71,377,803, and tax cost $71,403,908) $ 80,788,700
- ---------------------------------------------------------------------------------------------------
Cash 287
- ---------------------------------------------------------------------------------------------------
Income receivable 52,149
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 678,775
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 6,189
- ---------------------------------------------------------------------------------------------------
Deferred expenses 5,842
- --------------------------------------------------------------------------------------------------- -------------
Total assets 81,531,942
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------
Payable for investments purchased $ 569,438
- ---------------------------------------------------------------------------------------
Accrued expenses 80,832
- --------------------------------------------------------------------------------------- ----------
Total liabilities 650,270
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 6,356,491 shares outstanding $ 80,881,672
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $ 69,268,982
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 9,410,897
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and options 2,296,292
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (94,499)
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 80,881,672
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($80,881,672 / 6,356,491 shares outstanding) $12.72
- --------------------------------------------------------------------------------------------------- -------------
Offering Price Per Share (100 / 95.50 of $12.72)* $13.32
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
STAR CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends $ 254,440
- ----------------------------------------------------------------------------------------------------
Interest 110,402
- ---------------------------------------------------------------------------------------------------- ------------
Total income 364,842
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $ 304,304
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee 32,692
- ----------------------------------------------------------------------------------------
Custodian fees 8,008
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 22,132
- ----------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,632
- ----------------------------------------------------------------------------------------
Auditing fees 7,556
- ----------------------------------------------------------------------------------------
Legal fees 1,632
- ----------------------------------------------------------------------------------------
Portfolio accounting fees 26,316
- ----------------------------------------------------------------------------------------
Shareholder services fee 11,389
- ----------------------------------------------------------------------------------------
Share registration costs 9,535
- ----------------------------------------------------------------------------------------
Printing and postage 8,391
- ----------------------------------------------------------------------------------------
Insurance premiums 2,371
- ----------------------------------------------------------------------------------------
Miscellaneous 2,883
- ---------------------------------------------------------------------------------------- ----------
Total expenses 438,841
- ---------------------------------------------------------------------------------------------------- ------------
Net operating loss (73,999)
- ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments (includes $35,656 net loss on options) 2,303,725
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 4,810,601
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and options 7,114,326
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 7,040,327
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR CAPITAL APPRECIATION FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income/(operating loss) $ (73,999) $ 119,128
- -----------------------------------------------------------------
Net realized gain on investments and options ($2,303,725 and
$1,426,788, respectively, as computed for federal tax purposes) 2,303,725 1,403,382
- -----------------------------------------------------------------
Net change in unrealized appreciation 4,810,601 4,508,753
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from operations 7,040,327 6,031,263
- ----------------------------------------------------------------- ---------------------- ----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Distributions from net investment income 0 (127,110)
- -----------------------------------------------------------------
Distributions in excess of net investment income 0 (20,499)
- -----------------------------------------------------------------
Distributions from net realized gains (1,408,024) (114,139)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from distributions to
shareholders (1,408,024) (261,748)
- ----------------------------------------------------------------- ---------------------- ----------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 22,542,685 26,008,819
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 606,085 122,124
- -----------------------------------------------------------------
Cost of shares redeemed (4,329,045) (5,483,762)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from share transactions 18,819,725 20,647,181
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets 25,452,028 26,416,696
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period 56,429,644 30,012,948
- ----------------------------------------------------------------- ---------------------- ----------------------
End of period (including undistributed net investment income of
$(94,499) and $(20,499), respectively) $ 80,881,672 $ 56,429,644
- ----------------------------------------------------------------- ---------------------- ----------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, YEAR ENDED
1996 NOVEMBER 30,
(UNAUDITED) 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.82 $ 10.15 $ 10.00
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income (loss) (0.01) 0.03 --
- -----------------------------------------------------------------------
Net realized and unrealized gain on investments 1.20 1.72 0.15
- ----------------------------------------------------------------------- ------- --------- -----------
Total from investment operations 1.19 1.75 0.15
- ----------------------------------------------------------------------- ------- --------- -----------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Distributions from net investment income -- (0.04) --
- -----------------------------------------------------------------------
Distributions in excess of net investment income -- (0.00)** --
- -----------------------------------------------------------------------
Distributions from net realized gain on investment (0.29) (0.04) --
- ----------------------------------------------------------------------- ------- --------- -----------
Total distributions (0.29) (0.08) --
- ----------------------------------------------------------------------- ------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 12.72 $ 11.82 $ 10.15
- ----------------------------------------------------------------------- ------- --------- -----------
TOTAL RETURN (B) 10.43% 17.35% 1.50%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 1.37%* 1.47% 1.58%*
- -----------------------------------------------------------------------
Net investment income (loss) (0.23%)* 0.28% 0.08%*
- -----------------------------------------------------------------------
Expense waiver/reimbursement (c) -- 0.01% 0.10%*
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $80,882 $56,430 $30,013
- -----------------------------------------------------------------------
Average commission rate paid $0.0004 -- --
- -----------------------------------------------------------------------
Portfolio turnover 90% 144% 36%
- -----------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** 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
puposes for the year ended November 30, 1995.
(a) Reflects operations for the period from June 13, 1994 (date of initial
public investment) to November 30, 1994. For the period from May 16, 1994
(start of business) to June 12, 1994, all income was distributed to the
Administrator.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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)
STAR GROWTH EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------ -------------
COMMON STOCKS--97.2%
- --------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.7%
------------------------------------------------------------------------------------
16,000 Boeing Co. $ 1,364,000
------------------------------------------------------------------------------------
8,000 Raytheon Co. 426,000
------------------------------------------------------------------------------------
5,000 Textron, Inc. 423,750
------------------------------------------------------------------------------------ -------------
Total 2,213,750
------------------------------------------------------------------------------------ -------------
AIRLINES--0.8%
------------------------------------------------------------------------------------
9,000 Comair Holdings, Inc. 236,250
------------------------------------------------------------------------------------
4,000 UAL Corp. 228,500
------------------------------------------------------------------------------------ -------------
Total 464,750
------------------------------------------------------------------------------------ -------------
AUTOMOBILE--2.1%
------------------------------------------------------------------------------------
10,000 General Motors Corp. 551,250
------------------------------------------------------------------------------------
10,000 Johnson Controls, Inc. 697,500
------------------------------------------------------------------------------------ -------------
Total 1,248,750
------------------------------------------------------------------------------------ -------------
BANKING--4.3%
------------------------------------------------------------------------------------
8,636 Citicorp 725,424
------------------------------------------------------------------------------------
12,400 Corestates Financial Corp. 488,250
------------------------------------------------------------------------------------
10,000 J.P. Morgan & Co., Inc. 868,750
------------------------------------------------------------------------------------
6,000 NationsBank Corp. 486,750
------------------------------------------------------------------------------------ -------------
Total 2,569,174
------------------------------------------------------------------------------------ -------------
BROADCASTING--1.4%
------------------------------------------------------------------------------------
10,000 (a)Clear Channel Communications, Inc. 812,500
------------------------------------------------------------------------------------ -------------
CHEMICALS--4.0%
------------------------------------------------------------------------------------
7,000 Dow Chemical Co. 585,370
------------------------------------------------------------------------------------
5,000 Du Pont (E.I.) de Nemours & Co. 398,750
------------------------------------------------------------------------------------
9,000 Eastman Chemical Co. 603,000
------------------------------------------------------------------------------------
5,219 Monsanto Co. 792,636
------------------------------------------------------------------------------------ -------------
Total 2,379,756
------------------------------------------------------------------------------------ -------------
COMPUTER SERVICES--10.9%
------------------------------------------------------------------------------------
40,000 (a)Cisco Systems, Inc. 2,190,000
------------------------------------------------------------------------------------
22,570 Hewlett-Packard Co. 2,409,348
------------------------------------------------------------------------------------
4,970 International Business Machines Corp. 530,548
------------------------------------------------------------------------------------
7,000 (a)Microsoft Corp. 831,250
------------------------------------------------------------------------------------
15,000 Oracle Corp. 496,875
------------------------------------------------------------------------------------ -------------
Total 6,458,021
------------------------------------------------------------------------------------ -------------
DRUGS--10.5%
------------------------------------------------------------------------------------
10,000 Abbott Laboratories 431,250
------------------------------------------------------------------------------------
10,000 Amgen, Inc. 595,000
------------------------------------------------------------------------------------
5,000 (a)Biogen, Inc. 302,500
------------------------------------------------------------------------------------
</TABLE>
STAR GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------ -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
DRUGS--CONTINUED
------------------------------------------------------------------------------------
29,849 Merck & Co., Inc. $ 1,928,992
------------------------------------------------------------------------------------
35,000 Schering Plough Corp. 2,051,875
------------------------------------------------------------------------------------
20,000 Watson Pharmaceuticals, Inc. 900,000
------------------------------------------------------------------------------------ -------------
Total 6,209,617
------------------------------------------------------------------------------------ -------------
ELECTRICAL EQUIPMENT--0.7%
------------------------------------------------------------------------------------
5,000 General Electric Co. 413,750
------------------------------------------------------------------------------------ -------------
ELECTRONIC TECHNOLOGY--1.9%
------------------------------------------------------------------------------------
15,170 Intel Corp. 1,145,335
------------------------------------------------------------------------------------ -------------
ENTERTAINMENT--1.0%
------------------------------------------------------------------------------------
20,000 Callaway Golf Co. 602,500
------------------------------------------------------------------------------------ -------------
FINANCE--1.2%
------------------------------------------------------------------------------------
12,155 Dean Witter, Discover & Co. 720,184
------------------------------------------------------------------------------------ -------------
FOOD & BEVERAGE--5.5%
------------------------------------------------------------------------------------
13,500 CPC International, Inc. 933,188
------------------------------------------------------------------------------------
62,000 PepsiCo, Inc. 2,061,500
------------------------------------------------------------------------------------
16,526 Premark International, Inc. 266,482
------------------------------------------------------------------------------------ -------------
Total 3,261,170
------------------------------------------------------------------------------------ -------------
FOREST PRODUCTS & PAPER--1.0%
------------------------------------------------------------------------------------
8,000 Kimberly-Clark Corp. 583,000
------------------------------------------------------------------------------------ -------------
HOSPITAL--0.6%
------------------------------------------------------------------------------------
7,000 Columbia/HCA Healthcare Corp. 377,125
------------------------------------------------------------------------------------ -------------
HOSPITAL SUPPLIES--2.1%
------------------------------------------------------------------------------------
12,885 Johnson & Johnson 1,254,677
------------------------------------------------------------------------------------ -------------
HOUSEHOLD PRODUCTS--5.9%
------------------------------------------------------------------------------------
10,000 Clorox Co. 851,250
------------------------------------------------------------------------------------
21,908 Gillette Co. 1,295,311
------------------------------------------------------------------------------------
6,829 Procter & Gamble Co. 600,098
------------------------------------------------------------------------------------
16,526 Tupperware Corp. 756,065
------------------------------------------------------------------------------------ -------------
Total 3,502,724
------------------------------------------------------------------------------------ -------------
INSURANCE--6.9%
------------------------------------------------------------------------------------
15,000 Allstate Corp. 633,750
------------------------------------------------------------------------------------
35,000 American Bankers Insurance Group, Inc. 1,356,250
------------------------------------------------------------------------------------
8,561 American International Group, Inc. 806,874
------------------------------------------------------------------------------------
5,000 Ohio Casualty Corp. 170,625
------------------------------------------------------------------------------------
27,000 Travelers Group, Inc. 1,120,500
------------------------------------------------------------------------------------ -------------
Total 4,087,999
------------------------------------------------------------------------------------ -------------
MACHINERY & EQUIPMENT--1.2%
------------------------------------------------------------------------------------
10,925 Illinois Tool Works, Inc. 731,975
------------------------------------------------------------------------------------ -------------
</TABLE>
STAR GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------ -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
MANUFACTURING--1.8%
------------------------------------------------------------------------------------
14,000 Eastman Kodak Co. $ 1,041,250
------------------------------------------------------------------------------------ -------------
MULTI-INDUSTRY--0.7%
------------------------------------------------------------------------------------
7,529 Allied-Signal, Inc. 412,213
------------------------------------------------------------------------------------ -------------
OIL-DOMESTIC--1.5%
------------------------------------------------------------------------------------
2,500 Ashland, Inc. 106,875
------------------------------------------------------------------------------------
9,000 Texaco, Inc. 753,750
------------------------------------------------------------------------------------ -------------
Total 860,625
------------------------------------------------------------------------------------ -------------
OIL-FOREIGN--4.7%
------------------------------------------------------------------------------------
12,000 Exxon Corp. 1,017,000
------------------------------------------------------------------------------------
15,500 Mobil Corp. 1,749,563
------------------------------------------------------------------------------------ -------------
Total 2,766,563
------------------------------------------------------------------------------------ -------------
PRINTING & PUBLISHING--0.7%
------------------------------------------------------------------------------------
6,000 Gannett Co., Inc. 418,500
------------------------------------------------------------------------------------ -------------
RAILROADS--1.0%
------------------------------------------------------------------------------------
7,000 Burlington Northern Santa Fe 593,250
------------------------------------------------------------------------------------ -------------
REAL ESTATE--1.7%
------------------------------------------------------------------------------------
14,000 Camden Property Trust 323,750
------------------------------------------------------------------------------------
12,000 Meditrust 394,500
------------------------------------------------------------------------------------
18,799 South West Property Trust, Inc. 260,836
------------------------------------------------------------------------------------ -------------
Total 979,086
------------------------------------------------------------------------------------ -------------
RESTAURANTS--1.6%
------------------------------------------------------------------------------------
20,000 McDonald's Corp. 962,500
------------------------------------------------------------------------------------ -------------
RETAIL TRADE--3.3%
------------------------------------------------------------------------------------
24,000 Kohl's Corp. 795,000
------------------------------------------------------------------------------------
35,000 (a)Safeway, Inc. 1,181,250
------------------------------------------------------------------------------------ -------------
Total 1,976,250
------------------------------------------------------------------------------------ -------------
STEEL--0.8%
------------------------------------------------------------------------------------
6,000 AK Steel Holding Corp. 259,500
------------------------------------------------------------------------------------
6,000 USX-U.S. Steel Group, Inc. 186,000
------------------------------------------------------------------------------------ -------------
Total 445,500
------------------------------------------------------------------------------------ -------------
TELECOMMUNICATIONS--7.2%
------------------------------------------------------------------------------------
12,644 AT&T Corp. 788,670
------------------------------------------------------------------------------------
15,000 BellSouth Corp. 609,375
------------------------------------------------------------------------------------
25,000 Ericsson LM 576,563
------------------------------------------------------------------------------------
48,000 GTE Corp. 2,052,000
------------------------------------------------------------------------------------
6,000 NYNEX Corp. 276,750
------------------------------------------------------------------------------------ -------------
Total 4,303,358
------------------------------------------------------------------------------------ -------------
UTILITIES-ELECTRIC--4.5%
------------------------------------------------------------------------------------
45,000 Cinergy Corp. 1,333,125
------------------------------------------------------------------------------------
</TABLE>
STAR GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------ -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC--CONTINUED
------------------------------------------------------------------------------------
39,000 General Public Utilities $ 1,306,500
------------------------------------------------------------------------------------ -------------
Total 2,639,625
------------------------------------------------------------------------------------ -------------
UTILITIES-GAS--2.0%
------------------------------------------------------------------------------------
28,650 Coastal Corp. 1,174,650
------------------------------------------------------------------------------------ -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $49,407,007) 57,610,127
------------------------------------------------------------------------------------ -------------
(B) REPURCHASE AGREEMENT--3.0%
- --------------------------------------------------------------------------------------------------
$ 1,758,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.30%,
dated 5/31/1996, due 6/3/1996 (at amortized cost) 1,758,000
------------------------------------------------------------------------------------ -------------
TOTAL INVESTMENTS (IDENTIFIED COST $51,165,007)(C) $ 59,368,127
------------------------------------------------------------------------------------ -------------
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $51,165,007.
The net unrealized appreciation of investments on a federal tax basis
amounts to $8,203,120 which is comprised of $8,452,102 appreciation and
$248,982 depreciation at May 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($59,268,035) at May 31, 1996.
(See Notes which are an integral part of the Financial Statements)
STAR GROWTH EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value
(identified and tax cost $51,165,007) $ 59,368,127
- ---------------------------------------------------------------------------------------------------
Cash 120
- ---------------------------------------------------------------------------------------------------
Income receivable 130,158
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 431,074
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 91,202
- ---------------------------------------------------------------------------------------------------
Deferred expenses 20,887
- --------------------------------------------------------------------------------------------------- -------------
Total assets 60,041,568
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------
Payable for investments purchased $ 430,631
- ---------------------------------------------------------------------------------------
Options written, at value (Premium received $207,965) 305,622
- ---------------------------------------------------------------------------------------
Accrued expenses 37,280
- --------------------------------------------------------------------------------------- ----------
Total liabilities 773,533
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 4,432,456 shares outstanding $ 59,268,035
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $ 47,937,195
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and options 8,105,463
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and options 3,074,077
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 151,300
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 59,268,035
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE:
- ---------------------------------------------------------------------------------------------------
($59,268,035 / 4,432,456 shares outstanding) $13.37
- --------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share (95 / 100 of $13.37)* $12.70
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
STAR GROWTH EQUITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends $ 610,900
- ----------------------------------------------------------------------------------------------------
Interest 65,896
- ---------------------------------------------------------------------------------------------------- ------------
Total income 676,796
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $ 199,362
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee 27,167
- ----------------------------------------------------------------------------------------
Custodian fees 6,646
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,318
- ----------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,991
- ----------------------------------------------------------------------------------------
Auditing fees 4,164
- ----------------------------------------------------------------------------------------
Legal fees 2,188
- ----------------------------------------------------------------------------------------
Portfolio accounting fees 26,648
- ----------------------------------------------------------------------------------------
Shareholder services fee 9,380
- ----------------------------------------------------------------------------------------
Share registration costs 3,440
- ----------------------------------------------------------------------------------------
Printing and postage 10,394
- ----------------------------------------------------------------------------------------
Insurance premiums 2,346
- ----------------------------------------------------------------------------------------
Miscellaneous 3,313
- ---------------------------------------------------------------------------------------- ----------
Total expenses 313,357
- ----------------------------------------------------------------------------------------
Waiver--
- ----------------------------------------------------------------------------------------
Waiver of administrative personnel and services fee (22)
- ---------------------------------------------------------------------------------------- ----------
Net expenses 313,335
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income 363,461
- ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments (includes $210,677 net loss on options) 3,073,485
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 2,401,135
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and options 5,474,620
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 5,838,081
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR GROWTH EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1996 PERIOD ENDED
(UNAUDITED) NOVEMBER 30, 1995*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 363,461 $ 692,986
- ----------------------------------------------------------------
Net realized gain on investments and options ($3,073,485 and
$2,544,290, respectively, as computed for federal tax purposes) 3,073,485 2,544,290
- ----------------------------------------------------------------
Net change in unrealized appreciation of investments 2,401,135 5,704,327
- ---------------------------------------------------------------- ---------------------- ------------------------
Change in net assets resulting from operations 5,838,081 8,941,603
- ---------------------------------------------------------------- ---------------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Distributions from net investment income (306,416) (598,058)
- ----------------------------------------------------------------
Distributions from net realized gains (2,544,369) --
- ---------------------------------------------------------------- ---------------------- ------------------------
Change in net assets resulting from distributions to
shareholders (2,850,785) (598,058)
- ---------------------------------------------------------------- ---------------------- ------------------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------
Proceeds from sale of shares 12,114,782 47,289,797
- ----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 2,200,173 473,063
- ----------------------------------------------------------------
Cost of shares redeemed (6,733,210) (7,407,411)
- ---------------------------------------------------------------- ---------------------- ------------------------
Change in net assets resulting from share transactions 7,581,745 40,355,449
- ---------------------------------------------------------------- ---------------------- ------------------------
Change in net assets 10,569,041 48,698,994
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 48,698,994 --
- ---------------------------------------------------------------- ---------------------- ------------------------
End of period (including undistributed net investment income of
$151,300 and $94,928, respectively) $ 59,268,035 $ 48,698,994
- ---------------------------------------------------------------- ---------------------- ------------------------
</TABLE>
*For the period from December 12, 1994 (date of initial public investment) to
November 30, 1995.
(See Notes which are an integral part of the Financial Statements)
STAR GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1996 NOVEMBER 30,
(UNAUDITED) 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.70 $ 10.00
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.09 0.24
- -----------------------------------------------------------------------
Net realized and unrealized gain on investments 1.32 2.67
- ----------------------------------------------------------------------- ------- -------
Total from investment operations 1.41 2.91
- ----------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Distributions from net investment income (0.08) (0.21)
- -----------------------------------------------------------------------
Distributions from net realized gain on investments (0.66) --
- ----------------------------------------------------------------------- ------- -------
Total distributions (0.74) (0.21)
- ----------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.37 $ 12.70
- ----------------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 11.64% 29.44%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 1.18%* 1.17%*
- -----------------------------------------------------------------------
Net investment income 1.37%* 2.00%*
- -----------------------------------------------------------------------
Expense waiver/reimbursement (c) -- 0.03%*
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 59,268 $ 48,699
- -----------------------------------------------------------------------
Average commission rate paid $0.0007 --
- -----------------------------------------------------------------------
Portfolio turnover 68% 171%
- -----------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 12, 1994 (date of initial
public investment) to November 30, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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)
STAR RELATIVE VALUE FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ----------------------------------------------------------------------------------- --------------
COMMON STOCKS--96.1%
- -------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--6.6%
-----------------------------------------------------------------------------------
80,000 Lockheed Martin Corp. $ 6,710,000
-----------------------------------------------------------------------------------
81,000 Raytheon Co. 4,313,250
----------------------------------------------------------------------------------- --------------
Total 11,023,250
----------------------------------------------------------------------------------- --------------
AUTOMOBILE--8.6%
-----------------------------------------------------------------------------------
85,000 Ford Motor Co. 3,102,500
-----------------------------------------------------------------------------------
55,000 General Motors Corp. 3,031,875
-----------------------------------------------------------------------------------
105,000 Goodyear Tire and Rubber Company 5,302,500
-----------------------------------------------------------------------------------
44,000 Johnson Controls, Inc. 3,069,000
----------------------------------------------------------------------------------- --------------
Total 14,505,875
----------------------------------------------------------------------------------- --------------
BANKING--5.9%
-----------------------------------------------------------------------------------
20,000 Citicorp 1,680,000
-----------------------------------------------------------------------------------
22,500 Mellon Bank Corp. 1,285,313
-----------------------------------------------------------------------------------
20,000 National Australia Bank Ltd., ADR 935,000
-----------------------------------------------------------------------------------
45,000 NationsBank Corp. 3,650,625
-----------------------------------------------------------------------------------
90,000 Signet Banking Corp. 2,328,750
----------------------------------------------------------------------------------- --------------
Total 9,879,688
----------------------------------------------------------------------------------- --------------
CHEMICALS--3.2%
-----------------------------------------------------------------------------------
65,000 Dow Chemical Company 5,435,625
----------------------------------------------------------------------------------- --------------
COMPUTERS--3.8%
-----------------------------------------------------------------------------------
60,000 International Business Machines 6,405,000
----------------------------------------------------------------------------------- --------------
DRUGS--10.1%
-----------------------------------------------------------------------------------
20,000 American Home Products Corp. 1,070,000
-----------------------------------------------------------------------------------
80,000 Bristol-Myers Squibb Co. 6,830,000
-----------------------------------------------------------------------------------
85,000 Merck & Co., Inc. 5,493,125
-----------------------------------------------------------------------------------
70,000 Smithkline Beecham Corp., ADR 3,570,000
----------------------------------------------------------------------------------- --------------
Total 16,963,125
----------------------------------------------------------------------------------- --------------
ELECTRICAL EQUIPMENT--4.0%
-----------------------------------------------------------------------------------
52,000 General Electric Company 4,303,000
-----------------------------------------------------------------------------------
70,000 Philips Electronics N.V., ADR 2,458,750
----------------------------------------------------------------------------------- --------------
Total 6,761,750
----------------------------------------------------------------------------------- --------------
ELECTRONIC TECHNOLOGY--6.7%
-----------------------------------------------------------------------------------
100,000 Intel Corp. 7,550,000
-----------------------------------------------------------------------------------
55,000 Motorola, Inc. 3,671,250
----------------------------------------------------------------------------------- --------------
Total 11,221,250
----------------------------------------------------------------------------------- --------------
FINANCIAL SERVICES--2.9%
-----------------------------------------------------------------------------------
60,000 American Express Co. 2,745,000
-----------------------------------------------------------------------------------
</TABLE>
STAR RELATIVE VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ----------------------------------------------------------------------------------- --------------
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--CONTINUED
-----------------------------------------------------------------------------------
55,000 Corestates Financial Corp. $ 2,165,625
----------------------------------------------------------------------------------- --------------
Total 4,910,625
----------------------------------------------------------------------------------- --------------
HOUSEHOLD PRODUCTS--8.6%
-----------------------------------------------------------------------------------
76,000 Gillette Co. 4,493,500
-----------------------------------------------------------------------------------
60,000 Premark International, Inc. 967,500
-----------------------------------------------------------------------------------
70,000 Procter & Gamble Co. 6,151,250
-----------------------------------------------------------------------------------
60,000 Tupperware Corp. 2,745,000
----------------------------------------------------------------------------------- --------------
Total 14,357,250
----------------------------------------------------------------------------------- --------------
INSURANCE--4.1%
-----------------------------------------------------------------------------------
50,000 American Bankers Insurance Group 1,937,500
-----------------------------------------------------------------------------------
31,500 Cincinnati Financial Corp. 1,874,250
-----------------------------------------------------------------------------------
60,000 Ohio Casualty Corp. 2,047,500
-----------------------------------------------------------------------------------
22,500 Travelers Group, Inc. 933,750
----------------------------------------------------------------------------------- --------------
Total 6,793,000
----------------------------------------------------------------------------------- --------------
INTERNATIONAL OIL--6.6%
-----------------------------------------------------------------------------------
40,000 Mobil Corp. 4,515,000
-----------------------------------------------------------------------------------
30,000 Royal Dutch Petroleum Co. 4,500,000
-----------------------------------------------------------------------------------
25,000 Texaco, Inc. 2,093,750
----------------------------------------------------------------------------------- --------------
Total 11,108,750
----------------------------------------------------------------------------------- --------------
METALS & MINING--1.8%
-----------------------------------------------------------------------------------
50,000 Aluminum Company of America 3,081,250
----------------------------------------------------------------------------------- --------------
MULTI-DIVERSIFIED--3.3%
-----------------------------------------------------------------------------------
100,000 Allied-Signal, Inc. 5,475,000
----------------------------------------------------------------------------------- --------------
NATURAL GAS--1.1%
-----------------------------------------------------------------------------------
66,000 NICOR, Inc. 1,831,500
----------------------------------------------------------------------------------- --------------
RAILROADS--1.7%
-----------------------------------------------------------------------------------
20,000 Burlington Northern Santa Fe 1,695,000
-----------------------------------------------------------------------------------
16,000 Conrail, Inc. 1,124,000
----------------------------------------------------------------------------------- --------------
Total 2,819,000
----------------------------------------------------------------------------------- --------------
RETAIL TRADE--3.4%
-----------------------------------------------------------------------------------
110,000 Penney (J.C.), Inc. 5,706,250
----------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS--7.5%
-----------------------------------------------------------------------------------
90,000 AT&T Corp. 5,613,750
-----------------------------------------------------------------------------------
60,000 Cable & Wireless, ADR 1,237,500
-----------------------------------------------------------------------------------
103,000 GTE Corp. 4,403,250
-----------------------------------------------------------------------------------
35,000 Vodafone Group PLC, ADR 1,386,875
----------------------------------------------------------------------------------- --------------
Total 12,641,375
----------------------------------------------------------------------------------- --------------
TOBACCO--3.0%
-----------------------------------------------------------------------------------
50,000 Philip Morris Cos., Inc. 4,968,750
----------------------------------------------------------------------------------- --------------
</TABLE>
STAR RELATIVE VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ----------------------------------------------------------------------------------- --------------
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC--3.2%
-----------------------------------------------------------------------------------
160,000 General Public Utilities Corp. $ 5,360,000
----------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $120,570,873) 161,248,313
----------------------------------------------------------------------------------- --------------
(A) REPURCHASE AGREEMENT--3.6%
- -------------------------------------------------------------------------------------------------
$ 5,979,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.30%, dated 5/31/1996, due 6/3/1996
(at amortized cost) 5,979,000
----------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $126,549,873)(B) $ 167,227,313
----------------------------------------------------------------------------------- --------------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $126,549,873.
The net unrealized appreciation of investments on a federal tax basis
amounts to $40,677,440 which is comprised of $41,474,968 appreciation and
$797,528 depreciation at May 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($167,776,064) at May 31, 1996.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
STAR RELATIVE VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified and tax cost $126,549,873) $ 167,227,313
- --------------------------------------------------------------------------------------------------
Cash 175
- --------------------------------------------------------------------------------------------------
Income receivable 437,573
- --------------------------------------------------------------------------------------------------
Receivable for shares sold 155,730
- -------------------------------------------------------------------------------------------------- --------------
Total assets 167,820,791
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Accrued expenses 44,727
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 10,269,996 shares outstanding $ 167,776,064
- -------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid in capital $ 123,208,293
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 40,677,440
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 3,355,314
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 535,017
- -------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 167,776,064
- -------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
($167,776,064 / 10,269,996 shares outstanding) $16.34
- -------------------------------------------------------------------------------------------------- --------------
Offering Price Per Share: (100 / 95.50 of $16.34)* $17.11
- -------------------------------------------------------------------------------------------------- --------------
</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
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Dividends $ 2,000,790
- ---------------------------------------------------------------------------------------------------
Interest 123,412
- --------------------------------------------------------------------------------------------------- -------------
Total income 2,124,202
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 564,925
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 76,909
- ---------------------------------------------------------------------------------------
Custodian fees 16,876
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 30,308
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,724
- ---------------------------------------------------------------------------------------
Auditing fees 7,694
- ---------------------------------------------------------------------------------------
Legal fees 2,050
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 25,080
- ---------------------------------------------------------------------------------------
Shareholder services fee 26,612
- ---------------------------------------------------------------------------------------
Share registration costs 7,986
- ---------------------------------------------------------------------------------------
Printing and postage 9,838
- ---------------------------------------------------------------------------------------
Insurance premiums 1,604
- ---------------------------------------------------------------------------------------
Miscellaneous 3,344
- --------------------------------------------------------------------------------------- ----------
Total expenses 774,950
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 1,349,252
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments 3,355,262
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 9,172,132
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain on investments 12,527,394
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 13,876,646
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR RELATIVE VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 1,349,252 $ 2,210,020
- -----------------------------------------------------------------
Net realized gain on investments ($3,355,262 net gain and
$813,382 net gain, respectively, as computed for federal tax
purposes) 3,355,262 813,382
- -----------------------------------------------------------------
Net change in unrealized appreciation 9,172,132 27,231,330
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from operations 13,876,646 30,254,732
- ----------------------------------------------------------------- ---------------------- ----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Distributions from net investment income (1,149,094) (2,082,202)
- -----------------------------------------------------------------
Distributions from net realized gains (82,169) --
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from distributions to
shareholders (1,231,263) (2,082,202)
- ----------------------------------------------------------------- ---------------------- ----------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 30,409,406 42,825,305
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 402,588 528,705
- -----------------------------------------------------------------
Cost of shares redeemed (7,660,461) (13,641,288)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from share transactions 23,151,533 29,712,722
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets 35,796,916 57,885,252
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period 131,979,148 74,093,896
- ----------------------------------------------------------------- ---------------------- ----------------------
End of period (including undistributed net investment income of
$535,017 and $334,859, respectively) $ 167,776,064 $ 131,979,148
- ----------------------------------------------------------------- ---------------------- ----------------------
</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>
SIX MONTHS
ENDED
MAY 31,
1996 YEAR ENDED NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.02 $ 11.36 $ 11.80 $ 10.52 $ 9.43 $ 10.00
- ----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------
Net investment income 0.13 0.29 0.23 0.20 0.30 0.22
- ----------------------------------------------
Net realized and unrealized gain (loss) on
investments 1.32 3.65 (0.40) 1.30 1.12 (0.66)
- ---------------------------------------------- ------- --------- --------- --------- --------- -----------
Total from investment operations 1.45 3.94 (0.17) 1.50 1.42 (0.44)
- ---------------------------------------------- ------- --------- --------- --------- --------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------
Distributions from net investment income (0.12) (0.28) (0.23) (0.22) (0.33) (0.13)
- ----------------------------------------------
Distributions from net realized gain on
investments (0.01) -- (0.04) -- -- --
- ---------------------------------------------- ------- --------- --------- --------- --------- -----------
Total distributions (0.13) (0.28) (0.27) (0.22) (0.33) (0.13)
- ---------------------------------------------- ------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 16.34 $ 15.02 $ 11.36 $ 11.80 $ 10.52 $ 9.43
- ---------------------------------------------- ------- --------- --------- --------- --------- -----------
TOTAL RETURN (B) 9.72% 35.10% (1.54%) 14.47% 15.39% (4.31%)
- ----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------
Expenses 1.03%* 1.06% 1.15% 1.19% 0.47% 0.40%*
- ----------------------------------------------
Net investment income 1.79%* 2.17% 2.02% 1.79% 3.01% 4.75%*
- ----------------------------------------------
Expense waiver/reimbursement (c) -- -- -- 0.31% 1.00% 0.93%*
- ----------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------
Net assets, end of period
(000 omitted) $167,776 $131,979 $74,094 $49,701 $38,154 $33,015
- ----------------------------------------------
Average commission rate paid $0.0838 -- -- -- -- --
- ----------------------------------------------
Portfolio turnover 13% 24% 30% 59% 45% 38%
- ----------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) 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.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
U.S. EQUITIES--20.1%
- -------------------------------------------------------------------------------------------------
BASIC INDUSTRY--1.4%
- -------------------------------------------------------------------------------------------------
CHEMICALS--0.4%
--------------------------------------------------------------------------------
3,000 Dow Chemical Co. $ 250,875
--------------------------------------------------------------------------------
3,500 Eastman Chemical Co. 234,500
-------------------------------------------------------------------------------- --------------
Total 485,375
-------------------------------------------------------------------------------- --------------
METALS & MINING--0.8%
--------------------------------------------------------------------------------
4,500 Aluminum Co. of America 277,313
--------------------------------------------------------------------------------
3,500 Caterpillar Inc. 229,687
--------------------------------------------------------------------------------
8,000 Placer Dome Inc. 237,000
--------------------------------------------------------------------------------
14,000 Santa Fe Pacific Gold Corp. 213,500
-------------------------------------------------------------------------------- --------------
Total 957,500
-------------------------------------------------------------------------------- --------------
STEEL--0.2%
--------------------------------------------------------------------------------
5,600 AK Steel Holding Corp. 242,200
-------------------------------------------------------------------------------- --------------
TOTAL BASIC INDUSTRY 1,685,075
-------------------------------------------------------------------------------- --------------
CAPITAL GOODS--4.2%
- -------------------------------------------------------------------------------------------------
AEROSPACE--0.5%
--------------------------------------------------------------------------------
3,500 Boeing Co. 298,375
--------------------------------------------------------------------------------
4,300 Raytheon Co. 228,975
-------------------------------------------------------------------------------- --------------
Total 527,350
-------------------------------------------------------------------------------- --------------
ELECTRONICS--1.4%
--------------------------------------------------------------------------------
2,700 Emerson Electric Co. 231,188
--------------------------------------------------------------------------------
15,000 Intel Corp. 1,132,500
--------------------------------------------------------------------------------
3,200 Motorola Inc. 213,600
-------------------------------------------------------------------------------- --------------
Total 1,577,288
-------------------------------------------------------------------------------- --------------
OFFICE & BUSINESS EQUIPMENT--2.3%
--------------------------------------------------------------------------------
20,000 (a)Cisco Systems 1,095,000
--------------------------------------------------------------------------------
9,800 Hewlett Packard Co. 1,046,150
--------------------------------------------------------------------------------
5,000 International Business Machines 533,750
--------------------------------------------------------------------------------
Total 2,674,900
-------------------------------------------------------------------------------- --------------
TOTAL CAPITAL GOODS 4,779,538
-------------------------------------------------------------------------------- --------------
CONSUMER CYCLICAL--1.7%
- -------------------------------------------------------------------------------------------------
AUTOMOTIVE & RELATED--0.4%
--------------------------------------------------------------------------------
7,000 Johnson Controls, Inc. 488,250
-------------------------------------------------------------------------------- --------------
ENTERTAINMENT & LEISURE--0.3%
--------------------------------------------------------------------------------
12,000 Callaway Golf Co. 361,500
-------------------------------------------------------------------------------- --------------
RETAILING--0.9%
--------------------------------------------------------------------------------
16,500 (a)General Nutrition Co. 255,750
--------------------------------------------------------------------------------
6,800 (a)Kohls Corp. 225,250
--------------------------------------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
U.S. EQUITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL--CONTINUED
- -------------------------------------------------------------------------------------------------
RETAILING--CONTINUED
--------------------------------------------------------------------------------
10,000 (a)Safeway, Inc. $ 337,500
--------------------------------------------------------------------------------
5,700 (a)Vons Companies Inc. 208,050
-------------------------------------------------------------------------------- --------------
Total 1,026,550
-------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.1%
--------------------------------------------------------------------------------
1,300 (a)AMR Corp. 122,688
-------------------------------------------------------------------------------- --------------
TOTAL CONSUMER CYCLICAL 1,998,988
-------------------------------------------------------------------------------- --------------
CONSUMER STAPLES--3.0%
- -------------------------------------------------------------------------------------------------
HOUSEHOLD--1.6%
--------------------------------------------------------------------------------
1,500 Gillette Co. 88,688
--------------------------------------------------------------------------------
20,000 (a)Tupperware Corp. 915,000
--------------------------------------------------------------------------------
10,000 Procter & Gamble Co. 878,750
-------------------------------------------------------------------------------- --------------
Total 1,882,438
-------------------------------------------------------------------------------- --------------
FOOD & BEVERAGE--0.5%
--------------------------------------------------------------------------------
7,500 IBP Inc. 205,312
--------------------------------------------------------------------------------
20,000 Premark International, Inc. 322,500
-------------------------------------------------------------------------------- --------------
Total 527,812
-------------------------------------------------------------------------------- --------------
TOBACCO--0.9%
--------------------------------------------------------------------------------
10,400 Philip Morris Companies Inc. 1,033,500
-------------------------------------------------------------------------------- --------------
TOTAL CONSUMER STAPLES 3,443,750
-------------------------------------------------------------------------------- --------------
ENERGY--2.1%
- -------------------------------------------------------------------------------------------------
DOMESTIC OIL--0.2%
--------------------------------------------------------------------------------
3,000 Texaco Inc. 251,250
-------------------------------------------------------------------------------- --------------
INTERNATIONAL OIL--1.4%
--------------------------------------------------------------------------------
14,000 Mobil Corp. 1,580,250
-------------------------------------------------------------------------------- --------------
NATURAL GAS--0.5%
--------------------------------------------------------------------------------
13,000 Coastal Corp. 533,000
-------------------------------------------------------------------------------- --------------
TOTAL ENERGY 2,364,500
-------------------------------------------------------------------------------- --------------
EQUITY MUTUAL FUNDS--1.3%
- -------------------------------------------------------------------------------------------------
100,000 Gateway Trust 1,460,000
-------------------------------------------------------------------------------- --------------
TOTAL EQUITY MUTUAL FUNDS 1,460,000
-------------------------------------------------------------------------------- --------------
FINANCE--2.5%
- -------------------------------------------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS--0.8%
--------------------------------------------------------------------------------
10,958 Citicorp 920,472
-------------------------------------------------------------------------------- --------------
INSURANCE--1.0%
--------------------------------------------------------------------------------
12,000 American International Group, Inc. 1,131,000
-------------------------------------------------------------------------------- --------------
OTHER FINANCE--0.7%
--------------------------------------------------------------------------------
10,000 Dean Witter Discover & Co. 592,500
--------------------------------------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
U.S. EQUITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
FINANCE--CONTINUED
- -------------------------------------------------------------------------------------------------
OTHER FINANCE--CONTINUED
--------------------------------------------------------------------------------
2,500 Nationsbank Corp. $ 202,811
-------------------------------------------------------------------------------- --------------
Total 795,311
-------------------------------------------------------------------------------- --------------
TOTAL FINANCE 2,846,783
-------------------------------------------------------------------------------- --------------
HEALTH CARE--2.6%
- -------------------------------------------------------------------------------------------------
BIOPHARMACEUTICALS--0.2%
--------------------------------------------------------------------------------
3,500 (a)Amgen Inc. 208,250
-------------------------------------------------------------------------------- --------------
HOSPITAL MANAGEMENT--0.8%
--------------------------------------------------------------------------------
18,000 Columbia HCA Healthcare Corp. 969,750
-------------------------------------------------------------------------------- --------------
HOSPITAL SUPPLIES--0.7%
--------------------------------------------------------------------------------
8,000 Johnson & Johnson 779,000
-------------------------------------------------------------------------------- --------------
PHARMACEUTICALS-0.9%
--------------------------------------------------------------------------------
3,900 American Home Products Corp. 208,650
--------------------------------------------------------------------------------
10,000 Merck & Co. 646,250
--------------------------------------------------------------------------------
2,800 (a)Watson Pharmaceutical Inc. 126,000
-------------------------------------------------------------------------------- --------------
Total 980,900
-------------------------------------------------------------------------------- --------------
TOTAL HEALTH CARE 2,937,900
-------------------------------------------------------------------------------- --------------
UTILITIES--1.3%
- -------------------------------------------------------------------------------------------------
ELECTRIC--1.1%
--------------------------------------------------------------------------------
15,000 Duke Power Co. 723,750
--------------------------------------------------------------------------------
25,000 Southern Co. 578,125
-------------------------------------------------------------------------------- --------------
Total 1,301,875
-------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS--0.2%
--------------------------------------------------------------------------------
5,000 GTE Corp 213,750
-------------------------------------------------------------------------------- --------------
TOTAL UTILITIES 1,515,625
-------------------------------------------------------------------------------- --------------
TOTAL U.S. EQUITIES (IDENTIFIED COST, $17,502,281) 23,032,159
-------------------------------------------------------------------------------- --------------
INTERNATIONAL SECURITIES--21.6%
- -------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITIES--19.8%
- -------------------------------------------------------------------------------------------------
AUSTRALIA--2.2%
--------------------------------------------------------------------------------
30,000 National Australia Bank Ltd. 1,402,500
--------------------------------------------------------------------------------
40,000 News Corp. Ltd. 895,000
--------------------------------------------------------------------------------
10,000 (b)News Corp. Ltd. 193,750
-------------------------------------------------------------------------------- --------------
TOTAL AUSTRALIA 2,491,250
-------------------------------------------------------------------------------- --------------
CANADA--2.5%
--------------------------------------------------------------------------------
30,000 Alcan Aluminum Ltd. 982,500
--------------------------------------------------------------------------------
31,000 Canadian Pacific Ltd. 635,500
--------------------------------------------------------------------------------
20,000 Rio Algom Ltd. 405,000
--------------------------------------------------------------------------------
22,500 Seagram Ltd. 779,063
-------------------------------------------------------------------------------- --------------
TOTAL CANADA 2,802,063
-------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
INTERNATIONAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
DENMARK--1.2%
--------------------------------------------------------------------------------
40,000 Novo Nordisk AS $ 1,385,000
-------------------------------------------------------------------------------- --------------
TOTAL DENMARK 1,385,000
-------------------------------------------------------------------------------- --------------
FRANCE--0.8%
--------------------------------------------------------------------------------
35,000 Thomson CSF 905,625
-------------------------------------------------------------------------------- --------------
TOTAL FRANCE 905,625
-------------------------------------------------------------------------------- --------------
GERMANY--0.7%
--------------------------------------------------------------------------------
15,000 Daimler Benz A.G. 817,500
-------------------------------------------------------------------------------- --------------
TOTAL GERMANY 817,500
-------------------------------------------------------------------------------- --------------
GREAT BRITAIN--4.6%
--------------------------------------------------------------------------------
12,000 British Petroleum PLC 1,264,500
--------------------------------------------------------------------------------
30,000 Cable & Wireless Ltd. 618,750
--------------------------------------------------------------------------------
18,000 Reuters Holdings PLC 1,253,250
--------------------------------------------------------------------------------
25,200 SmithKline Beecham PLC 1,285,200
--------------------------------------------------------------------------------
20,000 (b)Vodaphone Group PLC 792,500
-------------------------------------------------------------------------------- --------------
TOTAL GREAT BRITAIN 5,214,200
-------------------------------------------------------------------------------- --------------
HOLLAND--2.1%
--------------------------------------------------------------------------------
18,300 Philips Electronics N.V. 642,787
--------------------------------------------------------------------------------
4,400 PolyGram N.V. 257,950
--------------------------------------------------------------------------------
10,000 Royal Dutch Petroleum Co. 1,500,000
-------------------------------------------------------------------------------- --------------
TOTAL HOLLAND 2,400,737
-------------------------------------------------------------------------------- --------------
ITALY--0.5%
--------------------------------------------------------------------------------
8,000 Luxottica Group SPA 619,000
-------------------------------------------------------------------------------- --------------
TOTAL ITALY 619,000
-------------------------------------------------------------------------------- --------------
JAPAN--1.6%
--------------------------------------------------------------------------------
11,000 Hitachi Ltd. 1,031,250
--------------------------------------------------------------------------------
35,000 Pioneer Electric Corp. 813,750
-------------------------------------------------------------------------------- --------------
TOTAL JAPAN 1,845,000
-------------------------------------------------------------------------------- --------------
NORWAY--1.2%
--------------------------------------------------------------------------------
30,000 Norsk Hydro AS 1,406,250
-------------------------------------------------------------------------------- --------------
TOTAL NORWAY 1,406,250
-------------------------------------------------------------------------------- --------------
SPAIN--1.2%
--------------------------------------------------------------------------------
40,000 Repsol SA 1,360,000
-------------------------------------------------------------------------------- --------------
TOTAL SPAIN 1,360,000
-------------------------------------------------------------------------------- --------------
SOUTH AFRICA--0.6%
--------------------------------------------------------------------------------
4,700 ASA Ltd. 213,850
--------------------------------------------------------------------------------
7,000 De Beers Cons'D Mines, ADR 226,625
--------------------------------------------------------------------------------
14,000 Driefontein Consolidated Ltd., ADR 207,375
-------------------------------------------------------------------------------- --------------
TOTAL SOUTH AFRICA 647,850
-------------------------------------------------------------------------------- --------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
INTERNATIONAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITIES--CONTINUED
- -------------------------------------------------------------------------------------------------
SWEDEN--0.6%
--------------------------------------------------------------------------------
30,000 Volvo Aktiebolaget $ 630,000
--------------------------------------------------------------------------------
3,000 (a)Swedish Match AB, ADR 98,250
-------------------------------------------------------------------------------- --------------
TOTAL SWEDEN 728,250
-------------------------------------------------------------------------------- --------------
TOTAL INTERNATIONAL EQUITIES 22,622,725
-------------------------------------------------------------------------------- --------------
CLOSED-END INVESTMENT COMPANIES--1.8%
- -------------------------------------------------------------------------------------------------
30,000 Chile Fund, Inc. 708,750
--------------------------------------------------------------------------------
38,010 Mexico Fund, Inc. 593,906
--------------------------------------------------------------------------------
34,000 Swiss Helvetia Fund, Inc. 709,750
-------------------------------------------------------------------------------- --------------
Total 2,012,406
-------------------------------------------------------------------------------- --------------
TOTAL INTERNATIONAL SECURITIES (IDENTIFIED COST, $20,003,026) 24,635,131
-------------------------------------------------------------------------------- --------------
REAL ESTATE INVESTMENT TRUST--18.8%
- -------------------------------------------------------------------------------------------------
38,000 Avalon Properties, Inc. 812,250
--------------------------------------------------------------------------------
30,500 Camden Property Trust 705,313
--------------------------------------------------------------------------------
39,300 Centerpoint Properties Corp. 933,375
--------------------------------------------------------------------------------
38,000 Chateau Properties, Inc. 883,500
--------------------------------------------------------------------------------
6,000 DeBartolo Realty Corp. 97,500
--------------------------------------------------------------------------------
75,000 Equity Inns, Inc. 890,625
--------------------------------------------------------------------------------
34,400 Federal Realty Investment Trust 743,900
--------------------------------------------------------------------------------
14,000 Glimcher Realty Trust 229,250
--------------------------------------------------------------------------------
26,400 Highwoods Properties, Inc. 775,500
--------------------------------------------------------------------------------
35,250 Kimco Realty Corp. 964,969
--------------------------------------------------------------------------------
26,600 Liberty Property 541,975
--------------------------------------------------------------------------------
51,500 LTC Properties 824,000
--------------------------------------------------------------------------------
50,000 Manufactured Home Communities, Inc. 937,500
--------------------------------------------------------------------------------
15,000 Meditrust 493,125
--------------------------------------------------------------------------------
12,000 New Plan Realty Trust 243,000
--------------------------------------------------------------------------------
32,100 Omega Healthcare Investors 918,863
--------------------------------------------------------------------------------
25,000 Post Properties, Inc. 837,500
--------------------------------------------------------------------------------
45,000 Security Capital Pacific Trust 1,001,250
--------------------------------------------------------------------------------
21,000 Simon Property Group, Inc. 509,250
--------------------------------------------------------------------------------
71,500 Sizeler Property Investments, Inc. 616,688
--------------------------------------------------------------------------------
67,000 Southwestern Property Trust, Inc. 929,625
--------------------------------------------------------------------------------
24,000 Starwood Lodging Trust 912,000
--------------------------------------------------------------------------------
19,840 Storage USA, Inc. 667,120
--------------------------------------------------------------------------------
40,000 Storage Trust Realty 830,000
--------------------------------------------------------------------------------
31,800 Summit Properties, Inc. 624,075
--------------------------------------------------------------------------------
37,000 Sun Communities, Inc. 989,750
--------------------------------------------------------------------------------
30,000 Tanger Factory Outlet Centers, Inc. 727,500
--------------------------------------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
REAL ESTATE INVESTMENT TRUST--CONTINUED
- -------------------------------------------------------------------------------------------------
22,500 Weingarten Realty Investment $ 835,311
--------------------------------------------------------------------------------
76,800 Winston Hotels 883,200
-------------------------------------------------------------------------------- --------------
TOTAL REAL ESTATE INVESTMENT TRUST (IDENTIFIED COST, $18,307,043) 21,357,914
-------------------------------------------------------------------------------- --------------
FIXED INCOME OBLIGATIONS--20.0%
- ---------------------------------------------------------------------------------------- ---------
CLOSED-END INVESTMENT COMPANIES--0.9%
--------------------------------------------------------------------------------
$ 50,000 First Commonwealth Fund Inc. 556,250
--------------------------------------------------------------------------------
50,000 Kleinwort Benson Australian Income Fund 456,250
-------------------------------------------------------------------------------- --------------
Total 1,012,500
-------------------------------------------------------------------------------- --------------
ENERGY--0.2%
--------------------------------------------------------------------------------
250,000 Ashland Oil, Inc., 7.90%, 8/5/2006 253,945
-------------------------------------------------------------------------------- --------------
FINANCE--1.1%
--------------------------------------------------------------------------------
500,000 Citicorp, 8.625%, 12/01/2002 534,985
--------------------------------------------------------------------------------
250,000 General Electric Capital Corp., 8.75%, 11/26/1996 253,770
--------------------------------------------------------------------------------
250,000 International Lease Finance Corp., 6.25%, 10/15/2000 242,775
--------------------------------------------------------------------------------
250,000 International Lease Finance Corp., 8.375%, 12/15/2004 265,095
-------------------------------------------------------------------------------- --------------
Total 1,296,625
-------------------------------------------------------------------------------- --------------
FOREIGN--0.5%
--------------------------------------------------------------------------------
500,000 Alcan Aluminum Ltd., 9.20%, 3/15/2001 520,470
-------------------------------------------------------------------------------- --------------
HEALTHCARE--0.6%
--------------------------------------------------------------------------------
250,000 Columbia HCA Healthcare Corp., 6.125%, 12/15/2000 241,343
--------------------------------------------------------------------------------
500,000 Columbia HCA Healthcare Corp.,6.910%, 6/15/2005 483,690
-------------------------------------------------------------------------------- --------------
Total 725,033
-------------------------------------------------------------------------------- --------------
INDUSTRIAL--0.7%
--------------------------------------------------------------------------------
245,807 Dow Chemical Co., 7.60%, 1/02/2002 252,114
--------------------------------------------------------------------------------
500,000 News America Holdings, Inc., Sr. Note, 9.125%, 10/15/1999 530,410
-------------------------------------------------------------------------------- --------------
Total 782,524
-------------------------------------------------------------------------------- --------------
PAPER--0.0%
--------------------------------------------------------------------------------
30,000 International Paper Co., 7.625%, 1/15/2007 30,312
-------------------------------------------------------------------------------- --------------
U.S. GOVERNMENT AGENCIES--6.5%
--------------------------------------------------------------------------------
75,000 Federal Home Loan Banks, 7.81%, 7/17/1996 75,258
--------------------------------------------------------------------------------
1,500,000 Federal Home Loan Mortgage Corp., 6.50%, 2/15/2023 1,415,625
--------------------------------------------------------------------------------
396,966 Federal Home Loan Mortgage Corp., 7.00%, 5/15/2019 397,184
--------------------------------------------------------------------------------
23,869 Federal Home Loan Mortgage Corp., 7.50%, 8/15/2016 23,873
--------------------------------------------------------------------------------
266,510 Federal Home Loan Mortgage Corp., 8.25%, 3/15/2022 268,940
--------------------------------------------------------------------------------
437,482 Federal Home Loan Mortgage Corp., 8.50%, 6/1/2024 451,420
--------------------------------------------------------------------------------
1,275,000 Federal National Mortgage Association, 5.36%, 2/16/2001 1,202,835
--------------------------------------------------------------------------------
500,000 Federal National Mortgage Association, 6.14%, 11/25/2005 464,635
--------------------------------------------------------------------------------
225,000 Federal National Mortgage Association, 6.54%, 10/3/2005 215,433
--------------------------------------------------------------------------------
</TABLE>
THE STELLAR FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- --------------
FIXED INCOME OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--CONTINUED
--------------------------------------------------------------------------------
$ 661,410 Federal National Mortgage Association, 7.00%, 3/17/2035 $ 623,796
--------------------------------------------------------------------------------
360,875 Federal National Mortgage Association, 7.25%, 1/25/2019 361,630
--------------------------------------------------------------------------------
1,351,000 Federal National Mortgage Association, 7.25%, 1/17/2021 1,352,648
--------------------------------------------------------------------------------
500,000 Federal National Mortgage Association, 9.50%, 6/25/2020 524,610
-------------------------------------------------------------------------------- --------------
Total 7,377,887
-------------------------------------------------------------------------------- --------------
U.S. TREASURY SECURITIES--8.6%
--------------------------------------------------------------------------------
750,000 PO, STRIP, 2/15/1998 676,028
--------------------------------------------------------------------------------
1,750,000 U.S. Treasury Bonds, 6.25%, 8/15/2023 1,561,648
--------------------------------------------------------------------------------
550,000 U.S. Treasury Bonds, 7.25%, 5/15/2016 554,609
--------------------------------------------------------------------------------
500,000 U.S. Treasury Bonds, 7.625%, 5/15/2007 514,765
--------------------------------------------------------------------------------
1,700,000 U.S. Treasury Bonds, 8.125%, 8/15/2019 1,877,514
--------------------------------------------------------------------------------
250,000 U.S. Treasury Bonds, 13.25%, 5/15/2014 378,545
--------------------------------------------------------------------------------
2,250,000 U.S. Treasury Notes, 5.125%, 6/30/1998 2,201,670
--------------------------------------------------------------------------------
200,000 U.S. Treasury Notes, 6.5%, 8/15/2005 194,904
--------------------------------------------------------------------------------
600,000 U.S. Treasury Notes, 6.75%, 5/31/1999 604,806
--------------------------------------------------------------------------------
500,000 U.S. Treasury Notes, 6.875%, 5/15/2006 500,840
--------------------------------------------------------------------------------
750,000 U.S. Treasury Notes, 7.75%, 11/30/1999 778,253
-------------------------------------------------------------------------------- --------------
Total 9,843,582
-------------------------------------------------------------------------------- --------------
UTILITY--0.9%
--------------------------------------------------------------------------------
500,000 Cincinnati Gas & Electric Co., 8.95%, 12/15/2021 507,950
--------------------------------------------------------------------------------
500,000 Georgia Power Co., 6.625%, 4/1/2003 477,690
-------------------------------------------------------------------------------- --------------
Total 985,640
-------------------------------------------------------------------------------- --------------
TOTAL FIXED INCOME OBLIGATIONS (IDENTIFIED COST, $23,440,650) 22,828,518
-------------------------------------------------------------------------------- --------------
SHORT-TERM SECURITIES--18.9%
- -------------------------------------------------------------------------------------------------
CASH EQUIVILENT--6.1%
--------------------------------------------------------------------------------
1,000,000 Coca-Cola Co., 5.25%, 7/8/1996(d) 994,604
--------------------------------------------------------------------------------
6,000,000 Student Loan Marketing Association, Floating Rates Notes 5,999,390
-------------------------------------------------------------------------------- --------------
Total 6,993,994
-------------------------------------------------------------------------------- --------------
(C)REPURCHASE AGREEMENT--12.8%
--------------------------------------------------------------------------------
14,540,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.875%, dated
5/31/1996, due 6/3/1996 (at amortized cost) 14,540,000
-------------------------------------------------------------------------------- --------------
TOTAL SHORT-TERM SECURITIES (IDENTIFIED COST, $21,515,467) 21,533,994
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $100,768,467)(E) $ 113,387,716
-------------------------------------------------------------------------------- --------------
</TABLE>
(a) Non-income producing.
(b) American Depository Receipts.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(d) This issue shows the rate of discount at the time of purchase.
THE STELLAR FUND
- --------------------------------------------------------------------------------
(e) The cost of investments for federal tax purposes amounts to $100,957,078.
The net unrealized appreciation of investments on a federal tax basis
amounts to $12,430,638, which is comprised of $13,912,470 appreciation and
$1,481,832 depreciation at May 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($113,834,248) at May 31, 1996.
The following abbreviations are used in this portfolio:
LTD--Limited
PLC--Public Limited Company
PO--Principal Only
SA--Support Agreement
STRIP--Separate Trading of Registered Interest & Principal of Securities
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------
Investments in repurchase agreements $ 14,540,000
- ----------------------------------------------------------------------------------
Investments in securities 98,847,716
- ---------------------------------------------------------------------------------- -------------
Total investments in securities, at value
(identified cost $100,768,467, and tax cost $100,957,078) $ 113,387,716
- -------------------------------------------------------------------------------------------------
Cash 450
- -------------------------------------------------------------------------------------------------
Income receivable 520,375
- -------------------------------------------------------------------------------------------------
Receivable for investments sold 12,923
- -------------------------------------------------------------------------------------------------
Receivable for shares sold 35,847
- -------------------------------------------------------------------------------------------------
Deferred expenses 86
- ------------------------------------------------------------------------------------------------- --------------
Total assets 113,957,397
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------
Options written, at value (Premium received $28,673) 5,937
- ----------------------------------------------------------------------------------
Accrued expenses 117,212
- ---------------------------------------------------------------------------------- -------------
Total liabilities 123,149
- ------------------------------------------------------------------------------------------------- --------------
Net Assets for 9,090,096 shares outstanding $ 113,834,248
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid in capital $ 98,841,135
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and options 12,641,985
- -------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and options 2,141,362
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 209,766
- ------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 113,834,248
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------
Trust Shares ($65,605,396 / 5,238,981 shares outstanding) $12.52
- ------------------------------------------------------------------------------------------------- --------------
Investment Shares ($48,228,852 / 3,851,115 shares outstanding) $12.52
- ------------------------------------------------------------------------------------------------- --------------
Offering Price Per Share (100 / 95.50 of $12.52)* $13.11
- ------------------------------------------------------------------------------------------------- --------------
</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
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends $ 1,171,826
- ----------------------------------------------------------------------------------------------------
Interest 1,329,669
- ---------------------------------------------------------------------------------------------------- ------------
Total income 2,501,495
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $ 541,197
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee 58,213
- ----------------------------------------------------------------------------------------
Custodian fees 15,279
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 83,319
- ----------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,008
- ----------------------------------------------------------------------------------------
Auditing fees 8,705
- ----------------------------------------------------------------------------------------
Legal fees 1,916
- ----------------------------------------------------------------------------------------
Portfolio accounting fees 31,447
- ----------------------------------------------------------------------------------------
Distribution services fee--Investment Shares 61,046
- ----------------------------------------------------------------------------------------
Shareholder services fee--Trust Shares 11,402
- ----------------------------------------------------------------------------------------
Shareholder services fee--Investment Shares 8,544
- ----------------------------------------------------------------------------------------
Share registration costs 12,625
- ----------------------------------------------------------------------------------------
Printing and postage 15,854
- ----------------------------------------------------------------------------------------
Insurance premiums 2,281
- ----------------------------------------------------------------------------------------
Miscellaneous 4,365
- ---------------------------------------------------------------------------------------- ----------
Total expenses 857,201
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income 1,644,294
- ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments (includes $83,127 gain on options written) 2,116,616
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 3,071,859
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and options 5,188,475
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 6,832,769
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 1,644,294 $ 3,563,878
- -----------------------------------------------------------------
Net realized gain on investments and options ($2,116,616 and
$1,866,344 respectively, as computed for federal tax purposes) 2,116,616 1,796,991
- -----------------------------------------------------------------
Net change in unrealized appreciation 3,071,859 11,343,033
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from operations 6,832,769 16,703,902
- ----------------------------------------------------------------- ---------------------- ----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Distributions from net investment income
- -----------------------------------------------------------------
Trust Shares (1,003,917) (2,114,360)
- -----------------------------------------------------------------
Investment Shares (685,971) (1,523,578)
- -----------------------------------------------------------------
Distributions from net realized gains
- -----------------------------------------------------------------
Trust Shares (1,066,240) (127,314)
- -----------------------------------------------------------------
Investment Shares (800,305) (421,368)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from distributions to
shareholders (3,556,433) (4,186,620)
- ----------------------------------------------------------------- ---------------------- ----------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 10,215,980 19,312,791
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 3,039,296 3,556,086
- -----------------------------------------------------------------
Cost of shares redeemed (16,353,404) (33,200,109)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from share transactions (3,098,128) (10,331,232)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets 178,208 2,186,050
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period 113,656,040 111,469,990
- ----------------------------------------------------------------- ---------------------- ----------------------
End of period (including undistributed net investment income of
$209,766 and $260,856, respectively) $ 113,834,248 $ 113,656,040
- ----------------------------------------------------------------- ---------------------- ----------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STELLAR FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, YEAR ENDED
1996 NOVEMBER 30,
(UNAUDITED) 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.17 $ 10.90 $ 11.34
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------
Net investment income 0.18 0.38 0.21
- ----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.56 1.32 (0.48)
- ---------------------------------------------------------------------------- ------- --------- -----------
Total from investment operations 0.74 1.70 (0.27)
- ---------------------------------------------------------------------------- ------- --------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------
Distributions from net investment income (0.19) (0.38) (0.17)
- ----------------------------------------------------------------------------
Distributions from net realized gain on investments (0.20) (0.05) --
- ---------------------------------------------------------------------------- ------- --------- -----------
Total distributions (0.39) (0.43) (0.17)
- ---------------------------------------------------------------------------- ------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 12.52 $ 12.17 $ 10.90
- ---------------------------------------------------------------------------- ------- --------- -----------
TOTAL RETURN (B) 6.21% 15.97% (1.81%)
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------
Expenses 1.40%* 1.40% 1.43%*
- ----------------------------------------------------------------------------
Net investment income 2.99%* 3.23% 3.57%*
- ----------------------------------------------------------------------------
Expense waiver/reimbursement (c) -- -- --
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $65,605 $64,754 $60,822
- ----------------------------------------------------------------------------
Average commission rate paid $0.0038 -- --
- ----------------------------------------------------------------------------
Portfolio turnover 38% 104% 79%
- ----------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) 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.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31,
1996 YEAR ENDED NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.17 $ 10.90 $ 11.34 $ 10.52 $ 9.80 $ 10.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.17 0.34 0.29 0.24 0.29 0.05
- ------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.55 1.33 (0.41) 0.99 0.74 (0.25)
- ------------------------------------------------ ------- --------- --------- --------- --------- -----------
Total from investment operations 0.72 1.67 (0.12) 1.23 1.03 (0.20)
- ------------------------------------------------ ------- --------- --------- --------- --------- -----------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from net investment income (0.17) (0.35) (0.24) (0.28) (0.31) --
- ------------------------------------------------
Distributions in excess of net investment
income -- -- -- (0.03)** -- --
- ------------------------------------------------
Distributions from net realized gain on
investments (0.20) (0.05) (0.08) (0.10) -- --
- ------------------------------------------------ ------- --------- --------- --------- --------- -----------
Total distributions (0.37) (0.40) (0.32) (0.41) (0.31) --
- ------------------------------------------------ ------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 12.52 $ 12.17 $ 10.90 $ 11.34 $ 10.52 $ 9.80
- ------------------------------------------------ ------- --------- --------- --------- --------- -----------
TOTAL RETURN (B) 6.07% 15.67% (1.22%) 11.99% 10.68% (2.00%)
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 1.65%* 1.65% 1.55% 1.45% 1.53% 1.44%*
- ------------------------------------------------
Net investment income 2.74%* 2.98% 2.32% 1.87% 3.03% 5.32%*
- ------------------------------------------------
Expense waiver/reimbursement (c) -- -- 0.12% 0.25% 0.33% 0.29%*
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period
(000 omitted) $48,229 $48,902 $50,648 $73,197 $35,544 $13,942
- ------------------------------------------------
Average commission rate paid $0.0038 -- -- -- -- --
- ------------------------------------------------
Portfolio turnover 38% 104% 79% 87% 98% 18%
- ------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** 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
(a) 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.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(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)
STAR STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--4.4%
- ---------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--0.5%
-------------------------------------------------------------------------------------
4,500 CPC International, Inc. $ 311,063
------------------------------------------------------------------------------------- -------------
INDUSTRIAL--0.6%
-------------------------------------------------------------------------------------
10,000 Ashland, Inc. 427,500
------------------------------------------------------------------------------------- -------------
INSURANCE--0.5%
-------------------------------------------------------------------------------------
10,000 Ohio Casualty Corp. 341,250
------------------------------------------------------------------------------------- -------------
OIL--1.2%
-------------------------------------------------------------------------------------
15,000 Halliburton Co. 834,375
------------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--1.6%
-------------------------------------------------------------------------------------
20,000 GTE Corp. 855,000
-------------------------------------------------------------------------------------
5,000 NYNEX Corp. 230,625
------------------------------------------------------------------------------------- -------------
Total 1,085,625
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $3,105,410) 2,999,813
------------------------------------------------------------------------------------- -------------
PREFERRED STOCKS--10.2%
- ---------------------------------------------------------------------------------------------------
ENERGY--3.1%
-------------------------------------------------------------------------------------
45,000 Enron Capital Resources Corp., $2.25, Cumulative Pfd., Series A 1,170,000
-------------------------------------------------------------------------------------
40,000 Texaco Capital, Inc., 6.875%, Pfd., Series A, MIPS 940,000
------------------------------------------------------------------------------------- -------------
Total 2,110,000
------------------------------------------------------------------------------------- -------------
FINANCE--3.0%
-------------------------------------------------------------------------------------
59,400 Providian Corp., $2.22, Cumulative MIPS 1,544,400
-------------------------------------------------------------------------------------
20,000 Travelers/Aetna P&C, $2.00, Pfd. 490,000
------------------------------------------------------------------------------------- -------------
Total 2,034,400
------------------------------------------------------------------------------------- -------------
INSURANCE--0.7%
-------------------------------------------------------------------------------------
20,000 Travelers P & C Capital I, $2.02, Pfd. 492,500
------------------------------------------------------------------------------------- -------------
OIL--2.1%
-------------------------------------------------------------------------------------
57,000 Atlantic Richfield Co., $2.23, Conv. Pfd. 1,439,250
------------------------------------------------------------------------------------- -------------
UTILITIES--1.3%
-------------------------------------------------------------------------------------
35,000 Cincinnati Gas and Electric Co., $2.07 Pfd. 888,125
------------------------------------------------------------------------------------- -------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $7,073,440) 6,964,275
------------------------------------------------------------------------------------- -------------
REAL ESTATE INVESTMENT TRUSTS--19.2%
- ---------------------------------------------------------------------------------------------------
25,300 Avalon Properties, Inc. 540,788
-------------------------------------------------------------------------------------
16,900 Camden Property Trust 390,813
-------------------------------------------------------------------------------------
40,000 Glimcher Realty Trust 655,000
-------------------------------------------------------------------------------------
40,000 Hospitality Properties Trust 1,040,000
-------------------------------------------------------------------------------------
42,100 Kimco Realty Corp., $2.13 Cumulative Pfd. 1,063,025
-------------------------------------------------------------------------------------
69,000 LTC Properties, Inc. 1,104,000
-------------------------------------------------------------------------------------
21,800 Liberty Property Trust 444,175
-------------------------------------------------------------------------------------
50,000 Manufactured Home Communities, Inc. 937,500
-------------------------------------------------------------------------------------
</TABLE>
STAR STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
REAL ESTATE INVESTMENT TRUSTS--CONTINUED
- ---------------------------------------------------------------------------------------------------
29,000 Meditrust $ 953,375
-------------------------------------------------------------------------------------
55,600 Omega Healthcare Investors 1,591,550
-------------------------------------------------------------------------------------
26,200 Public Storage, Inc., 9.75%, Pfd., Series F 700,850
-------------------------------------------------------------------------------------
99,750 South West Property Trust, Inc. 1,384,031
-------------------------------------------------------------------------------------
37,000 Summit Properties, Inc. 726,125
-------------------------------------------------------------------------------------
140,000 Winston Hotels, Inc. 1,610,000
------------------------------------------------------------------------------------- -------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (IDENTIFIED COST $12,608,416) 13,141,232
------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--35.0%
- ---------------------------------------------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS--5.9%
-------------------------------------------------------------------------------------
$ 250,000 Citicorp, 8.625%, 12/1/2002 267,493
-------------------------------------------------------------------------------------
1,350,000 J.P. Morgan & Co., Inc., 8.00%, 5/30/2005 1,380,078
-------------------------------------------------------------------------------------
500,000 NationsBank Corp., 7.625%, 4/15/2005 505,025
-------------------------------------------------------------------------------------
2,000,000 NationsBank Corp., Medium Term Note, 6.375%, 2/21/2006 1,862,560
------------------------------------------------------------------------------------- -------------
Total 4,015,156
------------------------------------------------------------------------------------- -------------
CHEMICAL & FERTILIZERS--0.7%
-------------------------------------------------------------------------------------
458,000 Dow Chemical Co., 9.35%, 3/15/2002 489,620
------------------------------------------------------------------------------------- -------------
ELECTRICAL EQUIPMENT--1.7%
-------------------------------------------------------------------------------------
1,100,000 Philips Electronics N.V., 8.375%, 9/15/2006 1,157,497
------------------------------------------------------------------------------------- -------------
ENERGY--1.5%
-------------------------------------------------------------------------------------
1,000,000 Chevron Capital USA, Inc., 7.45%, 8/15/2004 1,007,190
------------------------------------------------------------------------------------- -------------
FINANCE--3.3%
-------------------------------------------------------------------------------------
750,000 Associates Corp. of North America, 6.375%, 11/15/2005 699,060
-------------------------------------------------------------------------------------
1,500,000 International Lease Finance Corp., 8.375%, 12/15/2004 1,590,570
------------------------------------------------------------------------------------- -------------
Total 2,289,630
------------------------------------------------------------------------------------- -------------
FOREST PRODUCTS & PAPER--0.5%
-------------------------------------------------------------------------------------
360,000 Kimberly-Clark Corp., 7.875%, 2/1/2023 354,596
------------------------------------------------------------------------------------- -------------
HOSPITAL MANAGEMENT--2.9%
-------------------------------------------------------------------------------------
1,800,000 Columbia HCA Healthcare Corp., Medium Term Note, 8.70%, 2/10/2010 1,970,316
------------------------------------------------------------------------------------- -------------
HOUSEHOLD PRODUCTS--1.4%
-------------------------------------------------------------------------------------
1,000,000 Procter & Gamble Co., 7.375%, 3/1/2023 947,000
------------------------------------------------------------------------------------- -------------
INSURANCE--2.3%
-------------------------------------------------------------------------------------
1,500,000 Ohio National Life Insurance Company, 8.875%, 7/15/2004 1,576,275
------------------------------------------------------------------------------------- -------------
MANUFACTURING--0.4%
-------------------------------------------------------------------------------------
250,000 Eastman Kodak Co., 9.875%, 11/1/2004 263,940
------------------------------------------------------------------------------------- -------------
RETAILING & APPAREL--1.8%
-------------------------------------------------------------------------------------
1,125,000 J.C. Penney Co., Inc., 9.45%, 7/15/2002 1,214,618
------------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--1.8%
-------------------------------------------------------------------------------------
1,250,000 GTE Corp., 7.83%, 5/1/2023 1,218,063
------------------------------------------------------------------------------------- -------------
</TABLE>
STAR STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
TOBACCO--2.3%
-------------------------------------------------------------------------------------
$ 500,000 Philip Morris Cos., Inc., 6.00%, 11/15/1999 $ 484,110
-------------------------------------------------------------------------------------
1,117,000 Philip Morris Cos., Inc., 7.125%, 8/15/2002 1,112,331
------------------------------------------------------------------------------------- -------------
Total 1,596,441
------------------------------------------------------------------------------------- -------------
UTILITIES--8.5%
-------------------------------------------------------------------------------------
185,000 Alabama Power Co., 9.00%, 12/1/2024 191,913
-------------------------------------------------------------------------------------
500,000 Cincinnati Gas and Electric Co., 8.95%, 12/15/2021 507,950
-------------------------------------------------------------------------------------
140,000 Duke Power Co., 6.25%, 5/1/2004 130,603
-------------------------------------------------------------------------------------
1,500,000 Duke Power Co., 7.41%, 2/10/2004 1,485,645
-------------------------------------------------------------------------------------
389,000 Duke Power Co., 7.875%, 5/1/2024 381,403
-------------------------------------------------------------------------------------
1,500,000 Northern Illinois Gas, 7.26%, 10/15/2025 1,367,100
-------------------------------------------------------------------------------------
700,000 Pacific Bell, 7.25%, 2/1/2008 678,510
-------------------------------------------------------------------------------------
1,000,000 Pacific Bell, 8.50%, 8/15/2031 1,025,780
-------------------------------------------------------------------------------------
62,000 Southern California Edison Co., 8.375%, 12/1/2017 62,341
------------------------------------------------------------------------------------- -------------
Total 5,831,245
------------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $24,664,513) 23,931,587
------------------------------------------------------------------------------------- -------------
INTERNATIONAL BONDS--6.0%
- ---------------------------------------------------------------------------------------------------
CLOSED-END INVESTMENT COMPANIES--2.4%
-------------------------------------------------------------------------------------
80,000 First Commonwealth Fund Inc. 890,000
-------------------------------------------------------------------------------------
80,000 Kleinwort Benson Australian Income Fund 730,000
------------------------------------------------------------------------------------- -------------
Total 1,620,000
------------------------------------------------------------------------------------- -------------
INDUSTRIAL--1.3%
-------------------------------------------------------------------------------------
$ 1,000,000 News America Holdings, Inc., 7.60%, 10/11/2015 927,910
------------------------------------------------------------------------------------- -------------
METALS & MINING--2.3%
-------------------------------------------------------------------------------------
1,500,000 Alcan Aluminum Ltd., 9.20%, 3/15/2001 1,561,410
------------------------------------------------------------------------------------- -------------
TOTAL INTERNATIONAL BONDS (IDENTIFIED COST $4,222,059) 4,109,320
------------------------------------------------------------------------------------- -------------
GOVERNMENT AGENCIES--20.2%
- ---------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--7.4%
-------------------------------------------------------------------------------------
500,000 8.00%, 7/15/2020 507,785
-------------------------------------------------------------------------------------
1,000,000 8.00%, 9/15/2020 1,006,550
-------------------------------------------------------------------------------------
125,461 8.75%, 10/1/2014 130,253
-------------------------------------------------------------------------------------
1,172,753 9.00%, 5/1/2021 1,229,174
-------------------------------------------------------------------------------------
670,000 10.00%, 12/15/2020 721,141
-------------------------------------------------------------------------------------
1,000,000 10.00%, 1/15/2021 1,065,910
-------------------------------------------------------------------------------------
348,558 11.00%, 4/1/2003 369,796
------------------------------------------------------------------------------------- -------------
Total 5,030,609
------------------------------------------------------------------------------------- -------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--10.6%
-------------------------------------------------------------------------------------
117,728 8.75%, 10/1/2016 122,933
-------------------------------------------------------------------------------------
</TABLE>
STAR STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
CONTRACTS VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
GOVERNMENT AGENCIES--CONTINUED
- ---------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
-------------------------------------------------------------------------------------
$ 274,973 9.00%, 4/1/2016 $ 286,703
-------------------------------------------------------------------------------------
1,000,000 4.00%, REMIC, 6/25/2020 830,690
-------------------------------------------------------------------------------------
2,000,000 7.75%, REMIC, 5/25/2021 1,953,560
-------------------------------------------------------------------------------------
547,977 8.20%, REMIC, 4/25/2006 552,245
-------------------------------------------------------------------------------------
500,000 8.40%, REMIC, 8/25/2019 509,130
-------------------------------------------------------------------------------------
1,000,000 9.00%, REMIC, 11/25/2019 1,044,090
-------------------------------------------------------------------------------------
577,490 9.40%, REMIC, 6/25/2019 596,403
-------------------------------------------------------------------------------------
1,100,000 9.50%, REMIC, 6/25/2020 1,154,142
-------------------------------------------------------------------------------------
225,000 10.00%, REMIC, 12/25/2018 233,937
------------------------------------------------------------------------------------- -------------
Total 7,283,833
------------------------------------------------------------------------------------- -------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--2.2%
-------------------------------------------------------------------------------------
301,644 9.00%, 7/15/2016 318,985
-------------------------------------------------------------------------------------
834,405 9.00%, 1/15/2022 878,841
-------------------------------------------------------------------------------------
249,933 10.00%, 11/15/2009 273,362
------------------------------------------------------------------------------------- -------------
Total 1,471,188
------------------------------------------------------------------------------------- -------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $13,997,144) 13,785,630
------------------------------------------------------------------------------------- -------------
U.S. TREASURY--4.0%
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY BONDS--3.3%
-------------------------------------------------------------------------------------
500,000 United States Treasury Bond, 6.25%, 8/15/2023 446,185
-------------------------------------------------------------------------------------
1,000,000 United States Treasury Bond, 7.25%, 5/15/2016 1,008,380
-------------------------------------------------------------------------------------
500,000 United States Treasury Bond, 13.25%, 5/15/2014 757,090
------------------------------------------------------------------------------------- -------------
Total 2,211,655
------------------------------------------------------------------------------------- -------------
U.S. TREASURY NOTE--0.7%
-------------------------------------------------------------------------------------
500,000 United States Treasury Note, 6.875%, 5/15/2006 500,840
------------------------------------------------------------------------------------- -------------
TOTAL U.S. TREASURY (IDENTIFIED COST $2,902,950) 2,712,495
------------------------------------------------------------------------------------- -------------
CALL OPTIONS--0.0%
- ---------------------------------------------------------------------------------------------------
50 Philip Morris Co., expiration 6/22/1996, strike @ 105 (IDENTIFIED COST, $12,701) 2,500
------------------------------------------------------------------------------------- -------------
(A) REPURCHASE AGREEMENT--1.3%
- ---------------------------------------------------------------------------------------------------
921,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.30%, dated
5/31/1996, due 6/3/1996 (at amortized cost) 921,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $69,507,633)(B) $ 68,567,852
------------------------------------------------------------------------------------- -------------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $69,507,633. The
net unrealized depreciation of investments on a federal tax basis amounts to
$939,781, which is comprised of $891,945 appreciation and $1,831,726
depreciation at May 31, 1996.
STAR STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
Note: The categories of investments are shown as a percentage of net assets
($68,419,643) at
May 31, 1996.
The following acronyms are used throughout this portfolio:
REMIC--Real Estate Mortgage Investment Conduit
MIPS--Monthly Income Preferred Securities
(See Notes which are an integral part of the Financial Statements)
STAR STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value
(identified and tax cost $69,507,633) $ 68,567,852
- ---------------------------------------------------------------------------------------------------
Cash 219
- ---------------------------------------------------------------------------------------------------
Income receivable 757,461
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 2,340,373
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 149,494
- ---------------------------------------------------------------------------------------------------
Deferred expenses 21,382
- --------------------------------------------------------------------------------------------------- -------------
Total assets 71,836,781
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------
Payable for investments purchased $ 3,289,726
- -------------------------------------------------------------------------------------
Options written, at value (premium received $76,950) 66,125
- -------------------------------------------------------------------------------------
Accrued expenses 61,287
- ------------------------------------------------------------------------------------- ------------
Total liabilities 3,417,138
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 6,748,256 shares outstanding $ 68,419,643
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $ 70,056,713
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and options (928,956)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and options (728,603)
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 20,489
- --------------------------------------------------------------------------------------------------- -------------
TOTAL NET ASSETS $ 68,419,643
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE:
- ---------------------------------------------------------------------------------------------------
($68,419,643 / 6,748,256 shares outstanding) $10.14
- --------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share (95 / 100 of $10.14)* $9.63
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
* See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
STAR STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Dividends $ 994,072
- ---------------------------------------------------------------------------------------------------
Interest 1,471,591
- --------------------------------------------------------------------------------------------------- -------------
Total income 2,465,663
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 281,769
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 30,274
- ---------------------------------------------------------------------------------------
Custodian fees 7,415
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 21,799
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,245
- ---------------------------------------------------------------------------------------
Auditing fees 4,563
- ---------------------------------------------------------------------------------------
Legal fees 2,582
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 41,097
- ---------------------------------------------------------------------------------------
Shareholder services fee 10,524
- ---------------------------------------------------------------------------------------
Share registration costs 6,638
- ---------------------------------------------------------------------------------------
Printing and postage 16,623
- ---------------------------------------------------------------------------------------
Insurance premiums 4,304
- ---------------------------------------------------------------------------------------
Miscellaneous 3,474
- --------------------------------------------------------------------------------------- ----------
Total expenses 432,307
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 2,033,356
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized loss on investments (includes $53,483 net gain on options) (720,577)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and options (1,733,791)
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized loss on investments and options (2,454,368)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ (421,012)
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 2,033,356 $ 1,942,006
- ---------------------------------------------------------------
Net realized gain (loss) on investments and options ($720,577
net loss and $76,916 net gain, respectively,
as computed for federal tax purposes) (720,577) 76,916
- ---------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments and options (1,733,791) 804,835
- --------------------------------------------------------------- ----------------------- ------------------------
Change in net assets resulting from operations (421,012) 2,823,757
- --------------------------------------------------------------- ----------------------- ------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Distributions from net investment income (2,097,976) (1,856,897)
- ---------------------------------------------------------------
Distributions from net realized gains -- (76,916)
- ---------------------------------------------------------------
Distributions in excess of net realized gains -- (8,026)
- --------------------------------------------------------------- ----------------------- ------------------------
Change in net assets resulting from distributions to
shareholders (2,097,976) (1,941,839)
- --------------------------------------------------------------- ----------------------- ------------------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of shares 30,218,513 48,423,382
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 842,322 756,172
- ---------------------------------------------------------------
Cost of shares redeemed (7,634,865) (2,548,811)
- --------------------------------------------------------------- ----------------------- ------------------------
Change in net assets resulting from share transactions 23,425,970 46,630,743
- --------------------------------------------------------------- ----------------------- ------------------------
Change in net assets 20,906,982 47,512,661
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 47,512,661 --
- --------------------------------------------------------------- ----------------------- ------------------------
End of period (including undistributed net investment income of
$20,489 and $85,109, respectively) $ 68,419,643 $ 47,512,661
- --------------------------------------------------------------- ----------------------- ------------------------
</TABLE>
*For the period from December 12, 1994 (date of initial public investment) to
November 30, 1995.
(See Notes which are an integral part of the Financial Statements)
STAR STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31,
1996 PERIOD ENDED
(UNAUDITED) NOVEMBER 30, 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.53 $ 10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.37 0.69
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.39) 0.55
- ---------------------------------------------------------------------- ------- -------
Total from investment operations (0.02) 1.24
- ---------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Distributions from net investment income (0.37) (0.67)
- ----------------------------------------------------------------------
Distributions from net realized gain on investments 0.00 (0.04)
- ----------------------------------------------------------------------
Distributions in excess of net realized gain on investments -- (0.00)**
- ---------------------------------------------------------------------- ------- -------
Total distributions (0.37) (0.71)
- ---------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.14 $ 10.53
- ---------------------------------------------------------------------- ------- -------
TOTAL RETURN (B) (0.25%) 12.71%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.46%* 1.47%*
- ----------------------------------------------------------------------
Net investment income 6.86%* 7.41%*
- ----------------------------------------------------------------------
Expense waiver/reimbursement (c) -- 0.10%*
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $68,420 $47,513
- ----------------------------------------------------------------------
Average commission rate paid $0.0002 --
- ----------------------------------------------------------------------
Portfolio turnover 95% 258%
- ----------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** 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, 1995.
(a) Reflects operations for the period from December 12, 1994 (date of initial
public investment) to November 30, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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)
STAR U.S. GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--22.4%
- ------------------------------------------------------------------------------------------------
BEVERAGE & TOBACCO--1.0%
---------------------------------------------------------------------------------
$ 1,029,000 Philip Morris Cos., Inc., 8.625%, 3/1/1999 $ 1,073,803
--------------------------------------------------------------------------------- --------------
CHEMICALS--1.6%
---------------------------------------------------------------------------------
1,720,649 Dow Chemical Co., 7.60%, 1/2/2002 1,764,801
--------------------------------------------------------------------------------- --------------
ELECTRONIC TECHNOLOGY--1.3%
---------------------------------------------------------------------------------
1,500,000 Philips Electric, 6.75%, 8/15/2003 1,441,695
--------------------------------------------------------------------------------- --------------
FINANCE--6.3%
---------------------------------------------------------------------------------
2,250,000 Associates Corp. of North America, 6.375%, 11/15/2005 2,097,180
---------------------------------------------------------------------------------
750,000 Citicorp, 8.625%, 12/1/2002 802,477
---------------------------------------------------------------------------------
150,000 Ford Motor Credit Corp., LIBOR Floater, 5.75%, 7/19/1996 149,980
---------------------------------------------------------------------------------
250,000 General Electric Capital Corp., 8.75%, 11/26/1996 253,770
---------------------------------------------------------------------------------
2,250,000 International Lease Financing Co., 6.25%, 10/15/2000 2,184,975
---------------------------------------------------------------------------------
250,000 International Lease Financing Co., 8.375%, 12/15/2004 265,095
---------------------------------------------------------------------------------
1,250,000 NationsBank Corp., 7.625%, 4/15/2005 1,262,562
--------------------------------------------------------------------------------- --------------
Total 7,016,039
--------------------------------------------------------------------------------- --------------
FOOD & BEVERAGE--0.5%
---------------------------------------------------------------------------------
500,000 McDonalds Corp., 8.375%, 10/29/1999 523,975
--------------------------------------------------------------------------------- --------------
HEALTHCARE--1.1%
---------------------------------------------------------------------------------
500,000 Columbia HCA Healthcare Corp., 6.91%, 6/15/2005 483,690
---------------------------------------------------------------------------------
250,000 Columbia HCA Healthcare Corp., 8.70%, 2/10/2010 273,655
---------------------------------------------------------------------------------
515,000 Columbia HCA Healthcare Corp., 6.125%, 12/15/2000 497,166
--------------------------------------------------------------------------------- --------------
Total 1,254,511
--------------------------------------------------------------------------------- --------------
HOUSEHOLD PRODUCTS--0.9%
---------------------------------------------------------------------------------
1,000,000 Procter & Gamble Co., 7.375%, 3/1/2023 947,000
--------------------------------------------------------------------------------- --------------
INTERNATIONAL OIL--1.4%
---------------------------------------------------------------------------------
1,000,000 Ashland Oil, Inc., 7.90%, 8/5/2006 1,015,780
---------------------------------------------------------------------------------
600,000 Chevron Capital U S A, Inc., 7.45%, 8/15/2004 604,314
--------------------------------------------------------------------------------- --------------
Total 1,620,094
--------------------------------------------------------------------------------- --------------
PRODUCER MANUFACTURING--1.3%
---------------------------------------------------------------------------------
1,000,000 Alcan Aluminum, 7.25%, 12/15/1999 1,009,890
---------------------------------------------------------------------------------
400,000 Alcan Aluminum, 9.20%, 3/15/2001 416,376
--------------------------------------------------------------------------------- --------------
Total 1,426,266
--------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS--2.1%
---------------------------------------------------------------------------------
500,000 GTE Corp., 7.83%, 5/1/2023 487,225
---------------------------------------------------------------------------------
1,500,000 News America Holdings, Inc., 9.125%, 10/15/1999 1,591,230
---------------------------------------------------------------------------------
300,000 Pacific Telephone & Telegraph Co., 7.25%, 2/1/2008 290,790
--------------------------------------------------------------------------------- --------------
Total 2,369,245
--------------------------------------------------------------------------------- --------------
</TABLE>
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC--4.5%
---------------------------------------------------------------------------------
$ 100,000 Alabama Power Co., 8.75%, 12/1/2021 $ 100,739
---------------------------------------------------------------------------------
1,000,000 Cincinnati Gas & Electric Co., 8.95%, 12/15/2021 1,015,900
---------------------------------------------------------------------------------
1,000,000 Duke Power Co., 7.41%, Medium Term Note, 2/10/2004 990,430
---------------------------------------------------------------------------------
3,000,000 Georgia Power Co., 6.625%, 4/1/2003 2,866,140
--------------------------------------------------------------------------------- --------------
Total 4,973,209
--------------------------------------------------------------------------------- --------------
UTILITIES-GAS--0.4%
---------------------------------------------------------------------------------
500,000 Northern Illinois Gas Co., 7.26%, 10/15/2025 455,700
--------------------------------------------------------------------------------- --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $25,623,865) 24,866,338
--------------------------------------------------------------------------------- --------------
GOVERNMENT AGENCIES--24.8%
- ------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK--2.6%
---------------------------------------------------------------------------------
430,738 6.00%, 8/1/2013 399,793
---------------------------------------------------------------------------------
2,450,877 8.50%, 6/1/2024 2,528,962
--------------------------------------------------------------------------------- --------------
Total 2,928,755
--------------------------------------------------------------------------------- --------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--7.6%
---------------------------------------------------------------------------------
2,489,806 7.00%, 9/17/2031 2,354,435
---------------------------------------------------------------------------------
1,000,000 7.83%, 8/11/2004 993,780
---------------------------------------------------------------------------------
4,500,000 PC Gtd., 6.50%, 2/15/2023 4,246,875
---------------------------------------------------------------------------------
793,931 PC Gtd., 7.00%, 5/15/2019 794,368
---------------------------------------------------------------------------------
71,607 PC Gtd., 7.50%, 8/15/2016 71,621
--------------------------------------------------------------------------------- --------------
Total 8,461,079
--------------------------------------------------------------------------------- --------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--13.7%
---------------------------------------------------------------------------------
1,000,000 5.36%, 2/16/2001 943,400
---------------------------------------------------------------------------------
3,500,000 6.14%, 11/25/2005 3,252,445
---------------------------------------------------------------------------------
500,000 6.17%, 12/30/2003 466,020
---------------------------------------------------------------------------------
2,000,000 6.54%, 10/3/2005 1,914,960
---------------------------------------------------------------------------------
1,543,291 REMIC, 7.00%, 3/17/2035 1,455,524
---------------------------------------------------------------------------------
2,000,000 REMIC, 7.25%, 2/25/2017 2,004,140
---------------------------------------------------------------------------------
1,082,626 REMIC, 7.25%, 1/25/2019 1,084,889
---------------------------------------------------------------------------------
4,042,000 REMIC, 7.25%, 1/17/2021 4,046,931
--------------------------------------------------------------------------------- --------------
Total 15,168,309
--------------------------------------------------------------------------------- --------------
STUDENT LOAN MARKETING ASSOCIATION--0.9%
---------------------------------------------------------------------------------
1,000,000 5.38%, 8/2/1999 994,970
--------------------------------------------------------------------------------- --------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $28,178,123) 27,553,113
--------------------------------------------------------------------------------- --------------
U.S. TREASURY--50.1%
- ------------------------------------------------------------------------------------------------
TREASURY BONDS--18.1%
---------------------------------------------------------------------------------
3,500,000 6.25%, 8/15/2023 3,123,295
---------------------------------------------------------------------------------
2,250,000 7.25%, 5/15/2016 2,268,855
---------------------------------------------------------------------------------
1,250,000 7.625%, 2/15/2007 1,286,912
---------------------------------------------------------------------------------
</TABLE>
STAR U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
U.S. TREASURY--CONTINUED
- ------------------------------------------------------------------------------------------------
TREASURY BONDS--CONTINUED
---------------------------------------------------------------------------------
$ 400,000 7.625%, 2/15/2025 $ 424,348
---------------------------------------------------------------------------------
11,800,000 8.125%, 8/15/2019 13,032,156
--------------------------------------------------------------------------------- --------------
Total 20,135,566
--------------------------------------------------------------------------------- --------------
TREASURY NOTES--27.9%
---------------------------------------------------------------------------------
10,000,000 5.125%, 6/30/1998 9,785,200
---------------------------------------------------------------------------------
1,250,000 5.50%, 2/28/1999 1,221,938
---------------------------------------------------------------------------------
1,000,000 5.625%, 11/30/2000 962,130
---------------------------------------------------------------------------------
1,000,000 6.375%, 8/15/2002 983,080
---------------------------------------------------------------------------------
4,300,000 6.50%, 8/15/2005 4,190,436
---------------------------------------------------------------------------------
4,400,000 6.75%, 5/31/1999 4,435,244
---------------------------------------------------------------------------------
3,250,000 6.875%, 5/15/2006 3,255,460
---------------------------------------------------------------------------------
5,900,000 7.75%, 11/30/1999 6,122,253
--------------------------------------------------------------------------------- --------------
Total 30,955,741
--------------------------------------------------------------------------------- --------------
TREASURY SECURITIES--4.1%
---------------------------------------------------------------------------------
5,000,000 STRIP, 2/15/1998 4,506,850
--------------------------------------------------------------------------------- --------------
TOTAL U.S. TREASURY (IDENTIFIED COST $56,514,841) 55,598,157
--------------------------------------------------------------------------------- --------------
(A) REPURCHASE AGREEMENT--1.5%
- ------------------------------------------------------------------------------------------------
1,661,000 Donaldson, Lufkin, & Jenrette Securities Corp., 5.30%, dated
5/31/1996, due 6/3/1996 (at amortized cost) 1,661,000
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $111,977,829)(B) $ 109,678,608
--------------------------------------------------------------------------------- --------------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $111,977,829.
The net unrealized depreciation of investments on a federal tax basis
amounts to $2,299,221 which is comprised of $230,219 appreciation and
$2,529,440 depreciation at May 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($111,000,944) at
May 31, 1996.
The following acronyms are used throughout this portfolio:
GTD--Guarantee
LIBOR--London Interbank Offered Rate
PC--Participation Certificate
REMIC--Real Estate Mortgage Investment Conduit
STRIP--Separate Trading of Registered Interest & Principal of Securities
(See Notes which are an integral part of the Financial Statements)
STAR U.S. GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Total investments in securities, at value
(identified and tax cost $111,977,829) $ 109,678,608
- -------------------------------------------------------------------------------------------------
Cash 757
- -------------------------------------------------------------------------------------------------
Income receivable 1,458,152
- -------------------------------------------------------------------------------------------------
Receivable for shares sold 24,134
- -------------------------------------------------------------------------------------------------
Deferred expenses 11,432
- ------------------------------------------------------------------------------------------------- --------------
Total assets 111,173,083
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------
Income distribution payable $ 124,864
- -------------------------------------------------------------------------------------
Accrued expenses 47,275
- ------------------------------------------------------------------------------------- ----------
Total liabilities 172,139
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 11,751,038 shares outstanding $ 111,000,944
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid in capital $ 115,767,736
- -------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (2,299,221)
- -------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (2,467,571)
- ------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 111,000,944
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------
($111,000,944 / 11,751,038 shares outstanding) $9.45
- ------------------------------------------------------------------------------------------------- --------------
Offering Price Per Share (100 / 96.50 of $9.45)* $9.79
- ------------------------------------------------------------------------------------------------- --------------
</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
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest $ 3,815,068
- ---------------------------------------------------------------------------------------------------
Expenses:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 335,974
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 57,214
- ---------------------------------------------------------------------------------------
Custodian fees 13,416
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 19,705
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,908
- ---------------------------------------------------------------------------------------
Auditing fees 8,591
- ---------------------------------------------------------------------------------------
Legal fees 1,563
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 27,248
- ---------------------------------------------------------------------------------------
Shareholder services fee 19,616
- ---------------------------------------------------------------------------------------
Share registration costs 8,088
- ---------------------------------------------------------------------------------------
Printing and postage 9,707
- ---------------------------------------------------------------------------------------
Insurance premiums 1,941
- ---------------------------------------------------------------------------------------
Miscellaneous 5,098
- --------------------------------------------------------------------------------------- ----------
Total expenses 510,069
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 3,304,999
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized loss on investments (908,508)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments (5,404,433)
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized loss on investments (6,312,941)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ (3,007,942)
- --------------------------------------------------------------------------------------------------- -------------
</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>
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 3,304,999 $ 6,170,428
- -----------------------------------------------------------------
Net realized gain (loss) on investments ($908,508 net loss and
$173,123 net gain, respectively, as computed for federal tax
purposes) (908,508) 48,883
- -----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (5,404,433) 7,371,857
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from operations (3,007,942) 13,591,168
- ----------------------------------------------------------------- ---------------------- ----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Distributions from net investment income (3,304,999) (6,170,428)
- ----------------------------------------------------------------- ---------------------- ----------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 22,260,260 46,528,164
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 1,586,743 2,992,672
- -----------------------------------------------------------------
Cost of shares redeemed (16,199,563) (35,199,263)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from share transactions 7,647,440 14,321,573
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets 1,334,499 21,742,313
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period 109,666,445 87,924,132
- ----------------------------------------------------------------- ---------------------- ----------------------
End of period $ 111,000,944 $ 109,666,445
- ----------------------------------------------------------------- ---------------------- ----------------------
</TABLE>
(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>
SIX MONTHS
ENDED
MAY 31, YEAR ENDED
1996 NOVEMBER 30,
(UNAUDITED) 1995 1994 1993(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.98 $ 9.24 $ 10.25 $ 10.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income 0.29 0.60 0.55 0.51
- ----------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.53) 0.74 (0.90) 0.25
- ---------------------------------------------------------- ------- --------- --------- -----------
Total from investment operations (0.24) 1.34 (0.35) 0.76
- ---------------------------------------------------------- ------- --------- --------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Distributions from net investment income (0.29) (0.60) (0.55) (0.51)
- ----------------------------------------------------------
Distributions from net realized gain on investments -- -- (0.11) --
- ---------------------------------------------------------- ------- --------- --------- -----------
Total distributions (0.29) (0.60) (0.66) (0.51)
- ---------------------------------------------------------- ------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.45 $ 9.98 $ 9.24 $ 10.25
- ---------------------------------------------------------- ------- --------- --------- -----------
TOTAL RETURN (B) (2.45%) 14.90% (3.53%) 7.63%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 0.91%* 0.92% 0.97% 1.12%*
- ----------------------------------------------------------
Net investment income 5.90%* 6.23% 5.87% 5.55%*
- ----------------------------------------------------------
Expense waiver/reimbursement (c) -- -- 0.03% 0.30%*
- ----------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $111,001 $109,666 $87,924 $44,187
- ----------------------------------------------------------
Portfolio turnover 91% 236% 148% 105%
- ----------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) 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.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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)
STAR FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(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 eight diversified portfolios (individually referred to as the
"Fund", or collectively referred to as the "Funds"). The financial statements of
the following portfolios are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
<S> <C>
Star Capital Appreciation Fund ("Capital To maximize capital appreciation.
Appreciation Fund")
Star Growth Equity Fund ("Growth Equity Fund") To maximize capital appreciation.
Star Relative Value Fund ("Relative Value Fund") To obtain the highest total return, a combination of income
and capital appreciation, as is consistent with reasonable
risk.
The Stellar Fund ("Stellar Fund") To maximize total return, a combination of dividend income
and capital appreciation.
Star Strategic Income Fund ("Strategic Income To generate high current income.
Fund")
Star U.S. Government Income Fund ("U.S. To provide current income. Capital appreciation is a
Government Income Fund") secondary objective.
</TABLE>
The assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held.
Star Funds, except Stellar Fund, are offered without class designation. Shares
of Stellar Fund are offered in two classes: Investment shares and Trust shares.
(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--U.S. government securities, listed corporate bonds,
(other fixed income and asset-backed securities), and unlisted securities
and private placement securities are generally valued at the mean of the
latest bid and asked price as furnished by an independent pricing service.
Listed equity securities are valued at the last sale price reported on a
national securities exchange. Short-term securities are valued at the
prices provided by an independent pricing service. However, short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Funds to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
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
STAR FUNDS
- --------------------------------------------------------------------------------
creditworthy pursuant to the guidelines and/or standards reviewed or
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 Revenue Code, as amended (the "Code"). Dividend
income and 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 income. Accordingly, no
provisions for federal taxes are necessary.
At November 30, 1995, U.S. Government Income Fund, for federal tax
purposes, had a capital loss carryforward, as noted below, 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.
<TABLE>
<CAPTION>
FUND TOTAL TAX-LOSS CARRYFORWARD
<S> <C>
U.S. Government Income Fund $1,278,486
</TABLE>
Pursuant to the Code, such capital loss carryforward will expire as follows:
<TABLE>
<CAPTION>
FUND EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C> <C>
U.S. Government Income Fund 2002 $1,278,486
</TABLE>
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 over a period of five years from
each Fund's commencement date.
G. OPTIONS CONTRACTS WRITTEN--The Capital Appreciation Fund, Growth Equity
Fund, Stellar Fund, Strategic Income Fund and U.S. Government Income Fund
may write "covered" call option contracts. All of the preceding Funds,
except U.S. Government Income Fund may also write "covered" put options. A
written option obligates the Funds to deliver (a call), or to receive (a
put), the contract amount upon exercise by the holder of the option. The
principal reason for writing call or put options is to obtain, through
receipt of premiums, a greater current return than would be realized on
underlying securities alone. By writing a put option, the Fund risks
becoming obligated to purchase the underlying security for more than its
current market price upon exercise. Premiums received from writing options
are recorded as a liability and unrealized gain or loss is measured by the
difference between the current value and the premium received. For the
period ended May 31, 1996, Capital Appreciation Fund, Growth Equity Fund,
Stellar Fund, and Strategic Income Fund had realized gain (loss) on options
contracts of ($35,656), ($210,677), $83,127, and $53,483, respectively.
At May 31, 1996, Growth Equity Fund, Stellar Fund and Strategic Income Fund
had the following outstanding options:
STAR FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH EQUITY FUND
- -----------------------------------------------------------------------------------------------------------
UNREALIZED
EXPIRATION EXERCISE NUMBER OF APPRECIATION MARKET
ISSUER TYPE DATE PRICE CONTRACTS (DEPRECIATION) VALUE
<S> <C> <C> <C> <C> <C> <C>
Cisco Systems Call 1/17/97 55 200 $ 4,195 $ 160,000
- --------------------
Intel Call 1/17/97 90 100 (21,650) 30,000
- --------------------
Hewlett Packard Call 1/17/97 90 50 (80,202) 115,622
- -------------------- ----------------- ----------
Totals $ (97,657) $ 305,622
- -------------------- ----------------- ----------
<CAPTION>
STELLAR FUND
- -----------------------------------------------------------------------------------------------------------
UNREALIZED
EXPIRATION EXERCISE NUMBER OF APPRECIATION MARKET
ISSUER TYPE DATE PRICE CONTRACTS (DEPRECIATION) VALUE
<S> <C> <C> <C> <C> <C> <C>
Alcan Aluminum Put 6/21/96 30 200 $ 14,500 $ 2,500
- --------------------
Nordstrom Put 7/20/96 45 50 8,236 3,437
- -------------------- ----------------- ----------
Totals $ 22,736 $ 5,937
- -------------------- ----------------- ----------
<CAPTION>
STRATEGIC INCOME FUND
- -----------------------------------------------------------------------------------------------------------
UNREALIZED
EXPIRATION EXERCISE NUMBER OF APPRECIATION MARKET
ISSUER TYPE DATE PRICE CONTRACTS (DEPRECIATION) VALUE
<S> <C> <C> <C> <C> <C> <C>
Hewlett Packard Put 6/22/96 105 100 $ (6,651) $ 26,250
- --------------------
CPC Call 6/22/96 70 45 (2,363) 4,500
- --------------------
Merrill Lynch Put 10/19/96 55 100 4,599 11,250
- --------------------
Haliburton Put 7/20/96 50 100 2,726 6,875
- --------------------
Bristol Myers Put 6/22/96 85 40 (410) 12,250
- --------------------
NYNEX Call 10/19/96 50 50 12,924 5,000
- -------------------- ----------------- ----------
Totals $ 10,825 $ 66,125
- -------------------- ----------------- ----------
</TABLE>
The following is a summary of the Capital Appreciation Fund, Growth Equity Fund,
Stellar Fund and Strategic Income Fund written options activity:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
NUMBER OF CONTRACTS PROCEEDS*
<S> <C> <C>
Outstanding at November 30, 1995 90 $ 14,827
- -------------------------------------------------------------------------
Contracts opened 235 51,790
- -------------------------------------------------------------------------
Contracts expired (125) (35,656)
- -------------------------------------------------------------------------
Contracts exercised (200) (30,961)
- -------------------------------------------------------------------------
Contracts closed 0 0
- ------------------------------------------------------------------------- ------- ------------
Outstanding at May 31, 1996 0 $ 0
- ------------------------------------------------------------------------- ------- ------------
</TABLE>
STAR FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH EQUITY FUND
NUMBER OF CONTRACTS PROCEEDS*
<S> <C> <C>
Outstanding at November 30, 1995 0 $ 0
- -------------------------------------------------------------------------
Contracts opened 650 301,790
- -------------------------------------------------------------------------
Contracts expired (200) (30,075)
- -------------------------------------------------------------------------
Contracts exercised 0 0
- -------------------------------------------------------------------------
Contracts closed (100) (63,750)
- ------------------------------------------------------------------------- ------- ------------
Outstanding at May 31, 1996 350 $ 207,965
- ------------------------------------------------------------------------- ------- ------------
<CAPTION>
STELLAR FUND
NUMBER OF CONTRACTS PROCEEDS*
<S> <C> <C>
Outstanding at November 30, 1995 0 $ 0
- -------------------------------------------------------------------------
Contracts opened 805 111,800
- -------------------------------------------------------------------------
Contracts expired (555) (83,127)
- -------------------------------------------------------------------------
Contracts exercised 0 0
- -------------------------------------------------------------------------
Contracts closed 0 0
- ------------------------------------------------------------------------- ------- ------------
Outstanding at May 31, 1996 250 $ 28,673
- ------------------------------------------------------------------------- ------- ------------
<CAPTION>
STRATEGIC INCOME FUND
NUMBER OF CONTRACTS PROCEEDS*
<S> <C> <C>
Outstanding at November 30, 1995 390 $ 33,236
- -------------------------------------------------------------------------
Contracts opened 2,740 461,418
- -------------------------------------------------------------------------
Contracts expired (290) (41,102)
- -------------------------------------------------------------------------
Contracts exercised (710) (140,141)
- -------------------------------------------------------------------------
Contracts closed (1,695) (236,461)
- ------------------------------------------------------------------------- ------- ------------
Outstanding at May 31, 1996 435 $ 76,950
- ------------------------------------------------------------------------- ------- ------------
</TABLE>
*Represents premium received less commissions paid.
H. USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
I. 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:
STAR FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND RELATIVE VALUE FUND
SIX MONTHS SIX MONTHS
ENDED ENDED
MAY 31, 1996 YEAR ENDED MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995 (UNAUDITED) NOVEMBER 30, 1995
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
Shares sold 1,893,130 2,294,518 1,945,005 3,270,703
Shares issued to
shareholders in payment of
distributions declared 54,406 11,825 26,019 40,596
Shares redeemed (364,370) (490,433) (488,043) (1,044,452)
---------------- ------------ ---------------- ------------
Net change resulting
from Fund share
transactions 1,583,166 1,815,910 1,482,981 2,266,847
---------------- ------------ ---------------- ------------
</TABLE>
<TABLE>
<CAPTION>
STELLAR FUND
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
INVESTMENT SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 181,990 $ 2,252,286 316,665 $ 3,633,111
Shares issued to shareholders in payment of
distributions declared 120,236 1,459,056 151,838 1,724,929
Shares redeemed (469,628) (5,797,276) (1,097,558) (12,603,176)
--------- ------------- ----------- --------------
Net change resulting from Investment share
transactions (167,402) $ (2,085,934) (629,055) $ (7,245,136)
--------- ------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
TRUST SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 645,764 $ 7,963,694 1,362,547 $ 15,679,680
Shares issued to shareholders in payment of
distributions declared 130,192 1,580,240 161,056 1,831,157
Shares redeemed (857,648) (10,556,128) (1,783,611) (20,596,933)
--------- -------------- ----------- --------------
Net change resulting from Trust share transactions (81,692) $ (1,012,194) (260,008) $ (3,086,096)
--------- -------------- ----------- --------------
Net change resulting from Fund share
transactions (249,094) $ (3,098,128) (889,063) $ (10,331,232)
--------- -------------- ----------- --------------
</TABLE>
STAR FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH EQUITY FUND STRATEGIC INCOME FUND
SIX MONTHS SIX MONTHS
ENDED ENDED
MAY 31, 1996 YEAR ENDED MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995* (UNAUDITED) NOVEMBER 30, 1995*
<S> <C> <C> <C> <C>
Shares sold 945,995 4,433,979 2,889,784 4,687,046
Shares issued to
shareholders in payment
of distributions declared 180,375 41,831 80,719 72,542
Shares redeemed (528,893) (640,831) (735,845) (245,990)
---------------- ------------ ---------------- ------------
Net change resulting
from Fund share
transactions 597,477 3,834,979 2,234,658 4,513,598
---------------- ------------ ---------------- ------------
</TABLE>
*For the period from December 12, 1994 (date of initial public investment) to
November 30, 1995.
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
SIX MONTHS
ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
Shares sold 2,268,658 4,813,482
Shares issued to
shareholders in payment
of distributions declared 162,116 310,088
Shares redeemed (1,666,223) (3,651,974)
---------------- ------------
Net change resulting
from Fund share
transactions 764,551 1,471,596
---------------- ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
A. 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 any 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>
Capital Appreciation Fund 0.95%
Growth Equity Fund 0.75%
Relative Value Fund 0.75%
Stellar Fund 0.95%
Strategic Income Fund 0.95%
U.S. Government Income Fund 0.60%
</TABLE>
B. ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides each
Fund with certain administrative personnel and services. The fee paid to
FAS is based on the level of
STAR FUNDS
- --------------------------------------------------------------------------------
average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
C. DISTRIBUTION SERVICES FEE--The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Funds will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Funds to finance activities
intended to result in the sale of the Funds' investment shares. The Plan
provides that the Funds may incur distribution expenses up to 0.25% of the
average daily net assets of the investment shares annually, to compensate
FSC. Currently, only the Stellar Fund is accruing and paying 12b-1 fees.
The other Star Funds will not accrue or pay any distribution expenses
pursuant to the Plan until a second class of shares has been registered
with the Securities and Exchange Commission.
D. SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Star Bank, N.A., each Fund will pay Star Bank, N.A. up to
0.25% of its average daily net assets for the period. The fee paid to Star
Bank, N.A. is used to finance certain services for shareholders and to
maintain shareholder accounts. Star Bank, N.A. may voluntarily choose to
waive any portion of its fee. Star Bank, N.A. can modify or terminate this
voluntary waiver at any time at its sole discretion.
E. TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the
Funds. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
F. PORTFOLIO ACCOUNTING FEES--FServ also maintains the Funds' accounting
records for which it receives a fee. The fee is based on the level of each
Fund's average net assets for the period, plus out-of-pocket expenses.
G. CUSTODIAN FEES--Star Bank, N.A., is the Funds' custodian. The fee is based
on the level of each Fund's average net assets for the period, plus
out-of-pocket expenses.
STAR FUNDS
- --------------------------------------------------------------------------------
H. ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by
FAS. The Funds have agreed to reimburse FAS for the organizational expenses
during the five year period following effective date.
<TABLE>
<CAPTION>
EXPENSES OF AMOUNTS REIMBURSED TO
EFFECTIVE ORGANIZING FAS FOR THE SIX MONTHS ENDED
DATE THE FUND MAY 31, 1996
<S> <C> <C> <C>
Capital Appreciation Fund May 16, 1994 $ 25,801 $ 1,496
Growth Equity Fund November 14, 1994 32,925 1,480
Stellar Fund July 31, 1991 23,641 2,855
Strategic Income Fund November 14, 1994 29,810 1,984
U.S. Government Income Fund November 23, 1992 25,000 4,300
</TABLE>
I. GENERAL--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 six
months ended
May 31, 1996, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Capital Appreciation Fund $ 71,973,340 $ 55,450,289
Growth Equity Fund 39,434,393 35,649,660
Relative Value Fund 37,584,743 19,002,651
Stellar Fund 37,523,747 43,668,012
Strategic Income Fund 76,806,404 53,660,891
U.S. Government Income Fund 106,947,675 98,656,407
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
Stellar invests in equity and fixed income securities of non-U.S. issuers.
Although, Stellar maintains a diversified investment portfolio, the political or
economic developments within a particular country or region may have an adverse
effect on the ability of domiciled issuers to meet their obligations.
Additionally, political or economic developments may have an effect on the
liquidity and volatility of portfolio securities and currency holdings.
At May 31, 1996, the International Securities held in the Portfolio were
diversified within the following industries:
<TABLE>
<S> <C>
Basic Industry 1.8%
Capital Goods 3.3%
Consumer Cyclicals 3.4%
Consumer Staples 0.8%
Energy 3.6%
Finance 1.6%
Health Care 1.1%
Technology 1.6%
Miscellaneous 3.6%
Utilities 1.2%
</TABLE>
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Ralph R. Burchenal Edward C. Gonzales
Thomas L. Conlan Jr. President and Treasurer
Edward C. Gonzales Joseph S. Machi
Alfred Gottschalk, Phd. Vice President and Assistant Treasurer
Robert J. Hill, D.O. C. Grant Anderson
Barry L. Larkin Secretary
William H. Zimmer III
</TABLE>
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 risks,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Trust's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
- --------------------------
Star Bank, N.A.
Investment Adviser
- --------------------------
Federated Securities Corp.
Distributor
- --------------------------
CUSIP 854911500
CUSIP 854911880
CUSIP 854911708
CUSIP 854911609
CUSIP 854911401
CUSIP 854911864
CUSIP 854911807
G00446-01 (7/96)
{logo} Money
Star Funds Market Funds
Combined
Semi-Annual
Report
May 31, 1996
Portfolios of Star Funds
Star Tax-Free Money Market Fund
Star Treasury Fund
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the combined Semi-Annual Report to shareholders for the
Star Money Market Funds. The report covers activity in the Star Tax-Free Money
Market Fund and the Star Treasury Fund over the six-month period from December
1, 1995, through May 31, 1996.
First, you will find a discussion with your fund's portfolio manager about the
interest rate environment during the period, fund yields and strategy. Next are
shareholder voting results regarding the approval of board members, a complete
list of fund holdings and the financial statements.
During the period, each fund served as a practical way to put investors' ready
cash to work pursuing daily income--while providing the additional advantages of
daily liquidity and relative stability.* Here are each fund's highlights:
STAR TAX-FREE MONEY MARKET FUND
The fund's portfolio was diversified across high-quality money market securities
issued by municipalities across 20 states. The fund paid tax-free dividends of
$0.02 per share during the six-month period.** The fund's assets grew to reach
$175.7 million.
STAR TREASURY FUND
The fund's portfolio of U.S. Treasury money market securities paid dividends of
$0.02 per share during the six-month period. The fund's assets grew by more than
$100 million to end the period at $768.7 million.
The Star Money Market Funds can suit a range of conservative investment needs:
As an emergency cash reserve for planned or unplanned expenses. A "parking
place" for cash in-between investments. A very conservative place to pursue
income. Whatever your reason, thank you for participating in the daily earning
power of these funds.
Sincerely,
Edward C. Gonzales
President
July 15, 1996
*Although money market funds seek to maintain a share value of $1.00, there is
no guarantee that they will do so. An investment in the fund is neither
insured nor guaranteed by the U.S. government.
**Income may be subject to the federal alternative minimum tax and state and
local taxes.
INVESTMENT REVIEWS
- --------------------------------------------------------------------------------
STAR TAX-FREE MONEY MARKET FUND
Q Can you comment on the economy and the tax-free interest rate environment
during the reporting period?
A Economic data and perceptions made major shifts in last six months and
created confusion about the true direction of the economy. The Boeing and
General Motors strikes, bad weather, government shutdown, the drought and the
general reaction of politics in an election year have provided enough diversion
to impact any economic forecast. The Federal Reserve Board (the "Fed") had
become concerned over the course of economic growth and decided to lower
short-term interest rates in February as "insurance" to keep the economy
afloat. Ultimately, many economists were surprised at the strong 2.8% growth
rate in the first quarter and altered their forecasts, anticipating rising
interest rates and higher inflation. With rising energy costs and grain prices,
stimulative monetary and fiscal policies and an emerging consumer, economists
ratcheted up expectations for the expansion. As a result of the unexpected
economic strength, yields rose dramatically by the end of May, 1996. In fact,
since our last report dated November 30, 1996, taxable yields are higher by a
full 1%. Fortunately, tax-free yields were somewhat buffered from the rise in
taxable yields as demand for tax-exempt income remained strong. While yields
increased, it was not as much as experienced in the taxable market. Star Bank
views the circumstances outlined above as a short-term deviation from the
overall course of the weak cycle which we have long asserted. We continue to
believe that the second quarter of 1996 will represent the peak in Gross
Domestic Product ("GDP") growth for the year and economic performance will
gradually diminish until we enter a recession in 1997.
Q How did the fund's yield respond?
A The Star Tax-Free Money Market Fund's 7-day net yield declined from 3.19%
on December 1, 1995 to 2.94% on May 31, 1996.* This was caused by higher
yielding fixed coupon securities maturing during the period and being replaced
by relatively lower yielding instruments. Compared to funds with similar
objectives, this experience was clearly widespread. The Star-Tax-Free Money
Market Fund has offered competitive yields over the reporting period compared
to its peer group as reported by IBC "Donoghue's Money Fund Report".**
Q What was your strategy for managing the fund over the period?
A Our strategy has not drastically changed. Our forecast called for stable
short-term rates throughout the period. Thus, we maintained a neutral average
maturity and kept a lower percentage in variable rate notes in favor of fixed
rate securities.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary.
** Donoghue's Money Fund Report publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly and
12-month-to-date investment results for the same money funds.
Q What is your outlook for the short-term tax-free market in the near future?
A With the Federal funds rate standing at 5.25%, we believe the Fed will
continue to leave monetary policy unchanged for the near-term. Policy officials
do not seem alarmed by the stronger than expected GDP or inflation reports
issued during the first half of 1996. If the Fed remains focused on the "core"
inflation data that removes food and energy components, their view will
probably be moderated in favor of waiting to make changes. In the market place,
there seems to be a dichotomy between inflation data and perception. Reality
indicates some up-tick in price pressures, while perceptions seem to indicate a
1970's-style reflation fear. Over the next several months, those differences
should close and we believe most of the adjustment will come from the
perception side. Inflation measures such as the Consumer Price Index (CPI)
should continue showing only mild price pressures for the rest of 1996. For the
remainder of 1996, we expect the Federal funds rate to remain at 5.25% until
the fourth quarter. If our economic outlook is correct and recession appears
likely early next year, we expect the Fed to trim interest rates from 5.25% to
5.00% shortly after the Presidential elections.
STAR TREASURY FUND
Q Can you comment on the economy and the interest rate environment during the
reporting period?
A Economic data and perceptions made major shifts in last six months and
created confusion about the true direction of the economy. The Boeing and
General Motors strikes, bad weather, the government shutdown, the drought and
the general reaction of politics in an election year have provided enough
diversion to impact any economic forecast. The Fed had become concerned over
the course of economic growth and decided to lower short-term interest rates in
February as "insurance" to keep the economy afloat. Ultimately, many economists
were surprised at the strong 2.8% growth rate in the first quarter and altered
their forecasts, anticipating rising interest rates and higher inflation. With
rising energy costs and grain prices, stimulative monetary and fiscal policies
and an emerging consumer, economists ratcheted up expectations for the
expansion. As a result of the unexpected economic strength, yields rose
dramatically by the end of May. In fact, since our last report, yields are
higher by a full 1%. Star Bank, however, views these circumstances outlined as
a short-term deviation from the overall course of the weak cycle which we have
long asserted. We continue to believe that the second quarter of 1996 will
represent the peak in GDP growth for the year and economic performance will
gradually diminish until we enter a recession in 1997.
Q How has the fund's yield responded to this rate environment?
A The Star Treasury Fund's 7-day yield declined from 5.13% on December 1,
1995 to 4.58% on May 31, 1996.* This was caused by higher yielding fixed coupon
securities maturing during the period and being replaced by relatively lower
yielding instruments. Compared to funds with similar objectives, this
experience was clearly widespread. The Star Treasury Fund has offered
competitive yields that equaled or exceeded its peer group over the reporting
period as reported by IBC "Donoghue's Money Fund Report".**
Q What was your strategy for managing the fund over the period?
A Our strategy has not drastically changed. Our forecast called for stable
short-term rates throughout the period. Thus, we maintained a neutral average
maturity and kept about 70% of the portfolio in high yielding repurchase
agreements and the remaining 30% in fixed rate securities that mature within 13
months. We believe this combination has offered both excellent liquidity and
superior fund yields compared to other strategies.
Q What is your outlook for rates in the near future?
A With the Federal funds standing at 5.25%, we believe the Fed will continue
to leave monetary policy unchanged for the near-term. Policy officials do not
seem alarmed by the stronger than expected GDP or inflation reports issued
during the first half of 1996. If the Fed remains focused on the "core"
inflation data that removes food and energy components, their view will
probably be moderated in favor of waiting to make changes. In the market place,
there seems to be a dichotomy between inflation data and perception. Reality
indicates some up-tick in price pressures, while perceptions seem to indicate a
1970's-style reflation fear. Over the next several months, those differences
should close and we believe most of the adjustment will come from the
perception side. Inflation measures such as the CPI should continue to show
only mild price pressures for the rest of 1996. For the remainder of 1996, we
expect the Federal funds rate to remain at 5.25% until the fourth quarter. If
our economic outlook is correct and recession appears likely early next year,
we expect the Fed to trim interest rates from 5.25% to 5.00% shortly after the
Presidential elections.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary.
** Donoghue's Money Fund Report publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly and
12-month-to-date investment results for the same money funds.
SHAREHOLDER VOTING RESULTS
- --------------------------------------------------------------------------------
A Special Meeting of Fund shareholders was held on February 9, 1996. On February
9, 1996, the record date for shareholders voting at the meeting, there were
847,602,955 total outstanding shares. The following item was considered by
shareholders and the results of their voting were as follows:
Agenda Item
To approve or disapprove the following individuals as Board Members:
Ralph R. Burchenal, Thomas L. Conlan, Jr., Edward C. Gonzales, Alfred
Gottschalk, Ph.D., Robert J. Hill, D.O., Barry L. Larkin and William H. Zimmer,
III.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
566,241,945 448,459 --
565,737,927 952,810 --
566,293,940 396,464 --
566,423,929 1,266,476 --
566,069,006 621,398 --
561,770,620 4,919,785 --
566,459,083 231,320 --
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ----------------------------------------------------------------- ---------------- --------------
SHORT-TERM MUNICIPALS--99.5%
- -------------------------------------------------------------------------------
ALABAMA--0.7%
-----------------------------------------------------------------
$ 1,200,000 Montgomery, AL, BMC Special Care Facilities Finance Authority,
Weekly VRDNs Revenue Refunding Bonds (VHA Alabama, Inc. Capital
Asset Financing Program)/ (Series G)/(First National Bank of
Chicago SPA)/ (AMBAC Insured) AAA/A-1 $ 1,200,000
----------------------------------------------------------------- --------------
COLORADO--1.7%
-----------------------------------------------------------------
3,000,000 Smith Creek, CO, Weekly VRDNs Metropolitan District Revenue Bonds
(Nationsbank, TX LOC) A-1 3,000,000
----------------------------------------------------------------- --------------
FLORIDA--1.1%
-----------------------------------------------------------------
2,000,000 Escambia County, FL, IDA Weekly VRDNs Revenue Bonds (Pacer
Industries, Inc.)/(Series 1991)/(Trust Co. Bank LOC) Aa3 2,000,000
----------------------------------------------------------------- --------------
GEORGIA--1.8%
-----------------------------------------------------------------
2,150,000 Fulton County, GA, Development Authority Weekly VRDNs Revenue
Bonds (Georgia Tech Athletic Association, Inc.)/(Trust Co. Bank,
Atlanta, GA LOC) Aa3 2,150,000
-----------------------------------------------------------------
1,000,000 Fulton County, GA, Development Authority Weekly VRDNs Revenue
Bonds (Robert W. Woodruff Arts Center)/(SunTrust Bank, Atlanta,
GA LOC) Aa3 1,000,000
----------------------------------------------------------------- --------------
Total 3,150,000
----------------------------------------------------------------- --------------
ILLINOIS--22.5%
-----------------------------------------------------------------
1,800,000 Chicago, IL, 3.65% GO Tender Notes (Series A)/ (Morgan Guaranty
Trust LOC), 10/31/1996 Sp1+/VMIG1 1,800,000
-----------------------------------------------------------------
2,400,000 Cook County, IL, Weekly VRDNs Revenue Bonds (Catholic Charities
Housing Development Corp.)/ (Series 1988A-1)/(National
Westminster LOC) VMIG1 2,400,000
-----------------------------------------------------------------
2,500,000 Illinois Development Finance Authority, 3.15% Pollution Control
Revenue Bonds (Illinois Power Co.)/ (Series C)/(Canadian Imperial
Bank LOC), 6/13/1996 A-1+/VMIG1 2,500,000
-----------------------------------------------------------------
1,055,000 Illinois Development Finance Authority, Weekly VRDNs Revenue
Bonds (Lake Forest Academy)/ (Northern Trust Co. LOC) A-1+ 1,055,000
-----------------------------------------------------------------
2,000,000 Illinois Development Finance Authority, Weekly VRDNs Revenue
Bonds (Roosevelt University Project)/ (American National Bank
LOC) A-1+ 2,000,000
-----------------------------------------------------------------
3,000,000 Illinois Development Finance Authority, Weekly VRDNs Revenue
Bonds (St. Ignatius College)/ (Northern Trust Co. LOC) A-1+ 3,000,000
-----------------------------------------------------------------
4,500,000 Illinois Educational Facilities Authority, Weekly VRDNs Revenue
Bonds (Newberry Library)/(Northern Trust Co. LOC) VMIG1 4,500,000
-----------------------------------------------------------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ----------------------------------------------------------------- ---------------- --------------
SHORT-TERM MUNICIPALS--CONTINUED
- -------------------------------------------------------------------------------
ILLINOIS--CONTINUED
-----------------------------------------------------------------
$ 6,000,000 Illinois Health Facilities Authority, 3.60% Revenue Bonds
(Victory Health Services Project)/(Series C)/ (First National
Bank of Chicago LOC), 8/14/1996 VMIG1 $ 6,000,000
-----------------------------------------------------------------
1,500,000 Illinois Health Facilities Authority, Weekly VRDNs Revenue Bonds
(Evangelical Hospital Corp.)/(Series A)/(First National Bank of
Chicago LOC) VMIG1 1,500,000
-----------------------------------------------------------------
8,000,000 Illinois Health Facilities Authority, Weekly VRDNs Revenue Bonds
(Gottlieb Health Resources, Inc.)/ (Harris Trust & Savings Bank,
IL LOC) VMIG1 8,000,000
-----------------------------------------------------------------
4,700,000 Illinois Health Facilities Authority, Weekly VRDNs Revenue Bonds
(West Suburban Hospital Medical Center)/(First National Bank of
Chicago LOC) VMIG1 4,700,000
-----------------------------------------------------------------
1,630,000 Schaumburg, IL, IDR Weekly VRDNs (LaQuinta Motor
Inns)/(NationsBank of Fort Worth, TX LOC) Aa3 1,630,000
-----------------------------------------------------------------
350,000 Springfield, IL, Community Improvement Weekly VRDNs Revenue
Refunding Bonds (Kent Family, Inc. Project)/(PNC Bank, PA LOC) A1 350,000
----------------------------------------------------------------- --------------
Total 39,435,000
----------------------------------------------------------------- --------------
INDIANA--6.2%
-----------------------------------------------------------------
2,000,000 Indiana Bond Bank, 4.25%, (Series A-2), 1/9/1997 Sp1+/MIG1 2,008,815
-----------------------------------------------------------------
4,000,000 Indianapolis, IN, EDR, Weekly VRDNs (Rand McNally Project)/(First
Union National Bank, NC LOC) A-1 4,000,000
-----------------------------------------------------------------
3,195,000 Logansport, IN, Weekly VRDNs (MMMs Investment Project)/(Bank One,
Indianapolis, IN LOC) AA 3,195,000
-----------------------------------------------------------------
1,700,000 Purdue University, IN, Weekly VRDNs University Revenue Bonds
(Student Fee)/(Series H) A-1+/VMIG1 1,700,000
----------------------------------------------------------------- --------------
Total 10,903,815
----------------------------------------------------------------- --------------
KENTUCKY--3.8%
-----------------------------------------------------------------
1,000,000 Boone County, KY, IDR Weekly VRDNs (Square D Co.)/(Series
A)/(Societe Generale LOC) A-1+ 1,000,000
-----------------------------------------------------------------
4,000,000 Fulton, KY, IDA Weekly VRDNs (Community Health System of
Kentucky)/(First Union National Bank, Charlotte, NC LOC) VMIG1 4,000,000
-----------------------------------------------------------------
1,700,000 Louisville, KY, IDA Weekly VRDNs (222 Project)/(PNC Bank, KY LOC) A-1 1,700,000
----------------------------------------------------------------- --------------
Total 6,700,000
----------------------------------------------------------------- --------------
MAINE--1.7%
-----------------------------------------------------------------
3,000,000 Maine State, 4.50% GO TANs, 6/28/1996 Sp1+/MIG1 3,001,601
----------------------------------------------------------------- --------------
MARYLAND--0.4%
-----------------------------------------------------------------
700,000 Maryland State, IDA EDR Weekly VRDNs (Maryland Academy of
Sciences)/(NationsBank, NC LOC) VMIG1 700,000
----------------------------------------------------------------- --------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ----------------------------------------------------------------- ---------------- --------------
SHORT-TERM MUNICIPALS--CONTINUED
- -------------------------------------------------------------------------------
MICHIGAN--0.4%
-----------------------------------------------------------------
$ 705,000 Lenawee County, MI, Economic Development Corp. Weekly VRDNs
(Hardwoods of Michigan, Inc.)/(Series 1989)/(National City Bank,
OH LOC) VMIG1 $ 705,000
----------------------------------------------------------------- --------------
MISSISSIPPI--1.1%
-----------------------------------------------------------------
2,000,000 Forest, MS, IDR Weekly VRDNs Revenue Bonds (Sara Lee Corp.) AA- 2,000,000
----------------------------------------------------------------- --------------
MISSOURI--10.4%
-----------------------------------------------------------------
2,000,000 Independence, MO, 3.65% Water Utility Revenue Bonds,
(Westdeutsche Landesbank Girozentrale LOC), 7/11/1996 VMIG1 2,000,000
-----------------------------------------------------------------
2,100,000 Independence, MO, 3.65% Water Utility Revenue Bonds,
(Westdeutsche Landesbank Girozentrale LOC), 7/11/1996 VMIG1 2,100,000
-----------------------------------------------------------------
800,000 Independence, MO, IDA Weekly VRDNs (Shoney's Inn)/(Wachovia Bank,
NC LOC) NR (B) 800,000
-----------------------------------------------------------------
2,500,000 Missouri State, Environmental Improvement & Energy Authority
3.55% Revenue Bonds (Union Electric Co.), 7/10/1996 A-1+/P1 2,500,000
-----------------------------------------------------------------
4,000,000 Missouri State, Environmental Improvement & Energy Authority
3.65% Revenue Bonds (Union Electric Co.), 7/9/1996 A-1+/P1 4,000,000
-----------------------------------------------------------------
4,000,000 Missouri State, Environmental Improvement & Energy Authority,
Weekly VRDNs Revenue Bonds (Kansas City Power & Light Co.) A-1/VMIG1 4,000,000
-----------------------------------------------------------------
2,800,000 Missouri State, HEFA, Weekly VRDNs Revenue Bonds (Washington
University)/(Series A) A-1+/VMIG1 2,800,000
----------------------------------------------------------------- --------------
Total 18,200,000
----------------------------------------------------------------- --------------
MONTANA--1.1%
-----------------------------------------------------------------
2,000,000 Forsyth, Rosebud County, MT, Weekly VRDNs Pollution Control
Revenue Bonds (Portland General Electric Company)/(Swiss Bank
Corp., Basle LOC) A-1+/P1 2,000,000
----------------------------------------------------------------- --------------
NEW MEXICO--1.0%
-----------------------------------------------------------------
1,700,000 Belen, NM, IDR Weekly VRDNs Revenue Bonds (United Desiccants,
Inc.)/(National City Bank, KY LOC) NR (B) 1,700,000
----------------------------------------------------------------- --------------
OHIO--18.4%
-----------------------------------------------------------------
2,000,000 Beavercreek, OH, Local School District, 4.03% BANs,
7/18/1996 NR (C) 2,001,343
-----------------------------------------------------------------
2,500,000 Butler County, OH, 3.79% BANs, 8/30/1996 NR (C) 2,502,676
-----------------------------------------------------------------
1,250,000 Butler County, OH, 4.07% BANs, 4/24/1997 NR (C) 1,254,537
-----------------------------------------------------------------
950,000 Butler County, OH, 4.28% BANs, 11/1/1996 NR (C) 951,641
-----------------------------------------------------------------
500,000 Centerville, OH, Weekly VRDNs Health Care Revenue Bonds (Bethany
Lutheran Village Continuing Care Facility)/(PNC Bank, OH, LOC) VMIG1 500,000
-----------------------------------------------------------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ----------------------------------------------------------------- ---------------- --------------
SHORT-TERM MUNICIPALS--CONTINUED
- -------------------------------------------------------------------------------
OHIO--CONTINUED
-----------------------------------------------------------------
$ 2,500,000 Columbus, OH, Weekly VRDNs Sewer Revenue Bonds A-1+/VMIG1 $ 2,500,000
-----------------------------------------------------------------
750,000 Greater Cleveland Regional Transportation Authority, OH, 3.90%
BANs, 10/17/1996 MIG1 751,246
-----------------------------------------------------------------
2,000,000 Hamilton County, OH, 4.00% BANs, (Series A),
4/10/1997 MIG1 2,008,272
-----------------------------------------------------------------
3,000,000 Marion County, OH, Weekly VRDNs Hospital Revenue Bonds (Pooled
Lease Program)/(Bank One, Akron, OH LOC) A-1+ 3,000,000
-----------------------------------------------------------------
2,365,000 Marion County, OH, Weekly VRDNs Hospital Revenue Bonds (Pooled
Lease Program)/(Bank One, Columbus, OH LOC) A-1+ 2,365,000
-----------------------------------------------------------------
500,000 Ohio State University, Weekly VRDNs, (General Receipts)/(Series
1992B) A-1+/VMIG1 500,000
-----------------------------------------------------------------
2,000,000 Ohio State, 4.52% RANs (School District Cash Flow),
6/28/1996 MIG1 2,000,884
-----------------------------------------------------------------
2,325,000 Ohio State, IDR Weekly VRDNs Revenue Bonds (Cincinnati Riverfront
Coliseum, Inc.)/(PNC Bank, Cincinnati, OH LOC) A1 2,325,000
-----------------------------------------------------------------
2,000,000 Perry, OH, 3.65% GO (Lake County Local School District)/(Bank
One, Cleveland, OH, LOC), 6/1/1996 Aa2 2,000,000
-----------------------------------------------------------------
600,000 Perry, OH, 3.75% GO (Lake County Local School District)/(Bank
One, Cleveland, OH, LOC), 12/1/1996 Aa2 600,000
-----------------------------------------------------------------
400,000 University of Cincinnati, OH, 3.75% BANs (Series Q), 3/20/1997 Sp1+/MIG1 401,393
-----------------------------------------------------------------
2,600,000 University of Cincinnati, OH, 3.75% BANs (Series S-1), 3/20/1997 Sp1+/MIG1 2,609,052
-----------------------------------------------------------------
4,000,000 University of Cincinnati, OH, 4.25% General Receipts Anticipation
Revenue Notes, 8/28/1996 Sp1+/MIG1 4,002,311
----------------------------------------------------------------- --------------
Total 32,273,355
----------------------------------------------------------------- --------------
PENNSYLVANIA--9.8%
-----------------------------------------------------------------
1,200,000 Allegheny County, PA, HDA Daily VRDNs (Presbyterian University
Hospital)/(PNC Bank, PA SPA) A-1/VMIG1 1,200,000
-----------------------------------------------------------------
1,000,000 Allegheny County, PA, HDA, Daily VRDNs (Presbyterian University
Hospital)/(PNC Bank, PA SPA) A-1/VMIG1 1,000,000
-----------------------------------------------------------------
600,000 Allegheny County, PA, HDA, Daily VRDNs (Presbyterian University
Hospital)/(Series B)/(PNC Bank, PA SPA) A-1/VMIG1 600,000
-----------------------------------------------------------------
2,400,000 Allegheny County, PA, HDA, Daily VRDNs (Presbyterian University
Hospital)/(Series A)/(PNC Bank, PA SPA) A-1/VMIG1 2,400,000
-----------------------------------------------------------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ----------------------------------------------------------------- ---------------- --------------
SHORT-TERM MUNICIPALS--CONTINUED
- -------------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
-----------------------------------------------------------------
$ 3,000,000 Allegheny County, PA, 3.875% Grant Anticipation Notes (Port
Authority)/(Series A)/(PNC Bank, Pittsburgh, PA LOC), 6/28/1996 MIG1 $ 3,000,000
-----------------------------------------------------------------
6,000,000 Allegheny County, PA, IDR 3.75% Revenue Bonds (Duquesne Light
Co.)/(Series A)/(Canadian Imperial Bank LOC), 11/7/1996 A-1+/P1 6,000,000
-----------------------------------------------------------------
1,000,000 East Penn, PA, Industrial & Commercial Development Authority,
Weekly VRDNs Revenue Bonds (Electronic Data Systems Corp.
)/(Wachovia Bank, GA, LOC) Aa2 1,000,000
-----------------------------------------------------------------
2,000,000 Temple University, Commonwealth System of Higher Education
University Funding Obligations, 4.625% Revenue Bonds, 5/20/1997 Sp1+ 2,017,243
----------------------------------------------------------------- --------------
Total 17,217,243
----------------------------------------------------------------- --------------
TENNESSEE--2.7%
-----------------------------------------------------------------
1,000,000 Greenville, TN, IDR Weekly VRDNs Revenue Bonds (Ball Corp.
Project)/(Wachovia Bank, GA, LOC) A-1+ 1,000,000
-----------------------------------------------------------------
3,720,000 Sullivan County, TN, Health, Education & Housing Facilities
Revenue Bonds Weekly VRDNs (Ashbury Center Residential Care
Facility)/(NationsBank, NC, LOC) NR (C) 3,720,000
----------------------------------------------------------------- --------------
Total 4,720,000
----------------------------------------------------------------- --------------
TEXAS--10.4%
-----------------------------------------------------------------
2,480,000 Bexar County, TX, Health Facilities Development Corporation
Weekly VRDNs (Army Retirement-Residence Foundation)/(Rabobank,
Nederland, LOC) A-1+ 2,480,000
-----------------------------------------------------------------
2,430,000 Denton, TX, IDA Revenue Bonds VRNs (Safety-Kleen Corp.)/(Union
Bank of Switzerland LOC) VMIG1 2,430,000
-----------------------------------------------------------------
3,500,000 Greater East, TX, Higher Education Authority, Weekly VRDNs
Student Loans Revenue Bonds (Series A)/ (Student Loan Marketing
Association LOC) A-1+/VMIG1 3,500,000
-----------------------------------------------------------------
1,900,000 San Antonio, TX, IDA Weekly VRDNs (San Antonio River Center
Associates)/(PNC Bank, PA, LOC) A1 1,900,000
-----------------------------------------------------------------
2,000,000 Texas State Public Finance Authority, 3.30% (Series 1993A),
7/25/1996 A-1+/P1 2,000,000
-----------------------------------------------------------------
3,000,000 Texas State Public Finance Authority, 3.35% (Series 1993A),
7/25/1996 A-1+/P1 3,000,000
-----------------------------------------------------------------
3,000,000 Texas State, 4.75% TRANs (Series A), 8/30/1996 Sp1+/MIG1 3,004,822
----------------------------------------------------------------- --------------
Total 18,314,822
----------------------------------------------------------------- --------------
VIRGINIA--2.1%
-----------------------------------------------------------------
1,840,000 Charlottesville, VA, IDA IDR 3.75% Revenue Bonds (Safeway,
Inc.)/(Bankers Trust Co. LOC), 6/3/1996 A-1 1,840,000
-----------------------------------------------------------------
</TABLE>
STAR TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
<C> <S> <C> <C>
- ------------ ----------------------------------------------------------------- ---------------- --------------
SHORT-TERM MUNICIPALS--CONTINUED
- -------------------------------------------------------------------------------
VIRGINIA--CONTINUED
-----------------------------------------------------------------
$ 1,885,000 Rockbridge County, VA, IDA IDR Revenue Bonds, 3.30% (Safeway,
Inc.)/(Bankers Trust Co. LOC),
8/1/1996 A-1 $ 1,885,000
----------------------------------------------------------------- --------------
Total 3,725,000
----------------------------------------------------------------- --------------
WYOMING--2.2%
-----------------------------------------------------------------
2,675,000 Douglas, WY, IDR 3.75% Revenue Bonds (Safeway, Inc.)/(Bankers
Trust Co. LOC), 6/3/1996 A-1 2,675,000
-----------------------------------------------------------------
1,200,000 Gillette, WY, 3.65% Pollution Control Revenue Bonds,
(PacifiCorp.)/(Deutsche Bank, A.G. LOC), 8/15/1996 A-1+/P1 1,200,000
----------------------------------------------------------------- --------------
Total 3,875,000
----------------------------------------------------------------- --------------
TOTAL SHORT-TERM MUNICIPALS 174,820,836
----------------------------------------------------------------- --------------
MUTUAL FUNDS--0.0%
- -------------------------------------------------------------------------------
16,338 SEI Tax Exempt Trust (AT NET ASSET VALUE) 16,338
----------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(A) $ 174,837,174
----------------------------------------------------------------- --------------
</TABLE>
(a) 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. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($175,652,010) at
May 31, 1996.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
BANs--Bond Anticipation Notes
EDR--Economic Development Revenue
GO--General Obligation
HDA--Hospital Development Authority
HEFA--Health and Education Facilities Authority
IDA--Industrial Development Authority
IDR--Industrial Development Revenue
LOC--Letter of Credit
MMMs--Money Market Municipals
RANs--Revenue Anticipation Notes
SPA--Standby Purchase Agreement
TANs--Tax Anticipation Notes
TRANs--Tax and Revenue Anticipation Notes
VHA--Veterans Housing Administration
VRDNs--Variable Rate Demand Notes
VRNs--Variable Rate Notes
(See Notes which are an integral part of the Financial Statements)
STAR TAX-FREE MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $ 174,837,174
- -------------------------------------------------------------------------------------------------
Income receivable 1,360,329
- ------------------------------------------------------------------------------------------------- --------------
Total assets 176,197,503
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------
Income distribution payable $ 474,988
- -------------------------------------------------------------------------------------
Accrued expenses 70,505
- ------------------------------------------------------------------------------------- ----------
Total liabilities 545,493
- ------------------------------------------------------------------------------------------------- --------------
Net Assets for 175,652,010 shares outstanding $ 175,652,010
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------
$175,652,010 / 175,652,010 shares outstanding $1.00
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TAX-FREE MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest $ 3,355,903
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 507,559
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 94,274
- ---------------------------------------------------------------------------------------
Custodian fees 19,504
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,115
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,318
- ---------------------------------------------------------------------------------------
Auditing fees 8,235
- ---------------------------------------------------------------------------------------
Legal fees 2,765
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 21,362
- ---------------------------------------------------------------------------------------
Shareholder services fee 32,435
- ---------------------------------------------------------------------------------------
Share registration costs 20,141
- ---------------------------------------------------------------------------------------
Printing and postage 10,722
- ---------------------------------------------------------------------------------------
Insurance premiums 2,988
- ---------------------------------------------------------------------------------------
Miscellaneous 1,411
- --------------------------------------------------------------------------------------- -----------
Total expenses 738,829
- ---------------------------------------------------------------------------------------
Waiver--
- ---------------------------------------------------------------------------------------
Waiver of investment advisory fee (114,677)
- --------------------------------------------------------------------------------------- -----------
Net expenses 624,152
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income $ 2,731,751
- ---------------------------------------------------------------------------------------------------- ------------
</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>
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 2,731,751 $ 5,121,416
- ----------------------------------------------------------------- ---------------------- ----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Distributions from net investment income (2,731,751) (5,121,416)
- ----------------------------------------------------------------- ---------------------- ----------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 296,456,709 512,575,789
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 359 771
- -----------------------------------------------------------------
Cost of shares redeemed (288,161,230) (480,647,041)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from share transactions 8,295,838 31,929,519
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets 8,295,838 31,929,519
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period 167,356,172 135,426,653
- ----------------------------------------------------------------- ---------------------- ----------------------
End of period $ 175,652,010 $ 167,356,172
- ----------------------------------------------------------------- ---------------------- ----------------------
</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>
SIX MONTHS
ENDED
MAY 31,
1996 YEAR ENDED NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992 1991(A)
<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 0.02 0.03 0.02 0.02 0.03 0.03
- -----------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------
Distributions from net
investment income (0.02) (0.03) (0.02) (0.02) (0.03) (0.03)
- ----------------------------------------- ------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------- ------- --------- --------- --------- --------- -----------
TOTAL RETURN (B) 1.49% 3.32% 2.15% 1.91% 2.59% 2.84%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.68%* 0.66% 0.65% 0.65% 0.66% 0.55%*
- -----------------------------------------
Net investment income 2.96%* 3.26% 2.12% 1.90% 2.54% 3.95%*
- -----------------------------------------
Expense waiver/
reimbursement (c) 0.12%* 0.15% 0.15% 0.40% 0.40% 0.48%*
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period
(000 omitted) $175,652 $167,356 $135,427 $135,022 $144,487 $113,731
- -----------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from March 15, 1991 (date of initial
public investment) to November 30, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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)
STAR TREASURY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- --------------------------------------------------------------------------------- --------------
U.S. TREASURY--27.5%
- -------------------------------------------------------------------------------------------------
$ 102,000,000 U.S. Treasury Bills, 6/6/1996 - 5/29/1997 $ 100,450,867
---------------------------------------------------------------------------------
110,000,000 U.S. Treasury Notes, 4.375% - 8.50%, 6/30/1996 - 5/15/1997 110,745,766
--------------------------------------------------------------------------------- --------------
TOTAL U.S. TREASURY 211,196,633
--------------------------------------------------------------------------------- --------------
(A) REPURCHASE AGREEMENTS--72.7%
- -------------------------------------------------------------------------------------------------
30,000,000 Bear Stearns & Co., Inc., 5.30%, dated 5/31/1996, due 6/3/1996 30,000,000
---------------------------------------------------------------------------------
30,000,000 CS First Boston, Inc., 5.25%, dated 5/31/1996, due 6/3/1996 30,000,000
---------------------------------------------------------------------------------
30,000,000 Dean Witter Reynolds, Inc., 5.20%, dated 5/31/1996, due 6/3/1996 30,000,000
---------------------------------------------------------------------------------
25,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.17%,
dated 5/29/1996, due 6/5/1996 25,000,000
---------------------------------------------------------------------------------
167,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 5.30%,
dated 5/31/1996, due 6/3/1996 167,000,000
---------------------------------------------------------------------------------
6,000,000 Fuji Government Securities, Inc., 5.15%, dated 5/31/1996,
due 6/3/1996 6,000,000
---------------------------------------------------------------------------------
25,000,000 Fuji Government Securities, Inc., 5.30%, dated 5/31/1996,
due 6/3/1996 25,000,000
---------------------------------------------------------------------------------
6,000,000 HSBC Securities, Inc., 5.25%, dated 5/31/1996, due 6/3/1996 6,000,000
---------------------------------------------------------------------------------
30,000,000 HSBC Securities, Inc., 5.30%, dated 5/31/1996, due 6/3/1996 30,000,000
---------------------------------------------------------------------------------
30,000,000 Merrill Lynch, Pierce, Fenner and Smith, 5.15%, dated 5/31/1996,
due 6/3/1996 30,000,000
---------------------------------------------------------------------------------
179,525,000 SBC Capital Markets, Inc., 5.30%, dated 5/31/1996, due 6/3/1996 179,525,000
--------------------------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS 558,525,000
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $ 769,721,633
--------------------------------------------------------------------------------- --------------
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($768,720,817) at May 31, 1996.
(See Notes which are an integral part of the Financial Statements)
STAR TREASURY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $ 769,721,633
- -------------------------------------------------------------------------------------------------
Cash 466
- -------------------------------------------------------------------------------------------------
Income receivable 1,660,538
- ------------------------------------------------------------------------------------------------- --------------
Total assets 771,382,637
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------
Income distribution payable $ 2,603,992
- -----------------------------------------------------------------------------------
Accrued expenses 57,828
- ----------------------------------------------------------------------------------- ------------
Total liabilities 2,661,820
- ------------------------------------------------------------------------------------------------- --------------
Net Assets for 768,720,817 shares outstanding $ 768,720,817
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------
$768,720,817 / 768,720,817 shares outstanding $1.00
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TREASURY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest $ 17,565,096
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------
Investment advisory fee $ 1,616,143
- -------------------------------------------------------------------------------------
Administrative personnel and services fee 330,149
- -------------------------------------------------------------------------------------
Custodian fees 75,438
- -------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 19,514
- -------------------------------------------------------------------------------------
Directors'/Trustees' fees 2,040
- -------------------------------------------------------------------------------------
Auditing fees 9,144
- -------------------------------------------------------------------------------------
Legal fees 3,084
- -------------------------------------------------------------------------------------
Portfolio accounting fees 52,623
- -------------------------------------------------------------------------------------
Shareholder services fee 113,647
- -------------------------------------------------------------------------------------
Share registration costs 26,153
- -------------------------------------------------------------------------------------
Printing and postage 9,012
- -------------------------------------------------------------------------------------
Insurance premiums 3,427
- -------------------------------------------------------------------------------------
Miscellaneous 1,456
- ------------------------------------------------------------------------------------- ------------
Total expenses 2,261,830
- --------------------------------------------------------------------------------------------------- -------------
Net investment income $ 15,303,266
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STAR TREASURY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 15,303,266 $ 23,555,979
- ----------------------------------------------------------------- ---------------------- ----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Distributions from net investment income (15,303,266) (23,555,979)
- ----------------------------------------------------------------- ---------------------- ----------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 2,733,647,198 4,733,626,896
- -----------------------------------------------------------------
Net asset value of shares issued in connection with acquisition
of Prime Obligations Fund -- 86,272,662
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 34,970 102,122
- -----------------------------------------------------------------
Cost of shares redeemed (2,619,924,282) (4,523,804,720)
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets resulting from share transactions 113,757,886 296,196,960
- ----------------------------------------------------------------- ---------------------- ----------------------
Change in net assets 113,757,886 296,196,960
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period 654,962,931 358,765,971
- ----------------------------------------------------------------- ---------------------- ----------------------
End of period $ 768,720,817 $ 654,962,931
- ----------------------------------------------------------------- ---------------------- ----------------------
</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>
SIX MONTHS
ENDED
MAY 31,
1996 YEAR ENDED NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989(A)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.02 0.05 0.03 0.03 0.03 0.06 0.07 0.05
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Distributions from net
investment income (0.02) (0.05) (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 $ 1.00 $ 1.00
- ------------------------------ ------ --------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN (B) 2.39% 5.23% 3.30% 2.56% 3.41% 5.72% 7.72% 5.36%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 0.70%* 0.71% 0.70% 0.70% 0.71% 0.71% 0.73% 0.77%*
- ------------------------------
Net investment income 4.73%* 5.14% 3.24% 2.53% 3.33% 5.51% 7.44% 8.28%*
- ------------------------------
Expense waiver/
reimbursement (c) -- -- -- 0.25% 0.25% 0.10% 0.03% 0.01%*
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $768,721 $654,963 $358,766 $386,020 $346,508 $307,278 $226,519 $174,062
- ------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 14, 1989 (date of initial
public investment) to November 30, 1989.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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)
STAR FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(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 eight diversified portfolios (individually referred to as the
"Fund", or collectively as the "Funds") The financial statements of the
following portfolios are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
<S> <C>
Star Tax-Free Money Market Fund To provide current income exempt from federal regular
("Tax-Free Money Market Fund") income tax consistent with stability of principal.
Star Treasury Fund ("Treasury Fund") To achieve stability of principal and current income
consistent with stability of principal.
</TABLE>
The assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held.
Star Funds, except Stellar Fund, are offered without class designation. Shares
of Stellar Fund are offered in two classes: Investment shares and Trust shares.
On April 24, 1995, the Treasury Fund acquired all the net assets of Star Prime
Obligations Fund ("Prime Obligations Fund") pursuant to a plan of reorganization
approved by Prime Obligations Fund shareholders on April 20, 1995. The
acquisition was accomplished by a tax-free exchange between the Prime
Obligations Fund and the Treasury Fund on April 24, 1995. The net assets of the
Prime Obligations Fund were combined with those of the Treasury Fund. The
aggregate net assets of the Treasury Fund and Prime Obligations Fund immediately
before acquisition were $392,462,023 and $86,272,662, respectively. Immediately
after the acquisition, the combined aggregate net assets of the Treasury Fund
were $478,734,685.
(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--The Funds' use of the amortized cost method to value
their portfolio securities is in accordance with Rule 2a-7 under the Act.
Investments in other open-end 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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Funds to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
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 the guidelines and/or
standards reviewed or 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 income. Accordingly, no
provisions for federal taxes 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. USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
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 May
31, 1996, capital paid-in for Tax-Free Money Market Fund and Treasury Fund
aggregated $175,652,010 and $768,720,817, respectively. Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET FUND
SIX MONTHS
ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
Shares sold 296,456,709 512,575,789
- ---------------------------------------------------------------------
Shares issued in connection with acquisition of Prime Obligations
Fund -- --
- ---------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 359 771
- ---------------------------------------------------------------------
Shares redeemed (288,161,230) (480,647,041)
- --------------------------------------------------------------------- ---------------- ----------------------
Net change resulting from Fund share transactions 8,295,838 31,929,519
- --------------------------------------------------------------------- ---------------- ----------------------
</TABLE>
<TABLE>
<CAPTION>
TREASURY FUND
SIX MONTHS
ENDED
MAY 31, 1996 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1995
<S> <C> <C>
Shares sold 2,733,647,198 4,733,626,896
- --------------------------------------------------------------------
Shares issued in connection with acquisition of Prime Obligations
Fund -- 86,272,662
- --------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 34,970 102,122
- --------------------------------------------------------------------
Shares redeemed (2,619,924,282) (4,523,804,720)
- -------------------------------------------------------------------- ---------------- ----------------------
Net change resulting from Fund share transactions 113,757,886 296,196,960
- -------------------------------------------------------------------- ---------------- ----------------------
</TABLE>
STAR FUNDS
- --------------------------------------------------------------------------------
(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>
Tax-Free Money Market Fund 0.55%
- -------------------------------------------------------------------------------------------------------
Treasury Fund 0.50%
- -------------------------------------------------------------------------------------------------------
</TABLE>
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The fee paid to FAS 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.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Star Bank, N.A., the Funds will pay Star Bank, N.A. up to 0.25% of average
daily net assets for the period. For the foreseeable future, the Funds plan to
limit the Shareholder Servicing fee to 0.04% of average daily net assets. The
fee paid to Star Bank, N.A. is used to finance certain services for shareholders
and to maintain shareholder accounts.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the Funds. The fee
paid to FSSC is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Funds' accounting records
for which it receives a fee. The fee is based on the level of each Fund's
average daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Star Bank, N.A. is the Funds' custodian for which it receives a
fee. The fee is based on the level of each Fund's average net assets for the
period, plus out-of-pocket expenses.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Ralph R. Burchenal Edward C. Gonzales
Thomas L. Conlan, Jr. President and Treasurer
Edward C. Gonzales Joseph S. Machi
Alfred Gottschalk, Ph.D. Vice President and Assistant Treasurer
Robert J. Hill, D.O. C. Grant Anderson
Barry L. Larkin Secretary
William H. Zimmer III
</TABLE>
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 risks, including the 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 Trust's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
- -----------------------------
Star Bank, N.A.
Investment Adviser
- -----------------------------
Federated Securities Corp.
Distributor
- -----------------------------
CUSIP 854911302
CUSIP 854911104
2062306 (7/96)
