OMB APPROVAL
OMB Number: 3235-0360
Expires: July 31, 1994
Estimated average burden
hours per response ..............0.05
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM N-17f-2
Certificate of Accounting of Securities and Similar
Investments in the Custody of
Management Investment Companies
Pursuant to Rule 17f-2 [17 CFR 270.17f-2]
1. Investment Company Act File Number: 811-5762
Date examination completed: May 31, 1997
2. State Identification Number:
AL AK AZ AR CA CO
CT DE DC FL GA HI
ID IL IN IA KS KY
LA ME MD MA MI MN
MS MO MT NE NV NH
NJ NM NY NC ND OH
OK OR PA RI SC SD
TN TX UT VT VA WA
WV WI WY PUERTO RICO
3. Exact name of investment company as specified in registration statement:
Star Funds
4. Address of principal executive office (number, street, city, state, zip
code): Federated Investors Tower, Pittburgh, PA 15222-3779
INSTRUCTIONS
This Form must be completed by investment companies that have custody
of securities or similar investments.
Investment Company
1. All items must be completed by the investment company.
2. Give this Form to the independent public accountant who, in
compliance with Rule 17f-2 under the Act and applicable state law,
examines securities and similar investments in the custody of the
investment company.
Accountant
3. Submit this Form to the Securities and Exchange Commission and
appropriate state securities administrators when filing the
certificate of accounting required by Rule 17f-2 under the Act and
applicable state law. File the original and one copy with the
Securities and Exchange Commission's principal office in Washington,
D.C., one copy with the regional office for the region in which the
investment company's principal business operations are conducted, and
one copy with the appropriate state of administrator(s), if
applicable.
THIS FROM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
SEC 2198 (11-91)
Report of Independent Public Accountants
To the Board of Trustees of
the Star Funds:
We have examined management's assertion about the Star Funds' (the
"Funds") compliance with the requirements of subsection (b) and (c) of
Rule 17f-2 under the Investment Company Act of 1940 (the "Act") as of
May 31, 1997 included in the accompanying Management Statement
Regarding Compliance with Certain Provisions of the Investment Company
Act of 1940. The Star Funds represents a Massachusetts business trust
and include the Star Treasury Fund, Star Tax-Free Money Market Fund,
Star Relative Value Fund, The Stellar Fund, Star U.S. Government
Income Fund, Star Capital Appreciation Fund, Star Growth Equity Fund,
Star Strategic Income Fund and Star Stellar Insured Tax Free Bond
Fund. Management is responsible for the Funds' compliance with the
requirements of the Act. Our responsibility is to express an opinion
on management's assertion about the Funds' compliance based on our
examination.
Our examination was made in accordance with standards established by
the American Institute of Certified Public Accountants and,
accordingly, included examining, on a test basis, evidence about the
Funds' compliance with those requirements and performing such other
procedures as we considered necessary in the circumstances. Included
among our procedures were the following tests performed as of May 31,
1997, and the period from November 30, 1996 (the date of last
examination) through May 31, 1997, with respect to agreement of
security purchases and sales, without prior notice to management:
Confirmation of all securities held by institutions in book entry form (the
Federal Reserve Bank of Cleveland, Bankers Trust New York Corporation and The
Depository Trust Company);
Confirmation of all securities hypothecated, pledged, placed in
escrow, or out for transfer with brokers, pledgees, transfer agents,
and/or remarketing agents;
Reconciliation of all such securities to the books and records of the Funds and
Star Bank, N.A., the custodian;
Confirmation of all repurchase agreements with brokers/banks and agreement of
underlying collateral with Star Bank, N.A. records; and
Agreement of two (2) security purchases and two (2) security sales or
maturities for each fund identified above since our last report from
the books and records of the Funds to broker confirmations.
We believe that our examination provides a reasonable basis for our
opinion. Our examination does not provide a legal determination on the
Funds' compliance with specified requirements.
In our opinion, management's assertion that the Star Funds was in
compliance with the requirements of subsections (b) and (c) of Rule
17f-2 of the Investment Company Act of 1940 as of May 31, 1997 is
fairly stated, in all material respects.
This report is intended solely for the information and use of
management of the Star Funds and the Securities and Exchange
Commission and should not be used for any other purpose.
Arthur Andersen LLP
Cincinnati, Ohio
July 28, 1997
Management Statement Regarding Compliance with
CERTAIN PROVISIONS OF THE INVESTMENT COMPANY ACT OF 1940
We, as members of management of the Star Funds (the "Funds"), the
investment company, and Star Bank, N.A., the custodian, are
responsible for complying with the requirement of subsection (b) and
(c) of Rule 17f-2, "Custody of Investments by Registered Management
Investment Companies," of the Investment Company Act of 1940. We are
also responsible for establishing and maintaining an effective
internal control structure over compliance with those requirements. We
have performed an evaluation of the Fund's compliance with the
requirements of subsection (b) and (c) of Rule 17f-2 as of May 31,
1997.
Based on this evaluation, we assert that the Funds were in compliance
with those provisions of Rule 17f-2 of the Investment Company Act of
1940 as of May 31, 1997 with respect to securities reflected in the
investment account of the Funds.
Star Funds Star Bank, N.A.
By: By:
Joseph S. Machi Daniel B. Benhase
Vice President and Assistant Treasurer Executive Vice President
July 28, 1997
