[LOGO OF STAR FUNDS]
BOND FUNDS
COMBINED
SEMI-ANNUAL
REPORT
May 31, 1998
The Stellar Insured Tax-Free Bond Fund
Star U.S. Government Income Fund
Star Strategic Income Fund
President's Message
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for the Star Bond
Funds. The report covers the six-month period from December 1, 1997 through May
31, 1998. It includes a discussion with each Fund's portfolio manager, which
covers economic and market conditions and their impact on Fund performance and
strategy. Next is a complete list of each Fund's holdings and the financial
statements.
Fund-by-fund highlights over the six-month period are as follows:
STELLAR INSURED TAX-FREE BOND FUND
The Stellar Insured Tax-Free Bond Fund is managed to provide income free of
federal income tax through a portfolio of municipal bonds.* The Fund paid
tax-free dividends totaling $0.23 per share and capital gains totaling $0.03 per
share and the net asset value rose from $10.25 to $10.35. Through dividends and
the rise in net asset value, the total return of this share class was 3.48%, or
(1.15%) adjusted for the sales charge.** By the end of the period, the Fund had
attracted $142.5 million in net assets.
STAR U.S. GOVERNMENT INCOME FUND
The Star U.S. Government Income Fund provided shareholders with dividends
totaling $0.28 per share through a portfolio that consisted of U.S. Treasury
securities (35.6%), government agency securities (29.7%) and corporate bonds
(31.7%) at the end of the period. During the period, the net asset value of the
Fund's A Shares rose slightly from $9.87 to $9.95. Through income and the rise
in net asset value, the A Shares achieved a total return of 3.73%, or 0.08%
adjusted for the sales charge.** The Fund's net assets totaled $129.4 million at
the end of the period. This report also contains information about the Fund's
new share class--B Shares--which began operation on April 27, 1998.
STAR STRATEGIC INCOME FUND
The Star Strategic Income Fund is managed to provide income through a
diversified portfolio of investments that, at the end of the period, included
corporate bonds (40.3%), government agency bonds (20.2%), real estate investment
trusts (18%), common and preferred stocks (9.8%), and international securities
(10.7%). The Fund's B Shares paid dividends totaling $0.39 per share and capital
gains totaling $0.10 per share. During the period, the net asset value declined
from $10.67 to $10.29 due to market conditions. The total return for the B
Shares was 1.01%, or (3.99%) adjusted for the maximum contingent deferred sales
charge.** At the end of the period, Fund net assets reached $204.1 million.
Thank you for pursuing your income-oriented goals through the Star 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,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
July 15, 1998
- --------
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** 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 their
original cost.
Investment Reviews
The Stellar Insured Tax-Free Bond Fund
Q The first half of the Fund's fiscal year was a generally positive period for
tax-free bonds.* How did the Stellar Insured Tax-Free Bond Fund perform in terms
of tax-free dividends and total return?
A In a falling interest rate environment, the Stellar Insured Fund has
maintained dividends by avoiding swapping. Net cash flows were directed towards
securities with slight premium coupons to shield the dividend payment, while
partially enhancing total return.
Q As we reach the midpoint of 1998, what are your expectations for the bond
market environment for the rest of the year?
A While we are constructive on interest rates, the municipal market is likely to
underperform treasuries due to the increased refunding volume. With little new
cash coming into the market, new issues are priced to attract non-traditional or
crossover buyers. Yield on recent purchases has been at 90% of comparative
treasury yields. We expect this market condition to persist.
Star U.S. Government Income Fund
Q What are your comments on what was a generally positive bond market over the
first half of the Fund's fiscal year?
A During the first half of our fiscal year, the U.S. economy continued to
witness strong domestic growth which was offset by the dampening effects of
Asia. A strong U.S. dollar, shrinking federal budget deficit, and good inflation
news, tipped the scales in favor of lower bond yields. Yields for the six month
period declined 26 basis points in both shorter and longer maturities. While the
yield curve, as measured by 2- to 30-year Treasury issues, was unchanged from
beginning to end, there was some steepening early in the first quarter. As for
sector performance, concern over earnings and new issuances resulted in muted
performance for the corporate bond sector. Mortgage backed securities suffered
slightly, due to market worries over faster prepayments that will result from
homeowners refinancing their mortgages. Throughout this period, our outlook was
constructive on the market, expecting interest rates to decline which helped
Fund performance. With the aid of a longer-term outlook and proprietary models,
the Fund was able to "lock-in" higher yields while maintaining its high level of
income.
Q In this environment, how did the Star U.S. Government Income Fund perform for
shareholders in terms of income and total return?
A Income levels remained steady through the period, despite lower market yield
levels. Total return for the six months ended May 31, 1998 for A Shares was
+3.73%, compared to +3.76% for the Lipper U.S. Government Bond Fund Average.**
Fund performance was enhanced by adding incremental yield through corporate
bonds and extending the portfolio average maturity during the first quarter.
*Income may be subject to federal alternative minimum tax and state and local
taxes.
**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 their
original cost. Total return, adjusted for sales charge for the period, for
Class A Shares was 0.08%. Total return, based on net asset value and adjusted
for the maximum contingent deferred sales charge for the period, for Class B
Shares from April 27, 1998 (date of initial public investment) to May 31,
1998, was 1.55% and (3.43%). Lipper figures represent the average of the total
returns reported by all of the mutual funds designated by Lipper Analytical
Services, Inc. as falling into the respective categories indicated. These
figures do not reflect sales charges.
Q What are your expectations for the rest of the year, and how have you
allocated the Fund's portfolio among Treasury, mortgage-backed, agency and
corporate bonds?
A Our current market outlook and longer-term themes remain steadfastly bullish.
Real bond yields are currently at 4.5% (nominal yield less inflation) which has
historically been an attractive level. U.S. bond yields provided some of the
highest inflation adjusted yields in the world, further enhancing their
attractiveness. Lastly, government borrowing continued to decline. For 1998, the
U.S. faces its first budget surplus since 1969 and will redeem more bonds than
it issues at a staggering pace. The long-term decline of interest rates that
began in 1981 remains fully intact and we expect bond yields to reach 5% by the
year 2000 and 4% before 2010. Shorter-term, our outlook has improved and we
expect these longer-term themes to exert more of a positive influence on the
market.
Treasury securities represent 36% of invested assets. We continue to recommend
an overweight allocation in the corporate bond market at 32% of the portfolio.
Although performance has lagged, fundamentals for the corporate bond market
remain positive. Favored industries include real estate investment trusts
(REITs), financials (especially insurance and regional banks), energy, and
consumer staples. Mortgage backed securities (MBS) and agency debentures round
out the sector outlook with a 30% allocation. We continue to advocate bonds that
are protected from early redemption. Historically, low volatility allows for the
purchase of better call protection with minimal yield tradeoff.
Star Strategic Income Fund
Q What is your review of the bond market during the first half of the Fund's
fiscal year?
A During the first half of our fiscal year, the U.S. economy continued to
witness strong domestic growth which was offset by the dampening effects of
Asia. A strong U.S. dollar, shrinking federal budget deficit, and good inflation
news, tipped the scales in favor of lower bond yields. Yields for the six month
period declined 26 basis points in both shorter and longer maturities. While the
yield curve as measured by 2- to 30-year Treasury issues was unchanged from
beginning to end, there was some steepening early in the first quarter. As for
sector performance, concern over earnings and new issuances resulted in muted
performance for the corporate bonds. Mortgage backed securities suffered
slightly, due to market worries over faster prepayments that will result from
homeowners refinancing their mortgages. Throughout this period, our outlook was
constructive on the market, expecting interest rates to decline. With the aid of
a longer-term outlook and proprietary models, the Fund was able to "lock-in"
higher yields while maintaining its high level of income.
Q In this environment, how did the Star Strategic Income Fund perform for
shareholders on an income and total return basis?
A The Star Strategic Income Fund seeks to generate high current income as its
only objective. Income levels have remained steady for the past six months,
despite lower market yield levels. In adjusting to this lower yield environment,
we have increased exposure to more value oriented investments such as REITs,
alternative capital structures, longer maturity bonds, and preferred shares.
Total return for the six months ended May 31, 1998 was +1.01%.* REITs have
underperformed significantly in 1998, but offer significant yield advantages
over other equity securities. A major advantage for the Strategic Income Fund is
its flexibility to allocate assets towards those investments which offer the
best value (or yield).
*Performance quoted reflects 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 their original
cost. Total return, adjusted for the maximum contingent deferred sales charge,
for the period was (3.99%).
Q With expectations of continued low inflation and slower U.S. economic growth--
and no foreseeable Federal Reserve Board action on rates--what do you see for
fixed income securities for the rest of 1998?
A Our current market outlook and longer-term themes remain steadfastly bullish.
Real bond yields are currently at 4.5% (nominal yield less inflation) which has
historically been an attractive level. U.S. bond yields provided some of the
highest inflation adjusted yields in the world, further enhancing their
attractiveness. Lastly, government borrowing continued to decline. For 1998, the
U.S. faces its first budget surplus since 1969 and will redeem more bonds that
it issues at a staggering pace. The long-term decline of interest rates that
began in 1981 remains fully intact and we expect bond yields to reach 5% by the
year 2000 and 4% before 2010. Shorter-term, our outlook has improved and we
expect these longer-term themes to exert more of a positive influence on the
market.
In terms of sectors, we continue to allocate 40% of the portfolio towards the
corporate bond market. Although performance has lagged, fundamentals for the
corporate bond market remain positive. Mortgage backed securities (MBS)
represent a 20% allocation for high yield and minimal credit risk. U.S. equity
and international investments each represent 10%. REITs complete the sector
weights with a 20% allocation.
Portfolios of Investments
THE STELLAR INSURED TAX-FREE BOND FUND__________________________________________
May 31, 1998 (unaudited)
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<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
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<C> <S> <C> <C>
LONG-TERM MUNICIPALS - 96.1%
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ALABAMA - 6.2%
$2,500,000 Alabama Water PCA, Revenue Bonds, 5.50%
(AMBAC INS), 8/15/2012 AAA / Aaa $2,617,400
1,750,000 Alabama Water PCA, Revenue Bonds, 6.70%
(AMBAC INS)/(Original Issue Yield:
6.75%), 8/15/2006 AAA / Aaa 1,884,365
2,500,000 Bessemer, AL Water Revenue, Revenue
Refunding Bonds, 5.75% (AMBAC
INS)/(Original Issue Yield: 5.922%),
7/1/2016 AAA / Aaa 2,669,500
1,500,000 Jefferson County, AL, Sewer Refunding
Revenue Bonds, 5.65% (MBIA INS)/(Original
Issue Yield: 5.80%), 9/1/2008 AAA / Aaa 1,627,965
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Total 8,799,230
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ARIZONA - 2.2%
1,000,000 Mesa, AZ, Revenue Bonds , 5.25% (FGIC
INS)/ (Original Issue Yield: 5.625%),
7/1/2016 AAA / Aaa 1,017,630
2,000,000 Mesa, AZ, Revenue Bonds, 5.375% (FGIC
INS)/ (Original Issue Yield: 5.55%),
7/1/2015 AAA / Aaa 2,068,320
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Total 3,085,950
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CALIFORNIA - 0.7%
1,000,000 Oakland, CA, Refunding Revenue Bonds,
7.35% (FGIC INS)/(Original Issue Yield:
7.45%), 8/1/2003 AAA / Aaa 1,025,690
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COLORADO - 0.9%
1,250,000 Colorado Postsecondary Educational
Facilities, Revenue Bonds, 5.75% (Auraria
Foundation Project)/(FSA INS)/ (Original
Issue Yield: 5.85%), 9/1/2010 AAA / Aaa 1,339,325
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CONNECTICUT - 1.4%
2,000,000 Connecticut State Transportation
Infrastructure Authority, Refunding
Revenue Bonds, 5.25% (FGIC INS),
10/1/2014 AAA / Aaa 2,058,500
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FLORIDA - 2.0%
1,280,000 Florida State Department of
Transportation, Revenue Bonds, 5.125%
(FGIC INS)/(Original Issue Yield: 5.15%),
7/1/2013 AAA / Aaa 1,309,926
</TABLE>
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<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
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<C> <S> <C> <C>
LONG-TERM MUNICIPALS (CONTINUED)
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FLORIDA (CONTINUED)
$1,500,000 Orlando & Orange County Expressway
Authority, FL, Revenue Refunding Bonds,
5.375% (AMBAC INS)/(Original Issue Yield:
5.53%), 7/1/2008 AAA / Aaa $1,585,365
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Total 2,895,291
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ILLINOIS - 14.3%
2,000,000 Chicago, IL Park District, GO UT, 5.60% (MBIA INS)/(Original Issue
Yield: 5.75%),
1/1/2014 AAA / Aaa 2,104,820
1,100,000 Chicago, IL, GO UT Refunding Bonds, 5.375%
(MBIA INS)/ (Original Issue Yield:
5.60%), 1/1/2013 AAA / Aaa 1,168,134
1,500,000 Cook County, IL, GO UT, 5.375% (MBIA INS)/
(Original Issue Yield: 5.65%), 11/15/2012 AAA / Aaa 1,550,670
2,500,000 Illinois Health Facilities Authority,
Revenue Refunding Bonds, 5.80% (Advocate
Health Care Network)/(MBIA INS)/
(Original Issue Yield: 5.90%), 8/15/2016 AAA / Aaa 2,673,400
1,410,000 Illinois State, GO UT, 5.75% (MBIA INS)/
(Original Issue Yield: 6.00%), 5/1/2021 AAA / Aaa 1,477,257
2,225,000 Illinois State, GO UT, 6.10% (MBIA INS)/
(Original Issue Yield: 6.15%), 2/1/2017 AAA / Aaa 2,414,081
2,400,000 Mc Henry County, IL Community Unit School
District No. 200, Series A GO UT, 5.85%
(FSA INS)/(Original Issue Yield: 5.848%),
1/1/2016 AAA / Aaa 2,578,752
1,000,000 Northern Illinois University, Revenue
Bonds, 5.70% (FGIC INS)/(Original Issue
Yield: 5.85%), 4/1/2016 NR / Aaa 1,050,610
2,500,000 Regional Transportation Authority, Series-
A Revenue Bonds, 6.00% (AMBAC
INS)/(Original Issue Yield: 6.20%),
6/1/2009 AAA / Aaa 2,736,475
2,500,000 Will County, IL Forest Preservation
District, GO UT Refunding Bonds, 6.00% (AMBAC INS)/ (Original Issue
Yield:
6.30%), 12/1/2006 AAA / Aaa 2,676,625
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Total 20,430,824
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</TABLE>
(See Notes to the Portfolios of Investments)
THE STELLAR INSURED TAX-FREE BOND FUND__________________________________________
(Continued)
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<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
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<C> <S> <C> <C>
LONG-TERM MUNICIPALS (CONTINUED)
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INDIANA - 1.5%
$2,000,000 Indiana Transportation Finance Authority,
Airport Lease Revenue Refunding Bonds
(Series A), 5.00% (AMBAC INS), 11/1/2007 AAA / Aaa $2,086,960
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KENTUCKY - 1.8%
2,500,000 Jefferson County, KY HFDA, Revenue Bonds, 5.50% (University Medical
Center, Inc.)/(MBIA INS)/ (Original Issue Yield:
5.65%), 7/1/2017 AAA / Aaa 2,603,125
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LOUISIANA - 2.5%
1,000,000 Jefferson Parish, LA, Refunding Revenue
Bonds, 5.00% (AMBAC INS), 11/1/2011 AAA / NR 1,022,570
1,500,000 Louisiana PFA, Revenue Bonds, 5.10%
(Tulane University)/(MBIA INS)/ (Original
Issue Yield: 5.18%), 11/15/2014 AAA / Aaa 1,515,540
1,000,000 Terrebonne Parish LA Hospital Service
District No.1, Refunding Revenue Bonds,
5.25% (Terrebonne General Medical
Center)/(AMBAC INS)/(Original Issue
Yield: 5.40%), 4/1/2014 AAA / Aaa 1,010,920
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Total 3,549,030
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MASSACHUSETTS - 1.9%
2,500,000 Massachusetts Water Resources Authority,
Revenue Bonds, 5.40% (FGIC INS)/(Original
Issue Yield: 5.50%), 11/1/2011 AAA / Aaa 2,638,075
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MICHIGAN - 9.4%
1,000,000 Clarkston Community Schools, MI, GO UT, 5.25% (MBIA INS)/ (Original
Issue Yield:
5.38%), 5/1/2017 AAA / Aaa 1,011,320
2,450,000 Dearborn, MI Economic Development Corp.,
Revenue Bonds, 5.75% (Oakwood Obligated
Group)/(FGIC INS)/ (Original Issue Yield:
5.90%), 11/15/2015 AAA / Aaa 2,617,580
1,200,000 Haslett, MI Public School District, GO UT,
5.70% (MBIA INS)/(Original Issue Yield:
5.75%), 5/1/2016 AAA / Aaa 1,267,416
1,500,000 Lansing, MI Sewer Disposal System, Revenue
Bonds, 6.25% (MBIA INS)/ (Original Issue
Yield: 6.795%), 5/1/2007 AAA / Aaa 1,611,540
</TABLE>
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<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
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<C> <S> <C> <C>
LONG-TERM MUNICIPALS (CONTINUED)
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MICHIGAN (CONTINUED)
$2,500,000 Michigan State Comprehensive
Transportation Board, Refunding Revenue
Bonds, 5.75%, 5/15/2004 AA- / A1 $2,684,325
1,065,000 Richmond, MI Community School District, GO
UT School Improvements, 5.60% (AMBAC
INS)/ (Original Issue Yield: 5.85%),
5/1/2018 AAA / Aaa 1,104,213
1,000,000 Wyoming, MI, Revenue Bonds, 5.25% (MBIA
INS)/(Original Issue Yield: 5.35%),
5/1/2018 AAA / Aaa 1,009,890
2,000,000 Ypsilanti, MI School District, GO UT,
5.60% (FGIC INS)/(Original Issue Yield:
5.65%), 5/1/2012 AAA / Aaa 2,119,700
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Total 13,425,984
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MONTANA - 1.4%
2,000,000 Montana State Health Facilities Authority, Revenue Bonds, 5.125%
(Sisters of Charity, Leavenworth)/(MBIA INS)/(Original Issue Yield:
5.26%),
12/1/2018 AAA / Aaa 2,000,820
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NEBRASKA - 0.8%
1,000,000 Omaha, NE Public Power District, Series-B
Electric Revenue Bonds, 6.00% (ETM),
2/1/2007 NR / Aa2 1,119,220
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NEVADA - 5.7%
2,500,000 Clark County, NV School District, GO UT,
5.75% (FGIC INS), 6/15/2010 AAA / Aaa 2,701,775
2,500,000 Clark County, NV School District, GO UT,
5.80% (MBIA INS)/(Original Issue Yield:
5.85%), 6/15/2011 AAA / Aaa 2,682,500
1,000,000 Clark County, NV, Refunding Revenue Bonds,
5.90% (MBIA Insurance Corporation
INS)/(Original Issue Yield: 5.95%),
6/1/2009 AAA / Aaa 1,097,480
1,500,000 Washoe County, NV School District, GO UT,
5.75% (MBIA INS)/(Original Issue Yield:
5.85%), 6/1/2011 AAA / Aaa 1,610,010
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Total 8,091,765
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OHIO - 18.0%
2,555,000 Clermont County, OH, GO UT Refunding
Bonds, 6.00% (AMBAC INS), 5/15/2007 AAA / Aaa 2,762,083
</TABLE>
(See Notes to the Portfolios of Investments)
THE STELLAR INSURED TAX-FREE BOND FUND__________________________________________
(Continued)
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<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
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<C> <S> <C> <C>
LONG-TERM MUNICIPALS (CONTINUED)
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OHIO (CONTINUED)
$2,500,000 Cleveland, OH Waterworks, Refunding & Improvement Revenue Bonds
(Series H), 5.75% (MBIA INS)/ (Original Issue Yield:
5.84%), 1/1/2016 AAA / Aaa $2,666,825
1,000,000 Columbus, OH Sewer System, Refunding
Revenue Bonds, 6.25% (Original Issue
Yield: 6.60%), 6/1/2008 AA- / Aa3 1,088,690
3,000,000 Columbus, OH Water System, Revenue
Refunding Bonds, 6.375%, 11/1/2010 AA- / Aa3 3,234,930
3,500,000 Greater Cleveland Regional Transportation
Authority, OH, GO UT, 5.65% (FGIC INS)/
(Original Issue Yield: 5.73%), 12/1/2016 NR / Aaa 3,702,475
1,000,000 Hamilton County, OH Hospital Facilities
Authority, Refunding Revenue Bonds, 5.20%
(Children's Hospital Medical Center,
Cincinnati)/(FGIC INS)/(Original Issue
Yield: 5.35%), 5/15/2009 AAA / Aaa 1,062,250
2,000,000 Montgomery County, OH, Water Revenue
Bonds, 6.25% (Greater Moraine-Beaver
Creek)/ (FGIC INS)/(Original Issue Yield:
6.45%), 11/15/2012 AAA / Aaa 2,181,300
1,000,000 Ohio State Building Authority, Adult
Correctional Facilities Revenue Bonds,
5.70% (Adult Correctional
Facilities)/(MBIA INS)/ (Original Issue
Yield: 5.80%), 10/1/2006 AAA / Aaa 1,089,830
1,000,000 Ohio State Building Authority, Revenue
Bonds, 6.00% (State Facilities-
Administration Building)/(MBIA INS)/
(Original Issue Yield: 6.05%), 10/1/2008 AAA / Aaa 1,103,950
1,225,000 Ohio State Building Authority, Revenue
Bonds, 6.00% (State Facilities-
Administration Building)/(MBIA INS)/
(Original Issue Yield: 6.10%), 10/1/2009 AAA / Aaa 1,355,940
</TABLE>
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<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
OHIO (CONTINUED)
$1,000,000 Ohio State Turnpike Commission, Series A,
5.70% (MBIA INS)/ (Original Issue Yield:
5.75%), 2/15/2013 AAA / Aaa $1,073,460
2,000,000 Ohio State Water Development Authority,
Pollution Control Revenue Bonds, 5.25%
(MBIA INS)/(Original Issue Yield: 5.35%),
12/1/2009 AAA / Aaa 2,102,680
1,000,000 Ohio State Water Development Authority,
Revenue Bonds, 5.80% (AMBAC
INS)/(Original Issue Yield: 5.90%),
12/1/2011 AAA / Aaa 1,119,180
1,000,000 Sylvania, OH City School District, GO UT,
5.80% (FGIC INS), 12/1/2015 AAA / Aaa 1,071,470
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Total 25,615,063
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PENNSYLVANIA - 4.6%
1,000,000 Bucks County, PA Water & Sewer Authority,
Revenue Bonds, 5.55% (FGIC INS)/(Original
Issue Yield: 5.65%), 12/1/2017 AAA / Aaa 1,037,020
2,000,000 Chester Upland School Authority, PA,
Revenue Bonds (Series A), 5.25% (FSA
INS)/(Original Issue Yield: 5.35%),
9/1/2017 AAA / Aaa 2,021,760
1,320,000 Pennsylvania Infrastructure Investment
Authority, Subseries-A Revenue Bonds,
6.90%, 9/1/2003 AA+ / NR 1,392,098
2,000,000 Somerset County, PA General Authority,
Commonwealth Lease Revenue Bonds, 6.60%
(FGIC INS)/(Original Issue Yield: 6.70%),
11/15/2002 (PRF 10/15/2001@100) AAA / Aaa 2,162,340
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Total 6,613,218
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SOUTH CAROLINA - 1.2%
1,750,000 Spartanburg, SC, Water Revenue Bonds,
5.00% (FGIC INS), 6/1/2019 AAA / Aaa 1,729,823
- -------------------------------------------------------------------------------
TEXAS - 5.6%
2,500,000 Harris County, TX HFDC, Revenue Refunding Bonds, 5.75% (Memorial
Hospital System)/(MBIA INS)/(Original Issue Yield:
5.77%), 6/1/2019 AAA / Aaa 2,648,525
2,500,000 Port Houston Authority, TX Harris County,
Revenue Refunding Bonds, 6.50% (MBIA
INS)/(Original Issue Yield: 6.59%),
5/1/2005 AAA / Aaa 2,686,200
</TABLE>
(See Notes to the Portfolios of Investments)
7
THE STELLAR INSURED TAX-FREE BOND FUND__________________________________________
(Continued)
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<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
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<C> <S> <C> <C>
LONG-TERM MUNICIPALS (CONTINUED)
- ------------------------------------------------------------------------------
TEXAS (CONTINUED)
$2,500,000 Texas Water Development Board, Revenue
Bonds, 5.50% (Original Issue Yield:
5.55%), 7/15/2010 AAA / Aa1 $2,652,750
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Total 7,987,475
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UTAH - 3.7%
2,500,000 Davis County, UT School District, GO UT, 5.70% (MBIA INS)/(Original
Issue Yield:
5.75%), 6/1/2007 AAA / Aaa 2,677,750
2,400,000 Jordan, UT School District, GO UT, 5.90%,
6/15/2004 NR / Aa3 2,581,200
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Total 5,258,950
- ------------------------------------------------------------------------------
VIRGINIA - 0.8%
1,000,000 Chesapeake Bay Bridge & Tunnel District,
VA, Revenue Bonds, 5.60% (FGIC
INS)/(Original Issue Yield: 5.75%),
7/1/2007 AAA / Aaa 1,085,770
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WASHINGTON - 3.9%
2,500,000 Seattle, WA Municipal Lighting & Power, Revenue Bonds, 6.10%,
7/1/2005 (PRF
7/1/2004@102) AA / Aa2 2,789,425
2,500,000 Tacoma, WA Electric System, Revenue
Refunding Bonds, 6.15% (AMBAC
INS)/(Original Issue Yield: 6.25%),
1/1/2008 AAA / Aaa 2,701,200
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Total 5,490,625
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</TABLE>
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<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT OR SHARES RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
WISCONSIN - 5.6%
$1,000,000 Beloit, WI School District, GO UT, 6.125%
(MBIA INS)/(Original Issue Yield: 6.20%),
10/1/2007 (PRF 10/1/2001@100) AAA / Aaa $1,065,580
2,460,000 Wisconsin Health and Educational
Facilities Authority, Revenue Bonds,
5.60% (Aurora Medical Group)/(FSA INS),
11/15/2016 AAA / Aaa 2,553,529
2,000,000 Wisconsin Health and Educational
Facilities Authority, Revenue Bonds,
6.00% (Meriter Hospital, Inc.)/(MBIA
INS)/(Original Issue Yield: 6.125%),
12/1/2017 AAA / Aaa 2,160,200
2,095,000 Wisconsin State, GO UT, 5.50% (FGIC INS)/
(Original Issue Yield: 5.60%), 5/1/2010 AAA / Aaa 2,231,636
- -------------------------------------------------------------------------------
Total 8,010,945
- -------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPALS
(IDENTIFIED COST $129,944,607) 136,941,658
- -------------------------------------------------------------------------------
MUTUAL FUND SHARES - 2.3%
- -------------------------------------------------------------------------------
3,318,428 SEI Tax Exempt Money Market Fund (AT NET
ASSET VALUE) 3,318,428
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST AND VALUE $133,263,035) $140,260,086
- -------------------------------------------------------------------------------
</TABLE>
STAR U.S. GOVERNMENT INCOME FUND________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS - 31.7%
- ------------------------------------------------------------------------------
BANKING - 1.3%
$1,500,000 Citicorp, 8.625%, 12/1/2002 $1,651,620
- ------------------------------------------------------------------------------
CHEMICALS - 1.1%
1,330,513 Dow Chemical Co., 7.60%, 1/2/2002 1,368,333
- ------------------------------------------------------------------------------
FINANCE - 11.0%
3,000,000 Associates Corp. of North America, 6.68%, 9/17/1999 3,031,050
2,000,000 Associates Corp. of North America, 7.25%, 5/22/2006 2,125,660
500,000 Ford Motor Credit Corp., 6.11%, 12/28/2001 500,495
3,750,000 International Lease Finance Corp., 6.25%, 10/15/2000 3,778,388
250,000 International Lease Finance Corp., 8.375%, 12/15/2004 279,060
1,000,000 Irvine Apartment Communities, Inc., 7.00%, 10/1/2007 1,015,590
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------
FINANCE (CONTINUED)
$1,000,000 Lehman Brothers, Inc., 7.125%, 7/15/2002 $1,033,850
1,000,000 NationsBank Corp., 5.75%, 3/15/2001 995,990
1,500,000 Sears Roebuck Acceptance Corp., 7.00%, 6/15/2007 1,568,355
- -------------------------------------------------------------------------
Total 14,328,438
- -------------------------------------------------------------------------
FOOD & BEVERAGE - 0.6%
750,000 McDonald's Corp., 8.375%, 10/29/1999 775,463
- -------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.8%
1,000,000 Procter & Gamble Co., 7.375%, 3/1/2023 1,044,050
- -------------------------------------------------------------------------
INTERNATIONAL - 4.2%
1,000,000 Alcan Aluminum Corp., 7.25%, 12/15/1999 1,020,510
1,500,000 Philips Electronics N.V., 6.75%, 8/15/2003 1,529,550
430,000 TransCanada PipeLines Ltd., 8.625%, 5/15/2012 509,382
</TABLE>
(See Notes to the Portfolios of Investments)
STAR U.S. GOVERNMENT INCOME FUND________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------
INTERNATIONAL (CONTINUED)
$2,000,000 TransCanada PipeLines
Ltd., 9.125%, 4/20/2006 $2,341,380
- -------------------------------------------------
Total 5,400,822
- -------------------------------------------------
OIL - 3.8%
1,000,000 Ashland, Inc., 7.90%,
8/5/2006 1,100,780
600,000 Chevron Capital USA,
Inc., 7.45%, 8/15/2004 625,974
3,000,000 Occidental Petroleum
Corp., 8.50%, 11/9/2001 3,215,220
- -------------------------------------------------
Total 4,941,974
- -------------------------------------------------
REAL ESTATE - 4.0%
1,000,000 Highwoods Forsyth LP,
7.19%, 6/15/2004 1,016,320
2,000,000 Meditrust Corp., 7.82%,
9/10/2026 2,050,800
1,000,000 Post Apartment Homes LP,
7.30%, 4/1/2004 1,037,930
1,000,000 United Dominion Realty
Trust, Inc., 7.95%,
7/12/2006 1,076,160
- -------------------------------------------------
Total 5,181,210
- -------------------------------------------------
TELECOMMUNICATIONS - 1.2%
1,500,000 GTE Corp., 7.83%,
5/1/2023 1,566,825
- -------------------------------------------------
UTILITIES - ELECTRIC - 3.7%
4,250,000 Georgia Power Co.,
6.625%, 4/1/2003 4,290,885
500,000 Northern Illinois Gas,
7.26%, 10/15/2025 520,045
- -------------------------------------------------
Total 4,810,930
- -------------------------------------------------
TOTAL CORPORATE BONDS (IDENTIFIED
COST $40,112,094) 41,069,665
- -------------------------------------------------
GOVERNMENT AGENCIES - 29.7%
- -------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.5% 7,500,000 6.50%, 2/15/2023, REMIC
(Series 1669-G) 7,615,575
2,000,000 7.585%, 9/19/2006 2,093,660
- -------------------------------------------------
Total 9,709,235
- -------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIA-
TION - 22.2%
1,500,000 5.36%, 2/16/2001 1,487,955
5,000,000 6.00%, 2/25/2011, REMIC
(Series 1996-21-PK) 4,915,550
366,274 Federal National
Mortgage Association,
6.000%, 8/1/2013 362,153
3,000,000 6.03%, 7/7/1999 3,011,820
5,500,000 6.14%, 11/25/2005 5,598,285
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OR SHARES VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (CONTINUED)
- ---------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$3,500,000 6.17%, 11/9/2000 $3,497,869
1,250,000 6.50%, 11/25/2007, REMIC
(Series 1993-118-H) 1,267,038
4,250,000 6.50%, 4/25/2023, REMIC
(Series 1993-210-PL) 4,285,658
4,042,000 7.25%, 1/17/2021, REMIC
(Series G94-6-PE) 4,172,840
69,586 7.25%, 2/25/2017, REMIC
(Series 1992-36-PG) 69,586
- ---------------------------------------------------------------------------
Total 28,668,754
- ---------------------------------------------------------------------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $37,078,196) 38,377,989
- ---------------------------------------------------------------------------
U.S. TREASURY - 35.6%
- ---------------------------------------------------------------------------
TREASURY BONDS - 26.3%
10,000,000 United States Treasury Bond, 6.75%, 8/15/2026 11,175,700
7,400,000 United States Treasury Bond, 7.125%, 2/15/2023 8,561,948
4,925,000 United States Treasury Bond, 7.50%, 11/15/2016 5,807,215
3,500,000 United States Treasury Bond, 8.125%, 8/15/2019 4,429,530
3,000,000 United States Treasury Bond, 9.00%, 11/15/2018 4,094,340
- ---------------------------------------------------------------------------
Total 34,068,733
- ---------------------------------------------------------------------------
TREASURY NOTES - 9.3%
8,425,000 United States Treasury Note, 5.625%, 12/31/1999 8,436,456
3,500,000 United States Treasury Note, 7.75%, 11/30/1999 3,610,145
- ---------------------------------------------------------------------------
Total 12,046,601
- ---------------------------------------------------------------------------
TOTAL U.S. TREASURY (IDENTIFIED COST $44,217,762) 46,115,334
- ---------------------------------------------------------------------------
MUTUAL FUNDS - 0.1%
158,313 Flex Funds (AT NET ASSET VALUE) 158,313
- ---------------------------------------------------------------------------
(A)REPURCHASE AGREEMENT - 2.1%
$2,693,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998, due 6/1/1998
(AT AMORTIZED COST) 2,693,000
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST AND VALUE $124,259,365) $128,414,301
- ---------------------------------------------------------------------------
</TABLE>
STAR STRATEGIC INCOME FUND______________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 5.3%
- --------------------------------------------------
AEROSPACE - 0.2%
5,000 Honeywell, Inc. $419,687
- --------------------------------------------------
APPLIANCES & FURNISHINGS - 0.1%
2,857 Whirlpool Corp. 195,169
- --------------------------------------------------
BANKS & SAVINGS INSTITUTIONS - 1.0%
20,000 Banc One Corp. 1,102,500
15,000 Bank of New York Co., Inc. 916,875
- --------------------------------------------------
Total 2,019,375
- --------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- ---------------------------------------------------
ELECTRIC - 1.8%
20,000 Cinergy Corp. $646,250
10,000 Duke Energy Corp. 576,250
35,000 GPU, Inc. 1,347,500
38,942 Kansas City Power And Light 1,119,582
- ---------------------------------------------------
Total 3,689,582
- ---------------------------------------------------
INSURANCE - 0.8%
35,000 Ohio Casualty Corp. 1,706,250
- ---------------------------------------------------
</TABLE>
(See Notes to the Portfolios of Investments)
STAR STRATEGIC INCOME FUND______________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------
OIL - 0.4%
10,000 Chevron Corp. $798,750
- -----------------------------------------------------------------------------
RETAIL - 0.2%
5,000 Sears, Roebuck & Co. 309,062
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.8%
15,000 SBC Communications, Inc. 583,125
22,000 U.S. West, Inc. 1,116,500
- -----------------------------------------------------------------------------
Total 1,699,625
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST $11,429,881) 10,837,500
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 4.5%
- -----------------------------------------------------------------------------
ENERGY - 0.9%
70,000 Enron Capital Trust, Pfd., $2.08 1,802,500
- -----------------------------------------------------------------------------
FINANCE - 1.4%
111,000 PLC Capital Trust I, Pfd., Series B, $2.06 2,886,000
- -----------------------------------------------------------------------------
INSURANCE - 2.0%
160,000 Travelers P&C Capital I, Pfd., $2.02 4,180,000
- -----------------------------------------------------------------------------
UTILITIES - 0.2%
15,000 Alabama Power Capital Trust II, Pfd., $1.90 383,445
- -----------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $9,178,906) 9,251,945
- -----------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 18.0%
20,000 American Health Properties, Inc. 555,000
167,700 Capstead Mortgage Corp. 3,060,525
277,300 Dynex Capital, Inc. 3,310,269
60,625 Glimcher Realty Trust 1,261,758
19,637 Healthcare Realty Trust, Inc. 555,973
15,000 Highwoods Properties, Inc. 495,000
44,296 Highwoods Properties, Inc., Pfd., $2.00 1,085,252
169,000 IMPAC Mortgage Holdings, Inc. 2,651,187
42,100 Kimco Realty Corp., Cumulative Pfd., $2.13 1,089,337
137,600 LTC Properties, Inc. 2,760,600
99,973 Meditrust Corp. 2,817,989
40,000 Merry Land and Investment Co. 887,500
70,000 National Health Investors, Inc. 2,471,875
76,100 Omega Healthcare Investors 2,620,694
19,727 Omega Worldwide, Inc. 167,679
64,356 Pennsylvania Real Estate Investment Trust 1,516,388
45,000 Public Storage, Inc., Pfd., Series F, $2.44 1,251,563
55,000 RFS Hotel Investors, Inc. 1,093,125
85,000 Thornburg Mortgage Asset Co. 1,195,312
157,600 Town & Country Trust 2,590,550
40,000 United Dominion Realty Trust, Inc. 565,000
40,000 United Dominion Realty Trust, Inc., Cumulative Pfd.,
$2.15 1,032,500
15,000 United Dominion Realty Trust, Inc., Pfd., Series A,
$2.31 395,625
114,000 Winston Hotels, Inc. 1,368,000
- -----------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(IDENTIFIED COST $39,894,875) 36,798,701
- -----------------------------------------------------------------------------
CORPORATE BONDS - 40.3%
- -----------------------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS - 1.8%
$500,000 Capital Holding Corp., 9.25%, 5/7/2001 543,949
3,000,000 Citicorp, 7.25%, 10/15/2011 3,204,390
- -----------------------------------------------------------------------------
Total 3,748,339
- -----------------------------------------------------------------------------
COMPUTERS - 1.0%
2,000,000 Dell Computer Corp., 7.10%, 4/15/2028 2,030,900
- -----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
DIVERSIFIED ENERGY - 2.3%
$1,943,000 Occidental Petroleum Corp., 10.125%, 9/15/2009 $2,514,961
2,000,000 Occidental Petroleum Corp., 10.69%, 7/27/2000 2,183,980
- ------------------------------------------------------------------------------
Total 4,698,941
- ------------------------------------------------------------------------------
ELECTRONICS - 0.5%
1,000,000 Loral Corp., 7.625%, 6/15/2025 1,105,850
- ------------------------------------------------------------------------------
ENERGY - 3.6%
1,500,000 Ashland, Inc., 7.78%, 9/19/2016 1,611,045
750,000 Ashland, Inc., Series F, 7.90%, 8/5/2006 825,585
2,000,000 Atlantic Richfield Co., Series B, 8.60%, 5/15/2012 2,408,620
1,000,000 Chevron Capital USA, Inc., 7.45%, 8/15/2004 1,043,290 1,000,000
Coastal Corp., 9.625%, 5/15/2012 1,265,490
289,000 Duke Energy Corp., 7.875%, 5/1/2024 299,898
- ------------------------------------------------------------------------------
Total 7,453,928
- ------------------------------------------------------------------------------
ENERGY - OIL EXPLORATION - 1.6%
2,900,000 Noble Affiliates, Inc., 8.00%, 4/1/2027 3,313,279
- ------------------------------------------------------------------------------
FINANCE - 9.9%
1,500,000 Associates Corp. of North America, Medium Term Note,
7.25%, 5/22/2006 1,594,245
4,000,000 Banc One Corp., 8.00%, 4/29/2027 4,627,320
2,000,000 Highwoods Forsyth LP, 7.19%, 6/15/2004 2,032,640
1,500,000 International Lease Finance Corp., 8.375%, 12/15/2004 1,674,360
2,000,000 Lehman Brothers, Inc., 6.625%, 2/15/2008 2,020,360
3,500,000 Lehman Brothers Holdings, Inc., 7.25%, 10/15/2003 3,656,590
4,150,000 Nationsbank Capital Trust IV, 8.25%, 4/15/2027 4,604,674
56,161 Saxon Mortgage Securities Corp., 5.25%, 4/25/2024 55,991
- ------------------------------------------------------------------------------
Total 20,266,180
- ------------------------------------------------------------------------------
GROCERY STORE - RETAIL - 1.1%
2,000,000 Safeway, Inc., Medium Term Note, 8.57%, 4/1/2003 2,192,800
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.0%
2,000,000 Procter & Gamble Co., 7.375%, 3/1/2023 2,088,100
- ------------------------------------------------------------------------------
INDUSTRIAL - 3.2%
2,200,000 Fort James Corp., 6.625%, 9/15/2004 2,236,058
2,000,000 Lockheed Martin Corp., 7.875%, 3/15/2023 2,122,400
2,000,000 Weyerhaeuser Co., 7.50%, 3/1/2013 2,181,600
- ------------------------------------------------------------------------------
Total 6,540,058
- ------------------------------------------------------------------------------
INSURANCE - 1.1%
2,000,000 Ohio National Life Insurance Co., 8.875%, 7/15/2004 2,211,960
- ------------------------------------------------------------------------------
MANUFACTURING - 0.1%
250,000 Eastman Kodak Co., 9.875%, 11/1/2004 254,558
- ------------------------------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT - 1.2%
2,450,000 International Business Machines Corp., 6.50%,
1/15/2028 2,428,832
- ------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 5.5%
1,125,000 Irvine Apartment Communities, Inc., 7.00%, 10/1/2007 1,142,539
200,000 Meditrust Corp., 7.60%, 7/15/2001 204,468
</TABLE>
(See Notes to the Portfolios of Investments)
STAR STRATEGIC INCOME FUND______________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OR SHARES VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST (CONTINUED)
$1,000,000 Post Apartment Homes LP, 7.30%, 4/1/2004 $1,037,930
5,000,000 Spieker Properties, Inc., 8.00%, 7/19/2005 5,356,050
3,175,000 United Dominion Realty Trust, Inc., 7.25%, 1/15/2007 3,273,330
- -----------------------------------------------------------------------------
Total 11,014,317
- -----------------------------------------------------------------------------
RETAILING & APPAREL - 2.0%
1,000,000 Federated Department Stores, Inc., 7.45%, 7/15/2017 1,060,990
1,000,000 Penney (J.C.) Co., Inc., 7.95%, 4/1/2017 1,124,000
1,050,000 Penney (J.C.) Co., Inc., 9.45%, 7/15/2002 1,116,707
725,000 Sears, Roebuck & Co., 8.66%, 10/2/2006 841,856
- -----------------------------------------------------------------------------
Total 4,143,553
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.8%
3,500,000 GTE Corp., 7.83%, 5/1/2023 3,655,925
- -----------------------------------------------------------------------------
TOBACCO - 1.0%
1,029,000 Philip Morris Cos., Inc., 8.625%, 3/1/1999 1,048,376
1,017,000 Philip Morris Cos., Inc., 7.125%, 8/15/2002 1,042,171
- -----------------------------------------------------------------------------
Total 2,090,547
- -----------------------------------------------------------------------------
UTILITIES - 1.6%
2,000,000 Northern Illinois Gas, 7.26%, 10/15/2025 2,080,180
1,000,000 Pacific Bell, 8.50%, 8/15/2031 1,096,450
- -----------------------------------------------------------------------------
Total 3,176,630
- -----------------------------------------------------------------------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $80,169,710) 82,414,697
- -----------------------------------------------------------------------------
INTERNATIONAL SECURITIES - 10.7%
- -----------------------------------------------------------------------------
CLOSED-END INVESTMENT COMPANIES - 2.1%
220,000 First Commonwealth Fund Inc. 2,447,500
265,000 Kleinwort Benson Australian Income Fund 1,904,687
- -----------------------------------------------------------------------------
Total 4,352,187
- -----------------------------------------------------------------------------
ELECTRONICS - 1.1%
1,000,000 Philips Electronics N.V., 6.75%, 8/15/2003 1,019,700
1,100,000 Philips Electronics N.V., 8.375%, 9/15/2006 1,234,981
- -----------------------------------------------------------------------------
Total 2,254,681
- -----------------------------------------------------------------------------
FINANCE - 4.8%
3,000,000 ABN-AMRO Bank NV, New York, 7.75%, 5/15/2023 3,321,864
3,000,000 Societe Generale, New York, 7.40%, 6/1/2006 3,163,110
3,000,000 Zurich Capital Trust, 8.376%, 6/1/2037 3,313,440
- -----------------------------------------------------------------------------
Total 9,798,414
- -----------------------------------------------------------------------------
INTERNATIONAL OIL - 2.7%
129,300 TransCanada PipeLines Ltd., Pfd., $2.13 3,394,125
1,525,000 TransCanada PipeLines Ltd., 9.875%, 1/1/2021 2,064,743
- -----------------------------------------------------------------------------
Total 5,458,868
- -----------------------------------------------------------------------------
TOTAL INTERNATIONAL SECURITIES (IDENTIFIED COST $22,233,639) 21,864,150
- -----------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES - 20.2%
- -----------------------------------------------------------------------------
FEDERAL HOME LOAN BANK - 1.3%
722,918 9.00%, 5/1/2021 774,881
145,983 11.00%, 4/1/2003 156,885
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT, SHARES OR CONTRACTS VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCIES (CONTINUED)
- ---------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (CONTINUED)
$1,558,116 8.50%, 6/1/2024 $1,645,277
- ---------------------------------------------------------------------------
Total 2,577,043
- ---------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.2%
2,000,000 10.00%, REMIC, 1/15/2021 2,235,500
670,000 10.00%, REMIC, 12/15/2020 750,025
1,100,000 9.50%, REMIC, 6/25/2020 1,194,292
207,310 8.00%, REMIC, 7/15/2020 208,574
2,000,000 7.50%, REMIC, 5/20/2024 2,040,120
3,092,495 7.50%, REMIC, 7/15/2021 3,140,027
3,250,000 7.00%, REMIC, 1/15/2022 3,286,563
2,000,000 6.50%, REMIC, 3/15/2026 1,936,800
- ---------------------------------------------------------------------------
Total 14,791,901
- ---------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 6.0%
109,236 10.00%, REMIC, 12/25/2018 112,589
197,966 9.40%, REMIC, 6/25/2019 201,796
1,000,000 9.00%, REMIC, 11/25/2019 1,055,790
483,409 8.40%, REMIC, 8/25/2019 506,622
2,000,000 7.75%, REMIC, 5/25/2021 2,069,800
3,000,000 7.50%, REMIC, 9/25/2019 3,019,200
2,200,000 7.50%, REMIC, 5/25/2020 2,235,904
28,704 7.25%, REMIC, 2/25/2017 28,704
3,000,000 6.50%, 6/1/2099 2,981,250
- ---------------------------------------------------------------------------
Total 12,211,655
- ---------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOC. - 5.7%
157,155 9.00%, 7/15/2016 169,875
2,840,826 8.00%, 8/20/2026 2,937,585
744,843 8.00%, 11/20/2026 770,212
1,938,649 7.50%, 2/20/2027 1,988,937
4,000,000 7.50%, REMIC, 5/16/2023 4,117,720
452,065 9.00%, 1/15/2022 486,960
1,095,308 7.50%, 12/15/2026 1,129,196
- ---------------------------------------------------------------------------
Total 11,600,485
- ---------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(IDENTIFIED COST $40,938,975) 41,181,084
- ---------------------------------------------------------------------------
MUTUAL FUNDS SHARES - 0.2%
356,068 Flex Funds (AT NET ASSET VALUE) 356,068
- ---------------------------------------------------------------------------
(A)REPURCHASE AGREEMENT - 0.5%
$959,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998, due 6/1/1998 (AT
AMORTIZED COST) 959,000
- ---------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
100 Put option on Lyondell, expires 9/19/1998,
strike @ 22.5 1,875
35 Put option on Coca Cola, expires 1/16/1999,
strike @ 40 437
15 Put option on Exxon, expires 1/16/1999, strike @
35 563
50 Put option on Safeway, expires 6/20/1998, strike
@ 37.5 2,813
5 Put option on Pier 1 Imports, expires 6/20/1998,
strike @ 25 375
- ---------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED (IDENTIFIED COST $21,522) 6,063
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST AND VALUE $205,182,576) $203,669,208
- ---------------------------------------------------------------------------
</TABLE>
(See Notes to the Portfolios of Investments)
Notes to Portfolios of Investments
(a)The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at date of the portfolio.
*Current credit ratings are unaudited. Please refer to the Statement of
Additional Information for an explanation of the credit ratings.
The following abbreviations are used in these portfolios: AMBAC--American
Municipal Bond Assurance Corporation ETM--Escrowed to Maturity FGIC--Financial
Guaranty Insurance Company FSA--Financial Security Assurance GO--General
Obligation HFDA--Health Facility Development Authority HFDC--Health Facility
Development Corporation INS--Insured LOC--Letter of Credit LP--Limited
Partnership MBIA--Municipal Bond Investors Assurance PCA--Pollution Control
Authority PFA--Public Facility Authority PLC--Public Limited Company
PRF--Prerefunded REMIC--Real Estate Mortgage Investment Conduit UT--Unlimited
Tax
<TABLE>
<CAPTION>
Net Unrealized Gross Gross
Cost of Appreciation/ Unrealized Unrealized
Investments (Depreciation) Appreciation Depreciation
for Federal for Federal for Federal for Federal Total
Star Funds Tax Purposes Tax Purposes Tax Purposes Tax Purposes Net Assets*
- ------------------------ ------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
The Stellar Insured Tax-
Free Bond Fund $133,263,035 $6,997,051 $7,017,252 $20,201 $142,554,431
Star U.S. Government
Income Fund 124,259,365 4,154,936 4,309,486 154,550 129,413,204
Star Strategic Income
Fund 205,182,576 (1,513,368) 3,627,956 5,141,324 204,199,224
</TABLE>
*The categories of investments are shown as a percentage of net assets at May
31, 1998.
(See Notes which are an integral part of the Financial Statements)
Statements of Assets and Liabilities
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE STELLAR STAR U.S. STAR
INSURED GOVERNMENT STRATEGIC
TAX-FREE INCOME INCOME
BOND FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Total investments in
securities, at value $140,260,086 $128,414,301 $203,669,208
Cash -- 17,227 769
Income receivable 2,222,048 1,744,406 2,297,198
Receivable for investments
sold -- -- 4,770,423
Receivable for Fund shares
sold 84,369 102,556 703,098
Deferred organizational costs 1,719 -- 14,775
Deferred expenses -- 3,009 8,248
- ------------------------------------------------------------------------------
Total assets 142,568,222 130,281,499 211,463,719
- ------------------------------------------------------------------------------
LIABILITIES:
Payable for investments
purchased -- -- 7,140,511
Payable for Fund shares
redeemed -- 709,439 62,734
Options written, at value -- -- 61,250
Income distribution payable -- 158,856 --
Accrued expenses 13,791 -- --
- ------------------------------------------------------------------------------
Total liabilities 13,791 868,295 7,264,495
- ------------------------------------------------------------------------------
NET ASSETS:
Paid in capital 135,313,743 127,050,318 205,835,101
Net unrealized appreciation
(depreciation) of
investments and options 6,997,051 4,154,936 (1,490,696)
Accumulated net realized gain
(loss) on investments and
options 118,542 (1,784,418) (79,800)
Undistributed net investment
income (Distributions in
excess of
net investment income) 125,095 (7,632) (65,381)
- ------------------------------------------------------------------------------
Total Net Assets $142,554,431 $129,413,204 $204,199,224
- ------------------------------------------------------------------------------
NET ASSETS:
A Shares $142,554,431 $129,327,363 --
B Shares -- 85,841 $204,199,224
- ------------------------------------------------------------------------------
Total Net Assets $142,554,431 $129,413,204 $204,199,224
- ------------------------------------------------------------------------------
SHARES OUTSTANDING:
A Shares 13,777,054 13,003,370 --
B Shares -- 8,631 19,845,801
- ------------------------------------------------------------------------------
Total shares outstanding 13,777,054 13,012,001 19,845,801
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NET ASSET VALUE:
A Shares $10.35 $9.95 --
B Shares -- $9.95 $10.29
- ------------------------------------------------------------------------------
OFFERING PRICE PER SHARE+:
A Shares $10.84* $10.31** --
B Shares -- $9.95 $10.29
- ------------------------------------------------------------------------------
REDEMPTION PROCEEDS PER
SHARE++:
A Shares $10.35 $9.95 --
B Shares -- $9.45*** $9.78***
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Investments, at identified
cost $133,263,035 $124,259,365 $205,182,576
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Investments, at tax cost $133,263,035 $124,259,365 $205,182,576
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
*Computation of Offering price: 100/95.5 of net asset value.
**Computation of Offering price: 100/96.5 of net asset value.
***Computation of Redemption Proceeds: 95/100 of net asset value.
+See "What Shares Cost" in the prospectus.
++See "Contingent Deferred Sales Charge--B Shares" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Statements of Operations
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE STELLAR STAR
INSURED STAR U.S. STRATEGIC
TAX-FREE GOVERNMENT INCOME
BOND FUND INCOME FUND FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $3,576,841 $4,232,379 $4,675,026
Dividend income -- -- 3,059,342
- -------------------------------------------------------------------------------
Total income 3,576,841 4,232,379 7,734,368
- -------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 506,027 390,619 884,307
Administrative personnel and services
fee 77,644 74,650 107,177
Custodian fees 16,868 16,276 23,271
Transfer and dividend disbursing agent
fees and expenses 18,033 19,696 44,950
Directors'/Trustees' fees 1,282 797 1,281
Auditing fees 6,849 2,256 6,626
Legal fees 1,468 1,134 1,113
Portfolio accounting fees 27,581 11,212 27,103
Shareholder services fee--A Shares 33,735 32,547 --
Shareholder services fee--B Shares -- -- 46,542
Share registration costs 4,244 2,844 13,422
Printing and postage 3,996 3,687 6,643
Insurance premiums 2,002 1,841 1,895
Miscellaneous 2,004 274 1,189
- -------------------------------------------------------------------------------
Total expenses 701,733 557,833 1,165,519
- -------------------------------------------------------------------------------
Waiver--
- -------------------------------------------------------------------------------
Waiver of investment advisory fee (168,676) -- --
- -------------------------------------------------------------------------------
Net Expenses 533,057 557,833 1,165,519
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,043,784 3,674,546 6,568,849
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND OPTIONS:
Net realized gain (loss) on investments
and options 118,542 444,530 250,920
Net change in unrealized appreciation
(depreciation) on investments and
options 1,431,726 680,079 (4,973,910)
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND OPTIONS 1,550,268 1,124,609 (4,722,990)
- -------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $4,594,052 $4,799,155 $1,845,859
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
THE STELLAR STAR U.S. STAR
INSURED GOVERNMENT STRATEGIC
TAX-FREE INCOME INCOME
BOND FUND FUND FUND
-------------------------- -------------------------- --------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED PERIOD ENDED ENDED YEAR ENDED ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997* (UNAUDITED) 1997 (UNAUDITED) 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
OPERATIONS--
Net investment income $3,043,784 $5,136,452 $3,674,546 $8,037,714 $6,568,849 $10,087,926
Net realized gain (loss)
on investments
and options 118,542 324,276 444,530 477,834 250,920 2,538,513
Net change in net
unrealized
appreciation/
depreciation of
investments and options 1,431,726 5,565,325 680,079 75,785 (4,973,910) 571,178
- ---------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from
operations 4,594,052 11,026,053 4,799,155 8,591,333 1,845,859 13,197,617
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net
investment income
A Shares (2,992,371) (5,062,770) (3,702,025) (8,046,199) -- --
B Shares -- -- (451) -- (6,936,493) (10,071,575)
Distributions from net
realized gains
A Shares (324,276) -- -- -- -- --
B Shares -- -- -- -- (1,593,824) --
- ---------------------------------------------------------------------------------------------------------------
Change in net assets
from distributions to
shareholders (3,316,647) (5,062,770) (3,702,476) (8,046,199) (8,530,317) (10,071,575)
- ---------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sales of
shares 20,571,279 139,447,600 13,060,927 24,040,035 51,369,830 76,800,372
Net assets value of
shares issued to
shareholders in payment
of distributions
declared 44,516 10,086 1,586,589 2,889,975 2,949,829 3,169,146
Cost of shares redeemed (7,930,192) (16,829,546) (23,776,304) (28,903,412) (22,848,708) (14,457,644)
- ---------------------------------------------------------------------------------------------------------------
Change in net assets
from share transactions 12,685,603 122,628,140 (9,128,788) (1,973,402) 31,470,951 65,511,874
- ---------------------------------------------------------------------------------------------------------------
Change in net assets 13,963,008 128,591,423 (8,032,109) (1,428,268) 24,786,493 68,637,916
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 128,591,423 0 137,445,313 138,873,581 179,412,731 110,774,815
- ---------------------------------------------------------------------------------------------------------------
End of period $142,554,431 $128,591,423 $129,413,204 $137,445,313 $204,199,224 $179,412,731
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period $125,095 $73,682 $0 $20,298 $0 $302,263
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Net gain (loss) as
computed for federal
tax purposes $118,542 $324,276 $444,530 $350,516 $250,920 $2,846,274
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
*Reflects operations for the period from December 30, 1996 (date of initial
public investment) to November 30, 1997.
(See Notes which are an integral part of the Financial Statements)
Financial Highlights
STAR FUNDS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
NET REALIZED
AND DISTRIBUTIONS DISTRIBUTIONS
YEAR NET ASSET UNREALIZED DISTRIBUTIONS FROM NET IN EXCESS OF
ENDED VALUE, NET GAIN/(LOSS) ON TOTAL FROM FROM NET REALIZED GAIN NET REALIZED GAIN
NOVEMBER BEGINNING INVESTMENT INVESTMENTS INVESTMENT INVESTMENT ON INVESTMENTS ON INVESTMENTS
30, OF PERIOD INCOME AND OPTIONS OPERATIONS INCOME AND OPTIONS AND OPTIONS (D)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
THE STELLAR INSURED TAX-FREE BOND FUND
A SHARES
1997(a) $10.00 0.44 0.24 0.68 (0.43) -- --
1998(i) $10.25 0.23 0.13 0.36 (0.23) (0.03) --
STAR U.S. GOVERNMENT INCOME FUND
A SHARES
1993(b) $10.00 0.51 0.25 0.76 (0.51) -- --
1994 $10.25 0.55 (0.90) (0.35) (0.55) (0.11) --
1995 $9.24 0.60 0.74 1.34 (0.60) -- --
1996 $9.98 0.57 (0.15) 0.42 (0.57) -- --
1997 $9.83 0.57 0.04 0.61 (0.57) -- --
1998(i) $9.87 0.28 0.08 0.36 (0.28) -- --
B SHARES
1998(j) $9.89 0.05(k) 0.10 0.15 (0.09) -- --
STAR STRATEGIC INCOME FUND
B SHARES
1995(c) $10.00 0.69 0.55 1.24 (0.67) (0.04) (0.00)(l)
1996 $10.53 0.73 (0.04) 0.69 (0.72) -- --
1997 $10.50 0.73 0.18 0.91 (0.74) -- --
1998(i) $10.67 0.37 (0.26) 0.11 (0.39) (0.10) --
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from December 30, 1996 (date of initial
public investment) to November 30, 1997.
(b) 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.
(c) Reflects operations for the period from December 12, 1994 (date of initial
public investment) to November 30, 1995.
(d) Distributions are determined in accordance with federal 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.
(e) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge if applicable.
(f) Computed on an annualized basis.
(g) This voluntary expense decrease is reflected in both the expense and net
investment income ratios.
(h) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.
(i) For the six months ended May 31, 1998 (unaudited).
(j) Reflects operations for the period from April 27, 1998 (date of initial
public investment) to May 31, 1998 (unaudited).
(k) Per share information is based on average shares outstanding. (l) Less than
one cent per share. (See Notes which are an integral part of the Financial
Statements)
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------- NET ASSETS, AVERAGE
NET ASSET NET EXPENSE END COMMISSION PORTFOLIO
TOTAL VALUE, END TOTAL INVESTMENT WAIVER/ OF PERIOD RATE TURNOVER
DISTRIBUTIONS OF PERIOD RETURN (E) EXPENSES INCOME REIMBURSEMENT (G) (000 OMITTED) PAID (H) RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(0.43) $10.25 6.91% 0.79%(f) 4.66%(f) 0.25%(f) $128,591 -- 15%
(0.26) $10.35 3.48% 0.79%(f) 4.51%(f) 0.25%(f) $142,554 -- 8%
(0.51) $10.25 7.63% 1.12%(f) 5.55%(f) 0.30%(f) $44,187 -- 105%
(0.66) $9.24 (3.53%) 0.97% 5.87% 0.03% $87,924 -- 148%
(0.60) $9.98 14.90% 0.92% 6.23% -- $109,666 -- 236%
(0.57) $9.83 4.46% 0.92% 5.88% -- $138,874 -- 158%
(0.57) $9.87 6.46% 0.89% 5.88% -- $137,445 -- 140%
(0.28) $9.95 3.73% 0.85%(f) 5.58%(f) -- $129,327 -- 41%
(0.09) $9.95 1.55% 0.91%(f) 5.54%(f) -- $86 -- 41%
(0.71) $10.53 12.71% 1.47%(f) 7.41%(f) 0.10%(f) $47,513 -- 258%
(0.72) $10.50 6.99% 1.36% 7.26% -- $110,775 $0.0043 201%
(0.74) $10.67 9.02% 1.26% 7.13% -- $179,413 $0.0417 142%
(0.49) $10.29 1.01% 1.25%(f) 7.06%(f) -- $204,199 $0.0399 75%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Combined Notes to Financial Statements
MAY 31, 1998 (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 eleven diversified portfolios and one non-diversified portfolio. The
financial statements of the following portfolios (individually referred to as
the "Fund", or collectively as the "Funds") are presented herein along with each
Fund's investment objective:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
- ----------------------------------------------------------------------------
<C> <S>
The Stellar Insured Tax- Provide current income which is exempt from
Free Bond Fund federal income tax.
("Stellar Tax-Free Bond
Fund")
Star U.S. Government Provide current income.
Income Fund ("U.S.
Government Income Fund")
Star Strategic Income Fund Generate high current income.
("Strategic Income Fund")
</TABLE>
The financial statements of the Stock Funds and Money Market Funds are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Stellar Tax-Free Bond Fund issues one class of shares (A Shares); U.S.
Government Income Fund offers two classes of shares, (A Shares and B Shares);
and Strategic Income Fund issues one class of shares (B 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
Equity securities traded on a securities exchange and securities traded in the
over-the-counter market are valued at the last reported sales price on the day
of valuation; other securities for which no sale was reported on that date, are
valued at the last quoted bid price. Corporate and municipal bonds, asset backed
securities and U.S. government securities are valued using the last quoted bid
price as furnished by an independent pricing service. 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. Investments in other
open-end and closed-end regulated investment companies are valued at net asset
value.
B. REPURCHASE AGREEMENTS
It is the policy of the Funds to require a 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
Dividend income and distributions to shareholders are recorded on the ex-
dividend date. Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal Revenue Code,
as amended (the "Code").
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, 1997, U.S. Government Income Fund for federal tax purposes, had
capital loss carryforwards, as noted below, which will reduce the Funds' taxable
income arising from future net realized gains 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>
TOTAL TAX-LOSS
FUND CARRYFORWARD
- -------------------------------------------
<S> <C>
U.S. Government Income Fund $2,200,603
- -------------------------------------------
</TABLE>
Pursuant to the Code, such capital loss carryforwards will expire as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
- ------------------------------------------------------------------------------
EXPIRATION YEAR EXPIRATION AMOUNT
- ------------------------------------------------------------------------------
<S> <C>
2002 $1,057,116
2004 $1,143,487
- ------------------------------------------------------------------------------
</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 over a period not to exceed five
years from each Fund's commencement date.
G. OPTION CONTRACTS WRITTEN
The 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 call options, the Funds'
may forego potential gains on the underlying security. 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 an unrealized gain or loss is measured
by the difference between the current value and the premium received. For the
period ended May 31, 1998, Strategic Income Fund had realized gain (loss) on
options contracts both written and purchased of $198,330.
The U.S. Government Income Fund had no written option transactions during the
period.
At May 31, 1998, Strategic Income Fund had the following outstanding written
options:
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND
- ----------------------------------------------------------------------------
NUMBER UNREALIZED
EXPIRATION EXERCISE OF APPRECIATION MARKET
ISSUER TYPE DATE PRICE CONTRACTS (DEPRECIATION) VALUE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capstead Mortgage Call 9/19/98 $20.00 300 $12,562 $15,938
Lyondell
Petrochemical Put 9/19/98 30.00 100 (3,838) 13,437
AT&T Put 7/18/98 60.00 100 5,374 20,000
Bank One Call 6/20/98 60.00 100 2,412 2,188
J.C. Penney Put 6/20/98 70.00 100 6,162 9,687
----------------------
Total $22,672 $61,250
----------------------
</TABLE>
The following is a summary of the Strategic Income Fund options activity:
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND
------------------------
NUMBER OF
CONTRACTS PROCEEDS*
<S> <C> <C>
------------------------
Outstanding at November 30, 1997 405 $133,487
Contracts opened 4,033 693,315
Contracts expired (725) (59,607)
Contracts exercised (1,178) (267,731)
Contracts closed (1,835) (415,542)
------------------------
Outstanding at May 31, 1998 700 $83,922
------------------------
</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:
<TABLE>
<CAPTION>
STELLAR TAX-FREE BOND FUND
-----------------------------------
SIX MONTHS ENDED PERIOD ENDED
A SHARES MAY 31, 1998 NOVEMBER 30, 1997*
- ---------------------------------------- -----------------------------------
<S> <C> <C>
Shares sold 1,992,104 14,215,030
Shares issued to shareholders in payment
of distributions declared 4,311 995
Shares redeemed (767,510) (1,667,876)
-----------------------------------
Net change resulting from A Share
transactions 1,228,905 12,548,149
-----------------------------------
</TABLE>
*For the period from December 30, 1996 (date of initial public investment) to
November 30, 1997.
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
----------------------- -----------------------
A SHARES SHARES DOLLARS SHARES DOLLARS
- ---------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold 1,307,821 $12,975,930 2,492,225 $24,040,035
Shares issued to
shareholders in payment of
distributions declared 159,899 1,586,227 299,335 2,889,975
Shares redeemed (2,392,361) (23,776,304) (2,995,364) (28,903,412)
------------------------------------------------
Net change resulting from A
Share transactions (924,641) $(9,214,147) (203,804) $(1,973,402)
------------------------------------------------
<CAPTION>
U.S. GOVERNMENT
INCOME FUND
-----------------------
PERIOD ENDED
MAY 31, 1998**
-----------------------
B SHARES SHARES DOLLARS
- ---------------------------- ---------- -----------
<S> <C> <C>
Shares sold 8,594 $84,997
Shares issued to
shareholders in payment of
distributions declared 37 362
-----------------------
Net change resulting from B
Share transactions 8,631 $85,359
-----------------------
Net change resulting from
Fund Share transactions (916,010) $(9,128,788)
-----------------------
</TABLE>
** For the period from April 27, 1998 (date of initial public investment) to May
31, 1998.
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND
-------------------------
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
B SHARES MAY 31, 1998 1997
- ----------------------------------------------- -------------------------
<S> <C> <C>
Shares sold 4,916,064 7,353,514
Shares issued to shareholders in payment of
distributions declared 282,852 304,065
Shares redeemed (2,173,339) (1,383,953)
-------------------------
Net change resulting from B Share transactions 3,025,577 6,273,626
-------------------------
</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).
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- ----------------------------------------
<S> <C>
Stellar Tax-Free Bond Fund 0.75%
U.S. Government Income Fund 0.60%
Strategic Income Fund 0.95%
- ----------------------------------------
</TABLE>
The Adviser may voluntarily choose to waive a portion of its fee. The Adviser
can terminate this voluntary waiver of its advisory fees at any time at its sole
discretion.
B. ADMINISTRATIVE FEE
Federated Administrative Services ("FAS") provides each Fund with certain
administrative personnel and services for which it receives a fee. Effective
January 1, 1998, the fee that FAS receives changed to an annual rate of 0.12% of
the average daily net assets of the Trust for the period. The administrative fee
received during any fiscal year shall be at least $50,000 per Fund. Prior to
January 1, 1998, the FAS fee was based on the level of average aggregate net
assets of the Trust for the period.
Under the terms of a Sub-Administration Agreement between FAS and Star Bank,
N.A., FAS will pay to Star Bank, N.A., solely from the resources of FAS, a
sub-administration fee at an annual rate of 0.04% of the average daily net
assets of the Trust, for assisting FAS in rendering administrative services to
the Trust.
C. DISTRIBUTION SERVICES FEE
Pursuant to the provisions of a distribution plan adopted in accordance with the
Investment Company Act Rule 12b-1 (the "Plan"), A Shares and B Shares of the
Trust may pay to the distributor an amount computed at an annual rate of up to
0.25% of the average daily net assets, in each case to finance any activity
which is principally intended to result in the sale of shares subject to the
Plan. The Stellar Tax-Free Bond Fund, U.S. Government Income Fund and Strategic
Income Fund will not accrue or pay any distribution expenses pursuant to the
Plan until a "Y" class of shares has been registered with the Securities and
Exchange Commission.
D. SHAREHOLDER SERVICES FEE
Under the terms of the Shareholder Services Agreement with Star Bank, N.A.,
each Fund may pay Star Bank, N.A. up to 0.25% of average daily net assets for
the period. For the foreseeable future, Star Bank N.A. plans to limit the
Shareholder Servicing fee to 0.05% of average daily net assets. This fee is to
obtain certain services for shareholders and to maintain shareholder accounts.
Star Bank N.A. can modify or terminate this limitation at any time at its sole
discretion.
E. TRANSFER AND DIVIDEND DISBURSING AGENT FEES
Star Bank, N.A. serves as transfer agent and dividend disbursing agent for the
Funds. The fee paid to Star Bank, N.A. is based on the size, type, and number
of accounts and transactions made by shareholders.
Star Bank, N.A. became the Funds transfer and dividend disbursing agent March 9,
1998. Prior to March 9, 1998, Federated Services Company ("FServ") served as the
Fund's transfer and dividend disbursing agent and received for its services a
fee based on the size, type, and number of accounts and transactions made by
shareholders.
For the period ended May 31, 1998, the transfer and dividend disbursing agents
earned fees as follows:
<TABLE>
<CAPTION>
STAR BANK, N.A. FSERV
- ---------------------------------------------------
<S> <C> <C>
Stellar Tax-Free Bond Fund $9,455 $8,578
U.S. Government Income Fund 8,960 10,736
Strategic Income Fund 14,729 30,221
- ---------------------------------------------------
</TABLE>
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 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.
H. ORGANIZATIONAL EXPENSES
Organizational expenses were borne initially by FAS. The Funds have reimbursed
FAS for these expenses. These expenses have been deferred and are being
amortized over the five-year period following each Fund's effective date. For
the period ended May 31, 1998, the Funds expensed the following pursuant to this
agreement:
<TABLE>
<CAPTION>
AMOUNT
EXPENSED
TO FAS FOR
EXPENSES THE PERIOD
OF ENDED
ORGANIZING MAY 31,
EFFECTIVE DATE THE FUND 1998
- -------------------------------------------------------------------
<S> <C> <C> <C>
Stellar Tax-Free Bond Fund December 30, 1996 $2,398 $923
Strategic Income Fund November 14, 1994 30,000 14,400
- -------------------------------------------------------------------
</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
period ended May 31, 1998, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ----------------------------------------------------
<S> <C> <C>
Stellar Tax-Free Bond Fund $18,413,939 $10,823,850
U.S. Government Income Fund 53,090,675 63,631,108
Strategic Income Fund 173,169,993 137,513,149
- ----------------------------------------------------
</TABLE>
(6) YEAR 2000
Similar to other financial organizations, the Funds could be adversely affected
if the computer systems used by the Funds' service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Funds' Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Funds' other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Funds.
Trustees Officers
Thomas L. Conlan Jr. Edward C. Gonzales
PRESIDENT AND TREASURER
Edward C. Gonzales Joseph S. Machi
VICE PRESIDENT AND ASSISTANT TREASURER
Dr. Alfred Gottschalk C. Grant Anderson
SECRETARY
Dr. Robert J. Hill
Dawn M. Hornback
Lawrence M. Turner
William H. Zimmer III
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 or the Federal
Deposit Insurance Corporation. Investment in mutual funds involves investment
risk, including the possible loss of principal.
Thisreport is authorized for distribution to prospective investors only when
preceded or accompanied by the Trust's prospectus which contains facts
concerning its objectives and policies, management fees, expenses and other
information.
------------------------------
STAR BANK, N.A
Investment Adviser
Cusip 854911856 ------------------------------
Cusip 854911500 FEDERATED SECURITIES CORP.
Cusip 854911765 Distributor
Cusip 854911880 ------------------------------
G00446-02 (7/98)
6051TR
MONEY MARKET
[LOGO] STAR FUNDS FUNDS
COMBINED
SEMI-ANNUAL
REPORT
May 31, 1998
Star Treasury Fund
Star Tax-Free Money Market Fund
Star Ohio Tax-Free Money Market Fund
President's Message
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for the Star
Money Market Funds. The report covers activity in the Star Treasury Fund, the
Star Tax-Free Money Market Fund and the Star Ohio Tax-Free Money Market Fund
over the six-month period from December 1, 1997 through May 31, 1998.
It begins with the portfolio manager's discussion about the interest rate
environment during the period, Fund yields and strategy. Next is a list of
holdings and the financial statements for each Fund.
STAR TREASURY FUND
The Star Treasury Fund is a highly conservative way to pursue daily income. This
Fund invests in money market securities issued by the U.S. Treasury.* During the
period, both the Fund's C Shares and the Fund's Y Shares paid dividends totaling
$0.02 per share. The Fund's net assets totaled $1.4 billion at the end of the
period.
STAR TAX-FREE MONEY MARKET FUND
Designed for tax-sensitive investors the Star Tax-Free Money Market Fund is a
practical way to pursue daily tax-free income.* The Fund invests in high-quality
money market securities issued by municipalities across the United States.**
During the period, the Fund paid tax-free dividends totaling $0.01 per share.
The Fund's net assets totaled $116 million at the end of the period.
STAR OHIO TAX-FREE MONEY MARKET FUND
Designed for tax-sensitive Ohio residents, this Fund began operation on December
2, 1997.* It pursues daily income free of both federal and Ohio state tax by
investing in high-quality money market securities issued by Ohio
municipalities.** During the period, the Fund paid double-tax-free dividends
totaling $0.01 per share. The Fund's net assets totaled $33 million at the end
of the period.
Whatever your needs--an emergency cash reserve for planned or unplanned
expenses, a "parking place" for cash in-between investments, or a highly
conservative investment for income--the Star Money Market Funds are practical
choices. Of course, each Fund also gives you the additional advantages of easy
access to your money and relative stability.
Thank you for participating in the daily earning power of these Funds.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
July 15, 1998
- --------
*Although money market funds seek to maintain a share value of $1.00, there is
no guarantee that they will do so. Investments in money market mutual funds
are 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 Treasury Fund
- ------------------
Q What are your comments on the short-term market during the first half of the
Fund's fiscal year?
A During the first half of our fiscal year, the U.S. economy continued to
witness strong domestic growth which was offset by the dampening effects of
Asia. A strong U.S. dollar, shrinking federal budget deficit, and good inflation
news, tipped the scales in favor of lower yields. One-year Treasury note yields
for the six month period declined 15 basis points. Throughout this period, our
outlook was constructive on the market, expecting interest rates to decline.
With the aid of a longer-term outlook and proprietary models, the Fund was able
to "lock-in" higher yields while maintaining its high level of income.
Q How did the Star Treasury Fund's yield move over the six-month period?
A With yields declining over the past six months, the Fund's yield declined
slightly. Because we anticipated the decline in yields, the portfolio's average
maturity was lengthened to lock-in higher yields. By keeping the Fund's average
maturity longer than that of the average of its peers, the yield of the Star
Treasury Fund remained above the peer average.
Q Based on expectations for U.S. economic growth and inflation, are you
anticipating a rate increase by the Federal Reserve Board before the end of
1998?
A No. Our outlook calls for a "soft-landing" of the economy following the first
quarter's strong economic growth rate of 5+%. This level of growth is much
stronger than the Federal Reserve Board (the "Fed") or the bond market would
prefer given the current yield environment. A decline towards our forecasted 2%
growth rate would take pressure off Fed Chairman Greenspan to raise interest
rates. Fortunately, inflation trends support no change in monetary policy and a
slowing economy would only help this view. We continue to believe that the
federal funds rate will remain at its current level of 5.5% for the entire year.
Star Tax-Free Money Market Fund
- -------------------------------
Q What major factors affected the tax-free money market during the Fund's fiscal
year?
A During the first half of our fiscal year, the U.S. economy continued to
witness strong domestic growth which was offset by the dampening effects of
Asia. A strong U.S. dollar, shrinking federal budget deficit, and good inflation
news, tipped the scales in favor of lower yields. Yields for one-year maturities
declined 15 basis points. Throughout this period, our outlook was constructive
on the market, expecting interest rates to decline. With the aid of a
longer-term outlook and proprietary models, the Fund was able to "lock-in"
higher yields while maintaining its high level of income.
Q How did the Star Tax-Free Money Market Fund's yield move over the six-month
period?
A Supply and demand factors are always important and the most recent period was
no different. The combination of strong demand from investors for short-term
investment vehicles and lack of supply by well funded municipalities resulted in
yields remaining low throughout the period. With yields declining over the past
six months, the Fund's yield declined slightly. Because we anticipated the
decline in yields, the portfolio's average maturity was lengthened in order to
lock-in higher yields. By keeping the Fund's average maturity longer than that
of the average of its peers, the yield of the Star Tax-Free Money Market Fund
remained within a few basis points of the peer average.
Q As we reach the midpoint of 1998, what is your outlook for short-term rates
for the rest of the year?
A Our outlook calls for a "soft-landing" of the economy following the first
quarter's strong economic growth rate of 5+%. This level of growth is much
stronger than the Fed or the bond market would prefer given the current yield
environment. A decline towards our forecasted 2% growth rate would take pressure
off Fed Chairman Greenspan to raise interest rates. Fortunately, inflation
trends support no change in monetary policy and a slowing economy would only
help this view. We continue to believe that the federal funds rate will remain
at its current level of 5.5% for the entire year.
Star Ohio Tax-Free Money Market Fund
- ------------------------------------
Q What major factors affected the tax-free money market during the Fund's fiscal
year?
A During the first half of our fiscal year, the U.S. economy continued to
witness strong domestic growth which was offset by the dampening effects of
Asia. A strong U.S. dollar, shrinking federal budget deficit, and good inflation
news, tipped the scales in favor of lower yields. Yields for one-year maturities
declined 15 basis points. Throughout this period, our outlook was constructive
on the market, expecting interest rates to decline. With the aid of a
longer-term outlook and proprietary models, the Fund was able to "lock-in"
higher yields, while maintaining its high level of income.
Q How did the Star Ohio Tax-Free Money Market Fund's yield move over the
six-month period?
A Supply and demand factors are always important and the most recent period was
no different. The combination of strong demand from investors for short-term
investment vehicles and lack of supply by well funded municipalities resulted in
yields remaining low throughout the period. Although yields declined over the
past six months, the Fund's yield increased slightly. The reason is principally
related to reduced fund expenses thanks to strong asset growth. Also, we
anticipated the decline in yields and the portfolio's average maturity was
lengthened in order to lock-in higher yields. By keeping the Fund's average
maturity longer than that of the average of its peers, the yield of the Star
Ohio Tax-Free Money Market Fund moved from last place in the peer average into
the top half of funds.
Q As we reach the midpoint of 1998, what is your outlook for short-term rates
for the rest of the year?
A Our outlook calls for a "soft-landing" of the economy following the first
quarter's strong economic growth rate of 5+%. This level of growth is much
stronger than the Fed or the bond market would prefer given the current yield
environment. A decline towards our forecasted 2% growth rate would take pressure
off Fed Chairman Greenspan to raise interest rates. Fortunately, inflation
trends support no change in monetary policy and a slowing economy would only
help this view. We continue to believe that the federal funds rate will remain
at its current level of 5.5% for the entire year.
Portfolios of Investments
STAR TREASURY FUND______________________________________________________________
May 31, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY - 21.1%
- -------------------------------------------------------------------------------
$285,000,000 United States Treasury Notes, 5.125%-8.25%,
6/30/1998-4/30/1999 $286,124,293
- -------------------------------------------------------------------------------
(B)REPURCHASE AGREEMENTS - 71.4%
100,000,000 Bear, Stearns and Co., 5.53%, dated 5/29/1998,
due 6/1/1998 100,000,000
96,362,000 Dean Witter Reynolds, Inc., 5.53%, dated
5/29/1998, due 6/1/1998 96,362,000
336,173,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998, due 6/1/1998 336,173,000
100,000,000 Merrill Lynch, Pierce, Fenner and Smith, 5.53%,
dated 5/29/1998, due 6/1/1998 100,000,000
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OR SHARES VALUE
- -------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENTS (CONTINUED)
$336,172,000 SBC Capital Markets, Inc., 5.53%, dated
5/29/1998, due 6/1/1998 $336,172,000
- -------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 968,707,000
- -------------------------------------------------------------------------
MUTUAL FUNDS - 6.4%
30,000,000 Merrill Lynch Institutions Treasury Fund 30,000,000
56,246,215 Short Term Investment Fund 56,246,215
- -------------------------------------------------------------------------
TOTAL MUTUAL FUNDS (AT NET ASSET VALUE) 86,246,215
- -------------------------------------------------------------------------
TOTAL INVESTMENTS (AT AMORTIZED COST AND VALUE)(A) $1,341,077,508
- -------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
STAR TAX-FREE MONEY MARKET FUND_________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS - 102.0%
- -------------------------------------------------------------------------------
COLORADO - 1.7%
$2,000,000 Smith Creek Metropolitan District of Colorado,
Revenue Bonds Weekly VRDNs (Nationsbank, Fort
Worth LOC) A1+ $2,000,000
- -------------------------------------------------------------------------------
FLORIDA - 2.0%
2,300,000 University of Florida Athletic Association
Daily VRDNs (University of Florida
Stadium)/(SunTrust Bank, Central Florida LOC) VMIG1 2,300,000
- -------------------------------------------------------------------------------
GEORGIA - 4.4%
1,300,000 Columbus, GA Housing Authority Weekly VRDNs
(Columbus State University
Foundation)/(SunTrust Bank, Atlanta LOC) Aa3 1,300,000
1,000,000 Fulton County, GA Development Authority Weekly
VRDNs (Arthritis Foundation Inc.)/(SunTrust
Bank, Atlanta LOC) Aa3 1,000,000
800,000 Fulton County, GA Development Authority,
Revenue Bonds Weekly VRDNs (Robert W.
Woodruff Arts Center)/ (SunTrust Bank,
Atlanta LOC) Aa3 800,000
2,000,000 Rockdale County, GA Hospital Authority,
Revenue Anticipation Certificates (Series
1994) Weekly VRDNs (Rockdale Hospital)/
(SunTrust Bank, Atlanta LOC) VMIG1 2,000,000
- -------------------------------------------------------------------------------
Total 5,100,000
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
ILLINOIS - 13.6%
$2,000,000 Illinois Development Finance Authority,
(Series 1993A) Weekly VRDNs (Loyola
Academy)/(Northern Trust Corp. LOC) A1+ $2,000,000
1,055,000 Illinois Development Finance Authority,
Revenue Bonds Weekly VRDNs (Lake Forest
Academy)/(Northern Trust Corp. LOC) A1+ 1,055,000
2,000,000 Illinois Development Finance Authority,
Revenue Bonds Weekly VRDNs (Roosevelt
University)/(American National Bank, Chicago
LOC) A1+ 2,000,000
2,500,000 Illinois Development Finance Authority, Series
A Weekly VRDNs (Presbyterian Home VMIG1/
Lake)/(Lasalle National Bank, Chicago LOC) A1+ 2,500,000
2,500,000 Illinois Development Finance Authority,
Variable/Fixed Rate Demand Revenue Bonds,
(Series 1996) Weekly VRDNs (Chicago Symphony
Orchestra Project)/(Bank of America Illinois VMIG1/
LOC) A1+ 2,500,000
2,500,000 Illinois Educational Facilities Authority,
Refunding Revenue Bonds Weekly VRDNs
(Newberry Library Project)/(Northern Trust
Corp. LOC) VMIG1 2,500,000
1,000,000 Illinois Health Facilities Authority, Revenue
Bonds Weekly VRDNs (Gottlieb Health
Resources, Inc.)/ (Harris Trust & Savings
Bank, Chicago and Harris Trust & Savings
Bank, Chicago LOCs) VMIG1 1,000,000
</TABLE>
(See Notes to the Portfolios of Investments)
STAR TAX-FREE MONEY MARKET FUND_________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$1,330,000 Schaumburg, IL, IDR Refunding Bonds Weekly
VRDNs (La Quita Motor Inns)/(Nationsbank,
Fort Worth LOC) P1 $1,330,000
650,000 Springfield, IL , Community Improvement
Refunding Revenue Bonds Weekly VRDNs (Kent
Family Project)/(PNC Bank, N.A. LOC) A1 650,000
- -------------------------------------------------------------------------------
Total 15,535,000
- -------------------------------------------------------------------------------
INDIANA - 0.9%
1,000,000 Indiana Bond Bank, Advance Funding Program
Notes (Series 1998 A-2), 4.00% Notes,
1/20/1999 MIG1 1,002,469
- -------------------------------------------------------------------------------
KENTUCKY - 4.4%
1,000,000 Boone County, KY, IDRB (Series 1994A) Weekly
VRDNs (Square D. Co.)/(Societe Generale,
Chicago, IL LOC) A1+ 1,000,000
4,000,000 Fulton, KY, Revenue Bonds Weekly VRDNs
(Community Health System of Kentucky)/
(First Union National Bank, Charlotte, N.C.
LOC) VMIG1 4,000,000
- -------------------------------------------------------------------------------
Total 5,000,000
- -------------------------------------------------------------------------------
MARYLAND - 1.8%
1,700,000 Baltimore, MD EDA Weekly VRDNs (Field
Container Co. L.P.)/(American National Bank,
Chicago LOC) A1+ 1,700,000
365,000 Maryland State IDFA, (Series 1991) Weekly
VRDNs (Maryland Academy of Sciences
Facility)/ (Nationsbank, N.A., Charlotte
LOC) VMIG1 365,000
- -------------------------------------------------------------------------------
Total 2,065,000
- -------------------------------------------------------------------------------
MASSACHUSETTS - 4.3%
3,000,000 Massachusetts Bay Transit Authority, (Series
C), 3.85% CP (Westdeutsche Landesbank
Girozentrale LOC), Mandatory Tender
6/15/1998 A-1+/P-1 3,000,000
2,000,000 Massachusetts Bay Transit Authority, (Series
C), 3.85% CP (Westdeutsche Landesbank
Girozentrale LOC), Mandatory Tender 6/9/1998 A1+/P1 2,000,000
- -------------------------------------------------------------------------------
Total 5,000,000
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
MICHIGAN - 3.6%
$3,800,000 Cornell, MI Economic Development Corp.,
Industrial Development Revenue Refunding
Bonds (Series 1990), 3.75% CP (Mead-Escanaba
Paper Co. Project)/(Credit Suisse First
Boston LOC), Mandatory Tender 7/8/1998 A1+ $3,800,000
365,000 Lenawee County, MI EDC, Revenue Bonds Weekly
VRDNs (Hardwoods of Michigan, Inc.)/(National
City Bank, Ohio LOC) VMIG1 365,000
- -------------------------------------------------------------------------------
Total 4,165,000
- -------------------------------------------------------------------------------
MISSISSIPPI - 1.7%
2,000,000 Forest, MS, IDR Refunding Bonds Weekly VRDNs
(Sara Lee Corp.) AA- 2,000,000
- -------------------------------------------------------------------------------
MISSOURI - 7.1%
700,000 Independence, MO IDA, IDRB Weekly VRDNs (Shoney's Inn)/(Wachovia
Bank of NC, NA,
Winston-Salem LOC) NR 700,000
1,500,000 Missouri State Environmental Improvement &
Energy Authority, (Series 1985A), 3.75% CP
(Union Electric Co.)/(Union Bank of
Switzerland, Zurich LOC), Mandatory Tender
7/9/1998 P1/A1+ 1,500,000
5,000,000 Missouri State Environmental Improvement &
Energy Authority, Refunding Revenue Bonds
Weekly VRDNs (Kansas City Power And Light VMIG1/
Co.) A1 5,000,000
1,000,000 Missouri State HEFA, Revenue Bonds (Series C) VMIG1/
Daily VRDNs (Washington University) A1+ 1,000,000
- -------------------------------------------------------------------------------
Total 8,200,000
- -------------------------------------------------------------------------------
NEW MEXICO - 0.8%
900,000 Belen, NM, IDR Refunding Bonds (Series 1991)
Weekly VRDNs (United Desiccants,
Inc.)/(National City Bank, Kentucky LOC) NR 900,000
- -------------------------------------------------------------------------------
OHIO - 20.6%
2,000,000 Butler County, OH, 4.29% GOLT Coupon, 8/6/1998 NR 2,001,356
1,250,000 Butler County, OH, GO LT, 4.00% BANs,
3/19/1999 NR 1,253,847
2,000,000 Butler County, OH, GO UT, 4.25% BANs,
10/22/1998 NR 2,003,041
480,000 Centerville, OH, Health Care Revenue Bonds
Weekly VRDNs (Bethany Lutheran Village)/(PNC
Bank, Ohio, N.A. LOC) VMIG1 480,000
</TABLE>
(See Notes to the Portfolios of Investments)
STAR TAX-FREE MONEY MARKET FUND_________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
OHIO (CONTINUED)
$1,670,000 Clermont County, OH, 4.10% GO LT BANs,
12/17/1998 NR $1,671,968
2,000,000 Cuyahoga County, OH Hospital Authority, VMIG1/
(Series C) Weekly VRDNs (Cleveland Clinic) A1+ 2,000,000
1,000,000 Erie County, OH, GO LT, 4.25% BANs, 6/1/1999 SP-1+ 1,004,810
800,000 Franklin County, OH Hospital Facility
Authority, Series A Weekly VRDNs (U.S. Health
Corp. of Columbus)/(Morgan Guaranty Trust
Co., New York LOC) VMIG1 800,000
750,000 Hamilton County, OH Hospital Facilities
Authority, (Series 1997A) Weekly VRDNs
(Children's Hospital Medical Center)/(PNC
Bank, Ohio, N.A. LOC) VMIG1 750,000
1,000,000 Hamilton County, OH Hospital Facilities
Authority, (Series 1997A) Weekly VRDNs
(Health Alliance of Greater Cincinnati)/(MBIA
Insurance Corporation INS)/(Credit Suisse VMIG1/
First Boston LIQ) A1+ 1,000,000
300,000 Hamilton County, OH Hospital Facilities
Authority, Series B Revenue Bonds Weekly
VRDNs (Health Alliance of Greater VMIG1/
Cincinnati)/(MBIA Insurance Corporation INS) A1+ 300,000
185,000 Marion County, OH Hospital Authority Weekly
VRDNs (Pooled Lease Program)/ (Bank One,
Ohio, N.A. LOC) VMIG1 185,000
110,000 Marion County, OH Hospital Authority, Revenue
Bonds Weekly VRDNs (Pooled Lease
Program)/(Bank One, Ohio, N.A. LOC) A1+ 110,000
500,000 Mason, OH City School District, (Series A),
4.02% Coupon, 2/18/1999 MIG1 501,454
2,000,000 Middleburg Heights, OH Hospital Rev. Weekly
VRDNs (KeyBank, N.A. LOC) A1 2,000,000
1,000,000 Northwest, OH Local School District, GO UT,
4.84% Bonds, 6/17/1998 NR 1,000,427
1,000,000 Ohio School Districts, (Series B), 4.47% TANs, SP-1+/
6/30/1998 MIG1 1,000,451
310,000 Ohio State IDR, Refunding Bonds Weekly VRDNs
(Cincinnati Riverfront Coliseum, Inc.)/(PNC
Bank, Ohio, N.A. LOC) A1 310,000
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
OHIO (CONTINUED)
$485,000 Ohio State IDR, Refunding Bonds Weekly VRDNs
(Cincinnati Riverfront Coliseum, Inc.)/(PNC
Bank, Ohio, N.A. LOC) A1 $485,000
385,000 Ohio State IDR, Refunding Bonds Weekly VRDNs
(Cincinnati Riverfront Coliseum, Inc.)/(PNC
Bank, Ohio, N.A. LOC) A1 385,000
450,000 Ohio State IDR, Refunding Bonds Weekly VRDNs
(Cincinnati Riverfront Coliseum, Inc.)/(PNC
Bank, Ohio, N.A. LOC) A1 450,000
500,000 Ohio State Water Development Authority,
Pollution Control Revenue Refunding Bonds
(Series 1997) Weekly VRDNs (Philip Morris
Cos., Inc.) P1 500,000
2,000,000 Summit County, OH, GO LT (Series A), 4.50% SP-1+/
BANs, 6/3/1999 MIG1 2,014,580
1,750,000 University of Toledo, 7.70% General receipts
(MBIA Insurance Corporation INS), 6/1/1998 AAA/Aaa 1,785,000
- -------------------------------------------------------------------------------
Total 23,991,934
- -------------------------------------------------------------------------------
OREGON - 4.2%
4,845,000 Portland, OR Weekly VRDNs (University Park
Apartments)/(Bank of Boston, Connecticut LOC) P-1 4,845,000
- -------------------------------------------------------------------------------
PENNSYLVANIA - 12.0%
1,200,000 Allegheny County, PA HDA, (Series 1990 A)
Daily VRDNs (Presbyterian University
Hospital)/(MBIA Insurance Corporation INS) AAA/Aaa 1,200,000
2,200,000 Allegheny County, PA HDA, (Series 1990 B)
Daily VRDNs (Presbyterian University
Hospital)/(MBIA Insurance Corporation INS) AAA/Aaa 2,200,000
4,000,000 Allegheny County, PA IDA, PCR (Series 1992A),
3.85% Mandatory Put Bond (Duquesne Light
Power Co.)/(Canadian Imperial Bank of
Commerce, Toronto LOC), Optional Tender
10/21/1998 P1/A1+ 4,000,000
2,475,000 Butler County, PA IDA, Health, Hospital,
(Series B), 3.80% (Lutheran Welfare)/ (PNC
Bank, N.A. LOC), Mandatory Put 11/1/1998 A1 2,475,000
</TABLE>
(See Notes to the Portfolios of Investments)
STAR TAX-FREE MONEY MARKET FUND_________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
$1,000,000 East Penn, PA IDA, IDR Refunding Bonds Weekly
VRDNs (Electronic Data Systems
Corp.)/(Wachovia Bank of Georgia NA) Aa2 $1,000,000
2,000,000 Philadelphia, PA School District, (Series
1997-1998), 4.50% TRANs (Commerzbank AG, SP-1+/
Frankfurt LOC), 6/30/1998 MIG1 2,000,840
1,000,000 Temple University, Refunding Bonds (Series B),
4.50% Bonds, 5/14/1999 SP-1+ 1,006,865
- -------------------------------------------------------------------------------
Total 13,882,705
- -------------------------------------------------------------------------------
TENNESSEE - 8.7%
1,000,000 Greenville, TN IDB, IDRB Weekly VRDNs (Ball Corp.)/(Wachovia Bank
of Georgia NA, Atlanta
LOC) A1+ 1,000,000
3,700,000 Metropolitan Government Nashville & Davidson
County, TN HEFA, Educational Facilities
Revenue Bonds (Series 1997) Weekly VRDNs
(Belmont University Project)/(SunTrust Bank,
Nashville LOC) Aa3 3,700,000
2,000,000 Rutherford County, TN IDB Weekly VRDNs (Square
D. Co.)/(Societe Generale, Chicago, IL LOC) A1+ 2,000,000
3,360,000 Sullivan County, TN Health Educational &
Housing Facilities Board, Revenue Bonds
Weekly VRDNs (Asbury Center)/ (Nationsbank,
N.A., Charlotte LOC) NR 3,360,000
- -------------------------------------------------------------------------------
Total 10,060,000
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT CREDIT
OR SHARES RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
TEXAS - 7.0%
$2,275,000 Bexar County, Health Facilities Development
Authority Weekly VRDNs (Army Retirement
Resources Foundation)/ (Rabobank Nederland,
Utrecht LOC) A1+ $2,275,000
2,000,000 Harris County, TX HFDC, (Series 1994) Daily
VRDNs (Methodist Hospital, Harris County,
TX) A1+ 2,000,000
1,800,000 San Antonio, TX IDA Weekly VRDNs (San
Antonio River Center Associates)/(PNC Bank,
N.A. LOC) A1 1,800,000
2,000,000 Waller County, TX IDC, Industrial
Improvement Revenue Bonds Weekly VRDNs
(Tubular Steel, Inc.)/(Wachovia Bank of
Georgia NA LOC) P-1 2,000,000
- -------------------------------------------------------------------------------
Total 8,075,000
- -------------------------------------------------------------------------------
VIRGINIA - 1.5%
1,735,000 Rockbridge County, VA IDA, IDR Bonds, 3.70% Mandatory Put (Safeway,
Inc.)/(Bankers
Trust Co., LOC) 8/3/1998 A1 1,735,000
- -------------------------------------------------------------------------------
WISCONSIN - 1.7%
2,000,000 Racine County, WI School District, Tax &
Revenue Anticipation Prom Nts, 4.25% Bonds,
8/24/1998 SP-1+ 2,001,773
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM MUNICIPALS 117,858,881
- -------------------------------------------------------------------------------
MUTUAL FUND - 0.1%
155,023 SEI Tax Exempt Money Market Fund (AT NET
ASSET VALUE) 155,023
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS
(AT AMORTIZED COST AND VALUE)(A) $118,013,904
- -------------------------------------------------------------------------------
</TABLE>
STAR OHIO TAX-FREE MONEY MARKET FUND ___________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS - 101.8%
- ------------------------------------------------------------------------------
OHIO - 101.8%
$1,460,000 Allen County, OH Health Care Facilities,
(Series 1998) Weekly VRDNs (Mennonite
Home)/(Norwest Bank Minnesota, N.A. LOC) A1+ $1,460,000
535,000 Barberton, OH, Sewer System Revenue Refunding
Bonds, 3.70% Bonds, 12/1/1998 Aaa/AAA 535,000
1,200,000 Butler County, OH, 3.80% BANs, 10/22/1998 NR 1,202,139
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
OHIO (CONTINUED)
$225,000 Butler County, OH, GO LT, 4.00% BANs, 3/19/1999 NR $225,693
200,000 Centerville, OH Weekly VRDNs (Bethany Lutheran
Village)/ (PNC Bank, Ohio, N.A. LOC) A1/VMIG1 200,000
500,000 Clermont County, OH , 3.90% BANs, 12/17/1998 500,589
</TABLE>
(See Notes to the Portfolios of Investments)
STAR OHIO TAX-FREE MONEY MARKET FUND____________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
OHIO (CONTINUED)
$500,000 Cleveland, OH Public Power System, Electric,
Light & Power Improvement Revenue Bonds
(Series B), 5.40% Bonds (MBIA Insurance
Corporation INS), 11/15/1998 AAA/Aaa $503,550
100,000 Cleveland, OH, GO UT (Series A), 5.35% TRANs,
7/1/1998 AAA/Aaa 100,133
100,000 Columbus, OH Electrical Systems, Electric,
Light, & Power Improvement Revenue Bonds
Monthly VRDNs (Union Bank of Switzerland,
Zurich LOC) Aaa/VMIG1 100,151
1,000,000 Columbus, OH Sewer System, Revenue Bonds
(Series 1994) Weekly VRDNs AA-/A1 1,000,000
1,565,000 Columbus, OH, GO UT (Series 1) Weekly VRDNs VMIG1/
(Westdeutsche Landesbank Girozentrale SA) A1+ 1,565,000
1,500,000 Cuyahoga County, OH, Hospital Revenue Bonds VMIG1/
Weekly VRDNs (Cleveland Clinic) A-1+ 1,500,000
500,000 Erie County, OH, GO LT, 4.25% BANs, 6/1/1999 SP-1+/NR 502,405
600,000 Franklin County, OH Hospital Facility
Authority Daily VRDNs (Franciscan Sister - AA2/
St. Anthony) VMIG1 600,000
1,500,000 Franklin County, OH Hospital Facility
Authority, Series A Weekly VRDNs (U.S.
Health Corp. of Columbus)/ (Morgan Guaranty
Trust Co., New York LOC) VMIG1 1,500,000
100,000 Hamilton County, OH Health System Weekly
VRDNs (West Park Community)/ (Fifth Third
Bank, Cincinnati LOC) VMIG1 100,000
2,500,000 Hamilton County, OH Hospital Facilities
Authority, (Series 1997A) Weekly VRDNs
(Children's Hospital Medical Center)/(PNC
Bank, Ohio, N.A. LOC) VMIG1 2,500,000
1,800,000 Hamilton County, OH Hospital Facilities
Authority, Series B Revenue Bonds Weekly
VRDNs (Health Alliance of Greater VMIG1/
Cincinnati)/(MBIA Insurance Corporation INS) A-1+ 1,800,000
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- -------------------------------------------------------------------------------
OHIO (CONTINUED)
$1,000,000 Hamilton County, OH Weekly VRDNs (General
Protestant Orphan Home)/(Fifth Third Bank,
Cincinnati LOC) NR $1,000,000
150,000 Hamilton, OH Electric Systems Management,
(Series B), 8.00% Bonds (FGIC INS)/ (United
States Treasury PRF), 10/15/1998 (@102) AAA/Aaa 154,709
1,205,000 Marion County, OH Hospital Authority, (Series
1991) Weekly VRDNs (Marion County, OH Pooled
Hospital Program)/(Bank One, Ohio, N.A. LOC) AA/NR 1,205,000
605,000 Marysville, OH, GO UT, 3.91% BANs, 3/19/1999 NR 606,209
500,000 Mason City, OH , 3.95% BANs, 12/17/1998 NR 500,394
250,000 Mason, OH City School District, (Series A),
4.019% BANs, 2/18/1999 NR/MIG1 250,727
1,000,000 Mason, OH EDA Weekly VRDNs (Cedar Village
Project)/(Fifth Third Bank, Cincinnati LOC) NR 1,000,000
1,000,000 Middleburg Heights, OH, Hospital Improvement
Revenue Bonds Weekly VRDNs (KeyBank, N.A.
LOC) A-1 1,000,000
545,000 Middletown, OH, 4.40% BANs, 12/15/1998 NR 546,413
500,000 Aa3/
Milford, OH, GO LT, 4.11% BANs, 5/19/1999 VMIG1 501,204
2,500,000 Montgomery County, OH Health Facilities
Authority, (Series A) Daily VRDNs (Miami
(OH) Valley Hospital) AA-/F1 2,500,000
200,000 North Ridgeville, OH, 4.375% BANs, 6/2/1999 NR 200,718
2,000,000 Ohio School Districts, (Series B), 4.47% SP-1+/
TANs, 6/30/1998 MIG1 2,001,021
100,000 Ohio State IDR, Refunding Bonds Weekly VRDNs
(Cincinnati Riverfront Coliseum, Inc.)/(PNC
Bank, Ohio, N.A. LOC) NR/A1 100,000
1,000,000 A-1+/
Ohio State University Weekly VRDNs VMIG1 1,000,000
1,500,000 Ohio State Water Development Authority,
Pollution Control Revenue Refunding Bonds
(Series 1997) Weekly VRDNs (Philip Morris
Cos., Inc.) A2/P1 1,500,000
600,000 Scioto County, OH Hospital Authority, (Series
D) Weekly VRDNs (Volunteer Hospitals of
America) Aaa/A-1+ 600,000
</TABLE>
(See Notes to the Portfolios of Investments)
STAR OHIO TAX-FREE MONEY MARKET FUND____________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL AMOUNT RATING* VALUE
- ------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- ------------------------------------------------------------------------------
OHIO (CONTINUED)
$1,000,000 Summit County, OH Civic Facility Weekly VRDNs
(Young Mens Christian Association)/(KeyBank,
N.A. LOC) NR $1,000,000
1,000,000 Warren County, OH Health Care Facilities,
(Series A) Weekly VRDNs (Otterbein
Homes)/(Fifth Third Bank, Cincinnati LOC) A-1+ 1,000,000
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT CREDIT
OR SHARES RATING* VALUE
- ----------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS (CONTINUED)
- ----------------------------------------------------------------------------
OHIO (CONTINUED)
$730,000 Worthington City, OH City School District,
(Series 1998), 3.80% BANs, 1/15/1999 $730,878
- ----------------------------------------------------------------------------
TOTAL SHORT TERM MUNICIPALS 33,291,933
- ----------------------------------------------------------------------------
MUTUAL FUNDS - 0.1%
34,560 Midwest Ohio Tax-Free Fund (AT NET ASSET
VALUE) 34,560
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS
(AT AMORTIZED COST AND VALUE)(A) $33,326,493
- ----------------------------------------------------------------------------
</TABLE>
(See Notes to the Portfolios of Investments)
Notes to Portfolios of Investments
(a)Also represents cost for federal tax purposes.
(b)The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at date of the portfolio.
*Current credit ratings are unaudited. Please refer to the Statement of
Additional Information for an explanation of the credit ratings.
The following acronyms are used throughout this portfolio: BANs--Bond
Anticipation Notes CP--Commercial Paper EDA--Economic Development Authority
EDC--Economic Development Commission GO--General Obligation HDA--Hospital
Development Authority HEFA--Health and Education Facilities Authority
HFDC--Health Facility Development Corporation IDA--Industrial Development
Authority IDB--Industrial Development Bond IDC--Industrial Development
Corporation IDR--Industrial Development Revenue IDRB--Industrial Development
Revenue Bond IDFA--Industrial Development Finance Authority INS--Insured
LIQ--Liquidity Agreement LOC--Letter of Credit LT--Limited Tax MBIA--Municipal
Bond Investors Assurance PCR--Pollution Control Revenue PRF--Prerefunded
RANs--Revenue Anticipation Notes SA--Support Agreement TANs--Tax Anticipation
Notes TOBs--Tender Option Bonds TRANs--Tax and Revenue Anticipation Notes
UT--Unlimited Tax VRDNs--Variable Rate Demand Notes
<TABLE>
<CAPTION>
Total Net
Star Funds Assets**
- ------------------------------------ --------------
<S> <C>
Star Treasury Fund $1,356,130,595
Star Tax-Free Money Market Fund 115,561,091
Star Ohio Tax-Free Money Market Fund 32,703,900
</TABLE>
** The categories of investments are shown as a percentage of net assets at May
31, 1998.
(See Notes which are an integral part of the Financial Statements)
Statements of Assets and Liabilities
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
STAR
STAR OHIO
TAX-FREE TAX-FREE
STAR MONEY MONEY
TREASURY MARKET MARKET
FUND FUND FUND
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in repurchase agreements,
at amortized cost $968,707,000 -- --
Investments in securities 372,370,508 $118,013,904 $33,326,493
- --------------------------------------------------------------------------------
Total investments in securities, at
amortized cost and value $1,341,077,508 $118,013,904 $33,326,493
- --------------------------------------------------------------------------------
Cash 837,218 62,922 --
Income receivable 5,872,193 873,761 261,389
Receivable for investments sold 15,000,000 -- --
- --------------------------------------------------------------------------------
Total assets 1,362,786,919 118,950,587 33,587,882
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased -- 3,019,390 703,123
Payable for Fund shares redeemed -- -- 49,878
Income distribution payable 5,737,491 290,698 93,540
Accrued expenses 918,833 79,408 37,441
- --------------------------------------------------------------------------------
Total liabilities 6,656,324 3,389,496 883,982
- --------------------------------------------------------------------------------
NET ASSETS:
C Shares $433,951,978 $115,561,091 $32,703,900
Y Shares 922,178,617 -- --
- --------------------------------------------------------------------------------
Total Net Assets $1,356,130,595 $115,561,091 $32,703,900
- --------------------------------------------------------------------------------
SHARES OUTSTANDING:
C Shares 433,951,978 115,561,091 32,703,900
Y Shares 922,178,617 -- --
- --------------------------------------------------------------------------------
Total shares outstanding 1,356,130,595 115,561,091 32,703,900
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
C Shares $1.00 $1.00 $1.00
Y Shares $1.00 -- --
- --------------------------------------------------------------------------------
Investments, at identified cost $1,341,077,508 $118,013,904 $33,326,493
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Investments, at tax cost $1,341,077,508 $118,013,904 $33,326,493
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Statements of Operations
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
STAR
STAR OHIO
TAX-FREE TAX-FREE
STAR MONEY MONEY
TREASURY MARKET MARKET
FUND FUND FUND (A)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $34,767,760 $2,193,836 $583,994
EXPENSES:
Investment advisory fee 3,093,826 330,874 87,878
Administrative personnel and services fee 712,373 69,026 24,504
Custodian fees 154,691 15,040 3,994
Transfer and dividend disbursing agent
fees and expenses 88,234 16,376 13,136
Directors'/Trustees' fees 9,680 1,446 1,991
Auditing fees 520 7,275 --
Legal fees 8,390 4,000 5,430
Portfolio accounting fees 41,534 22,746 32,493
Distribution services fee--C Shares 302,008 -- --
Shareholder services fee--C Shares 107,284 30,079 7,989
Shareholder services fee--Y Shares 202,099 -- --
Share registration costs 14,384 6,080 23,184
Printing and postage 12,700 6,191 7,964
Insurance premiums 5,998 2,736 1,448
Miscellaneous 980 1,427 2,535
- ------------------------------------------------------------------------------
Total expenses 4,754,701 513,296 212,546
- ------------------------------------------------------------------------------
Waivers--
- ------------------------------------------------------------------------------
Waiver of investment advisory fee -- (60,159) (63,911)
Waiver of administrative personnel and
services fee -- -- (18,871)
- ------------------------------------------------------------------------------
Total Waivers -- (60,159) (82,782)
- ------------------------------------------------------------------------------
Net Expenses 4,754,701 453,137 129,764
- ------------------------------------------------------------------------------
Net investment income $30,013,059 $1,740,699 $454,230
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(a)Reflects operations from December 2, 1997 (date of initial public investment)
to May 31, 1998.
(See Notes which are an integral part of the Financial Statements)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
STAR STAR OHIO
STAR TAX-FREE TAX-FREE
TREASURY MONEY MARKET MONEY MARKET
FUND FUND FUND
------------------------------ -------------------------- ------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
MAY 31, YEAR ENDED MAY 31, YEAR ENDED MAY 31,
1998 NOVEMBER 30, 1998 NOVEMBER 30, 1998 (A)
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
OPERATIONS--
Net investment income $30,013,059 $47,717,951 $1,740,699 $4,103,115 $454,230
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net
investment income
C Shares (10,197,080) (29,726,806) (1,740,699) (4,103,115) (454,230)
Y Shares (19,815,979) (17,991,145) -- -- --
- -----------------------------------------------------------------------------------------------------
Change in net assets
from distributions to
shareholders (30,013,059) (47,717,951) (1,740,699) (4,103,115) (454,230)
- -----------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sales of
shares 3,910,935,445 6,634,149,054 269,647,365 529,216,899 70,765,692
Net assets value of
shares issued to
shareholders
in payment of
distributions declared 179,952 469,381 2,534 5,547 585
Cost of shares redeemed (3,683,680,529) (6,335,181,799) (280,436,343) (556,130,618) (38,062,377)
- -----------------------------------------------------------------------------------------------------
Change in net assets
from share transactions 227,434,868 299,436,636 (10,786,444) (26,908,172) 32,703,900
- -----------------------------------------------------------------------------------------------------
Change in net assets 227,434,868 299,436,636 (10,786,444) (26,908,172) 32,703,900
- -----------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,128,695,727 829,259,091 126,347,535 153,255,707 --
- -----------------------------------------------------------------------------------------------------
End of period $1,356,130,595 $1,128,695,727 $115,561,091 $126,347,535 $32,703,900
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a)Reflects operations from December 2, 1997 (date of initial public investment)
to May 31, 1998.
(See Notes which are an integral part of the Financial Statements)
Financial Highlights
STAR FUNDS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
NET ASSET DISTRIBUTIONS ------------------------------- NET ASSETS,
VALUE, NET FROM NET NET ASSET NET EXPENSE END OF
YEAR ENDED BEGINNING INVESTMENT INVESTMENT VALUE, END TOTAL INVESTMENT WAIVER/ PERIOD
NOVEMBER 30, OF PERIOD INCOME INCOME OF PERIOD RETURN(A) EXPENSES INCOME REIMBURSEMENT(B) (000 OMITTED)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STAR TREASURY FUND
C SHARES
1993 $1.00 0.03 (0.03) $1.00 2.56% 0.70% 2.53% 0.25% $386,020
1994 $1.00 0.03 (0.03) $1.00 3.30% 0.70% 3.24% -- $358,766
1995 $1.00 0.05 (0.05) $1.00 5.23% 0.71% 5.14% -- $654,963
1996 $1.00 0.05 (0.05) $1.00 4.80% 0.70% 4.69% -- $829,259
1997 $1.00 0.05 (0.05) $1.00 4.85% 0.73% 4.73% -- $469,400
1998(f) $1.00 0.02 (0.02) $1.00 2.38% 0.86%(c) 4.74%(c) -- $433,952
Y SHARES
1997(d) $1.00 0.03 (0.03) $1.00 3.37% 0.72%(c) 4.87%(c) -- $659,296
1998(f) $1.00 0.02 (0.02) $1.00 2.45% 0.72%(c) 4.91%(c) -- $922,179
STAR TAX-FREE MONEY MARKET FUND
C SHARES
1993 $1.00 0.02 (0.02) $1.00 1.91% 0.65% 1.90% 0.40% $135,022
1994 $1.00 0.02 (0.02) $1.00 2.15% 0.65% 2.12% 0.15% $135,427
1995 $1.00 0.03 (0.03) $1.00 3.32% 0.66% 3.26% 0.15% $167,356
1996 $1.00 0.03 (0.03) $1.00 2.91% 0.70% 2.87% 0.11% $153,256
1997 $1.00 0.03 (0.03) $1.00 3.02% 0.69% 2.96% 0.10% $126,348
1998(f) $1.00 0.01 (0.01) $1.00 1.45% 0.75%(c) 2.89%(c) 0.10%(c) $115,561
STAR OHIO TAX-FREE MONEY MARKET FUND
C SHARES
1998(e) $1.00 0.01 (0.01) $1.00 1.45% 0.81%(c) 2.84%(c) 0.52%(c) $32,704
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a)Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b)This voluntary expense decrease if reflected in both the expense and net
investment income ratios.
(c)Computed on an annualized basis.
(d)Reflects operations for the period from March 25, 1997 (date of initial
public investment) to November 30, 1997.
(e)Reflects operations for the period from December 2, 1997 (date of initial
public investment) to May 31, 1998 (unaudited).
(f)For the six months ended May 31, 1998 (unaudited).
(See Notes which are an integral part of the Financial Statements)
Combined Notes to Financial Statements
MAY 31, 1998 (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 eleven diversified portfolios and one non-diversified portfolio. The
financial statements of the following portfolios (individually referred to as
the "Fund", or collectively as the "Funds") are presented herein along with each
Fund's investment objective:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
- -----------------------------------------------------------------------------
<S> <C>
Star Treasury Fund Stability of
("Treasury Fund") principal and
current income
consistent with
stability of
principal.
Star Tax-Free Money Market Fund Current income exempt
("Tax-Free Money Market Fund") from federal regular
income tax
consistent with
stability of
principal.
Star Ohio Tax-Free Money Current income exempt
Market Fund ("Ohio Tax-Free from federal income
Money Market Fund")* tax and the personal
income taxes imposed
by the state of Ohio
and Ohio
municipalities with
stability of
principal.
</TABLE>
*The Ohio Tax-Free Money Market Fund became effective on November 19, 1997 and
had public investment as of December 2, 1997.
The financial statements of the Stock Funds and the Bond Funds are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Treasury Fund offers two classes of shares, (C Shares and Y Shares,
formerly, Investment Shares and Trust Shares, respectively); Tax-Free Money
Market Fund offers one class of shares (C Shares); and Ohio Tax-Free Money
Market Fund offers one class of shares (C 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
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
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 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 their income. Accordingly, no provisions for federal tax
are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may engage in when-issued or delayed delivery transactions. The Funds
record when-issued securities on the trade date and maintain security positions
such that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement
date.
F. 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, 1998, capital paid-in for Treasury Fund, Tax-Free Money Market Fund and Ohio
Tax-Free Money Market Fund aggregated $1,356,130,595, $115,561,091, and
$32,703,900 respectively. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
TREASURY FUND
------------------------------
SIX MONTHS PERIOD
ENDED ENDED
MAY 31, NOVEMBER 30,
Y SHARES 1998 1997*
- ----------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 2,040,780,025 2,057,044,184
Shares issued to shareholders in payment of
distributions declared 113,955 81,573
Shares redeemed (1,778,010,951) (1,397,830,169)
------------------------------
Net change resulting from Y Share transactions 262,883,029 659,295,588
------------------------------
</TABLE>
*Reflects operations for the period from March 25, 1997 (date of initial public
investment) to November 30, 1997.
<TABLE>
<CAPTION>
TREASURY FUND
------------------------------
SIX MONTHS YEAR
ENDED ENDED
MAY 31, NOVEMBER 30,
C SHARES 1998 1997
- ----------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 1,870,155,420 4,577,104,870
Shares issued to shareholders in payment of
distributions declared 65,997 387,808
Shares redeemed (1,905,669,578) (4,937,351,630)
------------------------------
Net change resulting from C Share transactions (35,448,161) (359,858,952)
------------------------------
</TABLE>
<TABLE>
<CAPTION>
TAX-FREE MONEY
MARKET FUND
--------------------------
SIX MONTHS YEAR
ENDED ENDED
MAY 31, NOVEMBER 30,
C SHARES 1998 1997
- ------------------------------------------------ ------------ ------------
<S> <C> <C>
Shares sold 269,647,365 529,216,899
Shares issued to shareholders in payment of dis-
tributions declared 2,534 5,547
Shares redeemed (280,436,343) (556,130,618)
--------------------------
Net change resulting from C Share transactions (10,786,444) (26,908,172)
--------------------------
</TABLE>
<TABLE>
<CAPTION>
OHIO TAX-FREE
MONEY MARKET
FUND
--------------
PERIOD ENDED
C SHARES MAY 31, 1998**
- ------------------------------------------------------------- --------------
<S> <C>
Shares sold 70,765,692
Shares issued to shareholders in payment of distributions de-
clared 585
Shares redeemed (38,062,377)
-----------
Net change resulting from C Share transactions 32,703,900
-----------
</TABLE>
** Reflects operations from the period December 2, 1997 (date of initial public
investment) to May 31, 1998.
(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 as follows:
<TABLE>
<CAPTION>
FUND NAME ANNUAL RATE
- --------------------------------------------
<S> <C>
Treasury Fund 0.50%
Tax-Free Money Market Fund 0.55%
Ohio Tax-Free Money Market Fund 0.55%
- --------------------------------------------
</TABLE>
The Adviser may voluntarily choose to waive a portion of its fee. The Adviser
may modify or terminate this voluntary waiver at any time at its sole
discretion.
B. ADMINISTRATIVE FEE
Federated Administrative Services ("FAS") provides the Funds with certain
administrative personnel and services. Effective January 1, 1998, the fee that
FAS receives changed to an annual rate of 0.12% of the average daily net assets
of the Trust for the period. The administrative fee received during any fiscal
year shall be at least $50,000 per fund. FAS may voluntarily choose to waive a
portion of its fee. FAS may modify or terminate this voluntary waiver at any
time at its sole discretion. Prior to January 1, 1998, the FAS fee was based on
the level of average net assets of the Trust for the period.
Under the terms of a Sub-Administration Agreement between FAS and Star Bank,
N.A., FAS will pay to Star Bank, N.A., solely from the resources of FAS, a
sub-administration fee at an annual rate of 0.04% of the average daily net
assets of the Trust, for assisting FAS in rendering administrative services to
the Trust.
C. DISTRIBUTION SERVICES FEE
Pursuant to the provisions of a distribution plan adopted in accordance with the
Investment Company Act Rule 12b-1 (the "Plan"), C Shares of the Trust may pay to
Federated Securities Corp. an amount computed at an annual rate of 0.25% of the
average daily net asset value of shares to finance any activity which is
principally intended to result in the sale of shares subject to the Plan.
Currently, only the Treasury Fund is accruing and paying 12b-1 fees. The
Tax-Free Money Market Fund and the Ohio Tax-Free Money Market Fund will not
accrue or pay any distribution expenses pursuant to the Plan until a "Y" 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 average daily net assets of the
funds for the period. For the foreseeable future, the Funds plan to limit the
Shareholder Servicing fee to 0.05% 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. Star
Bank, N.A. can modify or terminate this limitation at any time at its sole
discretion.
E. TRANSFER AND DIVIDEND DISBURSING AGENT FEES
Star Bank, N.A. serves as transfer agent and dividend disbursing agent for the
Funds. The fee paid to Star Bank, N.A. is based on the size, type, and number
of accounts and transactions made by shareholders.
Star Bank, N.A. became the Funds transfer and dividend disbursing agent March 9,
1998. Prior to March 9, 1998, Federated Services Company ("FServ") served as the
Fund's transfer and dividend disbursing agent and received for its services a
fee based on the size, type, and number of accounts and transactions made by
shareholders.
For the period ended May 31, 1998, the transfer and dividend disbursing agents
earned fees as follows:
<TABLE>
<CAPTION>
STAR
BANK,
N.A. FSERV
- ------------------------------------------------
<S> <C> <C>
Treasury Fund $71,639 $16,595
Tax-Free Money Market Fund 8,435 7,941
Ohio Tax-Free Money Market Fund 4,010 9,126
- ------------------------------------------------
</TABLE>
F. PORTFOLIO ACCOUNTING FEES
FServ 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.
G. 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 daily net assets for the period,
plus out-of-pocket expenses.
H. GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) YEAR 2000
Similar to other financial organizations, the Funds could be adversely affected
if the computer systems used by the Funds' service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Funds' Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Funds' other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Funds.
Trustees Officers
Thomas L. Conlan Jr. Edward C. Gonzales
PRESIDENT AND TREASURER
Edward C. Gonzales Joseph S. Machi
VICE PRESIDENT AND ASSISTANT TREASURER
Dr. Alfred Gottschalk C. Grant Anderson
SECRETARY
Dr. Robert J. Hill
Dawn M. Hornback
Lawrence M. Turner
William H. Zimmer III
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 or 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 objectives and policies, management fees, expenses and other
information.
---------------------------
Cusip 85491104 Star Bank, N.A.
Cusip 854911849 Investment Adviser
Cusip 854911302 ---------------------------
Cusip 854911781 Federated Securities Corp.
2062306 (7/98) Distributor
6052TR ---------------------------
[LOGO OF STAR FUNDS]
STOCK FUNDS
COMBINED
SEMI-ANNUAL
REPORT
May 31, 1998
The Stellar Fund
Star Relative Value Fund
Star Market Capitalization Fund
Star Growth Equity Fund
Star Capital Appreciation Fund
Star International Equity Fund
President's Message
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for the Star
Stock Funds. The report covers the six-month period from December 1, 1997
through May 31, 1998. It includes a brief discussion with each Fund's portfolio
manager, which covers economic and market conditions and their impact on Fund
performance and strategy. Next, is a complete list of each Fund's holdings and
the financial statements.
Fund-by-fund highlights of the six-month period are as follows:
THE STELLAR FUND
To pursue a high level of total return over the long-term, the Fund invests in
approximately equal weightings in U.S. stocks, U.S. bonds, international
securities,+ real estate securities, and short-term securities. This highly
diversified approach produced a total return of 6.65%, or 1.87% adjusted for the
sales charge, for A Shares.* Contributing to the total return were dividends
totaling $0.16 per share and capital gains totaling $1.30 per share. The net
asset value decreased from $14.27 to $13.66 due to market conditions, and
capital gain and dividend distributions.
Shareholders of Y Shares received a total return of 6.79%, through dividends
totaling $0.18 per share and capital gains totaling $1.30 per share.* The net
asset value decreased from $14.27 to $13.66 due to market conditions, and
capital gain and dividend distributions.
On the last day of the period, Fund net assets totaled $114 million.
STAR RELATIVE VALUE FUND
The Fund pursues a high level of total return through a portfolio of stocks that
appear to be undervalued and offer above-average yields with low volatility.
Many of these stocks are household names including American Express,
Bristol-Myers Squibb, Citicorp, Ford, Gillette, Goodyear, IBM, Intel, Merck, and
Sears. Over the six-month period, the Fund's A Shares delivered a total return
of 12.66%, or 7.57% adjusted for the sales charge.* The Fund's net asset value
rose from $23.48 on the first day of the period to $25.44 on the last day.
Shareholders received dividends totaling $0.10 per share and capital gains
totaling $0.82 per share.
The Fund's Y Shares produced a 12.83% total return through $0.12 in income and a
$0.82 increase in net asset value, while the net asset value increased from
$23.49 to $25.46.*
This report also contains information about the Fund's new B Shares, which began
operation on March 31, 1998.
Fund net assets increased substantially over the period, from $350 million to
$420 million.
STAR MARKET CAPITALIZATION FUND
The Star Market Capitalization Fund began operation on December 8, 1997. This
Fund gives investors the opportunity to pursue the broad performance of the
stock market as measured by the Standard & Poor's 500 Index.** Over the period
from December 8, 1997 (date of initial public investment) through May 31, 1998,
the Fund produced a total return of 12.04% through dividends totaling $0.01 per
share and a $1.19 increase in net asset value.*
STAR GROWTH EQUITY FUND
This Fund pursues classic growth through high-quality stocks that, at the end of
the period, included companies like Allstate, Boeing, Brunswick, Disney,
Gillette, Hewlett-Packard, IBM, Intel, Microsoft, Pepsico, Pfizer, and Wal-
Mart. During the six months, B Shares produced a total return of 12.09%, or
6.77% adjusted for the maximum contingent deferred sales charge.* Contributing
to the total return was a $0.95 increase in net asset value, $0.03 per share in
dividends and $0.96 in capital gains.
The Fund's Y Shares produced a 12.22% total return through $0.05 in income,
$0.96 in capital gains and a $0.95 increase in net asset value.*
- --------
+ Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
* 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 their
original cost.
** 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. This index is unmanaged
and investments cannot be made in an index.
At the end of the period, Fund net assets reached $166 million.
STAR CAPITAL APPRECIATION FUND
At the end of the period, the Fund's portfolio consisted of 147 growth- oriented
stocks spanning more than 30 different business and industrial sectors. The
Fund's A Shares achieved a six-month total return of 11.26%, or 6.22% adjusted
for the sales charge, through dividends totaling $0.02 per share and capital
gains totaling $3.08 per share.* Fund net assets reached $84 million.
STAR INTERNATIONAL EQUITY FUND
The Star International Equity Fund, which began operation on December 3, 1997,
gives investors the opportunity to diversify their stock holdings beyond the
U.S.+ As a "fund of funds," it invests primarily in shares of international
equity mutual funds. Over the period from December 3, 1997 (date of initial
public investment) through May 31, 1998, the Fund achieved a total return of
11.48%, or 9.83% adjusted for the sales charge.* Contributing to the total
return were dividends totaling $0.04 per share and a $1.10 increase in net asset
value. At the end of the period, Fund net assets reached $51 million.
Thank you for pursuing your long-term goals through the Star Stock Funds. We
hope you are pleased with your progress. 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,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
July 15, 1998
+ Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
* 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 their
original cost.
Investment Reviews
The Stellar Fund
Q How did The Stellar Fund perform for the first half of its fiscal year?
A The Fund's components all performed at or above the relevant benchmarks, the
strongest returns were generated by the domestic and international equity
portfolios.* The real estate investment trust ("REIT") component suffered a 4.3%
decline during the period.
Q With the exception of Southeast Asia and Japan, international stocks--notably
Europe--recorded excellent performance. While the fund has avoided the troubled
areas, where are its international holdings focused?
A The core of the international exposure has been focused on Europe for the last
two years. The Fund has limited exposure in select Latin American markets which
did not detract from the overall performance in the segment. The move to
European monetary union has sparked renewed interest in equity investment on the
continent.
Q As we reach the midpoint of 1998, there remains a considerable focus on the
potential impact of Asian economic turmoil on a highly valued--and volatile--
U.S. stock market. Can you address the risk/reward profile of the Fund's
multi-asset class diversification with that of U.S. equities?
A The Fund has overtaken a number of its competitors since the current
corrective phase began in late April. This type of market climate is uniquely
well suited to the Stellar Fund. The REIT component, which had been a drag on
the portfolio for much of the first half, became a contributor again just as the
international and domestic portfolios began to stall. This, combined with the
rally in bonds and the stability of the short term portfolio, allowed the Fund
to avoid much of the recent decline.
Star Relative Value Fund
Q While concerns over Asia's impact continued, the U.S. stock market marched on
from December 1, 1997 through May 31, 1998. How did the Star Relative Value Fund
perform versus the average growth and income fund?
A For the six months ending May 31, 1998, the Star Relative Value Fund's Y
Shares generated a +12.83% total rate of return on a no-load, net asset value
basis compared to a return of +11.91 for the average growth and income fund as
measured by Lipper Analytical Services, Inc.**
Q What specific sectors and stocks made the greatest impact on Fund performance
over the first half of the Fund's fiscal year?
A The healthcare, consumer cyclicals and financial sectors have added the most
positive performance to the Fund during the first half of the Fund's fiscal
year. Top performing stocks during this time period included Ford Motor,
Vodafone Group, Lehman Brothers, Comair, Cable & Wireless PLC, and Sears,
Roebuck & Co.
- --------
*Foreign investing involves special risks such as currency risk, increased
volatility of foreign securities and differences in auditing and other
financial standards.
**Performance quoted reflects 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 their
original cost. Total return for A Shares based on net asset value and offering
price for the period was +12.66% and +7.57%. Total return for B Shares based
on net asset value and offering price for the period from March 31, 1998 (date
of initial public investment) to May 31, 1998 was (2.11%) and (7.00%). Lipper
figures represent the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the respective categories indicated. These figures do not reflect sales
charges.
Q In this environment--in which daily, significant volatility seems to be par
for the course_--what are the advantages of the Fund's value-based strategy?
A The Star Relative Value Fund's value-based investment strategy traditionally
identifies companies with below average volatility, low price-to-earnings ratio
and above average dividend yields. The Fund's current beta factor is .93,
portfolio turnover remains low, the price-to-earnings ratio ("P/E") is 19.7x
compared to the Standard & Poor's 500 Index (the "S&P 500")+ P/E of 24.1x and
the Fund's dividend yield is 1.5% versus the S&P 500 yield at 1.3%. The stock
selection process has begun to highlight opportunities in depressed sectors such
as energy, basic materials and utilities.
Star Market Capitalization Fund
Q The Star Market Capitalization Fund gives investors the opportunity to pursue
the performance of the stock market as measured by the Standard & Poor's 500
Index. What are the advantages of an index approach to investing?
A The nature of an index provides for relatively stable holdings which reduces
the cost of maintaining the portfolio and minimizes the generation of capital
gains. This type of investment eliminates the influence of investment styles
such as growth and value from investment results as these selection methods come
into and fall out of favor.
Q How did the Fund perform relative to the S&P 500 during the first six months
of its operation?
A The Fund's performance exceeded the return of the actual S&P 500 index. This
anomaly was the result of the small initial size of the Fund and the impact
early cashflows had on performance during a volatile period in the market.
Q Buoyed by a strong economy, benign inflation and high consumer confidence, the
U.S. stock market continued to rise--while recording steep single-day plunges
resulting from Asian woes and corporate earnings disappointments. Do you see
this pattern continuing through the end of the year?
A Yes. The market will see leadership rotation continue as the former growth
engines of this recovery in the capital goods and export sectors cede leadership
to the consumer oriented sectors.
Star Growth Equity Fund
Q How did the Star Growth Equity Fund perform for the first half of its fiscal
year in what continues to be a turbulent market?
A For the first half of this fiscal year, the Fund's Y Shares had an attractive
return of +12.22%, based on net asset value.* This return was generated as the
markets went through a strong first quarter followed by tremendous rotation and
variability in the second quarter. The Fund continues to emphasize
diversification by both sector and individual securities. This has led to
positive returns with lower volatility.
- --------
+ 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. This index is unmanaged
and investments cannot be made in an index.
* Performance quoted reflects 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 their
original cost. Total return for Star Growth Equity Fund B Shares, based on net
asset value and adjusted for the maximum contingent deferred sales charge, for
the period was +12.09% and +6.77%.
The Fund has remained fully invested during this time frame and we have
emphasized sector changes in the portfolio. Thus, early in the period, we had a
heavier emphasis on energy and consumer stocks. As the period progressed, we
moved the Fund more in line with the S&P 500. Currently, we are moving back
towards financials and consumer stocks.
Q What sectors and individual stocks made the greatest positive impact on
performance?
A Positive performance, with all of the rotation, has generally been more
company specific rather than sector oriented. Still, a couple of areas of
strength have been in consumer cyclicals and healthcare securities. These groups
have benefited from a more robust consumer and the continuing development of new
healthcare products.
Individual names which have been particularly strong include Clear Channel
(radio broadcaster), Pfizer and Watson Pharmaceutical (healthcare), Lucent
Technology, Vodafone (communication), Sears, and Wal-Mart (retailers). These are
companies which have generally had positive earnings stories as compared to the
expectations of Wall Street analysts. We are continuing to look for and
emphasize companies with strong earnings growth potential for this portfolio.
Q While diversification and pure stock selection are the keys to investing in
this volatile market, how does your strategy factor in the potential impact of
Asia?
A Our overall investment process has included the likelihood of Asia causing a
slowdown in the global economy. This will obviously have a negative impact on
Gross Domestic Product (GDP) in this country as that weakness unfolds. While we
still have securities in the portfolio which have sales in the Asian economy, we
have tried to reduce the risk. This has been done by reducing some positions and
increasing the diversification. We also continue to use options as a means of
hedging the portfolio to further reduce this risk.
Star Capital Appreciation Fund
Q In an up and down stock market environment influenced by Asia's economic
difficulties and U.S. corporate earnings, how did Star Capital Appreciation Fund
perform versus its peer group over the first half of its fiscal year?
A The stocks typically owned by the Fund are far more domestically focused than
the companies which populate the upper tier of the corporate world. It is this
isolation which led to the strong performance of the Fund through late April.
The emphasis on value in the security selection process led to the Fund
outperforming its peer group during the early part of the period. As renewed
concern over the deepening crisis in Asia emerged during the second quarter,
investors abandoned valuation in favor of earnings visibility and the
perception of safety which size implies. The Fund's total return, based on net
asset value, for the six month period ended May 31, 1998, was +11.26 which
finished ahead of the Lipper Mid-Cap Funds Average of +8.95% for the same
period.*
- --------
*Performance quoted reflects 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 their original
cost. Total return for Star Capital Appreciation Fund, based on offering price,
for the period was +6.22%. Lipper figures represent the average of the total
returns reported by all of the mutual funds designated by Lipper Analytical
Services, Inc. as falling into the respective categories indicated. These
figures do not reflect sales charges.
Q At this point in the bull market, mid caps seem to be getting more attention
in the financial press as a way to diversify equity holdings beyond highly
valued large caps. Can you comment favorable risk/reward profile of mid caps
compared to large cap and small cap stocks?
A On virtually every relevant valuation measure, save dividend yield, the
universe of stocks available to the Fund is more attractive than the Blue Chip
segment of the market. History shows us that these periods of inequality can
persist for extended periods of time. Small to medium sized companies are viewed
as more cyclical from an earnings perspective and it is this cyclicality which
leads them to periods of strong performance early in the economic cycle. During
an extended business cycle, this cyclicality becomes a detriment to investor
participation and produces the sustained underperformance we have witnessed in
the past three years. One of the clearest signs of an end to this economic cycle
will be the emergence of these stocks as market leaders, as they anticipate the
recovery which will follow.
Q As we reach the midpoint of 1998, significant day-to-day volatility continues.
Do you anticipate that the process of reaching a realistic market level will be
a long-term one?
A Volatility is relative to the group under study, the Mid-Cap stocks as a group
are only 85% as volatile as the Blue Chips so far this year. Much of this is
attributable to the declining support for these stocks as investors focus on the
investment theme of large stable growth stocks. Historically, these stocks are
more volatile and we fully expect that when they emerge to a leadership role, it
will be accompanied by above average volatility.
Star International Equity Fund
Q Europe's extremely strong performance was the highlight of the international
marketplace during the period. What are your comments?
A Europe has enjoyed very strong appreciation in many of its equity markets this
year.+ Market performance of +46% in Belgium, +15% in the UK and to near +40%
for Italy, France and Germany has been recorded. This strength can be attributed
to a number of forces that may continue for some time. First and foremost, is
the euphoria associated with the financial unity of the European community. Not
only will the currency be consistent across borders, but tariffs have been
lifted and some measure of central economic control is being established.
Virtually all the countries are expecting consistent GDP growth with no hints of
recession. Likewise, inflation is down, the markets are benefiting from capital
inflow and many of the corporations are initiating aggressive earnings
enhancement goals (much like the series of "downsizing" in the U.S.) which
should positively influence their stock prices.
Q How were the Fund's assets weighted among the world regions at the end of the
period?
A Since the Star International Fund is a "fund of funds" it is impossible to
determine the exact amount of exposure the fund has to any one particular
geographic region. We have, however, selected funds that have generally
focused their primary exposure on Europe. To further enhance this emphasis
toward Europe and away from Southeast Asia, we have a number of "single
country" closed-end funds that allow us to "pinpoint" our exposure. Our
largest closed-end fund positions include the Italy Fund, the Irish Trust, the
Swiss Helvetia Fund and the UK Fund. Of the 11 single country fund positions, 7
are in Europe and none are in Southeast Asia.
--------
+ Foreign investing involves special risks including currency risk and
increased volatility of foreign securities.
Q What was the Fund's performance relative to its international benchmark?
A The Fund reported a total return of +11.48% versus the Morgan Stanley Capital
International Europe, Australia, and Far East Index ("MSCI-EAFE") at +15.1%.*
There were initial costs of establishing the Fund which accounted for some of
the performance differential.
Q As we pass the mid-point of 1998, what is your outlook for international
equities?
A We continue to assess the opportunities in international investing. While we
think there are still some difficulties in Southeast Asia that will need to be
addressed, we are extremely positive on the outlook for Europe. Ultimately, the
problem in the Asian markets should turn and there may be outstanding
opportunities in Latin America as well.
- --------
* Performance quoted reflects 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 their
original cost. Total return based on offering price for the period was
+9.83%. The Morgan Stanley Capital International Europe, Australia, and Far
East Index (MSCI-EAFE) is a market capitalization-weighted equity index
comprising 20 of the 48 countries in the MSCI universe and representing the
developed world outside North America. Each MSCI country index is created
separately, then aggregated, without change, into regional MSCI indices. This
index is unmanaged and investments cannot be made in an index.
Portfolio of Investments
THE STELLAR FUND________________________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
U.S. EQUITIES - 20.5%
- -------------------------------------------------------
BASIC INDUSTRY - 1.3%
- -------------------------------------------------------
CHEMICALS - 0.5%
3,000 Dow Chemical Co. $290,625
4,500 Du Pont (E.I.) de Nemours & Co. 346,500
- -------------------------------------------------------
Total 637,125
- -------------------------------------------------------
MANUFACTURING - 0.6%
7,000 Caterpillar, Inc. 384,562
8,000 Parker-Hannifin Corp. 328,500
- -------------------------------------------------------
Total 713,062
- -------------------------------------------------------
METALS & MINING - 0.2%
2,600 Aluminum Co. of America 180,375
- -------------------------------------------------------
TOTAL BASIC INDUSTRY 1,530,562
- -------------------------------------------------------
CAPITAL GOODS - 3.3%
- -------------------------------------------------------
AEROSPACE - 0.4%
5,000 Honeywell, Inc. 419,687
- -------------------------------------------------------
COMPUTERS & SOFTWARE - 1.8%
12,000 (a) Cisco Systems, Inc. 907,500
7,400 Lucent Technologies, Inc. 524,938
3,200 (a) Network Associates, Inc. 196,000
11,300 (a) Oracle Corp. 266,963
5,400 (a) Sun Microsystems, Inc. 216,338
- -------------------------------------------------------
Total 2,111,739
- -------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.6%
5,400 Emerson Electric Co. 328,050
5,300 Hewlett-Packard Co. 329,262
- -------------------------------------------------------
Total 657,312
- -------------------------------------------------------
ELECTRONICS - 0.5%
8,000 Intel Corp. 571,500
- -------------------------------------------------------
TOTAL CAPITAL GOODS 3,760,238
- -------------------------------------------------------
CONSUMER CYCLICAL - 2.5%
- -------------------------------------------------------
AUTOMOTIVE & RELATED - 0.4%
7,000 Johnson Controls, Inc. 416,500
- -------------------------------------------------------
ENTERTAINMENT & LEISURE - 0.3%
7,000 Brunswick Corp. 220,062
8,000 Callaway Golf Co. 165,000
- -------------------------------------------------------
Total 385,062
- -------------------------------------------------------
PUBLISHING - 0.4%
6,500 Gannett Co., Inc. 428,594
- -------------------------------------------------------
RETAILING & APPAREL - 1.3%
8,000 Gap (The), Inc. 432,000
6,999 Pier 1 Imports, Inc. 168,413
12,000 (a) Safeway, Inc. 437,250
8,400 Wal-Mart Stores, Inc. 463,575
- -------------------------------------------------------
Total 1,501,238
- -------------------------------------------------------
TRANSPORTATION - 0.1%
6,000 Comair Holdings, Inc. 159,750
- -------------------------------------------------------
TOTAL CONSUMER CYCLICAL 2,891,144
- -------------------------------------------------------
CONSUMER STAPLES - 2.1%
- -------------------------------------------------------
FOOD & BEVERAGE - 1.2%
3,000 BestFoods 169,312
11,425 R.J.R. Nabisco, Inc., Class A 531,263
3,500 Sara Lee Corp. 206,063
18,000 Sysco Corp. 419,625
- -------------------------------------------------------
Total 1,326,263
- -------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------
<C> <S> <C>
U.S. EQUITIES (CONTINUED)
- -------------------------------------------------------------
CONSUMER STAPLES (CONTINUED)
- -------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.7%
1,500 Gillette Co. $175,687
8,000 Procter & Gamble Co. 671,500
- -------------------------------------------------------------
Total 847,187
- -------------------------------------------------------------
TOBACCO - 0.2%
5,000 Philip Morris Cos., Inc. 186,875
- -------------------------------------------------------------
TOTAL CONSUMER STAPLES 2,360,325
- -------------------------------------------------------------
ENERGY - 2.8%
- -------------------------------------------------------------
DOMESTIC OIL - 0.1%
3,000 Tosco Corp. 95,250
- -------------------------------------------------------------
ENERGY - 0.5%
7,000 Cinergy Corp. 226,187
8,044 SBC Communications, Inc. 312,711
- -------------------------------------------------------------
Total 538,898
- -------------------------------------------------------------
ENERGY SERVICE & EQUIPMENT - 0.8%
2,000 Diamond Offshore Drilling, Inc. 95,625
10,000 (a) Global Marine, Inc. 223,125
4,500 Halliburton Co. 213,187
5,000 Schlumberger Ltd. 390,313
- -------------------------------------------------------------
Total 922,250
- -------------------------------------------------------------
INTERNATIONAL OIL - 1.1%
5,200 Chevron Corp. 415,350
6,000 Mobil Corp. 468,000
7,000 Texaco, Inc. 404,250
- -------------------------------------------------------------
Total 1,287,600
- -------------------------------------------------------------
NATURAL GAS - 0.3%
4,250 Coastal Corp. 299,625
- -------------------------------------------------------------
TOTAL ENERGY 3,143,623
- -------------------------------------------------------------
EQUITY MUTUAL FUNDS - 1.8%
100,000 Gateway Trust 2,013,000
- -------------------------------------------------------------
TOTAL EQUITY MUTUAL FUNDS 2,013,000
- -------------------------------------------------------------
FINANCE - 3.7%
- -------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS - 1.3%
2,658 Citicorp 396,374
7,200 Federal National Mortgage Association 431,100
8,500 Hubco, Inc. 299,625
5,000 Popular, Inc. 346,875
- -------------------------------------------------------------
Total 1,473,974
- -------------------------------------------------------------
INSURANCE - 1.2%
5,200 Allstate Corp. 489,450
7,500 American International Group, Inc. 928,594
- -------------------------------------------------------------
Total 1,418,044
- -------------------------------------------------------------
OTHER FINANCE - 1.2%
3,400 American Express Co. 348,925
6,000 Merrill Lynch & Co., Inc. 537,000
6,000 Morgan Stanley, Dean Witter & Co. 468,375
7,327 (a) Omega Worldwide, Inc. 62,280
- -------------------------------------------------------------
Total 1,416,580
- -------------------------------------------------------------
TOTAL FINANCE 4,308,598
- -------------------------------------------------------------
HEALTH CARE - 2.2%
- -------------------------------------------------------------
HOSPITAL SUPPLIES - 0.3%
5,000 Johnson & Johnson 345,313
- -------------------------------------------------------------
</TABLE>
(See Notes to the Portfolio of Investments)
THE STELLAR FUND________________________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------------------------------------------------------------------
<C> <S> <C>
U.S. EQUITIES (CONTINUED)
- ----------------------------------------------------------------------
HEALTH CARE (CONTINUED)
- ----------------------------------------------------------------------
MEDICAL DEVICES - 0.5%
7,000 (a) Sofamor Danek Group, Inc. $581,875
- ----------------------------------------------------------------------
PHARMACEUTICALS - 1.4%
6,000 Bristol-Myers Squibb Co. 645,000
3,500 Pfizer, Inc. 366,844
14,000 (a) Watson Pharmaceuticals, Inc. 612,500
- ----------------------------------------------------------------------
Total 1,624,344
- ----------------------------------------------------------------------
TOTAL HEALTH CARE 2,551,532
- ----------------------------------------------------------------------
MISCELLANEOUS - 0.3%
- ----------------------------------------------------------------------
DIVERSIFIED - 0.3%
7,000 Allied-Signal, Inc. 299,250
- ----------------------------------------------------------------------
TOTAL MISCELLANEOUS 299,250
- ----------------------------------------------------------------------
UTILITIES - 0.5%
- ----------------------------------------------------------------------
TELECOMMUNICATIONS - 0.5%
9,000 Cincinnati Bell, Inc. 286,312
5,600 GTE Corp. 326,550
- ----------------------------------------------------------------------
TOTAL UTILITIES 612,862
- ----------------------------------------------------------------------
TOTAL U.S. EQUITIES (IDENTIFIED COST $15,042,759) 23,471,134
- ----------------------------------------------------------------------
INTERNATIONAL SECURITIES - 20.0%
- ----------------------------------------------------------------------
INTERNATIONAL EQUITIES - 17.3%
- ----------------------------------------------------------------------
ARGENTINA - 0.1%
- ----------------------------------------------------------------------
5,000 YPF Sociedad Anonima, ADR 155,313
- ----------------------------------------------------------------------
AUSTRALIA - 0.8%
10,000 News Corp., Ltd., ADR 214,375
15,000 News Corp., Ltd., ADR 369,375
4,000 National Australia Bank, Ltd., Melbourne, ADR 275,750
- ----------------------------------------------------------------------
TOTAL AUSTRALIA 859,500
- ----------------------------------------------------------------------
CANADA - 1.8%
6,000 Alcan Aluminum, Ltd. 171,000
7,000 Bank of Montreal Que 394,625
16,000 Canadian Pacific Ltd. 465,000
7,000 Four Seasons Hotels, Inc. 218,750
5,000 Royal Bank of Canada, Montreal 306,250
7,000 Seagram Co. Ltd. 307,563
5,000 United Dominion Industries 161,563
- ----------------------------------------------------------------------
TOTAL CANADA 2,024,751
- ----------------------------------------------------------------------
DENMARK - 0.3%
4,500 Novo-Nordisk, ADR 353,250
- ----------------------------------------------------------------------
FINLAND - 0.3%
4,600 OY Nokia AB, Class A, ADR 298,713
- ----------------------------------------------------------------------
FRANCE - 1.8%
7,500 Alcatel Alsthom, ADR 324,375
9,000 AXA-UAP, ADR 516,375
2,200 Elf Aquitaine SA, ADR 150,837
5,500 Groupe Danone, ADR 299,062
4,500 Rhone-Poulenc, ADR 247,500
12,000 Thomson CSF, ADR 485,394
- ----------------------------------------------------------------------
TOTAL FRANCE 2,023,543
- ----------------------------------------------------------------------
GERMANY, FEDERAL REPUBLIC OF - 2.5%
8,000 Bayer AG, ADR 382,770
9,000 Commerzbank AG, Frankfurt, ADR 364,989
6,000 (a) Daimler Benz AG, ADR 593,250
3,500 RWE AG, ADR 185,916
2,000 Siemens AG, ADR 129,235
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
INTERNATIONAL SECURITIES (CONTINUED)
- ---------------------------------------------------------------------
INTERNATIONAL EQUITIES (CONTINUED)
- ---------------------------------------------------------------------
GERMANY, FEDERAL REPUBLIC OF (CONTINUED)
2,200 Systeme, Anwendungen, Produkte in der
Datevnerarbeitung, ADR $406,819
7,000 (a) Veba AG, ADR 469,000
2,000 Volkswagen AG, ADR 324,659
- ---------------------------------------------------------------------
TOTAL GERMANY, FEDERAL REPUBLIC OF 2,856,638
- ---------------------------------------------------------------------
HONG KONG - 0.1%
7,000 Hong Kong Telecommunications, Ltd., ADR 127,312
- ---------------------------------------------------------------------
IRELAND - 0.2%
4,000 (a) Elan Corp. Plc, ADR 244,750
- ---------------------------------------------------------------------
ITALY - 0.7%
3,500 Benetton Group Spa, ADR 153,125
2,500 Ente Nazionale Idrocarburi, ADR 176,562
3,500 Gucci Group Nv, ADR 158,812
20,000 Luxottica Group S.p.A., ADR 346,250
- ---------------------------------------------------------------------
TOTAL ITALY 834,749
- ---------------------------------------------------------------------
JAPAN - 0.7%
600 Bridgestone Corp., ADR 136,831
5,000 Canon, Inc., ADR 117,500
3,800 Fuji Photo Film Co., ADR 128,250
2,000 Hitachi Ltd., ADR 132,750
8,000 Pioneer Electronic Corp, ADR 152,000
2,000 Sony Corp., ADR 167,625
- ---------------------------------------------------------------------
TOTAL JAPAN 834,956
- ---------------------------------------------------------------------
MEXICO - 0.3%
4,000 Pan American Beverage, Class A 135,250
4,000 Telefonos de Mexico, Class L, ADR 189,750
- ---------------------------------------------------------------------
TOTAL MEXICO 325,000
- ---------------------------------------------------------------------
NETHERLANDS - 2.6%
20,000 ABN-AMRO Holdings NV, ADR 487,500
4,000 (a) Baan Co. NV, ADR 181,000
3,000 Heineken NV, ADR 115,426
10,000 Koninklijke Ahold NV, ADR 317,500
8,000 ING Groep, N.V., ADR 547,000
3,500 Philips Electronics N.V., ADR 332,938
5,000 Royal Dutch Petroleum Co., ADR 280,313
9,000 Unilever N.V., ADR 710,438
- ---------------------------------------------------------------------
TOTAL NETHERLANDS 2,972,115
- ---------------------------------------------------------------------
NEW ZEALAND - 0.1%
5,000 Fletcher Challenge Energy, ADR 155,937
- ---------------------------------------------------------------------
SPAIN - 0.3%
3,000 Repsol SA, ADR 164,250
1,500 Telefonica SA, ADR 201,750
- ---------------------------------------------------------------------
TOTAL SPAIN 366,000
- ---------------------------------------------------------------------
SWEDEN - 0.6%
16,000 Volvo AB, ADR 512,000
6,000 Telefonaktiebolaget LM Ericsson, Class B, ADR 167,250
- ---------------------------------------------------------------------
TOTAL SWEDEN 679,250
- ---------------------------------------------------------------------
SWITZERLAND - 1.4%
8,000 Holderbank Financiere Glaris AG, ADR 204,946
3,000 Nestle SA, ADR 321,886
4,000 Novartis AG, ADR 339,233
2,000 Roche Holding AG, ADR 206,069
4,500 Zurich Versicherungsgesellschaft, ADR 563,022
- ---------------------------------------------------------------------
TOTAL SWITZERLAND 1,635,156
- ---------------------------------------------------------------------
</TABLE>
(See Notes to the Portfolio of Investments)
THE STELLAR FUND________________________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------
<C> <S> <C>
INTERNATIONAL SECURITIES (CONTINUED)
- -----------------------------------------------------------------------
INTERNATIONAL EQUITIES (CONTINUED)
- -----------------------------------------------------------------------
UNITED KINGDOM - 2.7%
3,000 Barclays Bank PLC, London, ADR $327,000
2,500 British Airways, ADR 262,812
5,500 British Petroleum Co. PLC, ADR 487,437
12,000 Cable & Wireless Communications PLC, ADR 416,250
3,500 Cadbury Schweppes PLC, ADR 214,375
5,500 Glaxo Wellcome PLC , ADR 296,656
3,000 Reuters Holdings PLC, ADR 205,500
10,000 Sedgwick Group PLC, ADR 125,000
4,000 Smithkline Beecham Corp., ADR 215,250
5,000 Vodafone Group PLC, ADR 549,375
- -----------------------------------------------------------------------
TOTAL UNITED KINGDOM 3,099,655
- -----------------------------------------------------------------------
TOTAL INTERNATIONAL EQUITIES 19,846,588
- -----------------------------------------------------------------------
CLOSED-END INVESTMENT COMPANIES - 2.7%
6,000 Brazil Fund, Inc. 113,250
10,000 Emerging Markets Infrastructure Fund, Inc. 101,250
15,000 Irish Investment Fund, Inc. 337,500
24,000 Italy Fund, Inc. 360,000
62,500 Kleinwort Benson Australian Income Fund 449,219
35,000 Latin American Discovery Fund 341,250
22,000 Mexico Fund 349,250
15,000 Morgan Stanley Asia-Pacific Fund 101,250
9,500 Morgan Stanley Emerging Markets Fund, Inc. 98,563
24,000 Spain Fund, Inc. 469,500
10,000 Templeton Dragon Fund, Inc. 91,875
10,000 WEBS Italy Index Fund, Inc. 278,750
- -----------------------------------------------------------------------
TOTAL CLOSED-END INVESTMENT COMPANIES 3,091,657
- -----------------------------------------------------------------------
TOTAL INTERNATIONAL SECURITIES
(IDENTIFIED COST $17,094,552) 22,938,245
- -----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 19.4%
18,000 American General Hospitality Corp. 427,500
13,000 Apartment Investment & Management Co., Class A 507,000
7,498 Arden Realty Group, Inc. 205,726
14,000 Avalon Properties, Inc. 393,750
3,000 BankBoston Corp. 316,125
13,000 Bay Apartment Communities, Inc. 477,750
8,000 Bedford Property Investors, Inc. 154,000
13,000 Brandywine Realty Trust 301,437
13,000 BRE Properties, Inc., Class A 344,500
9,000 CarrAmerica Realty Corp. 252,000
12,300 CenterPoint Properties Corp. 416,662
10,000 Crescent Real Estate Equities, Inc. 342,500
12,500 Developers Diversified Realty 489,844
12,000 EastGroup Properties, Inc. 240,750
18,875 Equity Office Properties Trust 519,062
15,000 Equity Residential Properties Trust 734,062
16,400 Federal Realty Investment Trust 405,900
15,000 FelCor Suite Hotels, Inc. 516,562
15,000 Glenborough Realty Trust, Inc. 421,875
10,000 Health & Rehabilitation Properties, Inc. 185,000
10,000 Healthcare Realty Trust, Inc. 283,125
11,000 Hospitality Properties Trust 343,750
14,000 Irvine Apartment Communities, Inc. 418,250
24,000 JDN Realty Corp. 780,000
11,000 Kilroy Realty Corp. 288,063
15,250 Kimco Realty Corp. 593,797
20,000 Koger Equity, Inc. 420,000
5,000 Lexington Corporate Properties Trust 70,625
23,500 LTC Properties, Inc. 471,469
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
13,000 Liberty Property Trust $343,688
12,000 Mack-Cali Realty Corp. 432,000
20,000 Manufactured Home Communities, Inc. 498,750
22,000 Merry Land and Investment Co. 488,125
26,000 Nationwide Health Properties, Inc. 624,000
20,000 New Plan Realty Trust 468,750
22,100 Omega Healthcare Investors 761,069
10,000 Pacific Gulf Properties, Inc. 217,500
22,000 Patriot American Hospitality, Inc. 526,625
12,000 Prentiss Properties Trust 306,750
13,000 Public Storage, Inc. 390,000
30,000 RFS Hotel Investors, Inc. 596,250
12,000 Realty Income Corp. 318,750
18,000 Reckson Associates Realty Corp. 447,750
1,925 Security Capital Group, Inc., Warrants 1,925
16,571 Security Capital Pacific Trust 373,883
18,080 Simon DeBartolo Group, Inc. 603,420
30,500 Sizeler Property Investment, Inc. 329,781
15,000 Smith (Charles E.) Residential Realty, Inc. 485,625
16,000 Spieker Properties, Inc. 637,000
12,500 Starwood Lodging Trust 589,844
16,000 Storage Trust Realty 386,000
8,000 Storage USA, Inc. 297,500
16,800 Summit Properties, Inc. 334,950
10,500 Weingarten Realty Investors 448,875
- -------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (IDENTIFIED COST $19,331,589) 22,229,894
- -------------------------------------------------------------------------------
FIXED INCOME OBLIGATIONS - 20.1%
- -------------------------------------------------------------------------------
CLOSED-END INVESTMENT COMPANIES - 0.5%
- -------------------------------------------------------------------------------
50,000 First Commonwealth Fund Inc. 556,250
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.1%
60,000 General Electric Co., Deb., 7.875%, 9/15/1998 60,449
- -------------------------------------------------------------------------------
ENERGY - 0.2%
250,000 Ashland, Inc., Unsecd. Note, Series F, 7.90%, 8/5/2006 275,195
- -------------------------------------------------------------------------------
FINANCE - 4.9%
2,050,000 Associates Corp. of North America, Sr. Note, 6.68%,
9/17/1999 2,071,217
500,000 Citicorp, Sub. Note, 8.625%, 12/1/2002 550,540
250,000 International Lease Finance Corp., Unsecd. Note,
6.25%, 10/15/2000 251,893
250,000 International Lease Finance Corp., Unsecd. Note,
8.375%, 12/15/2004 279,060
1,000,000 Lehman Brothers Holdings, Inc., Note, 6.50%, 10/1/2002 1,011,840
400,000 Meditrust Corp., Note, 7.82%, 9/10/2026 410,160
500,000 United Dominion Realty Trust, Inc., Note, 7.95%,
7/12/2006 538,080
35,940 Vendee Mortgage Trust 1992-2, 6.75%, 7/15/2011 35,921
365,000 Zurich Capital Trust, Company Guarantee, Series 144A,
8.376%, 6/1/2037 403,135
- -------------------------------------------------------------------------------
Total 5,551,846
- -------------------------------------------------------------------------------
FOREIGN - 1.3%
200,000 TransCanada PipeLines Ltd., Deb., 9.875%, 1/1/2021 270,786
1,000,000 TransCanada PipeLines Ltd., Sub. Deb., 9.125%,
4/20/2006 1,170,690
- -------------------------------------------------------------------------------
Total 1,441,476
- -------------------------------------------------------------------------------
</TABLE>
(See Notes to the Portfolio of Investments)
THE STELLAR FUND________________________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
FIXED INCOME OBLIGATIONS (CONTINUED)
- ---------------------------------------------------------------------------
INDUSTRIAL - 0.2%
190,073 Dow Chemical Co., Series 1992-A1, 7.60%, 1/2/2002 $195,476
- ---------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 7.5%
487,827 Federal Home Loan Mortgage Corp., 5.50%, 8/15/2004 486,949
1,277,385 Federal Home Loan Mortgage Corp., 6.25%, 7/15/2005 1,280,540
1,500,000 Federal Home Loan Mortgage Corp., 6.50%, 2/15/2023 1,523,115
264,984 Federal National Mortgage Association, 5.50%,
3/25/2014 264,136
332,600 Federal National Mortgage Association, 6.00%,
2/25/2011 326,982
500,000 Federal National Mortgage Association, 6.14%,
11/25/2005 508,935
1,000,000 Federal National Mortgage Association, 6.17%,
11/9/2000 999,391
750,000 Federal National Mortgage Association, 6.50%,
4/25/2023 756,293
250,000 Federal National Mortgage Association, 6.93%,
9/17/2012 264,053
250,000 Federal National Mortgage Association, 6.85%,
8/22/2005 264,573
851,000 Federal National Mortgage Association, 7.25%,
1/17/2021 878,547
500,000 Federal National Mortgage Association, 7.50%,
9/25/2019 503,200
500,000 Federal National Mortgage Association, 9.50%,
6/25/2020 542,860
- ---------------------------------------------------------------------------
Total 8,599,574
- ---------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 5.0%
1,850,000 United States Treasury Bond, 6.75%, 8/15/2026 2,067,505
2,300,000 United States Treasury Bond, 7.50%, 11/15/2016 2,711,999
250,000 United States Treasury Bond, 8.125%, 8/15/2019 316,395
500,000 United States Treasury Bond, 9.00%, 11/15/2018 682,390
- ---------------------------------------------------------------------------
Total 5,778,289
- ---------------------------------------------------------------------------
UTILITY - 0.4%
500,000 Georgia Power Co., 1st Mtg. Bond, 6.625%, 4/1/2003 504,810
- ---------------------------------------------------------------------------
TOTAL FIXED INCOME OBLIGATIONS
(IDENTIFIED COST $23,432,539) 22,963,365
- ---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OR SHARES VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 7.3%
- -------------------------------------------------------------------------------
AUTOMOTIVE & RELATED - 0.2%
200,000 Ford Motor Credit Corp., Unsecd. Note, 6.11%,
12/28/2001 $200,198
- -------------------------------------------------------------------------------
FINANCE - 1.2%
1,255,000 International Lease Finance Corp., Note, 6.25%,
6/15/1998 1,256,117
100,000 Lehman Brothers Holdings, Inc., Sr. Note, 6.375%,
6/1/1998 100,047
- -------------------------------------------------------------------------------
Total 1,356,164
- -------------------------------------------------------------------------------
FOOD AND BEVERAGE - 0.0%
21,000 PepsiCo, Inc., Deb., 7.625%, 12/18/1998 21,231
- -------------------------------------------------------------------------------
RETAILING & APPAREL - 0.4%
500,000 Sears Roebuck Acceptance Corp., Unsecd. Note, 7.00%,
6/15/2007 522,785
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 5.5%
1,000,000 Federal Home Loan Bank, 5.60%, 7/30/1999 998,060
1,275,000 Federal National Mortgage Association, 5.36%,
2/16/2001 1,264,762
1,000,000 Federal National Mortgage Association, 5.89%,
12/30/1998 1,000,960
1,000,000 Student Loan Marketing Association, 5.407%,
11/10/1998 1,000,040
1,000,000 Student Loan Marketing Association, 5.437%, 8/2/1999 999,540
1,000,000 Student Loan Marketing Association, 5.477%, 3/7/2001 1,002,690
- -------------------------------------------------------------------------------
Total 6,266,052
- -------------------------------------------------------------------------------
TOTAL CASH EQUIVALENTS (IDENTIFIED COST $8,431,192) 8,366,430
- -------------------------------------------------------------------------------
MUTUAL FUND SHARES - 4.1%
2,957,691 Flex Funds 2,957,691
1,750,000 Government Money Market Fund 1,750,000
- -------------------------------------------------------------------------------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 4,707,691
- -------------------------------------------------------------------------------
(B) REPURCHASE AGREEMENT - 8.1%
$9,214,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998, due 6/1/1998
(AT AMORTIZED COST) 9,214,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $97,254,322) $113,890,759
- -------------------------------------------------------------------------------
</TABLE>
STAR RELATIVE VALUE FUND________________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------------------------------------------
<C> <S> <C>
COMMON STOCKS - 98.1%
- ----------------------------------------------
AEROSPACE - 5.4%
75,000 Honeywell, Inc. $6,295,312
97,000 Lockheed Martin Corp. 10,888,250
98,000 Raytheon Co. 5,359,375
- ----------------------------------------------
Total 22,542,937
- ----------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- ---------------------------------------------------
AUTOMOBILE - 2.1%
80,000 Ford Motor Co. $4,150,000
65,000 General Motors Corp. 4,675,937
- ---------------------------------------------------
Total 8,825,937
- ---------------------------------------------------
AUTOMOTIVE & RELATED - 3.8%
130,000 Goodyear Tire & Rubber Co. 9,343,750
</TABLE>
(See Notes to the Portfolio of Investments)
STAR RELATIVE VALUE FUND________________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- ----------------------------------------------------------------------
AUTOMOTIVE & RELATED (CONTINUED)
110,000 Johnson Controls, Inc. $6,545,000
- ----------------------------------------------------------------------
Total 15,888,750
- ----------------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS - 5.7%
65,000 Bank of New York Co., Inc. 3,973,125
26,000 Citicorp 3,877,250
62,500 First Financial Bancorp 3,585,937
62,000 Mellon Bank Corp. 4,181,125
25,000 National Australia Bank, Ltd., Melbourne, ADR 1,723,438
70,000 NationsBank Corp. 5,302,500
40,000 TCF Financial Corp. 1,302,500
- ----------------------------------------------------------------------
Total 23,945,875
- ----------------------------------------------------------------------
CHEMICAL & FERTILIZERS - 5.2%
160,000 Dow Chemical Co. 15,500,000
200,000 Lyondell Petrochemical Co. 6,237,500
- ----------------------------------------------------------------------
Total 21,737,500
- ----------------------------------------------------------------------
DIVERSIFIED - 2.0%
200,000 Allied-Signal, Inc. 8,550,000
- ----------------------------------------------------------------------
DRUGS - 11.6%
200,000 American Home Products Corp. 9,662,500
130,000 Bristol-Myers Squibb Co. 13,975,000
103,500 Merck & Co., Inc. 12,115,969
240,000 Smithkline Beecham Corp., ADR 12,915,000
- ----------------------------------------------------------------------
Total 48,668,469
- ----------------------------------------------------------------------
UTILITIES - ELECTRIC - 1.7%
190,000 GPU, Inc. 7,315,000
- ----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.5%
124,000 General Electric Co. 10,338,500
- ----------------------------------------------------------------------
ELECTRONICS - 8.4%
270,000 Intel Corp. 19,288,125
300,000 Motorola, Inc. 15,881,250
- ----------------------------------------------------------------------
Total 35,169,375
- ----------------------------------------------------------------------
ENERGY MINERALS - 1.7%
151,000 Halliburton Co. 7,153,625
- ----------------------------------------------------------------------
FINANCE - 3.4%
200,000 Lehman Brothers Holdings, Inc. 14,187,500
- ----------------------------------------------------------------------
FOOD & BEVERAGE - 0.3%
60,000 Lance, Inc. 1,260,000
- ----------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 6.9%
97,000 Gillette Co. 11,361,125
212,000 Procter & Gamble Co. 17,794,750
- ----------------------------------------------------------------------
Total 29,155,875
- ----------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- ---------------------------------------------------------------------------
INSURANCE - 4.7%
105,000 Cincinnati Financial Corp. $4,410,000
125,000 Ohio Casualty Corp. 6,093,750
150,000 Travelers Group, Inc. 9,150,000
- ---------------------------------------------------------------------------
Total 19,653,750
- ---------------------------------------------------------------------------
INTERNATIONAL OIL - 7.1%
148,000 Mobil Corp. 11,544,000
156,000 Royal Dutch Petroleum Co., ADR 8,745,750
170,000 Texaco, Inc. 9,817,500
- ---------------------------------------------------------------------------
Total 30,107,250
- ---------------------------------------------------------------------------
MANUFACTURING - 1.4%
80,000 Lucent Technologies, Inc. 5,675,000
- ---------------------------------------------------------------------------
MISC. FINANCIAL SERVICES - 2.2%
75,000 American Express Co. 7,696,875
20,966 Associates First Capital Corp. 1,568,519
- ---------------------------------------------------------------------------
Total 9,265,394
- ---------------------------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT - 5.3%
190,000 International Business Machines Corp. 22,301,250
- ---------------------------------------------------------------------------
RAILROADS - 0.6%
25,000 Burlington Northern Santa Fe 2,487,500
- ---------------------------------------------------------------------------
RETAILING & APPAREL - 4.3%
150,000 Penney (J.C.) Co., Inc. 10,771,875
118,000 Sears, Roebuck & Co. 7,293,875
- ---------------------------------------------------------------------------
Total 18,065,750
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS - 8.0%
169,000 AT&T Corp. 10,287,875
67,000 Cable & Wireless Communications PLC ADR 2,324,063
250,000 Cincinnati Bell, Inc. 7,953,125
152,000 GTE Corp. 8,863,500
39,000 Vodafone Group PLC, ADR 4,285,125
- ---------------------------------------------------------------------------
Total 33,713,688
- ---------------------------------------------------------------------------
TOBACCO - 3.3%
370,000 Philip Morris Cos., Inc. 13,828,750
- ---------------------------------------------------------------------------
TRANSPORTATION - 0.5%
82,500 Comair Holdings, Inc. 2,196,563
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST $234,178,524) 412,034,238
- ---------------------------------------------------------------------------
(B) REPURCHASE AGREEMENT - 1.7%
$7,144,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998, due 6/1/1998
(AT AMORTIZED COST) 7,144,000
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $241,322,524) $419,178,238
- ---------------------------------------------------------------------------
</TABLE>
STAR MARKET CAPITALIZATION FUND ________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 98.5%
- --------------------------------------------------------------------------
322,099 Standard & Poor's Depositary Receipts Trust, ADR
(IDENTIFIED COST $34,830,670) $35,189,316
- --------------------------------------------------------------------------
MUTUAL FUND - 0.8%
287,875 Flex Funds (AT NET ASSET VALUE) 287,875
- --------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
(B) REPURCHASE AGREEMENT - 0.6%
$218,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998,
due 6/1/1998 (at amortized cost) $218,000
- --------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $35,336,545) $35,695,191
- --------------------------------------------------------------------------
</TABLE>
(See Notes to the Portfolio of Investments)
STAR GROWTH EQUITY FUND_________________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 95.9%
- ----------------------------------------------------------------------
AEROSPACE & DEFENSE - 0.6%
20,000 Boeing Co. $952,500
- ----------------------------------------------------------------------
APPLIANCES - 0.9%
22,143 Whirlpool Corp. 1,512,644
- ----------------------------------------------------------------------
AUTOMOBILE - 0.8%
25,000 Ford Motor Co. 1,296,875
- ----------------------------------------------------------------------
BANKING - 3.0%
4,280 Amsouth Bancorporation 164,493
2,547 BB&T Corp. 168,580
19,110 Charter One Financial, Inc. 654,518
3,342 Compass Bancshares, Inc. 158,641
2,870 Crestar Financial Corp. 164,846
9,680 First Financial Bancorp 555,390
4,928 First Tennessee National Corp. 156,464
3,225 First Virginia Bank, Inc. 168,506
8,480 Hibernia Corp., Class A 178,080
10,100 J.P. Morgan & Co., Inc. 1,254,294
11,812 NationsBank Corp. 894,759
3,761 Regions Financial Corp. 154,671
4,026 SouthTrust Corp. 163,305
2,489 Union Planters Corp. 145,607
- ----------------------------------------------------------------------
Total 4,982,154
- ----------------------------------------------------------------------
BEVERAGE & TOBACCO - 0.5%
20,000 Fortune Brands, Inc. 768,750
- ----------------------------------------------------------------------
BROADCASTING - 1.5%
26,000 (a) Clear Channel Communications, Inc. 2,492,750
- ----------------------------------------------------------------------
CHEMICALS - 1.3%
70,000 Lyondell Petrochemical Co. 2,183,125
- ----------------------------------------------------------------------
COMPUTER SERVICES - 9.5%
84,900 (a) Cisco Systems, Inc. 6,420,563
43,140 Hewlett-Packard Co. 2,680,073
53,500 (a) Microsoft Corp. 4,537,469
90,000 (a) Oracle Corp. 2,126,250
- ----------------------------------------------------------------------
Total 15,764,355
- ----------------------------------------------------------------------
DRUGS - 8.1%
35,800 American Home Products Corp. 1,729,588
36,000 Bristol-Myers Squibb Co. 3,870,000
21,000 Merck & Co., Inc. 2,458,313
26,000 Pfizer, Inc. 2,725,125
60,000 (a) Watson Pharmaceuticals, Inc. 2,625,000
- ----------------------------------------------------------------------
Total 13,408,026
- ----------------------------------------------------------------------
ELECTRIC - 1.0%
5,000 Cinergy Corp. 161,563
40,000 GPU, Inc. 1,540,000
- ----------------------------------------------------------------------
Total 1,701,563
- ----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.9%
37,000 General Electric Co. 3,084,875
- ----------------------------------------------------------------------
ELECTRONIC TECHNOLOGY - 5.3%
46,340 Intel Corp. 3,310,414
37,546 Lucent Technologies, Inc. 2,663,421
20,000 (a) Sun Microsystems, Inc. 801,250
73,000 Telefonaktiebolaget LM Ericsson, Class B, ADR 2,034,875
- ----------------------------------------------------------------------
Total 8,809,960
- ----------------------------------------------------------------------
ENERGY SERVICES - 2.3%
50,000 ENSCO International, Inc. 1,265,625
60,000 (a) Global Marine, Inc. 1,338,750
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------
ENERGY SERVICES (CONTINUED)
25,000 Halliburton Co. $1,184,375
- --------------------------------------------------------------
Total 3,788,750
- --------------------------------------------------------------
ENTERTAINMENT - 1.7%
50,000 Brunswick Corp. 1,571,875
11,147 Disney (Walt) Co. 1,261,004
- --------------------------------------------------------------
Total 2,832,879
- --------------------------------------------------------------
FINANCE - 2.5%
10,000 MGIC Investment Corp. 599,375
22,000 Merrill Lynch & Co., Inc. 1,969,000
20,000 Morgan Stanley, Dean Witter & Co. 1,561,250
- --------------------------------------------------------------
Total 4,129,625
- --------------------------------------------------------------
FOOD & BEVERAGE - 3.9%
40,000 Campbell Soup Co. 2,180,000
30,000 Interstate Bakeries Corp. 967,500
48,000 PepsiCo, Inc. 1,959,000
40,000 (a) U.S. Foodservice, Inc. 1,325,000
- --------------------------------------------------------------
Total 6,431,500
- --------------------------------------------------------------
GOVERNMENT AGENCY - 2.9%
40,000 Federal National Mortgage Association 2,395,000
59,500 SLM Holding Corp. 2,376,281
- --------------------------------------------------------------
Total 4,771,281
- --------------------------------------------------------------
HEALTH TECHNOLOGY - 2.8%
60,000 Allegiance Corp. 3,000,000
20,000 (a) Sofamor Danek Group, Inc. 1,662,500
- --------------------------------------------------------------
Total 4,662,500
- --------------------------------------------------------------
HOSPITAL SUPPLY - 1.0%
22,000 Abbott Laboratories 1,632,125
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS - 6.6%
64,000 Clorox Co. 5,344,000
10,000 Gillette Co. 1,171,250
53,658 Procter & Gamble Co. 4,503,918
- --------------------------------------------------------------
Total 11,019,168
- --------------------------------------------------------------
INSURANCE - 7.1%
35,000 Allstate Corp. 3,294,375
18,341 American International Group, Inc. 2,270,845
25,000 Ohio Casualty Corp. 1,218,750
60,000 SunAmerica, Inc. 2,917,500
35,000 Travelers Group, Inc. 2,135,000
- --------------------------------------------------------------
Total 11,836,470
- --------------------------------------------------------------
METALS & MINING - 0.8%
20,000 Aluminum Co. of America 1,387,500
- --------------------------------------------------------------
MULTI-INDUSTRY - 0.5%
21,058 Allied-Signal, Inc. 900,230
- --------------------------------------------------------------
NATURAL GAS - 1.5%
36,150 Coastal Corp. 2,548,575
- --------------------------------------------------------------
OFFICE EQUIPMENT - 0.8%
12,000 International Business Machines Corp. 1,408,500
- --------------------------------------------------------------
OIL - DOMESTIC - 3.9%
17,500 Ashland, Inc. 872,813
12,000 Atlantic Richfield Co. 946,500
25,000 Chevron Corp. 1,996,875
45,000 Texaco, Inc. 2,598,750
- --------------------------------------------------------------
Total 6,414,938
- --------------------------------------------------------------
</TABLE>
(See Notes to the Portfolio of Investments)
STAR GROWTH EQUITY FUND_________________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------
OIL - FOREIGN - 1.1%
22,600 Mobil Corp. $1,762,800
- -----------------------------------------------------
PROCESS INDUSTRIES - 1.4%
30,000 Fort James Corp. 1,434,375
20,000 International Paper Co. 920,000
- -----------------------------------------------------
Total 2,354,375
- -----------------------------------------------------
PRODUCER MANUFACTURING - 7.7%
29,800 Caterpillar, Inc. 1,637,138
40,000 Illinois Tool Works, Inc. 2,640,000
45,000 Masco Corp. 2,531,250
30,000 PACCAR, Inc. 1,656,563
52,500 Parker-Hannifin Corp. 2,155,781
30,000 Textron, Inc. 2,225,621
- -----------------------------------------------------
Total 12,846,353
- -----------------------------------------------------
RESTAURANTS - 0.8%
20,000 CKE Restaurants, Inc. 635,000
20,000 (a) ShowBiz Pizza Time, Inc. 710,000
- -----------------------------------------------------
Total 1,345,000
- -----------------------------------------------------
RETAIL TRADE - 5.9%
61,600 (a) Kohl's Corp. 2,929,850
41,526 Premark International, Inc. 1,331,427
86,244 (a) Safeway, Inc. 3,142,516
20,000 Sears, Roebuck & Co. 1,236,250
20,000 Wal-Mart Stores, Inc. 1,103,750
- -----------------------------------------------------
Total 9,743,793
- -----------------------------------------------------
TELECOMMUNICATIONS - 4.6%
11,520 Bell Atlantic Corp. 1,055,520
53,000 BellSouth Corp. 3,418,500
25,000 GTE Corp. 1,457,813
5,200 Vodafone Group PLC, ADR 571,350
25,000 (a) WorldCom, Inc. 1,137,500
- -----------------------------------------------------
Total 7,640,683
- -----------------------------------------------------
TRANSPORTATION - 1.7%
40,000 Airborne Freight Corp. 1,490,000
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES, PRINCIPAL AMOUNT OR CONTRACTS VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
45,000 Canadian Pacific Ltd. $1,307,813
- -------------------------------------------------------------------------------
Total 2,797,813
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST $109,908,471 159,212,435
- -------------------------------------------------------------------------------
OPTIONS PURCHASED - 0.1%
100 Call Option on AMEX Computer Tech Index, expires
6/20/1998, Strike @ 53 63,750
50 Call Option on Callaway Golf, expires 8/15/1998,
Strike @ 25 2,656
200 Call Option on Intel, expires 6/20/1998, Strike @ 70 38,750
270 Put Option on Coca-Cola, expires 1/16/1999, Strike @
40 5,063
120 Put Option on Exxon, expires 1/16/1999, Strike @ 35 3,000
180 Put Option on General Electric, expires 1/16/1999,
Strike @ 40 3,000
40 Put Option on Merck, expires 1/16/1999, Strike @ 60 750
200 Put Option on Microsoft, expires 6/20/1998, Strike @
80 15,000
250 Put Option on S&P 100, expires 6/20/1998, Strike @
530 47,813
- -------------------------------------------------------------------------------
TOTAL OPTIONS (IDENTIFIED COST $330,527) 179,782
- -------------------------------------------------------------------------------
MUTUAL FUNDS - 1.2%
18,783 Dean Family Fund, Class A (IDENTIFIED COST $200,244) 223,520
1,751,986 Government Money Market Fund (AT AMORTIZED COST) 1,751,986
- -------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS (AT NET ASSET VALUE) 1,975,506
- -------------------------------------------------------------------------------
(B) REPURCHASE AGREEMENTS - 2.1%
$3,467,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998, due 6/1/1998
(AT AMORTIZED COST) 3,467,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $115,658,228) $164,834,723
- -------------------------------------------------------------------------------
</TABLE>
STAR CAPITAL APPRECIATION FUND__________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 97.2%
- ---------------------------------------------------------------
AIRLINES - 2.0%
14,000 ASA Holdings Ltd. $550,375
10,000 (a) Alaska Air Group, Inc. 463,125
11,000 (a) Continental Airlines, Inc., Class B 622,187
- ---------------------------------------------------------------
Total 1,635,687
- ---------------------------------------------------------------
AEROSPACE & DEFENSE - 2.7%
20,000 (a) BE Aerospace, Inc. 578,125
10,600 Cordant Technologies, Inc. 528,675
25,000 Elron Electronic Industries Ltd. 425,000
16,500 (a) Gulfstream Aerospace Corp. 701,250
- ---------------------------------------------------------------
Total 2,233,050
- ---------------------------------------------------------------
APPLIANCES - 1.2%
19,000 Maytag Corp. 958,312
- ---------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- ----------------------------------------------------------------
AUTOMOTIVE & RELATED - 0.5%
18,500 Meritor Automotive, Inc. $445,156
- ----------------------------------------------------------------
BANKING - 7.6%
6,600 Ahmanson (H.F.) & Co. 503,250
11,550 Amsouth Bancorporation 443,953
6,600 BB&T Corp. 436,837
25,000 City National Corp. 918,750
15,000 Comerica, Inc. 986,250
16,000 Crestar Financial Corp. 919,000
38,000 First Tennessee National Corp. 1,206,500
10,500 SouthTrust Corp. 425,906
15,500 Texas Regional Bancshares, Inc., Class A 496,000
- ----------------------------------------------------------------
Total 6,336,446
- ----------------------------------------------------------------
</TABLE>
(See Notes to the Portfolio of Investments)
STAR CAPITAL APPRECIATION FUND__________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------
BUILDING & CONSTRUCTION - 1.9%
10,000 Martin Marietta Materials $460,000
6,000 Southdown, Inc. 393,750
13,000 (a) U.S.G. Corp. 690,625
- -------------------------------------------------------------
Total 1,544,375
- -------------------------------------------------------------
CHEMICALS - 1.6%
11,000 Great Lakes Chemical Corp. 440,000
20,000 Hanna (M.A.) Co. 401,250
2,750 (a) Octel Corp. 59,984
21,000 Schulman (A.), Inc. 417,375
- -------------------------------------------------------------
Total 1,318,609
- -------------------------------------------------------------
COMPUTER SERVICES - 11.7%
25,000 (a) American Management System, Inc. 678,125
22,000 (a) Boole & Babbage, Inc. 541,750
16,000 (a) DataWorks Corp. 296,000
21,000 (a) Datastream Systems, Inc. 446,250
40,500 (a) Diamond Multimedia Systems, Inc. 308,812
22,000 (a) Electronic Arts, Inc. 957,000
28,000 International Game Technology 691,250
12,500 (a) Intuit, Inc. 592,187
20,000 (a) Lexmark Intl. Group, Class A 1,110,000
30,000 (a) MAPICS, Inc. 528,750
8,000 (a) Network Associates, Inc. 490,000
12,000 (a) Progress Software Corp. 388,500
9,000 (a) Saville Systems Ireland PLC, ADR 359,437
22,000 (a) Sterling Software, Inc. 598,125
10,000 (a) Storage Technology Corp. 838,750
38,400 (a) Symantec Corp. 916,800
- -------------------------------------------------------------
Total 9,741,736
- -------------------------------------------------------------
CONSUMER NON-DURABLES - 1.3%
11,000 Cintas Corp. 502,562
19,500 (a) Fabri-Centers of America, Class A 575,250
- -------------------------------------------------------------
Total 1,077,812
- -------------------------------------------------------------
DIVERSIFIED - 0.4%
20,000 (a) Grace (W.R.) & Co. 371,250
- -------------------------------------------------------------
DRUGS - 4.7%
13,400 Bindley Western Industries, Inc. 475,700
28,800 DePuy, Inc. 860,400
20,000 Mylan Laboratories, Inc. 600,000
12,000 Omnicare, Inc. 420,750
37,600 Owens & Minor, Inc. 441,800
26,000 (a) Watson Pharmaceuticals, Inc. 1,137,500
- -------------------------------------------------------------
Total 3,936,150
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.0%
19,000 (a) Berg Electronics Corp. 391,875
15,600 DT Industries, Inc. 451,912
- -------------------------------------------------------------
Total 843,787
- -------------------------------------------------------------
ELECTRONICS - 2.3%
9,000 (a) Alliant Techsystems, Inc. 580,500
10,000 Avnet, Inc. 590,000
15,900 (a) Recoton Corp. 517,744
19,000 (a) Smart Modular Technologies, Inc. 260,062
- -------------------------------------------------------------
Total 1,948,306
- -------------------------------------------------------------
FINANCE - 8.8%
7,000 Capital Re Corp. 521,500
9,300 Compass Bancshares, Inc. 441,459
15,000 Countrywide Credit Industries, Inc. 693,750
9,000 Eaton Vance Corp. 404,437
10,000 Edwards(AG), Inc. 404,375
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- ---------------------------------------------------------------
FINANCE (CONTINUED)
24,000 Finova Group, Inc. $1,327,500
11,000 Jefferies Group, Inc. 506,000
16,500 Keyspan Energy Corp. 555,844
17,000 Morgan Keegan, Inc. 389,937
30,000 Pinnacle West Capital Corp. 1,348,125
12,000 Raymond James Financial, Inc. 363,000
10,000 Regions Financial Corp. 411,250
- ---------------------------------------------------------------
Total 7,367,177
- ---------------------------------------------------------------
FOOD & BEVERAGE - 2.2%
10,400 Earthgrains Co. 549,250
6,000 Interstate Bakeries Corp. 193,500
18,200 Michael Foods, Inc. 507,325
26,000 Universal Foods Corp. 619,125
- ---------------------------------------------------------------
Total 1,869,200
- ---------------------------------------------------------------
INDUSTRIAL PRODUCTS - 1.6%
9,000 C&D Technologies, Inc. 504,000
18,200 Kennametal, Inc. 875,875
- ---------------------------------------------------------------
Total 1,379,875
- ---------------------------------------------------------------
INSURANCE - 2.1%
4,000 Lincoln National Corp. 359,500
8,800 NAC Re Corp. 410,850
7,000 Torchmark Corp. 300,125
5,000 Transatlantic Holdings, Inc. 374,062
5,000 UNUM Corp. 277,812
- ---------------------------------------------------------------
Total 1,722,349
- ---------------------------------------------------------------
MANUFACTURED HOUSING - 5.4%
30,000 Centex Corp. 1,072,500
15,000 D. R. Horton, Inc. 270,000
28,000 Kaufman & Broad Homes Corp. 719,250
25,000 Lennar Corp. 662,500
28,000 M/I Schottenstein Homes, Inc. 563,500
23,300 (a) NVR, Inc. 748,513
19,500 (a) Toll Brothers, Inc. 502,125
- ---------------------------------------------------------------
Total 4,538,388
- ---------------------------------------------------------------
MANUFACTURING - 7.0%
13,000 Arvin Industries, Inc. 481,813
10,000 Carlisle Cos., Inc. 483,750
15,000 (a) Gentex Corp. 549,375
16,000 HON Industries, Inc. 512,000
30,000 Kaman Corp., Class A 551,250
23,000 Kaydon Corp. 907,063
15,000 Miller Herman, Inc. 415,313
32,000 RPC Energy Services, Inc. 422,000
17,600 Sonoco Products Co. 614,900
13,500 (a) VWR Scientific Products Corp. 384,750
8,000 Whirlpool Corp. 546,500
- ---------------------------------------------------------------
Total 5,868,714
- ---------------------------------------------------------------
MEDICAL - 8.3%
18,000 Biomet, Inc. 519,750
20,600 (a) CONMED Corp. 435,175
17,500 (a) Genzyme Corp. 479,063
73,000 (a) Graham Field Health Products, Inc. 428,875
26,700 (a) Hanger Orthopedic Group, Inc. 517,313
22,000 (a) Healthcare & Retirement Corp. 851,125
12,700 Integrated Health Services, Inc. 472,281
17,300 (a) Maxxim Medical, Inc. 404,388
31,325 (a) PSS World Medical, Inc. 391,563
9,300 RLI Corp. 484,763
31,200 (a) Trigon Healthcare, Inc. 1,060,800
</TABLE>
(See Notes to the Portfolio of Investments)
STAR CAPITAL APPRECIATION FUND__________________________________________________
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------
MEDICAL (CONTINUED)
47,700 (a) Veterinary Centers of America $900,338
- -------------------------------------------------------------
Total 6,945,434
- -------------------------------------------------------------
METALS - 1.4%
16,500 Alumax, Inc. 772,406
30,000 Easco, Inc. 390,000
- -------------------------------------------------------------
Total 1,162,406
- -------------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT - 0.5%
11,500 (a) CORT Business Services Corp. 449,938
- -------------------------------------------------------------
OIL & GAS - 6.0%
16,000 (a) BJ Services Co. 523,000
15,000 Baker Hughes, Inc. 540,000
10,000 Diamond Offshore Drilling, Inc. 478,125
16,000 ENSCO International, Inc. 405,000
8,900 (a) Getty Petroleum Corp. 194,131
21,000 (a) Global Marine, Inc. 468,563
16,000 Helmerich & Payne, Inc. 404,000
10,000 (a) Nabors Industries, Inc. 235,625
32,000 (a) Patterson Energy Inc. 358,000
9,000 Transocean Offshore, Inc. 443,813
20,000 (a) Varco International, Inc. 521,250
23,000 Vintage Petroleum, Inc. 416,875
- -------------------------------------------------------------
Total 4,988,382
- -------------------------------------------------------------
OIL INTERNATIONAL - 0.5%
9,000 (a) Smith International, Inc. 441,562
- -------------------------------------------------------------
PUBLISHING - 0.7%
18,000 (a) Big Flower Holdings, Inc. 552,375
- -------------------------------------------------------------
REAL ESTATE - 0.1%
2,000 American Real Estate Investment Corp. 38,250
- -------------------------------------------------------------
RESTAURANTS - 1.1%
22,000 (a) Landrys Seafood Restaurants, Inc. 498,438
22,050 (a) Sonic Corp. 456,159
- -------------------------------------------------------------
Total 954,597
- -------------------------------------------------------------
RETAIL - 6.0%
30,000 (a) Best Buy Co., Inc. 978,750
12,700 (a) Department 56, Inc. 465,931
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------
RETAIL (CONTINUED)
24,000 (a) Lands' End, Inc. $775,500
10,000 Lowe's Cos., Inc. 791,875
6,900 (a) Mens Wearhouse, Inc. 294,113
11,500 (a) S&K Famous Brands, Inc. 209,875
19,100 Shopko Stores, Inc. 666,113
33,000 (a) Staples, Inc. 829,125
- --------------------------------------------------------------------------
Total 5,011,282
- --------------------------------------------------------------------------
STEEL - 0.6%
23,000 (a) RMI Titanium Co. 493,063
- --------------------------------------------------------------------------
TECHNOLOGY SERVICES - 1.2%
10,000 Harris Corp. 481,875
4,900 TCA Cable TV, Inc. 298,594
18,000 (a) WavePhore, Inc. 227,250
- --------------------------------------------------------------------------
Total 1,007,719
- --------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.7%
9,000 Century Telephone Enterprises, Inc. 398,813
50,000 Comsat Corp. 1,743,750
18,000 (a) Dycom Industries, Inc. 515,250
17,400 (a) Norstan, Inc. 430,650
- --------------------------------------------------------------------------
Total 3,088,463
- --------------------------------------------------------------------------
TRANSPORTATION - 1.1%
14,800 Airborne Freight Corp. 551,300
14,000 Alexander and Baldwin, Inc. 402,500
- --------------------------------------------------------------------------
Total 953,800
- --------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST $73,589,505) 81,223,650
- --------------------------------------------------------------------------
MUTUAL FUND SHARES - 0.6%
42,500 Dean Small Cap Value Fund,
Class A (AT NET ASSET VALUE) (IDENTIFIED COST
$500,815) 534,648
- --------------------------------------------------------------------------
(B) REPURCHASE AGREEMENT - 2.0%
$1,692,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998, due 6/1/1998
(AT AMORTIZED COST) 1,692,000
- --------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $75,782,320) $83,450,298
- --------------------------------------------------------------------------
</TABLE>
STAR INTERNATIONAL EQUITY FUND__________________________________________________
May 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
MUTUAL FUNDS--92.2%
75,000 Chile Fund, Inc. $1,115,625
50,000 Mexico Fund 793,750
50,000 Swiss Helvetia Fund 1,615,625
256,300 Bartlett Value International Fund, Class A 3,416,475
50,000 Brazil Fund, Inc. 943,750
287,037 Federated International Equity Fund, Class A 6,294,715
24,590 Flex Partners International Equity Fund 344,508
157,565 Founders Worldwide Growth Fund 3,871,381
100,000 France Growth Fund, Inc. 1,456,250
75,000 Irish Investment Fund, Inc. 1,687,500
96,100 Italy Fund, Inc. 1,441,500
123,568 Janus Worldwide Fund 5,696,488
5,000 Latin America Investment Fund 60,625
217,290 Lexington Global Fund 2,663,970
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
MUTUAL FUNDS (CONTINUED)
10,341 Lindner International Fund $100,828
230,798 Morgan Stanley Global Equity Allocation Fund 4,978,305
40,564 One Fund, Inc. 541,528
123,526 Scudder Global Fund 3,941,711
5,000 The Central European Fund 56,875
233,811 USAA World Growth Fund 4,292,765
100,000 United Kingdom Fund, Inc. 1,537,500
- --------------------------------------------------------------------------
TOTAL MUTUAL FUNDS (IDENTIFIED COST $42,778,970) 46,851,674
- --------------------------------------------------------------------------
(B) REPURCHASE AGREEMENT--7.8%
$3,961,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.53%, dated 5/29/1998, due 6/1/1998
(AT AMORTIZED COST) 3,961,000
- --------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $46,739,970) $50,812,674
- --------------------------------------------------------------------------
</TABLE>
(See Notes to the Portfolio of Investments)
Notes to Portfolios of Investments
(a)Non-income producing.
(b)The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at date of the portfolio.
The following abbreviations are used in these portfolios:
ADR--American Depositary Receipt
PLC--Public Limited Company
<TABLE>
<CAPTION>
Net Unrealized Gross Gross
Cost of Appreciation/ Unrealized Unrealized
Investments (Depreciation) Appreciation Depreciation
for Federal for Federal for Federal for Federal Total
Star Funds Tax Purposes Tax Purposes Tax Purposes Tax Purposes Net Assets*
- ------------------------ ------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
The Stellar Fund $97,254,322 $16,636,437 $17,909,305 $1,272,868 $114,441,171
Star Relative Value Fund 241,322,524 177,855,714 179,947,422 2,091,708 420,117,696
Star Market
Capitalization Fund 35,336,545 358,646 358,646 -- 35,739,168
Star Growth Equity Fund 115,658,228 49,176,495 50,544,961 1,368,466 165,980,830
Star Capital
Appreciation Fund 75,782,320 7,667,978 11,280,464 3,612,486 83,536,502
Star International
Equity Fund 46,739,970 4,072,704 4,692,101 619,397 50,804,418
</TABLE>
*The categories of investments are shown as a percentage of net assets at May
31, 1998.
(See Notes which are an integral part of the Financial Statements)
Statements of Assets & Liabilities
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
STAR STAR STAR STAR STAR
THE RELATIVE MARKET GROWTH CAPITAL INTERNATIONAL
STELLAR VALUE CAPITALIZATION EQUITY APPRECIATION EQUITY
FUND FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Total investments in
securities, at value $113,890,759 $419,178,238 $35,695,191 $164,834,723 $83,450,298 $50,812,674
Cash 247 107,348 -- 25,498 294 1,107
Income receivable 614,920 734,713 1,416 218,165 78,902 28,207
Receivable for
investments sold 136,811 -- -- 1,249,750 -- --
Receivable for Fund
shares sold 61,833 491,967 8,044 939,454 9,965 874
Deferred organizational
costs -- -- -- 20,853 8,533 --
Deferred expenses -- -- 42,002 10,354 1,837 --
- --------------------------------------------------------------------------------------------------------------------
Total assets 114,704,570 420,512,266 35,746,653 167,298,797 83,549,829 50,842,862
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments
purchased 188,750 287,930 -- 943,881 -- --
Payable for Fund shares
redeemed 35,103 55,023 -- 17,836 -- --
Options written, at
value -- -- -- 356,250 -- --
Payable to Bank -- -- 7,485 -- -- --
Accrued expenses 39,546 51,617 -- -- 13,327 38,444
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 263,399 394,570 7,485 1,317,967 13,327 38,444
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Paid in capital 88,469,308 234,152,765 35,384,345 109,813,036 72,508,972 46,531,786
Net unrealized
appreciation
(depreciation) of
investments and
options 16,636,437 177,855,714 358,646 49,291,576 7,667,978 4,072,704
Accumulated net
realized gain (loss)
on investments and
options 8,804,079 7,548,763 -- 6,752,724 3,519,906 329,064
Undistributed net
investment income
(Distributions in
excess of net
investment income) 531,347 560,454 (3,823) 123,494 (8,956) (92,970)
Net operating loss -- -- -- -- (151,398) (36,166)
- --------------------------------------------------------------------------------------------------------------------
Total Net Assets $114,441,171 $420,117,696 $35,739,168 $165,980,830 $83,536,502 $50,804,418
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
A Shares $50,891,097 $49,197,154 -- -- $83,536,502 $50,804,418
B Shares -- 2,486,605 -- $60,032,701 -- --
C Shares -- -- $35,739,168 -- -- --
Y Shares 63,550,074 368,433,937 -- 105,948,129 -- --
- --------------------------------------------------------------------------------------------------------------------
Total Net Assets $114,441,171 $420,117,696 $35,739,168 $165,980,830 $83,536,502 $50,804,418
- --------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING:
A Shares 3,725,790 1,933,619 -- -- 6,694,421 4,575,890
B Shares -- 97,667 -- 3,312,337 -- --
C Shares -- -- 3,195,189 -- -- --
Y Shares 4,650,845 14,473,273 -- 5,842,593 -- --
- --------------------------------------------------------------------------------------------------------------------
Total shares
outstanding 8,376,635 16,504,559 3,195,189 9,154,930 6,694,421 4,575,890
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
A Shares $13.66 $25.44 -- -- $12.48 $11.10
B Shares -- $25.46 -- $18.12 -- --
C Shares -- -- $11.19 -- -- --
Y Shares $13.66 $25.46 -- $18.13 -- --
- --------------------------------------------------------------------------------------------------------------------
OFFERING PRICE PER
SHARE+:
A Shares $14.30* $26.64* -- -- $13.07* $11.27**
B Shares -- $25.46 -- $18.12 -- --
C Shares -- -- $11.19 -- -- --
Y Shares $13.66 $25.46 -- $18.13 -- --
- --------------------------------------------------------------------------------------------------------------------
REDEMPTION PROCEEDS PER
SHARE++:
A Shares $13.66 $25.44 -- -- $12.48 $11.10
B Shares -- $24.19*** -- $17.21*** -- --
C Shares -- -- $11.19 -- -- --
Y Shares $13.66 $25.46 -- $18.13 -- --
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Investments, at
identified cost $97,254,322 $241,322,524 $35,336,545 $115,658,228 $75,782,320 $46,739,970
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Investments, at tax
cost $97,254,322 $241,322,524 $35,336,545 $115,658,228 $75,782,320 $46,739,970
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Computation of Offering price: 100/95.5 of net asset value.
** Computation of Offering price: 100/98.5 of net asset value.
*** Computation of Redemption Proceeds: 95/100 of net asset value.
+ See "What Shares Cost" in the prospectus.
++ See "Contingent Deferred Sales Charge--B Shares" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Statements of Operations
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
STAR STAR STAR STAR STAR
THE RELATIVE MARKET GROWTH CAPITAL INTERNATIONAL
STELLAR VALUE CAPITALIZATION EQUITY APPRECIATION EQUITY
FUND FUND FUND (A) FUND FUND FUND (B)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $1,400,881 $204,478 $33,479 $146,199 $47,185 $128,509
Dividend income 1,215,437 3,595,713 21,912 1,118,222 347,478 103,057
- ---------------------------------------------------------------------------------------------------------
Total income 2,616,318 3,800,191 55,391 1,264,421 394,663 231,566
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 549,219 1,503,887 14,759 617,875 394,226 130,583
Administrative personnel
and services fee 66,474 231,550 12,276 94,976 47,740 26,080
Custodian fees 14,453 50,130 1,230 20,596 10,374 4,353
Transfer and dividend
disbursing agent fees
and expenses 70,716 79,919 12,497 73,232 19,000 14,045
Directors'/Trustees'
fees 897 3,794 1,925 -- 551 1,980
Auditing fees 9,266 8,890 -- 6,916 8,195 --
Legal fees 1,906 4,494 2,250 546 1,457 5,400
Portfolio accounting
fees 43,307 49,707 1,175 12,072 26,698 32,860
Distribution services
fee--A Shares 63,436 55,110 -- -- -- --
Distribution services
fee--B Shares -- -- -- 66,796 -- --
Shareholder services
fee--A Shares 12,688 11,025 -- -- 20,749 8,706
Shareholder services
fee--B Shares -- 82 -- 13,251 -- --
Shareholder services
fee--C Shares -- -- 2,460 -- -- --
Shareholder services
fee--Y Shares 16,218 89,153 -- 27,940 -- --
Share registration costs 10,624 24,619 1,025 4,014 7,882 26,405
Printing and postage 8,712 16,303 828 -- 7,493 11,920
Insurance premiums 5,757 4,459 1,400 1,456 1,477 1,440
Miscellaneous 3,279 4,822 1,800 4,381 219 3,960
- ---------------------------------------------------------------------------------------------------------
Total expenses 876,952 2,137,944 53,625 944,051 546,061 267,732
- ---------------------------------------------------------------------------------------------------------
NET INVESTMENT
INCOME/NET OPERATING
LOSS 1,739,366 1,662,247 1,766 320,370 (151,398) (36,166)
- ---------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss)
on investments and
options 8,677,190 7,549,871 -- 6,840,350 3,523,505 --
Net realized gains
received from
underlying funds -- -- -- -- -- 329,064
Net change in unrealized
appreciation
(depreciation) on
investments and options (2,867,486) 38,184,647 358,646 11,984,939 5,118,111 4,072,704
- ---------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS) 5,809,704 45,734,518 360,412 18,825,289 8,641,616 4,401,768
- ---------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS $7,549,070 $47,396,765 $360,412 $19,145,659 $8,490,218 $4,365,602
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a)Reflects operations for the period from December 8, 1997 (date of initial
public investment) to May 31, 1998.
(b)Reflects operations for the period from December 3, 1997 (date of initial
public investment) to May 31, 1998.
(See Notes which are an integral part of the Financial Statements)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
STAR STAR
THE RELATIVE MARKET
STELLAR VALUE CAPITALIZATION
FUND FUND FUND
-------------------------- -------------------------- ----------------
SIX MONTHS YEAR SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 (A)
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
OPERATIONS--
Net investment income
(operating loss) $1,739,366 $3,257,201 $1,662,247 $4,111,958 $1,766
Net realized gain (loss)
on investments, options
and underlying funds 8,677,190 10,472,803 7,549,871 12,351,845 --
Net change in net
unrealized
appreciation/depreciation
of investments and
options (2,867,486) (266,167) 38,184,647 69,992,342 358,646
- ----------------------------------------------------------------------------------------------------
Change in net assets
resulting from
operations 7,549,070 13,463,837 47,396,765 86,456,145 360,412
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net
investment income
A Shares (586,369) (1,325,460) (160,748) (2,940,841) --
B Shares -- -- -- -- --
C Shares -- -- -- -- (5,589)
Y Shares (837,658) (1,933,469) (1,731,557) (918,577) --
Distributions from net
realized gain on
investments and options
A Shares (4,564,730) (1,845,065) (1,335,755) (4,395,625) --
B Shares -- -- -- -- --
C Shares -- -- -- -- --
Y Shares (5,845,323) (2,461,154) (11,016,756) -- --
- ----------------------------------------------------------------------------------------------------
Change in net assets
from distributions to
shareholders (11,834,080) (7,565,148) (14,244,816) (8,255,043) (5,589)
- ----------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sales of
shares 7,477,763 15,147,571 66,212,226 382,346,269 35,447,326
Net assets value of
shares issued to
shareholders in payment
of distributions
declared 10,452,548 6,507,375 10,841,583 3,231,015 3,084
Cost of shares redeemed (13,343,459) (30,556,221) (39,891,954) (329,817,737) (66,065)
- ----------------------------------------------------------------------------------------------------
Change in net assets
from share transactions 4,586,852 (8,901,275) 37,161,855 55,759,547 35,384,345
- ----------------------------------------------------------------------------------------------------
Change in net assets 301,842 (3,002,586) 70,313,804 133,960,649 35,739,168
NET ASSETS:
Beginning of period 114,139,329 117,141,915 349,803,892 215,843,243 --
- ----------------------------------------------------------------------------------------------------
End of period $114,441,171 $114,139,329 $420,117,696 $349,803,892 $35,739,168
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period $531,347 $216,008 $560,454 $790,512 --
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Net gain (loss) as
computed for federal tax
purposes $8,677,190 $10,410,330 $7,549,871 $12,351,845 --
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a)Reflects operations for the period from December 8, 1997 (date of initial
public investment) to May 31, 1998.
(b)Reflects operations for the period from December 3, 1997 (date of initial
public investment) to May 31, 1998.
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
STAR STAR STAR
GROWTH CAPITAL INTERNATIONAL
EQUITY APPRECIATION EQUITY
FUND FUND FUND
---------------------------- ------------------------------- -------------
SIX MONTHS PERIOD
SIX MONTHS YEAR ENDED YEAR ENDED
ENDED ENDED MAY 31, ENDED MAY 31,
MAY 31, 1998 NOVEMBER 30, 1998 NOVEMBER 30, 1998 (B)
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED)
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
$320,370 $1,040,010 ($151,398) $124,077 ($36,166)
6,840,350 8,585,979 3,523,505 18,507,772 329,064
11,984,939 22,147,767 5,118,111 (8,746,048) 4,072,704
- -----------------------------------------------------------------------
19,145,659 31,773,756 8,490,218 9,885,801 4,365,602
- -----------------------------------------------------------------------
-- -- (133,033) -- (92,970)
(73,283) (830,336) -- -- --
-- -- -- -- --
(302,204) (220,127) -- -- --
-- -- (17,824,043) -- --
(2,579,169) (5,807,116) -- -- --
-- -- -- -- --
(6,040,139) -- -- -- --
- -----------------------------------------------------------------------
(8,994,795) (6,857,579) (17,957,076) -- (92,970)
- -----------------------------------------------------------------------
25,437,072 160,959,446 6,372,614 13,656,375 47,208,066
6,314,151 4,941,932 11,194,078 -- 50,831
(30,033,511) (122,016,691) (7,681,586) (19,586,731) (727,111)
- -----------------------------------------------------------------------
1,717,712 43,884,687 9,885,106 (5,930,356) 46,531,786
- -----------------------------------------------------------------------
11,868,576 68,800,864 418,248 3,955,445 50,804,418
154,112,254 85,311,390 83,118,254 79,162,809 --
- -----------------------------------------------------------------------
$165,980,830 $154,112,254 $83,536,502 $83,118,254 $50,804,418
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
$123,494 $178,611 -- $124,077 --
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
$6,840,350 $8,618,710 $3,523,505 $18,482,144 $329,064
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
Financial Highlights
STAR FUNDS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
NET REALIZED
NET AND DISTRIBUTIONS
YEAR NET ASSET INVESTMENT UNREALIZED DISTRIBUTIONS DISTRIBUTIONS FROM NET
ENDED VALUE, INCOME/ GAIN/(LOSS) ON TOTAL FROM FROM NET IN EXCESS OF REALIZED GAIN
NOVEMBER BEGINNING (OPERATING INVESTMENTS INVESTMENT INVESTMENT NET INVESTMENT ON INVESTMENTS
30, OF PERIOD LOSS) AND OPTIONS OPERATIONS INCOME INCOME (I) AND OPTIONS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
THE STELLAR FUND
Y SHARES (FORMERLY, TRUST SHARES)
1994(a) $11.34 0.21 (0.48) (0.27) (0.17) -- --
1995 $10.90 0.38 1.32 1.70 (0.38) -- (0.05)
1996 $12.17 0.37 1.62 1.99 (0.37) -- (0.20)
1997 $13.59 0.40 1.18 1.58 (0.40) -- (0.50)
1998(p) $14.27 0.22 0.65 0.87 (0.18) -- (1.30)
A SHARES (FORMERLY, INVESTMENT SHARES)
1993 $10.52 0.24 0.99 1.23 (0.28) (0.03) (0.10)
1994 $11.34 0.29 (0.41) (0.12) (0.24) -- (0.08)
1995 $10.90 0.34 1.33 1.67 (0.35) -- (0.05)
1996 $12.17 0.34 1.62 1.96 (0.34) -- (0.20)
1997 $13.59 0.36 1.18 1.54 (0.36) -- (0.50)
1998(p) $14.27 0.20 0.65 0.85 (0.16) -- (1.30)
STAR RELATIVE VALUE FUND
Y SHARES (FORMERLY, TRUST SHARES)
1997(b) $22.67 0.08 0.81 0.89 (0.07) -- --
1998(p) $23.49 0.11 2.80 2.91 (0.12) -- (0.82)
A SHARES (FORMERLY, INVESTMENT SHARES)
1993 $10.52 0.20 1.30 1.50 (0.22) -- --
1994 $11.80 0.23 (0.40) (0.17) (0.23) -- (0.04)
1995 $11.36 0.29 3.65 3.94 (0.28) -- --
1996 $15.02 0.27 4.01 4.28 (0.26) -- (0.01)
1997 $19.03 0.67 4.45 5.12 (0.28) -- (0.39)
1998(p) $23.48 0.07(n) 2.81 2.88 (0.10) -- (0.82)
B SHARES
1998(c) $26.01 0.02 (0.57) (0.55) -- -- --
STAR MARKET CAPITALIZATION FUND
C SHARES
1998(d) $10.00 0.00(m)(n) 1.20 1.20 (0.01) -- --
STAR GROWTH EQUITY FUND
Y SHARES (FORMERLY, TRUST SHARES)
1997(e) $16.46 0.34 0.73 1.07 (0.35) -- --
1998(p) $17.18 0.04 1.92 1.96 (0.05) -- (0.96)
B SHARES (FORMERLY, INVESTMENT SHARES)
1995(f) $10.00 0.24 2.67 2.91 (0.21) -- --
1996 $12.70 0.17 3.12 3.29 (0.16) -- (0.66)
1997 $15.17 0.19 2.97 3.16 (0.14) -- (1.02)
1998(p) $17.17 0.01 1.93 1.94 (0.03) -- (0.96)
STAR CAPITAL APPRECIATION FUND
A SHARES
1994(g) $10.00 -- 0.15 0.15 -- -- --
1995 $10.15 0.03 1.72 1.75 (0.04) (0.00) (0.04)
1996 $11.82 (0.03) 1.05 1.02 -- -- (0.29)
1997 $12.55 0.02 1.77 1.79 -- -- --
1998(p) $14.34 (0.03) 1.27 1.24 (0.02) -- (3.08)
STAR INTERNATIONAL EQUITY FUND
A SHARES
1998(h) $10.00 (0.01) 1.15 1.14 (0.04) -- --
- --------------------------------------------------------------------------------------------------------
</TABLE>
(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) Reflects operations for the period from August 18, 1997 (date of initial
public investment) to November 30, 1997.
(c) Reflects operations for the period from March 31, 1998 (date of initial
public investment) to May 31, 1998 (unaudited).
(d) Reflects operations for the period from December 8, 1997 (date of initial
public investment) to May 31, 1998 (unaudited).
(e) Reflects operations for the period from August 18, 1997 (date of initial
public investment) to November 30, 1997.
(f) Reflects operations for the period from December 12, 1994 (date of initial
public investment) to November 30, 1995.
(g) Reflects operations for the period from June 13, 1994 (date of initial
public investment) to November 30, 1994.
(h) Reflects operations for the period from December 3, 1997 (date of initial
public investment) to May 31, 1998 (unaudited).
(i) Distributions are determined in accordance with federal 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.
(j) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge if applicable.
(k) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(l) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.
(m) Less than one cent per share. (n) Amount based on average shares
outstanding. (o) Computed on an annualized basis. (p) For the six months ended
May 31, 1998 (unaudited).
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
------------------------------------------ NET ASSETS, AVERAGE
NET ASSET NET EXPENSE END COMMISSION PORTFOLIO
TOTAL VALUE, END TOTAL INVESTMENT WAIVER/ OF PERIOD RATE TURNOVER
DISTRIBUTIONS OF PERIOD RETURN (J) EXPENSES INCOME REIMBURSEMENT (K) (000 OMITTED) PAID (L) RATE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(0.17) $10.90 (1.81%) 1.43%(o) 3.57%(o) -- $60,822 -- 79%
(0.43) $12.17 15.97% 1.40% 3.23% -- $64,754 -- 104%
(0.57) $13.59 16.94% 1.39% 2.85% -- $67,047 $0.0671 65%
(0.90) $14.27 12.22% 1.31% 2.89% -- $63,742 $0.1046 64%
(1.48) $13.66 6.79% 1.41%(o) 3.12%(o) -- $63,550 $0.1254 43%
(0.41) $11.34 11.99% 1.45% 1.87% 0.25% $73,197 -- 87%
(0.32) $10.90 (1.22%) 1.55% 2.32% 0.12% $50,648 -- 79%
(0.40) $12.17 15.67% 1.65% 2.98% -- $48,902 -- 104%
(0.54) $13.59 16.64% 1.66% 2.76% -- $50,094 $0.0671 65%
(0.86) $14.27 11.94% 1.56% 2.63% -- $50,398 $0.1046 64%
(1.46) $13.66 6.65% 1.66%(o) 2.87%(o) -- $50,891 $0.1254 43%
(0.07) $23.49 3.93% 1.01%(o) 1.35%(o) -- $312,056 $0.0918 18%
(0.94) $25.46 12.83% 1.04%(o) 0.86%(o) -- $368,434 $0.0882 6%
(0.22) $11.80 14.47% 1.19% 1.79% 0.31% $49,701 -- 59%
(0.27) $11.36 (1.54%) 1.15% 2.02% -- $74,094 -- 30%
(0.28) $15.02 35.10% 1.06% 2.17% -- $131,979 -- 24%
(0.27) $19.03 28.86% 1.04% 1.71% -- $215,843 $0.0905 16%
(0.67) $23.48 27.69% 1.01% 1.40% -- $37,748 $0.0918 18%
(0.92) $25.44 12.66% 1.51%(o) 0.71%(o) -- $49,197 $0.0882 6%
-- $25.46 (2.11%) 0.74%(o) 0.81%(o) -- $2,487 $0.0882 6%
(0.01) $11.19 12.04% 1.09%(o) 0.04%(o) -- $35,739 $0.0664 0%
(0.35) $17.18 4.59% 2.49%(o) 1.62%(o) -- $109,087 $0.1035 60%
(1.01) $18.13 12.22% 1.06%(o) 0.47%(o) -- $105,948 $0.1010 20%
(0.21) $12.70 29.44% 1.17%(o) 2.00%(o) 0.03%(o) $48,699 -- 171%
(0.82) $15.17 27.34% 1.19% 1.31% -- $85,311 $0.0007 96%
(1.16) $17.17 22.65% 0.94% 0.75% -- $45,025 $0.1035 60%
(0.99) $18.12 12.09% 1.32%(o) 0.21%(o) -- $60,033 $0.1010 20%
-- $10.15 1.50% 1.58%(o) 0.08%(o) 0.10%(o) $30,013 -- 36%
(0.08) $11.82 17.35% 1.47% 0.28% 0.01% $56,430 -- 144%
(0.29) $12.55 8.95% 1.32% (0.24%) -- $79,163 $0.0703 174%
-- $14.34 14.26% 1.29% 0.16% -- $83,118 $0.0987 262%
(3.10) $12.48 11.26% 1.32%(o) (0.36%)(o) -- $83,537 $0.0859 57%
(0.04) $11.10 11.48% 1.54%(o) (0.21%)(o) -- $50,804 $0.0610 0%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Combined Notes to Financial Statements
MAY 31, 1998 (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 eleven diversified portfolios and one non-diversified portfolio. The
financial statements of the following portfolios (individually referred to as
the "Fund", or collectively as the "Funds") are presented herein along with each
Fund's investment objective:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
<C> <S>
The Stellar Fund Maximize total return, a combination of ("Stellar Fund")
dividend income and capital appreciation.
Star Relative Value Fund Maximize total return, a combination of income
("Relative Value Fund") and capital appreciation.
Star Market Capitalization Fund Seeks to provide total return that ("Market
Capitalization Fund") approximates the total return of the Standard
and Poor's 500 Composite Stock Price Index.
Star Growth Equity Fund Maximize capital appreciation.
("Growth Equity Fund")
Star Capital Appreciation Fund Maximize capital appreciation.
("Capital Appreciation Fund")
Star International Equity Fund Long-term capital appreciation.
("International Equity Fund")
</TABLE>
The financial statements of the Bond Funds and Money Market Funds are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Stellar Fund offers two classes of shares, A Shares and Y Shares (formerly,
Investment shares and Trust shares, respectively); Relative Value Fund offers
three classes of shares. A Shares, Y Shares (formerly, Investment shares and
Trust shares, respectively) and B Shares; Market Capitalization Fund offers one
class of shares (C Shares); Growth Equity Fund offers two classes of shares, B
Shares and Y Shares (formerly, Investment shares and Trust shares,
respectively); the Capital Appreciation Fund offers one class of shares (A
Shares); and the International Equity Fund offers one class of shares (A
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
Equity securities traded on a securities exchange and securities traded in the
over-the-counter market are valued at the last reported sales price on the day
of valuation; other securities for which no sale was reported on that date, are
valued at the last quoted bid price. Corporate and municipal bonds, asset backed
securities and U.S. government securities are valued using the last quoted bid
price as furnished by an independent pricing service. 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. 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 a 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
Dividend income and distributions to shareholders are recorded on the ex-
dividend date. Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal Revenue Code,
as amended (the "Code").
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. 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 over a period not to exceed five
years from each Fund's commencement date.
G. OPTION CONTRACTS WRITTEN
The Capital Appreciation Fund, Growth Equity Fund and Stellar Fund may write
"covered" call option contracts. All of the Funds 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 call options, the Funds may forego potential gains
on the underlying security. 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 an unrealized gain or loss is measured by the difference between
the current value and the premium received. For the period ended May 31, 1998,
the Capital Appreciation Fund, Growth Equity Fund and Stellar Fund had realized
gain (loss) on options contracts, written and purchased, of $0, $(24,708), and
($23,599), respectively.
At May 31, 1998, the Capital Appreciation Fund and the Stellar Fund had no
outstanding options.
The Capital Appreciation Fund had no written option activity during the period.
The following is a summary of the Stellar Fund and Growth Equity Fund options
activity:
<TABLE>
<CAPTION>
STELLAR FUND
-------------------
NUMBER OF
CONTRACTS PROCEEDS*
-------------------
<S> <C> <C>
Outstanding at November 30, 1997 0 $0
Contracts opened 235 201,072
Contracts expired 0 0
Contracts exercised 0 0
Contracts closed (235) (201,072)
-------------------
Outstanding at May 31, 1998 0 $0
-------------------
</TABLE>
<TABLE>
<CAPTION>
GROWTH EQUITY FUND
-------------------
NUMBER OF
CONTRACTS PROCEEDS*
-------------------
<S> <C> <C>
Outstanding at November 30, 1997 0 $0
Contracts opened 1,550 659,432
Contracts expired (100) (10,225)
Contracts exercised 0 0
Contracts closed (450) (177,876)
-------------------
Outstanding at May 31, 1998 1,000 $471,331
-------------------
</TABLE>
*Represents premium received less commissions paid.
At May 31, 1998, Growth Equity Fund had the following outstanding written
options:
<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>
AMEX Computer
Tech Index Put 6/20/98 $500.00 100 $ 29,593 $185,000
AMEX Oil Index Put 6/20/98 470.00 50 11,048 33,125
AMEX Oil Index Put 6/20/98 470.00 100 2,098 66,250
Cisco Systems Inc. Put 7/18/98 53.375 200 56,999 2,500
Ford Motor Co. Put 6/20/98 55.00 100 9,124 1,875
Merck & Co. Put 7/18/98 115.00 150 (6,002) 50,625
Procter & Gamble
Co. Put 7/18/98 75.00 200 11,999 12,500
Safeway, Inc. Put 6/20/98 35.00 100 222 4,375
------------------
Total $115,081 $356,250
------------------
</TABLE>
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:
<TABLE>
<CAPTION>
STELLAR FUND
------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
-------------------- --------------------------
A SHARES (FORMERLY,
INVESTMENT SHARES) SHARES DOLLARS SHARES DOLLARS
- ---------------------------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 151,257 $2,050,878 229,880 $3,158,813
Shares issued to
shareholders in payment of
distributions declared 394,262 5,086,165 234,369 3,116,031
Shares redeemed (351,678) (4,755,721) (618,771) (8,513,615)
------------------------------------------------
Net change resulting from A
Share transactions 193,841 $2,381,322 (154,522) ($2,238,771)
------------------------------------------------
<CAPTION>
STELLAR FUND
------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
-------------------- --------------------------
Y SHARES (FORMERLY, TRUST
SHARES) SHARES DOLLARS SHARES DOLLARS
- ---------------------------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 402,529 $5,426,885 875,937 $11,988,758
Shares issued to
shareholders in payment of
distributions declared 415,743 5,366,383 254,884 3,391,344
Shares redeemed (633,961) (8,587,738) (1,598,328) (22,042,606)
------------------------------------------------
Net change resulting from Y
Share transactions 184,311 $2,205,530 (467,507) ($6,662,504)
------------------------------------------------
Net change resulting from
Fund share transactions 378,152 $4,586,852 (622,029) ($8,901,275)
------------------------------------------------
<CAPTION>
RELATIVE VALUE FUND
------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
-------------------- --------------------------
A SHARES (FORMERLY,
INVESTMENT SHARES) SHARES DOLLARS SHARES DOLLARS
- ---------------------------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 376,734 $9,405,851 4,467,573 $74,577,199
Shares issued to
shareholders in payment of
distributions declared 63,992 1,468,018 154,522 2,938,215
Shares redeemed (114,506) (2,842,903) (14,355,524) (319,674,245)
------------------------------------------------
Net change resulting from A
Share transactions 326,220 $8,030,966 (9,733,429) ($242,158,831)
------------------------------------------------
<CAPTION>
RELATIVE VALUE FUND
--------------------
PERIOD ENDED MAY
31, 1998 (A)
--------------------
<S> <C> <C> <C> <C>
B SHARES SHARES DOLLARS
- ---------------------------- -------- ----------
Shares sold 98,824 $2,534,149
Shares issued to
shareholders in payment of
distributions declared -- --
Shares redeemed (1,157) (25,057)
--------------------
Net change resulting from B
Share transactions 97,667 $2,509,092
--------------------
<CAPTION>
RELATIVE VALUE FUND
--------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1998 NOVEMBER 30, 1997 (B)
----------------------- -------------------------
Y SHARES (FORMERLY, TRUST
SHARES) SHARES DOLLARS SHARES DOLLARS
- -------------------------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,244,714 $54,272,226 13,707,273 $307,769,070
Shares issued to
shareholders in payment
of distributions declared 407,952 9,373,565 12,454 292,800
Shares redeemed (1,461,440) (37,023,994) (437,680) (10,143,492)
--------------------------------------------------
Net change resulting from
Y Share transactions 1,191,226 $26,621,797 (13,282,047) $297,918,378
--------------------------------------------------
Net change resulting from
Fund share transactions 1,615,113 $37,161,855 3,548,618 $55,759,547
--------------------------------------------------
</TABLE>
(a) For the period from March 31, 1998 (date of initial public investment) to
May 31, 1998.
(b) For the period from August 18, 1997 (date of initial public investment) to
November 30, 1997.
<TABLE>
<CAPTION>
MARKET
CAPITALIZATION
FUND
-----------------
PERIOD ENDED
MAY 31, 1998 (A)
-----------------
C SHARES SHARES
- ------------------------ -----------------
<S> <C>
Shares sold 3,200,684
Shares issued to
shareholders in payment
of distributions
declared 312
Shares redeemed (5,807)
-----------------
Net change resulting
from C Share
transactions 3,195,189
-----------------
</TABLE>
(a) Reflects operations for the period from December 8, 1997 (date of initial
public investment) to May 31, 1998.
<TABLE>
<CAPTION>
GROWTH EQUITY FUND
---------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, 1997
------------------------------- ------------------------
B SHARES (FORMERLY,
INVESTMENT SHARES) SHARES DOLLARS SHARES DOLLARS
- ------------------------ ----------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 687,095 $12,061,613 4,005,011 $53,886,404
Shares issued to
shareholders in payment
of distributions
declared 166,135 2,646,059 346,216 4,838,986
Shares redeemed (163,177) (2,844,985) (7,354,386) (118,965,391)
---------------------------------------------------------
Net change resulting
from B Share
transactions 690,053 $11,862,687 (3,003,159) ($60,240,001)
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------
GROWTH EQUITY FUND
---------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1998 NOVEMBER 30, 1997 (B)
------------------------------- ------------------------
Y SHARES (FORMERLY,
TRUST SHARES) SHARES DOLLARS SHARES DOLLARS
- ------------------------ ----------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 763,189 $13,375,459 6,523,027 $107,073,043
Shares issued to
shareholders in payment
of distributions
declared 230,083 3,668,092 5,992 102,945
Shares redeemed (1,500,908) (27,188,526) (178,790) (3,051,300)
---------------------------------------------------------
Net change resulting
from Y Share
transactions (507,636) ($10,144,975) 6,350,229 $104,124,688
---------------------------------------------------------
Net change resulting
from Fund share
transactions 182,417 $1,717,712 3,347,070 $43,884,687
---------------------------------------------------------
<CAPTION>
CAPITAL APPRECIATION FUND
-------------------------------
YEAR ENDED
SIX MONTHS ENDED NOVEMBER 30,
A SHARES MAY 31, 1998 1997
- ------------------------ ----------------- ------------
<S> <C> <C>
Shares sold 503,190 991,069
Shares issued to
shareholders in payment
of distributions
declared 1,003,938 --
Shares redeemed (608,566) (1,501,409)
-------------------------------
Net change resulting
from A share
transactions 898,562 (510,340)
-------------------------------
<CAPTION>
INTERNATIONAL
EQUITY FUND
-----------------
PERIOD ENDED
A SHARES MAY 31, 1998 (C)
- ------------------------ -----------------
<S> <C>
Shares sold 4,638,828
Shares issued to
shareholders in payment
of distributions
declared 5,114
Shares redeemed (68,052)
-----------------
Net change resulting
from A share
transactions 4,575,890
-----------------
</TABLE>
(b) For the period from August 18, 1997 (date of initial public investment) to
November 30, 1997.
(c) Reflects operations for the period from December 3, 1997 (date of initial
public investment) to May 31, 1998.
(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).
<TABLE>
<CAPTION>
ANNUAL
FUND RATE
- ----------------------------------
<S> <C>
Stellar Fund 0.95%
Relative Value Fund 0.75%
Market Capitalization Fund 0.30%
Growth Equity Fund 0.75%
Capital Appreciation Fund 0.95%
International Equity Fund 0.75%
- ----------------------------------
</TABLE>
B. ADMINISTRATIVE FEE
Federated Administrative Services ("FAS") provides each Fund with certain
administrative personnel and services for which it receives a fee. Effective
January 1, 1998, the fee that FAS receives changed to an annual rate of 0.12% of
the average daily net assets of the Trust for the period. The administrative fee
received during any fiscal year shall be at least $50,000 per Fund. Prior to
January 1, 1998, the FAS fee was based on the level of average aggregate daily
net assets of the Trust for the period.
Under the terms of a Sub-Administration Agreement between FAS and Star Bank,
N.A., FAS will pay to Star Bank, N.A., solely from the resources of FAS, a
sub-administration fee at an annual rate of 0.04% of the average daily net
assets of the Trust, for assisting FAS in rendering administrative services to
the Trust.
C. DISTRIBUTION SERVICES FEE
Pursuant to the provisions of a distribution plan adopted in accordance with the
Investment Company Act Rule 12b-1 (the "Plan"), A Shares, B Shares, and C Shares
of the Trust may pay to the distributor an amount computed at an annual rate of
up to 0.25% of the average daily net assets, in each case to finance any
activity which is principally intended to result in the sale of shares subject
to the Plan. Currently, the Stellar Fund, Relative Value and Growth Equity Fund
are accruing and paying 12b-1 fees. The Market Capitalization Fund, Capital
Appreciation Fund and International Equity Fund will not accrue or pay any
distribution expenses pursuant to the Plan until a "Y" class of shares has been
registered with the Securities and Exchange Commission.
D. SHAREHOLDER SERVICES FEE
Under the terms of the Shareholder Services Agreement with Star Bank, N.A.,
each Fund will pay Star Bank, N.A. up to 0.25% of average daily net assets for
the period. For the foreseeable future, Star Bank N.A. plans to limit the
Shareholder Servicing fee to 0.05% of average daily net assets. This fee is to
obtain certain services for shareholder and to maintain shareholder accounts.
Star Bank N.A. can modify or terminate this limitation at any time at its sole
discretion.
E. TRANSFER AND DIVIDEND DISBURSING AGENT FEES
Star Bank, N.A. serves as transfer agent and dividend disbursing agent for the
Funds. The fee paid to Star Bank, N.A. is based on the size, type, and number
of accounts and transactions made by shareholders.
Star Bank, N.A. became the Funds transfer and dividend disbursing agent March 9,
1998. Prior to March 9, 1998, Federated Services Company ("FServ") served as the
Fund's transfer and dividend disbursing agent and received for its services a
fee based on the size, type, and number of accounts and transactions made by
shareholders.
For the period ended May 31, 1998, the transfer and dividend disbursing agents
earned fees as follows:
<TABLE>
<CAPTION>
STAR
BANK,
N.A. FSERV
- -------------------------------------------
<S> <C> <C>
Stellar Fund $18,500 $52,216
Relative Value Fund 34,920 44,999
Market Capitalization Fund 3,097 9,400
Growth Equity Fund 19,845 53,387
Capital Appreciation Fund 7,041 11,959
International Equity Fund 4,702 9,343
- -------------------------------------------
</TABLE>
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 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.
H. ORGANIZATIONAL EXPENSES
Organizational expenses were borne initially by FAS. The funds have reimbursed
FAS for these expenses. These expenses have been deferred and are being
amortized over the five year period following the Funds effective date. For the
period ended May 31, 1998, the Funds expensed the following:
<TABLE>
<CAPTION>
AMOUNTS
EXPENSES EXPENSED
OF FOR THE
ORGANIZING PERIOD ENDED
EFFECTIVE DATE THE FUND MAY 31, 1998
- --------------------------------------------------------------------
<S> <C> <C> <C>
Growth Equity Fund November 14, 1994 $30,000 $0
Capital Appreciation Fund May 16, 1994 $30,000 $4,654
- --------------------------------------------------------------------
</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
period ended May 31, 1998, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ---------------------------------------------------
<S> <C> <C>
Stellar Fund $44,076,721 $55,238,141
Relative Value Fund 41,268,418 22,618,594
Market Capitalization Fund 34,830,669 0
Growth Equity Fund 31,030,859 38,069,796
Capital Appreciation Fund 46,531,695 48,606,404
International Equity Fund 42,778,970 0
- ---------------------------------------------------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
The Stellar Fund invests in equity and fixed income securities of non-U.S.
issuers. Although, the Stellar Fund 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, 1998, the diversification of industries was as follows:
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS
- ---------------------------
<S> <C>
Basic Industry 0.48%
Capital Goods 2.20%
Consumer Cyclic 1.69%
Consumer Staple 2.45%
Energy 1.22%
Finance 3.31%
Health Care 1.40%
Miscellaneous 0.66%
Technical 1.26%
Transportation 0.64%
Utilities 1.53%
</TABLE>
- -------------------------------------------------------------------------------
(7) YEAR 2000
Similar to other financial organizations, the Funds could be adversely affected
if the computer systems used by the Funds' service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Funds' Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Funds' other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Funds.
Trustees
Thomas L. Conlan Jr.
Edward C. Gonzales
Dr. Alfred Gottschalk
Dr. Robert J. Hill
Dawn M. Hornback
Lawrence M. Turner
William H. Zimmer III
Officers
Edward C. Gonzales
PRESIDENT AND TREASURER
Joseph S. Machi
VICE PRESIDENT AND ASSISTANT TREASURER
C. Grant Anderson
SECRETARY
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government or the Federal
Deposit Insurance Corporation. Investment in mutual funds involves investment
risk, including the possible loss of principal.
Thisreport is authorized for distribution to prospective investors only when
preceded or accompanied by the Trust's prospectus which contains facts
concerning its objectives and policies, management fees, expenses and other
information.
------------------------------
STAR BANK, N.A
Investment Adviser
Cusip 854911609 ------------------------------
Cusip 854911708 FEDERATED SECURITIES CORP.
Cusip 854911401 Distributor
Cusip 854911773 ------------------------------
Cusip 854911831 Cusip 854911799 Cusip 854911864 Cusip 854911823 Cusip 854911807
Cusip 854911815
G00446-01 (7/98)
6050TR
