[LOGO]
THE
STARBURST
MONEY MARKET
FUND
A PORTFOLIO OF
THE STARBURST FUNDS
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1995
FEDERATED SECURITIES CORP.
- ------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
855245601
855245502
0060101 (6/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of The Starburst
Money Market Fund for the six-month period ended April 30, 1995. This report
provides you with complete financial information for the fund, including an
investment review by the portfolio manager, a list of investments for the fund,
and the financial statements. In addition, Financial Highlights tables have been
included for Trust Shares and Investment Shares.
The fund invests in a wide range of money market securities, and is a great way
to put the money you keep on-hand to work earning income.
Please note the following highlights from the last six-month reporting period.
The fund paid shareholders dividends of approximately $5 million, or $0.03 per
share. Total net assets in the fund totaled $195 million at the end of the
reporting period.
Thank you for your confidence in The Starburst Money Market Fund as a way to put
your cash to work. We will continue to keep you informed about your investment,
as we remain committed to delivering the highest level of personal service.
Sincerely,
J. Christopher Donahue
President
June 15, 1995
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The investment objective of The Starburst Money Market Fund is to provide
current income consistent with stability of principal. The fund pursues this
investment objective by investing in a variety of high-quality money market
instruments maturing in thirteen months or less. The average maturity of the
fund's portfolio will be 90 days or less.
Beginning October 31, 1994, the fund's portfolio was barbelled between corporate
notes maturing in one year and commercial paper maturing in 30 days or less. The
fund's weighted average maturity was 41 days. Short-term interest rates
increased during the fourth quarter of 1994 because of strong economic growth
and a corresponding 75 basis point increase in the Federal Funds rate by the
Federal Reserve Board. The fund maintained a relatively short average maturity
during the fourth quarter in order to protect fund net asset value from rising
interest rates while quickly reinvesting maturing securities at higher yields.
The barbelled structure was maintained during the fourth quarter because the
one-year yield curve remained quite steep.
During the first quarter of 1995, short-term interest rates began to decrease in
response to slower economic growth and decreased market expectations of further
rate hikes by the Federal Reserve Board. The decrease in interest rates was
accompanied by a flatter one-year yield curve. As a result of the flatter curve
and tighter credit spreads, the fund's barbelled structure was de-emphasized and
maturing securities were reinvested primarily in 30-day commercial paper instead
of one-year corporate notes.
Fund average maturity was relatively short at 37 days on April 30, 1995, because
the one-year yield curve was so flat that extending average maturity offered no
material yield advantage.
THE STARBURST MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT--13.3%
- ---------------------------------------------------------------------------------
$ 8,000,000 Banque Nationale de Paris, 6.07%, 5/8/1995 $ 8,000,031
------------------------------------------------------------------
9,000,000 National Westminster Bank, 6.13%, 6/30/1995 9,000,705
------------------------------------------------------------------
9,000,000 Societe Generale Bank, 6.06%, 5/2/1995 9,000,010
------------------------------------------------------------------ ------------
TOTAL CERTIFICATES OF DEPOSIT 26,000,746
------------------------------------------------------------------ ------------
*COMMERCIAL PAPER--51.3%
- ---------------------------------------------------------------------------------
FINANCE AUTOMOTIVE--4.1%
------------------------------------------------------------------
8,000,000 Vehicle Services of America, 6.11%, (NationsBank LOC) 5/11/1995 7,986,422
------------------------------------------------------------------ ------------
FINANCIAL SERVICES--6.6%
------------------------------------------------------------------
8,000,000 Merrill Lynch & Co., Inc., 6.07%, 5/9/1995 7,989,209
------------------------------------------------------------------
5,000,000 Transamerica Finance Corp., 5.99%, 6/1/1995 4,974,210
------------------------------------------------------------------ ------------
Total 12,963,419
------------------------------------------------------------------ ------------
FUNDING CORPORATION--32.1%
------------------------------------------------------------------
9,000,000 Black & Decker R.E.C.O.P. Trust, 5.98%, 5/9/1995 9,000,000
------------------------------------------------------------------
9,000,000 Circuit City R.E.C.O.P. Trust, 6.05%, 6/16/1995 9,000,000
------------------------------------------------------------------
9,000,000 Credit Card Securitization, 5.98%, 5/24/1995 8,965,615
------------------------------------------------------------------
8,000,000 Falcon Asset Securitization, 6.00%, 5/10/1995 7,988,000
------------------------------------------------------------------
1,100,000 General Electric Capital Corp., 5.98%, 6/22/1995 1,090,498
------------------------------------------------------------------
9,000,000 Madison Funding Corp., 5.99%, 5/22/1995 8,968,552
------------------------------------------------------------------
9,020,000 Receivables Capital Corp., 5.98%, 5/17/1995-5/30/1995 8,989,854
------------------------------------------------------------------
8,500,000 Sterling, Inc. Credit Card Trust, 6.00%, (Barclays Bank LOC)
5/25/1995 8,500,000
------------------------------------------------------------------ ------------
Total 62,502,519
------------------------------------------------------------------ ------------
MANUFACTURING--4.6%
------------------------------------------------------------------
9,000,000 Xerox Corp., 5.99%, 5/19/1995 8,973,045
------------------------------------------------------------------ ------------
</TABLE>
THE STARBURST MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------
UTILITIES--3.9%
------------------------------------------------------------------
$ 7,650,000 Alabama Power Co., 5.98%, 5/9/1995 $ 7,639,834
------------------------------------------------------------------ ------------
TOTAL COMMERCIAL PAPER 100,065,239
------------------------------------------------------------------ ------------
CORPORATE NOTES--11.3%
- ---------------------------------------------------------------------------------
FINANCE-AUTOMOTIVE--3.6%
------------------------------------------------------------------
6,950,000 Ford Motor Credit Corp., 5.15%-6.30%, 6/19/1995-3/25/1996 6,919,786
------------------------------------------------------------------ ------------
FINANCE-COMMERCIAL--2.2%
------------------------------------------------------------------
4,200,000 Associates Corp. of North America, 5.24%-9.00%,
7/24/1995-12/15/1995 4,226,576
------------------------------------------------------------------ ------------
FINANCIAL SERVICES--4.0%
------------------------------------------------------------------
1,000,000 Merrill Lynch & Co., 5.50%, 7/28/1995 999,693
------------------------------------------------------------------
3,750,000 Safeco Corp., 10.75%, 9/15/1995 3,807,099
------------------------------------------------------------------
3,000,000 Transamerica Finance Corp., 9.20%, 6/30/1995 3,017,560
------------------------------------------------------------------ ------------
Total 7,824,352
------------------------------------------------------------------ ------------
LEASING--1.5%
------------------------------------------------------------------
3,000,000 International Lease Finance Corp., 5.75%-9.80%,
7/31/1995-1/15/1996 2,982,916
------------------------------------------------------------------ ------------
TOTAL CORPORATE NOTES 21,953,630
------------------------------------------------------------------ ------------
**VARIABLE RATE INSTRUMENTS--13.3%
- ---------------------------------------------------------------------------------
8,000,000 Commonwealth Life Insurance Co., 6.28%, 5/1/1995++ 8,000,000
------------------------------------------------------------------
8,000,000 National Home Life Assurance Co., 6.28%, 5/1/1995++ 8,000,000
------------------------------------------------------------------
10,000,000 Student Loan Marketing Association, 6.215%, 5/2/1995 10,010,849
------------------------------------------------------------------ ------------
TOTAL VARIABLE RATE INSTRUMENTS 26,010,849
------------------------------------------------------------------ ------------
</TABLE>
THE STARBURST MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
***REPURCHASE AGREEMENT--10.6%
- ---------------------------------------------------------------------------------
$20,727,000 Fuji Securities, Inc., 5.90%, dated 4/28/1995, due 5/1/1995 $ 20,727,000
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $194,757,464+
------------------------------------------------------------------ ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
** Denotes variable rate securities which show current rate and next demand
date.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ Also represents cost for federal tax purposes.
++ Denotes restricted securities which are subject to restrictions on resale
under Federal Securities law. These securities are considered liquid under
criteria established by the Board of Trustees.
Note: The categories of investments are shown as a percentage of net assets
($195,025,726) at April 30, 1995.
The following abbreviation is used throughout this portfolio:
<TABLE>
<S> <C>
LOC -- Letter of Credit
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------
Investment in repurchase agreement $ 20,727,000
- -----------------------------------------------------------------
Investments in securities 174,030,464
- ----------------------------------------------------------------- ------------
Total investments in securities, at amortized cost $194,757,464
- --------------------------------------------------------------------------------
Cash 218,135
- --------------------------------------------------------------------------------
Income receivable 814,410
- -------------------------------------------------------------------------------- ------------
Total assets 195,790,009
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Income distribution payable 718,135
- -----------------------------------------------------------------
Accrued expenses 46,148
- ----------------------------------------------------------------- ------------
Total liabilities 764,283
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 195,025,726 shares outstanding $195,025,726
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Trust Shares ($157,519,255 / 157,519,255 shares outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
Investment Shares ($37,506,471 / 37,506,471 shares outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $5,665,792
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $385,653
- -----------------------------------------------------------------------
Administrative personnel and services fee 133,878
- -----------------------------------------------------------------------
Custodian fees 24,029
- -----------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 33,166
- -----------------------------------------------------------------------
Directors'/Trustees' fees 1,337
- -----------------------------------------------------------------------
Auditing fees 10,144
- -----------------------------------------------------------------------
Legal fees 2,598
- -----------------------------------------------------------------------
Portfolio accounting fees 24,513
- -----------------------------------------------------------------------
Investment Shares--Distribution services fee 53,369
- -----------------------------------------------------------------------
Share registration costs 22,189
- -----------------------------------------------------------------------
Printing and postage 6,109
- -----------------------------------------------------------------------
Insurance premiums 4,456
- -----------------------------------------------------------------------
Miscellaneous 687
- ----------------------------------------------------------------------- --------
Total expenses 702,128
- -----------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------------------
Waiver of investment advisory fee $86,477
- -------------------------------------------------------------
Waiver of distribution services fee 21,348 107,825
- ------------------------------------------------------------- ------- --------
Net expenses 594,303
- ----------------------------------------------------------------------------------- ----------
Net investment income $5,071,489
- ----------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
-------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------
Net investment income $ 5,071,489 $ 5,694,713
- -------------------------------------------------------- ------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------
Trust Shares--Distributions from net investment income (3,973,970 ) (4,486,408)
- --------------------------------------------------------
Investment Shares--Distributions from net investment
income (1,097,519 ) (1,208,305)
- -------------------------------------------------------- ------------- -----------------
Change in net assets resulting from distributions
to shareholders (5,071,489 ) (5,694,713)
- -------------------------------------------------------- ------------- -----------------
SHARE TRANSACTIONS--
- --------------------------------------------------------
Proceeds from sale of shares 343,524,138 712,751,811
- --------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 1,043,716 1,156,479
- --------------------------------------------------------
Cost of shares redeemed (347,631,490 ) (687,107,098)
- -------------------------------------------------------- ------------- -----------------
Change in net assets resulting from share
transactions (3,063,636 ) 26,801,192
- -------------------------------------------------------- ------------- -----------------
Change in net assets (3,063,636 ) 26,801,192
- --------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------
Beginning of period 198,089,362 171,288,170
- -------------------------------------------------------- ------------- -----------------
End of period $ 195,025,726 $ 198,089,362
- -------------------------------------------------------- ------------- -----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990(a)
-------------- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.03 0.03 0.03 0.04 0.06 0.06
- ----------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------
Distributions from net investment
income (0.03) (0.03) (0.03) (0.04) (0.06) (0.06)
- ---------------------------------------- -------- ---- ---- ---- ---- -----
NET ASSET VALUE, END OF PERIOD $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------- -------- ---- ---- ---- ---- -----
TOTAL RETURN(b) 2.64% 3.29% 2.84% 4.07% 6.44% 5.89%
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 0.58%(c) 0.75% 0.70% 0.64% 0.62% 0.58%(c)
- ----------------------------------------
Net investment income 5.29%(c) 3.26% 2.83% 4.01% 6.13% 7.80%(c)
- ----------------------------------------
Expense waiver/reimbursement(d) 0.09%(c) 0.04% 0.00% 0.01% 0.05% 0.10%(c)
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000
omitted) $157,519 $158,367 $131,508 $187,394 $212,997 $117,716
- ----------------------------------------
</TABLE>
(a) Reflects operations for the period from February 5, 1990 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -------------------------------------
(UNAUDITED) 1994 1993 1992 1991(a)
-------------- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------
Net investment income 0.03 0.03 0.03 0.04 0.03
- ----------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------
Distributions from net investment income (0.03) (0.03) (0.03) (0.04) (0.03)
- ---------------------------------------------- --------- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------- --------- ----- ----- ----- ------
TOTAL RETURN(b) 2.57% 3.13% 2.69% 3.95% 2.90%
- ----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------
Expenses 0.73%(c) 0.91% 0.86% 0.78% 0.61%(c)
- ----------------------------------------------
Net investment income 5.14%(c) 3.11% 2.66% 3.65% 5.51%(c)
- ----------------------------------------------
Expense waiver/reimbursement(d) 0.19%(c) 0.22% 0.20% 0.19% 0.05%(c)
- ----------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------
Net assets, end of period (000 omitted) $37,506 $39,722 $39,780 $36,432 $7,238
- ----------------------------------------------
</TABLE>
(a) Reflects operations for the period from April 29, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Starburst 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 four diversified portfolios. The financial statements
included herein present only those of The Starburst Money Market Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The Fund provides
two classes of shares: Trust and Investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS--It is the policy of the Fund 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 in
support of repurchase agreement transactions. Additionally, procedures have been
established by the Fund 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 Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to
be creditworthy pursuant to guidelines 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 Fund could receive less than the repurchase price
on the sale of collateral securities.
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.
</TABLE>
THE STARBURST MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(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 April
30, 1995, capital paid in aggregated $195,025,726. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
TRUST SHARES APRIL 30, 1995 OCTOBER 31, 1994
- --------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Shares sold 168,168,094 349,300,863
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared -- --
- ---------------------------------------------------------
Shares redeemed (169,015,661) (322,442,175)
- --------------------------------------------------------- -------------- ---------------
Net change resulting from Trust share transactions (847,567) 26,858,688
- --------------------------------------------------------- -------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
INVESTMENT SHARES APRIL 30, 1995 OCTOBER 31, 1994
- --------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Shares sold 175,356,044 363,450,948
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,043,716 1,156,479
- ---------------------------------------------------------
Shares redeemed (178,615,829) (364,664,923)
- --------------------------------------------------------- -------------- ---------------
Net change resulting from Investment share transactions (2,216,069) (57,496)
- --------------------------------------------------------- -------------- ---------------
Net change resulting from Fund share transactions (3,063,636) 26,801,192
- --------------------------------------------------------- -------------- ---------------
</TABLE>
THE STARBURST MONEY MARKET FUND
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Compass Bank, the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.40 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive all or a portion of its fee. The Adviser can modify or terminate
this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive all or a portion of its fee.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Investment class of shares. The Plan provides that the Fund may
incur distribution expenses up to .25 of 1% of the average daily net assets of
the Investment Shares, annually, to compensate FSC. The distributor may
voluntarily choose to waive all or a portion of its fee. The distributor can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, AND PORTFOLIO
ACCOUNTING AND CUSTODIAN FEES--Federated Services Company ("FServ") serves as
transfer and dividend disbursing agent for the Fund for which it receives a fee.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average net assets for the period
plus, out-of-pocket expenses.
Compass Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Fund are Officers and
Directors or Trustees of the above companies.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue J. Christopher Donahue
Thomas G. Bigley President
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland Vice President
James E. Dowd Edward C. Gonzales
Lawrence D. Ellis, M.D. Vice President and Treasurer
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Vice President and Secretary
Peter E. Madden Jeffrey W. Sterling
Gregor F. Meyer Vice President and Assistant Treasurer
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Assistant Treasurer
Marjorie P. Smuts C. Grant Anderson
Assistant Secretary
</TABLE>
MUTUAL FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS, ARE NOT GUARANTEED BY ANY
BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN MUTUAL FUNDS INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. ALTHOUGH MONEY MARKET FUNDS SEEK TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE IS NO ASSURANCE THAT
THEY WILL BE ABLE TO DO SO.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN
PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS WHICH CONTAINS FACTS CONCERNING
ITS OBJECTIVE AND POLICIES, MANAGEMENT FEES, EXPENSES AND OTHER INFORMATION.
[LOGO]
THE STARBURST
GOVERNMENT MONEY
MARKET FUND
A PORTFOLIO OF THE STARBURST FUNDS
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1995
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
855245403
855245304
0060102 (6/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of The Starburst
Government Money Market Fund for the six-month period ended April 30, 1995. This
report provides you with complete financial information for the fund, including
an investment review by the portfolio manager, a list of investments for the
fund, and the financial statements. In addition, Financial Highlights tables
have been included for Trust Shares and Investment Shares.
The fund is an excellent way to earn daily income from your investment dollars.
Since the fund invests only in short-term U.S. government securities that are
guaranteed for prompt payment of principal and interest, you can rest easy
knowing that your money will be there when you need it.
Please note the following highlights from the last six-month reporting period.
The fund paid shareholders dividends of approximately $4 million, which amounted
to $0.03 per share to shareholders of Trust Shares and $0.02 per share to
shareholders of Investment Shares. Total net assets in the fund amounted to
$141.9 million at the end of the reporting period.
Thank you for your confidence in The Starburst Government Money Market Fund as a
way to put your money to work. We will continue to keep you informed about your
investment, and welcome your comments and questions.
Sincerely,
J. Christopher Donahue
President
June 15, 1995
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The investment objective of The Starburst Government Money Market Fund is to
provide current income consistent with stability of principal. The fund pursues
this investment objective by investing in a portfolio of short-term U.S.
government securities, including certain obligations of or guaranteed by U.S.
government agencies and instrumentalities. The average maturity in the fund's
portfolio will be 90 days or less.
Beginning October 31, 1994, the fund's portfolio was barbelled between Treasury
Notes maturing in one year and repurchase agreements maturing in one day. The
fund's weighted average maturity was 43 days. Short-term interest rates
increased during the fourth quarter of 1994 because of strong economic growth
and a corresponding 75 basis point increase in the Federal Fund's rate by the
Federal Reserve Board. The fund maintained a relatively short average maturity
during the fourth quarter in order to protect fund net asset value from rising
interest rates while quickly reinvesting maturing securities at higher yields.
The barbelled structure was maintained during the fourth quarter because the
one-year yield curve remained quite steep.
During the first quarter of 1995, short-term interest rates began to decrease in
response to slower economic growth and decreased market expectations of further
rate hikes by the Federal Reserve Board. The decrease in interest rates was
accompanied by a flatter one-year yield curve. As a result of the flatter yield
curve, the fund's barbelled structure was de-emphasized and maturing Treasury
Notes were invested in overnight repurchase agreements instead of one-year
Treasury Notes.
Fund average maturity was relatively short at 39 days on April 30, 1995, because
the one-year yield curve was so flat that extending average maturity offered no
material yield advantage.
THE STARBURST GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
UNITED STATES TREASURY NOTES--30.9%
- ---------------------------------------------------------------------------------
$44,000,000 3.875%-8.50%, 5/15/1995-4/30/1996 $ 43,929,653
------------------------------------------------------------------ ------------
*REPURCHASE AGREEMENTS--62.2%
- ---------------------------------------------------------------------------------
6,500,000 BZW Securities Corp., 5.83%, dated 4/28/1995, due 5/1/1995 6,500,000
------------------------------------------------------------------
28,339,000 First Chicago Capital Markets, Inc., 5.90%, dated 4/28/1995, due
5/1/1995 28,339,000
------------------------------------------------------------------
34,000,000 Fuji Securities, Inc., 5.90%, dated 4/28/1995, due 5/1/1995 34,000,000
------------------------------------------------------------------
6,500,000 Greenwich Capital Markets, Inc., 5.85%, dated 4/28/1995, due
5/1/1995 6,500,000
------------------------------------------------------------------
6,500,000 HSBC Securities, Inc., 5.85%, dated 4/28/1995, due 5/1/1995 6,500,000
------------------------------------------------------------------
6,500,000 Harris Government Securities, Inc., 5.875%, dated 4/28/1995, due
5/1/1995 6,500,000
------------------------------------------------------------------ ------------
TOTAL REPURCHASE AGREEMENTS 88,339,000
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $132,268,653+
------------------------------------------------------------------ ------------
</TABLE>
+ Also represents cost for federal tax purposes.
* The repurchase agreements are fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
Note: The categories of investments are shown as a percentage of net assets
($141,946,575) at April 30, 1995.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------
Investments in repurchase agreements $88,339,000
- ------------------------------------------------------------------
Investments in securities 43,929,653
- ------------------------------------------------------------------ -----------
Total investments in securities, at amortized cost $132,268,653
- --------------------------------------------------------------------------------
Cash 326,171
- --------------------------------------------------------------------------------
Receivable for investments sold 14,000,000
- --------------------------------------------------------------------------------
Income receivable 926,476
- -------------------------------------------------------------------------------- ------------
Total assets 147,521,300
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased 4,959,341
- ------------------------------------------------------------------
Income distribution payable 609,615
- ------------------------------------------------------------------
Accrued expenses 5,769
- ------------------------------------------------------------------ -----------
Total liabilities 5,574,725
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 141,946,575 shares outstanding $141,946,575
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Trust Shares: ($135,640,959 / 135,640,959 shares outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
Investment Shares: ($6,305,616 / 6,305,616 shares outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $4,641,101
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $324,087
- ----------------------------------------------------------------------
Administrative personnel and services fee 112,486
- ----------------------------------------------------------------------
Custodian fees 17,314
- ----------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 32,844
- ----------------------------------------------------------------------
Directors'/Trustees' fees 2,077
- ----------------------------------------------------------------------
Auditing fees 10,966
- ----------------------------------------------------------------------
Legal fees 2,006
- ----------------------------------------------------------------------
Portfolio accounting fees 24,009
- ----------------------------------------------------------------------
Investment Shares--Distribution services fee 7,858
- ----------------------------------------------------------------------
Share registration costs 8,518
- ----------------------------------------------------------------------
Printing and postage 5,867
- ----------------------------------------------------------------------
Insurance premiums 4,789
- ----------------------------------------------------------------------
Miscellaneous 706
- ---------------------------------------------------------------------- --------
Total expenses 553,527
- ----------------------------------------------------------------------
Deduct--Waiver of distribution services fee 3,143
- ---------------------------------------------------------------------- --------
Net expenses 550,384
- --------------------------------------------------------------------------------- ----------
Net investment income $4,090,717
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------
Net investment income $ 4,090,717 $ 5,876,916
- --------------------------------------------------------- ------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------
Trust Shares (3,936,485 ) (5,721,662)
- ---------------------------------------------------------
Investment Shares (154,232 ) (155,254)
- --------------------------------------------------------- ------------- ----------------
Change in net assets resulting from distributions to
shareholders (4,090,717 ) (5,876,916)
- --------------------------------------------------------- ------------- ----------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------
Proceeds from sale of shares 156,157,654 477,308,758
- ---------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 100,014 134,615
- ---------------------------------------------------------
Cost of shares redeemed (170,576,645 ) (502,449,797)
- --------------------------------------------------------- ------------- ----------------
Change in net assets resulting from share
transactions (14,318,977 ) (25,006,424)
- --------------------------------------------------------- ------------- ----------------
Change in net assets (14,318,977 ) (25,006,424)
- ---------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------
Beginning of period 156,265,552 181,271,976
- --------------------------------------------------------- ------------- ----------------
End of period $ 141,946,575 $ 156,265,552
- --------------------------------------------------------- ------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 ---------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990(a)
-------------- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------
Net investment income 0.03 0.03 0.03 0.04 0.06 0.05
- ---------------------------------------------- -------- ---- ---- ---- ---- -----
LESS DISTRIBUTIONS
- ----------------------------------------------
Distributions from net investment income (0.03) (0.03) (0.03) (0.04) (0.06) (0.05)
- ---------------------------------------------- -------- ---- ---- ---- ---- -----
NET ASSET VALUE, END OF PERIOD $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------- -------- ---- ---- ---- ---- -----
TOTAL RETURN(b) 2.64% 3.18% 2.65% 3.72% 6.05% 5.74%
- ----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------
Expenses 0.67%(c) 0.68% 0.67% 0.65% 0.64% 0.62%(c)
- ----------------------------------------------
Net investment income 5.05%(c) 3.09% 2.63% 3.64% 5.76% 7.61%(c)
- ----------------------------------------------
Expense waiver/reimbursement(d) 0.00% 0.00% 0.00% 0.01% 0.05% 0.10%(c)
- ----------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------
Net assets, end of period (000 omitted) $135,641 $150,507 $175,601 $221,785 $174,158 $82,346
- ----------------------------------------------
</TABLE>
(a) Reflects operations for the period from February 5, 1990 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -------------------------------------
(UNAUDITED) 1994 1993 1992 1991(a)
-------------- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------
Net investment income 0.02 0.03 0.02 0.04 0.03
- ------------------------------------------------- --------- ----- ----- ----- ------
LESS DISTRIBUTIONS
- -------------------------------------------------
Distributions from net investment income (0.02) (0.03) (0.02) (0.04) (0.03)
- ------------------------------------------------- --------- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------- --------- ----- ----- ----- ------
TOTAL RETURN(b) 2.57% 3.03% 2.50% 3.61% 2.74%
- -------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------
Expenses 0.82%(c) 0.83% 0.82% 0.76% 0.64%(c)
- -------------------------------------------------
Net investment income 4.90%(c) 2.92% 2.48% 3.64% 5.04%(c)
- -------------------------------------------------
Expense waiver/reimbursement(d) 0.10%(c) 0.19% 0.20% 0.16% 0.05%(c)
- -------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------
Net assets, end of period (000 omitted) $6,306 $5,759 $5,671 $7,874 $8,947
- -------------------------------------------------
</TABLE>
(a) Reflects operations for the period from April 29, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Starburst Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act") as an open-end, diversified management
investment company. The Trust consists of four diversified portfolios. The
financial statements included herein present only those of The Starburst
Government Money Market Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers two classes of shares: Trust and Investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Funds use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS--It is the policy of the Fund 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 Fund to monitor, on a
daily basis, the market value of each repurchase agreement's underlying
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines 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 Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSE 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.
THE STARBURST GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At April 30, 1995, capital paid-in aggregated $141,946,575.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
TRUST SHARES APRIL 30, 1995 OCTOBER 31, 1994
- --------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Shares sold 108,272,825 405,150,009
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared -- --
- ---------------------------------------------------------
Shares redeemed (123,138,164) (430,244,529)
- --------------------------------------------------------- -------------- ---------------
Net change resulting from Trust share transactions (14,865,339) (25,094,520)
- --------------------------------------------------------- -------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
INVESTMENT SHARES APRIL 30, 1995 OCTOBER 31, 1994
- --------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Shares sold 47,884,829 72,158,749
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 100,014 134,615
- ---------------------------------------------------------
Shares redeemed (47,438,481) (72,205,268)
- --------------------------------------------------------- ------------- --------------
Net change resulting from Investment share transactions 546,362 88,096
- --------------------------------------------------------- ------------- --------------
Net change resulting from Fund share transactions (14,318,977) (25,006,424)
- --------------------------------------------------------- ------------- --------------
</TABLE>
THE STARBURST GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Compass Bank, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.40 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive all or a portion of its fee. The Adviser can modify or terminate
this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive all or a portion of its fee.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Investment Shares. The Plan provides that the Fund may incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Investment Shares, annually, to compensate FSC. The distributor may voluntarily
choose to waive all or a portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODIAN FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund for which it receives a fee. The fee is
based on the size, type, and number of accounts and transactions made by
shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average net assets for the period,
plus out-of-pocket expenses.
Compass Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -----------------------------------------------------------------------------
John F. Donahue J. Christopher Donahue
Thomas G. Bigley President
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland Vice President
James E. Dowd Edward C. Gonzales
Lawrence D. Ellis, M.D. Vice President and Treasurer
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Vice President and Secretary
Peter E. Madden Jeffrey W. Sterling
Gregor F. Meyer Vice President and Assistant
John E. Murray, Jr. Treasurer
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts Assistant Treasurer
C. Grant Anderson
Assistant Secretary
</TABLE>
MUTUAL FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS, ARE NOT GUARANTEED BY ANY
BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN MUTUAL FUNDS INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. ALTHOUGH MONEY MARKET FUNDS SEEK TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE IS NO ASSURANCE THAT
THEY WILL BE ABLE TO DO SO.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN
PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS WHICH CONTAINS FACTS CONCERNING
ITS OBJECTIVE AND POLICIES, MANAGEMENT FEES, EXPENSES AND OTHER INFORMATION.
[LOGO]
THE STARBURST
GOVERNMENT
INCOME FUND
A PORTFOLIO OF THE STARBURST FUNDS
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1995
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
855245809
2060308 (6/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of The Starburst
Government Income Fund for the six-month period ended April 30, 1995. This
report provides you with complete financial information for the fund, including
an investment review by the portfolio manager, a list of investments for the
fund, and the financial statements.
The fund seeks income by investing in government bonds. Since these bonds are
guaranteed by the U.S. government for prompt payment of principal and interest,
you can rest easy knowing that your money is working hard for you, without
exposing you to an unreasonable level of investment risk.
Please note the following highlights from the last six-month reporting period.
The net asset value of fund shares increased $0.15 to $9.69 per share. The fund
generated a total return of 4.89%* and paid shareholders dividends of
approximately $1.7 million, or $0.31 per share. Total net assets in the fund
amounted to $49.6 million at the end of the reporting period.
Thank you for your confidence in The Starburst Government Income Fund. We will
continue to keep you informed about your investment and welcome your comments
and questions.
Sincerely,
J. Christopher Donahue
President
June 15, 1995
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The investment objective of The Starburst Government Income Fund is to provide
current income. The fund pursues this investment objective by investing in a
professionally managed, diversified portfolio limited primarily to securities
issued or guaranteed by the U.S. government or its instrumentalities, including
obligations of U.S. government agencies and, subject to certain limitations,
privately issued mortgage-backed securities.
Beginning October 31, 1994, the fund's portfolio was barbelled between Treasury
Notes maturing in ten years and Treasury, Agency, and collateralized mortgage
obligation securities maturing in less than three years. The fund's weighted
average maturity was 3.78 years. Interest rates, particularly short-term
interest rates, increased during the fourth quarter of 1994 because of strong
economic growth and a corresponding 75 basis point increase in the Federal Funds
rate by the Federal Reserve Board. The fund maintained a relatively short
average maturity during the fourth quarter in order to protect fund net asset
value from rising interest rates. The barbelled structure was maintained during
the fourth quarter because the yield curve remained quite steep.
During the first quarter of 1995, interest rates began to fall in response to
slower economic growth and decreased market expectations of further rate hikes
by the Federal Reserve Board. The decrease in interest rates was accompanied by
a much steeper yield curve. Short-term interest rates dropped faster than
long-term interest rates because investors began to anticipate an eventual cut
in the Federal Funds rate by the Federal Reserve Board. Fund average maturity
was extended during the quarter to take advantage of the falling rates. However,
the barbelled structure was maintained because the drop in short-term rates was
exaggerated by extraneous factors thought to be transitory in nature.
Fund average maturity was 4.64 years on April 30, 1995.
THE STARBURST GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM OBLIGATIONS--78.0%
- -------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--6.4%
-----------------------------------------------------------------
$ 3,000,000 8.115%, 1/31/2005 $ 3,165,480
----------------------------------------------------------------- -----------
FEDERAL HOME LOAN MORTGAGE CORP.--REMIC--1.4%
-----------------------------------------------------------------
578,947 8.40%, 1/15/2005 584,765
-----------------------------------------------------------------
97,008 8.00%, 7/15/2013 96,755
----------------------------------------------------------------- -----------
Total 681,520
----------------------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--REMIC--10.5%
-----------------------------------------------------------------
273,772 8.90%, 6/25/1996 275,100
-----------------------------------------------------------------
875,675 8.75%, 12/25/2004 887,664
-----------------------------------------------------------------
3,000,000 9.10%, 7/25/2018 3,060,330
-----------------------------------------------------------------
1,000,000 9.40%, 8/25/2018 1,016,550
----------------------------------------------------------------- -----------
Total 5,239,644
----------------------------------------------------------------- -----------
MERRILL LYNCH CMO TRUST--2.1%
-----------------------------------------------------------------
1,000,000 9.50%, 11/20/2000 1,024,210
----------------------------------------------------------------- -----------
STUDENT LOAN MARKETING ASSOCIATION--2.0%
-----------------------------------------------------------------
1,000,000 + 6.525%, 5/22/1995 1,000,130
----------------------------------------------------------------- -----------
U.S. TREASURY BONDS--33.0%
-----------------------------------------------------------------
14,000,000 9.375%, 2/15/2006 16,344,160
----------------------------------------------------------------- -----------
U.S. TREASURY NOTES--22.6%
-----------------------------------------------------------------
11,000,000 8.875%, 2/15/1996 11,211,420
----------------------------------------------------------------- -----------
TOTAL LONG-TERM OBLIGATIONS (IDENTIFIED COST, $40,519,824) 38,666,564
----------------------------------------------------------------- -----------
</TABLE>
THE STARBURST GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
* REPURCHASE AGREEMENT--21.2%
- -------------------------------------------------------------------------------------
$10,506,000 Fuji Securities, Inc., 5.90%, dated 4/28/1995, due 5/1/1995
(at amortized cost) $10,506,000
----------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $51,025,824) $49,172,564++
----------------------------------------------------------------- -----------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ Denotes a floating rate obligation for which the current rate and next reset
date are shown.
++ The cost of investments for federal tax purposes amounts to $51,025,824. The
net unrealized depreciation on a federal tax basis amounts to $1,853,260,
which is comprised of $113,202 appreciation and $1,966,462 depreciation at
April 30, 1995.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
CMO -- Collateralized Mortgage Obligation
REMIC -- Real Estate Mortgage Investment Conduit
</TABLE>
Note: The categories of investments are shown as a percentage of net assets
($49,556,989) at April 30, 1995.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------
Investment in repurchase agreement $10,506,000
- -------------------------------------------------------------------
Investments in securities 38,666,564
- ------------------------------------------------------------------- -----------
Total investments in securities, at value
(identified and tax cost, $51,025,824) $49,172,564
- ---------------------------------------------------------------------------------
Income receivable 634,074
- ---------------------------------------------------------------------------------
Receivable for shares sold 11,895
- ---------------------------------------------------------------------------------
Deferred expenses 10,600
- --------------------------------------------------------------------------------- -----------
Total assets 49,829,133
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for shares redeemed 132,450
- -------------------------------------------------------------------
Income distribution payable 95,613
- -------------------------------------------------------------------
Accrued expenses 44,081
- ------------------------------------------------------------------- -----------
Total liabilities 272,144
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 5,115,298 shares outstanding $49,556,989
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSISTS OF:
- ---------------------------------------------------------------------------------
Paid-in capital $54,591,656
- ---------------------------------------------------------------------------------
Net unrealized depreciation of investments (1,853,260)
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (3,181,407)
- --------------------------------------------------------------------------------- -----------
Total Net Assets $49,556,989
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Proceeds Per Share:
($49,556,989 / 5,115,298 shares outstanding) $9.69
- --------------------------------------------------------------------------------- -----------
Computation of Offering Price:
Offering Price Per Share (100/97.50 of $9.69)* $9.94
- --------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $1,974,828
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $194,722
- -----------------------------------------------------------------------
Administrative personnel and services fee 36,053
- -----------------------------------------------------------------------
Custodian fees 10,951
- -----------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 50,284
- -----------------------------------------------------------------------
Directors'/Trustees' fees 1,545
- -----------------------------------------------------------------------
Auditing fees 7,896
- -----------------------------------------------------------------------
Legal fees 1,493
- -----------------------------------------------------------------------
Portfolio accounting fees 16,797
- -----------------------------------------------------------------------
Distribution services fee 64,907
- -----------------------------------------------------------------------
Share registration costs 6,483
- -----------------------------------------------------------------------
Printing and postage 5,741
- -----------------------------------------------------------------------
Insurance premiums 2,983
- -----------------------------------------------------------------------
Miscellaneous 2,688
- ----------------------------------------------------------------------- --------
Total expenses 402,543
- -----------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------------------
Waiver of investment advisory fee $94,702
- -------------------------------------------------------------
Waiver of distribution services fee 16,813 111,515
- ------------------------------------------------------------- ------- --------
Net expenses 291,028
- ----------------------------------------------------------------------------------- ----------
Net investment income 1,683,800
- ----------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------
Net realized loss on investments (368,835)
- -----------------------------------------------------------------------------------
Net change in unrealized depreciation of investments 1,112,060
- ----------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments 743,225
- ----------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $2,427,025
- ----------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------
Net investment income $ 1,683,800 $ 4,351,534
- -------------------------------------------------------
Net realized gain (loss) on investments ($368,835 and
$2,421,386, net losses, respectively, as computed for
federal tax purposes) (368,835) (2,421,386)
- -------------------------------------------------------
Net change in unrealized depreciation of investments 1,112,060 (4,872,163)
- ------------------------------------------------------- -------------- ---------------
Change in net assets resulting from operations 2,427,025 (2,942,015)
- ------------------------------------------------------- -------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------
Distributions from net investment income (1,683,800) (4,352,321)
- ------------------------------------------------------- -------------- ---------------
SHARE TRANSACTIONS--
- -------------------------------------------------------
Proceeds from sale of shares 1,411,671 10,404,085
- -------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 1,087,930 2,862,263
- -------------------------------------------------------
Cost of shares redeemed (12,513,252) (44,390,859)
- ------------------------------------------------------- -------------- ---------------
Change in net assets resulting from share
transactions (10,013,651) (31,124,511)
- ------------------------------------------------------- -------------- ---------------
Change in net assets (9,270,426) (38,418,847)
- -------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------
Beginning of period 58,827,415 97,246,262
- ------------------------------------------------------- -------------- ---------------
End of period $ 49,556,989 $ 58,827,415
- ------------------------------------------------------- -------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 --------------------------------
(UNAUDITED) 1994 1993 1992(a)
--------------- ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.54 $10.40 $10.25 $10.00
- ----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------
Net investment income 0.31 0.54 0.63 0.36
- ----------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.15 (0.86) 0.21 0.25
- ---------------------------------------------- ---------- ------ ------ -----
Total from investment operations 0.46 (0.32) 0.84 0.61
- ----------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------
Distributions from net investment income (0.31) (0.54) (0.63) (0.36 )
- ----------------------------------------------
Distributions from net realized gain on
investment transactions -- -- (0.06) --
- ---------------------------------------------- ---------- ------ ------ -----
Total distributions (0.31) (0.54) (0.69) (0.36 )
- ---------------------------------------------- ---------- ------ ------ -----
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 9.54 $10.40 $10.25
- ---------------------------------------------- ---------- ------ ------ -----
TOTAL RETURN(b) 4.89% (3.12%) 8.42% 6.24%
- ----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------
Expenses 1.12%(c) 1.20% 1.11% 0.79%(c)
- ----------------------------------------------
Net investment income 6.49%(c) 5.44% 6.11% 6.79%(c)
- ----------------------------------------------
Expense waiver/reimbursement(d) 0.43%(c) 0.30% 0.29% 0.60%(c)
- ----------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------
Net assets, end of period (000 omitted) $49,557 $58,827 $97,246 $65,984
- ----------------------------------------------
Portfolio turnover 32% 91% 69% 88%
- ----------------------------------------------
</TABLE>
(a) Reflects operations for the period from April 22, 1992 (date of initial
public investment) to October 31, 1992.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST GOVERNMENT INCOME FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Starburst 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 four diversified portfolios. The financial statements
included herein present only those of The Starburst Government Income Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--U.S. government securities are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Short-term securities with remaining
maturities of sixty days or less at the time of purchase may be valued at
amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund 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 Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines 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 Fund could receive less
than the repurchase price on the sale of collateral securities.
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
THE STARBURST GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At October 31, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $2,812,678, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward of $391,292 and $2,421,386 will expire in 2001 and 2002,
respectively.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
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>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31, 1994
- --------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Shares sold 147,164 1,025,192
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 113,406 290,048
- ---------------------------------------------------------
Shares redeemed (1,309,360) (4,502,369)
- --------------------------------------------------------- ------------- --------------
Net change resulting from share transactions (1,048,790) (3,187,129)
- --------------------------------------------------------- ------------- --------------
</TABLE>
THE STARBURST GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Compass Bank, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive all or a portion of its fee. The Adviser can modify or terminate
this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive all or a portion of its fee.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may incur distribution
expenses up to .25 of 1% of the average daily net assets of the Fund, annually,
to compensate FSC. The distributor may voluntarily choose to waive all or a
portion of its fee. The distributor can modify or terminate this voluntary
waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODIAN FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund for which it receives a fee. The fee is
based on the size, type, and number of accounts and transactions made by
shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average net assets for the period,
plus out-of-pocket expenses.
Compass Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($22,617) were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following April 17, 1992 (the date the Fund became
effective). For the six months ended April 30, 1995, the Fund paid $2,123
pursuant to this agreement.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
THE STARBURST GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1995, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Purchases $14,263,828
- ------------------------------------------------------------------------------- -----------
Sales $21,464,210
- ------------------------------------------------------------------------------- -----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue J. Christopher Donahue
Thomas G. Bigley President
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland Vice President
James E. Dowd Edward C. Gonzales
Lawrence D. Ellis, M.D. Vice President and Treasurer
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Vice President and Secretary
Peter E. Madden Jeffrey W. Sterling
Gregor F. Meyer Vice President and Assistant Treasurer
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Assistant Treasurer
Marjorie P. Smuts C. Grant Anderson
Assistant Secretary
</TABLE>
MUTUAL FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS, ARE NOT GUARANTEED BY ANY
BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN MUTUAL FUNDS INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN
PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS WHICH CONTAINS FACTS CONCERNING
ITS OBJECTIVE AND POLICIES, MANAGEMENT FEES, EXPENSES AND OTHER INFORMATION.
[LOGO]
THE
STARBURST
MUNICIPAL
INCOME
FUND
A PORTFOLIO OF
THE STARBURST FUNDS
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1995
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
855245700
3052008 (6/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of The Starburst
Municipal Income Fund for the six-month period ended April 30, 1995. This report
provides you with complete financial information for the fund, including an
investment review by the portfolio manager, a list of investments for the fund,
and the financial statements.
The fund seeks income that is free from federal income tax by investing in a
highly diversified portfolio of municipal securities. Securities purchased by
the fund underwrite projects in housing, industrial development, healthcare, and
education.
With taxes taking a larger bite out of your income, you can rely on the fund to
help ease your tax burden.
Please note the following highlights from the last six-month reporting period.
Net asset value of fund shares grew by $0.31 to $10.36 per share. The fund
generated a total return of 5.33%* and paid more than $507,000 in dividends and
capital gain distributions, or $0.23 per share. Total net assets in the fund
amounted to $21.7 million at the end of the reporting period.
Thank you for your confidence in The Starburst Municipal Income Fund. We will
continue to keep you informed about your investment and welcome your comments
and questions.
Sincerely,
J. Christopher Donahue
President
June 15, 1995
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The investment objective of The Starburst Municipal Income Fund is to provide
current income exempt from federal regular income tax. The fund pursues this
investment objective by investing in a professionally managed, diversified
portfolio of municipal securities. Currently, the fund invests at least 80% of
its portfolio in municipal securities whose average weighted maturity is 15
years or less. Historically, the fund also has attempted to diversify its
portfolio geographically.
Beginning October 31, 1994, the fund's portfolio was defensively positioned with
an average maturity of 7.28 years. The majority of bonds in the portfolio was
prerefunded bonds, general obligation bonds, and utility revenue bonds maturing
in five to ten years. Interest rates, particularly short-term interest rates,
increased during the fourth quarter of 1994 because of strong economic growth
and a corresponding 75 basis point increase in the Federal Funds rate by the
Federal Reserve Board. The fund maintained a relatively short average maturity
during the fourth quarter in order to protect fund net asset value from rising
interest rates.
During the first quarter of 1995, interest rates began to fall in response to
slower economic growth and decreased market expectations of further rate hikes
by the Federal Reserve Board. The decrease in tax-free interest rates was
particularly sharp because of widespread expectations of a decrease in the
supply of tax-free municipal bonds in 1995. Fund average maturity was extended
during the quarter to take advantage of the falling rates. Fund average credit
quality was improved during the quarter because yield spreads on lower-rated
bonds became too small to justify holding the lower-rated bonds.
Fund average maturity was 7.90 years on April 30, 1995.
THE STARBURST MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- --------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--95.6%
- -----------------------------------------------------------------------
ALABAMA--28.9%
---------------------------------------------------------
$1,885,000 Alabama Municipal Electric Authority Power, 6.50% Revenue
Bonds, (Series A)/(MBIA Insured), 9/1/2005, (Prerefunded) AAA $ 2,050,654
---------------------------------------------------------
1,125,000 Auburn University, Housing & Dining, 5.20% Revenue Bonds,
(MBIA Insured), 6/1/2004 AAA 1,108,935
---------------------------------------------------------
1,000,000 Birmingham, AL, 7.75% Refunding GO UT Bonds, 10/1/2007 AA 1,086,710
---------------------------------------------------------
1,000,000 Birmingham, AL, Specialty Care Facilities, 5.00% Revenue
Refunding Bonds, (Series B)/(MBIA Insured), 6/1/2003 AAA 969,540
---------------------------------------------------------
1,000,000 Birmingham, AL, Water Works & Sewer Board, 6.25% Revenue
Bonds, 1/1/2008 AA 1,035,050
--------------------------------------------------------- -----------
Total 6,250,889
--------------------------------------------------------- -----------
FLORIDA--4.6%
---------------------------------------------------------
1,000,000 Homestead, FL, Special Insurance Assessment, 4.90%
Revenue Bonds, (MBIA Insured), 9/1/2000 AAA 999,930
--------------------------------------------------------- -----------
HAWAII--2.8%
---------------------------------------------------------
600,000 Hawaii County, HI, 6.30% Refunding GO Bonds, 5/15/1998 A-2 599,928
--------------------------------------------------------- -----------
ILLINOIS--5.3%
---------------------------------------------------------
1,200,000 Chicago, IL, School Financing Authority, 5.20% Refunding
GO Bonds, (Series A)/(FGIC Insured), 6/1/2006,
(Prerefunded) AAA 1,150,152
--------------------------------------------------------- -----------
MISSOURI--4.7%
---------------------------------------------------------
1,000,000 St. Louis County, MO, Public Facilities Corp. Lease
Revenue Bonds, 6.00%, (Series A)/(AMBAC Insured),
2/15/2008 AAA 1,024,890
--------------------------------------------------------- -----------
NEVADA--4.3%
---------------------------------------------------------
1,000,000 Las Vegas, NV, 5.00%, Refunding GO UT Bonds, (Series B)/
(MBIA Insured), 1/1/2008 AAA 929,660
--------------------------------------------------------- -----------
</TABLE>
THE STARBURST MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- --------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
NORTH CAROLINA--4.3%
---------------------------------------------------------
$ 850,000 Charlotte, NC, Water & Sewer, 6.90% GO Bonds, 10/1/2006
(Prerefunded) AA $ 940,576
--------------------------------------------------------- -----------
SOUTH CAROLINA--1.5%
---------------------------------------------------------
300,000 Columbia, SC, Waterworks & Sewer System, 6.30% Revenue
Refunding Bonds, 2/1/2000 AA 316,753
--------------------------------------------------------- -----------
TEXAS--21.2%
---------------------------------------------------------
1,000,000 Alief, TX, Independent School District, 5.875% Refunding
GO Bonds, 2/15/2005 AAA 1,027,280
---------------------------------------------------------
600,000 Carrollton, TX, Farmers Branch/Independent School
District, 6.75% GO Bonds, 2/15/2007, (Prerefunded) AAA 651,588
---------------------------------------------------------
500,000 Dallas, TX, 6.20% GO Bonds, 1/1/2003 AA 531,030
---------------------------------------------------------
1,000,000 Fort Worth, TX, 6.00% GO Bonds, 3/1/2007, (Prerefunded) AA 1,024,550
---------------------------------------------------------
500,000 Plano, TX, 5.60% Refunding GO Bonds, (AMBAC Insured),
9/1/2005 AAA 505,350
---------------------------------------------------------
800,000 Sabine River Authority, TX, 6.50% Revenue Refunding
Bonds, 12/1/2002, (Prerefunded) AA 859,472
--------------------------------------------------------- -----------
Total 4,599,270
--------------------------------------------------------- -----------
VIRGINIA--5.3%
---------------------------------------------------------
1,200,000 Virginia State Housing Development Authority, 5.45%
Refunding Bonds, (Series 1993E), 11/1/2007 AA+ 1,149,612
--------------------------------------------------------- -----------
</TABLE>
THE STARBURST MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
PRINCIPAL RATING:
AMOUNT MOODY'S
OR SHARES OR S&P* VALUE
- ---------- --------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
WASHINGTON--12.7%
---------------------------------------------------------
$1,000,000 Washington State Public Power Supply, 7.25% Revenue
Refunding Bonds, (Series B), 7/1/2015, (Prerefunded) AA $ 1,107,660
---------------------------------------------------------
1,470,000 Washington Suburban Sanitary District, 6.90% GO UT Bonds
(Second Series), 6/1/2009, (Prerefunded) AAA 1,635,140
--------------------------------------------------------- -----------
Total 2,742,800
--------------------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $20,792,032) 20,704,460
--------------------------------------------------------- -----------
MUTUAL FUND SHARES--3.2%
- -----------------------------------------------------------------------
SHORT-TERM TAX-FREE MONEY MARKET ISSUES
---------------------------------------------------------
693,704 Lehman Tax-Free Money Market Fund (at net asset value) 693,704
--------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $21,485,736) $21,398,164+
--------------------------------------------------------- -----------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings.
+ The cost of investments for federal tax purposes amounts to $21,485,736. The
net unrealized depreciation of investments on a federal tax basis amounts to
$87,572, which is comprised of $195,656 appreciation and $283,228 depreciation
at April 30, 1995.
Note: The categories of investments are shown as a percentage of net assets
($21,662,780) at April 30, 1995.
The following abbreviations are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
UT -- Unlimited Tax
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MUNICIPAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost
$21,485,736) $21,398,164
- --------------------------------------------------------------------------------
Income receivable 351,822
- --------------------------------------------------------------------------------
Deferred expenses 2,703
- -------------------------------------------------------------------------------- -----------
Total assets 21,752,689
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for shares redeemed $56,997
- ----------------------------------------------------------------------
Income distribution payable 23,862
- ----------------------------------------------------------------------
Accrued expenses 9,050
- ---------------------------------------------------------------------- -------
Total liabilities 89,909
- -------------------------------------------------------------------------------- -----------
NET ASSETS for 2,091,463 shares outstanding $21,662,780
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $22,048,751
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (87,572)
- --------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (298,399)
- -------------------------------------------------------------------------------- -----------
Total Net Assets $21,662,780
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Proceeds Per Share:
($21,662,780 / 2,091,463 shares outstanding) $10.36
- -------------------------------------------------------------------------------- -----------
Computation of Offering Price
Offering Price Per Share (100/97.5 of $10.36)* $10.63
- -------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------
Interest income $ 608,475
- ---------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 86,901
- ---------------------------------------------------------------------------
Administrative personnel and services fee 24,797
- ---------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 24,926
- ---------------------------------------------------------------------------
Directors'/Trustees' fees 1,309
- ---------------------------------------------------------------------------
Auditing fees 8,201
- ---------------------------------------------------------------------------
Legal fees 2,024
- ---------------------------------------------------------------------------
Portfolio accounting fees 23,487
- ---------------------------------------------------------------------------
Distribution services fee 28,967
- ---------------------------------------------------------------------------
Share registration costs 7,087
- ---------------------------------------------------------------------------
Printing and postage 5,359
- ---------------------------------------------------------------------------
Insurance premiums 3,340
- ---------------------------------------------------------------------------
Miscellaneous 1,355
- --------------------------------------------------------------------------- --------
Total expenses 217,753
- ---------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------------------
Waiver of investment advisory fee $ 86,901
- ----------------------------------------------------------------
Waiver of distribution services fee 18,899 105,800
- ---------------------------------------------------------------- -------- --------
Net expenses 111,953
- --------------------------------------------------------------------------------------- -----------
Net investment income 496,522
- --------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------
Net realized gain (loss) on investments (297,706)
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 917,943
- --------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments 620,237
- --------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 1,116,759
- --------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MUNICIPAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------
Net investment income $ 496,522 $ 1,489,299
- --------------------------------------------------------
Net realized gain (loss) on investments ($297,706 net
loss and $10,595 net gain, respectively, as computed
for federal income tax purposes) (297,706) 10,595
- --------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments 917,943 (2,429,104)
- -------------------------------------------------------- ------------- ---------------
Change in net assets resulting from operations 1,116,759 (929,210)
- -------------------------------------------------------- ------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------
Distributions from net investment income (496,522) (1,488,927)
- --------------------------------------------------------
Distributions from net realized gains (10,621) (278,081)
- -------------------------------------------------------- ------------- ---------------
Change in net assets resulting from distributions
to shareholders (507,143) (1,767,008)
- -------------------------------------------------------- ------------- ---------------
SHARE TRANSACTIONS
- --------------------------------------------------------
Proceeds from sale of shares 425,939 6,261,137
- --------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 350,674 1,232,194
- --------------------------------------------------------
Cost of shares redeemed (7,634,055) (19,852,255)
- -------------------------------------------------------- ------------- ---------------
Change in net assets resulting from share
transactions (6,857,442) (12,358,924)
- -------------------------------------------------------- ------------- ---------------
Change in net assets (6,247,826) (15,055,142)
- --------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------
Beginning of period 27,910,606 42,965,748
- -------------------------------------------------------- ------------- ---------------
End of period $ 21,662,780 $ 27,910,606
- -------------------------------------------------------- ------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 --------------------------------
(UNAUDITED) 1994 1993 1992*
-------------- ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.05 $10.82 $10.08 $9.90
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.22 0.44 0.47 0.46
- ------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.32 (0.70) 0.74 0.18
- ------------------------------------------------ ---------- ------ ------ ------
Total from investment operations 0.54 (0.26) 1.21 0.64
- ------------------------------------------------ ---------- ------ ------ ------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from net investment income (0.22) (0.44) (0.47) (0.46)
- ------------------------------------------------
Distributions from net realized gain on
investment transactions (0.01) (0.07) -- --
- ------------------------------------------------ ---------- ------ ------ ------
TOTAL DISTRIBUTIONS (0.23) (0.51) (0.47) (0.46)
- ------------------------------------------------ ---------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.36 $10.05 $10.82 $10.08
- ------------------------------------------------ ---------- ------ ------ ------
TOTAL RETURN(a) 5.33% (2.49%) 12.22% 6.60%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 0.97%(b) 0.75% 0.52% 0.77%(b)
- ------------------------------------------------
Net investment income 4.29%(b) 4.18% 4.41% 4.89%(b)
- ------------------------------------------------
Expense waiver/reimbursement(c) 0.91%(b) 0.89% 1.26% 1.25%(b)
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $21,663 $27,911 $42,966 $14,487
- ------------------------------------------------
Portfolio turnover rate 7% 18% 27% 48%
- ------------------------------------------------
</TABLE>
* Reflects operations for the period from November 20, 1991 (date of initial
public investment) to October 31, 1992.
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(b) Computed on an annualized basis.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE STARBURST MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Starburst 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 four diversified portfolios. The financial statements
included herein present only those of The Starburst Municipal Income Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue and any other factors or market data the
pricing service deems relevant in determining valuations for normal
institutional size trading units of debt securities. The independent
pricing service does not rely exclusively on quoted prices. 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 investment companies are valued at net
asset value.
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.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are
THE STARBURST MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
being amortized using the straight-line method not to exceed a period of
five years from the Fund's commencement date.
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>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31, 1994
- ------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Shares sold 41,936 593,444
- -------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 34,560 117,608
- -------------------------------------------------------
Shares redeemed (762,952) (1,903,129)
- ------------------------------------------------------- ------------ --------------
Net change resulting from share transactions (686,456) (1,192,077)
- ------------------------------------------------------- ------------ --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Compass Bank, the Fund's investment adviser, (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive all or a portion of its fee. The Adviser can modify or terminate
this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive all or a portion of its fee.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may incur distribution
expenses up to .25 of 1% of the average daily net assets of the Fund, annually,
to compensate FSC. The distributor may voluntarily choose to waive all or a
portion of its fee. The distributor can modify or terminate this voluntary
waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODY FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund for which it receives a fee. The fee is
based on the size, type, and number of accounts and transactions made by
shareholders.
THE STARBURST MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average net assets for the period plus,
out-of-pocket expenses.
Compass Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Fund are Officers and
Trustees or Directors of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1995, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES $1,556,377
- -------------------------------------------------------------------------------- ----------
SALES $8,387,069
- -------------------------------------------------------------------------------- ----------
</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue J. Christopher Donahue
Thomas G. Bigley President
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland Vice President
James E. Dowd Edward C. Gonzales
Lawrence D. Ellis, M.D. Vice President and Treasurer
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Vice President and Secretary
Peter E. Madden Jeffrey W. Sterling
Gregor F. Meyer Vice President and Assistant Treasurer
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Assistant Treasurer
Marjorie P. Smuts C. Grant Anderson
Assistant Secretary
</TABLE>
MUTUAL FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS, ARE NOT GUARANTEED BY ANY
BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN MUTUAL FUNDS INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN
PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS WHICH CONTAINS FACTS CONCERNING
ITS OBJECTIVE AND POLICIES, MANAGEMENT FEES, EXPENSES AND OTHER INFORMATION.
