UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-17f-2

Certificate of Accounting of Securities and Similar
Investments in the Custody of
Management Investment Companies

Pursuant to Rule 17f-2 [17 CFR 270.17f-2]

1. Investment Company Act File Number:     811-5762

Date examination completed:      September 30, 1997


2. State identification Number:

AL     AK     AZ     AR     CA     CO
CT     DE     DC     FL     GA     HI
ID     IL     IN     IA     KS     KY
LA     ME     MD     MA     MI     MN
MS     MO     MT     NE     NV     NH
NJ     NM     NY     NC     ND     OH
OK     OR     PA     RI     SC     SD
TN     TX     UT     VT     VA     WA
WV     WI     WY     PUERTO RICO
Other (specify):


3. Exact name of investment company as specified in registration statement:
Star Funds

4. Address of principal executive office (number, street, city, state,
zip code):
Federated Investors Tower, Pittsburgh,  PA  15222-3779

INSTRUCTIONS

This From must be completed by investment companies that have custody
of securities or similar investments.

Investment Company

1.	All items must be completed by the investment company.
2.	Give this Form to the independent public accountant who,
in compliance with Rule 17f-2 under the Act and applicable state law, examines
securities and similar investments in the custody of the investment company.

Accountant

3.	Submit this Form to the Securities and Exchange Commission and
appropriate state securities administrators when filing the certificate of
accounting required by Rule 17f-2 under the Act and applicable state law.
File the original and one copy with the Securities and Exchange Commission's
principal office in Washington, D.C., one copy with the regional office for
the region in which the investment company's principal business operations
are conducted, and one copy with the appropriate state of administrator(s),
if applicable.

THIS FROM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
SEC 2198 (11-91)




Management Statement Regarding Compliance with
Certain Provisions of the Investment Company Act of 1940


We, as members of management of the Star Funds (the "Funds"), the investment
company, and Star Bank, N.A., the custodian, are responsible for complying
with the requirements of subsections (b) and (c) of Rule 17f-2, "Custody
of Investments by Registered Management Investment Companies," of the
Investment Company Act of 1940.  We are also responsible for establishing
and maintaining an effective internal control structure over compliance
with those requirements.  We have performed an evaluation of the Funds'
compliance with the requirements of subsections (b) and (c) of Rule 17f-2
as of September 30, 1997 and from May 31, 1997 (date of the last examination)
through September 30, 1997.

Based on this evaluation, we assert that the Funds were in compliance
with those requirements of Rule 17f-2 of the Investment Company Act of
1940 as of September 30, 1997 and from May 31, 1997 through September 30,
1997, with respect to securities reflected in the investment account of the
Funds.



Star Funds                                     Star Bank, N.A.

By: /s/ Joseph S. Machi                        By: /s/ Daniel B. Benhase
Joseph S. Machi                                Daniel B. Benhase
Vice President and Assistant Treasurer         Executive Vice President


November 28, 1997





ARTHUR ANDERSEN LLP 
Report of Independent Public Accountants



To the Board of Trustees of
    the Star Funds:


We have examined management's assertion about the Star Funds' (the "Funds")
compliance with the requirements of subsections (b) and (c) of Rule 17f-2
under the Investment Company Act of 1940 (the "Act") as of September 30, 1997
included in the accompanying Management Statement Regarding Compliance with
Certain Provisions of the Investment Company Act of 1940.  The Funds
represents a Massachusetts business trust and includes the Star Treasury
Fund, Star Tax-Free Money Market Fund, Star Relative Value Fund, The Stellar
Fund, Star U.S. Government Income Fund, Star Capital Appreciation Fund, Star
Growth Equity Fund, Star Strategic Income Fund and Star Stellar Insured Tax
Free Bond Fund.  Management is responsible for the Funds' compliance with
the requirements of the Act.  Our responsibility is to express an opinion
on management's assertion about the Funds' compliance based on our examination.

Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly,
included examining, on a test basis, evidence about the Funds' compliance
with those requirements and performing such other procedures as we considered
necessary in the circumstances.  Included among our procedures were the
following tests performed as of September 30, 1997, and with respect to
agreement of security purchases and sales, for the period from May 31, 1997
(date of the last examination) through September 30, 1997, without prior
notice to management:

Confirmation of all securities held by institutions in book entry form
(the Federal Reserve Bank of Cleveland, Bankers Trust New York Corporation
and The Depository Trust Company);

Confirmation of all securities hypothecated, pledged, placed in escrow, or
out for transfer with brokers, pledgees, transfer agents, and/or remarketing
agents;

Reconciliation of all such securities to the books and records of the Funds
and Star Bank, N.A., the custodian;

Confirmation of all repurchase agreements with brokers/banks and agreement
of underlying collateral with Star Bank, N.A. records; and

Agreement of two (2) security purchases and two (2) security sales or
maturities for each fund identified above since our last report from the
books and records of the Funds to broker confirmations.

We believe that our examination provides a reasonable basis for our opinion.
Our examination does not provide a legal determination on the Funds'
compliance with specified requirements.

In our opinion, management's assertion that the Star Funds was in compliance
with the requirements of subsections (b) and (c) of Rule 17f-2 of the
Investment Company Act of 1940 as of September 30, 1997 is fairly stated, 
in all material respects.

This report is intended solely for the information and use of management of
the Star Funds and the Securities and Exchange Commission and should not be
used for any other purpose.


/s/ Arthur Andersen LLP

Cincinnati, Ohio
November 28, 1997