<PAGE>
[LOGO]
RSI Retirement Trust
Core Equity Fund
Value Equity Fund
Emerging Growth Equity Fund
International Equity Fund
Actively Managed Bond Fund
Intermediate-Term Bond Fund
Short-Term Investment Fund
Dedicated Bond Fund
1996
Broker/Dealer:
[LOGO]
RETIREMENT SYSTEM
Distributors Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
President's Message...................................................... 1
Investment Review........................................................ 2
Combined Financial Statements............................................ 19
Financial Statements of Investment Funds................................. 21
Core Equity Fund..................................................... 21
Value Equity Fund.................................................... 25
Emerging Growth Equity Fund.......................................... 29
International Equity Fund............................................ 35
Actively Managed Bond Fund........................................... 41
Intermediate-Term Bond Fund.......................................... 46
Short-Term Investment Fund........................................... 51
Notes to Financial Statements............................................ 54
Independent Auditor's Report............................................. 72
Officers, Consultants, Investment Managers and Custodians................ 73
Board of Trustees........................................................ 74
</TABLE>
[LOGO]
is a registered trademark of Retirement System Group Inc.
<PAGE>
PRESIDENT'S MESSAGE
To Our Unitholders:
The past year has seen a huge upswing in the strength of the
stock market. I am pleased to report that during this time, the
Trust's funds have also enjoyed solid performances. For
example, for the fiscal year ended September 30, 1996, all of
the Trust's equity funds achieved double digit returns, and
outperformed both their respective Lipper benchmarks and market
index benchmarks. (Please see the Investment Review section,
beginning on page two, for specific details.) Both bond funds
also outperformed their respective Lipper benchmarks.
The performance results of the Value Equity Fund--which
achieved a 21.58% return for fiscal year 1996--continue to be
especially gratifying, since, in an effort to improve the
Fund's performance, a new investment manager (Retirement System
Investors Inc.) was appointed as of April 1, 1995.
Investment management is arguably the single most important
retirement plan service an employer seeks, and for good reason.
Investment performance directly affects a plan's long-term
costs: for a defined benefit plan, the higher the rate of
return, the lower the plan sponsor's contributions; for a
defined contribution plan, investment performance has a direct
impact on each participant's account balance. In light of
this--and as a series mutual fund that invests the assets of
tax-qualified pension plans and IRAs exclusively--we are
understandably very proud of our investment returns.
Another positive development during the past fiscal year
has been the growth of assets under Trust management, which
have increased by $55 million, to $652 million at September 30,
1996.
On behalf of the Board of Trustees, I would like to thank
our unitholders for choosing RSI Retirement Trust to help meet
their retirement savings goals.
Sincerely,
[SIGNATURE]
William Dannecker
President and Trustee
November 15, 1996
1
<PAGE>
INVESTMENT REVIEW
CORE EQUITY FUND
The Core Equity Fund seeks capital appreciation over the long
term. The Fund invests in a broadly diversified group of
high-quality, medium-to-large companies which the manager,
Retirement System Investors Inc., believes to be reasonably
valued relative to their earnings growth potential.
MARKET ENVIRONMENT
Moderate economic growth, low inflation, benign interest rates,
heavy corporate stock repurchases and huge cash inflow by
mutual fund investors propelled the stock market in the fiscal
year ended September 30, 1996.
Corporate earnings and profit margin improvements benefited
from productivity gains from technological innovations,
downsizing of costs and the improved competitive position of
U.S. companies.
At the end of the reporting period, the market's valuation
at 16 times 1997 earnings estimates (i.e., price to earning
ratio) was moderately above past averages,
but within historical ranges.
The Core Equity Fund's above-market performance (see below)
was positively influenced by the Fund's focus and concentration
in large growth companies, which performed well when compared
to smaller growth or value issues. The Fund's largest market
sector holdings in capital goods, technology and consumer
staples enhanced its performance. Also, performance benefited
from the lower than market weighting in the weak performing
utilities, raw materials and consumer cyclical groups.
The major portfolio changes during the past year involved
increasing weightings in financials and reducing holdings in
utilities.
The Fund's diversification and stock selections reflect the
portfolio manager's focus on such dominant investment themes as
growing globalization of demand for goods, technological
innovations, productivity, life style enhancements and
demographic factors.
PERFORMANCE RESULTS
The Core Equity Fund produced a solid return of 21.11% for the
one-year period ended September 30, 1996, and outperformed the
S&P 500, which posted a return of 20.36% for the same one-year
period. The S&P 500 is an unmanaged representative index of the
broad equity market. (All market index results that appear in
this report are gross, since expenses are not applicable.) For
the five and
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
CORE EQUITY FUND VS S&P 500
FOR 10-YEAR PERIOD ENDED 9/30/96
CORE EQUITY S&P 500
<S> <C> <C>
Return 13.94% 14.96%
Risk 13.18% 13.81%
THIS CHART COMPARES THE HISTORICAL AVERAGE ANNUAL
TOTAL RETURN AND THE RISK (AS MEASURED BY THE STANDARD
DEVIATION) OF THE CORE EQUITY FUND AND THE
STANDARD & POOR'S 500 INDEX FOR THE TEN-YEAR
PERIOD ENDED 9/30/96. THE S&P 500 INDEX IS AN
UNMANAGED INDEX OF COMMON STOCKS WIDELY USED
AS A MEASURE OF THE BROAD EQUITY MARKET, AND IS A
REPRESENTATIVE MARKET INDEX FOR THIS FUND.
STANDARD DEVIATION IS A STATISTICAL MEASURE OF VOL-
ATILITY OFTEN USED AS A MEASURE OF RISK IN GENERAL,
THE GREATER THE STANDARD DEVIATION, THE GREATER THE
TENDENCY TO VARY FROM THE AVERAGE ANNUAL TOTAL
RETURN. BY COMPARING THE MAGNITUDE OF THE STAN-
DARD DEVIATIONS, THE RELATIVE VOLATILITY OF EACH
INVESTMENT CAN BE DETERMINED. A LOWER STANDARD
DEVIATION REFLECTS LOWER VOLATILITY.
</TABLE>
2
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ten years ended September 30, 1996, the Core Fund produced an
average annual return of 15.37% and 13.94%, respectively, while
the S&P 500 posted an average annual return of 15.23% and
14.96% for these same two periods.
It should be noted that the Core Equity Fund's annualized
return for the ten years ended September 30, 1996, was achieved
while taking less risk (as measured by standard deviation) than
the S&P 500 (see chart on page two).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CORE EQUITY VS S&P 500
<S> <C> <C>
86 $10,000.00 $10,000.00
87 13,842.17 14,332.65
88 11,862.87 12,541.94
89 15,789.13 16,663.20
90 15,092.55 15,111.49
91 18,045.86 19,834.22
92 19,617.05 22,027.59
93 22,485.61 24,892.76
94 23,189.71 25,807.96
95 30,452.39 33,476.85
96 36,880.58 40,294.01
Core Equity: $36,881
S&P 500: $40,294
GROWTH OF $10,000
CORE EQUITY S&P 500
1 year $12,111 $12,036
5 year 20,437 20,315
10 year 36,881 40,294
CUMULATIVE RETURNS
1 year 21.11% 20.36%
5 year 104.37% 103.15%
10 year 268.81% 302.94%
AVERAGE ANNUAL RETURNS
1 year 21.21% 20.36%
5 year 15.37% 15.23%
10 year 13.94% 14.96%
</TABLE>
For the one-year period ended September 30, 1996, the
Fund's return of 21.11% was 387 basis points higher than the
17.24%
return of its Lipper benchmark, the Lipper Growth and Income
Funds Average, for the same period. This performance placed the
Core Equity Fund in the top 16% of Lipper's Growth and Income
Funds grouping of mutual funds. (The Fund ranked 78th out of
503 funds; rankings are based on total returns.) For the
longer-term periods of five and ten years ended September 30,
1996, the Fund's annualized returns of 15.37% and 13.94%
compared favorably with the Lipper benchmark annualized returns
of 13.79% and 12.81% for the same two periods. The ten year
performance results placed Core in the top 23% of its Lipper
grouping (28th out of 122 funds). Past performance is not a
guarantee of future results.
CORE EQUITY FUND VS LIPPER GROWTH AND INCOME FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
CORE EQUITY FUND(1) 21.11% 15.37% 13.94%
Lipper Growth & Income Funds Avg.(2) 17.24 13.79 12.81
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
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3
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VALUE EQUITY FUND
The Value Equity Fund seeks income and capital appreciation by
investing in a diversified portfolio of stocks with below
average price-to-earnings (P/E) ratios and above-average growth
prospects. The portfolio typically has a dividend yield that is
considerably higher than the market itself. The aim of the
portfolio manager, Retirement System Investors Inc., is to
produce above-market returns by choosing stocks whose current
prices do not adequately reflect their ability to grow earnings
and dividends over time. (Retirement System Investors Inc.
became the manager of this Fund effective April 1, 1995.)
MARKET ENVIRONMENT
For most of fiscal 1996, investors favored growth stocks over
traditional value issues, with the notable exceptions of
financial companies, such as banks and insurance companies, and
to a lesser extent, capital goods manufacturers. The technology
sector of the stock market, while volatile, was among the broad
market's strongest, due to fundamental company performance and
large investor capital inflows. Technology stocks are typically
high P/E, growth issues with more downside risk than value
stocks. For fiscal year 1996, the Russell 1000 Value Index, an
appropriate market benchmark for value managers, returned
17.95%, while the Russell 1000 Growth Index returned 21.40%.
During the middle months of the year, technology stocks
suffered as it became apparent that both the companies
themselves and investors had become too optimistic. For the
first group, this caused an over-capacity situation; for the
second group, a period of re-valuation--taking more realistic
prospects into account with the necessary marking down of
earnings expectations and stock prices. After a lackluster
start for fiscal year 1996 (with the exception of the strong
June quarter), economic growth was moderate but steady. This
slow, steady economic growth was accompanied by low inflation,
and was an excellent background for financial concerns, many of
which also benefited from internal restructuring and cost
cutting. Utility stocks suffered as utilities' traditional
character as regulated companies with fairly predictable
earnings and dependable dividends continued to change in the
face of on-going deregulation trends in both the electric
utility and telecommunications service industries, leading to a
more competitive environment with relative winners and losers.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
VALUE EQUITY FUND VS
RUSSELL 1000 VALUE INDEX
FOR 10-YEAR PERIOD ENDED 9/30/96
VALUE EQUITY RUSSELL 1000 VALUE
<S> <C> <C>
Return 11.09% 14.02%
Risk 15.64% 12.97%
THIS CHART COMPARES THE HISTORICAL AVERAGE ANNUAL
TOTAL RETURN AND THE RISK (AS MEASURED BY THE STAN-
DARD DEVIATION) OF THE VALUE EQUITY FUND AND THE
RUSSELL 1000 VALUE INDEX FOR THE TEN-YEAR PERIOD ENDED
9/30/96. THE RUSSELL 1000 VALUE INDEX IS A REPRESENTATIVE
MARKET INDEX FOR THIS FUND. SEE THE CORE EQUITY
FUND CHART (P. 4) FOR A DEFINITION OF STANDARD
DEVIATION.
</TABLE>
4
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As noted below, the Value Equity Fund returned 21.58% for
the year and compared favorably with the Russell 1000 Value
Index. The Fund's holdings in financial stocks such as money
center banks and insurers, aerospace/defense concerns,
industrial companies, and pharmaceutical manufacturers, all
contributed to the Fund's solid performance. The Fund's utility
holdings were a moderate drag on performance, as was exposure
to materials producers such as paper, aluminum and copper
companies. Individual stock selection appeared to play a part
in the Fund's outperformance--the Fund's top ten holdings at
fiscal year end, most of which the Fund held throughout fiscal
year 1996, returned an average 31.23% for the period.
PERFORMANCE RESULTS
For the one-year period ended September 30, 1996, the Value
Equity Fund returned 21.58%, outpacing the 17.95% return of the
Russell 1000 Value Index, an unmanaged representative index
reflecting the performance of approximately 650 stocks with a
less-than-average growth orientation. For the five- and
ten-year periods ended September 30, 1996, the Fund produced
annual returns of 13.05% and 11.09%, respectively, compared to
annualized returns of 16.08% and 14.02% for the Russell 1000
Value Index. The Fund's risk profile, as measured by standard
deviation, versus the market (the Russell 1000 Value) is
reflected in the chart on page four.
The Value Equity Fund's return of 21.58% for the one-year
period ended September 30, 1996 outperformed by 434 basis
points the 17.24% return of the Lipper Growth and Income Funds
Average, a representative performance benchmark, for the same
period. The Value Fund was in the top 13% of its Lipper
grouping with this performance (62nd out of 503 funds; rankings
are based on total returns). For the five years ended September
30, 1996, the Fund's annualized return was 13.05%, while the
Lipper benchmark returned 13.79% per annum for the period. For
the recent ten-year period, the Fund returned 11.09% per year
versus the 12.81% annualized return for the Lipper benchmark.
Past performance is not a guarantee of future results.
5
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE EQUITY FUND VS RUSSELL 1000 VALUE INDEX
<S> <C> <C>
86 $10,000.00 $10,000.0
87 13,135.29 13,278.75
88 12,125.98 12,563.73
89 15,110.95 16,130.44
90 11,464.95 13,667.84
91 15,498.25 17,622.29
92 16,551.67 19,806.54
93 19,105.85 24,829.92
94 19,517.11 24,659.87
95 23,543.19 31,487.89
96 28,622.69 37,139.68
Value Equity: $28,623
Russell 1000: $37,140
GROWTH OF $10,000
VALUE EQUITY RUSSELL 1000
1 year $12,158 $11,795
5 year 18,468 21,075
10 year 28,623 37,140
CUMULATIVE RETURNS
1 year 21.58% 17.95%
5 year 84.68% 110.75%
10 year 186.23% 271.40%
AVERAGE ANNUAL RETURNS
1 year 21.58% 17.95%
5 year 13.05% 16.08%
10 year 11.09% 14.02%
</TABLE>
VALUE EQUITY FUND VS LIPPER GROWTH
AND INCOME FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
VALUE EQUITY FUND(1) 21.58% 13.05% 11.09%
Lipper Growth & Income Funds Avg.(2) 17.24 13.79 12.81
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
EMERGING GROWTH EQUITY FUND
The Emerging Growth Equity Fund, a fund that has above-average
volatility, seeks capital appreciation through investment in
quality growth stocks of smaller companies--those in the $50
million to $750 million capitalization range at time of
purchase.
MARKET ENVIRONMENT
For the one-year period ended September 30, 1996, economic
growth, as measured by the Gross Domestic Product ("GDP"),
started in a lackluster way at 0.5%, annualized for the fourth
quarter, 1995. During the next two quarters, however, the
economy gained momentum (GDP growing at 2.3%, annualized, and
4.7%, annualized, respectively), but reverted to slow growth
during the most recent quarter. The domestic equity markets
during the period showed respectable double digit returns as
corporate earnings growth continued to show solid gains and
inflation remained rather stable (3% level for this 12-month
period). This occurred even though interest rates encountered a
high level of volatility, as the underlying strength of the
economy was in question for much of 1996.
6
<PAGE>
Corporate earnings benefited
from productivity gains and
technological innovations,
downsizing of costs and the
improved competitive position of
U.S. companies. In such an
environment, investor confidence
remained very strong, and this
was a period in which large
capitalization growth stocks and
cyclically oriented issues, for
the most part, turned in the
best results for the year. Small
capitalization companies (as
represented by the Russell 2000
Index, a representative index
for this grouping) produced a
return of 13.13% for the one
year ended September 30, 1996.
(Most of the return was
forthcoming for the nine months
ended June 30, 1996. The recent
quarter return of 0.34% was
significantly influenced by the
magnitude of the stock market
correction in July, when the
Russell 2000 Index declined
8.73%, about double that of the
broad equity market). Although a
respectable result for this
index, its return was 723 basis
points under the 20.36% return
of the S&P 500, the broad U.S.
equity market index. (For fiscal
year 1995, the Russell 2000
Index returned 23.36%, but also
trailed the S&P 500 return of
29.72% by 636 basis points).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
EMERGING GROWTH EQUITY FUND VS
RUSSELL 2000 INDEX
FOR 10-YEAR PERIOD ENDED 9/30/96
EMERGING GROWTH RUSSELL 2000
<S> <C> <C>
Return 16.03% 11.91%
Risk 21.79% 19.97%
THIS CHART COMPARES THE HISTORICAL AVERAGE ANNUAL
TOTAL RETURN AND THE RISK (AS MEASURED BY THE STAN-
DARD DEVIATION) OF THE EMERGING GROWTH EQUITY
FUND AND THE RUSSELL 2000 INDEX FOR THE TEN-YEAR PERIOD
ENDED 9/30/96. THE RUSSELL 2000 INDEX IS A REPRESENTA-
TIVE MARKET INDEX FOR THIS FUND. SEE THE CORE
EQUITY FUND CHART (P. 4) FOR A DEFINITION OF STAN-
DARD DEVIATION.
</TABLE>
The Emerging Growth Equity Fund continued to be managed by
two investment managers (under sub-advisory agreements with
Retirement System Investors Inc.). As of September 30, 1996,
Friess Associates, Inc. ("Friess") was managing 55% of the
assets of the Fund and The Putnam Advisory Company, Inc.
("Putnam") was managing the remaining 45%.
Friess is a smaller market capitalization, aggressive
growth-oriented manager. At the start of the year, Friess
maintained over 81% of portfolio assets concentrated in the
consumer staples, technology and capital goods sectors of the
market. Concentrations shifted away from technology during the
year ended September 30, 1996, and toward energy and consumer
cyclicals. At September 30, 1996, the portion of the Fund's
portfolio managed by Friess held 74 stocks.
Friess turned in another strong result for fiscal year
1996, with a gross return of 20.86%, or 7.73 percentage points
higher than the Russell 2000 Index. (For fiscal year 1995,
Friess' gross return of 58.30% was 3,494 basis points higher
than the return of the Russell 2000 Index). Maintaining
strategic locations in key geographic areas in the U.S.
facilitates Friess's analysts in making direct contact with
company managements, as well as with their customers, suppliers
and competitors. This enables the analysts to identify those
companies with dramatically positive sales and
7
<PAGE>
earnings growth, strong order flow, and important market share
growth trends, which are not always well understood by the
investment market place in general. During the year, the
manager dramatically increased exposure to oil service,
apparel, restaurants and retailing, generating positive
investment returns.
Putnam is a more conservative emerging growth company
manager than Friess. It looks for superior achieving companies
(that are reasonably priced) by evaluating the fundamental
criteria, such as rapidly growing earnings, above-average
return on equity, and low debt to total capitalization. The
manager's diversified approach and large number of holdings
aided the portfolio, as many of the stocks held, met or
exceeded earnings and growth expectations. The consumer and
business services sector was the most consistent positive
contributor to performance throughout the fiscal year. Within
this broad-based sector, radio, outdoor advertising,
teleservices and temporary staffing were the leaders.
Technology holdings were gradually reduced throughout the year,
with many of the current holdings being information technology
consulting companies, which are higher-confidence, less
volatile growth technology companies. (Putnam's gross return
for its portion of the Fund for fiscal year 1996 was
exceptional, at 43.37%, versus 38.08% for fiscal year 1995. In
both years, Putnam significantly outperformed the market).
At the end of the fiscal year, the top three sectors for
Putnam were consumer cyclicals, consumer staples and
technology. (Friess also had major concentrations in these
sectors at fiscal year end.) On September 30, 1996, the portion
of the Fund's portfolio managed by Putnam held 171 stocks, of
which only seven overlapped with the Friess holdings.
Accordingly, the Fund continues to reflect a highly diversified
position (a situation that has prevailed for the past six years
that these two advisors have managed the Fund).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING GROWTH EQUITY FUND VS RUSSELL 2000 INDEX
<S> <C> <C>
86 $10,000.00 $10
87 12,009.16 12,939.58
88 10,981.68 11,540.71
89 12,670.16 14,020.46
90 9,875.24 10,213.44
91 15,396.67 14,817.85
92 16,003.57 16,142.28
93 23,431.44 21,494.36
94 23,721.70 22,069.29
95 34,685.39 27,225.69
96 44,244.00 30,800.54
Emerging Growth: $44,244
Russell 2000: $30,801
GROWTH OF $10,000
EMERGING GROWTH EQUITY RUSSELL 2000
1 year $12,756 $11,313
5 year 28,736 20,786
10 year 44,244 30,801
CUMULATIVE RETURNS
1 year 27.56% 13.13%
5 year 187.36% 107.86%
10 year 342.44% 208.01%
AVERAGE ANNUAL RETURNS
1 year 27.56% 13.13%
5 year 23.51% 15.76%
10 year 16.03% 11.91%
</TABLE>
PERFORMANCE RESULTS
The Emerging Growth Equity Fund
achieved a return of 27.56% for
the one-year period
ended September 30, 1996, nearly 15 percentage points higher
than the 13.13% return for the Russell 2000, a representative
index that reflects the performance of
8
<PAGE>
2,000 small company securities. Over the longer term (five and
ten years ended September 30, 1996), the Fund also outperformed
the Russell 2000 Index, achieving an average annual return of
23.51% and 16.03% per year, respectively, compared to the
15.76% and 11.91% return per year for the Russell 2000 Index.
The Fund's risk profile (as measured by standard deviation)
versus the market (the Russell 2000 index) is reflected in the
chart on page seven.
The Emerging Growth Fund has also maintained a performance
advantage over its benchmark, the Lipper Small Company Growth
Funds Average. For the one-year period ended September 30,
1996, the Emerging Growth Fund produced a return of 27.56%,
outpacing by more than nine percentage points the Lipper Small
Company Growth Funds Average return of 18.40%. This return
placed the Emerging Growth Fund in the top 17% of mutual funds
in the Lipper Small Company Growth Funds grouping. (The Fund
ranked 56th out of 349 funds; rankings are based on total
returns.) Past performance is not a guarantee of future
results.
The Fund's five-year return of 23.51%, annualized,
outperformed its Lipper benchmark by 643 basis points and
ranked in the top 9% of the Lipper Small Company Growth Funds
grouping (8th out of 94 funds). For the longer term (ten years
ended September 30, 1996), the Emerging Growth Equity Fund,
with an annualized return of 16.03%, reflected a performance
advantage versus the 14.67% per year return of the Lipper
benchmark. This return placed the Fund in the top 29% of its
Lipper grouping for the same time period.
EMERGING GROWTH EQUITY FUNDS VS LIPPER SMALL COMPANY GROWTH
FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
EMERGING GROWTH EQUITY FUND(1) 27.56% 23.51% 16.03%
Lipper Small Company Growth Funds Avg.(2) 18.40 17.08 14.67
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
INTERNATIONAL EQUITY FUND
The International Equity Fund seeks capital appreciation over
time by investing in stocks that are headquartered in foreign
countries, in order to take advantage of opportunities outside
the U.S. capital markets. While holdings are principally
concentrated in the larger markets abroad (including small
capitalization companies), some investments are also made in
emerging markets. The portfolio manager, Morgan Grenfell
Investment Services Ltd. (Morgan Grenfell), looks for companies
whose current prices, in their view, do not reflect their true
earnings potential, and for stocks that are misperceived by
investors, and therefore, are selling at undervalued prices.
(Morgan Grenfell manages under a sub-advisory agreement with
Retirement System Investors Inc.)
9
<PAGE>
MARKET ENVIRONMENT
A background of benign inflation, stable to low interest rates
and continuing improvements in productivity and corporate
profits allowed international markets to prosper in the year
ended September 30, 1996. Most posted positive returns,
particularly when measured in local currency. Returns in U.S.
dollar terms were lower as the dollar strengthened, depressing,
for example, the local currency return of 19.1% in Europe to
14.7%. The impact of this strengthening was most clearly
seen in Japan, where the local yen return was 13.5%, but only
0.5% in U.S. dollars. For fiscal year 1996, the non-U.S. stock
markets, as measured by the MSCI EAFE Index, returned 8.61%
versus the S&P 500 return of 20.36%. (The situation was similar
in fiscal 1995, when the MSCI EAFE Index was up 5.80%, while
the S&P returned 29.72%.)
In contrast to the previous year, the emerging markets of
Latin America produced good returns despite suffering further
currency devaluation. Mexico returned in excess of 13% and
Brazil over 17%, both returns in U.S. dollars. The markets of
Asia were mixed as questions were raised about the
competitiveness of countries where currencies, in many cases,
are pegged to the U.S. dollar. Malaysia was an exception,
rising by 17%, but the Korean index returned -31% over the
period. Overall, as an equity class, the emerging markets index
(the MSCI Emerging Markets Free Index) returned 5.2%, and would
have detracted from overall portfolio returns.
The Fund's portfolio manager maintained the strategy of the
previous year-- remaining underweight in Japan (33% vs. the
market
weighting of 40%), but overweight in the other established
Asian markets, particularly Hong Kong (6% vs. 3%). Selective
investments in the emerging markets of Asia and South America
were increased in the first quarter, 1996, and a number of
quoted smaller capitalization issues were held during the
period. As the dollar strengthened, the European and yen hedges
which had been in place throughout 1995 were progressively
removed during the year, so that the portfolio was no longer
hedged by June 30th. This strategy also contributed to the
overall performance results achieved. (Morgan Grenfell finished
the year 585 basis points ahead of the Index, with a gross
return of 14.46% for the International Equity Fund.)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
INTERNATIONAL EQUITY FUND VS
MSCI EAFE
FOR 10-YEAR PERIOD ENDED 9/30/96
INTERNATIONAL EQUITY MSCI EAFE
<S> <C> <C>
Return 8.11% 8.67%
Risk 13.10% 17.20%
THIS CHART COMPARES THE HISTORICAL AVERAGE
ANNUAL TOTAL RETURN AND THE RISK (AS MEASURED BY
THE STANDARD DEVIATION) OF THE INTERNATIONAL
EQUITY FUND AND THE MSCI EAFE FOR THE TEN-YEAR
PERIOD ENDED 9/30/96. THE MSCI EAFE IS A REPRE-
SENTATIVE MARKET INDEX FOR THIS FUND. SEE THE
CORE EQUITY FUND CHART (P. 4) FOR A DEFINITION OF
STANDARD DEVIATION.
</TABLE>
10
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND VS MSCI EAFE
<S> <C> <C>
86 $10,000.00 $10,000.00
87 14,050.69 14,486.76
88 12,003.83 14,365.47
89 14,361.55 17,568.74
90 12,200.32 12,718.21
91 14,104.36 15,503.70
92 13,627.14 14,400.65
93 16,562.74 18,196.04
94 18,355.91 19,977.74
95 19,401.93 21,136.87
96 21,812.11 22,957.45
International Equity: $21,812
MSCI EAFE: $22,957
GROWTH OF $10,000
INTERNATIONAL EQUITY MSCI EAFE
1 year $11,242 $10,861
5 year 15,465 14,808
10 year 21,812 22,957
CUMULATIVE RETURNS
1 year 12.42% 8.61%
5 year 54.65% 48.08%
10 year 118.12% 129.57%
AVERAGE ANNUAL RETURNS
1 year 12.42% 8.61%
5 year 9.11% 8.17%
10 year 8.11% 8.67%
</TABLE>
PERFORMANCE RESULTS
For the one-year period ended
September 30, 1996, the
International Equity Fund
returned
12.42%, outpacing the MSCI EAFE Index return of 8.61%. For the
recent five-year period, at 9.11% annualized, the Fund
outperformed the EAFE Index, which returned 8.17% per annum for
the period. For the ten years ended September 30, 1996, the
International Fund produced a return of 8.11%, compared to the
MSCI EAFE Index per year return of 8.67%. During this period,
the Fund had a much lower risk exposure, as measured by
standard deviation, than the MSCI EAFE Index (see chart on page
10).
The International Equity Fund's return of 12.42% for the
one-year period ended September 30, 1996 outpaced by more than
three percentage points the 9.36% return of the Lipper
International Funds Average, the Fund's benchmark. This one-
year return ranked the Fund in the top 22% of its Lipper
grouping (69th out of 319 funds; rankings are based on total
return). For the trailing five- and ten-year periods ended
September 30, 1996, the Fund returned 9.11% and 8.11% per
annum, respectively, versus an annualized return of 9.67% and
10.11%, respectively, for the Lipper benchmark. Past
performance is not a guarantee of future results.
INTERNATIONAL EQUITY FUND VS LIPPER INTERNATIONAL FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
INTERNATIONAL EQUITY FUND(1) 12.42% 9.11% 8.11%
Lipper International Funds Avg.(2) 9.36 9.67 10.11
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
11
<PAGE>
ACTIVELY MANAGED BOND FUND
The Actively Managed Bond Fund invests in high-quality,
fixed-income securities (bonds and other debt securities) with
maturities of up to 30 years. The Fund has been managed by
Retirement System Investors Inc. exclusively since August 2,
1993.
MARKET ENVIRONMENT
The environment for fixed-income investors became less
favorable during the fiscal year ended September 30, 1996, and
interest rates in the intermediate and longer maturities rose
to end the year at higher levels. Last year's bond market rally
continued through the final quarter of 1995, but was reversed
early in 1996 when investors perceived that the economy was
regaining strength and that Congress' plans to reduce both
government spending and the budget deficit would be
unsuccessful. The 30-year Treasury ended the September 1996
fiscal year at 6.9% versus 6.5% the year before; the ten-year
Treasury rose to 6.7% from 6.2%; the five year Treasury rose to
6.5% from 6.0%; and the two year Treasury increased to 6.1%
from 5.8%. Interest rates were volatile during the year and
ranged from lows in January of 5.95% for the 30-year Treasury
and 5.52% for the ten-year Treasury, to highs in July of 7.19%
for the Bond and 7.06% for the Note.
The performance of fixed-income investments varied
substantially with duration in fiscal 1996. Rising rates and a
steepening yield curve reduced prices and total return as
investors extended out on the curve. The yield spread between
the three-month Treasury bill and the 30-year bond widened to
176 basis points at the end
of fiscal 1996, from 109 basis
points the year before. Short
interest rates moved lower in
the last quarter of 1995 and
early 1996, as the Federal
Reserve cut the Fed Funds' rate
in several steps to 5.25%, where
it has held since January.
Within fixed-income sectors,
long duration Governments and
non-callable corporates
underperformed mortgages and
other callable issues in fiscal
1996.
The Actively Managed Bond
Fund began fiscal 1996 with a
duration of 4.6 years, which was
gradually raised starting in
April to 5.3 years at September
30, 1996. The Lehman Brothers
Aggregate Bond Index had a
modified duration of 4.7 years
at the end of fiscal 1996.
Investment changes during the
year primarily consisted of
buying Treasury notes and
discount callable Federal agency
issues maturing in eight to ten
years, at yields of 55 to 70
basis points over the comparable
Treasury.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
ACTIVELY MANAGED BOND FUND VS
LEHMAN BROTHERS AGGREGATE BOND INDEX
FOR 10-YEAR PERIOD ENDED 9/30/96
ACTIVELY MANAGED LEHMAN BROS.
<S> <C> <C>
Return 7.60% 8.49%
Risk 5.52% 5.10%
THIS CHART COMPARES THE HISTORICAL AVERAGE ANNUAL
TOTAL RETURN AND THE RISK (AS MEASURED BY THE STAN-
DARD DEVIATION) OF THE ACTIVELY MANAGED BOND
FUND AND THE LEHMAN BROS. AGGREGATE BOND INDEX
FOR THE TEN-YEAR PERIOD ENDED 9/30/96. LEHMAN
BROS. IS A REPRESENTATIVE MARKET INDEX FOR THIS
FUND. SEE THE CORE EQUITY FUND CHART (P. 4) FOR A
DEFINITION OF STANDARD DEVIATION.
</TABLE>
12
<PAGE>
The Fund maintained high quality, with 48% in U.S.
Treasuries, 18% in Federal agency notes and bonds, 13% in
Federal agency mortgage pass thrus, 16% in agency
collateralized mortgage obligation PACs, 4% in corporates, and
1% in cash, as of fiscal year end. All Fund holdings must have
a quality rating of "A" or better.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ACTIVELY MANAGED BOND FUND VS LEHMAN BROTHERS AGGREGATE BOND INDEX
<S> <C> <C>
86 $10,000.00
87 9,939.68 10,026.15
88 10,951.74 11,359.05
89 11,876.68 12,637.26
90 12,456.46 13,591.66
91 14,685.65 15,765.84
92 16,597.35 17,747.19
93 18,529.32 19,519.45
94 17,603.87 18,889.75
95 19,981.67 21,542.22
96 20,799.05 22,596.41
Actively Managed: $20,799
Lehman Bros. Index: $22,596
GROWTH OF $10,000
ACTIVELY MANAGED BOND FUND LB AGG. BOND INDEX
1 year $10,409 $10,489
5 year 14,163 14,333
10 year 20,799 22,596
CUMULATIVE RETURNS
1 year 4.09% 4.89%
5 year 41.63% 43.33%
10 year 107.99% 125.96%
AVERAGE ANNUAL RETURNS
1 year 4.09% 4.89%
5 year 7.21% 7.46%
10 year 7.60% 8.49%
</TABLE>
PERFORMANCE RESULTS
The Actively Managed Bond Fund
posted a return of 4.09% for the
one-year period
ended September 30, 1996. The Lehman Brothers Aggregate Bond
Index, a representative market index, achieved a return of
4.89% for the same period. For the recent five-year period, the
Fund's annualized return was 7.21%, which was within 25 basis
points of the market index return of 7.46% per annum. Over the
longer term (ten years ended September 30, 1996), the Fund had
a return of 7.60% per year, versus the 8.49% annualized return
of the Lehman Brothers Aggregate Bond Index. During this
ten-year period, the Fund's risk profile, as measured by
standard deviation, was 8% greater than that of the market
index (see chart on page 12).
The Actively Managed Bond Fund outperformed its Lipper
benchmark, the U.S. Government Bond Funds Average, for the
one-year period ended September 30, 1996, with a return of
4.09% compared to the 3.24% return of the benchmark. With this
return, the Fund achieved a top 24% ranking within its Lipper
grouping. (Rankings are based on total returns.) Over the
longer term (five and ten years ended September 30, 1996), the
Fund continued to outpace its Lipper benchmark, with annualized
returns of 7.21% and 7.60%, respectively, versus 6.34% and
7.04% per year returns for the Lipper benchmark. For both
periods, the Fund achieved a top 21% and top 24% ranking,
respectively, in the Lipper grouping. Past performance is not a
guarantee of future results.
13
<PAGE>
ACTIVELY MANAGED BOND FUND VS LIPPER U.S. GOVERNMENT BOND FUNDS
AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
ACTIVELY MANAGED BOND FUND(1) 4.09% 7.21% 7.60%
Lipper U.S. Government Bond Funds
Avg.(2) 3.24 6.34 7.04
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
INTERMEDIATE-TERM BOND FUND
The Intermediate-Term Bond Fund invests in high-quality,
fixed-income securities that mature within ten years or have
expected average lives of ten years or less. It is managed by
Retirement System Investors Inc.
MARKET ENVIRONMENT
The less favorable environment for fixed-income investors (as
discussed under the Actively Managed Bond Fund) also affected
the Intermediate-Term Bond Fund, but
to a smaller degree than the
Actively Managed Bond Fund,
because of the Intermediate
Fund's lower duration and
volatility. The duration of the
Fund held at around three years
during fiscal 1996, similar to
the modified duration of three
years for the Lehman Brothers
Government Intermediate Bond
Index, a representative market
proxy for the Fund.
The Intermediate-Term Bond
Fund maintained an emphasis on
high-quality, fixed-income
investments during the one-year
period covered by this report.
At the end of the year, 91% of
the holdings were in "AAA"
securities, including 32% in
U.S. Treasuries, 39% in agency
mortgage pass thrus and short
collateralized mortgage
obligation PACs and 20% in
Federal agency notes and bonds.
The remaining 9% was invested in
corporates. (The quality of
holdings is restricted to "A" or
better, and at least 65% of
holdings must be U.S. Government
or agency issues.)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
INTERMEDIATE-TERM BOND FUND VS
LEHMAN BROTHERS GOVERNMENT-
INTERMEDIATE BOND INDEX
FOR 10-YEAR PERIOD ENDED 9/30/96
INTERMEDIATE-TERM LEHMAN BROS.
<S> <C> <C>
Return 7.44% 7.73%
Risk 3.91% 4.04%
THIS CHART COMPARES THE HISTORICAL AVERAGE ANNUAL
TOTAL RETURN AND THE RISK (AS MEASURED BY THE STAN-
DARD DEVIATION) OF THE INTERMEDIATE-TERM BOND
FUND AND THE LEHMAN BROS. GOVERNMENT-INTER-
MEDIATE BOND INDEX FOR THE TEN-YEAR PERIOD ENDED
9/30/96. LEHMAN BROS. IS A REPRESENTATIVE MARKET
INDEX FOR THIS FUND. SEE THE CORE EQUITY FUND CHART
(P. 4) FOR A DEFINITION OF STANDARD DEVIATION.
</TABLE>
14
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERMEDIATE-TERM LEHMAN BROTHERS GOVERNMENT-
BOND FUND VS INTERMEDIATE BOND INDEX
<S> <C> <C>
86 $10,000.00 $10,000.00
87 10,249.83 10,151.21
88 11,311.59 11,229.96
89 12,303.96 12,310.24
90 13,359.24 13,365.05
91 15,191.76 15,181.34
92 16,926.37 17,072.87
93 18,150.38 18,378.56
94 17,765.69 18,102.77
95 19,584.23 20,022.29
96 20,493.49 21,043.85
Intermediate-Term Bond: $20,493
Lehman Brothers Index: $21,044
GROWTH OF $10,000
INTERMEDIATE-TERM BOND FUND LB GOV'T-INTER. BOND INDEX
1 year $10,464 $10,510
5 year 13,490 13,862
10 year 20,493 21,044
CUMULATIVE RETURNS
1 year 4.64% 5.10%
5 year 34.90% 38.62%
10 year 104.93% 110.44%
AVERAGE ANNUAL RETURNS
1 year 4.64% 5.10%
5 year 6.17% 6.75%
10 year 7.44% 7.73%
</TABLE>
PERFORMANCE RESULTS
The Intermediate-Term Bond Fund
posted a return of 4.64% for the
one-year period
ended September 30, 1996, versus the 5.10% return for the
Lehman Brothers Government-Intermediate Bond Index, a
representative market index. For the ten-year period ended
September 30, 1996, the Intermediate-Term Bond Fund achieved an
annual return of 7.44%, while the market index returned 7.73%
per year. Both the Fund and the market index had similar risk
profiles, as measured by standard deviation, during this period
(see chart on page 14).
For the one-year period ended September 30, 1996, the Fund
had a return of 4.64% versus 4.41% for the Lipper
Short-Intermediate (one to five years maturity) U.S. Government
Funds Average, the Fund's performance benchmark. For the recent
five- and ten-year periods, the Fund's annualized return of
6.17% and 7.44%, respectively, outperformed the Lipper
benchmark for both periods by 34 and 32 basis points,
respectively. Past performance is not a guarantee of future
results.
INTERMEDIATE-TERM BOND FUND VS LIPPER U.S. GOVERNMENT FUNDS
AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
INTERMEDIATE-TERM BOND FUND(1) 4.64% 6.17% 7.44%
Lipper Intermediate (5 to 10 years
maturity) U.S. Gov't. Funds
Avg.(2) 4.41 5.83 7.12
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
15
<PAGE>
SHORT-TERM INVESTMENT FUND
The Short-Term Investment Fund, managed by Retirement System
Investors Inc., invests in high-quality, cash equivalent-type
securities maturing in one year or less, and U.S. Government
instruments with maturities of up to two years. The portfolio's
maximum average maturity is one year.
MARKET ENVIRONMENT
Short-term interest rates fell in the last quarter of 1995 and
early 1996, as the Federal Reserve cut the Fed Funds' rate in
several steps to 5.25%. Since January, the Fed Funds' rate has
held at 5.25% and short rates have been relatively stable at
around that level. Consequently, the 90-day Treasury bill fell
from 5.41% at September 30, 1995 to 5.06% in January, 1996, and
rose slightly to 5.16% at September 30, 1996.
During the 12-months ended September 30, 1996, the
Short-Term Investment Fund's average maturity peaked at 112
days in April, 1996 (up from 78 days at September 30, 1995) and
declined thereafter to 67 days at fiscal year end. The Fund's
maturity benchmark, the Donoghue All-Taxable Money Fund
Average, began the fiscal year at 54 days and ended the fiscal
year at 51 days.
Short intersector yield spreads (e.g., one-month commercial
paper versus two-year Treasury note) widened from 10 basis
points on September 30, 1995 to 80 basis points in September
30, 1996. Most other intersector spreads also widened as the
yield curve steepened. Investment changes during the fiscal
year included increasing the average maturity through purchases
of discount Federal Agencies in the three-, six- and 12-month
maturity horizon to improve yield. U.S. Treasuries and
commercial paper holdings were reduced. The high quality of the
Fund was maintained, with 92% of holdings rated "AA" or better
at year end.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
SHORT-TERM INVESTMENT FUND VS
90-DAY U.S. TREASURY BILLS
FOR 10-YEAR PERIOD ENDED 9/30/96
SHORT-TERM INVESTMENT 90-DAY T-BILLS
<S> <C> <C>
Return 5.54% 5.61%
Risk 0.99% 0.81%
THIS CHART COMPARES THE HISTORICAL AVERAGE ANNUAL
TOTAL RETURN AND THE RISK (AS MEASURED BY THE STAN-
DARD DEVIATION) OF THE SHORT-TERM INVESTMENT
FUND AND THE 90-DAY U.S. TREASURY BILLS FOR THE
TEN-YEAR PERIOD ENDED 9/30/96. T-BILLS ARE A
REPRESENTATIVE MARKET INDEX FOR THIS FUND. SEE THE CORE
EQUITY FUND CHART (P. 4) FOR A DEFINITION OF STAN-
DARD DEVIATION.
</TABLE>
16
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SHORT-TERM 90-DAY
INVESTMENT FUND VS TREASURY BILLS
<S> <C> <C>
86 $10,000.00 $10,000.00
87 10,588.24 10,577.07
88 11,336.13 11,257.81
89 12,344.54 12,198.85
90 13,373.80 13,161.56
91 14,229.25 13,985.82
92 14,762.85 14,536.27
93 15,101.64 14,983.62
94 15,550.54 15,554.93
95 16,355.17 16,426.63
96 17,142.86 17,265.19
Short-Term: $17,143
90-Day T-Bills: $17,265
GROWTH OF $10,000
SHORT-TERM INVESTMENT 90-DAY TREASURY BILLS
1 year $10,482 $10,510
5 year 12,048 12,345
10 year 17,143 17,265
CUMULATIVE RETURNS
1 year 4.82% 5.10%
5 year 20.48% 23.45%
10 year 71.43% 72.65%
AVERAGE ANNUAL RETURNS
1 year 4.82% 5.10%
5 year 3.80% 4.30%
10 year 5.54% 5.61%
</TABLE>
PERFORMANCE RESULTS
For the one-year period ended
September 30, 1996, the
Short-Term Investment Fund
returned 4.82% versus the 5.05% for the Donoghue All-Taxable
Money Funds Average, an unmanaged index of money funds that
reflects performance after fees and expenses are taken out. The
90-Day U.S. Treasury Bill (an unmanaged index which provides a
representative proxy for the short-term fixed-income securities
market) returned 5.10% for this period.
The Fund's 5.54% annualized return for the ten-year period
ended September 30, 1996 was in line with the 5.58% per year
return of the Donoghue benchmark and the 5.61% annualized
return of 90-Day Treasury Bills for the same period. Both the
Fund and the 90-Day Treasury Bills had extremely low risk
profiles, as measured by standard deviation, during this period
(see chart on page 16). Past performance is not a guarantee of
future results.
SHORT-TERM INVESTMENT FUND VS DONOGHUE ALL TAXABLE MONEY FUNDS
AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENT FUND(1) 4.82% 3.80% 5.54%
Donoghue All Taxable Money Funds
Avg.(2) 5.05 4.05 5.58
</TABLE>
1. All performance results shown are net of management fees
and all related expenses.
2. Reported by the Donoghue Money Fund Reporting Service. The
performance results reflect an unmanaged index, and are
net, since expenses are applicable.
---------------------------------------------------------------
17
<PAGE>
DEDICATED BOND FUND
The Dedicated Bond Fund currently has no unitholders. However,
since the Fund remains open to investors, we are required to
provide investment information about the Fund.
The Fund may be used by employers to cover future
retirement benefits for a defined group of retirees by matching
plan assets to liabilities. The Fund seeks to achieve a target
rate of return for each employer's portfolio (i.e., the life of
the retiree liability) that is competitive with the long-term,
high-quality bond yields at the time the employer allocates
assets to the Fund. It provides a predictable cash flow which,
for this Fund, is more important than attempting to maximize
yield in the selection of fixed-income securities.
The following shows the historical performance of the Fund
through April 1992 (when the last investor withdrew from the
Fund), as compared to the Lehman Brothers Government/Corporate
Bond Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DEDICATED LEHMAN BROTHERS GOVERNMENT/
BOND FUND VS CORPORATE BOND INDEX
<S> <C> <C>
6/85 $10,000.00 $10,000.00
9/85 9,990.00 10,200.00
86 12,199.79 12,310.11
87 12,249.81 12,263.59
88 14,019.90 13,831.47
89 15,539.66 15,396.31
90 16,489.14 16,436.02
91 19,119.15 19,042.22
4/92 19,989.07 19,876.74
Dedicated Bond Fund: $19,989
Lehman Brothers Index: $19,887
GROWTH OF $10,000*
SHORT-TERM INVESTMENT 90-DAY TREASURY BILLS
1 year $11,080 $11,078
5 year 15,840 15,860
Inception** 19,989 19,877
CUMULATIVE RETURNS*
1 year 10.80% 10.78%
5 year 58.40% 58.60%
Inception** 99.90% 98.77%
AVERAGE ANNUAL RETURNS*
1 year 10.80% 10.78%
5 year 9.64% 9.66%
Inception** 10.67% 10.58%
* All periods ended 4/30/92
** Inception 7/1/85
</TABLE>
18
<PAGE>
COMBINED FINANCIAL STATEMENTS
RSI RETIREMENT TRUST
Combined Statement of Assets and Liabilities September 30,
1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$491,268,515)--Note 2(A) $648,801,967
Cash 1,056,947
Receivable for investments sold 1,934,829
Receivable for units sold 1,206,172
Dividends and interest receivable 3,514,532
Other assets 140,457
------------
656,654,904
LIABILITIES:
Options written (premiums received $72,005) $ 24,063
Payable for investments purchased 2,836,543
Payable for units redeemed 880,380
Payable to investment managers 264,222
Accrued expenses 598,224 4,603,432
----------- ------------
NET ASSETS--Note 5 $652,051,472
------------
------------
</TABLE>
Combined Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $18,576,202
Dividends (Net of foreign taxes of $37,905) 5,902,319
-----------
Total Income $ 24,478,521
Expenses:
Investment managers's fees--Note 3(A) 3,374,426
Shareholder servicing fees and expenses--Note 3(B) 2,694,465
Custodian fees and expenses 321,134
Legal and auditing fees 146,602
Consultant fees 69,265
Trustees' fees and expenses--Note 3(C) 162,008
Other 303,556
-----------
Total Expenses 7,071,456
Less fees paid indirectly--Note 4 (68,376)
Less expense reimbursement--Note 3 (105,450)
-----------
Net Expenses 6,897,630
------------
INVESTMENT INCOME--NET 17,580,891
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES--Note 4:
Net realized gain on:
Investments 33,381,963
Foreign Currency Transactions 649,097
-----------
34,031,060
-----------
Unrealized appreciation (depreciation) on investments
Investments 33,030,263
Foreign currency translations of other assets and
liabilities (191,808)
-----------
32,838,455
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES 66,869,515
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 84,450,406
------------
------------
</TABLE>
See Notes to Financial Statements
19
<PAGE>
RSI RETIREMENT TRUST (CONTINUED)
Combined Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
------------- -------------
<S> <C> <C>
OPERATIONS
Investment income--net $ 17,580,891 $ 18,238,984
Net realized gain on investments 34,031,060 19,805,975
Unrealized appreciation (depreciation) on investments 32,838,455 66,426,982
------------- -------------
Net increase in net assets resulting from operations 84,450,406 104,471,941
------------- -------------
CAPITAL TRANSACTIONS--Note 5
Value of units sold 91,183,749 91,722,398
Value of units redeemed (121,085,914) (108,767,059)
------------- -------------
Net (decrease) in net assets resulting from capital
transactions (29,902,165) (17,044,661)
------------- -------------
Net increase 54,548,241 87,427,280
NET ASSETS at beginning of year 597,503,231 510,075,951
------------- -------------
NET ASSETS at end of year $ 652,051,472 $ 597,503,231
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements
20
<PAGE>
FINANCIAL STATEMENTS OF INVESTMENT FUNDS
CORE EQUITY FUND
Statement of Investments September 30, 1996
--------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C> <C>
COMMON STOCKS 95.3%
AEROSPACE AND DEFENSE 5.1%
124,300 Lockheed Martin Corp. $ 11,202,538
------------
AUTOMOBILES 0.8%
62,562 Chrysler Corporation 1,790,837
------------
BANKING 3.6%
21,400 Bankamerica Corp. 1,757,475
30,488 Chase Manhattan Corp. 2,442,850
38,900 Citicorp 3,525,313
------------
7,725,638
------------
FINANCIAL SERVICES 2.0%
49,500 Morgan (J.P.) & Company
Inc. 4,399,313
------------
BUILDING PRODUCTS 2.8%
90,500 Armstrong World
Industries Inc. 5,644,937
22,000 Martin Marietta Material 470,250
------------
6,115,187
------------
CHEMICALS 1.7%
41,500 E.I. Du Pont De Nemours &
Company 3,662,375
------------
COMMERCIAL SERVICES 0.1%
2,900 Robert Half International 106,938
------------
DRUG AND HEALTH CARE 15.1%
333,400 Johnson & Johnson 17,086,750
174,700 Merck & Company Inc. 12,294,512
42,400 Pfizer Inc. 3,354,900
------------
32,736,162
------------
ELECTRONICS AND
ELECTRICAL 15.1%
25,400 Cisco Systems Inc.* 1,574,800
41,600 Electronic Data Systems
Corp. 2,553,200
57,900 Emerson Electric Company 5,218,237
105,200 General Electric Company 9,573,200
84,800 Hewlett Packard Corp. 4,134,000
88,200 Intel Corp. 8,412,075
28,700 Motorola Inc. 1,481,638
------------
32,947,150
------------
ENERGY 9.5%
40,400 Amoco Corp. 2,848,200
138,000 Dresser Industries Inc. 4,105,500
2,500 Exxon Corp. 208,125
46,000 Royal Dutch Petroleum
Company 7,181,750
68,100 Texaco Inc. 6,265,200
------------
20,608,775
------------
</TABLE>
See Notes to Financial Statements 21
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1996
-----------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C> <C>
ENGINEERING AND
CONSTRUCTION 3.7%
131,400 Fluor Corp. $ 8,081,100
------------
FINANCIAL SERVICES 5.3%
310,200 Federal National Mortgage
Association 10,818,225
21,000 Sunamerica, Inc. 724,500
------------
11,542,725
------------
FOOD AND SERVICES 0.1%
4,800 Dole Food Company 201,600
------------
HOUSEHOLD PRODUCTS 2.4%
1,000 Black & Decker Corp. 41,500
53,100 Procter & Gamble Company 5,177,249
------------
5,218,749
------------
INSURANCE 1.8%
64,400 Allstate Corp. 3,171,700
12,900 Travelers Group, Inc. 633,713
------------
3,805,413
------------
MACHINERY AND ENGINEERING 1.8%
8,200 Cincinnati Milacron Inc. 154,775
12,900 Deere & Company 541,799
66,600 Ingersoll-Rand Company 3,163,500
------------
3,860,074
------------
METALS AND MINING 1.2%
23,000 Phelps Dodge Corp. 1,474,875
14,100 Potash Corp. of
Saskatchewan 1,031,063
------------
2,505,938
------------
OFFICE AND BUSINESS
EQUIPMENT 2.8%
9,200 International Business
Machines Corp. 1,145,400
91,700 Xerox Corp. 4,917,413
------------
6,062,813
------------
OTHER 3.5%
76,500 Allied Signal Inc. 5,039,438
29,700 Philip Morris Companies
Inc. 2,665,575
------------
7,705,013
------------
SOFTWARE PRODUCTS 7.7%
2,800 3Com Corp.* 167,999
18,050 Computer Associates
International, Inc. 1,078,488
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C> <C>
120,000 Informix Corp.* $ 3,345,000
22,300 Microsoft Corp.* 2,938,025
214,200 Oracle Systems Corp.* 9,103,500
700 Parametric Technology
Corp.* 34,563
3,600 Structural Dynamics
Research* 85,950
1,800 Sun Microsystems Inc. 111,600
200 U.S. Robotics Corp. 12,925
------------
16,878,050
------------
TELECOMMUNICATIONS 9.2%
200 ADC Telecommunications* 12,750
154,100 American Telephone &
Telegraph Corp. 5,817,275
114,300 DSC Communications Corp.* 2,871,788
193,700 GTE Corp. 7,457,450
51,741 Lucent Technologies Inc. 2,373,634
21,000 Tellabs Inc.* 1,480,500
------------
20,013,397
------------
Total Common Stocks (Cost $90,523,514) 207,169,785
------------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT 4.3%
$9,411,146 Bear Stearns & Co. Inc.
Dated 9/30/96 5.60% due
10/01/1996.
Collateralized by
29,370,000 United States
Treasury Strips due
08/15/2012 (Value
$9,600,465.60) 9,411,146
------------
Total Investments (Cost
$99,934,660) 99.6% 216,580,931
------------
<CAPTION>
# OF
CONTRACTS
- ----------
<C> <S> <C> <C>
STOCK OPTIONS WRITTEN
150 American Telephone &
Telegraph Corp. (938)
50 Federal National Mortgage
Association (8,125)
60 Johnson & Johnson (10,500)
120 Johnson & Johnson (4,500)
------------
Total (Premiums Received $72,005) (24,063)
------------
Other Assets, Less Liabilities 0.4% 799,464
------ ------------
Net Assets 100.0% $217,356,332
------ ------------
------ ------------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 22
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$99,934,660)--Note 2(A) $216,580,931
Receivable for units sold 456,158
Dividends and interest receivable 561,709
Other assets 33,768
------------
217,632,566
LIABILITIES:
Options written (premiums received $72,005) $ 24,063
Payable for investments purchased 9,600
Payable for units redeemed 59,541
Payable to investment managers 89,925
Accrued expenses 93,105 276,234
---------- ------------
NET ASSETS at value, applicable to 3,842,487 outstanding
units of beneficial interest--Note 5 $217,356,332
------------
------------
NET ASSET VALUE offering and redemption price per unit
($217,356,332 divided by 3,842,487 units) $ 56.57
------------
------------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $3,963,983
Interest 768,229
----------
Total Income $ 4,732,212
Expenses:
Investment manager's fees--Note 3(A) 1,064,643
Shareholder servicing fees and expenses--Note 3(B) 658,012
Custodian fees and expenses 38,957
Legal and auditing fees 22,053
Consultant fees 10,389
Trustees' fees and expenses--Note 3(C) 20,275
Other 63,481
----------
Total Expenses 1,877,810
------------
INVESTMENT INCOME--NET 2,854,402
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 9,678,626
Unrealized appreciation on investments 26,737,020
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 36,415,646
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 39,270,048
------------
------------
</TABLE>
See Notes to Financial Statements
23
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 2,854,402 $ 2,964,601
Net realized gain on investments 9,678,626 2,812,350
Unrealized appreciation on investments 26,737,020 39,148,975
------------ ------------
Net increase in net assets resulting from operations 39,270,048 44,925,926
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 17,141,226 28,004,631
Value of units redeemed (28,996,541) (24,532,607)
------------ ------------
Net increase (decrease) in net assets resulting from capital
transactions (11,855,315) 3,472,024
------------ ------------
Net increase 27,414,733 48,397,950
NET ASSETS at beginning of year 189,941,599 141,543,649
------------ ------------
NET ASSETS at end of year $217,356,332 $189,941,599
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
VALUE EQUITY FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C> <C>
COMMON STOCKS 93.9%
AEROSPACE AND DEFENSE 2.7%
15,700 Lockheed Martin Corp. $ 1,414,962
-----------
AUTOMOBILES 2.3%
31,862 Chrysler Corporation 912,050
9,300 Ford Motor Company 290,625
-----------
1,202,675
-----------
BANKING 10.6%
5,300 Bankamerica Corp. 435,263
23,900 Chase Manhattan Corp. 1,914,988
18,800 Citicorp 1,703,750
11,500 Keycorp 506,000
16,600 Mellon Bank Corp. 983,550
-----------
5,543,551
-----------
CHEMICALS 2.2%
13,200 E.I. Du Pont De Nemours &
Company 1,164,900
-----------
DRUG AND HEALTH CARE 10.1%
18,000 American Home Products
Corp. 1,147,500
18,900 Bristol-Myers Squibb
Company 1,821,488
18,900 Living Centers* 472,500
10,500 Merck & Company Inc. 738,938
11,700 Mylan Laboratories 200,363
33,300 Ornda Healthcorp* 911,588
-----------
5,292,377
-----------
ELECTRONICS AND
ELECTRICAL 5.6%
13,900 General Electric Company 1,264,900
9,300 Hewlett Packard Corp. 453,375
7,000 Intel Corp. 667,625
26,300 Kemet Corp.* 529,288
-----------
2,915,188
-----------
ENERGY 5.6%
5,800 Amoco Corp. 408,900
2,900 Atlantic Richfield
Company 369,750
2,100 British Petroleum 262,500
14,000 Exxon Corp. 1,165,500
7,900 Texaco Inc. 726,800
-----------
2,933,450
-----------
FINANCIAL SERVICES 4.0%
8,621 Bear Stearns Companies 200,438
33,200 Federal National Mortgage
Association 1,157,850
21,600 Sunamerica, Inc. 745,200
-----------
2,103,488
-----------
FOOD AND SERVICES 2.5%
30,500 Dole Food Company 1,281,000
-----------
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C> <C>
FOREST PRODUCTS AND PAPER 1.7%
15,200 Mead Corp. $ 891,100
-----------
INSURANCE 5.3%
31,900 Allstate Corp. 1,571,075
23,950 Travelers Group, Inc 1,176,544
-----------
2,747,619
-----------
MACHINERY AND ENGINEERING 4.8%
24,200 Deere & Company 1,016,400
22,600 Gatx Corp. 1,056,550
8,600 Ingersoll-Rand Company 408,500
-----------
2,481,450
-----------
MATERIALS AND SERVICES 2.2%
38,300 PHH Corp. 1,139,425
-----------
MERCHANDISING 3.1%
12,200 Melville Corp. 538,325
20,200 Sears Roebuck & Company 903,950
7,000 Wal-Mart Stores,Inc. 184,624
-----------
1,626,899
-----------
METALS AND MINING 2.1%
7,000 Phelps Dodge Corp. 448,874
8,800 Potash Corp. of
Saskatchewan 643,500
-----------
1,092,374
-----------
OFFICE AND BUSINESS
EQUIPMENT 3.3%
6,600 International Business
Machines Corp. 821,700
17,000 Xerox Corp. 911,624
-----------
1,733,324
-----------
OTHER 9.7%
20,700 Allied Signal Inc. 1,363,612
6,200 Aluminum Company Of
America 365,800
15,600 Philip Morris Companies
Inc. 1,400,100
16,000 United Technologies Corp. 1,922,000
-----------
5,051,512
-----------
TELECOMMUNICATIONS 6.6%
8,000 American Telephone &
Telegraph Corp. 302,000
20,000 DSC Communications Corp.* 502,500
18,400 GTE Corp. 708,400
2,592 Lucent Technologies Inc. 118,907
27,600 MCI Communications 703,800
10,700 Nynex Corp. 465,450
21,000 U S West Inc. 624,750
-----------
3,425,807
-----------
</TABLE>
See Notes to Financial Statements 25
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C> <C>
UTILITIES 9.5%
30,100 Cinergy Corp. $ 929,338
9,200 DTE Energy Company 257,600
23,600 Nicor Inc. 796,500
23,500 Peoples Energy Corp. 799,000
35,300 Texas Utilities Company 1,398,762
42,300 Washington Water Power
Company 798,413
-----------
4,979,613
-----------
Total Common Stocks (Cost $39,584,443) $49,020,714
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -----------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT 6.4%
$3,356,629 Bear Stearns & Co. Dated
9/30/1996 5.60% due
10/01/1996.
Collateralized by
3,795,000 United States
Treasury Securities due
11/15/2005 (Value
$2,056,435) and 3,600,000
United States Treasury
Strips due 8/15/2010
(Value $1,369,116) $ 3,356,629
-----------
Total Investments (Cost
$42,941,072) 100.3% $52,377,343
Liabilities, net of other assets -0.3% (146,395)
------ -----------
Net Assets 100.0% $52,230,948
------ -----------
------ -----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 26
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$42,941,072)--Note 2(A) $ 52,377,343
Receivable for investments sold 534,644
Receivable for units sold 134,887
Dividends and interest receivable 127,271
Other assets 15,800
------------
53,189,945
LIABILITIES:
Payable for investments purchased $ 855,612
Payable for units redeemed 27,364
Payable to investment manager 18,321
Accrued expenses 57,700 958,997
---------- ------------
NET ASSETS at value, applicable to 1,316,681 outstanding
units of beneficial interest--Note 5 $ 52,230,948
------------
------------
NET ASSET VALUE offering and redemption price per unit
($52,230,948 divided by 1,316,681 units) $ 39.67
------------
------------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $1,325,666
Interest 220,223
----------
Total Income $ 1,545,889
Expenses:
Investment manager's fees--Note 3(A) 215,788
Shareholder servicing fees and expenses--Note 3(B) 267,638
Custodian fees and expenses 24,937
Legal and auditing fees 21,232
Consultant fees 10,389
Trustees' fees and expenses--Note 3(C) 20,271
Insurance premiums 8,694
Other 25,535
----------
Total expenses 594,484
Less fees paid indirectly--Note 4 (11,620)
----------
Net Expenses 582,864
------------
INVESTMENT INCOME--NET 963,025
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 4,551,286
Unrealized appreciation on investments 3,977,314
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 8,528,600
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,491,625
------------
------------
</TABLE>
See Notes to Financial Statements
27
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 963,025 $ 1,235,982
Net realized gain on investments 4,551,286 1,438,305
Unrealized appreciation on investments 3,977,314 4,775,796
----------- -----------
Net increase in net assets resulting from operations 9,491,625 7,450,083
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 6,089,364 7,261,555
Value of units redeemed (7,173,870) (6,491,239)
----------- -----------
Net increase (decrease) in net assets resulting from capital
transactions (1,084,506) 770,316
----------- -----------
Net increase 8,407,119 8,220,399
NET ASSETS at beginning of year 43,823,829 35,603,430
----------- -----------
NET ASSETS at end of year $52,230,948 $43,823,829
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
28
<PAGE>
EMERGING GROWTH EQUITY FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C> <C>
COMMON STOCKS 97.4%
APPAREL AND TEXTILE 4.7%
40,000 Genesco Inc.* $ 375,000
75,000 Stride Rite Corp.* 675,000
19,260 St. John Knits Inc. 965,408
30,000 Sports Authority* 798,750
6,060 Tommy Hilfiger* 359,055
62,500 Vans, Inc.* 1,195,312
-----------
4,368,525
-----------
AUTOMOTIVE PRODUCTS 0.8%
5,625 Custom Chrome* 101,250
25,000 Tower Automotive* 631,250
-----------
732,500
-----------
BROADCASTING AND
PUBLISHING 2.2%
4,800 American Radio Systems
Corp.* 176,400
2,800 Chancellor Broadcasting
Corp Class A* 116,200
200 Cox Radio Inc.* 4,400
14,500 Granite Broadcasting
Corp.* 206,625
8,000 Heftel Broadcasting
Corp--A* 345,000
34,400 National Media Corp.* 511,700
6,910 SFX Broadcasting Inc.* 312,678
3,500 Sinclair Broadcast Group
Inc.* 139,562
7,925 Young Broadcasting Corp.
Cl. A* 259,544
-----------
2,072,109
-----------
BUILDING AND CONSTRUCTION 1.5%
11,900 Apogee Enterprises Inc. 413,525
42,000 Dal-Tile International* 687,750
25,000 Dycom Industries, Inc.* 318,750
-----------
1,420,025
-----------
BUSINESS AND PUBLIC
SERVICES 7.3%
36,300 Americredit Corp.* 667,013
9,480 Cambridge Technology
Partners Inc.* 284,400
3,400 Carriage Services Inc.* 64,600
2,400 CCC Information Services
Group* 49,800
6,300 Claremont Technology
Group* 218,925
6,400 Computer Task Group Inc. 199,200
18,163 Concord Efs Inc.* 467,697
15,600 Correctional Services
Corp.* 220,350
15,100 Cotelligent Group Inc.* 226,500
6,100 Equity Corporation
International* 191,388
5,200 Interim Services Inc.* 222,300
6,927 Keane Inc.* 332,496
2,800 Labor Ready, Inc.* 47,950
4,400 Lamar Advertising Co.* 179,300
2,200 Learning Tree
International, Inc.* 80,850
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C> <C>
9,700 Outdoor Systems, Inc.* $ 451,050
13,800 Precision Response Corp.* 520,950
3,300 Registry, Inc.* 122,925
16,550 Robert Half International
Inc.* 610,280
8,200 Strayer Education Inc.* 134,275
10,650 Sykes Enterprises, Inc.* 500,550
6,100 Universal Outdoor
Holdings* 218,075
4,300 Vincam Group, Inc.* 164,475
50,000 Warrantech Corp.* 484,375
1,700 Whitman-Hart Inc.* 80,325
-----------
6,740,049
-----------
COMMERCIAL SERVICES 2.6%
6,900 Corestaff Inc.* 181,125
40,000 Employee Solutions* 690,000
6,700 FYI Incorporated* 134,000
300 International Network
Services* 10,538
20,000 Metromail Corp.* 432,500
4,300 National Techteam Inc.* 116,638
5,200 Physician Support
Systems* 122,200
13,850 PMT Services Inc.* 277,000
12,200 Wackenhut Corp Class B 190,625
12,200 Wackenhut Corrections
Corp.* 271,450
-----------
2,426,076
-----------
CONSUMER GOODS AND
SERVICES 7.5%
9,850 Blyth Industries Inc.* 477,725
36,200 French Fragrances Inc.* 253,400
600 Gargoyles, Inc.* 12,450
17,700 Hollywood Entertainment
Corp.* 360,638
11,500 Marks Bros Jewelers Inc.* 310,500
11,970 Nautica Enterprises Inc.* 386,032
40,000 Norrell Corp. 1,260,000
5,300 North Face Inc.* 149,063
11,775 Sola International Inc.* 438,619
7,400 Pete's Brewing Company* 52,725
21,350 Rexall Sundown Inc.* 779,275
22,900 Signature Resorts Inc.* 549,600
11,700 Speedway Motorsports
Inc.* 307,125
13,890 Stewart Enterprises Inc. 468,788
10,600 The Finish Line Class A* 500,850
21,596 Wolverine World Wide 599,282
-----------
6,906,072
-----------
DATA PROCESSING 1.8%
5,300 Alternative Resources
Corp.* 148,400
6,500 Business Objects SA Adr* 125,125
25,000 CACI International
Inc--Cl A* 434,375
30,000 CHS Electronics, Inc.* 386,250
10,100 Data Processing
Resources, Cp* 207,050
</TABLE>
See Notes to Financial Statements 29
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
DATA PROCESSING--CONTINUED
<C> <S> <C> <C>
5,300 HPR Inc.* $ 82,150
4,600 Vantive Corp.* 293,250
-----------
1,676,600
-----------
ELECTRONICS AND
ELECTRICAL 6.7%
20,000 Advanced Lighting Techs* 395,000
30,600 Applied Magnetics* 543,150
7,353 Baldor Electric Company 143,384
20,000 Calpine Corporation* 320,000
22,600 Computer Products Inc.* 494,375
5,932 Credence Systems Corp.* 91,938
13,150 C.P. Clare Corp.* 121,638
17,510 Del Global Technologies
Corp.* 148,835
25,000 Eltron International
Inc.* 800,000
25,000 Etec Systems, Inc.* 850,000
4,800 Flextronics International
Ltd.* 130,800
4,955 Harman International
Industries Inc. 241,556
30,000 Jabil Circuit Inc.* 513,750
17,000 Reptron Electronics Inc.* 301,750
8,650 Sanmina Corp.* 348,162
6,600 Transwitch Corp.* 41,250
56,400 Xicor Inc.* 655,650
-----------
6,141,238
-----------
EMPLOYMENT AGENCY 0.4%
6,375 On Assignment Inc.* 211,969
7,700 SOS Staffing Service* 86,625
2,100 Staffmark, Inc.* 28,875
-----------
327,469
-----------
ENTERTAINMENT 3.0%
40,000 Action Performance Co.,
Inc.* 500,000
30,000 Cannondale Corp.* 697,500
15,000 Family Golf Centers,
Inc.* 423,750
1,000 Penn National Gaming
Inc.* 30,500
5,100 Anchor Gaming* 312,375
8,100 Penske Motorsports Inc* 280,462
7,950 Regal Cinemas Inc.* 194,775
13,600 Sodak Gaming Inc.* 306,000
-----------
2,745,362
-----------
FOOD AND SERVICES 1.9%
5,600 Apple South Inc. 74,200
8,400 Landry's Seafood
Restaurants* 205,800
46,900 Mortons Restaurant Group* 820,750
25,000 Sonic Corp.* 628,125
-----------
1,728,875
-----------
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C> <C>
FURNITURE/HOME APPLIANCES 0.3%
13,800 Cort Business Services
Corp.* $ 279,450
-----------
INSURANCE 2.1%
6,200 Compdent Corp.* 234,050
5,300 CRA Managed Care Inc* 283,550
4,200 First Commonwealth Inc.* 91,350
27,825 HCC Insurance Holdings
Inc. 803,447
7,855 Reinsurance Group of
America Inc. 344,638
4,625 Sierra Health Services* 158,984
-----------
1,916,019
-----------
LODGING/MOTELS 1.2%
25,500 Prime Hospitality Corp.* 420,750
10,500 Servico, Inc.* 170,625
15,675 Studio Plus Hotels, Inc.* 246,880
10,800 Suburban Lodges Of
America* 226,800
-----------
1,065,055
-----------
MACHINERY AND ENGINEERING 3.6%
20,000 Applied Power 637,500
118,200 JLG Industries 2,201,475
6,200 Miller Industries
Inc./Tenn* 244,900
11,100 Rental Service Corp.* 238,650
-----------
3,322,525
-----------
MEDICAL SERVICES AND
DRUGS 11.9%
5,650 Access Health Inc.* 317,812
25,000 ADAC Laboratories 493,750
23,000 Advanced Technology Labs* 730,250
5,600 Alternative Living
Services* 78,400
16,250 American Homepatient
Inc.* 353,438
8,900 Amrion, Inc.* 190,238
1,800 Arthrocare Corp.* 16,650
9,800 ARV Assisted Living Inc.* 142,100
7,100 Assisted Living Concepts,
Inc.* 134,900
29,000 Ballard Medical Products 565,500
95,000 Bio Technology General* 754,062
17,860 Dura Pharmaceuticals
Inc.* 656,355
5,300 Emeritus Corp.* 83,475
30,000 ESC Medical Systems* 945,000
6,800 Gelman Sciences, Inc.* 191,250
11,412 Genesis Health Ventures
Inc.* 320,962
20,000 Health Images 267,500
7,500 Healthplan Services* 164,063
6,900 Idexx Laboratories Inc.* 312,225
9,100 Igen Inc.* 64,838
7,000 Impath, Inc.* 85,750
11,800 Iridex Corp.* 91,450
4,000 I-Stat Corp.* 73,000
</TABLE>
See Notes to Financial Statements 30
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
MEDICAL SERVICES AND
DRUGS--CONTINUED
<C> <S> <C> <C>
4,190 Lincare Holdings Inc.* $ 165,505
5,700 Lunar Corp.* 182,400
40,000 Medcath, Inc.* 670,000
9,800 Medicis Pharmaceutical
Cl-A* 472,850
6,200 Memtec Ltd 173,600
4,800 Minimed, Inc.* 117,600
8,050 National Surgery Centers
Inc.* 215,338
9,400 NCS Healthcare Inc. Class
A* 294,925
6,300 Orthologic Corp.* 66,938
3,200 Pediatix Medical* 160,000
20,000 Physio Control Int'l* 502,500
4,300 Renal Care Group Inc.* 156,950
10,200 Respironics, Inc.* 247,350
6,800 Sabratek Corp.* 107,100
9,300 Sterling House Corp.* 152,288
3,700 Target Therapeutics Inc.* 157,250
3,700 United Dental Care Inc.* 132,275
-----------
11,007,837
-----------
OIL & GAS 4.2%
20,000 BJ Services* 725,000
25,500 Energy Ventures Inc.* 1,032,750
70,000 Marine Drilling Co* 665,000
23,000 Swift Energy* 552,000
30,000 Vintage Petroleum 881,250
-----------
3,856,000
-----------
RETAIL TRADE 8.2%
3,500 99 Cents Only Stores* 49,000
2,500 Barnett Inc.* 57,500
32,300 Black Box Corp.* 1,065,900
25,000 Central Garden & Pet* 503,125
67,500 Claires Stores 1,442,812
12,500 Cost Plus Inc.* 284,375
9,000 Loehmann's, Inc.* 240,750
25,300 MacFrugals* 597,712
3,500 Party City Corp.* 64,750
3,900 Petco Animal Supplies,
Inc.* 104,325
50,000 Pier 1 Imports 806,250
50,000 Showbiz Pizza Time Inc.* 887,500
27,900 Tech Data Corp.* 770,738
16,546 The Mens Wearhouse Inc.* 401,240
9,000 West Marine Inc.* 294,750
-----------
7,570,727
-----------
SOFTWARE PRODUCTS 13.8%
4,200 Analysts International
Corp. 193,200
32,800 Auspex Systems* 496,100
5,600 Bisys Group Inc.* 229,600
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C> <C>
35,000 Cheyenne Software* $ 752,500
60,000 Cognos Inc.* 1,942,500
15,156 Computer Horizons Corp.* 431,932
25,000 Data General* 350,000
20,000 Datastream Systems* 605,000
6,000 Gensym Corp.* 130,500
10,000 Ikos Systems, Inc.* 198,750
3,730 Inso Corp.* 195,825
8,643 McAfee Associates Inc.* 596,367
50,000 MicroAge Inc.* 943,750
35,000 Microtouch Systems 1* 656,250
9,600 Raptor Systems, Inc.* 163,200
34,400 PC Docs Group Intl, Inc.* 464,400
9,150 Peak Technologies Group
Inc.* 194,438
20,000 Pomeroy Computer
Resources* 645,000
3,223 Project Software &
Development, Inc.* 135,365
6,900 Renaissance Solutions
Inc.* 284,625
9,900 SPSS, Inc.* 267,300
26,800 Structural Dynamics* 639,850
18,150 Technology Solutions
Company* 630,712
44,300 Vanstar Corp.* 1,074,275
30,000 Xircom Inc.* 480,000
-----------
12,701,439
-----------
TECHNOLOGY 1.3%
26,400 Control Data Systems* 610,500
20,000 Kronos, Inc.* 615,000
-----------
1,225,500
-----------
TELECOMMUNICATIONS 7.0%
5,500 Bet Holdings* 158,125
8,900 Cai Wireless Systems
Inc.* 64,525
7,303 Centennial Cellular
Corp.--Cl A* 96,765
2,200 CMG Information Services
Inc.* 31,350
13,100 Coherent Communic.
Systems Corp.* 242,350
4,775 Commnet Cellular Inc.* 137,878
25,000 Comverse Technology* 971,875
29,800 Digital Microwave* 677,950
35,000 Digital Systems Intl
Inc.* 625,625
13,500 Evergreen Media Corp.* 421,875
11,420 EZ Communications
Inc.--Cl A* 502,480
7,050 Heartland Wireless
Communications Inc.* 176,250
5,400 Intermedia Communications
Inc.* 157,950
21,900 Mastec, Inc.* 739,125
19,000 Midcom Communication
Inc.* 256,500
8,600 P-Com Inc.* 212,850
5,200 RMH Teleservices Inc* 76,700
13,293 Saga Communications
Inc.--Cl A* 297,430
</TABLE>
See Notes to Financial Statements 31
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
TELECOMMUNICATIONS--CONTINUED
<C> <S> <C> <C>
8,100 Spectralink, Corp.* $ 52,650
9,200 Teltrend, Inc.* 386,400
13,515 Transaction Network
Services* 192,589
-----------
6,479,242
-----------
TOYS 1.4%
42,900 Galoob (Lewis) Toys* 1,254,825
-----------
TRANSPORTATION 2.0%
9,255 Expeditors International
of Wash Inc. 326,239
25,000 AAR Corp. 578,125
55,000 Mesa Air Group, Inc.* 501,875
30,000 Skywest Inc. 420,000
-----------
1,826,239
-----------
Total Common Stocks (Cost $65,635,492) $89,789,758
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -----------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT 2.9%
$2,643,898 Bear Stearns & Co. Dated
9/30/1996 5.60% due
10/01/1996 Collateralized
by 2,650,000 United
States Treasury Strips
due 11/15/2005 (Value
$1,435,982) and 3,865,000
United States Treasury
Strips Due 8/15/2012
(Value $1,263,391) $ 2,643,898
-----------
Total Investments (Cost
$68,279,391) 100.3% $92,433,656
Liabilities, net of other assets -0.3% (297,742)
------ -----------
Net Assets 100.0% $92,135,914
------ -----------
------ -----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 32
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$68,279,391)--Note 2(A) $ 92,433,656
Receivable for investments sold 1,348,751
Receivable for units sold 242,302
Dividends and interest receivable 33,406
Other assets 18,394
------------
94,076,509
LIABILITIES:
Payable for investments purchased $1,741,750
Payable for units redeemed 26,998
Payable to investment managers 68,718
Accrued expenses 103,129 1,940,595
---------- ------------
NET ASSETS at value, applicable to 1,373,656 outstanding
units of beneficial interest--Note 5 $ 92,135,914
------------
NET ASSET VALUE offering and redemption price per unit
($92,135,914 divided by 1,373,656 units) $ 67.07
------------
------------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 79,542
Interest 228,561
-----------
Total Income $ 308,103
Expenses:
Investment manager's fees--Note 3(A) 940,612
Shareholder servicing fees and expenses--Note 3(B) 455,412
Custodian fees and expenses 85,333
Legal and auditing fees 22,536
Consultant fees 10,388
Trustees' fees and expenses--Note 3(C) 40,364
Other 40,550
-----------
Total Expenses 1,595,195
Less fees paid indirectly--Note 4 (36,673)
-----------
Net Expenses 1,558,522
-----------
INVESTMENT (LOSS)--NET (1,250,419)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 15,317,099
Unrealized appreciation on investments 6,281,307
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 21,598,406
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $20,347,987
-----------
-----------
</TABLE>
See Notes to Financial Statements
33
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
------------ -----------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net $ (1,250,419) $ (925,073)
Net realized gain on investments 15,317,099 15,078,221
Unrealized appreciation on investments 6,281,307 9,142,586
------------ -----------
Net increase in net assets resulting from operations 20,347,987 23,295,734
------------ -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 10,600,409 11,643,470
Value of units redeemed (13,437,810) (8,606,464)
------------ -----------
Net increase (decrease) in net assets resulting from capital
transactions (2,837,401) 3,037,006
------------ -----------
Net increase 17,510,586 26,332,740
NET ASSETS at beginning of year 74,625,328 48,292,588
------------ -----------
NET ASSETS at end of year $ 92,135,914 $74,625,328
------------ -----------
------------ -----------
</TABLE>
See Notes to Financial Statements
34
<PAGE>
INTERNATIONAL EQUITY FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------- -----------
<C> <S> <C> <C>
COMMON STOCKS 98.8%
AEROSPACE 1.0%
11,000 British Aerospace $ 181,691
58,500 Rolls Royce Ord 218,934
-----------
400,625
-----------
AIRLINES 0.5%
21,900 British Airways 185,572
-----------
BANKING 7.8%
17,000 Asahi Bank 193,857
13,000 Bank Of Tokyo-Mitsubishi
Bank 283,647
4,390 Far East Bank & Trust 15,395
13,000 HSBC Holdings 241,239
17,750 HSBC Holdingsuk Reg 340,219
25,000 Kiyo Bank 125,482
12,500 Malayan Banking Bhd 124,176
23,000 Mitsubishi Tr & Bank 353,144
25,350 Natl Westminster ord 269,103
14,200 Nordbanken Ab 364,432
17,232 Overseas Chinese Bank 206,811
918 Shinhan Bank Corp Ac 16,453
9,000 Siam Commericial Bank 109,059
15,000 Sumitomo Bank 277,451
12,000 Sumitomo Trust & Bank 150,847
-----------
3,071,315
-----------
BROADCASTING & PUBLISHING 1.8%
12,600 Bec World Public Co.Ltd
Thb* 129,879
31,600 Elsevier Nv Cva 522,680
23,883 General Cable Ord* 65,716
-----------
718,275
-----------
BUILDING MATERIALS 0.8%
4,150 Asia Cement Gds (Repr Shs
Of Com)* 88,810
38,000 Blue Circle Inds 228,428
-----------
317,238
-----------
BUSINESS & PUBLIC SERVICE 4.8%
8,000 Asatsu Inc. 316,061
14,800 Logica Ord 175,851
22,300 Reuters Holdings Ord 257,469
1,710 SAP Ag Non Vtg Prf 287,006
5,000 Secom Company 316,510
18,255 Securitas Ab 440,941
8,000 Toppan Printing Co 112,776
-----------
1,906,614
-----------
<CAPTION>
SHARES VALUE
- ------- -----------
<C> <S> <C> <C>
CHEMICALS 3.4%
40,000 Asahi Chemical Ind $ 260,391
7,350 Bayer Ag (Var) 268,506
30,000 Courtaulds Ord 226,068
15,000 Nippon Shokubai Co 132,261
2,000 Sgl Carbon Ag 233,402
13,000 Shin-Etsu Chem Co 233,454
-----------
1,354,082
-----------
CONSTRUCTION & HOUSING 4.4%
12,000 Cardo Ab 266,304
175,000 DMCI Hldgs Inc.* 130,074
8,000 Empresa Ica Soc Adr(Cv 1
Ord Ptg Cert)* 122,000
6,020 IHC Caland Nv 317,018
16,000 Kajima Corp 147,974
24,000 Nishimatsu Const 232,736
140,000 Road King Infrastr* 115,867
16,000 Sekisui House Ord 175,270
18,000 Sungei Way Holdings 96,229
1,800 Technip 164,576
-----------
1,768,048
-----------
CONSUMER GOODS & SERVICES 3.4%
1,020 Adecco Sa 280,723
3,900 Luxoitica Group ADR 283,725
17,000 H.M.
Sampoernaidr(1000)Alien
Mkt) 165,590
50,000 Suzuki Motor Corp 610,572
-----------
1,340,610
-----------
ELECTRONICS & ELECTRICAL 8.1%
2,200 Advantest 90,077
26,000 Canon Inc Ord 511,264
46,300 General Electric Ord 286,284
45,000 Hitachi Ltd 436,379
20,000 Matsushita Elec Ind. 335,815
1,120 Rexel 297,943
4,000 Rohm Co 252,489
1,070 Samsung Electronic 83,966
66,500 Securicor Group Ord 281,748
6,750 SGS-Thomson Micro* 322,901
4,600 Sony Corp 290,363
-----------
3,189,229
-----------
ENERGY 3.0%
6,000 Banpu Co 131,248
61,000 Eni Spa 311,999
10,000 Ptt Explorin and Prd 147,930
21,000 Shell Transport & Trading
Ord 320,434
29,000 Showa Shell Sekiyu 294,242
-----------
1,205,853
-----------
</TABLE>
See Notes to Financial Statements 35
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------- -----------
FINANCE 2.6%
<C> <S> <C> <C>
1,330 Cetelem $ 286,550
31,000 Guoco Group 151,532
10,661 Ing Groep Nv 332,737
14,000 Nomura Securities Company
Ltd 257,697
-----------
1,028,516
-----------
FOOD & SERVICES 2.8%
460 Carrefour 258,375
6,000 Cervecerias Unidasads
(Cnv Into 5 Shs)* 125,719
11,000 Ceval Alimentos Saspon
Adr Repr 1000 101,267
30,000 Grand Metropolitan Ord 223,254
53,000 Morrison Supermarket 127,605
4,700 Orkla Asa 256,632
-----------
1,092,852
-----------
HEALTH 5.7%
43,500 British Biotech Ord* 142,817
20,000 Glaxo Plc 313,149
25,666 Medeva Ord 102,523
38 Roche Holding
Aggenusscheine Npv 279,949
520 Sandoz Ag 624,720
18,000 Sankyo Company 460,623
2,900 Synthelabo 247,563
5,000 Yamanouchi Pharm 105,952
-----------
2,277,296
-----------
INDUSTRIAL COMPONENTS 1.0%
35,454 BICC 164,623
12,000 Delta Ord 76,732
20,000 NSK 137,020
-----------
378,375
-----------
INSURANCE 1.4%
42,146 Royal & Sun Alliance
Insurance Group* 266,859
24,000 Tokio Marine & Fire 284,455
-----------
551,314
-----------
LEISURE 2.1%
36,500 Genting Berhad Mydlr 265,028
20,500 Granada Group Ord 274,506
763,000 Regal Hotels Intl. 207,203
2,400 Sony Music Ent 97,189
-----------
843,926
-----------
<CAPTION>
SHARES VALUE
- ------- -----------
<C> <S> <C> <C>
MACHINERY & ENGINEERING 5.1%
51,000 Hitachi Zosen Corp $ 260,562
2,000 Hyundai Eng And Con* 61,519
6,000 Kandenko Co 73,269
20,000 Kawasaki Heavy Industries 96,434
10,000 Keppel Corp. 77,407
8,000 Matsushita Elc Wks 79,015
12,000 Max Company 234,891
46,000 Mitsubishi Heavy
Industries 374,622
24,000 Shinmaywa Industries 224,116
48,000 United Engineers Bhd 371,511
42,000 Vickers Plc Ord 186,154
-----------
2,039,500
-----------
MERCHANDISING 7.5%
5,466 Ahold 309,568
1,800 Autobacs Seven Co. 158,874
2,800 BIC 367,817
150,000 Cifra Sa De Cv Adr(Cnv
Into 1 Ord B)* 216,135
2,500 Hennes & Mauritzser "B" 306,838
9,850 Centros Com Pryca 240,491
21,000 Great Univ Stores Ord 210,449
2,640 Christian Dior 308,948
7,000 Ito-Yokado Co 397,859
22,500 Makro Atacadista Gdsrepr* 207,137
31,500 Smith(Wh)Group "A" Ord 232,939
-----------
2,957,055
-----------
METALS & MINING 5.0%
13,650 Acos Espec Itabiraadr
Repr 54,143
69,000 Kawasaki Steel Corp. 231,712
270,000 Mim Holdings Ltd 328,995
30,000 Mitsubishi Materials 143,844
160,000 Nkk Corp* 410,879
170,000 North Ltd 473,474
3,000 Pohang Iron & Steelspon
Adr-Rep 1/4 Ord 64,125
17,000 Usinor Sacilor 262,513
-----------
1,969,685
-----------
MULTI INDUSTRY 2.9%
101,000 First Pacific Co. 152,813
16,500 Getinge Industrier "B"
Sek2 316,349
5,277 Hunter Douglas Nv 368,568
49,000 Hutchison Whampoa 329,497
-----------
1,167,227
-----------
</TABLE>
See Notes to Financial Statements 36
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------- -----------
REAL ESTATE 4.6%
<C> <S> <C> <C>
58,000 Cheung Kong Hldgs $ 446,270
872 City Developments 7,430
117,000 Hong Kong Land Hld 272,610
21,000 Mitsubishi Estate 288,495
26,000 Mitsui Fudosan Co 345,512
16,300 Sun Hung Kai Props 173,371
66,000 Wharf (Hldgs) 273,115
-----------
1,806,803
-----------
TELECOMMUNICATIONS 7.0%
53,300 British Telecomm Ord 296,652
53 Ddi Corp. 428,774
16,436 Ericsson (Lm) Telser B 414,373
112,600 Hong Kong Telecomm 203,854
41,000 Indosat 138,276
36 Nippon Tel & Tel Cp 265,060
43,000 Technology Resource
Inds.* 113,225
2,300 Telebras Telec Braspon
Adr 180,550
134,000 Telecom Ital
Mobile--Spinoff From
Sip* 297,568
12,000 Telefonica De Espana 222,893
6,000 Telefonos De Mexico
Sponsored ADR 192,750
-----------
2,753,975
-----------
TEXTILE & APPAREL 2.9%
5,400 Adidas Ag 492,111
6,600 Gucci Group Nv 474,473
35,000 Teijin 176,617
-----------
1,143,201
-----------
<CAPTION>
SHARES VALUE
- ------- -----------
<C> <S> <C> <C>
TRANSPORTATION 3.2%
23,000 Brambles Inds Ltd $ 373,067
60,000 Mayne Nickless Ltd. (Aust
List) 405,903
56,000 Nippon Yusen Kabush-Iki
Kaish 291,638
33,000 Tobu Railways Co 203,267
-----------
1,273,875
-----------
UTILITIES 4.3%
89,500 British Gas Ord 278,449
5,200 Cemig Cia Energ Mgspon
Adr Rep 155,330
75,000 Consol Electricpower Asia 158,574
1,200 Gas Natural Sdg Sa 211,958
11,000 Kurita Water Industries 238,033
13,000 Manila Electric Co 96,131
53,000 Osaka Gas Co. 179,885
48,000 Tokyo Gas Co Ord 164,208
4,500 Veba Ag 235,789
-----------
1,718,357
-----------
WHOLESALE INT'L TRADE 1.7%
3,530 Gehe Ag 236,064
2,030 Guilbert SA* 304,425
116 Hyundai Corp.* 3,498
10,000 Mitsubishi Corp. 127,502
-----------
671,489
-----------
Total Investments (Cost
$33,433,435) 98.8% $39,130,907
Other Assets, Less Liabilities 1.2% 471,046
------ -----------
Net Assets 100.0% $39,601,953
------ -----------
------ -----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 37
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Geographical Diversification September 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF NET
ASSETS
--------------------
COUNTRY TOTAL
- ---------------------------------------------------------- --------------------
<S> <C>
Japan 32.6%
United Kingdom 15.0
Hong Kong 6.9
Netherlands 5.9
France 7.1
Sweden 5.3
Germany 4.4
Switzerland 3.0
Malaysia 2.5
Australia 4.0
Spain 4.9
Singapore 0.7
Thailand 1.3
Italy 1.5
Mexico 0.5
Indonesia 0.8
South Korea 0.6
Norway 0.6
Belgium 0.7
Philippines 0.6
---
Total Investments 98.9%
Other Assets Less Liabilities 1.1
---
Total 100.0%
---
---
</TABLE>
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$33,433,435)--Note 2(A) $39,130,907
Cash 553,596
Receivable for investments sold 51,434
Receivable for units sold 90,009
Dividends and interest receivable 125,025
Other assets 12,817
-----------
39,963,788
LIABILITIES:
Payable for investments purchased $229,581
Payable to investment managers 18,836
Payable for units redeemed 2,606
Accrued expenses 110,812 361,835
-------- -----------
NET ASSETS at value, applicable to 875,253
outstanding units of
beneficial interest--Note 5 $39,601,953
-----------
-----------
NET ASSET VALUE offering and redemption price per
unit
($39,601,953 divided by 875,253 units) $ 45.25
-----------
-----------
</TABLE>
See Notes to Financial Statements
38
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Net of foreign taxes of $37,905) $ 533,128
Interest 57,740
----------
Total Income $ 590,868
Expenses:
Investment managers's fees--Note 3(A) 293,050
Shareholder servicing fees and expenses--Note 3(B) 207,484
Custodian fees and expenses 97,780
Legal and auditing fees 20,453
Consultant fees 10,389
Trustees' fees and expenses--Note 3(C) 20,271
Other 33,151
----------
Total expenses 682,578
Less fees paid indirectly--Note 4 (20,083)
----------
Net Expenses 662,495
----------
INVESTMENT (LOSS)--NET (71,627)
REALIZED AND UNREALIZED GAIN--Note 4:
Net realized gain on:
Investments 3,178,271
Foreign currency transactions 649,097
----------
3,827,368
----------
Unrealized appreciation (depreciation) on:
Investments 791,603
Foreign currency translations of other assets and
liabilities (191,808)
----------
599,795
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCIES 4,427,163
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,355,536
----------
----------
</TABLE>
See Notes to Financial Statements
39
<PAGE>
INTERNATIONAL EQUITY FUND
(CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net $ (71,627) $ (18,971)
Net realized gain 3,827,368 417,722
Unrealized appreciation 599,795 1,247,852
----------- -----------
Net increase in net assets resulting from operations 4,355,536 1,646,603
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 8,808,775 5,659,129
Value of units redeemed (4,705,939) (4,833,851)
----------- -----------
Net increase in net assets resulting from capital
transactions 4,102,836 825,278
----------- -----------
Net increase 8,458,372 2,471,881
NET ASSETS at beginning of year 31,143,581 28,671,700
----------- -----------
NET ASSETS at end of year $39,601,953 $31,143,581
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
40
<PAGE>
ACTIVELY MANAGED BOND FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
CORPORATE BONDS 4.4%
FINANCIAL SERVICES
$ 500,000 Beneficial Corp. 9.32%
Due 8/4/1997 $ 513,453
1,200,000 Ford Motor Co. CMO 1993-A
5.78% Due 1/1/1999 1,181,039
1,125,000 Ford Motor Credit Co.
10.35% Due 10/1/1997 1,170,123
500,000 Ford Motor Credit Co.
9.20% Due 5/07/1997 508,921
------------
3,373,536
------------
FOOD AND SERVICES
2,000,000 General Mills Inc. 8.95%
Due 12/18/2000 2,150,258
------------
OIL
1,000,000 Consolidated Natural Gas
Sf Deb. 8.625% Due
12/1/2011 1,053,550
------------
Total Corporate Bonds
(Cost $6,312,157) $ 6,577,344
------------
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS 93.6%
$ 39,088 Collateralized Mtg Oblig
Tr 1 0% Due 5/20/2017 $ 28,402
228,320 Collateralized Mtg Oblig
Tr 29 0% Due 5/01/2013 167,532
134,346 Collaterized Mortgage Sec
Corp. 7.00% Due
6/1/2006 133,648
1,000,000 Federal Farm Credit 7.03%
Due 2/19/2008 945,350
2,000,000 Federal Home Loan Bank
Note 7.70% Due
7/12/2010 1,939,458
350,000 Federal Home Loan Bank
Structured Note 7.35%
Due 6/16/2009 355,850
2,000,000 Federal Home Loan
Mortgage Corp. 7.29%
Due 4/7/2004 1,979,860
1,500,000 Federal Home Loan
Mortgage Corp. 6.84%
Due 3/2/2009 1,406,003
1,000,000 Federal Home Loan
Mortgage Corp. 6.53%
Due 2/23/2006 943,868
1,000,000 Federal Home Loan
Mortgage Corp. 6.59%
Due 12/09/2008 932,981
4,000,000 Federal Home Loan
Mortgage Corp. 6.355%
Due 8/8/2005 3,803,552
1,445,000 Federal Home Loan
Mortgage Corp. 6.08%
Due 10/29/08 1,324,454
1,000,000 Federal Home Loan
Mortgage Corp. 6.375%
Due 3/11/2003 965,502
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 1,000,000 Federal Home Loan
Mortgage Corp. CMO
1534G 6.00% Due
5/15/2022 $ 931,319
1,000,000 Federal Home Loan
Mortgage Corp. CMO 1617
H 6.50% Due 10/15/2023 876,059
2,000,000 Federal Home Loan
Mortgage Corp. CMO
#1206-GC 7.00% Due
2/15/2020 1,941,978
2,000,000 Federal Home Loan
Mortgage Corp. CMO
1197G 6.75% Due
12/15/2006 1,963,798
2,000,000 Federal Home Loan
Mortgage Corp. CMO
1278G 7.00% Due
11/15/2020 2,007,758
893,994 Federal Home Loan
Mortgage Corp. Pool
#141001 7.75% Due
9/1/2016 887,664
358,311 Federal Home Loan
Mortgage Corp. Pool
#297625 8.50% Due
6/1/2017 370,740
568,413 Federal Home Loan
Mortgage Corp. Pool
#533624 8.50% Due
12/01/2007 588,148
478,793 Federal Home Loan
Mortgage Corp. Pool
#533625 8.50% Due
12/1/2007 494,837
1,400,000 Federal Home Loan
Mortgage Corp. CMO
1611-I 6.00% Due
02/15/2023 1,296,889
1,000,000 Federal Home Loan
Mortgage Corp. CMO 1601
PJ 6.00% Due 10/15/2008 895,449
2,000,000 Federal National Mortgage
Association 6.58% Due
3/1/2006 1,902,978
1,000,000 Federal National Mortgage
Association CMO G93-31
PL 6.50% Due 10/25/2021 936,049
1,000,000 Federal National Mortgage
Association 6.25% Due
1/14/2004 954,329
1,000,000 Federal National Mortgage
Association Note 7.00%
Due 8/12/2002 985,139
1,000,000 Federal National Mortgage
Association CMO 93-251
PJ 6.50% Due 12/25/2023 926,919
2,000,000 Federal National Mortgage
Association 7.46% Due
9/30/1999 2,029,678
</TABLE>
See Notes to Financial Statements 41
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 1,000,000 Federal National Mortgage
Association 6.39% Due
12/9/2003 $ 962,039
2,000,000 Federal National Mortgage
Association, 7.14% Due
8/28/2002 1,992,218
1,500,000 Federal National Mortgage
Association, 5.99% Due
10/27/2008 1,362,989
1,000,000 Federal National Mortgage
Association, 6.71% Due
2/13/2006 957,089
1,000,000 Federal National Mortgage
Association, 6.77% Due
1/19/2006 966,469
1,000,000 Federal National Mortgage
Association CMO 1356 K
5.50% Due 5/15/2021 830,059
3,000,000 Federal National Mortgage
Association CMO
1993-32H 6.00% Due
3/25/2023 2,708,427
2,000,000 Federal National Mortgage
Association CMO
1993-76Pj 6.00% Due
6/25/2008 1,799,438
1,040,000 Federal National Mortgage
Association CMO G93-14J
6.50% Due 3/25/2023 943,393
1,000,000 Federal National Mortgage
Association CMO
#1991-47H 7.50% Due
5/25/2006 1,015,659
3,000,000 Federal National Mortgage
Association CMO G92-40L
7.00% Due 7/25/2007 2,958,267
1,000,000 Federal National Mortgage
Association, CMO
93-226C 6.00% Due
12/25/2023 851,559
3,253,162 Federal National Mortgage
Association Pass Thru
Pool #050965 6.50% Due
1/1/2024 3,078,594
764,780 Federal National Mortgage
Association Pass Thru
Pool #050987 6.50% Due
2/1/2009 747,212
1,167,317 Federal National Mortgage
Association Pass Thru
Pool #239024 7.00% Due
10/1/2023 1,132,460
1,273,950 Federal National Mortgage
Association Pass Thru
Pool #50966 7.00% Due
1/1/2024 1,235,909
746,097 Federal National Mortgage
Association Pass Thru
Pool #87277 7.50% Due
4/1/2018 754,057
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 500,000 Federal National Mortgage
Association CMO 93-61HB
6.75% Due 3/25/2022 $ 479,780
545,569 Government National
Mortgage Association,
Custom #152027 8.000%
Due 10/20/2016 554,805
18,008 Government National
Mortgage Association,
Custom #209105 8.000%
Due 3/20/2017 18,274
344,077 Government National
Mortgage Association,
Jumbo #000675 8.000%
Due 12/20/2016 349,902
84,619 Government National
Mortgage Association,
Jumbo #000710 8.000%
Due 2/20/2017 85,868
1,804,787 Government National
Mortgage Association,
Pass Thru 8.00% Due
11/15/2024 1,825,775
863,729 Government National
Mortgage Association,
Pass Thru Pool #377003
8.00% Due 8/15/2024 873,773
860,252 Government National
Mortgage Association,
Pass Thru Pool #385850
8.00% Due 8/15/2024 870,256
850,652 Government National
Mortgage Association,
Pass Thru Poo1 #354611
7.00% Due 7/15/2023 819,018
2,314 Government National
Mortgage Association,
Pool #002919 8.00% Due
2/15/2004 2,370
2,379 Government National
Mortgage Association,
Pool #010855 8.00% Due
07/15/2006 2,439
36,453 Government National
Mortgage Association,
Pool #011192 7.25% Due
4/15/2006 36,548
16,899 Government National
Mortgage Association,
Pool #025811 9.00% Due
1/15/2009 17,983
89,642 Government National
Mortgage Association,
Pool #05214 8.00% Due
7/15/2005 91,861
43,921 Government National
Mortgage Association,
Pool #1350 6.50% Due
3/15/2002 43,506
</TABLE>
See Notes to Financial Statements 42
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 221,654 Government National
Mortgage Association,
Pool #169957 8.50% Due
7/15/2016 $ 230,666
157,701 Government National
Mortgage Association,
Pool #193256 8.00% Due
3/15/2017 161,263
308,552 Government National
Mortgage Association,
Pool #196754 8.50% Due
2/15/2017 321,313
140,628 Government National
Mortgage Association,
Pool #202887 8.00% Due
4/15/2017 143,805
66,187 Government National
Mortgage Association,
Pool #205624 8.50% Due
3/15/2017 68,924
270,901 Government National
Mortgage Association,
Pool #213606 8.00% Due
4/15/2017 277,020
14,357 Government National
Mortgage Association,
Pool #216159 8.00% Due
4/15/2017 14,681
280,959 Government National
Mortgage Association,
Pool #218150 8.00% Due
6/15/2017 287,306
518,899 Government National
Mortgage Association,
Pool #226673 9.50% Due
07/15/2017 559,590
13,377 Government National
Mortgage Association,
Pool #247493 8.00% Due
7/15/2018 13,659
7,694 Government National
Mortgage Association,
Pool #290013 8.00% Due
4/15/2020 7,824
202,988 Government National
Mortgage Association,
Pool #290123 8.00% Due
6/15/2020 206,416
180,001 Government National
Mortgage Association,
Pool #291195 8.00% Due
5/15/2020 183,040
769,716 Government National
Mortgage Association,
Pool #364979 8.00% Due
04/15/2024 778,667
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 835,413 Government National
Mortgage Association,
Pool #373826 8.00% Due
9/15/2023 $ 845,888
6,800,000 United States Treasury
Zero Coupon 0% Due
2/15/2006 3,613,785
10,020,000 United States Treasury
Bonds 9.25% Due
2/15/2016 12,340,241
3,100,000 United States Treasury
Notes 8.75% Due
8/15/2000 3,344,125
6,880,000 United States Treasury
Notes 5.75% Due
10/31/1997 6,873,540
4,610,000 United States Treasury
Notes 5.50% Due
9/30/1997 4,598,475
6,025,000 United States Treasury
Notes 6.00% Due
11/30/1997 6,032,530
12,000,000 United States Treasury
Notes 6.50% Due
5/15/2005 11,842,500
19,180,000 United States Treasury
Zero Coupon 0% Due
2/15/2010 7,574,355
1,000,000 United States Treasury
Zero Coupon 0% Due
2/15/1999 864,759
5,000,000 United States Treasury
Notes 7.875% Due
11/15/1999 5,217,180
1,100,000 United States Treasury
Notes 5.625% Due
8/31/1997 1,098,280
7,000,000 United States Treasury
Zero Coupon 0% Due
2/15/2002 4,959,073
5,000,000 United States Treasury
Zero Coupon 0% Due
5/15/2004 3,016,695
------------
Total United States Government and Agency
Obligations (Cost $140,150,936) $140,759,787
------------
SHORT TERM INVESTMENTS 0.7%
UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS
$ 1,000,000 Federal Home Loan Board
Discount Note 5.70% Due
10/01/1996 (Cost
$1,000,000) $ 1,000,000
------------
Total Investments (Cost
$147,463,093) $148,337,131
Other Assets, Less Liabilities 1.3% 1,967,147
------ ------------
Net Assets 100.0% $150,304,278
------ ------------
------ ------------
</TABLE>
See Notes to Financial Statements 43
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$147,463,093)--Note 2(A) $148,337,131
Cash 269,278
Receivable for units sold 187,445
Interest receivable 1,639,524
Other assets 28,375
------------
150,461,753
LIABILITIES:
Payable for units redeemed $17,801
Payable to investment manager 40,701
Accrued expenses 98,973 157,475
------- ------------
NET ASSETS at value, applicable to 4,882,232
outstanding units of
beneficial interest--Note 5 $150,304,278
------------
------------
NET ASSET VALUE offering and redemption price per
unit
($150,304,278 divided by 4,882,232 units) $ 30.79
------------
------------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $9,865,990
----------
Total Income $9,865,990
Expenses:
Investment manager's fees--Note 3(A) 489,590
Shareholder servicing fees and expenses--Note 3(B) 543,272
Custodian fees and expenses 32,233
Legal and auditing fees 22,479
Consultant fees 10,389
Trustees' fees and expenses--Note 3(C) 20,276
Other 55,375
----------
Total Expenses 1,173,614
----------
INVESTMENT INCOME--NET 8,692,376
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS--Note 4:
Net realized (loss) on investments (15,324)
Unrealized (depreciation) on investments (2,644,736)
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS (2,660,060)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,032,316
----------
----------
</TABLE>
See Notes to Financial Statements
44
<PAGE>
ACTIVELY MANAGED BOND FUND
(CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 8,692,376 $ 8,025,855
Net realized (loss) on investments (15,324) (89,181)
Unrealized appreciation (depreciation) on investments (2,644,736) 9,180,073
------------ ------------
Net increase in net assets resulting from operations 6,032,316 17,116,747
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 28,269,160 15,769,704
Value of units redeemed (24,124,192) (28,969,909)
------------ ------------
Net increase (decrease) in net assets resulting from
capital
transactions 4,144,968 (13,200,205)
------------ ------------
Net increase 10,177,284 3,916,542
NET ASSETS at beginning of year 140,126,994 136,210,452
------------ ------------
NET ASSETS at end of year $150,304,278 $140,126,994
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements
45
<PAGE>
INTERMEDIATE-TERM BOND FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
CORPORATE BONDS 8.3%
$ 800,000 Ford Motor Co. CMO 1993-A
5.78% Due 1/01/1999 $ 787,359
2,500,000 General Telephone Of
California 6.75% Due
12/01/1997 2,506,580
1,500,000 New Jersey Bell Tel Deb
4.875% Due 11/1/2000 1,399,022
1,500,000 Pepsico Inc. 7.625% Due
12/18/1998 1,530,000
------------
Total Corporate Bonds (Cost $6,270,126) $ 6,222,961
------------
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS 90.1%
$ 2,000,000 Federal Home Loan Bank
Notes 6.27% Due
1/14/2004 $ 1,907,616
1,000,000 Federal Home Loan
Mortgage Corp. 8.15%
Due 9/12/2006 1,004,512
1,000,000 Federal Home Loan
Mortgage Corp. 6.355%
Due 8/8/2005 950,888
1,000,000 Federal Home Loan
Mortgage Corp. 6.91%
Due 6/20/2005 972,683
1,000,000 Federal Home Loan
Mortgage Corp. 7.29%
Due 4/7/2004 989,930
1,013,348 Federal Home Loan
Mortgage Corp. #A
CMO 8.75% Due
07/15/2000 1,029,043
1,500,000 Federal Home Loan
Mortgage Corp. CMO
1489G 5.85% Due
10/15/2006 1,443,839
1,000,000 Federal Home Loan
Mortgage Corp. CMO 1331
H 7% Due 11/15/2005 1,006,559
4,146,667 Federal Home Loan
Mortgage Corp. CMO
1278G 7.00% Due
11/15/2020 4,162,752
1,000,000 Federal Home Loan
Mortgage Corp. CMO 1324
VC
7.00% Due 6/15/2001
1324Vc 1,008,329
18,585 Federal Home Loan
Mortgage Corp. Pool
#200030 9.00% Due
03/01/2001 19,339
51,637 Federal Home Loan
Mortgage Corp. Pool
#200034 8.50% Due
05/01/2001 53,148
24,707 Federal Home Loan
Mortgage Corp. Pool
#200035 9.00% Due
05/01/2001 25,709
92,328 Federal Home Loan
Mortgage Corp. Pool
#200040 9.00% Due
06/01/2001 96,075
79,883 Federal Home Loan
Mortgage Corp. Pool
#200070 7.50% Due
04/01/2002 80,136
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 134,744 Federal Home Loan
Mortgage Corp. Pool
#200071 7.50% Due
05/01/2002 $ 135,171
122,999 Federal Home Loan
Mortgage Corp. Pool
#212242 7.50% Due
07/01/2001 123,556
31,005 Federal Home Loan
Mortgage Corp. Pool
#212719 7.50% Due
08/01/2001 31,145
85,342 Federal Home Loan
Mortgage Corp. Pool
#213857 7.50% Due
11/01/2001 85,728
32,369 Federal Home Loan
Mortgage Corp. Pool
#214040 7.50% Due
12/01/2001 32,515
146,145 Federal Home Loan
Mortgage Corp. Pool
#251478 7.00% Due
12/01/1998 145,679
2,108 Federal Home Loan
Mortgage Corp. Pool
#297945 7.50% Due
05/01/1997 2,086
56,740 Federal Home Loan
Mortgage Corp. Pool
#309883 7.00% Due
09/01/1998 56,445
76,222 Federal Home Loan
Mortgage Corp. Pool
#320139 8.00% Due
09/01/2001 77,737
648,043 Federal Home Loan
Mortgage Corp. Remic
1680E 6.50% Due
2/15/2024 614,046
660,000 Federal Home Loan
Mortgage Corp.Str Note
4.90% Due 9/3/2003 647,634
1,000,000 Federal Home Loan
Mortgage. Corp. CMO
1534 F 6.00% Due
04/15/2020 966,039
1,000,000 Federal National Mortgage
Association CMO G93-8PG
6.50% Due 7/25/2018 969,529
2,000,000 Federal National Mortgage
Association
6.38% Due 6/25/2003 1,931,938
1,000,000 Federal National Mortgage
Association
6.25% Due 1/14/2004 954,329
1,500,000 Federal National Mortgage
Association 6.24% Due
1/28/2004 1,418,099
111,112 Federal National Mortgage
Association CMO
1991-19G 7% Due
02/25/2019 110,728
2,000,000 Federal National Mortgage
Association CMO
1993-162C 3.00% Due
8/25/2023 1,767,918
</TABLE>
See Notes to Financial Statements 46
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 1,000,000 Federal National Mortgage
Association CMO
1994-10M 6.50% Due
06/25/2023 $ 950,219
661,779 Federal National Mortgage
Association CMO 93-244A
0% Due 11/25/2023 619,617
2,000,000 Federal National Mortgage
Association CMO
G93-27AE 6.00% Due
11/25/2019 1,835,338
1,000,000 Federal National Mortgage
Association Note 7.00%
Due 8/12/2002 985,139
4,110 Federal National Mortgage
Association Pool #
31435 8.50% Due
08/01/2001 4,239
764,780 Federal National Mortgage
Association Pool
#050987 6.50% Due
2/1/2009 747,212
41,052 Federal National Mortgage
Association Pool #26607
9.00% Due 05/01/2001 42,876
21,750 Federal National Mortgage
Association Pool #26707
9.00% Due 05/01/2001 22,717
92,258 Federal National Mortgage
Association Pool #28645
9.00% Due 06/01/2001 96,357
191,279 Federal National Mortgage
Association Pool #28785
9.00% Due 06/01/2001 199,777
35,930 Federal National Mortgage
Association Pool #29470
9.00% Due 07/01/2001 37,526
9,609 Federal National Mortgage
Association Pool #29658
8.50% Due 07/01/2001 9,909
82,528 Federal National Mortgage
Association Pool #30409
8.50% Due 09/01/2001 85,112
160,171 Federal National Mortgage
Association Pool #46609
8.00% Due 05/01/2002 163,800
251,814 Federal National Mortgage
Association Pool #46872
8.00% Due 05/01/2002 257,162
18,471 Federal National Mortgage
Association Pool #47137
8.00% Due 05/01/2002 18,890
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 154,587 Federal National Mortgage
Association Pool #47402
8.00% Due 05/01/2002 $ 158,090
166,380 Federal National Mortgage
Association Pool #47932
8.00% Due 05/01/2002 170,150
101,754 Federal National Mortgage
Association Pool #48103
8.00% Due 05/01/2002 104,059
33,009 Federal National Mortgage
Association Pool #7242
8.50% Due 07/01/2001 34,042
1,266,553 Federal National Mortgage
Association Pool #82407
9.00% Due 3/1/2004 1,323,255
414,498 Federal National Mortgage
Association Pool #87277
7.50% Due 4/1/2018 418,921
1,338,545 Federal National Mortgage
Association CMO 1992-9G
7.00% Due 7/25/2005 1,345,250
783,001 Federal National Mortgage
Association CMO
1993-194E 5.70% Due
6/25/2008 718,206
500,000 Federal National Mortgage
Association CMO
1993-167 6.35% Due
1/25/2022 473,340
1,000,000 Federal National Mortgage
Association CMO
1993-38V 5.75% Due
8/25/2021 917,779
2,000,000 Federal National Mortgage
Association, 7.46% Due
9/30/1999 2,029,678
1,000,000 Federal National Mortgage
Association, 6.58% Due
3/1/2006 951,489
1,000,000 Federal National
Mortgage. Assoc. CMO
G93-3G 6.00% Due
06/25/2018 951,219
1,000,000 Federal Home Loan
Mortgage Corp. CMO
1611-I 6.00% Due
2/15/2023 926,349
500,000 Federal Home Loan
Mortgage Corp. CMO
1624-M 6.00% Due
12/15/2008 461,235
1,024,274 Federal National Mortgage
Association CMO
X-225C-UC 6.25% Due
9/25/2022 919,623
850,652 Government National
Mortgage Association
Pool #354611 7.00% Due
7/15/2023 819,018
10,000 United States Treasury
Bonds 3.50% due
11/15/1998 9,834
10,000,000 United States Treasury
Notes 7.875% due
11/15/1999 10,434,360
</TABLE>
See Notes to Financial Statements 47
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 5,000,000 United States Treasury
Zero Coupon 0% due
2/15/1998 $ 4,612,244
4,000,000 United States Treasury
Zero Coupon 0% due
2/15/1999 3,459,035
4,000,000 United States Treasury
Zero Coupon 0% due
8/15/2002 2,739,636
3,000,000 United States Treasury
Zero Coupon 0% due
2/15/2000 2,428,197
------------
Total United States Government and Agency
Obligations (Cost $66,523,933) $ 67,301,779
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
SHORT TERM INVESTMENTS 0.5%
UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS
$ 400,000 Federal Home Loan Board
Discount Note 5.70% Due
10/01/1996 (Cost
$400,000) $ 400,000
------------
Total Investments (Cost $73,194,059) 98.9% $ 73,924,740
Other Assets, Less Liabilities 1.1% 829,220
------ ------------
Net Assets 100.0% $ 74,753,960
------ ------------
------ ------------
</TABLE>
See Notes to Financial Statements 48
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$73,194,059)--Note 2(A) $73,924,740
Cash 61,238
Receivable for units sold 63,703
Interest receivable 813,062
Other assets 16,828
-----------
74,879,571
LIABILITIES:
Payable for units redeemed $25,593
Payable to investment managers 22,369
Accrued expenses 77,649 125,611
------- -----------
NET ASSETS at value, applicable to 2,550,981
outstanding units of
beneficial interest--Note 5 $74,753,960
-----------
-----------
NET ASSET VALUE offering and redemption price per
unit
($74,753,960 divided by 2,550,981 units) $ 29.30
-----------
-----------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $5,947,702
----------
Total Income $5,947,702
Expenses:
Investment manager's fees--Note 3(A) 303,786
Shareholder servicing fees and expenses--Note 3(B) 403,716
Custodian fees and expenses 25,632
Legal and auditing fees 19,775
Consultant fees 10,389
Trustees' fees and expenses--Note 3(C) 20,275
Insurance premiums 18,188
Other 26,323
----------
Total Expenses 828,084
----------
INVESTMENT INCOME--NET 5,119,618
REALIZED GAIN AND UNREALIZED (LOSS) ON INVESTMENTS--Note
4:
Net realized gain on investments 672,005
Unrealized (depreciation) on investments (2,099,642)
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS (1,427,637)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,691,981
----------
----------
</TABLE>
See Notes to Financial Statements
49
<PAGE>
INTERMEDIATE-TERM BOND FUND
(CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 5,119,618 $ 5,519,273
Net realized gain on investments 672,005 148,558
Unrealized appreciation (depreciation) on investments (2,099,642) 2,902,615
----------- -----------
Net increase in net assets resulting from operations 3,691,981 8,570,446
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 8,291,530 11,398,598
Value of units redeemed (27,711,540) (19,266,677)
----------- -----------
Net (decrease) in net assets resulting from capital
transactions (19,420,010) (7,868,079)
----------- -----------
Net increase (decrease) (15,728,029) 702,367
NET ASSETS at beginning of year 90,481,989 89,779,622
----------- -----------
NET ASSETS at end of year $74,753,960 $90,481,989
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
50
<PAGE>
SHORT-TERM INVESTMENT FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
COMMERCIAL PAPER 3.9%
$ 1,000,000 Merrill Lynch 5.30% Due
10/4/1996 (Cost
$999,558) $ 999,558
------------
CORPORATE NOTES 6.7%
$ 500,000 CSX Transportation Inc.
5.55% Due 3/15/1997 $ 499,659
106,000 Merrill Lynch Note 5.00%
Due 12/15/1996 105,854
500,000 Pacific Gas & Electric
4.90% Due 12/9/1996 499,543
500,000 Pepsico Inc. 5.00% Due
2/24/1997 499,065
105,000 Pitney Bowes Credit Corp.
5.625% Due 2/15/1997 104,959
------------
Total Commercial Paper (Cost $1,710,294) $ 1,709,080
------------
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS 90.8%
$ 500,000 Federal Farm Credit Bank
4.61% Due 12/10/1996 $ 499,381
1,000,000 Federal Farm Credit Bank
4.95% Due 3/3/1997 997,685
500,000 Federal Farm Credit Bank
4.20% Due 10/28/1996 499,497
250,000 Federal Home Loan Bank
5.61% Due 1/26/1998 248,472
250,000 Federal Home Loan Bank
4.72% Due 12/30/1996 249,515
400,000 Federal Home Loan Bank
5.49% Due 1/16/1998 397,400
1,000,000 Federal Home Loan Bank
5.255% Due 1/29/1997 998,929
500,000 Federal Home Loan Bank
4.60% Due 12/16/1996 499,290
500,000 Federal Home Loan Bank
5.41% Due 3/14/1997 499,312
500,000 Federal Home Loan Bank
5.35% Due 3/14/1997 499,445
500,000 Federal Home Loan Bank
5.035% Due 3/6/1997 498,993
750,000 Federal Home Loan Bank
4.575% Due 11/12/1996 749,115
450,000 Federal Home Loan Bank
4.57% Due 12/30/1996 449,001
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 750,000 Federal Home Loan Bank
4.75% Due 1/13/1997 $ 748,371
100,000 Federal Home Loan Bank
4.61% Due 1/6/1997 99,801
450,000 Federal Home Loan
Mortgage Corp. 4.625%
Due 11/15/1996 450,000
200,000 Federal Home Loan
Mortgage Corp. 4.525%
Due 1/27/1997 199,377
250,000 Federal Home Loan
Mortgage Corp. 4.80%
Due 1/20/1997 249,657
150,000 Federal Home Loan
Mortgage Corp. Note
5.20% Due 8/4/1997 149,108
500,000 Federal Home Loan
Mortgage Corp.
Structured Note 5.10%
Due 1/13/1997 499,370
500,000 Federal Home Loan
Mortgage Corp. 5.47%
Due 4/1/1997 499,913
30,000 Federal National Mortgage
Association 5.35% Due
10/10/1997 30,000
250,000 Federal National Mortgage
Association 4.5% Due
11/1/1996 249,717
750,000 Federal National Mortgage
Association Discount
Note 5.24% Due
10/2/1996 749,890
1,000,000 Federal National Mortgage
Association Medium Term
Note 5.60% Due 11/1/96 999,934
500,000 Tennessee Valley
Authority
Discount Note
4.60% Due 12/15/1996 498,992
10,800,000 Tennessee Valley
Authority
Discount Note
5.14% Due 10/02/1996 10,798,456
------------
Total United States Government and Agency
Obligations (Cost $23,312,953) $ 23,308,621
------------
Total Investments (Cost $26,022,805) $ 26,017,259
Liabilities, net of other assets -1.4% (349,172)
------ ------------
Net Assets 100.0% $ 25,668,087
------ ------------
------ ------------
</TABLE>
See Notes to Financial Statements 51
<PAGE>
SHORT-TERM INVESTMENT FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$26,022,805)--Note 2(A) $26,017,259
Cash 172,835
Receivable for units sold 31,668
Interest receivable 214,535
Other assets 14,475
-----------
26,450,772
LIABILITIES:
Payable for units redeemed $720,477
Payable to investment managers 5,352
Accrued expenses 56,856 782,685
-------- -----------
NET ASSETS at value, applicable to 1,267,898
outstanding units of
beneficial interest--Note 5 $25,668,087
-----------
-----------
NET ASSET VALUE offering and redemption price per
unit
($25,668,087 divided by 1,267,898 units) $ 20.24
-----------
-----------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $1,487,757
----------
Total Income $1,487,757
Expenses:
Investment manager's fees--Note 3(A) 66,957
Shareholder servicing fees and expenses--Note 3(B) 158,931
Custodian fees and expenses 16,262
Legal and auditing fees 18,074
Consultant fees 6,932
Trustees' fees and expenses--Note 3(C) 20,276
Medical and life insurance 8,136
Printing and postage 8,839
Other 15,284
----------
Total Expenses 319,691
Less expense reimbursement--Note 3(A) (105,450)
----------
Net Expenses 214,241
----------
INVESTMENT INCOME--NET 1,273,516
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS--Note 4:
Realized gain on investments --
Unrealized (depreciation) on investments (12,603)
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS (12,603)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,260,913
----------
----------
</TABLE>
See Notes to Financial Statements
52
<PAGE>
SHORT-TERM INVESTMENT FUND
(CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 1,273,516 $ 1,437,317
Net realized gain on investments -- --
Unrealized appreciation (depreciation) on investments (12,603) 29,085
----------- -----------
Net increase in net assets resulting from operations 1,260,913 1,466,402
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 11,983,285 11,985,311
Value of units redeemed (14,936,022) (16,066,312)
----------- -----------
Net (decrease) in net assets resulting from capital
transactions (2,952,737) (4,081,001)
----------- -----------
Net (decrease) (1,691,824) (2,614,599)
NET ASSETS at beginning of year 27,359,911 29,974,510
----------- -----------
NET ASSETS at end of year $25,668,087 $27,359,911
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1--GENERAL
Participation in RSI Retirement Trust ("RSI") is limited to
IRA's and trusts established by eligible employers, which
include banks, savings banks, credit unions, savings and loan
associations and other organizations determined by the Trustees
of RSI to have business interests in common with organizations
participating in RSI. Such trusts are exempt from taxation
under Section 501(a) of the Internal Revenue Code ("Code") and
have been established under pension or profit sharing plans
which are qualified under Section 401 of the Code
("Participating Plans").
In order to provide investment products to Participating
Plans, RSI operates, pursuant to an Agreement and Declaration
of Trust amended effective as of August 31, 1984 ("Trust
Agreement"), as a series fund currently issuing as of September
30, 1996 seven classes of units of beneficial interest: Core
Equity Fund, Emerging Growth Equity Fund, Value Equity Fund,
International Equity Fund, Actively Managed Bond Fund,
Intermediate-Term Bond Fund and Short-Term Investment Fund
("Investment Funds"). The Trust Agreement was amended in 1984
to provide for the continued operation of RSI as an open-end
management investment company under the Investment Company Act
of 1940 ("Act"). Retirement System Distributors Inc.
("Distributors") acts as the distributor of the Investment
Funds' units of beneficial interest. The Distributor is a
wholly owned subsidiary of Retirement System Group Inc.
("Group").
On April 24, 1992, the remaining unitholders of RSI's
Dedicated Bond Fund sold their units and the proceeds were used
to purchase units in other RSI fixed-income funds. The
Dedicated Bond Fund has been inactive subsequent to this date,
but may be reactivated again, should a number of clients elect
to "immunize" their retiree liabilities. The financial
highlights of the Dedicated Bond Fund are presented for the
period from October 1, 1991 through April 24, 1992, the date on
which all of its units were redeemed.
The financial statements of the Investment Funds are
presented on a combined and individual basis. The combined
financial statements should be read in conjunction with the
individual financial statements.
1996 ANNUAL MEETING RESULTS:
On July 1, 1996, RSI held its Annual Meeting of Trust
Participants to consider: (1) the election of four Trustees for
terms of three years; (2) ratification or rejection of
McGladrey & Pullen as independent accountants of RSI for the
fiscal year ending September 30, 1996; and (3) whether or not
to increase the annual retainer fees and meetings fees paid to
Trustees. These results, which are unaudited, are on the
following page.
54
<PAGE>
<TABLE>
<CAPTION>
PROPOSAL 1: ELECTION OF TRUSTEES
- --------------------------------------------------------------------------
SHARES % OF SHARES VOTED % OF OUTSTANDING SHARES
<S> <C> <C> <C>
NOMINEE:
William Dannecker
FOR 12,217,386 99.98 72.53
AGAINST 1,850 .02 10.98
ABSTAIN 0 -- --
NOMINEE:
Covington Hardee
FOR 11,205,043 90.95 66.52
AGAINST 1,014,193 9.05 6.02
ABSTAIN 0 -- --
NOMINEE:
Maurice E. Kinkade
FOR 11,342,779 92.27 67.34
AGAINST 876,457 7.73 5.20
ABSTAIN 0 -- --
NOMINEE:
William G. Lillis
FOR 11,587,396 94.55 68.79
AGAINST 631,840 5.45 3.75
ABSTAIN 0 -- --
<CAPTION>
PROPOSAL 2: APPROVAL OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------
SHARES % OF SHARES VOTED % OF OUTSTANDING SHARES
<S> <C> <C> <C>
FOR 12,217,398 99.98 72.53
AGAINST 0 -- --
ABSTAIN 1,837 0.02 10.91
<CAPTION>
PROPOSAL 3: APPROVAL OF INCREASE IN
ANNUAL RETAINER FEES AND TRUSTEE MEETING FEES
- --------------------------------------------------------------------------
SHARES % OF SHARES VOTED % OF OUTSTANDING SHARES
<S> <C> <C> <C>
FOR 10,893,829 87.83 64.67
AGAINST 1,294,039 11.88 7.68
ABSTAIN 31,367 0.29 0.19
</TABLE>
55
<PAGE>
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
(A) SECURITIES VALUATION: Except for debt securities with
remaining maturities of 60 days or less, investments for
which market prices are available are valued as follows:
(1)each listed security is valued at its closing price
obtained from the respective exchange on which the
security is listed, or, if there were no sales on that
day, at its last reported closing or bid price. For
international securities other than those traded on Far
East markets, the last recorded prices at the close of
business on the New York Stock Exchange are used to
price the holdings. For securities traded in the Far
East markets, the closing prices are used to value the
securities.
(2)each unlisted security quoted on the NASDAQ is valued at
the last current bid price obtained from the NASDAQ;
(3)United States Government and agency obligations and
certain other debt obligations are valued based upon bid
quotations from various market makers for identical or
similar obligations.
(4)mortgage-backed securities and asset-backed securities
are valued with a cash flow model based on both the
pre-payment assumptions (Public Securities Association
median) and the price-yield spreads over comparable
United States Treasury Securities.
(5)short-term money market instruments (such as
certificates of deposit, bankers' acceptances and
commercial paper) are valued by bid quotations or by
reference to bid quotations of available yields for
similar instruments of issuers with similar credit
rating.
Debt securities with remaining maturities of 60 days or
less are valued on the basis of amortized cost. In the absence
of an ascertainable market value, investments are valued at
their fair value as determined by the officers of RSI using
methods and procedures reviewed and approved by RSI's Trustees.
Investments and other assets and liabilities denominated in
foreign currencies are translated to US. dollars at the
prevailing rates of exchange. It is not practical to isolate
that portion of income arising from changes in the exchange
rates from the portion arising from changes in the market
prices of securities.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized
gain and loss from securities transactions are recorded on
a specific cost basis. Dividend income is recognized on the
ex-dividend date or when the dividend information is known;
interest income, including, where applicable, amortization
of discount and premium on investments and zero coupon
bonds, is recognized on an accrual basis.
56
<PAGE>
The Investment Funds may enter into repurchase agreements
with financial institutions, deemed to be creditworthy by
the Investment Funds' Manager, subject to the sellers'
agreement to repurchase and the Funds' agreement to resell
such securities at a mutually agreed upon price. Securities
purchased subject to repurchase agreements are deposited
with the Investment Funds' custodian and, pursuant to the
terms of the repurchase agreement, must have an aggregate
market value greater than or equal to the repurchase price
plus accrued interest at all times. If the value of the
underlying securities falls below the value of the
repurchase price plus accrued interest, the Investment
Funds will require the seller to deposit additional
collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on
its repurchase obligation, the Investment Funds maintain
the right to sell the underlying securities at market value
and may claim any resulting loss against the seller.
(C) DIVIDENDS TO UNITHOLDERS: RSI does not normally declare
nor pay dividends on its net investment income or capital
gains.
(D) FEDERAL INCOME TAXES: RSI has received a determination
letter from the Internal Revenue Service stating that it is
exempt from taxation under Section 501(a) of the Internal
Revenue Code with respect to funds derived from
Participating Plans which are pension or profit sharing
trusts maintained in conformity with Section 401 of the
Code.
(E) ACCOUNTING ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the
date of the financial statements and the reported amounts
of increase and decrease in net assets from operations
during the period. Actual results could differ from those
estimates.
(F) OTHER: RSI accounts separately for the assets, liabilities
and operations of each Investment Fund. Expenses directly
attributed to each Investment Fund are charged to that
Investment Fund's operations; expenses which are applicable
to all Investment Funds are allocated among them.
Administrative expenses incurred by RSI relating to the
administration of Plans of Participation are charged to
Full Participation Employers (as defined in the Trust
Agreement) and are not included in the operation of the
Investment funds.
The Investment Funds may enter into financial futures
contracts which require initial margin deposits of cash or
U.S. Government securities equal to approximately 10% of
the value of the contract. During the period the financial
futures are open, changes in the value of the contracts are
recognized by "marking to market" on a daily basis to
reflect the market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments
are
57
<PAGE>
made or received to reflect daily unrealized gains or
losses. The Investment Fund is exposed to market risk as a
result of movements in securities, values and interest
rates.
The Investment Funds may write options on equity
securities. Premiums received for options written are
recorded as a liability and "marked to market" daily to
reflect the current value of the option written. If the
written option is exercised prior to expiration, the
premium received is treated as a realized gain. If the
written option is exercised, the premium received is added
to the sale proceeds of the underlying security.
NOTE 3--INVESTMENT MANAGERS' FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
(A) Retirement System Investors Inc. ("Investors") is the
Investment Advisor for each Investment Fund. Investors has
retained sub-advisors to manage the International Equity
Fund and the Emerging Growth Equity Fund. Investors acts as
Investment Manager to the remaining Trust Investment Funds,
and in the case of all Investment Funds, exercises general
oversight with respect to the portfolio management,
including reporting of manager performance to the Trustees
and Investment Committee, compliance matters, sub-advisory
portfolio analysis, and presentations to unitholders. Prior
to April 1, 1995, NFJ Investment Group was the sub-advisor
of the Value Equity Fund.
Fees incurred by Investors pursuant to the provisions of
its investment management contracts are payable monthly to
Investors and quarterly to all sub-advisors and are
computed based on the value of the net assets of each
Investment Fund determined on a monthly or quarterly bases
as appropriate at the rates listed in the following table.
<TABLE>
<CAPTION>
INVESTMENT FUND INVESTMENT MANAGER FEE
- ---------------------------- ---------------------------------- -----------------------------
<S> <C> <C>
Core Equity Fund Retirement System Investors Inc. .60% on first $50 million
.50% on next $150 million,
and .40% over $200 million
Value Equity Fund Retirement System Investors Inc. .60% on first $10 million,
.50% on next $10 million,
.40% on next $20 million,
.30% on next $20 million,
.20% on next $40 million,
.15% on next $50 million,
and .10% over $150 million
Emerging Growth Equity Fund Friess Associates, Inc. 1.00%
(Sub-adviser) 1.00% on first $25 million,
The Putnam Advisory and .75% over $25 million
Company, Inc. (Sub-adviser)
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT FUND INVESTMENT MANAGER FEE
- ---------------------------- ---------------------------------- -----------------------------
<S> <C> <C>
International Equity Fund Morgan Grenfell Investment .60% on first $50 million,
Services Limited and .50% over $50 million
(Sub-adviser)
Actively Managed Bond Fund Retirement System Investors Inc. .40% on first $50 million,
.30% on next $100 million,
and .20% over $150 million
Intermediate-Term Bond Fund Retirement System Investors Inc. .40% on first $50 million,
.30% on next $100 million,
and .20% over $150 million
Short-Term Investment Fund Retirement System Investors Inc. .25 on first $50 million,
and .20% over $50 million
</TABLE>
RSI's investment management agreement with Investors
provides for RSI to receive a management fee of 0.20% per
annum of the average daily net assets of the Investment
Funds that employ a sub-advisor. For the year ended
September 30, 1996, Investors has voluntarily waived a
portion of its investment manager's fee from the Short-Term
Investment Fund amounting to $105,450, to limit the Funds
annual expenses to 0.80% of average net assets.
(B) Shareholder servicing fees and expenses for the year ended
September 30, 1996 consist of fees paid to Retirement
System Consultants Inc., (a subsidiary of Group) under a
contract for providing administrative services for the
Investment Funds. The fee arrangement applicable for each
of the investment funds is as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS FEE
- --------------------------------- ---------
<S> <C>
First $25 million .60%
Next $25 million .50%
Next $25 million .40%
Next $25 million .30%
Over $100 million .20%
</TABLE>
(C) Each Trustee who is not an officer of RSI receives an
annual fee of $9,500 and a fee of $950 per meeting
attended, except that such fee is $400 for a telephonic
meeting. In addition, the chair of each committee receives
an additional $100 per meeting attended. Several Trustees
also participate in a deferred compensation plan which
permits each Trustee to defer payment of a portion of their
fees. A Trustee and all officers of RSI are also officers
of Group and its subsidiaries.
59
<PAGE>
NOTE 4--SECURITIES TRANSACTIONS
The following summarizes the securities transactions, other
than short-term securities, by the various Investment Funds for
the year ended September 30, 1996:
<TABLE>
<CAPTION>
PURCHASES SALES
---------------- ----------------
<S> <C> <C>
Core Equity Fund $ 20,591,420 $ 18,876,866
Value Equity Fund 28,912,110 27,309,391
Emerging Growth Equity Fund 118,947,460 123,134,187
International Equity Fund 23,212,808 17,774,439
Actively Managed Bond Fund 38,040,465 24,452,623
Intermediate-Term Bond Fund 10,825,211 24,223,140
</TABLE>
Net unrealized appreciation (depreciation) consisting of
gross unrealized appreciation and gross unrealized depreciation
at September 30, 1996 for each of the Investment Funds was as
follows:
<TABLE>
<CAPTION>
NET UNREALIZED GROSS
APPRECIATION GROSS UNREALIZED UNREALIZED
(DEPRECIATION) APPRECIATION DEPRECIATION
---------------- ---------------- --------------
<S> <C> <C> <C>
Core Equity Fund $ 116,694,213 $ 116,758,721 $ (64,508)
Value Equity Fund 9,436,271 9,743,576 (307,305)
Emerging Growth Equity Fund 24,154,266 26,330,167 (2,175,901)
International Equity Fund 5,697,472 7,074,342 (1,376,870)
Actively Managed Bond Fund 874,038 2,429,273 (1,555,235)
Intermediate-Term Bond Fund 730,681 1,444,334 (713,653)
Short-Term Investment Fund (5,546) 5,037 (10,583)
</TABLE>
The following summarizes the market value of securities
that were on loan to brokers and the value of securities and
cash held as collateral for these loans at September 30, 1996:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
-------------- --------------
<S> <C> <C>
Core Equity Fund $ 1,745,656 $ 1,855,044
Value Equity Fund 3,756,622 3,953,149
Emerging Growth Equity Fund 22,314,509 23,784,418
International Equity Fund 3,110,798 3,324,391
Actively Managed Bond Fund 27,601,790 28,314,838
Intermediate Term Bond Fund 4,471,964 4,563,000
</TABLE>
These securities lending arrangements may result in
significant credit exposure in the event the counterparty to
the transaction was unable to fulfill its contractual
obligations. In accordance with industry practice, the
securities lending agreements are generally collaterized by
cash or securities with a market value in excess of the
Investment Funds obligation under the contract. The Investment
Funds attempt to
60
<PAGE>
minimize credit risk associated with these activities by
monitoring broker credit exposure and collateral values on a
daily basis and requiring additional collateral to be deposited
with or returned to the Investment Funds when deemed necessary.
For the year ended September 30, 1996 the Value Equity
Fund, Emerging Growth Equity Fund and the International Equity
Fund each had expenses paid through brokerage/service
arrangements which amounted to $11,620, $36,673, and $20,083,
respectively.
NOTE 5--CAPITAL TRANSACTIONS:
At September 30, 1996 there were an unlimited number of
units of beneficial interest authorized for each Investment
Fund.
Transactions in the units of beneficial interest of each
Investment Fund for the year ended September 30, 1996 were as
follows:
<TABLE>
<CAPTION>
CORE EQUITY VALUE EQUITY
FUND FUND
----------------------- ----------------------
UNITS AMOUNT UNITS AMOUNT
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Units sold 338,372 $ 17,141,226 171,011 $ 6,089,364
Units redeemed (562,143) (28,996,541) (197,341) (7,173,870)
--------- ------------ --------- -----------
Net (decrease) (223,771) $(11,855,315) (26,330) $(1,084,506)
--------- ------------ --------- -----------
--------- ------------ --------- -----------
</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH INTERNATIONAL
EQUITY FUND EQUITY FUND
----------------------- ----------------------
UNITS AMOUNT UNITS AMOUNT
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Units sold 182,662 $ 10,600,409 209,851 $ 8,808,775
Units redeemed (228,340) (13,437,810) (108,338) (4,705,939)
--------- ------------ --------- -----------
Net increase (decrease) (45,678) $ (2,837,401) 101,513 $ 4,102,836
--------- ------------ --------- -----------
--------- ------------ --------- -----------
</TABLE>
<TABLE>
<CAPTION>
ACTIVELY MANAGED INTERMEDIATE-TERM
BOND FUND BOND FUND
----------------------- -----------------------
UNITS AMOUNT UNITS AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Units sold 942,767 $ 28,269,160 289,856 $ 8,291,530
Units redeemed (797,462) (24,124,192) (969,774) (27,711,540)
--------- ------------ --------- ------------
Net increase (decrease) 145,305 $ 4,144,968 (679,918) $(19,420,010)
--------- ------------ --------- ------------
--------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENT FUND
-----------------------
UNITS AMOUNT
--------- ------------
<S> <C> <C>
Units sold 608,462 $ 11,983,285
Units redeemed (757,202) (14,936,022)
--------- ------------
Net (decrease) (148,740) $ (2,952,737)
--------- ------------
--------- ------------
</TABLE>
61
<PAGE>
Transactions in the units of beneficial interest of each
Investment Fund for the year ended September 30, 1995 were as
follows:
<TABLE>
<CAPTION>
CORE EQUITY VALUE EQUITY
FUND FUND
----------------------- ----------------------
UNITS AMOUNT UNITS AMOUNT
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Units sold 720,368 $ 28,004,631 255,492 $ 7,261,555
Units redeemed (633,274) (24,532,607) (228,928) (6,491,239)
--------- ------------ --------- -----------
Net increase 87,094 $ 3,472,024 26,564 $ 770,316
--------- ------------ --------- -----------
--------- ------------ --------- -----------
</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH INTERNATIONAL
EQUITY FUND EQUITY FUND
---------------------- ----------------------
UNITS AMOUNT UNITS AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Units sold 291,562 $11,643,470 151,666 $ 5,659,129
Units redeemed (215,323) (8,606,464) (130,786) (4,833,851)
--------- ----------- --------- -----------
Net increase 76,239 $ 3,037,006 20,880 $ 825,278
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
ACTIVELY MANAGED INTERMEDIATE-TERM
BOND FUND BOND FUND
------------------------ -----------------------
UNITS AMOUNT UNITS AMOUNT
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Units sold 575,262 $ 15,769,704 431,437 $ 11,398,598
Units redeemed (1,064,868) (28,969,909) (735,598) (19,266,677)
---------- ------------ --------- ------------
Net (decrease) (489,606) $(13,200,205) (304,161) $ (7,868,079)
---------- ------------ --------- ------------
---------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENT FUND
-----------------------
UNITS AMOUNT
--------- ------------
<S> <C> <C>
Units sold 637,944 $ 11,985,311
Units redeemed (853,573) (16,066,312)
--------- ------------
Net (decrease) (215,629) $ (4,081,001)
--------- ------------
--------- ------------
</TABLE>
62
<PAGE>
Net assets at September 30, 1996 are comprised as follows:
<TABLE>
<CAPTION>
EMERGING
CORE EQUITY VALUE EQUITY GROWTH INTERNATIONAL
FUND FUND EQUITY FUND EQUITY FUND
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Paid-in capital (deficit) $(30,556,772) $(20,671,712) $(14,483,218) $ 3,683,466
Accumulated income (loss) 45,215,255 17,992,762 (1,781,337) (1,553,854)
Accumulated realized gain 86,003,636 45,473,627 84,246,203 31,775,452
Unrealized appreciation 116,694,213 9,436,271 24,154,266 5,696,889
------------ ------------ ------------ -----------
Net Assets $217,356,332 $ 52,230,948 $ 92,135,914 $39,601,953
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
ACTIVELY SHORT-TERM
MANAGED INTERMEDIATE-TERM INVESTMENT
BOND FUND BOND FUND FUND
------------ --------------- --------------
<S> <C> <C> <C>
Paid-in (deficit) $(30,673,613) $ (59,007,893) $(15,329,202)
Accumulated income 147,350,512 118,583,484 39,672,924
Accumulated realized gain 32,753,341 14,447,688 1,329,911
Unrealized appreciation (depreciation) 874,038 730,681 (5,546)
------------ --------------- --------------
Net Assets $150,304,278 $ 74,753,960 $ 25,668,087
------------ --------------- --------------
------------ --------------- --------------
</TABLE>
NOTE 6--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
The Investment Funds activity during the year in writing
equity call options had off-balance sheet risk of accounting
loss. These financial instruments involve market risk in excess
of the amount recognized in the Statement of Assets and
Liabilities. A written equity call option obligates the
Investment Funds to deliver the underlying security upon
exercise by the holder of the option. The Investment Funds
cover options written by owning the underlying security.
A summary of the Investment Funds option transactions
written for the year follows:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Contracts outstanding at September 30, 1995 -- --
Options written 435 $96,165
Options exercised (5 ) (2,435 )
Options expired (50 ) (21,725 )
--------- ----------
Contracts outstanding at September 30, 1996 380 $72,005
--------- ----------
--------- ----------
</TABLE>
63
<PAGE>
NOTE 7--FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CORE EQUITY FUND
--------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 46.71 $ 35.57 $ 34.49 $ 30.09 $ 27.68
-------- -------- -------- -------- --------
Net Income from Investment
Operations:
Investment income--net 0.72 0.74 0.54 0.56 0.65
Net realized and unrealized
gain (loss) on investments 9.14 10.40 0.54 3.84 1.76
-------- -------- -------- -------- --------
Total from Investment
Operations 9.86 11.14 1.08 4.40 2.41
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 56.57 $ 46.71 $ 35.57 $ 34.49 $ 30.09
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN 21.11 % 31.32 % 3.13 % 14.62 % 8.71 %
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets
Expenses (0.92)% (0.98)% (1.01)% (0.99)% (0.95)%
Investment income--net 1.40 % 1.86 % 1.56 % 1.74 % 2.25 %
Portfolio Turnover Rate 9.95 % 7.91 % 6.47 % 13.41 % 18.94 %
Average Commission Rate Paid (per
share)+ $ .05 -- -- -- --
Net Assets at End of the Year
($1,000's) $217,356 $189,942 $141,544 $146,137 $134,269
</TABLE>
-----------------------------------------
* Using average units basis.
+ Required by regulations issued in 1995.
64
<PAGE>
<TABLE>
<CAPTION>
VALUE EQUITY FUND
--------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 32.63 $ 27.05 $ 26.48 $ 22.94 $ 21.48
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income--net 0.72 0.93 0.79 0.70 0.52
Net realized and unrealized
gain (loss) on investments 6.32 4.65 (0.22) 2.84 0.94
-------- -------- -------- -------- --------
Total from Investment
Operations 7.04 5.58 0.57 3.54 1.46
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 39.67 $ 32.63 $ 27.05 $ 26.48 $ 22.94
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN 21.58 % 20.63 % 2.15 % 15.43 % 6.80 %
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets
Expenses** (1.20)% (1.32)% (1.41)% (1.70)% (1.55)%
Investment income--net 1.98 % 3.24 % 3.02 % 2.83 % 2.32 %
Portfolio Turnover Rate 61.53 % 67.06 % 40.41 % 54.46 % 14.26 %
Average Commission Rate Paid (per
share)+ $ .01 -- -- -- --
Net Assets at End of the Year
($1,000's) $52,231 $43,824 $35,603 $38,104 $33,417
</TABLE>
-----------------------------------------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for
the years ended 9/30/96 and 9/30/95.
+ Required by regulations issued in 1995.
65
<PAGE>
<TABLE>
<CAPTION>
EMERGING GROWTH EQUITY FUND
--------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 52.58 $ 35.96 $ 35.52 $ 24.26 $ 23.34
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income (loss)--net (0.90) (0.67) (0.57) (0.53) (0.35)
Net realized and unrealized
gain (loss) on investments 15.39 17.29 1.01 11.79 1.27
-------- -------- -------- -------- --------
Total from Investment
Operations 14.49 16.62 0.44 11.26 0.92
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 67.07 $ 52.58 $ 35.96 $ 35.52 $ 24.26
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN 27.56 % 46.22 % 1.24 % 46.41 % 3.94 %
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets
Expenses** (1.91)% (2.12)% (2.08)% (2.27)% (2.18)%
Investment income--net (1.54)% (1.61)% (1.64)% (1.78)% (1.43)%
Portfolio Turnover Rate 150.40 % 170.54 % 114.15 % 145.59 % 135.45 %
Average Commission Rate Paid (per
share)+ $ .02 -- -- -- --
Net Assets at End of Year
($1,000's) $92,136 $74,625 $48,293 $56,645 $40,844
</TABLE>
-----------------------------------------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for
the years ended 9/30/96 and 9/30/95.
+ Required by regulations issued in 1995.
66
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 40.25 $ 38.08 $ 34.36 $ 28.27 $ 29.26
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income (loss)--net (0.08) (0.02) (0.09) (0.21) (0.16)
Net realized and unrealized
gain (loss) on investments 5.08 2.19 3.81 6.30 (0.83)
-------- -------- -------- -------- --------
Total from Investment
Operations 5.00 2.17 3.72 6.09 (0.99)
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 45.25 $ 40.25 $ 38.08 $ 34.36 $ 28.27
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN 12.42 % 5.70 % 10.83 % 21.54 % (3.38)%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets
Expenses** (1.93)% (1.90)% (1.96)% (2.83)% (2.69)%
Investment income--net (0.20)% (0.07)% (0.25)% (0.68)% (0.50)%
Portfolio Turnover Rate 51.29 % 51.40 % 44.25 % 55.02 % 52.58 %
Average Commission Rate Paid (per
share)+ $ .02 -- -- -- --
Net Assets at End of the Year
($1,000's) $39,602 $31,143 $28,672 $21,769 $18,997
</TABLE>
-----------------------------------------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for
the years ended 9/30/96 and 9/30/95.
+ Required by regulations issued in 1995.
67
<PAGE>
<TABLE>
<CAPTION>
ACTIVELY MANAGED BOND FUND
--------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 29.58 $ 26.06 $ 27.43 $ 24.57 $ 21.74
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income--net 1.80 1.64 1.47 1.23 1.54
Net realized and unrealized
gain (loss) on investments (0.59) 1.88 (2.84) 1.63 1.29
-------- -------- -------- -------- --------
Total from Investment
Operations 1.21 3.52 (1.37) 2.86 2.83
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 30.79 $ 29.58 $ 26.06 $ 27.43 $ 24.57
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN 4.09 % 13.51 % (4.99)% 11.64 % 13.02 %
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets
Expenses (0.80)% (0.84)% (0.82)% (0.87)% (0.84)%
Investment income--net 5.94 % 5.95 % 5.51 % 5.22 % 6.87 %
Portfolio Turnover Rate 17.14 % 18.21 % 8.54 % 170.16 % 132.97 %
Net Assets at End of the Year
($1,000's) $150,304 $140,127 $136,210 $146,918 $189,827
</TABLE>
-----------------------------------------
* Using average units basis.
68
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND FUND
--------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 28.01 $ 25.40 $ 25.95 $ 24.20 $ 21.72
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income--net 1.74 1.66 1.46 1.48 1.55
Net realized and unrealized
gain (loss) on investments (0.45) 0.95 (2.01) 0.27 0.93
-------- -------- -------- -------- --------
Total from Investment
Operations 1.29 2.61 (0.55) 1.75 2.48
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 29.30 $ 28.01 $ 25.40 $ 25.95 $ 24.20
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN 4.61 % 10.28 % (2.12)% 7.23 % 11.42 %
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets
Expenses (0.98)% (0.98)% (0.95)% (1.07)% (0.98)%
Investment income--net 6.06 % 6.27 % 5.68 % 5.95 % 6.78 %
Portfolio Turnover Rate 13.20 % 15.95 % 17.92 % 12.39 % 24.86 %
Net Assets at End of the Year
($1,000's) $74,754 $90,482 $89,780 $97,796 $117,107
</TABLE>
-----------------------------------------
* Using average units basis.
69
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENT FUND
--------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 19.31 $ 18.36 $ 17.83 $ 17.43 $ 16.80
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income--net 0.94 0.93 0.53 0.43 0.64
Net realized and unrealized
gain (loss) on investments (0.01) 0.02 0.00 (0.03) (0.01)
-------- -------- -------- -------- --------
Total from Investment
Operations 0.93 0.95 0.53 0.40 0.63
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 20.24 $ 19.31 $ 18.36 $ 17.83 $ 17.43
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN 4.82 % 5.17 % 2.97 % 2.29 % 3.75 %
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets
Expenses (0.80)% (0.80)% (0.80)% (0.89)% (0.79)%
Investment income--net 4.76 % 4.94 % 2.92 % 2.43 % 3.72 %
Decrease in above expense ratio due
to fee waiver 0.39 % 0.34 % 0.32 % -- --
Net Assets at End of the Year
($1,000's) $25,668 $27,360 $29,975 $35,117 $34,911
</TABLE>
-----------------------------------------
* Using average units basis.
70
<PAGE>
<TABLE>
<CAPTION>
DEDICATED BOND
FUND
(SEE NOTE 1)
------------------
YEAR
ENDED
9/30/92***
------------------
<S> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout the year)
Net Asset Value, Beginning of Year $ 18.97
-----
Income from Investment Operations: 0.79
Net realized and unrealized gain (loss) on
investments 0.07
-----
Total from Investment Operations 0.86
-----
Net Asset Value, End of the Year $ 19.83**
-----
-----
TOTAL RETURN 4.53%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets***
Expenses** (0.75)
Investment income--net 7.45%
Portfolio Turnover Rate 0
Net Assets at End of the Year ($1,000's) $0
</TABLE>
-----------------------------------------
* Using average units basis.
** Period from October 1, 1991 to April 24, 1992
*** Annualized
71
<PAGE>
INDEPENDENT AUDITOR'S REPORT
---------------------------------------------------------------
To the Unitholders and Board of Trustees
RSI Retirement Trust
We have audited the combined and individual statements of
assets and liabilities, including the statements of
investments, of the Core Equity Fund, Emerging Growth Equity
Fund, Value Equity Fund, International Equity Fund, Actively
Managed Bond Fund, Intermediate-Term Bond Fund and Short-Term
Investment Fund (the "Investment Funds") of RSI Retirement
Trust (the "Trust") as of September 30, 1996, and the related
statements of operations for the year then ended, the
statements of changes in net assets for each of the two years
in the period then ended and the financial highlights for each
of the five years in the period then ended. We also audited the
financial highlights of the Dedicated Bond Fund series of the
Trust for the period ended April 24, 1992 (see Note 1). These
financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is
to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1996, by
correspondence with the custodians and brokers. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the combined and individual financial
statements and financial highlights referred to above present
fairly, in all material respects, the financial position of the
Investment Funds of the Trust at September 30, 1996, the
results of their operations, the changes in their net assets
and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles.
[SIGNATURE]
New York, New York
November 15, 1996
72
<PAGE>
OFFICERS
---------------------------------------------------------------
William Dannecker, President
James P. Coughlin, C.F.A., Executive Vice President and Chief
Investment Officer
Stephen P. Pollak, Esq., Executive Vice President, Counsel and
Secretary
John F. Meuser, Senior Vice President and Treasurer
Durando J. Saccente, Vice President
Veronica A. Fisher, First Vice President and Assistant
Treasurer
Herbert Kuhl, Jr., C.F.A., First Vice President
Denise F. Roche, First Vice President
Chris R. Kaufman, Second Vice President
Deborah A. Modzelewski, Second Vice President
Heidi Viceconte, Second Vice President
CONSULTANTS
---------------------------------------------------------------
Actuarial--Retirement System Consultants Inc.
Investments--Hewitt Associates
INVESTMENT MANAGERS
---------------------------------------------------------------
Friess Associates, Inc.
Morgan Grenfell Investment Services Limited
The Putnam Advisory Company, Inc.
Retirement System Investors Inc.
CUSTODIANS
---------------------------------------------------------------
The Chase Manhattan Bank, N.A.
Custodial Trust Company
DISTRIBUTOR
---------------------------------------------------------------
Retirement System Distributors Inc.
TRANSFER AGENT
---------------------------------------------------------------
Retirement System Consultants Inc.
INDEPENDENT AUDITORS
---------------------------------------------------------------
McGladrey & Pullen, LLP
COUNSEL
---------------------------------------------------------------
Shereff, Friedman, Hoffman & Goodman, LLP
73
<PAGE>
BOARD OF TRUSTEES
---------------------------------------------------------------
Herbert G. Chorbajian
Chairman, President and Chief Executive Officer
ALBANK, FSB, NY
Candace Cox
President and Chief Investment Officer
NYNEX Asset Management Co., NY
William Dannecker
President and Chief Executive Officer
Retirement System Group Inc., NY
Eugene C. Ecker
Pension and Group Insurance Consultant
Covington Hardee
Retired Chairman
The Lincoln Savings Bank, FSB, NY
Ralph L. Hodgkins, Jr.
Retired Chief Executive Officer
Mid Maine Savings Bank, FSB, ME
Maurice E. Kinkade
Director of Development
Maplebrook School
President, KINCO Management
Willliam G. Lillis
Real Estate Consultant
William L. Schrauth
President and Chief Executive Officer
The Savings Bank of Utica, NY
William E. Swan
President and Chief Executive Officer
Lockport Savings Bank, NY
Raymond L. Willis
Private Investments
74
<PAGE>
THE INFORMATION CONTAINED HEREIN SHALL NOT BE CONSTRUED TO BE OR CONSTITUTE AN
OFFER OR SOLICITATION OF AN OFFER TO BUY UNITS IN THE RSI RETIREMENT TRUST.
SALES OF UNITS IN THE TRUST MAY BE MADE ONLY IN THOSE STATES WHERE SUCH UNITS
ARE EXEMPT FROM REGISTRATION OR HAVE BEEN QUALIFIED FOR SALE. TOTAL RETURNS ARE
BASED ON HISTORICAL RESULTS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
FUTURE PERFORMANCE AND UNIT NET ASSET VALUE WILL FLUCTUATE SO THAT UNITS, IF
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS MATERIAL MUST
BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
<PAGE>
[LOGO]
RSI Retirement Trust
Core Equity Fund
Value Equity Fund
Emerging Growth Equity Fund
International Equity Fund
Actively Managed Bond Fund
Intermediate-Term Bond Fund
Short-Term Investment Fund
Dedicated Bond Fund
1996
Broker/Dealer:
[LOGO]
RETIREMENT SYSTEM
Distributors, Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
