As Filed with the Securities and Exchange Commission on January 29, 1996
File No. 2-95074
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933 /xx/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 14 /xx/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF l940 /xx/
Amendment No. 16 /xx/
(Check appropriate box or boxes)
RSI RETIREMENT TRUST
(Exact Name of Registrant as Specified in Charter)
317 Madison Avenue, New York, New York 10017
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (2l2) 503-0100
Stephen P. Pollak, Esq.
317 Madison Avenue
New York, New York 10017
(Name and address of agent for service)
Copy to:
Lawrence Rogers, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
It is proposed that this filing will become effective (check appropriate box):
xx immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant toparagraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
___ This post-effective amendment designates a new effective date for a
previously filed post effective amendment.
<PAGE>
Registrant has elected to maintain registration of an indefinite
number of units of Beneficial Interest pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant's Rule 24f-2 Notice for
its fiscal year ended September 30, 1995 was filed with the Securities and
Exchange Commission on November 27, 1995. Registrant has also elected to
maintain registration of a definite number of units of Beneficial Interest
pursuant to Rule 24e-2 under the Investment Company Act of 1940, as amended.
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------
Title of Proposed Proposed
Securities Amount of Maximum Maximum Amount of
Being Units Being Offering Price Aggregate Registration
Registered Registered Per Unit Offering Price Fee
- ----------------------------------------------------------------------------
Units of
beneficial
interest 5,852 $49.55 $289,967 $100.00
(no par value)
- ----------------------------------------------------------------------------
This calculation has been made pursuant to Rule 24e-2 under the
Investment Company Act of 1940. The highest price per unit of the Registrant's
eight series as of January 19, 1996 was $49.55. This number was utilized in the
above-referenced calculation in accordance with Rule 457(c) of the Securities
Act of 1933. Registrant, during its fiscal year ended September 30, 1995,
redeemed or purchased $17,044,661, or 798,619 units, all of which units are
being registered in accordance with Rule 24e-2. No previous filing during
Registrant's current fiscal year has utilized such redeemed or repurchased units
for purposes of a reduction in registration fee. 5,852 additional units are
being registered for $100.00. The minimum fee is $100.
<PAGE>
CROSS REFERENCE SHEET
N-1A Item No. Location (Caption)
Part A
Item 1. Cover Page............................ Cover Page
Item 2. Synopsis.............................. Prospectus Summary
Item 3. Condensed Financial
Information....................... Financial Highlights
Item 4. General Description of
Registrant........................ The Fund; Investment
Objectives and
Policies; Investment
Restrictions;
Distributions and
Taxes
Item 5. Management of the Fund................ Administration of the
Fund; Investment
Managers; General
Information
Item 5A. Managements' Discussion................ Not Applicable
of Fund Performance
Item 6. Capital Stock and
Other Securities.................. Investments in the
Fund; General
Information
Item 7. Purchase of Securities
Being Offered..................... Participants in the
Fund; Investments
in the Fund;
Valuation of Units
Item 8. Redemption or Repurchase.............. Withdrawals
and Exchanges;
Valuation of Units
Item 9. Pending Legal Proceedings............. Not Applicable
Part B
Item 10. Cover Page............................. Cover Page
Item 11. Table of Contents...................... Table of Contents
Item 12. General Information
History........................... The Fund
Item 13. Investment Objectives &
Policies.......................... Investment Objectives
and Policies
(Part A, Item 4);
Investment
Restrictions (Part
A, Item 4);
Brokerage
Allocation and
Portfolio Turnover
Item 14. Management of the Fund................. Administration of the
Fund (Part A,
Item 5)
Item 15. Control Persons & Principal
Holders of Securities............. Control Persons and
Principal
Unitholders
Item 16. Investment Advisory &
Other Services.................... Investments in the
Fund (Part A,
Item 6);
Administration of
the Fund (Part A,
Item 5); Investment
Managers (Part
A, Item 5); General
Information
(Part A, Item 6)
Item 17. Brokerage Allocation................... Brokerage Allocation
<PAGE>
Item 18. Capital Stock &
Other Securities.................. Investments in the
Fund (Part A,
Item 6); General
Information
(Part A, Item 6)
Item 19. Purchase, Redemption &
Pricing of Securities
Being Offered..................... Investments in the
Fund (Part A,
Item 6); Withdrawals
and Exchanges
(Part A, Item 8);
Valuation of Units
(Part A, Item 8)
Item 20. Tax Status............................. Distributions and
Taxes (Part A,
Item 4)
Item 21. Underwriters........................... Not Applicable
Item 22. Calculation of Yield
Quotation on Money
Market Funds...................... Not Applicable
Item 23. Financial Statements................... Financial Statements
<PAGE>
TABLE OF CONTENTS
Introduction..................................................
Fee Table.....................................................
Financial Highlights..........................................
Prospectus Summary............................................
The Fund......................................................
Participants in the Fund......................................
Investment Objectives and Policies............................
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......................................
Other Investment Policies and Risk Considerations........
Investment Restrictions.......................................
Investments in the Fund.......................................
Full Participating Trusts................................
Participating Trusts of Eligible Employers
other than Full Participating Trusts...................
Individual Retirement Accounts (IRAs)....................
General..................................................
Withdrawals and Exchanges.....................................
Withdrawals from Investment Funds (Redemptions)..........
Exchanges................................................
Valuation of Units............................................
Distributions and Taxes.......................................
Administration of the Fund....................................
General..................................................
Information Regarding Trustees...........................
The Service Agreement....................................
Distribution Agreement...................................
Investment Managers...........................................
General Information...........................................
Units of Beneficial Interest and Voting Rights...........
Termination of the Fund..................................
Custodian................................................
Litigation...............................................
Expenses.................................................
Performance Information..................................
Counsel and Auditors..........................................
Appendix......................................................
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, OR AN
OFFER TO OR A SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL.
<PAGE>
P R O S P E C T U S
RSI RETIREMENT TRUST
INTRODUCTION
The units offered hereby are being sold by RSI Retirement Trust
("Fund"), an open-end diversified management investment company.
The Fund is a no load series mutual fund that currently offers
eight investment funds ("Investment Funds") with each having its own investment
objectives and investment strategies.
The Fund is designed for the investment of funds held in trusts
which are exempt from taxation under Section 501(a) of the Internal Revenue Code
of 1986, as amended ("Code") and which have been established by eligible
employers to effectuate pension or profit sharing plans which are qualified
under Section 401(a) of said Code. Eligible employers are corporations or
associations organized under the laws of any state or of the United States,
organizations which are controlling, controlled by, or under common control with
such eligible employers or the members of which consist solely of some or all of
such organizations, organizations which are determined by the Trustees of the
Fund to have business interests in common with other organizations participating
in the Fund or self-employed individuals; provided, however, that the
participation in the Fund of any self-employed individual or of any corporation
or association which is not a bank, savings bank, credit union or savings and
loan association, or controlling, controlled by, or under common control with a
bank, savings bank, credit union or savings and loan association, shall be
subject to the approval of the Trustees of the Fund ("Eligible Employers").
The Fund is also designed for the investment of funds held in
individual retirement trusts or custodial accounts which are exempt from
taxation under Section 408(e) of the Code and which have been established by
individual accountholders ("Individual Retirement Accountholders") to effectuate
an individual retirement trust or custodial agreement which is maintained in
conformity with Section 408(a) of the Code ("Individual Retirement Accounts").
Individual Retirement Accountholders are individuals for whom an Individual
Retirement Account (IRA) has been established; provided, however, that
participation in the Fund of such arrangement shall be subject to the approval
of the Trustees of the Fund.
<PAGE>
This Prospectus sets forth concisely information about the Fund
that an investor ought to know before investing. Please read and retain this
Prospectus for future reference. The Fund has filed with the Securities and
Exchange Commission a Statement of Additional Information, dated January 29,
1996, ("Statement of Additional Information"), which sets forth additional and
more detailed information with respect to the Fund. The information in the
Statement of Additional Information is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained
without charge by writing to RSI Retirement Trust, 317 Madison Avenue, New York,
New York 10017, Attention: Stephen P. Pollak, Esq.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
FEE TABLE
Shown below are all expenses incurred by the Investment Funds,
during the 1995 fiscal year, restated where appropriate, to reflect current
fees.
<TABLE>
<CAPTION>
Core Value Emerging International Actively Intermediate- Short-Term
Equity Equity Growth Equity Managed Term Investment Dedicated
Fund Fund Equity Fund Fund Bond Fund Bond Fund Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I. Shareholder Transaction Expenses
Sales Load on Purchases None None None None None None None None
Sales Load on Reinvested Dividends None None None None None None None None
Deferred Sales Load None None None None None None None None
Redemption Fees None None None None None None None None
Exchange Fees None None None None None None None None
II. Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .53% .56% 1.23%** .80% .34% .36 % .25% .25%
Other Expenses(after fee waivers)+ .45% .76% .89% 1.10% .50% .62% .55%+ .50%
Total Annual Fund Operating Expenses .98% 1.32% 2.12% 1.90% .84% .98% .80%+ .75%*
III. Example: You would pay the following expenses in each of the funds on a $1,000 investment assuming (1) a 5% annual return and
(2) redemption at the end of each time period.
1 year $10.00 $13.44 $21.51 $19.29 $8.57 $10.00 $ 8.17+ $ 7.66
3 years $31.22 $ 41.84 $66.43 $59.72 $26.81 $31.22 $25.55+ $23.98
5 years $54.23 $72.44 $114.11 $102.82 $46.63 $54.23 $44.45+ $41.74
10 years $120.78 $160.09 $247.32 $224.07 $104.20 $120.78 $99.43+ $93.44
The purpose of this table is to assist investors in understanding
the costs and expenses an investor in the Fund will bear. See, "Administration
of the Fund -- Distribution Agreement" and "General Information -- Expenses" for
a more complete description of these costs and expenses.
A. Annual Fund Operating Expenses are based on each Investment Fund's historical
expenses adjusted in the case of each Investment Fund to reflect current fees.
The Investment Funds incur Other Expenses for maintaining shareholder records,
furnishing shareholder statements and reports and other services. See,
"Administration of the Fund -- The Service Agreement" for further information.
Management Fees and Other Expenses have already been reflected in each
Investment Fund's unit price and are not charged directly to individual unit
holder accounts. See, "Investment Managers" and "General Information --
Expenses" for further information.
B. Example of Expenses. The hypothetical example illustrates the expenses
associated with a $1,000 investment over periods of 1, 3, 5 and 10 years, based
on the expenses in the table and an assumed annual rate of return of 5%. The
return of 5% and expenses should not be considered indications of actual or
expected performance or expenses, both of which will vary. Please refer to
"Condensed Financial Information" for each Investment Fund's past performance.
* Annualized based on 1992 fiscal year. No funds have been invested in the
Dedicated Bond Fund since April 24, 1992. ** This annual fee exceeds the fee
paid by most other investment companies.
+ "Other Expenses" for the Short-Term Investment Fund reflects a voluntary fee
waiver by Retirement System Consultants Inc. (which will continue for at least
the current fiscal year of the Fund). Absent the voluntary fee waiver, other
expenses for this Investment Fund would be .89% of average net assets and total
annual fund operating expenses for this Investment Fund would be 1.14%.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS:
The following information for the years ended September 30, 1992, 1993, 1994 and
1995, has been audited by McGladrey & Pullen, LLP, independent auditors, whose
report thereon, which is incorporated by reference, appears in the Fund's 1994
Annual Report to Unitholders. The financial information included in this table
should be read in conjunction with the financial statements incorporated by
reference in the Statement of Additional Information.
Financial highlights for each Investment Fund are as follows:
CORE EQUITY FUND
<TABLE>
<CAPTION>
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 35.57 $ 34.49 $ 30.09 $ 27.68 $ 23.15 $ 24.41 $ 18.34 $ 21.40 $ 15.46 $ 11.49
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Investment income-net 0.74 0.54 0.56 0.65 0.75 0.85 0.69 0.54 0.53 0.53
Net realized and unrealized gain
(loss) on investments 10.40 0.54 3.84 1.76 3.78 (1.90) 5.38 (3.60) 5.41 3.44
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 11.14 1.08 4.40 2.41 4.53 (1.05) 6.07 (3.06) 5.94 3.97
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Net realized gain on investments -- -- -- -- -- (0.07) -- -- -- --
Paid-in capital -- -- -- -- -- (0.14) -- -- -- --
Total distributions -- -- -- -- -- (0.21) -- -- -- --
Net increase (decrease) 11.14 1.08 4.40 2.41 4.53 (1.26) 6.07 (3.06) 5.94 3.97
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year $ 46.71 $ 35.57 $ 34.49 $ 30.09 $ 27.68 $ 23.15 $ 24.41 $ 18.34 $ 21.40 $ 15.46
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 31.32% 3.13% 14.62% 8.71% 19.57% (4.41%) 33.10% (14.29%) 38.42% 34.55%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets:
Expenses** (0.98) (1.01) (0.99) (0.95) (0.94) (0.64) (0.49) (0.51) (0.44) (0.42)
Investment income-net 1.86% 1.56% 1.74% 2.25% 2.88% 3.41% 3.29% 3.07% 2.84% 3.56%
Portfolio Turnover Rate 7.91% 6.47% 13.41% 18.94% 18.88% 10.71% 21.51% 12.80% 13.98% 16.24%
Net Assets at End of Year ($1,000's) $189,942 $141,544 $146,137 $134,269 $158,578 $136,539 $134,572 $105,571 $126,701 $104,144
<FN>
* Using average units basis.
** The August 1, 1990 reorganization of RSI externalized all employees and the
investment advisory, administrative and distribution services they had performed
into separate entities. Certain investment expenses previously allocated among
the series portfolios are now set by contract between RSI and the new entities.
</FN>
</TABLE>
<PAGE>
VALUE EQUITY FUND
<TABLE>
<CAPTION>
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 27.05 $ 26.48 $ 22.94 $ 21.48 $ 15.89 $ 21.11 $ 16.94 $ 18.35 $ 13.97 $ 11.09
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Investment income-net 0.93 0.79 0.70 0.52 0.45 0.38 0.46 0.43 0.42 0.42
Net realized and unrealized gain
(loss) on investments 4.65 (0.22) 2.84 0.94 5.14 (5.44) 3.71 (1.84) 3.96 2.46
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 5.58 0.57 3.54 1.46 5.59 (5.06) 4.17 (1.41) 4.38 2.88
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Net realized gain on investments -- -- -- -- -- (0.05) -- -- -- --
Paid-in capital -- -- -- -- -- (0.11) -- -- -- --
Total distributions -- -- -- -- -- (0.16) -- -- -- --
Net increase (decrease) 5.58 0.57 3.54 1.46 5.59 (5.22) 4.17 (1.41) 4.38 2.88
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year $ 32.63 $ 27.05 $ 26.48 $ 22.94 $ 21.48 $ 15.89 $ 21.11 $ 16.94 $ 18.35 $ 13.97
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN + 20.63% 2.15% 15.43% 6.80% 35.18% (24.13%) 24.62% (7.68%) 31.35% 25.97%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets:
Expenses** (1.32%) (1.41%) (1.70) (1.55) (1.56) (1.74) (1.37) (1.19) (1.12) (1.17)
Investment income-net 3.24% 3.02% 2.83% 2.32% 2.30% 1.98% 2.44% 2.72% 2.57% 3.18%
Portfolio Turnover Rate 67.06% 40.41% 54.46% 14.26% 23.55% 45.04% 46.51% 65.40% 57.81% 87.90%
Net Assets at End of Year ($1,000's) $43,824 $35,603 $38,104 $33,417 $37,955 $30,636 $84,313 $71,365 $79,765 $69,613
<FN>
* Using average units basis.
** The August 1, 1990 reorganization of RSI externalized all employees and the
investment advisory, administrative and distribution services they had performed
into separate entities. Certain investment expenses previously allocated among
the series portfolios are now set by contract between RSI and the new entities.
Ratio reflects fees paid with brokerage commissions only for the year ended
September 30, 1995.
+ On April 1, 1995, Retirement System Investors Inc. became the sole advisor
to Value Equity Fund.
</FN>
</TABLE>
<PAGE>
EMERGING GROWTH EQUITY FUND
<TABLE>
<CAPTION>
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 35.96 $ 35.52 $ 24.26 $ 23.34 $ 14.97 $ 19.36 $ 16.78 $ 18.35 $ 15.28 $ 11.48
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Investment income (loss)-net (0.67) (0.57) (0.53) (0.35) (0.23) 0.01 0.22 0.13 0.09 0.07
Net realized and unrealized gain
(loss) on investments 17.29 1.01 11.79 1.27 8.60 (4.24) 2.36 (1.70) 2.98 3.73
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 16.62 0.44 11.26 0.92 8.37 (4.23) 2.58 (1.57) 3.07 3.80
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Net realized gain on investments -- -- -- -- -- (0.05) -- -- -- --
Paid-in capital -- -- -- -- -- (0.11) -- -- -- --
Total distributions -- -- -- -- -- (0.16) -- -- -- --
Net increase (decrease) 16.62 0.44 11.26 0.92 8.37 (4.39) 2.58 (1.57) 3.07 3.80
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year $ 52.58 $ 35.96 $ 35.52 $ 24.26 $ 23.34 $ 14.97 $ 19.36 $ 16.78 $ 18.35 $ 15.28
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 46.22% 1.24% 46.41% 3.94% 55.91% (22.06%) 15.38% 8.56%) 20.09% 33.10%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets:
Expenses** (2.12) (2.08) (2.27) (2.18) (2.27) (2.46) (1.76) (1.72) (1.59) (1.59)
Investment income (loss)-net (1.61%) (1.64%) (1.78%) (1.43%) (1.19%) 0.07% 1.23% 0.84% 0.52% 0.46%
Portfolio Turnover Rate 170.54% 114.15% 145.59% 135.45% 101.10% 167.90% 39.40% 36.88% 34.28% 43.16%
Net Assets at End of Year ($1,000's) $74,625 $48,293 $56,645 $40,844 $46,283 $32,560 $50,026 $46,604 $52,088 $49,553
<FN>
* Using average units basis.
** The August 1, 1990 reorganization of RSI externalized all employees and the
investment advisory, administrative and distribution services they had performed
into separate entities. Certain investment expenses previously allocated among
the series portfolios are now set by contract between RSI and the new entities.
Ratio reflects fees paid with brokerage commissions only for the year ended
September 30, 1995.
</FN>
</TABLE>
<PAGE>
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 38.08 $ 34.36 $ 28.27 $ 29.26 $ 25.31 $ 30.03 $ 25.10 $ 29.38 $ 20.91 $ 11.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Investment income (loss)-net (0.02) (0.09) (0.21) (0.16) 0.15 (0.31) (0.15) (0.27) (0.22) (0.24)
Net realized and unrealized gain
(loss) on investments 2.19 3.81 6.30 (0.83) 3.80 (4.16) 5.08 (4.01) 8.69 9.25
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 2.17 3.72 6.09 (0.99) 3.95 (4.47) 4.93 (4.28) 8.47 9.01
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Net realized gain on investments -- -- -- -- -- (0.08) -- -- -- --
Paid-in capital -- -- -- -- -- (0.17) -- -- -- --
Total distributions -- -- -- -- -- (0.25) -- -- -- --
Net increase (decrease) 2.17 3.72 6.09 (0.99) 3.95 (4.72) 4.93 (4.28) 8.47 9.01
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year $ 40.25 $ 38.08 $ 34.36 $ 28.27 $ 29.26 $ 25.31 $ 30.03 $ 5.10 $ 9.38 $ 20.91
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 5.70% 10.83% 21.54% (3.38%) 15.61% (15.05%) 19.64% (14.57%) 40.51% 75.71%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets:
Expenses** (1.90) (1.96) (2.83) (2.69) (2.58) (2.64) (2.65) (2.97) (2.57) (2.82)
Investment income (loss)-net (0.07%) (0.25%) (0.68%) (0.50%) 0.54% (1.06%) (0.54%) (1.07%) (0.90%) (1.45%)
Portfolio Turnover Rate 51.40% 44.25% 55.02% 52.58% 65.55% 84.61% 103.55% 55.45% 56.71% 68.08%
Net Assets at End of Year ($1,000's) $31,143 $28,672 $21,769 $18,997 $22,677 $21,691 $29,249 $24,388 $31,420 $27,429
<FN>
* Using average units basis.
** The August 1, 1990 reorganization of RSI externalized all employees and the
investment advisory, administrative and distribution services they had performed
into separate entities. Certain investment expenses previously allocated among
the series portfolios are now set by contract between RSI and the new entities.
Ratio reflects fees paid with brokerage commissions only for year ended
September 30, 1995.
</FN>
</TABLE>
<PAGE>
ACTIVELY MANAGED BOND FUND
<TABLE>
<CAPTION>
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 26.06 $ 27.43 $ 24.57 $ 21.74 $ 18.44 $ 17.72 $ 16.34 $ 14.83 $ 14.92 $ 12.34
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Investment income-net 1.64 1.47 1.23 1.54 1.51 1.44 1.34 1.16 1.12 1.18
Net realized and unrealized gain
(loss) on investments 1.88 (2.84) 1.63 1.29 1.79 (0.57) 0.04 0.35 (1.21) 1.40
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 3.52 (1.37) 2.86 2.83 3.30 0.87 1.38 1.51 (0.09) 2.58
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Net realized gain on investments -- -- -- -- -- (0.05) -- -- -- --
Paid-in capital -- -- -- -- -- (0.10) -- -- -- --
Total distributions -- -- -- -- -- (0.15) -- -- -- --
Net increase (decrease) 3.52 (1.37) 2.86 2.83 3.30 0.72 1.38 1.51 (0.09) 2.58
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year $ 29.58 $ 26.06 $ 27.43 $ 24.57 $ 21.74 $ 18.44 $ 17.72 $ 16.34 $ 14.83 $ 14.92
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 13.51% (4.99%) 11.64% 13.02% 17.90% 4.88% 8.45% 10.18% (0.60%) 20.91%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets:
Expenses** (0.84) (0.82) (0.87) (0.84) (0.84) (0.83) (0.85) (0.67) (0.81) (0.73)
Investment income-net 5.94% 5.51% 5.22% 6.87% 7.56% 7.64% 7.80% 7.36% 7.38% 8.39%
Portfolio Turnover Rate 18.21% 8.54% 170.16% 132.97% 125.32% 162.70% 1,078.25% 986.87% 809.66% 569.30%
Net Assets at End of Year ($1,000's) $140,127 $136,210 $146,918 $189,827 $197,573 $180,269 $136,674 $138,063 $134,326 $132,544
<FN>
* Using average units basis.
** The August 1, 1990 reorganization of RSI externalized all employees and the
investment advisory, administrative and distribution services they had performed
into separate entities. Certain investment expenses previously allocated among
the series portfolios are now set by contract between RSI and the new entities.
</FN>
</TABLE>
<PAGE>
INTERMEDIATE-TERM BOND FUND
<TABLE>
<CAPTION>
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 25.40 $ 25.95 $ 24.20 $ 21.72 $ 19.10 $ 17.73 $ 16.30 $ 14.77 $ 14.41 $ 12.30
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Investment income-net 1.66 1.46 1.48 1.55 1.46 1.44 1.47 1.33 1.27 1.22
Net realized and unrealized gain
(loss) on investments 0.95 (2.01) 0.27 0.93 1.16 0.08 (0.04) 0.20 (0.91) 0.89
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 2.61 (0.55) 1.75 2.48 2.62 1.52 1.43 1.53 0.36 2.11
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Net realized gain on investments -- -- -- -- -- (0.05) -- -- -- --
Paid-in capital -- -- -- -- -- (0.10) -- -- -- --
Total distributions -- -- -- -- -- (0.15) -- -- -- --
Net increase (decrease) 2.61 (0.55) 1.75 2.48 2.62 (1.37) 1.43 1.53 0.36 2.11
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year $ 28.01 $ 25.40 $ 25.95 $ 24.20 $ 21.72 $ 19.10 $ 17.73 $ 16.30 $ 14.77 $ 14.41
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 10.28% (2.12%) 7.23% 11.42% 13.72% 8.58% 8.77% 10.36% 2.50% 17.15%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets:
Expenses** (0.98) (0.95%) (1.07) (0.98) (0.98) (0.64) (0.48) (0.44) (0.43) (0.33)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment income-net 6.27% 5.68% 5.95% 6.78% 7.21% 7.81% 8.65% 8.47% 8.58% 9.08%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Portfolio Turnover Rate 15.95% 17.92% 12.39% 24.86% 43.70% 20.56% 38.44% 9.66% 28.85% 25.15%
Net Assets at End of Year ($1,000's) $90,482 $89,780 $97,796 $117,107 $108,144 $111,544 $126,007 $118,283 $104,971 $109,251
<FN>
* Using average units basis.
** The August 1, 1990 reorganization of RSI externalized all employees and the
investment advisory, administrative and distribution services they had performed
into separate entities. Certain investment expenses previously allocated among
the series portfolios are now set by contract between RSI and the new entities.
</FN>
</TABLE>
<PAGE>
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 18.36 $ 17.83 $ 17.43 $ 16.80 $ 15.79 $ 14.69 $ 13.49 $ 12.60 $ 11.90 $ 11.09
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Investment income-net 0.93 0.53 0.43 0.64 0.99 1.14 1.19 0.84 0.70 0.77
Net realized and unrealized gain
(loss) on investments 0.02 0.00 (0.03) (0.01) 0.02 0.09 0.01 0.05 0.00 0.04
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 0.95 0.53 0.40 0.63 1.01 1.23 1.20 0.89 0.70 0.81
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Net realized gain on investments -- -- -- -- -- (0.04) -- -- -- --
Paid-in capital -- -- -- -- -- (0.09) -- -- -- --
Total distributions -- -- -- -- -- (0.13) -- -- -- --
Net increase 0.95 0.53 0.40 0.63 1.01 1.10 1.20 0.89 0.70 0.81
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year $ 19.31 $ 18.36 $ 17.83 $ 17.43 $ 16.80 $ 15.79 $ 14.69 $ 13.49 $ 12.60 $ 11.90
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 5.17% 2.97% 2.29% 3.75% 6.40% 8.34% 8.90% 7.06% 5.88% 7.30%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets:
Expenses** (0.80) (0.80) (0.89) (0.79) (0.79) (0.59) (0.45) (0.91) (0.80) (0.64)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment income-net 4.94% 2.92% 2.43% 3.72% 6.06% 7.49% 8.41% 6.51% 5.76% 6.71%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Decrease in above expense ratio 0.34% 0.32%
due to Fee waiver
Net Assets at End of Year ($1,000's) $27,360 $29,975 $35,117 $34,911 $61,505 $62,481 $54,265 $30,076 $67,917 $50,851
<FN>
* Using average units basis.
** The August 1, 1990 reorganization of RSI externalized all employees and the
investment advisory, administrative and distribution services they had performed
into separate entities. Certain investment expenses previously allocated among
the series portfolios are now set by contract between RSI and the new entities.
</FN>
</TABLE>
<PAGE>
DEDICATED BOND FUND
<TABLE>
<CAPTION>
Period Year Year Year Year Year Year
10/1/91 Ended Ended Ended Ended Ended Ended
4/24/92*** 9/30/91 9/30/90 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 18.97 $ 16.36 $ 15.54 $ 14.02 $ 12.25 $ 12.20 $ 9.99
------ ------ ------ ------ ------ ------ ------
9.99
Income from Investment Operations:
Investment income-net 0.79 1.91 1.39 1.31 1.20 1.12 1.07
Net realized and unrealized gain
(loss) on investments
0.07 0.70 (0.44) 0.21 0.57 (1.07) 1.14
----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 0.86 2.61 0.95 1.52 1.77 0.05 2.21
----- ----- ----- ----- ----- ----- -----
Less Distributions:
Net realized gain on investments -- -- (0.04) -- -- -- --
Paid-in capital -- -- (0.09) -- -- -- --
Total distributions -- -- (0.13) -- -- -- --
Net increase (decrease) 0.86 2.61 0.82 1.52 1.77 0.05 2.21
----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year $ 19.83 $ 18.97 $ 16.36 $ 15.54 $ 14.02 $ 12.25 $ 12.20
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 4.53%+ 15.95% 6.11% 10.84% 14.49% 0.41% 22.12%
RATIOS/SUPPLEMENTAL DATA
Ratios to Average Net Assets:
Expenses** (0.75)++ (0.68) (0.79) (0.56) (0.47) (0.31) (0.34)
Investment income-net 7.45%++ 10.83% 8.66% 8.95% 9.01% 8.86% 9.27%
Portfolio Turnover Rate 0.0% 0.00% 0.55% 22.16% 0.36% 0.00% 76.42%
Net Assets at End of Year ($1,000's) $ 0.0 $14,133 $13,988 $18,664 $24,310 $24,414 $27,694
<FN>
* Using average units basis.
** The August 1, 1990 reorganization of RSI externalized all employees and the
investment advisory, administrative and distribution services they had performed
into separate entities. Certain investment expenses previously allocated among
the series portfolios are now set by contract between RSI and the new entities.
*** No sales after April 24, 1992.
+ Not annualized for periods less than a year - commenced operation July 3,
1985.
++ Annualized
</FN>
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this prospectus and in the Statement
of Additional Information.
The Fund is a New York common law trust currently offering eight
no load Investment Funds, each having its own investment objectives and
policies: Core Equity Fund, Emerging Growth Equity Fund, Value Equity Fund,
International Equity Fund, Actively Managed Bond Fund, Intermediate-Term Bond
Fund, Short-Term Investment Fund and Dedicated Bond Fund. See, "Investment
Objectives and Policies".
Trusts which are exempt from taxation under Section 501(a) of the
Code and have been established to effectuate pension or profit sharing plans
qualified under Section 401(a) of said Code by Eligible Employers are eligible
for participation in the Fund. Eligible Employers are corporations or
associations organized under the laws of any state or of the United States,
organizations which are controlling, controlled by, or under common control with
such eligible employers or the members of which consist solely of some or all of
such organizations, organizations which are determined by the Trustees of the
Fund to have business interests in common with other organizations participating
in the Fund or self-employed individuals; provided, however, that the
participation in the Fund of any self-employed individual or any corporation or
association which is not a bank, savings bank, credit union or savings and loan
association, or controlling, controlled by, or under common control with a bank,
savings bank, credit union or savings and loan association, shall be subject to
the approval of the Trustees of the Fund. See, "Participants in the Fund".
The Fund is also designed for the investment of funds held in
individual retirement trusts or custodial accounts which are exempt from
taxation under Section 408(e) of the Code and which have been established by
individual accountholders ("Individual Retirement Accountholders") to effectuate
an individual retirement trust or custodial agreement which is maintained in
conformity with Section 408(a) of the Code ("Individual Retirement Accounts").
Individual Retirement Accountholders are individuals for whom an Individual
Retirement Account (IRA) has been established; provided, however, that
participation in the Fund of such arrangement shall be subject to the approval
of the Trustees of the Fund. See, "Participants in the Fund".
A Participating Trust established by an Eligible Employer through
the adoption of the Fund's Agreement and Declaration of Trust is herein referred
to as a "Full Participating Trust". Subject to guidelines established by the
Trustees, authority is permitted to be reserved to Investment Fiduciaries of
Full Participating Trusts to direct the proportions in which units held in such
<PAGE>
Trusts shall be divided between certain investment classifications established
by the Trustees of the Fund or, in the case of Full Participating Trusts
established to effectuate defined benefit Plans, to direct the Trustees of the
Fund to invest assets of such Trust in units of specified Investment Funds. See,
"Investments in the Fund -- Full Participating Trusts". Participating Trusts
other than Full Participating Trusts and Individual Retirement Accounts can
effect purchases from specific Investment Funds. See, "Investments in the Fund
- -- Participating Trusts of Eligible Employers other than Full Participating
Trusts" and "Investments in the Fund -- Individual Retirement Accounts (IRAs)".
Except with respect to Individual Retirement Accounts, there is no
minimum initial investment for admission for a Participating Trust and
subsequent investments may be made in any amount. The purchase price for units
in each Investment Fund will be the net asset value per unit next determined
following receipt of proper investment instructions. See, "Investments in the
Fund -- General" and "Valuation of Units". Certificates representing units of
the Fund will not be issued. See, "Investments in the Fund -- General".
Withdrawals (i.e., redemptions) and exchanges may be made at any
time. See, "Withdrawals and Exchanges". The withdrawal and exchange price is the
net asset value per unit next determined following receipt of proper
instructions. See, "Withdrawals and Exchanges".
Net asset value per unit of each Investment Fund is determined by
dividing the total value of the Investment Fund's assets, less any liabilities,
by the number of units of such Investment Fund outstanding. The Fund determines
the value of the assets held in each Investment Fund as of the close of trading
(normally 4:00 p.m. Eastern time). See, "Valuation of Units".
The Fund has entered into a Distribution Agreement with
Retirement System Distributors Inc. ("Broker-Dealer"), whereby the Broker-Dealer
will distribute and promote the sale of units in the Fund's Investment Funds.
See, "Administration of the Fund -- Distribution Agreement".
THE FUND
The Fund is an open-end diversified management investment company.
The Fund is a trust which was established by individual trustees under the laws
of the State of New York pursuant to an Agreement and Declaration of Trust made
as of October 22, 1940. The Agreement and Declaration of Trust, as amended from
time to time, is referred to as the "Agreement and Declaration of Trust". The
term "Trustees", as used herein, refers to the trustees acting from time to time
under the Agreement and Declaration of Trust in their capacity as such. Except
as otherwise specifically provided herein, the term "Trustees", as used herein,
is not meant to refer to the trustees of Participating Trusts (as hereinafter
defined) in their capacity as such, although the trustees of Full Participating
<PAGE>
Trusts (as hereinafter defined) are one and the same as the trustees under the
Agreement and Declaration of Trust. The Fund has entered into a service
agreement ("Service Agreement") with Retirement System Consultants Inc.
("Service Company"), pursuant to which, among other things, the Service Company
has agreed to provide the Fund with certain administrative services in order to
enable the Trustees to fulfill their administrative duties to the Participating
Trusts established under the Agreement and Declaration of Trust. See,
"Administration of the Fund -- Administrative Services". Certain references
herein to "Trustees" refer to the trustees acting from time to time pursuant to
authority delegated to the Service Company. See, "Administration of the Fund --
The Service Agreement" and "Reorganization".
PARTICIPANTS IN THE FUND
Participation in the Fund is limited to Qualified Trusts (as
hereinafter defined) established by either Eligible Employers or Individual
Retirement Accountholders. Eligible Employers are corporations or associations
organized under the laws of any state or of the United States, organizations
which are controlling, controlled by, or under common control with such eligible
employers or the members of which consist solely of some or all of such
organizations, organizations which are determined by the Trustees of the Fund to
have business interests in common with other organizations participating in the
Fund or self-employed individuals; provided, however, that the participation in
the Fund of any self-employed individual or any corporation or association which
is not a bank, savings bank, credit union or savings and loan association, or
controlling, controlled by, or under common control with a bank, savings bank,
credit union or savings and loan association, shall be subject to the approval
of the Trustees of the Fund. Individual Retirement Accountholders are
individuals for whom an Individual Retirement Account has been established;
provided, however, that participation in the Fund of such arrangement, shall be
subject to the approval of the Trustees of the Fund. Qualified Trusts include
trusts which are exempt from taxation under Section 501(a) of the Code and have
been established to effectuate pension or profit sharing plans which are
qualified under Section 401(a) of said Code ("Plans") either by (a) the adoption
of a Plan of Participation and the Agreement and Declaration of Trust or (b) the
execution of a trust instrument with a trustee or trustees, other than the
Trustees. Qualified Trusts also include Individual Retirement Accounts which are
exempt from taxation under Section 408(a) of said Code. See, "Investments in the
Fund -- Individual Retirement Accounts (IRAs)". Qualified Trusts which have been
admitted to the Fund are referred to as "Participating Trusts".
Participation in the Fund requires the execution of an agreement
by the Eligible Employer or the adoption of resolutions or other documentation
satisfactory to the Trustees ("Participation Agreement"). With respect to the
Participation Agreement of an Eligible Employer, such agreement, among other
things, adopts the Agreement and Declaration of Trust as a part of the Plan of
<PAGE>
the Eligible Employer and provides that the provisions of the Agreement and
Declaration of Trust shall be controlling with respect to the assets of the Plan
transferred to the Trustees. Participation Agreements entered into with respect
to Full Participating Trusts provide, in addition, for the designation of the
Trustees as the trustees of the Eligible Employer's Plan and for the allocation
of certain administrative plan responsibilities between the Trustees and
fiduciaries designated by the Eligible Employer. See, "Investments in the Fund".
INVESTMENT OBJECTIVES AND POLICIES
The Fund consists of eight Investment Funds each with a different
set of investment objectives and policies. There can be no assurance that the
investment objective of any Investment Fund can be attained. The term
"investment manager" as used herein in reference to any Investment Fund means
the investment manager acting for such fund or any segment thereof.
Although all of the Investment Funds stress current income to some
degree, it is the policy of each Investment Fund to earn current income for the
reinvestment and further accumulation of assets. Accordingly, no current income
will be distributed. This policy is unlike that of most investment companies
which do not reinvest earnings as the Fund does. This policy arises from the
fact that the Fund, unlike most investment companies, exclusively invests
retirement funds. Participating Trusts do, however, receive a benefit from any
current income of the Fund comparable to the benefit received from the
distributions made by most other investment companies. In the Fund, this benefit
is received in the form of an increase in net asset value per unit rather than
in the form of cash or reinvestment through the purchase of additional units.
Six of the Investment Funds, the Core Equity Fund, Emerging Growth
Equity Fund, Value Equity Fund, Actively Managed Bond Fund, Intermediate-Term
Bond Fund and Short-Term Investment Fund, commenced investment operation as
separate funds on January 1, 1983. The net assets of these funds were
transferred from two predecessor investment funds and were allocated to these
Investment Funds pursuant to instructions of the Participating Trusts. The
International Equity Fund and Dedicated Bond Fund commenced operations on May 1,
1984 and July 3, 1985, respectively.
The following sets forth the investment objectives and policies
particular to each of the Investment Funds. See, "Investment Objectives and
Policies -- Other Investment Policies" for a discussion of investment policies
relating to the Investment Funds generally.
CORE EQUITY FUND
The Core Equity Fund is a diversified fund which seeks to achieve
a total return in excess of the total return of the Lipper Growth and Income
Mutual Funds Average measured over a period of three to five years. Total return
includes both capital return (appreciation or depreciation in net asset value)
and income return (dividends and any interest income, net of operating
<PAGE>
expenses). Investments are made primarily in common stocks, although investments
may be made in other equity-based securities, such as securities convertible
into common stocks and warrants to purchase common stocks. A portion of the Core
Equity Fund may be temporarily held in cash equivalents not exceeding 25% of the
total assets of such Fund. See, "Investment Objectives and Policies -- Other
Investment Policies -- Cash Equivalents" for the definition of "cash
equivalents". Although there is no assurance that the Core Equity Fund will meet
its total return objective, the securities held in the Core Equity Fund will
generally reflect the price volatility of the broad equity market (i.e., the
Standard & Poor's 500 Composite Stock Price Index).
In general, the Core Equity Fund will invest in stocks of
companies with market capitalizations in excess of $750 million. Equity
securities of a company will be selected considering such factors as the sales,
growth, and profitability prospects for the economic sector and markets in which
the company operates and for the products or services it provides; the financial
condition of the company; its ability to meet its liabilities and to provide
income in the form of dividends; the prevailing price of the security; how that
price compares to historical price levels of the security, to current price
levels in the general market, and to the prices of competing companies;
projected earnings estimates and earnings growth rate of the company, and the
relation of those figures to the current price.
Under normal circumstances, the Core Equity Fund expects to be as
fully invested as practicable in equity-based securities, primarily common
stocks, and will be at least 65% so invested. Equity-based securities may
include securities convertible into common stocks and warrants to purchase
common stocks.
Mr. James P. Coughlin, President and Chief Investment Officer of
Retirement System Investors Inc. ("Investors Inc."), has been the portfolio
manager for the Core Equity Fund since August, 1984. Mr. Coughlin also serves as
Executive Vice President-Investments of the Fund. His prior experience in the
investment management business, as a research analyst and portfolio manager was
with the economic and investment counsel firm of Lionel Edie & Co., which for a
time was a subsidiary of Merrill Lynch and eventually part of Manufacturers
Hanover. An honors graduate of Iona College, Mr. Coughlin holds a Bachelor of
Arts degree in Economics. He received a Master of Business Administration degree
in Finance from New York University Graduate School of Business and is a
Chartered Financial Analyst (CFA).
VALUE EQUITY FUND
The Value Equity Fund, a diversified fund, seeks to achieve,
primarily through capital appreciation, a total return which exceeds the Lipper
Growth and Income Mutual Funds Average measured over a period of three to five
years. Total return includes both capital return (appreciation or depreciation
in net asset value) and income return (dividends and any interest income, net of
operating expenses). Investments are made in securities of companies which are
perceived by the investment manager to be "undervalued" (undervalued due to the
<PAGE>
perceptions by other investors and which therefore may be selling at, in the
investment manager's view, unjustifiably low price-to-book ratios,
price/earnings ratios, price/dividend ratios, etc.), financially sound and which
offer prospects for significant earnings or dividend growth relative to their
market prices. Such undervalued companies generally will have price/earnings and
price-to-book ratios that are lower than average relative to (a) the
corresponding ratios of the average company in a similar industry included in
broad stock market indices (e.g., the Standard & Poor's 500 Composite Stock
Price Index), (b) comparable to generally accepted value indices (e.g., the
Russell Value 1000 Index) or (c) the company's historical price/earnings and
price-to-book ratios. Investments are made primarily in common stocks, although
investments may be made in other equity-based securities, such as securities
convertible into common stocks and warrants to purchase common stocks. In
general, the Value Equity Fund will invest in stocks of companies with a market
capitalization in excess of $750 million. A portion of the Value Equity Fund may
be temporarily held in cash equivalents not exceeding 25% of the total assets of
such Fund. See, "Investment Objectives and Policies -- Other Investment Policies
- -- Cash Equivalents" for the definition of "cash equivalents". The portfolio of
the Value Equity Fund generally will have a lower degree of risk than the
portfolio of the Emerging Growth Equity Fund and a slightly higher degree of
risk than the Core Equity Fund.
As an "equity" fund, at least 65% of the total assets of the Value
Equity Fund will, under normal market conditions, be invested in equity-based
securities. The Value Equity Fund currently does not, nor is there any present
intention to, invest more than 5% of the net assets of such Fund in warrants.
Since April 1995, the Value Equity Fund has been managed by James
P. Coughlin, President and Chief Investment Officer of Investors Inc. He was
joined by Christopher Kaufman in June 1995, as co-manager. Each plays an
important role in the Investment Fund's management process and work closely
together to develop investment strategies and select securities for the
Investment Fund's portfolio. Mr. Coughlin also serves as Executive Vice
President-Investments for the Fund, where he has been a portfolio manager since
August 1984. His prior experience in the investment management business, as a
research analyst and portfolio manager, was with the economic and investment
counsel firm of Lionel Edie & Co., which for a time was a subsidiary of Merrill
<PAGE>
Lynch and eventually part of Manufacturers Hanover. An honors graduate of Iona
College, Mr. Coughlin holds a Bachelor of Arts degree in Economics. He received
a Master of Business Administration degree in Finance from New York University
Graduate School of Business and is a Chartered Financial Analyst (CFA). Mr.
Kaufman joined Investors Inc. in May 1995, with over 8 years of investment
experience. Prior to joining Investors Inc., he was an Investment Vice President
at The Mutual Life Insurance Company of New York, where he spent 8 years in
investment/security analysis and in a portfolio advisory capacity. Prior to
that, he worked for 2 years in the Investment Management Group of Bankers Trust.
Mr. Kaufman graduated with honors and a Phi Beta Kappa from Hunter College, with
a Bachelor of Arts degree in Economics and Art History, and received a Masters
of Business Administration in Finance from the Columbia School of Business. He
is currently pursuing a Chartered Financial Analyst (CFA) designation.
EMERGING GROWTH EQUITY FUND
The Emerging Growth Equity Fund is a diversified fund which seeks
to maximize total return, primarily through capital appreciation, through
investment in securities of rapidly growing, emerging companies. The Emerging
Growth Equity Fund seeks to achieve a total return which exceeds the Lipper
Small Company Growth Mutual Funds Average measured over a period of three to
five years. Total return includes both capital return (appreciation or
depreciation in net asset value) and income return (dividends and any interest
income, net of operating expenses). Emerging growth companies are those that are
expected by the Fund's manager to experience rapid earnings growth in the next
few years. The following types of companies frequently offer rapid earnings
growth: newer companies that are able to identify and service a market niche;
more mature companies that restructure their operations or develop a new product
or service that enhances the company's sales and profit growth potential; small
to medium-sized companies (i.e., market capitalizations from $50 million to $750
million at time of purchase) that, because of successful market penetration,
expect to experience accelerating revenue and earnings growth. Investment
holdings in companies with market capitalizations greater than $1 billion
(occurring as a result of price appreciation) should not exceed 10% of the
Fund's total assets. Emerging growth companies generally exhibit the following
characteristics relative to the average company in a similar industry included
in the broad stock market indices (e.g., the Standard & Poor's 500 Composite
Stock Price Index): higher than average return on equity, higher than average
earnings and dividend growth potential as perceived by the investment manager
and smaller than average market capitalization. Investments are made primarily
in common stocks, although investments may be made in other equity-based
securities, such as securities convertible into common stocks and warrants to
purchase common stocks. A portion of the Emerging Growth Equity Fund may be
temporarily held in cash equivalents not exceeding 25% of the total assets of
such Fund. See, "Investment Objectives and Policies -- Other Investment Policies
- -- Cash Equivalents" for the definition of "cash equivalents". The portfolio of
the Emerging Growth Equity Fund generally will have a higher degree of risk and
price volatility than the portfolio of the Core Equity Fund and may have a lower
income return than such fund.
As an "equity" fund, at least 65% of the total assets of the
Emerging Growth Equity Fund, will, under normal market conditions, be invested
in equity-based securities. The Emerging Growth Equity Fund currently does not,
nor is there any present intention to, invest more than 5% of the net assets of
such Fund in warrants.
Friess Associates Inc. has been a manager of a portion of the
Emerging Growth Equity Fund since January 1, 1990. Friess Associates Inc. was
organized in 1974 and is wholly owned by Foster Friess and Lynnette E. Friess,
who are directors and the sole officers of the firm. Friess directs the purchase
and sale of investment securities in the day to day management of its portion of
the Investment Fund. All investment decisions for the Investment Fund are made
by investment teams comprising three or more analysts, and no single person is
primarily responsible for making investment recommendations to such teams.
<PAGE>
Richard M. Frucci, Senior Vice President of The Putnam Advisory
Company, Inc. has, since February 28, 1994, primary responsibility for the
day-to-day management of the portion of the Emerging Growth Equity Fund managed
by The Putnam Advisory Company, Inc. Mr. Frucci has been employed by The Putnam
Advisory Company, Inc. since 1984.
INTERNATIONAL EQUITY FUND
The International Equity Fund, a diversified fund, seeks to
achieve a total return (currency adjusted) in excess of the total return of the
Lipper International Mutual Funds Average measured over a period of three to
five years. Total return includes both capital return (appreciation or
depreciation in net asset value) and income return (dividends and any interest
income, net of operating expenses). Investments are made primarily in common
stocks and other equity-based securities such as securities convertible into
common stocks and warrants to purchase common stocks. Investments may also be
made in fixed-income securities not in excess of 25% of the value of the total
assets of the International Equity Fund. Such investments will be made primarily
in securities of companies domiciled outside of the United States and at least
65% of such Fund's total assets will be invested in securities of companies
domiciled in at least three countries. The International Equity Fund may also
invest in securities of non-United States governments and their agencies and may
also invest in securities of United States companies which derive, or are
expected to derive, a substantial portion of their revenues from operations
outside the United States. Investments in such U.S. companies will normally be
less than 10% of such Investment Fund's total assets. The International Equity
Fund may enter into forward foreign currency exchange contracts to protect
against uncertainty in the level of future foreign exchange rates. See,
"Investment Objectives and Policies -- Other Investment Policies -- Foreign
Currency Transactions". A portion of the International Equity Fund may be
temporarily held in cash equivalents not exceeding 25% of the total assets of
such Fund. See, "Investment Objectives and Policies -- Other Investment Policies
- -- Cash Equivalents" for the definition of "cash equivalents".
In general, the International Equity Fund will invest in stocks of
companies whose market capitalizations are greater than the break point (as
hereafter defined) for small capitalization stocks. The definition for the size
of small capitalization stocks is the lowest quartile ("break point"), of the
market index in each country the Investment Fund invests in. However, it is
permissible for the portfolio to invest in small capitalization stocks, but such
investments should normally not exceed 25% of the portfolio's total assets.
Equity securities of a company will be selected considering such factors as the
sales, growth, and profitability prospects for the economic sector and markets
<PAGE>
in which the company operates and for the products or services it provides; the
financial condition of the company, its ability to meet its liabilities and to
provide income in the form of dividends; the prevailing price of the security;
how that price compares to historical price levels of the security, to current
price levels in the general market, and to the prices of competing companies;
projected earnings estimates and earnings growth rate for the company, and the
relation of those figures to the current price.
Investments in fixed-income securities will be based on judgments
by the investment manager of the quality of the securities. This judgment may be
based upon such considerations as the issuer's financial strength, including its
historic and current financial condition, its historic and projected earnings
and its present and anticipated cash flow; the issuer's debt maturity schedules
and current and future borrowing requirements; and the issuer's continuing
ability to meet its future obligations. In addition, emphasis will be placed on
comparative geographical and economic valuation, which will require fundamental
analysis of the economies, currencies, financial markets and other variables of
the various countries in which investments may be made.
Investments currently may be made in the following countries:
Australia; New Zealand; Hong Kong; Indonesia; Japan; Malaysia; Philippines;
Singapore; South Korea; Thailand; Sri Lanka; Taiwan; Canada; South Africa;
Austria; Belgium; Denmark; Finland; France; Germany; Greece; Ireland; Italy;
Luxembourg; Netherlands; Norway; Portugal; Spain; Sweden; Switzerland; India;
Pakistan; Turkey; United Kingdom; Jordan; Mexico; Argentina; Peru; Brazil; Chile
and Venezuela. The Investment Fund sub-investment adviser will not consider
investments in any of these markets until the adviser, the Fund custodian and
Fund management are completely satisfied with local administrative and
regulatory controls within each such market. Investments in securities of
non-United States issuers and in securities involving foreign currencies involve
investment risks that are different from investments in securities of United
States issuers involving no foreign currency, including the effect of different
economies, changes in currency rates, future political and economic developments
and possible imposition of exchange controls or other governmental restrictions.
There may also be less publicly available information about a non-United States
issuer than about a domestic issuer, and non-United States issuers are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
issuers. Most stock exchanges outside the United States have substantially less
volume than the New York Stock Exchange and securities of some non-United States
companies are less liquid and more volatile than securities of comparable
domestic issuers. There is generally less government regulation of stock
exchanges, brokers and listed companies outside than in the United States. In
addition, with respect to certain countries there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments which could adversely affect investments in securities
of issuers located in those countries.
As an "equity" fund, at least 65% of the total assets of the
International Equity Fund will, under normal market conditions, be invested in
equity-based securities. The International Equity Fund currently does not, nor
is there any present intention to, invest more than 5% of the net assets of such
Fund in warrants.
William G.M. Thomas, investment manager for the International
Equity Fund, has an honors degree from Queen's University, Belfast, and joined
Morgan Grenfell in 1979 as a technology analyst. Prior to Morgan Grenfell, he
spent 10 years with the Extel Group developing sophisticated investment computer
<PAGE>
software for international portfolio management firms including Morgan Grenfell.
At Morgan Grenfell, his work in global technology introduced him to Japan and
Japanese companies and in 1984 he became part of the Morgan Grenfell Investment
Services (MGIS) Japanese research team, traveling to Japan, visiting companies
and analyzing investment opportunities. Mr. Thomas, who became a director of
MGIS in 1988, now heads the Japanese Research Team and works with a team of 15
analysts in London and Tokyo, researching Japanese companies.
ACTIVELY MANAGED BOND FUND
The Actively Managed Bond Fund is a diversified fund which seeks
through selective investment in bonds and other debt securities, to achieve a
total return (i.e., income, including reinvested income, and capital
appreciation or depreciation in the net asset value, net of operating expenses)
in excess of the Lipper U.S. Government Bond Funds Average measured over a
period of three to five years. The returns are sought through substantial
periodic altering of the structure (particularly the maturity structure) of the
portfolio. Such strategy requires that the investment manager or managers have
the flexibility to lengthen and shorten maturities of the portfolio, as well as
to make shifts in quality and sector distribution, as market conditions dictate.
Obtaining successful results in the Actively Managed Bond Fund will principally,
but not exclusively, depend upon the manager's ability to forecast interest rate
and bond market movements. An important technique will be the manager's use of
cash reserves (i.e., when interest rates are expected to rise, the manager will
sell portfolio securities and thereby raise its cash reserves, whereas when
interest rates are expected to drop, the Fund's cash reserves would be expected
to be fully invested). Securities issued or guaranteed by the United States
government or its agencies or instrumentalities in which the Actively Managed
Bond Fund might invest would generally be of the same nature as those in which
the Short-Term Investment Fund might invest. See, "Short-Term Investment Fund"
below. The debt securities in which the Actively Managed Bond Fund may invest
are limited by the following policies: (a) at least 75% of the portfolio, taken
at market value, must be in debt securities having a rating at the time of
purchase of "Aa" or better from Moody's Investors Service, Inc., "AA" or better
from Standard & Poor's Corporation or Fitch Investors Service, Inc. or an
equivalent rating from another nationally known rating service or must consist
of securities issued or guaranteed by the United States government or its
agencies or instrumentalities, (b) at least 65% of such portfolio must be
invested in securities issued or guaranteed by the United States government or
its agencies or instrumentalities and (c) the balance of such portfolio must be
invested in debt securities of United States corporations rated at the time of
purchase of "A" or better from Moody's Investors Service, Inc., Standard &
Poor's Corporation, Fitch Investors Service, Inc. or another nationally known
rating service (see, "Appendix" for an explanation of the ratings); and other
debt securities (e.g., securities of foreign issuers) which, in the judgment of
the investment manager, would be of comparable quality to United States
securities having a rating of "A" or better by one of the above rating agencies.
These judgments may be based upon such considerations as the issuer's financial
<PAGE>
strength, including its historic and current financial condition, its historic
and projected earnings and its present and anticipated cash flow; the issuer's
debt maturity schedules and current and future borrowing requirements; and the
issuer's continuing ability to meet its future obligations.
The portfolio structure of the Actively Managed Bond Fund is
distributed among sectors or industries with no more than 25% of such portfolio
invested in securities of any one sector of the corporate bond market. The Fund
attempts to purchase only securities which were part of an original issue of
$100 million or more.
Non-income producing securities to be held in the Actively Managed
Bond Fund may include zero-coupon obligations of corporations, instruments
evidencing ownership of future interest or principal payments on United States
Treasury Bonds and collateralized mortgage obligations. (See the next paragraph
for a discussion of collateralized mortgage obligations.) Zero-coupon
obligations pay no current interest. Zero-coupon obligations are sold at prices
discounted from par value, with that par value to be paid to the holder at
maturity. The return on a zero-coupon obligation, when held to maturity, equals
the difference between the par value and the original purchase price.
Zero-coupon obligations may be purchased if the yield spread between these
obligations and coupon issues is considered advantageous, giving consideration
to the duration of the two alternative investments. The market value of a
zero-coupon obligation is generally more volatile than that of an
interest-bearing obligation and, as a result, if a zero-coupon obligation is
sold prior to maturity under unfavorable market conditions, the loss that may be
sustained on such sale may be greater than on the sale of an interest-bearing
obligation of similar yield and maturity.
From time to time the Fund may invest in collateralized mortgage
obligations ("CMOs") and certain stripped mortgage-backed securities. CMOs
generally represent a participation in, or are secured by, a pool of mortgage
loans. The CMOs in which the Fund may invest are limited to United States
government and related securities (including those of agencies or
instrumentalities) such as CMOs issued by GNMA, FNMA and FHLMC. Stripped
mortgage securities are usually structured with two classes that receive
different portions of the interest and principal distributions on a pool of
mortgage assets. The Fund may invest in both the interest-only or "IO" class and
the principal-only or "PO" class. The yield to maturity on an IO class is
extremely sensitive not only to changes in prevailing interest rates but also to
the rate of principal payments (including prepayments) on the related underlying
mortgage assets, and a rapid rate of principal payments may have a material
adverse effect on the Fund's yield to maturity. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the Fund
may fail to fully recoup its initial investment in these securities. Conversely,
POs tend to increase in value if prepayments are greater than anticipated and
decline if prepayments are slower than anticipated.
<PAGE>
The Actively Managed Bond Fund invests in fixed-income securities
without any restriction on maturity. Fixed-income securities can have maturities
as long as 30 years or more. The average maturity of securities in the Actively
Managed Bond Fund will be based primarily upon the investment manager's
expectations for the future course of interest rates and then prevailing price
and yield levels in the fixed-income market.
Changes in interest rates will cause the value of securities held
in the Actively Managed Bond Fund to vary inversely to changes in prevailing
interest rates. If, however, a security is held to maturity, no gain or loss
will be realized as a result of changes in prevailing rates. The value of these
securities will also be affected by general market and economic conditions and
by the creditworthiness of the issuer. Fluctuations in value of the Actively
Managed Bond Fund securities will cause net asset value per unit to fluctuate.
A portion of the Actively Managed Bond Fund may be temporarily
held, without limitation on amount, in cash equivalents. See, "Investment
Objectives and Policies - Other Investment Policies - Cash Equivalents" for the
definition of "cash equivalents".
As a "bond" fund, at least 65% of the total assets of the Actively
Managed Bond Fund will, under normal market conditions, be invested in debt
securities.
Commencing August 1993, Messrs. James P. Coughlin and Herbert
Kuhl, Jr. assumed responsibility for managing 100% of the Actively Managed Bond
Fund assets. Mr. Kuhl retired in November 1995 and was replaced by Michael Egan
and Deborah A. Modzelewski, as co-managers. The three managers work closely
together to develop investment strategies and select securities for the
Investment Fund. Mr. Coughlin also serves as Executive Vice
President-Investments for the Fund. He joined Retirement System for Savings
Institutions (predecessor to Investors Inc.) in 1984. His prior investment
experience, both with domestic equities and fixed-income securities, was with
the economic and investment counsel firm of Lionel Edie & Co., which for a time
was a subsidiary of Merrill Lynch and eventually part of Manufacturers Hanover.
He is an honors graduate of Iona College with a Bachelor of Arts degree in
Economics and received a Master of Business Administration degree in Finance
from New York University Graduate School of Business. Mr. Coughlin is a
Chartered Financial Analyst. Ms. Modzelewski joined Retirement System in
September 1984 and she has been responsible for money market investments and
cash management for all investment funds managed by Investors Inc. and has
handled the day to day portfolio management of the Fund's Short-Term Investment
Fund and Retirement System Fund Inc.'s Money Market Fund. A graduate of New York
University, Ms. Modzelewski holds a Bachelor of Science degree in Finance and
International Business. She also received a Master of Business Administration
degree in Finance from St. John's University. Mr. Egan joined Investors Inc. in
October 1995, with over 20 years of experience in securities research and
fixed-income investments. Prior to joining the company, he was with the State of
New York Banking Department, where he was responsible for examining banks'
safety and soundness, and for assessing the risks associated with banks' trading
activities in new instruments. Mr. Egan was also employed by Oppenheimer & Co.,
Inc., and Morgan Guaranty Trust Co.--J.P. Morgan Investment Management, Inc. in
various investment management capacities. He is a graduate from the University
of Missouri with a degree in Banking and Finance and attended the New York
Graduate School of Business.
<PAGE>
INTERMEDIATE-TERM BOND FUND
The Intermediate-Term Bond Fund is a diversified fund which seeks
to achieve a total return (i.e., income, including reinvested income, and
capital appreciation or depreciation in the net asset value, net of operating
expenses) in excess of the Lipper Short-Intermediate (five to ten year maturity)
U. S. Government Mutual Funds Average measured over a period of three to five
years. The returns are sought through a high level of current income with
consideration also given to safety of principal through investment in
fixed-income securities either maturing within ten years or having an expected
average life of under ten years. The Fund is managed within an average portfolio
maturity range of 2 1/2 years to a maximum of 5 years and an average duration
range from 2 1/2 years to 4 years. Investment emphasis is placed upon securing a
stable rate of return through investment in a diversified portfolio of debt
securities. The Intermediate-Term Bond Fund will attempt to purchase only
securities which were part of an original issue of $100 million or more. The
average maturity of securities in the Intermediate-Term Bond Fund will be based
primarily upon the investment manager's expectations for the future course of
interest rates and the then prevailing price and yield levels in the
fixed-income markets. The debt securities in which the Intermediate Bond Fund
may invest are limited by the following policies: (a) at least 75% of the
portfolio of the Intermediate-Term Bond Fund, taken at market value, must be in
debt securities having a rating at the time of purchase of "Aa" or better from
Moody's Investors Service, Inc., "AA" or better from Standard & Poor's
Corporation or Fitch Investors Service, Inc. or an equivalent rating from
another nationally known rating service or must consist of securities issued or
guaranteed by the United States government or its agencies or instrumentalities,
(b) at least 65% of such portfolio must be invested in securities issued or
guaranteed by the United States government or its agencies or instrumentalities
and (c) the balance of such portfolio must be invested in debt securities of
United States corporations rated at the time of purchase "A" or better by one of
the above rating agencies and other debt securities (e.g., securities of foreign
investors) which, in the judgment of the investment manager, would be of
comparable quality to U. S. securities having a rating of "A" or better by one
of the above rating agencies. See, "Appendix" for an explanation of the ratings.
A reduction below such rating for any debt security owned will not require
disposition of the security.
The portfolio structure of the Intermediate-Term Bond Fund is
distributed among sectors or industries with no more than 25% of such portfolio
invested in securities of any one sector of the corporate bond market. The Fund
attempts to purchase only securities which were part of an original issue of
$100 million or more.
Non-income producing securities to be held in the
Intermediate-Term Bond Fund may include zero-coupon obligations of corporations,
instruments evidencing ownership of future interest or principal payments on
<PAGE>
United States Treasury Bonds and collateralized mortgage obligations. (See the
next paragraph for a discussion of collateralized mortgage obligations.)
Zero-coupon obligations pay no current interest. Zero-coupon obligations are
sold at prices discounted from par value, with that par value to be paid to the
holder at maturity. The return on a zero-coupon obligation, when held to
maturity, equals the difference between the par value and the original purchase
price. Zero-coupon obligations may be purchased if the yield spread between
these obligations and coupon issues is considered advantageous, giving
consideration to the duration of the two alternative investments. The market
value of a zero-coupon obligation is generally more volatile than that of an
interest-bearing obligation and, as a result, if a zero-coupon obligation is
sold prior to maturity under unfavorable market conditions, the loss that may be
sustained on such sale may be greater than on the sale of an interest-bearing
obligation of similar yield and maturity.
From time to time the Fund may invest in collateralized mortgage
obligations ("CMOs") and certain stripped mortgage-backed securities. CMOs
generally represent a participation in, or are secured by, a pool of mortgage
loans. The CMOs in which the Fund may invest are limited to United States
government and related securities (including those of agencies or
instrumentalities) such as CMOs issued by GNMA, FNMA and FHLMC. Stripped
mortgage securities are usually structured with two classes that receive
different portions of the interest and principal distributions on a pool of
mortgage assets. The Fund may invest in both the interest-only or "IO" class and
the principal-only or "PO" class. The yield to maturity on an IO class is
extremely sensitive not only to changes in prevailing interest rates but also to
the rate of principal payments (including prepayments) on the related underlying
mortgage assets, and a rapid rate of principal payments may have a material
adverse effect on the Fund's yield to maturity. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the Fund
may fail to fully recoup its initial investment in these securities, even if the
securities are United States government and related securities. Conversely, POs
tend to increase in value if prepayments are greater than anticipated and
decline if prepayments are slower than anticipated.
A portion of the Intermediate-Term Bond Fund may be temporarily
held, without limitation on amount, in cash equivalents. See, "Investment
Objectives and Policies -- Other Investment Policies -- Cash Equivalents" for
the definition of "cash equivalents".
As a "bond" fund, at least 65% of the total assets of the
Intermediate-Term Bond Fund will, under normal market conditions, be invested in
debt securities.
Since 1986, The Intermediate-Term Bond Fund has been managed by
James P. Coughlin, President and Chief Investment Officer of Investors Inc., who
was assisted, beginning in 1986, by Herbert Kuhl, Jr. until Mr. Kuhl's
retirement in November 1995. Upon Mr. Kuhl's retirement, he was replaced by
Michael Egan and Deborah A. Modzelewski as co-managers. The three managers work
closely together to develop investment strategies and select securities for the
Investment Fund. Mr. Coughlin also serves as Executive Vice
President-Investments for the Fund. He joined Retirement System for Savings
Institutions (predecessor to Investors Inc.) in 1984. His prior investment
experience, both with domestic equities and fixed-income securities, was with
<PAGE>
the economic and investment counsel firm of Lionel Edie & Co., which for a time
was a subsidiary of Merrill Lynch and eventually part of Manufacturers Hanover.
He is an honors graduate of Iona College with a Bachelor of Arts degree in
Economics and received a Master of Business Administration degree in Finance
from New York University Graduate School of Business. Mr. Coughlin is a
Chartered Financial Analyst. Ms. Modzelewski joined Retirement System for
Savings Institutions (predecessor to Investors Inc.) in September 1984 and she
has been responsible for money market investments and cash management for all
investment funds managed by Investors Inc. and has handled the day to day
portfolio management of the Fund's Short-Term Investment Fund and Retirement
System Fund Inc.'s Money Market Fund. A graduate of New York University, Ms.
Modzelewski holds a Bachelor of Science degree in Finance and International
Business. She also received a Master of Business Administration degree in
Finance from St. John's University. Mr. Egan joined Investors Inc. in October
1995 with over 20 years of experience in securities research and fixed-income
investments. Prior to joining the company, he was with the State of New York
Banking Department, where he was responsible for examining banks' safety and
soundness, and for assessing the risks associated with banks' trading activities
in new instruments. Mr. Egan was also employed by Oppenheimer & Co., Inc., and
Morgan Guaranty Trust Co.--J.P. Morgan Investment Management, Inc. in various
investment management capacities. He is a graduate from the University of
Missouri with a degree in Banking and Finance and attended the New York Graduate
School of Business.
SHORT-TERM INVESTMENT FUND
The Short-Term Investment Fund, a diversified fund, seeks current
income and stability of principal through investment in short term, fixed-income
securities, and seeks to achieve a 12 month total return (i.e., income,
including reinvested income, and capital appreciation or depreciation in the net
asset value, net of operating expenses) in excess of the average return of a
broad-based universe of institutional money market funds. However, the fund is
not a money market fund and its net asset value will fluctuate. The Short-Term
Investment Fund purchases only instruments which are callable on demand or with
a remaining maturity of one year or less, except debt obligations issued or
guaranteed by the United States government or its agencies or instrumentalities,
which may have a remaining maturity of up to two years, and will maintain a
dollar weighted average portfolio maturity of 12 months or less. Although the
type of money market securities in which the Short-Term Investment Fund invests
are not completely risk free, such securities are generally considered by the
investment manager to have a low risk of default in payment of principal and
interest obligations. With respect to repurchase agreements and the lending of
portfolio securities by the Short-Term Investment Fund, there is the risk of the
failure of the parties involved to repurchase at the agreed upon price or to
return the securities loaned. See, "Investment Objectives and Policies -- Other
Investment Policies -- Repurchase Agreements" and "Investment Objectives and
Policies -- Other Investment Policies -- Lending Portfolio Securities" for a
description of these and other related risks. In addition to effecting
repurchase agreements and the lending of securities, the Short-Term Investment
Fund limits its investments to the instruments described below. The Short-Term
Investment Fund attempts to maintain a relatively stable per share value with
less fluctuation than a longer-term bond fund.
<PAGE>
Obligations issued by or guaranteed by the United States
government, its agencies or instrumentalities. United States
government obligations are bills, notes, bonds and other debt
securities issued by the Treasury which are direct obligations of
the United States government and differ primarily in length of
their maturity. These obligations are backed by the "full faith
and credit" of the United States. Obligations issued by an agency
or instrumentality of the United States government are not direct
obligations of the Treasury. They include notes, bonds and
discount notes which may or may not be backed by the full faith
and credit of the United States. In the case of securities not
backed by the full faith and credit of the United States, the
Short-Term Investment Fund must look principally to the agency
issuing or guaranteeing the obligations for ultimate repayment and
may not be able to assert a claim against the United States itself
in the event the agency or instrumentality does not meet its
commitments. Securities in which the Short-Term Investment Fund
may invest that are not backed by the full faith and credit of the
United States include, but are not limited to, obligations of
Federal National Mortgage Association and the United States Postal
Service, each of which has the right to borrow from the United
States Treasury to meet its obligations, and obligations of the
Federal Farm Credit System and the Federal Home Loan Banks, both
of whose obligations may be satisfied only by the individual
credits of each issuing agency. Securities which are backed by the
full faith and credit of the United States include obligations of
the Government National Mortgage Association and the Farmers Home
Administration.
Bank obligations. These obligations include, but are not
limited to, negotiable certificates of deposit, bankers'
acceptances and fixed time deposits issued by United States banks
and foreign banks. Investments in United States bank obligations
are limited to obligations of United States banks (including
foreign branches), which are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose
deposits are insured by the Federal Deposit Insurance Corporation
or the Federal Savings and Loan Insurance Corporation. In
addition, any United States bank whose obligations are held must
have a class of unsecured debt obligations rated "A" or better by
Moody's Investors Service, Inc., Standard & Poor's Corporation,
Fitch Investors Service, Inc. or another nationally known rating
service or, if not rated, have comparable quality in the opinion
of the investment manager.
Investments in foreign bank obligations are limited to
United States dollar denominated obligations of foreign banks
which at the time of investment (a) have more than $10 billion, or
the equivalent in other currencies, in total assets; (b) in terms
<PAGE>
of assets are among the 75 largest foreign banks in the world; (c)
have branches or agencies in the United States; and (d) in the
opinion of the investment manager, are of an investment quality
comparable with obligations of United States banks which may be
purchased.
Fixed time deposits are obligations of foreign branches of
United States banks or foreign banks which are payable at a stated
maturity date and bear a fixed rate of interest. Generally, fixed
time deposits may be withdrawn on demand by the investor, but they
may be subject to early withdrawal penalties which vary depending
upon market conditions and the remaining maturity of the
obligation. Although fixed time deposits do not have a market,
there are no contractual restrictions on the Fund's right to
transfer a beneficial interest in the deposit to a third party. It
is the present policy of the Fund not to invest in fixed time
deposits subject to withdrawal penalties, other than overnight
deposits, if more than 10% of the value of its total assets would
be invested in such deposits or other illiquid securities.
Obligations of foreign banks involve somewhat different
investment risks from those affecting obligations of United States
banks, including the possibilities that liquidity could be
impaired because of future political and economic developments,
that the obligations may be less marketable than comparable
obligations of United States banks, that a foreign jurisdiction
might impose withholding taxes on interest income payable on those
obligations, that foreign deposits may be seized or nationalized,
that foreign governmental restrictions like exchange control may
be adopted which might adversely affect the payment of principal
and interest on those obligations and that the selection of those
obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the
accounting, auditing and financial reporting standards, practices
and requirements applicable to foreign banks may differ from those
applicable to United States banks.
Commercial paper and master demand notes issued by United
States corporations. Commercial paper is unsecured promissory
notes issued to finance short-term credit requirements. The Fund's
investments in commercial paper will be limited to commercial
paper rated "Prime-1" by Moody's Investors Service, Inc., and
rated "A-1" or better by Standard & Poor's Corporation. Master
notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a United States commercial
bank acting as agent for the payees of such notes. Master notes
are callable on demand by the Fund, but are not marketable to
third parties. Consequently, the right to redeem such notes
depends on the borrower's ability to pay on demand. The investment
manager will take into account the creditworthiness of the issuer
of master notes in making investment decisions with respect to
such notes.
<PAGE>
Bonds, debentures or notes issued by United States
corporations. Bonds, debentures or notes are obligations of the
issuing company to repay a set amount of money on a specific date
and to pay interest (usually semi-annually) at a fixed or floating
rate to maturity. The corporate bonds, debentures and notes
purchased by the Fund consist of bonds, debentures and notes which
are callable on demand or have a remaining maturity of less than
one year which are rated "A" or better by Moody's Investors
Service, Inc., Standard & Poor's Corporation, Fitch Investors
Service, Inc. or another nationally known rating service including
all sub classifications indicated by modifiers of such "A"
ratings, or, if not rated, have comparable quality in the opinion
of the investment manager.
See, "Appendix" for an explanation of the ratings described
above.
The Short-Term Investment Fund is managed by a team of
Investors Inc. professionals, who each play an important role in the Investment
Fund's management process. Team members work closely together to develop
investment strategies and select securities for the Investment Fund's portfolio.
From October 1988 until his retirement in November 1995, Herbert Kuhl, Jr.
assumed responsibility for the Investment Fund's day-to-day management. Since
November 1995, Deborah A. Modzelewski who joined Retirement System for Savings
Institutions (predecessor to Investors Inc.) in 1984, is responsible for the day
to day management of the Fund with assistance provided by James P. Coughlin,
President and Chief Investment Officer of Investors Inc., who has over 25 years
of diversified investment experience. Ms. Modzelewski, prior to joining
Retirement System, was with Allied Irish Banks and she received her
undergraduate degree from New York University with a Bachelor of Science degree
in Finance and International Business. She received a Master of Business
Administration degree in Finance from St. John's University.
DEDICATED BOND FUND
The Dedicated Bond Fund, a diversified fund, seeks to produce
annual cash flows sufficient to fund all future benefit payments for defined
groups of employees under defined benefit Plans (see, "Investments in the Fund
- -- Full Participating Trusts -- A. Defined Benefit Plans"). The necessary cash
flows will be determined based on an actuarial determination of the stream of
future payments for the current group of employees participating in a Plan.
Investment emphasis is placed on producing such cash flows through investment in
a diversified portfolio of fixed-income securities. More emphasis is generally
placed on predictability of cash flow than on maximizing yield in the selection
of fixed income securities due to the Dedicated Bond Fund's objective of cash
matching -- i. e., establishing a portfolio where the flow of coupon payments
and principal repayments matches the liability stream. This investment emphasis
could result in having maturities which, at a given point in time, would not
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produce the maximum yield available in the market generally through a choice of
different maturities. At least 75% of the portfolio of the Dedicated Bond Fund,
taken at market value, must have a rating at the time of purchase of at least
"Aa" from Moody's Investors Service, Inc., or "AA" from Standard & Poor's
Corporation or Fitch Investors Service, Inc. or an equivalent rating from
another nationally known rating service, or must consist of, and at least 50% of
such portfolio must be invested in, securities issued or guaranteed by the
United States government or its agencies or instrumentalities. In addition, the
Dedicated Bond Fund invests in corporate debt securities only if at the time of
purchase they carry a rating of at least "A" from Moody's Investors Service,
Inc., Standard & Poor's Corporation, Fitch Investors Service, Inc. or an
equivalent rating from another nationally known rating service. Securities
issued or guaranteed by the United States government or its agencies or
instrumentalities in which the Dedicated Bond Fund might invest would be of the
same nature as those in which the Short-Term Investment Fund might invest except
that they may have longer maturities. See, "Short-Term Investment Fund" above.
See, "Appendix" for an explanation of the ratings.
The Dedicated Bond Fund attempts to purchase only securities which
were part of an original issue of $100 million or more. The Fund seeks to
minimize its investment in issues which are subject to call or refunding. In
general, the Dedicated Bond Fund does not invest in callable or refundable
issues unless they have a coupon that is at least 1.5% below the issue's current
yield to maturity at the time of purchase.
While there is no minimum investment in the Dedicated Bond Fund,
Participating Trusts participating in the Dedicated Bond Fund should have a
retired lives liability of approximately $1 million at current interest rates.
As a "bond" fund, at least 65% of the total assets of the
Dedicated Bond Fund will, under normal market conditions, be invested in debt
securities.
Since 1986, the Dedicated Bond Fund has been managed by James P.
Coughlin of Investors Inc. He was assisted by Herbert Kuhl, Jr. until Mr. Kuhl's
retirement in November 1995. Upon Mr. Kuhl's retirement, he was replaced by
Michael Egan and Deborah A. Modzelewski, as co-managers. The three managers work
closely together to develop investment strategies and select securities for the
Investment Fund. Mr. Coughlin is President of Investors and Executive Vice
President-Investments of the Fund. He joined Retirement System for Savings
Institutions (predecessor to Investors Inc.) in 1984. His prior investment
experience, both with domestic equities and fixed-income securities was with the
economic and investment counsel firm of Lionel Edie & Co., which for a time was
a subsidiary of Merrill Lynch and eventually part of Manufacturers Hanover. He
is an honors graduate of Iona College with a Bachelor of Arts degree in
Economics and received a Master of Business Administration degree in Finance
from New York University Graduate School of Business. Mr. Coughlin is a
Chartered Financial Analyst. Ms. Modzelewski joined Retirement System in
September 1984 and she has been responsible for money market investments and
cash management for all investment funds managed by Investors Inc. and has
handled the day to day portfolio management of the Fund's Short-Term Investment
Fund and Retirement System Fund Inc.'s Money Market Fund. A graduate of New York
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University, Ms. Modzelewski holds a Bachelor of Science degree in Finance and
International Business. She also received a Master of Business Administration
degree in Finance from St. John's University. Mr. Egan joined Investors Inc. in
October 1995 with over 20 years of experience in securities research and
fixed-income investments. Prior to joining the company, he was with the State of
New York Banking Department, where he was responsible for examining banks'
safety and soundness, and for assessing the risks associated with banks' trading
activities in new instruments. Mr. Egan was also employed by Oppenheimer & Co.,
Inc., and Morgan Guaranty Trust Co.--J.P. Morgan Investment Management, Inc. in
various investment management capacities. He is a graduate from the University
of Missouri with a degree in Banking and Finance and attended the New York
Graduate School of Business.
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following investment policies apply to all Investment Funds
unless otherwise noted.
Securities Subject to Resale Restrictions
The Investment Funds will not invest in securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended, or which are not readily marketable,
except for master demand notes, other securities payable upon demand, fixed-time
deposits, notes secured by mortgages, repurchase agreements and instruments
evidencing loans of securities.
Foreign Securities
The Investment Funds, other than the International Equity Fund,
may invest up to 20% of the value of their total assets in securities of foreign
issuers, except the Intermediate-Term Bond Fund and Dedicated Bond Fund, which
are limited to 10%, and the Short-Term Investment Fund, which is limited to 25%.
The Investment Funds purchasing these securities may be subject to additional
risks associated with the holding of property abroad. Such risks include future
political and economic developments, currency fluctuations, the possible
withholding of tax payments, the possible seizure or nationalization of foreign
assets, the possible establishment of exchange controls or the adoption of other
foreign government restrictions which might adversely affect the payment of
principal or interest on foreign securities in the Investment Funds. Risks that
may be involved with the Investment Funds' investment in foreign securities are,
therefore, different in some respects from those incurred by investment
companies which invest solely in the securities of domestic issuers.
Foreign Currency Transactions
The value of the assets of the International Equity Fund and the
value of the foreign securities held by the other Investment Funds as measured
in United States dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the
International Equity Fund may incur costs in connection with conversions between
various currencies. The International Equity Fund will conduct its foreign
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currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through forward
contracts to purchase or sell foreign currencies. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers.
The Investment Funds will enter into forward foreign currency
exchange contracts as described hereafter. When an Investment Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to establish the United States dollar cost or proceeds.
By entering into a forward contract United States dollars for the purchase or
sale of the amount of foreign currency involved in an underlying security
transaction, such Fund will be able to protect itself against a possible loss
between trade and settlement dates resulting from an adverse change in the
relationship between the United States dollar and such foreign currency.
However, this tends to limit potential gains which might result from a positive
change in such currency relationships.
When an investment manager believes that the currency of a
particular foreign country may suffer a substantial decline against the United
States dollar, it may enter into a forward contract to sell an amount of foreign
currency approximating the value of some or all of the Investment Fund's
portfolio securities denominated in such foreign currency. A forward contract
may also be used to protect a portion of the portfolio denominated in a foreign
currency against an adverse movement in the value of that currency relative to
other currencies. The forecasting of short-term currency market movement is
extremely difficult and the successful execution of a short-term hedging
strategy is highly uncertain. No Investment Fund intends to enter into such
forward contracts on a regular or continuous basis, and will not do so if, as a
result, such Fund would have more than 25% of the value of its total assets
committed to such contracts. No Investment Fund will enter into such forward
contracts or maintain a net exposure in such contracts where such Fund would be
obligated to deliver an amount of foreign currency in excess of the value of
such Fund's portfolio securities or other assets denominated in that currency.
Under normal circumstances, consideration of the prospect for currency parities
will be incorporated into the longer term investment decisions made with regard
to overall diversification strategies (i.e., anticipated currency fluctuations
will necessarily be considered as part of the investment decision process).
However, the Trustees believe that it is important to have the flexibility to
enter into such forward contracts when it is determined that the best interests
of an Investment Fund will be served.
It is impossible to forecast with absolute precision the market
value of portfolio securities at the expiration of the contract. Accordingly, it
may be necessary for an Investment Fund to purchase additional foreign currency
on the spot market (and bear the expense of such purchase) if the market value
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of the security is less than the amount of foreign currency such Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency such Fund is
obligated to deliver.
An Investment Fund's dealing in forward foreign currency exchange
contracts will be limited to the transactions described above. Of course, no
Investment Fund is required to enter into such transactions with regard to its
foreign currency denominated securities and will not do so unless deemed
appropriate by the investment manager. It also should be realized that this
method of protecting the value of an Investment Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange which one can achieve at some future point in time. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.
Cash Equivalents
A portion of any Investment Fund may be held in cash equivalents.
Cash equivalents are interest-bearing instruments or deposits maturing within
one year in which funds are invested temporarily pending long-term investment or
in which funds are invested when warranted for liquidity reasons or when market
conditions warrant a temporary "defensive" investment strategy. The purpose of
cash equivalents is to provide income at money market rates while minimizing the
risk of decline in value to the maximum extent possible. The instruments may
include, but are not limited to, repurchase agreements, obligations issued by or
guaranteed by the United States government, its agencies or instrumentalities,
obligations of banks, and commercial paper. For a description of repurchase
agreements, see below, and for a further description of the other instruments,
see, "Investment Objectives and Policies -- Short-Term Investment Fund".
Repurchase Agreements
The Investment Funds may each enter into repurchase agreements.
Under repurchase agreements, an Investment Fund purchases securities, bankers'
acceptances and certificates of deposit, from a bank, broker-dealer, savings and
loan association or other recognized financial institution with a concurrent
obligation of the seller to repurchase them within a specified time or on notice
at a fixed price (equal to the purchase price plus interest). Repurchase
agreements are considered loans under the Investment Company Act. Repurchase
agreements maturing in more than seven days and other illiquid securities will
not exceed 10% of the value of the total assets of any Investment Fund.
Repurchase agreements will be entered into only for debt obligations issued or
guaranteed by the United States government, its agencies or instrumentalities.
See, "Investment Objectives and Policies -- Short-Term Investment Fund".
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In the event of a bankruptcy or a default of a seller of
repurchase agreements, the Fund could experience costs and delays in liquidating
the securities held as collateral and the Fund might incur a loss if the value
of the collateral held declined during this period. Certificated securities
purchased subject to resale must be placed in the physical possession of the
Fund's custodian. Uncertificated securities, such as Treasury Bills and most
agency issues, which are recorded by book-entry on the records of the Federal
Reserve Banks, must be transferred to the Fund's custodian by appropriate entry
in the Federal Reserve Banks' records. If the value of the securities purchased
should decline below the sales price, additional securities sufficient to make
the value of the securities equal to the sales price must be deposited with the
Fund's custodian. If the seller defaults, the Investment Fund might incur a loss
if the value of the securities securing the repurchase agreement declines and
might incur disposition costs in connection with liquidating the securities. In
addition, if bankruptcy proceedings are commenced with respect to the seller,
realization upon the securities by the Investment Fund may be delayed or denied.
Reverse Repurchase Agreements
Each Investment Fund may enter into reverse repurchase agreements
with broker-dealers or financial institutions deemed creditworthy under
guidelines approved by the board of the Investment Fund. Such agreements involve
the sale of securities held by the Investment Fund pursuant to the Investment
Fund's agreement to repurchase the securities at an agreed-upon date and price
reflecting a market rate of interest. Reverse repurchase agreements are
considered to be borrowings by the Investment Fund and may be entered into only
when the investment manager believes an Investment Fund's earnings from the
transaction will exceed the interest expense incurred.
Lending Portfolio Securities
Any Investment Fund may lend its portfolio securities where such
loans are callable at any time and are continuously secured by collateral (cash,
government securities or Letters of Credit) equal to no less than the market
value, determined daily, of the securities loaned. Securities may be lent to
normal market participants such as broker-dealers. The Investment Fund which
lends its securities will receive dividends or interest paid on the securities
loaned. It may also earn interest for having made the loan. On termination of
the loan, the borrower is required to return the securities to the Investment
Fund. Any cash collateral deposited pursuant to loans of securities will be
invested in cash equivalents including securities issued or guaranteed by the
United States government, its agencies or instrumentalities. Income earned on
the instruments, minus any amounts paid to the borrower for the use of cash,
will be added to the asset value of the Investment Fund, increasing the value of
each unit. At the same time, the value of the money market instrument may
increase or decrease depending on movements in general interest rates during the
period the instrument is held. If a decrease in value is greater than the net
amount of income earned on the money market instrument, the asset value of the
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Investment Fund, and the value of each unit in that Investment Fund, will
decline if the Investment Fund bears the responsibility for such investment.
Letters of Credit will only be used if the issuing bank has a bond rating of "A"
or better by one or more of the nationally known rating agencies. Loans of
portfolio securities will be limited to 50% of the value of each Investment
Fund's total assets. Borrowers of portfolio securities may not be affiliated
directly or indirectly with the Fund. As with any extension of credit, there are
risks of delay in recovery and in some cases even loss of rights in securities
loaned should the borrower of the securities fail financially. However, these
loans of portfolio securities will only be made to firms deemed to be
creditworthy.
Futures and Options Transactions
An Investment Fund may purchase and sell stock index futures
contracts and futures contracts on financial instruments and related options for
the purpose of hedging against changes in values of such Fund's portfolio
securities or options on stock indices held by such Fund. An Investment Fund may
also purchase and sell forward foreign currency exchange contracts and related
options and forward currency contracts for the purpose of hedging against
changes in foreign currency exchange rates and other hedging strategies relating
to portfolio securities. See, "Foreign Currency Transactions", above. Finally,
an Investment Fund may invest in interest rate futures contracts and related
options to hedge against changes in interest rates in relation to the interest
rates that are reflected in portfolio securities. The ability of an Investment
Fund to hedge successfully will depend on the investment manager's ability to
forecast pertinent market movements, which cannot be assured.
Options are valued at their last purchase price as of the close of
options trading on the applicable exchange. Futures contracts are marked to the
market daily and options thereon are valued at their last sale price, as of the
close of the applicable commodities exchange.
An Investment Fund will not enter into futures contracts or
related options if the aggregate initial margin and premiums exceed 5% of the
liquidation value of the Fund's total assets, taking into account unrealized
profits and losses on such contracts, provided, however, that in the case of an
option that is in-the-money, the in-the-money amount may be excluded in
computing such 5%. The above restriction does not apply to the purchase or sale
of futures contracts and related options for bona fide hedging purposes, within
the meaning of regulations of the Commodity Futures Trading Commission. For
purposes of the foregoing, a call option is "in-the-money" when the current
market price is above the strike price and a put option is "in-the-money" when
the current market price is below the strike price.
Any Investment Fund may purchase call and put options on
securities and on stock indices to attempt to increase such Fund's total return.
An Investment Fund may purchase call options when, in the opinion of the
investment manager for such Fund, the market price of the underlying security or
index will increase above the exercise price. An Investment Fund will purchase
<PAGE>
put options when the investment manager for such Fund expects the market price
of the underlying security or index to decrease below the exercise price. When
an Investment Fund purchases a call option it will pay a premium to the person
writing the option and a commission to the broker selling the option. If the
option is exercised by the Investment Fund, the amount of the premium and the
commission paid may be greater than the amount of the brokerage commission that
would be charged if the security were to be purchased directly.
In addition, an Investment Fund may write covered put or call
options on securities or stock indices. By writing options, the Investment Fund
limits its profit to the amount of the premium received. By writing a call
option, the Investment Fund assumes the risk that it may be required to deliver
the security having a market value greater than at the time the option was
written. By writing a put option, the Investment Fund assumes the risk that it
may be required to purchase the underlying security at a price in excess of its
current market value. An Investment Fund will not write options if immediately
after such sale the aggregate value of the obligations under the outstanding
options would exceed 25% of such Fund's net assets.
The staff of the Securities and Exchange Commission has taken the
position that the purchase and sale of futures contracts and the writing of
related options may involve senior securities for the purposes of the
restrictions contained in the Investment Company Act on investment companies'
issuing senior securities. However, the staff has issued letters declaring that
it will not recommend enforcement action if an investment company:
(a) sells futures contracts to offset expected declines in the
value of the investment company's portfolio securities,
provided the value of such futures contracts does not
exceed the total market value of those securities (plus
such additional amount as may be necessary because of
differences in the volatility factor of the portfolio
securities vis-a-vis the futures contracts);
(b) writes call options on futures contracts, stock indices or
other securities, provided that such options are covered
by the investment company's holding of a corresponding
long futures position, by its ownership of portfolio
securities which correlate with the underlying stock
index, or otherwise;
(c) purchases futures contracts, provided the investment
company establishes a segregated account ("cash segregated
account") consisting of cash or cash equivalents in an
amount equal to the total market value of such futures
contracts less the initial margin deposited therefor; and
(d) writes put options on futures contracts, stock indices or
other securities, provided that such options are covered
by the investment company's holding of a corresponding
short futures position, by establishing a cash segregated
account in an amount equal to the value of its obligation
under the option, or otherwise.
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The Fund will conduct its purchases and sales of futures contracts
and writing of related options transactions in accordance with the foregoing.
There are risks associated with the use of futures contracts for
hedging purposes. In a declining market environment, the increase in value of
the hedging instruments may not completely offset the decline in value of the
securities owned by an Investment Fund. Conversely, in a rising market
environment the loss in the hedged position may be greater than the capital
appreciation that an Investment Fund may experience in its securities positions.
Further, if market values do not fluctuate, an Investment Fund will sustain a
loss at least equal to the commissions on the financial futures transactions and
premium paid.
The price of a futures contract will vary from day to day and
should parallel (but not necessarily equal) the changes in price of the
underlying deliverable securities. The difference between these two price
movements is called "basis". There are occasions when basis becomes distorted.
All investors in the futures market are subject to initial margin and variation
margin requirements. Rather than providing a variation margin, an investor may
close out a futures position. Changes in the initial and variation margin
requirements may influence an investor's decision to close out the position. The
normal relationship between the securities and futures markets may become
distorted if changing margin requirements do not reflect changes in value of the
securities. The liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking delivery of the
underlying securities. In the event investors decide to make or take delivery
(which is unlikely), liquidity in the futures market could be reduced, thus
producing temporary basis distortion. Finally, the margin requirements in the
futures market are lower than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary basis distortion.
Under certain circumstances, successful use of futures contracts
by an Investment Fund is also subject to the respective investment manager's
ability to correctly anticipate movements in the direction of the prices of the
Investment Fund's underlying securities. For example, if an Investment Fund has
hedged against the possibility of a decrease in the price of its securities and
prices of such securities increase instead, the Investment Fund will lose part
or all of the benefit of the increased value of the securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Investment Fund has hedged with futures and
has insufficient cash, it may have to sell securities to meet daily maintenance
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. The Investment Fund may
have to sell securities at a time when it may be disadvantageous to do so.
In the futures market, it may not always be possible to execute a
buy or sell order at the desired price or to close out a position due to market
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conditions, limits on open positions and/or daily price fluctuation limits. Each
market establishes a limit on the amount by which the daily market price of a
futures contract may fluctuate. Once the market price of a futures contract
reaches its daily price fluctuation limit, positions in the contract can be
neither taken nor liquidated unless traders are willing to effect trades at or
within the limit. The holder of a futures contract may therefore be locked into
its position by an adverse price movement for several days or more to its
detriment. Should this occur, it may be possible for an investor to reduce its
exposure to changing securities values through option transactions.
Short-Term Trading
None of the Investment Funds plans to purchase securities solely
for the purpose of short-term trading. The turnover rate for an Investment Fund
will not be a factor preventing sale or purchase when the investment manager
believes investment considerations warrant such sale or purchase. The annual
portfolio turnover rates for each of the eight Investment Funds for the fiscal
year ended September 30, 1995 were as follows: Core Equity Fund (7.91%),
Emerging Growth Equity Fund (170.54%), Value Equity Fund (67.06%), International
Equity Fund (51.40%), Actively Managed Bond Fund (18.21%), Intermediate-Term
Bond Fund (15.95%), Short-Term Investment Fund (0.00%), and Dedicated Bond Fund
(0.00%). High portfolio turnover involves correspondingly greater brokerage
commissions, other transaction costs and a possible increase in short-term
capital gains and losses.
The foregoing investment objectives and related policies are not
fundamental and may be changed by the Trustees without the approval of the
holders of a majority of the outstanding units of the affected Investment Fund
or Funds.
INVESTMENT RESTRICTIONS
The investment policies of the respective Investment Funds are
subject to a number of restrictions which reflect both self-imposed standards
and Federal and state regulatory limitations. The investment restrictions
recited below are matters of fundamental policy and may not be changed without
the affirmative vote of a majority of the outstanding shares of the Investment
Fund. Accordingly, each Investment Fund will not:
(a) Concentrate 25% or more of its total assets in securities of
issuers in any one industry (for this purpose the United
States government, its agencies and instrumentalities are
not considered an industry);
(b) With respect to 75% of its total assets, invest more than 5%
of its total assets in the securities of any single issuer
(for this purpose the United States government, its agencies
and instrumentalities are not considered a single issuer);
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(c) Borrow money in any Investment Fund except for temporary
emergency purposes and then only in an amount not exceeding
5% of the value of the total assets of that Investment Fund;
(d) Pledge, mortgage or hypothecate the assets of any Investment
Fund to any extent greater than 10% of the value of the
total assets of that Investment Fund; or
(e) Invest more than 10% of its total assets in illiquid
securities, including repurchase agreements with maturities
greater than seven days.
The Investment Funds are subject to further investment
restrictions that are set forth in the Statement of Additional Information.
INVESTMENTS IN THE FUND
As more fully explained below, investments in the Fund may be made
by Qualified Trusts which are either Full Participating Trusts, Participating
Trusts other than Full Participating Trusts or Individual Retirement Accounts.
Participation in the Fund requires a Participation Agreement. The Participation
Agreement for Qualified Trusts other than Individual Retirement Accounts, among
other things, adopts the Agreement and Declaration of Trust as a part of the
Plan of the Eligible Employer and provides that the provisions of the Agreement
and Declaration of Trust shall be controlling with respect to the assets of the
Plan transferred to the Trustees.
FULL PARTICIPATING TRUSTS
A Participating Trust which has adopted the Agreement and
Declaration of Trust and which designated the Trustees as named fiduciaries and
as administrator to act as "Trustee Administrator" (see, "Administration of the
Fund -- Administrative Services") is herein referred to as a "Full Participating
Trust". A Plan effectuated by a Full Participating Trust is herein referred to
as a "Plan of Participation" and the Eligible Employer which is the sponsor of
such Plan is herein referred to as a "Full Participating Employer".
The Participation Agreement which adopts the Agreement and
Declaration of Trust is required to provide for the manner of administration of
the Plan of Participation and the investment of its assets, including, among
other things, any applicable allocation of authority between the Trustees and
the investment fiduciary designated by the Full Participating Employer with
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respect to the acquisition, retention and disposition of units of the Fund on
behalf of the Full Participating Trust. Fiduciaries designated by a Full
Participating Employer with such authority with respect to units of the Fund or
with other authority relating to the investment of assets of a Full
Participating Trust are herein referred to as "Investment Fiduciaries".
Except upon the withdrawal of a Full Participating Trust from the
participation in the Fund, the assets of such Trust which are held by the
Trustees are comprised solely of units of the Fund.
A Plan of Participation may be a defined benefit Plan or a defined
contribution Plan.
Admissions to an Investment Fund or Funds by Full Participating
Trusts are effected by the Trustees in their discretion, which is exercised
consistently with the directions of the Investment Fiduciaries in the case of
Full Participating Trusts subject to Classification Authority and/or Unit
Direction Authority (as defined below), and to allocation directions relating to
DC Investment Classifications (as defined below), provided with respect to Full
Participating Trusts established under defined contribution Plans.
Subject to the approval of the Trustees, the benefits under a Plan
of Participation may be funded through one or more funding agencies in addition
to the Trust. Such a plan, sometimes referred to as a "Plan of Partial
Participation", remains a Plan of Participation subject to the provisions of the
Agreement and Declaration of Trust, and the Eligible Employer which sponsors it
remains a Full Participating Employer, except that the Trustees have no
responsibility with respect to the assets of a Plan of Partial Participation
which are not held and administered by them under the Agreement and Declaration
of Trust. The Investment Fiduciaries of a Plan of Partial Participation are
solely responsible for the manner in which the Plan assets of such Plan shall be
diversified. A Full Participating Employer sponsoring a Plan of Partial
Participation is required to elect that the assets of its Full Participating
Trust held by the Trustees shall be subject to Unit Direction Authority, and/or,
with the consent of the Trustees, to Classification Authority.
A. Defined Benefit Plans
A Full Participating Employer sponsoring a defined benefit Plan of
Participation may elect to authorize Investment Fiduciaries to direct, to the
extent provided below, the manner in which the units held in its Full
Participating Trust shall be allocated among classes of units. Except to the
extent authority is reserved to Investment Fiduciaries pursuant to an election
described below, the Trustees, acting as the trustees of the Full Participating
Trust established in connection with a defined benefit Plan, determine in their
discretion the classes of units which will be acquired, retained and disposed of
<PAGE>
by the Full Participating Trust. In this connection, the Trustees may establish
guidelines as to proportions of the units held in such Full Participating Trust
which shall be allocated among various classes of units and may take into
account characteristics of the Plan of Participation, Full Participating
Employer, Plan participants, or other factors as they may deem relevant.
Allocation authority is permitted to be reserved to Investment
Fiduciaries on one or both of the following two bases, as elected by the Full
Participating Employer:
(a) Classification Authority. The Investment Fiduciaries
may be given the authority to direct, subject to guidelines
established by the Trustees, the proportions in which the units
held in the Full Participating Trust shall be divided between the
investment classifications ("Investment Classifications")
established by the Trustees. The Trustees have classified the
classes of units comprising the Investment Funds under two
Investment Classifications comprising investments providing
generally for a return based on fixed income investments and
equity investments. The Trustees may change the Investment
Classifications or add new classifications from time to time.
Trusts with respect to which the Investment Fiduciaries have been
given the authority described in this paragraph are referred to as
trusts subject to "Classification Authority".
(b) Unit Direction Authority. The Investment Fiduciaries
may be given authority to direct the Trustees to invest, subject
to guidelines established by the Trustees, assets of the Full
Participating Trust in units of specified Investment Funds. Trusts
with respect to which the Investment Fiduciaries have been given
the authority described in this paragraph are referred to as
trusts subject to "Unit Direction Authority".
The allocation of the assets of a Full Participating Trust among
units and/or classes of units are effected in conformity with the funding policy
established with respect to the Plan of Participation in accordance with the
provisions of the Agreement and Declaration of Trust. The Trustees may establish
guidelines with respect to the allocation of units where a directory power has
been reserved to Investment Fiduciaries, taking into account such
characteristics of the Plan of Participation, Full Participating Employer, Plan
participants or other factors as they may deem relevant. To the extent permitted
by the Employee Retirement Income Security Act of l974, as amended ("ERISA")
and, subject to the requirements of any guidelines so established, the Trustees
will follow the investment directions of the Investment Fiduciaries and will
have no liability or responsibility with respect to such directions.
B. Defined Contribution Plans
The assets of Full Participating Trusts which have been
established under Plans which are defined contribution Plans are invested in
units in the manner set forth below. The Trustees have established three
Investment Classifications ("DC Investment Classifications") under which the
classes of units comprising the Investment Funds have been classified. The DC
<PAGE>
Investment Classifications comprise investments providing generally for (a) a
return based on long-term fixed income investments, (b) a return based on
short-term fixed income investments, and (c) equity investments. The Trustees
may change the DC Investment Classifications or add new classifications from
time to time.
The Dedicated Bond Fund is not currently available for defined
contribution Plans. Full Participating Employers sponsoring defined contribution
Plans may choose from the remaining seven funds those that will be offered to
employees.
Each Full Participating Employer sponsoring a defined contribution
Plan which is funded under a Full Participating Trust is required to elect in
its Participation Agreement the DC Investment Classifications among which
contributions under such Plan shall be allocated. The Trustees may, upon the
request of such Full Participating Employer or Investment Fiduciaries, if any,
establish an investment classification or classifications, other than the DC
Investment Classifications, hereinafter called "Special DC Investment
Classifications", which include classes of units selected by such Full
Participating Employer or its Investment Fiduciaries. The Full Participating
Employer or its Investment Fiduciaries shall provide the Fund with investment
instructions in respect of contributions made under its defined contribution
Plan specifying the DC Investment Classifications and/or Special DC Investment
Classifications under which such contributions are to be invested. The Trustees
shall invest contributions directed to be invested in any such DC Investment
Classification and/or Special DC Investment Classification and shall make
withdrawals therefrom in such manner as to preserve the proportions of the DC
Investment Classification and/or Special DC Investment Classifications which are
represented by the Investment Funds. To the extent permitted by ERISA, the
Trustees shall have no liability or responsibility for the determination of the
Investment Funds included in a Special DC Investment Classification directed by
a Full Participating Employer or its Investment Fiduciaries. The allocation of
the assets of a Full Participating Trust established in connection with a
defined contribution Plan among the DC Investment Classifications established by
the Trustees and the selection of the Investment Funds, or combinations thereof,
shall be subject to the funding policy established with respect to the defined
contribution Plan in accordance with the provisions of the Agreement and
Declaration of Trust and such guidelines as may be established by the Trustees.
PARTICIPATING TRUSTS OF ELIGIBLE EMPLOYERS OTHER THAN FULL PARTICIPATING TRUSTS
Participating Trusts of Eligible Employers other than Full
Participating Trusts can effect purchases of specific Investment Funds by
sending the Fund a completed investment instruction form instructing the
Trustees how to invest in the Fund on behalf of the Participating Trust amounts
accompanying such form and any subsequent contributions made prior to a change
in instructions. Investment instruction forms can be obtained from the office of
RSI Retirement Trust at 317 Madison Avenue, New York, New York 10017. Completed
forms and funds in the form of checks can be submitted in person to the office
of the Fund or by mail.
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
Individual Retirement Accounts are eligible for participation in
the Fund. The Fund serves solely as the investment vehicle for the Individual
Retirement Accounts. Individual Retirement Accounts may purchase units of all
Investment Funds other than the Dedicated Bond Fund. In order to participate in
the Fund, a completed Application and Transfer Request form must be sent to the
Fund instructing the Trustees how to allocate amounts accompanying the form (and
any subsequent contributions made prior to a change in instructions) among the
various Investment Funds on behalf of the individual submitting the form. The
minimum initial Fund investment is $2,000 (which may be made in quarterly
investments of $500 during the first year). The minimum initial investment for
each Investment Fund is $500, and subsequent investments for each Investment
Fund must also be at least $500. Application and Transfer Request forms can be
obtained by writing to Retirement System Distributors Inc., Customer Service, at
P. O. Box 2064, Grand Central Station, New York, New York 10163-2064, or by
calling the Distributor's Individual Retirement Account Customer Service line at
1-800-772-3615. Completed Application and Transfer Request forms and
contribution checks can be submitted in person to the office of the Fund or by
mail to the above address. Investors wishing to purchase units by means of wire
transfers should contact the Distributor.
GENERAL
There is no minimum initial investment for admission to each
Investment Fund for a Participating Trust (other than an Individual Retirement
Account as described above) and subsequent investments may be made in any amount
(subject to the Individual Retirement Account minimum). All funds will be
invested in full and fractional units. The purchase price for units of each
Investment Fund will be its net asset value per unit next determined following
receipt of investment instructions to the Fund and the purchase price at the
office of the Fund. See, "Valuation of Units". Upon request, each Participating
Trust must provide to the Trustees a properly completed investment instruction
form. An investment instruction form which is not properly completed will be
directed to the Service Company for clarification. The Service Company will
ascertain the information necessary to properly complete the investment
instruction form and forward it to the Fund. If such investment instruction form
is transmitted to the Fund in proper form by 4:00 p.m., Eastern Time, the
purchase will be effected at the net asset value determined as of the close of
business on that day. Otherwise, such investment instruction form will be based
on the next determined net asset value. Each Participating Trust must contain an
appropriate provision authorizing the investment of all or a portion of its
assets in the Fund.
Because units are not transferable, certificates representing
units of the Fund will not be issued. All units purchased shall be confirmed to
Trust Participants and credited to the accounts of the Participating Trusts on
the Fund's books.
<PAGE>
The Fund reserves the right in its sole discretion to (a) suspend
the availability of its units, or (b) to reject requests for admission, when in
the judgment of the Trustees such suspension or rejection is in the best
interests of the Fund. In addition, the availability of units or classes of
units to Full Participating Trusts shall be subject to the applicable
authorizing election of the Full Participating Employer and the guidelines
established by the Trustees.
WITHDRAWALS AND EXCHANGES
WITHDRAWALS FROM INVESTMENT FUNDS (REDEMPTIONS)
All or a portion of the units held in any of the Investment Funds
can be redeemed at any time. Payment for units withdrawn by a Participating
Trust which is not a Full Participating Trust (including an Individual
Retirement Account) will be made by check drawn in favor of the trustee or
trustees of such Participating Trust. Payment for units withdrawn by a Full
Participating Trust will be made to the Trustees in their capacities as the
trustees of such Full Participating Trust to be administered in accordance with
the Agreement and Declaration of Trust.
Participating Trusts (other than Individual Retirement Accounts)
can make withdrawals at any time by filing the redemption request form provided
by the Trustees at the Fund's office.
Individual Retirement Accountholders can request a distribution of
account shares at any time, by completing a Redemption Request Form which is
available by calling the Distributor's Individual Retirement Account Customer
Service line at 1-800-772-3615 or by writing to Retirement System Distributors
Inc., Customer Service, at P.O. Box 2064, Grand Central Station, New York, New
York 10163-2064.
A redemption request filed by a Participating Trust (including an
Individual Retirement Account) which is not properly completed will be directed
to the Service Company for clarification. The Service Company will ascertain the
information necessary to properly complete the redemption request and forward it
to the Fund. If such redemption request is transmitted to the Fund in proper
form by 4:00 p.m., Eastern Time, the withdrawal will be effected at the net
asset value determined as of the close of business on that day. Otherwise, such
withdrawal will be based on the next determined net asset value.
Withdrawal of units by a Full Participating Trust shall be made
only by the Trustees, in their capacities as trustees of a Full Participating
Trust, acting in their discretion consistently with the directions of the
Investment Fiduciaries in the case of Full Participating Trusts subject to
Classification Authority and/or Unit Direction Authority and to the allocation
directions relating to DC Investment Classifications provided with respect to
Full Participating Trusts established under defined contribution Plans.
<PAGE>
The withdrawal price will be the net asset value per unit next
determined following receipt of instructions for withdrawal, together with all
other required documents, in proper form at the office of the Fund. See,
"Valuation of Units". Generally a request must be accompanied by appropriate
evidence of authority and authorization (e.g., certified resolutions, incumbency
and signature certificates, evidence of any required governmental approval, and
a signature guarantee for Individual Retirement Accounts). The value of a unit
on withdrawal may be more or less than the value upon admission to the
Investment Fund, depending upon the value at the time of withdrawal of the
assets in the Investment Fund, from which the units are withdrawn. See,
"Valuation of Units". Withdrawals are subject to determination by the Trustees
that the Redemption Request Form has been properly completed.
Payment for units withdrawn will normally be made, in the case of
Full Participating Trusts, to the Trustees in their capacities as trustees of
the Full Participating Trust or, in the case of Participating Trusts other than
Full Participating Trusts (including Individual Retirement Accounts), to the
trustees of such Participating Trust, within one business day of the
determination of net asset value following receipt of documents in proper form,
but in no event will payment be made more than seven days after such receipt.
The payment may be delayed or the right of withdrawal from any Investment Fund
suspended at times when (a) trading on the New York Stock Exchange is restricted
or closed for other than customary weekends and holidays, (b) an emergency, as
defined by rules of the Securities and Exchange Commission, exists making
disposal of portfolio securities or determination of the value of the net assets
of an Investment Fund not reasonably practicable, or (c) the Securities and
Exchange Commission has by order permitted such suspension.
Disqualification of a Participating Trust other than an Individual
Retirement Account could result from actions taken by the trustee thereof or by
the administrators or fiduciaries of the Plan with respect to which it has been
established. In that event, a determination of disqualification may be made by
the Internal Revenue Service or by a court. If at any time a Participating Trust
is disqualified, the Trustees will withdraw all units of such Participating
Trust at the net asset value next determined after the Trustees are apprised of
such disqualification. Payments for units withdrawn by the Trustees upon
disqualification will be made in the same manner as described in the preceding
paragraph for payment of units withdrawn upon request.
EXCHANGES
Units in any Investment Fund may be exchanged without cost for
units in any other Investment Fund. Exchanges may be effected by Participating
Trusts other than Full Participating Trusts (but not including Individual
Retirement Accounts), and by Full Participating Trusts subject to Unit Direction
Authority, by sending a completed investment instruction form to the Trustees.
Exchange of units by a Full Participating Trust other than a Full Participating
<PAGE>
Trust subject to Unit Direction Authority, shall be made only by the Trustees in
their capacities as trustees of such Full Participating Trust, acting in their
discretion consistently with the direction of the Investment Fiduciaries in the
case of Full Participating Trusts subject to Classification Authority and to the
allocation directions relating to DC Investment Classifications provided with
respect to Full Participating Trusts established under defined contribution
Plans. Investment instruction forms can be obtained from the Fund at its office.
Completed investment instruction forms can be returned in person or by mail to
the Fund.
Individual Retirement Accountholders may exchange units in any
Investment Fund for units in any other Investment Fund without cost by
completing an Individual Retirement Account Exchange Request Form. This form is
available by calling the Distributor's Individual Retirement Account Customer
Service line at 1-800-772-3615 or by writing to Retirement System Distributors
Inc., Customer Service, at P.O. Box 2064, Grand Central Station, New York, New
York 10163-2064. Exchanges may be effected by an Individual Retirement
Accountholder by sending a completed Exchange Request Form to the trustee of the
Individual Retirement Account. (The trustee of all Individual Retirement
Accounts is a Participating Trust of the Fund, although not a Full Participating
Trust.)
Any exchange will be based on the respective net asset values of
the units involved next determined after receipt of instructions for an exchange
at the office of the Fund prior to its close of business. Exchanges are subject
to determination by the Trustees that the investment instruction form has been
properly completed.
VALUATION OF UNITS
Net asset value per unit of each Investment Fund is determined by
dividing the total value of each Investment Fund's assets, less any liabilities,
by the number of units of the respective Investment Funds outstanding.
The Fund determines the value of the assets held in each
Investment Fund as of the close of the New York Stock Exchange composite
transactions on each day on which the Exchange is open for trading (normally
4:00 p.m. Eastern time), provided that such determination need be made only on
each day on which units are to be valued for purposes of issuance or redemption.
The following days are holidays on the New York Stock Exchange: January 1, New
Year's Day; third Monday in February, Presidents' Day; Friday before Easter,
Good Friday; last Monday in May, Memorial Day; July 4, Independence Day; first
Monday in September, Labor Day; fourth Thursday in November, Thanksgiving Day;
December 25, Christmas Day. Except for debt securities with remaining maturities
of 60 days or less, assets for which markets are available are valued as
follows: (a) each listed equity security is valued at its closing price obtained
<PAGE>
from the respective primary exchange on which the security is listed, or, if
there were no sales on that day, at its last reported current closing price; (b)
each unlisted equity security quoted on the NASDAQ is valued at the last current
bid price obtained from the NASDAQ; (c) United States government and agency
obligations are valued based upon bid quotations from various market makers for
identical or similar obligations; and (d) short-term money market instruments
(such as certificates of deposit, bankers' acceptances and commercial paper) are
most often valued by bid quotation or by reference to bid quotations of
available yields for similar instruments of issuers with similar credit ratings.
Certain of these prices may be obtained by the Fund from a service which
collects and disseminates such market prices. When approved by the Trustees,
certain debt securities, including corporate debt obligations, may be valued on
the basis of prices provided by such service when such prices are believed to
reflect the fair market value of such debt securities.
Debt securities with remaining maturities of 60 days or less are
valued on the basis of amortized cost. Under this method of valuation, the
security is initially valued at cost on the date of purchase or, in the case of
securities purchased with more than 60 days remaining to maturity, the market
value on the 61st day prior to maturity. Thereafter, the Fund assumes a constant
proportionate amortization in value until maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security, unless the Trustees are apprised that amortized cost no longer
represents fair market value. The Fund will monitor the market value of these
investments for the purpose of ascertaining whether any such circumstances
exist.
When approved by the Trustees, certain securities may be valued on
the basis of valuations provided by an independent pricing service when such
prices are believed by the Trustees to reflect the fair market value of such
securities. These securities would normally be those which have no available
recent market value, have few outstanding shares and therefore infrequent
trades, or for which there is a lack of consensus on the value, with quoted
prices covering a wide range. The lack of consensus would result from relatively
unusual circumstances such as no trading in the security for long periods of
time, or a company's involvement in merger or acquisition activity, with widely
varying valuations placed on the company's assets or stock. Prices provided by
an independent pricing service may be determined without exclusive reliance on
quoted prices and may take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data.
In the absence of an ascertainable market value, assets are valued
at their fair market value as determined by the officers of the Fund using
methods and procedures reviewed and approved by the Trustees.
Investments denominated in foreign currencies are translated to
United States dollars at the prevailing rate of exchange. Each foreign security
is valued at its closing price or the mean between the jobber's bid and asked
price, depending on the security and the exchange on which it is traded.
The Fund does not ordinarily declare and pay dividends on its
investment income. The Fund did, however, declare a dividend of shares of common
stock of Retirement System Group Inc. ("System") in connection with the
<PAGE>
reorganization of the Fund and the transfer of certain assets of the Fund to the
System in 1990. See, "Distributions and Taxes". Income earned on assets in an
Investment Fund is included in the total value of such Fund's assets. Interest
income on debt securities is accrued and added to asset value daily. Dividend
income is recognized and added to asset value on the ex-dividend date. In
addition, realized and unrealized gains or losses on investment securities of
each Investment Fund will be added to or subtracted from, respectively, the
asset value of that Investment Fund.
DISTRIBUTIONS AND TAXES
With respect to the Plans of Eligible Employers, the Fund has
received from the Internal Revenue Service a determination that it is a
commingled trust which is exempt from taxation under Section 501(a) of the Code
with respect to funds derived from Participating Trusts which are pension or
profit sharing trusts maintained in conformity with Section 401(a) of the Code.
In order for the Fund to maintain its tax exempt status, only
Qualified Trusts (including Individual Retirement Accounts) may participate in
the Fund. In addition, all investments and income belonging to any Qualified
Trust must be used exclusively for the benefit of the participants and their
beneficiaries under that Qualified Trust prior to the satisfaction of all
liabilities for such participants and their beneficiaries. Except to the extent
provided by applicable Federal law, no Participating Trust may assign any part
of its interest in the Fund. The Fund must, at all times, be maintained as a
domestic trust in the United States, and there must be a separate accounting for
the interest of each Participating Trust in the Fund.
The Fund does not intend to declare a dividend from its net
investment income or to make distributions of any gains realized on sales of
portfolio securities. Income on, and gains realized from the sale of, portfolio
securities of each Investment Fund will be added to the total asset value of the
assets of such Investment Fund and losses realized from the sale of portfolio
securities of each Investment Fund will be subtracted from the total asset value
of the assets of such Investment Fund. See, "Valuation of Units".
Payments for units withdrawn from the Fund are not taxable upon
their distribution to the trustees of a Participating Trust which is qualified
under Section 401(a) of the Code. Distributions from Individual Retirement
Accounts are ordinarily taxable, unless "rolled over" into another Individual
Retirement Account or a tax-qualified trust.
The foregoing describes only certain Federal tax considerations
relating to the Fund. Among other things, it does not describe other tax laws
such as state or local taxes, does not describe the deductibility of
contributions to Participating Trusts and does not describe the taxation of
individual participants on the receipt of distributions from Participating
Trusts. Trust Participants and Eligible Employers and Individual Retirement
Accountholders should consult their individual tax advisors with respect to the
taxes applicable to or in respect of their Plans.
<PAGE>
ADMINISTRATION OF THE FUND
GENERAL
The business and affairs of the Fund, a New York common law trust,
are managed by the Trustees. The Trustees perform the duties and undertake the
responsibilities, in effect, of a board of directors of an investment company.
As Trustees, however, they must discharge their duties with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims. The Trustees
were last elected by vote of the Trust Participants at a meeting held on June
29, 1995. Pursuant to the Fund's Agreement and Declaration of Trust, the
Trustees of the Fund have been divided into three classes of Trustees. At each
annual meeting, one class of Trustees is elected. There is no limitation on the
number of terms which may be served by any Trustee. The Trustees of the Fund and
their principal occupations are set forth below. Each Trustee who is an
"interested person" of the Fund, as defined in the Investment Company Act, is
indicated by an asterisk (*).
INFORMATION REGARDING TRUSTEES
PRINCIPAL OCCUPATION
POSITIONS WITH FOR LAST FIVE YEARS AND
NAME THE FUND AGE AFFILIATION WITH THE FUND
Current term remaining - three years:
Candace Cox Trustee 44 President and Chief Investment
Officer, NYNEX Asset Management Co.,
since November, 1995; Vice President,
Public Markets Investments, NYNEX
Asset Management Co., from July 1994
to October 1995; Managing Director,
Public Markets Investments, NYNEX
Asset Management Co., from September
1992 to October 1995; Principal
Investment Officer, New York City
Controller's Office, New York, New
York from July 1989 to August 1992.
Eugene C. Ecker Trustee 71 Consultant since January 1988, Pension
and Group Insurance.
Raymond L. Willis Trustee 60 Private investments since March 1989.
Current term remaining - two years:
Herbert G. Trustee 61 Chairman and Chief Executive Officer
Chorbajian* since October 1990 and President and
Director since June 1985 of ALBANK,
FSB; Chairman, President and Chief
Executive Officer of ALBANK Financial
Corporation since April 1992.
Ralph L. Trustee 62 Retired; Vice President, Peoples
Hodgkins, Jr. Heritage Bank, Portland Maine from
September 1994 to March 1995; formerly
President and Chief Executive Officer,
Mid Maine Savings Bank, FSB, Auburn,
Maine from August 1970 to August 1994.
William L. Trustee 60 President and Chief Executive Officer,
Schrauth* The Savings Bank of Utica, Utica, New
York since August 1977.
William E. Swan* Trustee 48 President and Chief Executive Officer,
Lockport Savings Bank, Lockport, New
York since July 1989.
<PAGE>
PRINCIPAL OCCUPATION
POSITIONS WITH FOR LAST FIVE YEARS AND
NAME THE FUND AGE AFFILIATION WITH THE FUND
Current term remaining - one year:
William President 56 President and Trustee of the Fund
Dannecker* and Trustee since May 1986 and May 1987,
respectively; Chief Executive Officer
of the Fund from January 1988 to
August 1990; President of Retirement
System Fund Inc. since February 1991
and Director since November 1990;
President and Director of Retirement
System Group Inc. since March 1989 and
Chief Executive Officer since January
1990; President and Director of
Retirement System Consultants Inc.
since January 1990 and March 1989,
respectively; Director of Retirement
System Investors Inc. since March
1989; President and Director of
Retirement System Distributors Inc.
since December 1990 and July 1989,
respectively.
Covington Hardee Trustee 76 Chairman of the Board Emeritus from
1984 to April 1990, The Lincoln
Savings Bank, FSB, New York, New York.
Maurice E. Kinkade Trustee 54 Director of Development, Maplebrook
School, Amenia, New York, since
September 1994; President, of KINCO
Management, Poughkeepsie, New York
from June 1992 to September 1995;
formerly Chairman and Chief Executive
Officer from 1984 and 1980,
respectively to February 1990.
President from August 1986 to February
1990 and between 1980 and 1984,
Poughkeepsie Savings Bank, FSB,
Poughkeepsie, New York.
<PAGE>
William G. Lillis* Trustee 65 Real Estate Consultant; formerly
President and Chief Executive Officer
from April 1981 and December 1989,
respectively to November 1991,
American Savings Bank, White Plains,
New York.
See, "Administration of the Fund" in the Statement of Additional
Information for further information regarding Trustees' compensation
An important function of the Trustees is the selection of
investment managers for the Investment Funds and the review and evaluation of
their performance.
The Trustees periodically evaluate the performance of the
investment managers and review the continued appropriateness of the structure of
the Investment Funds. The Trustees also periodically evaluate the allocation of
assets among Investment Classifications and among Investment Funds and
guidelines of investment for all Plans. The Trustees have retained Hewitt
Associates to assist them in the above matters, for which service the Fund paid
Hewitt Associates fees and expenses amounting to $55,842 for the Fund's fiscal
year ended September 30, 1995.
THE SERVICE AGREEMENT
Effective August 1, 1990, the Fund entered into a Service
Agreement with the Service Company, whereby the Service Company provides the
Fund with the general administrative and related services necessary to carry on
the affairs of the Fund.
Pursuant to the Service Agreement, the Service Company has agreed
to: (a) manage, supervise and conduct the affairs and business of the Fund, and
matters incidental thereto, in a manner consistent with the Fund's Agreement and
Declaration of Trust, Rules and Procedures, Statement of Investment Objectives
and Guidelines and Prospectus, as these may be amended from time to time; (b)
furnish or provide to the Fund such office space, equipment and personnel, and
such clerical and back office services, as the Fund may reasonably require; (c)
provide the Fund with stock transfer agent and registrar services and maintain
sufficient trained personnel and equipment and supplies to perform such
services; (d) provide the Fund with Plan administrative services necessary due
to the fact that the Trustees of the Fund are the Trustee Administrator for each
of the affected Participating Trusts under the Fund's Agreement and Declaration
of Trust; and (e) provide the Fund with certain administrative services in
connection with Individual Retirement Accounts. In addition, the Service Company
provides information relating to the allocation of assets between equities and
fixed income obligations and within specified Investment Funds of the Fund.
<PAGE>
Effective August 1, 1993, the Trustees of the Fund approved
continuance of an amended Service Agreement with the Service Company. Under the
amended Service Agreement, the Service Company is paid a fee for its services as
of the last day of each month such Service Agreement is in effect, at the
following annual rates, based on the average daily net assets of each of the
Fund's Investment Funds for such month:
Net Assets of Investment Fund Fee (% of average daily net assets)
First $25 million .60%
Next $25 million .50%
Next $25 million .40%
Next $25 million .30%
Over $100 Million .20%
The Service Company will pay all of the fees and expenses incurred
by it in providing the Fund with the services and facilities described in the
Service Agreement. The Fund will pay, or reimburse the Service Company for the
payment of, the following fees and expenses incurred by or on behalf of the
Fund, including, without limitation: (1) fees and expenses relating to
investment advisory services; (2) fees and expenses of custodians and
depositories; (3) fees and expenses of outside legal counsel, independent
auditors and consultants; (4) interest charges; (5) all Federal, state and local
taxes (including, without limitation, stamp, excise, income and franchise
taxes); (6) costs of stock certificates and other expenses of issuing and
redeeming units; (7) costs incidental to unitholder meetings; (8) fees and
expenses of registering or qualifying units for sale under Federal and state
securities laws; (9) costs (including postage) of printing and mailing
prospectuses, proxy statements and other reports and notices to unitholders and
to governmental agencies (other than in connection with promoting the sale of
units to prospective new investors); (10) premiums on all insurance and bonds;
(11) fees and expenses of the Fund's Trustees; (12) fees and expenses paid to
any securities pricing organization; and (13) fees and expenses paid to any
third party arising out of any of the services relating to Participating Trusts
and other unitholders, as described in the Service Agreement.
<PAGE>
The amended Service Agreement was initially effective until July
31, 1995, and will remain in effect from year to year thereafter if such
continuance is approved in the manner required for investment advisory contracts
under the Investment Company Act, and if, in addition, the following findings
are made by a majority of the Fund's Trustees who are "not interested" (as
defined in the Investment Company Act): (A) that the Service Agreement is in the
best interests of the Fund and its unitholders; (B) that the services to be
performed pursuant to the Service Agreement are services required for the
operation of the Fund; (C) that the Service Company can provide services, the
nature and quality of which are at least equal to those provided by others
offering the same or similar services; and (D) that the fees for such services
are fair and reasonable in light of the usual and customary charges made by
others for services of the same nature and quality.
The Service Agreement may be terminated by the Fund or the Service
Company, without penalty, on not more than 60 days' nor less than 30 days'
written notice. The Service Agreement will also terminate automatically in the
event of its "assignment" (as defined in the Investment Company Act).
DISTRIBUTION AGREEMENT
Pursuant to the Distribution Agreement, approved effective August
1, 1993, the Broker-Dealer will distribute and promote the sale of units in the
Fund's Investment Funds without compensation for its services. Prior to August
1, 1993, a Rule 12b-1 Plan and Distribution Agreement was in effect, under which
the Broker-Dealer was compensated for distributing units of the Fund.
Pursuant to the Distribution Agreement, the Broker-Dealer is
responsible for paying all of the "distribution expenses" incurred in connection
with the performance of its services on behalf of the Fund. For purposes of the
Distribution Agreement, "distribution expenses" means all expenses which
represent payment for activities primarily intended to result in the sale of
units including, but not limited to, the following: (a) payments made to, and
expenses of, persons or entities which provide sales services in connection with
the distribution of units, including, but not limited to, office space and
equipment, telephone facilities, answering routine inquiries regarding the Fund,
processing transactions and providing any other service to new or prospective
holders of units; (b) costs relating to the formulation and implementation of
marketing and promotional activities with respect to units, including, but not
limited to, direct mail promotions and television, radio, newspaper, magazine
and other mass media advertising; (c) costs of printing and distributing
prospectuses, statements of additional information and reports of the Fund to
<PAGE>
prospective holders of units; (d) costs involved in preparing, printing and
distributing advertising and sales literature pertaining to units; and (e) costs
involved in obtaining whatever information, analyses and reports with respect to
marketing and promotional activities with respect to units that the Fund or the
Broker-Dealer may, from time to time, deem advisable.
The Distribution Agreement was initially effective until July 31,
1995, and will remain in effect from year to year thereafter if such continuance
is approved in the manner required under the Investment Company Act. The
Distribution Agreement may be terminated by the Fund or the Broker-Dealer
without penalty, on not more than 60 days' nor less than 30 days' written
notice. The Distribution Agreement will also terminate automatically in the
event of its "assignment" as defined in the Investment Company Act.
INVESTMENT MANAGERS
Investors Inc. serves as the investment manager for each
Investment Fund pursuant to an Investment Management Agreement dated August 1,
1993. Investors Inc. retains sub-investment advisers to manage the portfolios,
subject to Investors Inc.'s overall supervision, of the Emerging Growth Equity
Fund, and International Equity Fund pursuant to Sub-Investment Advisory
Agreements dated August 1, 1993 between Investors Inc. and each such
sub-investment adviser. Investors Inc. is responsible for overall management of
each Investment Fund's business affairs, as well as managing the portfolios of
each Investment Fund which does not have a sub-investment adviser. The
Investment Management Agreement and each Sub-Investment Advisory Agreement (each
a "Contract") were approved by Trust Participants at a meeting held on July 30,
1993.
Each Contract has an initial term of two years and remains in
effect from year to year thereafter, if such continuance is approved in the
manner required by the Investment Company Act. Each Contract may be terminated
by either party, without penalty, on not more than 60 days' nor less than 30
days' written notice. The Contracts will also terminate automatically in the
event of "assignment" as defined in the Investment Company Act.
The sub-investment advisers for the Emerging Growth Equity Fund
are Freiss Associates, Inc. ("Freiss") and The Putnam Advisory Company, Inc.
("Putnam"), each of which has been allocated approximately 50% of that
Investment Fund's assets (initially and in respect of subsequent investments by
Participating Trusts). The sub-investment adviser for the International Equity
Fund is Morgan Grenfell Investment Services Limited ("Morgan Grenfell"). From
June 15, 1992 until March 31, 1995, NFJ Investment Group was responsible for
managing the Value Equity Fund's portfolio. Beginning April 1, 1995 Investors
Inc. assumed the portfolio management function.
The following is a brief description of Investors Inc. and each
sub-investment adviser, including its address, a brief description of its
business history, and the identification of its controlling persons:
Retirement System Investors Inc. ("Investors Inc."), 317
Madison Avenue, New York, New York 10017, is a wholly-owned
subsidiary of the System. Investors Inc. was formed in March 1989
to act as investment adviser to certain of the Fund's Investment
Funds following the consummation of the Reorganization. Investors
Inc. may also act as investment adviser to other investment
companies.
Friess Associates, Inc. ("Friess"), 350 Broadway, P.O. Box
576, Jackson, Wyoming 83001, is an investment adviser to
individual and institutional clients with substantial investment
portfolios. The company was organized in 1974 and is wholly owned
by Foster S. Friess and Lynnette E. Friess who are directors and
the sole officers of the company.
Morgan Grenfell Investment Services Limited ("MGIS"), 20
Finsbury Circus, London EC2M 1NB, England, was established in 1977
to provide international investment management services to North
American investment funds. MGIS is a wholly-owned subsidiary of
Morgan Grenfell Asset Management Limited ("MGAM"), the holding
company for a group of United Kingdom operated funds management
companies; each of MGIS (indirectly) and MGAM (directly) are
wholly-owned subsidiaries of Morgan Grenfell Group PLC, an
investment holding company which is a subsidiary of Deutsche Bank
AG.
The Putnam Advisory Company, Inc. ("Putnam"), One Post
Office Square, Boston, Massachusetts 02109, was formed in 1968 to
manage domestic and foreign institutional separately managed
accounts. Its parent company is The Putnam Companies, Inc. The
Putnam Companies, Inc. is a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc., a publicly owned holding company, whose
principal businesses are international insurance and reinsurance
brokerage, employee benefit consulting and investment management.
The Putnam organization has been managing money since 1937 with
the inception of The George Putnam Fund of Boston.
The Trustees select the investment manager and the investment
manager selects sub-investment advisers based upon a quantitative and
qualitative evaluation of their skills in managing assets pursuant to specific
investment styles and strategies. Short-term investment performance, by itself,
is not a significant factor in selecting or terminating sub-investment advisers.
The Fund will mail written notice of the appointment of a new manager to each
Participating Trust as promptly as is reasonably practicable under the
circumstances when a new manager begins providing investment management
services.
The investment manager and each sub-investment adviser has
complete discretion to purchase and sell portfolio securities for its segment of
an Investment Fund within the parameters of the Investment Fund's objectives,
policies and restrictions. Although the investment manager's and each
sub-investment adviser's activities are subject to general oversight by the
Trustees, the Trustees do not evaluate the investment merits of the investment
managers' individual security selections.
<PAGE>
The Investment Management and Sub-Investment Advisory Agreements
provide for fees at the annual rates set forth in the following table. The
Sub-Investment Advisory fees are payable by Investors Inc. and not by the
Investment Funds.
Total Management Sub-Investment
Investment Fund Fee Advisory Fee
CORE EQUITY FUND N/A
First $50 Million .60%
Next $150 Million .50
Over $200 Million .40
EMERGING GROWTH EQUITY FUND
The Putnam Advisory Company, Inc.
First $25 Million
Over $25 Million
1.20 1.0
Friess Associates, Inc. .95 .75
1.20 1.0
VALUE EQUITY FUND N/A
First $10 Million .60
Next $10 Million .50
Next $20 Million .40
Next $20 Million .30
Next $40 Million .20
Next $50 Million .15
Over $150 Million .10
INTERNATIONAL EQUITY FUND
First $50 Million
Over $50 Million .80 .60
.70 .50
<PAGE>
ACTIVELY MANAGED BOND FUND N/A
First $50 Million .40
Next $100 Million .30
Over $150 Million .20
INTERMEDIATE-TERM BOND FUND N/A
First $50 Million
Next $100 Million .40
Over $150 Million .30
.20
SHORT-TERM INVESTMENT FUND N/A
First $50 Million
Over $50 Million .25
.20
DEDICATED BOND FUND N/A
First $5 Million .25
Next $15 Million .20
Over $20 Million .15
The total fees paid by the Emerging Growth Equity Fund, Value
Equity Fund, and International Equity Fund are higher than those paid by most
other mutual funds.
The Investors Inc. fee is payable as of the last day of each
month, based on average daily net assets of each of the Investment Funds during
such month. Each sub-investment advisory fee is payable at the end of each
quarterly period. The Morgan Grenfell and Putnam fees are calculated on the
basis of assets at the end of each month during the quarter. The Freiss fees are
calculated on the basis of assets at the end of each quarter.
No investment manager provides any services to an Investment Fund
except portfolio investment. However, if authorized by the Fund, an investment
manager or its affiliate may execute portfolio transactions for the Funds and
receive brokerage commissions therefor.
<PAGE>
An adviser may also serve as a discretionary investment manager or
non discretionary investment adviser to management or advisory accounts
unrelated in any manner to the Fund. Each Contract requires the adviser to
provide fair and equitable treatment to the Fund in the selection of portfolio
investments and the allocation of investment opportunities, but does not
obligate the adviser to give the Fund exclusive or preferential treatment.
Although the advisers make investment decisions for an Investment
Fund independently from those for their other clients, it is likely that similar
investment decisions will be made from time to time. When an Investment Fund and
a client are simultaneously engaged in the purchase or sale of the same
security, the transactions are, to the extent feasible and practicable, averaged
as to price and allocated as to quantity between the Investment Fund and the
clients in a manner considered by the investment manager to be equitable. In
some cases, this system could have a detrimental effect on the price or volume
of the security to be purchased or sold, as far as the particular Investment
Fund is concerned. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions should be to the benefit of
the Investment Fund.
GENERAL INFORMATION
UNITS OF BENEFICIAL INTEREST AND VOTING RIGHTS
The units offered hereby constitute units of beneficial interest
in the respective Investment Funds as to which they have been issued. The
Agreement and Declaration of Trust provides that the Fund may issue an unlimited
number of units of beneficial interest without par value. The classes are
treated as series for the purposes of the Investment Company Act and are
referred to elsewhere in this Prospectus as Investment Funds. The Agreement and
Declaration of Trust permits the Trustees to create an unlimited number of
Investment Funds and, with respect to each Investment Fund, to issue an
unlimited number of full and fractional units of beneficial interest of that
Fund. Each class of units designated as a separate Investment Fund represents a
separate pool of assets. Currently, the Fund is offering units of beneficial
interest in eight Investment Funds: Core Equity Fund, Emerging Growth Equity
Fund, Value Equity Fund, International Equity Fund, Actively Managed Bond Fund,
Intermediate-Term Bond Fund, Short-Term Investment Fund, and Dedicated Bond
Fund. The Trustees may classify or reclassify units into one or more Investment
Funds so long as such classification or reclassification does not have a
material adverse effect on Participating Trusts which own the units.
The units of each Investment Fund are fully paid and
non-assessable, except as described in the last paragraph hereunder, have no
preference as to conversion, exchange, dividends, retirement or other features,
and have no preemptive rights. The voting rights of the units held by a
Participating Trust are exercised by the named fiduciary or fiduciaries of the
related Plan who have been duly vested in accordance with the provisions of
ERISA, with authority to invest assets of the Plan in units of the Fund or, if
applicable, the Individual Retirement Accountholder ("Trust Participant"). A
<PAGE>
Trust Participant is entitled to one vote for each full unit (and a fractional
vote for each fractional unit) outstanding on the books of the Fund in the name
of the Participating Trust. The units of each Investment Fund have
non-cumulative voting rights, which means that the holders of more than 50% of
the units voting for the election of the Trustees can elect 100% of the Trustees
if they choose to do so. On any matter submitted to a vote of Trust
Participants, all units of the Fund then issued and outstanding and entitled to
vote, irrespective of the class, will be voted in the aggregate and not by
class, except (a) when required by the Investment Company Act, units shall be
voted by individual classes; and (b) when the matter affects an interest of less
than all classes, then only Trust Participants of Participating Trusts which own
units of the affected series shall be entitled to vote thereon. Units vote in
the aggregate on matters such as the election of Trustees; whereas, units are
voted by class on matters such as the approval of an Investment Management
Agreement and changing certain investment restrictions.
Except as set forth below under "Termination of the Fund", as used
in this Prospectus, when referring to the approvals to be obtained from Trust
Participants in connection with matters affecting all of the Investment Funds,
the term "majority" means the vote of the lesser of (1) 67% of the Fund's
outstanding units present at a meeting if the holders of more than 50% of the
outstanding units are present in person or by proxy, or (2) more than 50% of the
Fund's outstanding units. When referring to the approvals to be obtained from
Trust Participants in connection with matters affecting less than all of the
Investment Funds, the term "majority" means the vote of the lesser of (A) 67% of
each Investment Fund's outstanding units present at a meeting if the holders of
more than 50% of the outstanding units of such Investment Fund are present in
person or by proxy, or (B) more than 50% of such Investment Fund's outstanding
units.
No document shall be issued evidencing any interest in the Fund.
No Participating Trust shall have the power to sell, assign or transfer any unit
or all or any part of its equity or interest in the Fund or use it as security
for a loan. The Service Company is a Transfer Agent and provides transfer agency
services to the Fund. See, "Administration of the Fund -- The Service
Agreement."
Participating Trusts may be subject to liability for obligations
of the Fund under the laws of some jurisdictions. Therefore, the Agreement and
Declaration of Trust contains a disclaimer of liability of Participating Trusts
and requires notice of such disclaimer be given in each obligation entered into
or executed by the Trustees. It also provides for an indemnification out of
Trust property for any Participating Trust held personally liable for the
obligations of the Fund.
TERMINATION OF THE FUND
The Fund has been established to continue for such time as may be
necessary to accomplish the purposes as to which it was created. Subject to
approval of Participating Trusts which own at least a majority of the
outstanding units of any Investment Fund, the Trustees may (a) sell the assets
<PAGE>
of such Investment Fund to another trust or corporation in exchange for cash or
securities of such trust or corporation, and distribute such cash or securities,
ratably among the Participating Trusts which own the units of such Investment
Fund; or (b) sell and convert into money the assets of such Investment Fund and
distribute the proceeds or such assets ratably among the Participating Trusts
which own the units of such Investment Fund.
Upon completion of the distribution of the remaining proceeds or
the remaining assets of any Investment Fund, the Fund will terminate as to that
Investment Fund and the Trustees will be discharged of any and all further
liabilities and duties and the right, title and interest of all parties will be
canceled and discharged.
CUSTODIAN
The Chase Manhattan Bank, N.A., Chase Metro Tech Center, Brooklyn,
New York 11245, acts as custodian of the assets of the Short-Term Investment
Fund, the Intermediate-Term Bond Fund, the Actively Managed Bond Fund, the
Dedicated Bond Fund and the International Equity Fund. Custodial Trust Company,
101 Carnegie Center, Princeton, New Jersey 08540-6231, acts as custodian of the
assets of the Core Equity Fund, the Emerging Growth Equity Fund and the Value
Equity Fund.
LITIGATION
The Fund currently is not involved in any material pending
litigation.
EXPENSES
All fees and expenses incurred in the administration of the Fund,
other than expenses relating to the administration of Plans of Participation,
are charged to the Fund. Expenses relating to the administration of Plans of
Participation are charged to Full Participating Employers. Expenses relating to
the administration of Individual Retirement Accounts are charged to Individual
Retirement Accountholders. Examples of expenses relating to the administration
of Plans of Participation and Individual Retirement Accounts are general
overhead expenses (other than for investment), particular expenses arising from
services to particular Plans of Participation and Individual Retirement Accounts
which are recorded on the basis of time records maintained by the Service
Company and actuarial expense. Expenses chargeable to the Fund which are
directly attributable to a particular Investment Fund are charged to that Fund's
operations. Expenses which are not attributable to a particular Investment Fund
are allocated among the Investment Funds on bases which are deemed equitable by
the Trustees. The expenses of each of the eight Investment Funds as a percentage
<PAGE>
of average net assets were as follows for the Fund's fiscal year ended September
30, 1995: Core Equity Fund (0.98%); Emerging Growth Equity Fund (2.12%); Value
Equity Fund (1.32%); International Equity Fund (1.90%); Actively Managed Bond
Fund (0.84%); Intermediate-Term Bond Fund (0.98%); Short-Term Investment Fund
(0.80%) and Dedicated Bond Fund (.00%).
PERFORMANCE INFORMATION
Each Investment Fund's performance may be quoted in advertising in
terms of total return. Total returns are based on historical results and are not
intended to indicate future performance. Total returns are based on the overall
dollar or percentage change in value of a hypothetical investment in an
Investment Fund. Each Investment Fund's total return shows its overall change in
value, including changes in Unit price. A cumulative total return reflects
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded rate that would have produced the
same cumulative total return if performance had been constant over the entire
period. Because average annual returns for more than one year tend to smooth out
variations in returns, they are not the same as actual year-by-year results.
The performance of an Investment Fund, as well as the composite
performance of all bond funds and all equity funds, may be compared to data
prepared by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.,
Morning Star, Inc., the Donoghue Organization, Inc. or other independent
services which monitor the performance of investment companies, and may be
quoted in advertising in terms of their rankings in each applicable universe.
In addition, the Fund may use performance data reported in
financial and industry publications, including Barron's, Business Week, Forbes,
Investor's Daily, IBC/Donoghue's Money Fund Report, Money Magazine, The Wall
Street Journal and USA Today.
COUNSEL AND AUDITORS
Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New
York, New York, 10022, serves as counsel for the Fund. McGladrey & Pullen, LLP,
555 Fifth Avenue, New York, New York, 10017, have been selected as auditors of
the Fund.
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION, AND,
IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
<PAGE>
APPENDIX
Description of Moody's Investors Service, Inc.'s long-term debt
ratings of A or better:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Description of Standard & Poor's Corporation's corporate debt ratings
of A or better:
AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
Description of Fitch Investors Service, Inc.'s corporate debt ratings
of A or better:
AAA -- AAA rated bonds are considered to be investment grade and of the
highest quality. The obligor has an extraordinary ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA -- AA rated bonds are considered to be investment grade and of high
quality. The obligor's ability to pay interest and repay principal, while very
strong, is somewhat less than for AAA rated securities or more subject to
possible change over the term of the issue.
<PAGE>
A -- A rated bonds are considered to be investment grade and of good
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
Description of Moody's Investors Service, Inc.'s commercial paper
rating of Prime-1:
Prime-1 -- Issuers rated Prime-1 (or related supporting institutions) have
a superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Description of Standard & Poor's Corporation commercial paper ratings
of A-1 or better:
A-1 -- This highest rating designation indicates that the degree of
safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation.
<PAGE>
File No. 2-95074
STATEMENT OF ADDITIONAL INFORMATION
RSI RETIREMENT TRUST
JANUARY 29, 1996
This Statement of Additional Information sets forth certain
information with respect to units offered by RSI Retirement Trust ("Fund"), an
open-end diversified management investment company.
The Fund is a no load series mutual fund that currently offers
eight investment funds with each having its own investment objectives and
investment strategies. The Fund is designed for the investment of funds held in
trusts which are exempt from taxation under Section 501(a) of the Internal
Revenue Code of 1986, as amended ("Code") and which have been established by
Eligible Employers to effectuate pension or profit sharing plans which are
qualified under Section 401(a) of said Code. Eligible Employers are corporations
or associations organized under the laws of any state or of the United States,
organizations which are controlling, controlled by, or under common control with
such eligible employers or the members of which consist solely of some or all of
such organizations, or organizations which are determined by the Trustees of the
Fund to have business interests in common with other organizations participating
in the Fund or self-employed individuals; provided, however, that the
participation in the Fund of any self-employed individual or of any corporation
or association which is not a bank, savings bank, credit union or savings and
loan association, or controlling, controlled by, or under common control with a
bank, savings bank, credit union or savings and loan association, shall be
subject to the approval of the Trustees of the Fund.
The Fund is also designed for the investment of funds held in
Individual Retirement Accounts (IRAs) which are exempt from taxation under
Section 408(e) of the Code and which have been established by individual
retirement accountholders to effectuate an individual retirement trust or
custodial agreement which is maintained in conformity with Section 408(a) of the
Code. Individual retirement accountholders are individuals for whom an
Individual Retirement Account has been established; provided, however, that
participation in the Fund of such arrangement shall be subject to the approval
of the Trustees of the Fund.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THE
INFORMATION HEREIN SHOULD BE READ IN CONJUNCTION WITH THE FUND'S PROSPECTUS
DATED JANUARY 29, 1996, A COPY OF WHICH MAY BE OBTAINED BY WRITING TO RSI
RETIREMENT TRUST, 317 MADISON AVENUE, NEW YORK, NEW YORK 10017, ATTENTION:
STEPHEN P. POLLAK, ESQ.
<PAGE>
TABLE OF CONTENTS
Page
The Fund.........................................................
Investment Restrictions..........................................
Distribution Agreement...........................................
Administration of the Fund.......................................
Control Persons and Principal Unitholders........................
Investment Managers..............................................
Brokerage Allocation and Portfolio Turnover......................
Counsel and Auditors.............................................
Financial Statements.............................................
<PAGE>
THE FUND
The Fund is a trust which was established by individual trustees
under the laws of the State of New York pursuant to an Agreement and Declaration
of Trust made as of October 22, 1940. The Agreement and Declaration of Trust, as
amended from time to time, is referred to as the "Agreement and Declaration of
Trust". The term "Trustees", as used herein, refers to the trustees acting from
time to time under the Agreement and Declaration of Trust in their capacity as
such. Except as otherwise specifically provided herein, the term "Trustees", as
used herein, is not meant to refer to the trustees of Participating Trusts (see,
"The Fund" in the Prospectus) in their capacity as such, although the trustees
of Full Participating Trusts (see, "Investments in the Fund -- Full
Participating Trusts" in the Prospectus) are one and the same as the trustees
under the Agreement and Declaration of Trust. The Agreement and Declaration of
Trust was amended effective as of August 31, 1984 to provide for the continued
operation of the Fund as an open-end diversified investment company under the
name of Retirement System for Savings Institutions. Prior to such date the Fund
had been known as The Savings Banks Retirement System.
..........Effective August 1, 1990 the Fund consummated a reorganization
("Reorganization") in order to further enhance the long-term viability of the
Fund and realize value for the Participating Trusts. The Reorganization was
effected through a transfer of the Fund's operating assets and business (e.g.,
office furniture, computers and files) and certain intangible assets (i.e.,
reorganization costs) to subsidiaries of Retirement System Group Inc.
("System"), in exchange for shares of the common stock of the System, and the
spin-off of the System through the allocation of such shares to the
Participating Trusts ("Distributed Shares"), all pursuant to the Agreement and
Plan of Reorganization, dated as of March 22, 1990, as amended ("Reorganization
Agreement"), between the System and the Fund. Thus, immediately following the
consummation of the Reorganization ("Closing"), the Participating Trusts owned
all of the outstanding shares of the System's common stock while at the same
time retaining units in the Fund's Investment Funds (as hereinafter defined).
Pursuant to the Reorganization Agreement, the System and its subsidiaries
assumed certain of the liabilities of the Fund, including liabilities under two
Participating Trusts which were sponsored by the Fund for its own employees. In
connection with the Reorganization, the Fund changed its name to RSI Retirement
Trust effective August 1, 1990.
As a condition to receipt of its Distributed Shares, each
Participating Trust was required to enter into a stockholders' agreement with
the System, the Fund, the Service Company and a trustee/custodian which provides
for, among other things, (a) significant restrictions on transfers of the common
stock, (b) opportunities for Participating Trusts to dispose of their
Distributed Shares in an initial offer period following the Closing and during
three subsequent offer periods and (c) opportunities for members of the System's
Board of Directors and management and certain other persons to acquire shares of
the common stock from Participating Trusts during such offer periods and/or
directly from the System.
<PAGE>
The Fund also entered into an investment management agreement with
a subsidiary of the System, Retirement System Investors Inc. ("Investors Inc."),
effective at the Closing. This agreement was superseded by a new Investment
Management Agreement, effective August 1, 1993, pursuant to which Investors Inc.
manages the assets of each of the Investment Funds of the Fund. See, "Investment
Managers" in this Statement of Additional Information.
The Fund also entered into a service agreement ("Service
Agreement") with a subsidiary of the System, Retirement System Consultants Inc.
("Service Company"), effective at the Closing. Pursuant to the Service
Agreement, the Service Company provides the Fund with general administrative and
related services necessary to carry on the affairs of the Fund. See,
"Administration of the Fund -- Service Agreement" in the Prospectus.
The Fund also entered into a distribution agreement ("Distribution
Agreement") with a subsidiary of the System, Retirement System Distributors Inc.
("Broker-Dealer"), effective at the Closing. Pursuant to the Distribution
Agreement, the Broker-Dealer distributes and promotes the sale of units in the
Fund's Investment Funds. See, "Distribution Plan" in this Statement of
Additional Information.
The Fund is registered with the Securities and Exchange Commission
("Commission") as an open-end diversified management investment company.
Registration of the Fund with the Commission does not mean that the Commission
has approved the Fund's investment objectives and policies or passed upon the
merits of the offering of beneficial interests in the Fund.
The Fund is currently offering eight investment funds ("Investment
Funds"), each with a different set of investment objectives and policies: Core
Equity Fund, Emerging Growth Equity Fund, Value Equity Fund, International
Equity Fund, Actively Managed Bond Fund, Intermediate-Term Bond Fund, Short-Term
Investment Fund and Dedicated Bond Fund. There can be no assurance that the
investment objective of any Investment Fund can be attained. The term
"investment manager" as used herein in reference to any Investment Fund means
the investment manager acting for such fund or any segment thereof.
YIELD
The yield of each Investment Fund is calculated by dividing the
net investment income per unit (as described below) earned by the Investment
Fund during a 30-day (or one month) period by the net asset value per unit on
the last day of the period and analyzing the result on a semi-annual basis by
adding one to the quotient, raising the sum to the power of six, subtracting one
from the result and then doubling the difference. The Investment Fund's net
investment income per unit earned during the period is based on the average
daily number of units outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period. This calculation can be expressed as follows:
<PAGE>
6
Yield = 2[(a-b +1)-1]
---
cd
Where: a = dividends and interest earned during the
period
b = expenses accrued for the period
c = the average daily number of units outstanding
during the period that were entitled to receive
dividends
d = the net asset value per unit on the last day
of the period
Except as noted below, for the purpose of determining net
investment income earned during the period (variable "a" in the formula),
interest earned on debt obligations held by an Investment Fund is calculated by
computing the yield to maturity of each obligation based on the market value of
the obligation (including actual accrued interest) at the close of business on
the last business day of each month, or, with respect to obligations purchased
during the month, based on the purchase price (plus actual accrued interest),
dividing the result by 360 and multiplying the quotient by the market value of
the obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by an Investment Fund. For purposes of this calculation, it
is assumed that each month contains 30 days. The maturity of an obligation with
a call provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date.
The yields on certain obligations, including instruments such as
commercial paper and bank obligations, are dependent on a variety of factors,
including general market conditions, conditions in the particular market for the
obligation, the financial condition of the issuer, the size of the offering, the
maturity of the obligation and the ratings of the issue. The ratings of Moody's
Investors Service and Standard & Poor's Corporation represent their respective
opinions as to the quality of the obligations they undertake to rate. Ratings,
however, are general and are not absolute standards of quality. Consequently,
obligations with the same rating, maturity and interest rate may have different
market prices. In addition, subsequent to its purchase by an Investment Fund, an
issue may cease to be rated or may have its rating reduced below the minimum
required for purchase. In such event, the investment manager will consider
whether the Investment Fund should continue to hold the obligation.
<PAGE>
For the 30-day period ended September 30, 1995, the yield for each
Investment Fund as to which performance may be quoted in advertising was as
follows:
INVESTMENT FUNDS Yield
Core Equity Fund 2.24%
Emerging Growth Equity Fund -1.41%
Value Equity Fund 3.07%
International Equity Fund -0.07%
Short-Term Investment Fund 4.11%
Intermediate-Term Bond Fund 5.25%
Actively Managed Bond Fund 5.73%
Total Return
Average annual total return quotes ("Standardized Return") used in
an Investment Fund's performance are calculated according to the following
formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (exponent)
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of that period.
Under the foregoing formula, the time periods used will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication and will cover one,
three, five and ten year periods or a shorter period dating from the
effectiveness of an Investment Fund's registration statement. Average annual
total return, or "T" in the formula above, is computed by finding the average
annual change in the value of an initial $1,000 investment over the period.
An Investment Fund also may include in advertising total return
performance data that are not calculated according to the formula set forth
above in order to compare more accurately the Investment Fund's performance with
other measures of investment return. For example, an Investment Fund may
calculate total return for specified periods of time by assuming the investment
of $1,000 in Investment Fund units. The rate of return is determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the initial value.
Set forth below are the average annual total returns for the
periods ending September 30, 1995 and December 31, 1995 for each of the
Investment Funds as to which performance may be quoted in advertising. Total
returns are based on historical results and are not intended to indicate future
performance. Total returns are based on the overall dollar or percentage change
<PAGE>
in value of a hypothetical investment in an Investment Fund. Each Investment
Fund's total returns show its overall change in value, including changes in unit
price. A cumulative total return reflects performance over a stated period of
time. An average annual total return reflects the hypothetical annually
compounded rate that would have produced the same cumulative total return if
performance had been constant over the entire period. (Footnotes are indicated
at the end of the tables.)
Net Investment Performance+
For Periods Ending September 30, 1995:
Annualized
Since Inception
1 Year 3 Years 5 Years 10 Years 12-3/4 Years
------ ------- ------- -------- ------------
EQUITY FUNDS
RSI Retirement Trust:
Core 31.32% 15.79% 15.07% 15.15% 15.64%
Emerging Growth 46.22% 29.41% 28.56% 16.53% 15.60%
Value 20.63% 12.46% 15.48% 11.48% 11.31%
International 5.70% 12.50% 9.72% 13.05%
Annualized
Since Inception
1 Year 3 Years 5 Years 10 Years 12-3/4 Years
------ ------- ------- -------- ------------
FIXED-INCOME FUNDS
Short-Term 5.17% 3.47% 4.11% 5.79% 6.68%
Intermediate-Term 10.28% 4.99% 7.96% 8.66% 9.48%
Actively Managed 13.51% 6.38% 9.91% 9.22% 9.88%
Annualized
Since Inception
1 Year 3 Years 5 Years 10 Years 12-3/4 Years
------ ------- ------- -------- ------------
TOTAL FUNDS
RSI Retirement Trust Plan
Category:**
Positive Risk Tolerance N/A N/A N/A N/A N/A
Conservative Risk Tolerance 22.70% 13.12% 14.39% 13.11% 13.22%
<PAGE>
For Periods Ending December 29, 1995:
Annualized
Since Inception
1 Year 3 Years 5 Years 10 Years 13 Years*
------ ------- ------- -------- ---------
EQUITY FUNDS
RSI Retirement Trust 40.17% 16.15% 15.14% 14.02% 15.87%
Emerging Growth 42.83% 21.40% 26.04% 15.09% 15.38%
Value 33.96% 12.70% 14.04% 10.83% 11.64%
International 12.46% 13.89% 8.85% 11.37% - 0 -
FIXED-INCOME FUNDS
RSI Retirement Trust:
Short-Term 5.39% 3.72% 3.98% 5.71% 6.66%
Intermediate-Term 13.99% 6.14% 7.77% 8.32% 9.53%
Actively Managed 17.70% 7.83% 9.42% 8.85% 10.02%
TOTAL FUNDS
RSI Retirement Trust
Plan Category:**
Positive Risk
Tolerance 26.95% 12.06% 12.61% 11.20% 12.26%
Average Risk Tolerance -- -- -- -- --
Conservative Risk 24.09% -- -- -- --
+ All performance results shown are net of management fees and all related
investment expenses, unless otherwise footnoted.
* The International Equity Fund was started on May 1, 1984.
** The performance information of these two categories reflects asset
allocation strategies employed by the Board of Trustees of RSI
Retirement Trust with respect to those employee benefit plans over
which the Board of Trustees has investment discretion. The asset
allocation strategies are designed to take into account the differing
levels of risk tolerance of such plans. Effective November 1, 1994, the
Trust maintains two active Tolerance for Risk Categories ---
Conservative (which replaced the former Low and Average Tolerance for
Risk Categories) and Positive. As a result of this change only the
Positive Tolerance for Risk Category maintained continuity with a
previous risk category regarding asset mix and performance results.
<PAGE>
OTHER INFORMATION
The performance of an Investment Fund, as well as the composite
performance of all fixed-income funds and all equity funds, may be compared to
data prepared by Lipper Analytical Services, Inc., CDA Investment Technologies,
Inc. or other independent services which monitor the performance of investment
companies, and may be quoted in advertising in terms of their rankings in the
applicable Lipper Mutual Funds Universes. These Lipper Universes are as follows:
The Lipper General Equity Funds Universe for the Core Equity Fund and the Value
Equity Fund; the Lipper Small Company Growth Funds Universe for the Emerging
Growth Equity Fund; the Lipper International Funds Universe for the
International Equity Fund; the Lipper Fixed Income Funds Universe for the
Actively Managed Fixed-Income Fund; and the Lipper (one to five year maturity)
Investment Grade Funds Universe for the Intermediate-Term Fixed-Income Fund. In
addition, an Investment Fund may use performance data reported in financial and
industry publications, including Barron's, Business Week, Forbes, Investor's
Daily, IBC/Donoghue's Money Fund Report, Money Magazine, The Wall Street Journal
and The New York Times.
INVESTMENT RESTRICTIONS
The following restrictions and fundamental policies cannot be
changed for any Investment Fund without the approval of the holders of a
majority of the outstanding units of the affected Investment Fund or Funds. Each
Investment Fund may not:
(a) With respect to at least 75% of the value of any Investment
Fund's total assets, purchase securities of any issuer (except
securities issued or guaranteed as to principal or interest by
the United States government, its agencies or
instrumentalities) if as a result more than 5% of the value of
the total assets of such Investment Fund would be invested in
the securities of such issuer or all Investment Funds together
would own more than 10% of the outstanding voting securities
of such issuer; for purposes of this limitation,
identification of the "issuer" will be based on a
determination of the source of assets and revenues committed
to meeting interest and principal payments of each security;
(b) Invest in companies for the purpose of exercising control or
management, except a company all the stock of which is owned
by the Fund and which provides administrative services to the
Fund and others;
(c) Borrow money in any Investment Fund except for temporary
emergency purposes and then only in an amount not exceeding 5%
of the value of the total assets of that Investment Fund;
<PAGE>
(d) Pledge, mortgage or hypothecate the assets of any Investment
Fund to any extent greater than 10% of the value of the total
assets of that Investment Fund;
(e) Issue senior securities;
(f) Underwrite any issue of securities;
(g) Purchase or sell real estate, but this shall not prevent
investments in instruments secured by real estate or interest
therein or in marketable securities of issuers which invest in
real estate or engage in real estate operations;
(h) Make loans to other persons, except the Fund may make time or
demand deposits with banks, may purchase bonds, debentures or
similar obligations that are publicly distributed or of a type
customarily purchased by institutional investors, may loan
portfolio securities and may enter into repurchase and reverse
repurchase agreements;
(i) Purchase securities (other than stock index futures contracts
and futures contracts on financial instruments and related
options) on margin or make short sales of securities;
(j) Purchase or sell commodities or commodity contracts except
futures contracts on financial instruments, such as bank
certificates of deposit and United States Treasury securities,
foreign currencies and stock indexes;
(k) Invest in securities of other investment companies except as
part of a merger, consolidation, reorganization or purchase of
assets approved by the Trust Participants;
(l) Participate on a joint or joint and several basis in any
securities trading account;
(m) Purchase from or sell portfolio securities to its Trustees,
officers or other "interested persons" (as defined in the
Investment Company Act of 1940, as amended ("Investment
Company Act")) of the Fund, except as permitted by the
Investment Company Act or any rules or orders thereunder;
<PAGE>
(n) Purchase any securities in an Investment Fund that would cause
25% or more of the value of that Investment Fund's total
assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal
activities in the same industry (as defined by Standard &
Poor's); except that there is no limitation in any Investment
Fund with respect to investments in obligations issued or
guaranteed by the United States government or its agencies or
instrumentalities; or
(o) Invest the assets of any Investment Fund in nonmarketable
securities (including repurchase agreements and time deposits
maturing in more than seven days but excluding master demand
notes and other securities payable on demand) to any extent
greater than 10% of the value of the total assets of that
Investment Fund. If through the appreciation of nonmarketable
securities, or the depreciation of marketable securities, an
Investment Fund has more than 10% of its assets invested in
nonmarketable securities, the Investment Fund will reduce its
holdings of nonmarketable securities to 10% or less of its
total assets as soon as practicable consistent with the
objective of limiting any loss that may be sustained upon such
reduction.
Except as stated in (o) above, if a percentage restriction is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from a change in values or assets will not constitute a violation of
that restriction.
DISTRIBUTION AGREEMENT
Pursuant to the Distribution Agreement, the Broker-Dealer will
distribute and promote the sale of units in the Fund's Investment Funds.
The Broker-Dealer is not paid a fee for its services under the
Distribution Agreement, which was approved, effective August 1, 1993, by a vote
of Trust Participants on July 31, 1993. Prior to August 1, 1993, the Fund had a
Rule 12b-1 Plan in effect pursuant to which the Fund reimbursed the
Broker-Dealer for distribution related expenses.
The Distribution Agreement was initially effective until July 31,
1995, and will remain in effect from year to year thereafter if such continuance
is approved in the manner required under the Investment Company Act. The
Distribution Agreement may be terminated by the Fund or the Broker-Dealer
without penalty, on not more than 60 days' nor less than 30 days' written
notice. The Distribution Agreement will also terminate automatically in the
event of its "assignment" (as defined in the Investment Company Act).
ADMINISTRATION OF THE FUND
An important function of the Trustees is the selection of
investment managers for the Investment Funds and the review and evaluation of
their performance.
<PAGE>
The Trustees periodically evaluate the performance of the
investment managers and review the continued appropriateness of the structure of
the Investment Funds. The Trustees also periodically evaluate the allocation of
assets among Investment Classifications (see, "Investments In the Fund -- Full
Participating Trusts" in the Prospectus) and among Investment Funds and
guidelines of investment for all Plans.
INFORMATION REGARDING EXECUTIVE OFFICERS AND TRUSTEES
The Fund has 11 Trustees who are elected for staggered terms of
three years each. The officers of the Fund are the President, one or more Vice
Presidents, a Secretary, a Treasurer and an Auditor. The Fund currently has five
standing committees: an Audit Committee, a Board Affairs Committee, an
Investment Committee, a Nominating Committee, and a Proxy Committee. These
committees meet from time to time between meetings of the Trustees to consider
matters concerning the Fund. A majority of the Trustees are not "interested
persons" of the Fund within the meaning of the Investment Company Act.
The Fund pays to each of the Trustees who is not an officer of the
Fund a fee of $800 for each board meeting and each committee meeting which they
attend. A fee of $400 is paid to each non officer Trustee who participates in a
telephonic meeting. In addition, the Fund pays to each Trustee who is not an
officer of the Fund an annual fee of $7,000. Trustees may elect to defer to a
future date a portion of such fees under a deferred compensation plan provided
by the Fund under Section 457 of the Code.
The Trustees hold six regular meetings a year. During the Fund's
fiscal year ended September 30, 1995, total Trustee compensation amounted to
$141,200. The Trustees and officers are reimbursed for their reasonable expenses
incurred in attending meetings or otherwise in connection with their attention
to the affairs of the Fund. During the Fund's fiscal year ended September 30,
1995, the total of such reimbursed expenses was $19,745.
The Fund does not provide Trustees and officers, directly or
indirectly, with any pension or retirement benefits for their services to the
Fund. William Dannecker, the President of the Fund, is an officer of the System,
the Service Company and the Broker-Dealer and receives compensation in such
capacities. James P. Coughlin, Executive Vice President of the Fund, is an
officer of the System and Investors Inc. and receives compensation in such
capacities. Stephen P. Pollak, Executive Vice President, Counsel and Secretary
of the Fund, is an officer of the System, Investors Inc., the Broker-Dealer and
the Service Company, and receives compensation in such capacities. John F.
Meuser, Vice President and Treasurer of the Fund, is an officer of the System
and Investors Inc., and receives compensation in such capacities.
The Trustees of the Fund received the compensation shown below for
services to the Fund during the fiscal year ended September 30, 1995. Fund
officers received no compensation from the Fund during the fiscal year ended
September 30, 1995:
<PAGE>
PENSION OR RETIREMENT
BENEFITS ACCRUED
AS PART OF FUND
AGGREGATE COMPENSATION EXPENSES
NAME OF TRUSTEE FROM THE FUND
Herbert G. Chorbajian $13,033.34 $- 0 -
Candace Cox 16,616.67* - 0 -
William Dannecker - 0 - - 0 -
Eugene C. Ecker 12,116.67 - 0 -
Covington Hardee 12,116.67* - 0 -
Ralph L. Hodgkins, Jr. 10,916.67 - 0 -
Maurice E. Kinkade 14,216.67* - 0 -
William G. Lillis 13,516.67* - 0 -
William L. Schrauth 17,716.67 - 0 -
William E. Swan 11,833.34 - 0 -
Raymond L. Willis 18,716.67 - 0 -
The executive officers of the Fund, each of whose address is c/o
RSI Retirement Trust, 317 Madison Avenue, New York, New York 10017, their
principal occupations for the last five years and their affiliations, if any,
with the Fund are set forth below.
*Aggregate compensation includes amounts deferred under the Fund's Section 457
Deferred Compensation Plan. The total amount of deferred compensation payable
under the Plan as of September 30, 1995 is as follows: Ms. Cox ($57,364); Mr.
Hardee ($25,352); Mr. Kinkade ($91,927) and Mr. Lillis ($13,829).
PRINCIPAL OCCUPATION
POSITIONS FOR LAST FIVE YEARS AND
NAME WITH FUND AFFILIATION WITH FUND
William Dannecker President President and Chief Executive Officer
and Trustee of Retirement System Group Inc. since
January 1990 and Director since March
1989; President of Retirement System
Consultants Inc. since January 1990
and Director since March 1989;
Director of Retirement System
Investors Inc. since March 1989;
President of Retirement System
Distributors Inc. since December 1990
and Director since July 1989;
President of Retirement System Fund
Inc. since February 1991 and Director
since November 1990.
James P. Coughlin Executive Vice Executive Vice President and Chief
President Investment Officer of Retirement
System Group Inc. since January 1993,
Senior Vice President - Investments
from January 1990 to December 1992,
Chief Investment Officer since January
1991 and Director since May 1990;
President of Retirement System
Investors Inc. since February 1990;
Senior Vice President of Retirement
System Fund Inc. since February 1991;
President of Retirement System
Distributors Inc. from February 1990
to December 1990.
<PAGE>
PRINCIPAL OCCUPATION
POSITIONS FOR LAST FIVE YEARS AND
NAME WITH FUND AFFILIATION WITH FUND
Stephen P. Pollak Executive Vice Executive Vice President, Counsel and
President, Secretary of Retirement System Group
Counsel and Inc. since January 1993, Senior Vice
Secretary President, Counsel and Secretary from
January 1990 to December 1992,
Director since March 1989; Vice
President and Secretary of Retirement
System Consultants Inc. since January
1990 and Director since March 1989;
Vice President and Secretary of
Retirement System Distributors Inc.
since February 1990 and Director since
July 1989; Vice President and
Secretary of Retirement System
Investors Inc. since February 1990 and
Director since March 1989; Senior Vice
President, Counsel and Secretary of
Retirement System Fund Inc. since
February 1991 and Director since
November 1990.
<PAGE>
PRINCIPAL OCCUPATION
POSITIONS FOR LAST FIVE YEARS AND
NAME WITH FUND AFFILIATION WITH FUND
John F. Meuser Vice Senior Vice President of Retirement
President System Group Inc. since January 1996,
and Vice President from January 1993 to
Treasurer December 1995, First Vice President
from August 1990 to December 1992;
Financial and Operations Principal
since October 1993 and Registered
Representative since February 1990 of
Retirement System Distributors Inc.;
Vice President of Retirement System
Investors Inc. since February 1990;
Vice President and Treasurer of
Retirement System Fund Inc. since
October 1992.
No officer of the Fund receives any remuneration directly from the Fund
for service to the Fund.
1995 ANNUAL MEETING RESULTS
On June 29, 1995, the Fund held its Annual Meeting of Trust
Participants to consider: (1) the election of three trustees for terms of three
years; (2) ratification or rejection of McGladrey & Pullen as independent
accountants of the Fund for the fiscal year ending September 30, 1995; and (3)
whether or not to terminate the sub-advisory investment agreement between
Investors Inc. and NFJ Investment Group.
Proposal 1: Election of Trustees
Voted: Shares % of Shares Voted % of Shares Outstanding
- ----- ------ ----------------- -----------------------
C. Cox Vote:
For 13,721,937 99.37 80.4
Against 0 - -
Abstain 87,162 .63 .005
E.C. Ecker Vote:
For 13,577,398 98.32 79.6
Against 0 - -
Abstain 231,702 1.68 .014
R.L. Willis Vote:
For 13,721,937 99.37 80.4
Against 0 - -
Abstain 87,162 .63 .005
<PAGE>
Proposal 2: Approval of Independent Accountants
Voted: Shares % of Shares Voted % of Shares Outstanding
- ----- ------ ----------------- -----------------------
For 13,807,250 99.9 80.9
Against 1,849 .01 .0001
Abstain 0 - -
Proposal 3: Approval of Termination of Sub-Advisory Investment Agreement
Voted: Shares % of Shares Voted % of Shares Outstanding
- ----- ------ ----------------- -----------------------
For 1,037,667 99.29 79.6
Against 7,393 .71 .006
Abstain 0 - -
CONTROL PERSONS AND PRINCIPAL UNITHOLDERS
No person controls the Fund.
The Plan of Participation of each of the Trust Participants listed
below owned of record and beneficially five percent or more of the Fund's
outstanding units and each of the Investment Fund's outstanding units, as of
December 31, 1995:
Name Percentage
Fund (considered as a whole):
The Long Island Savings Bank, FSB 8.56
GreenPoint Bank 6.57
Core Equity Fund:
The Long Island Savings Bank, FSB 8.91
GreenPoint Bank 6.98
Emerging Growth Equity Fund:
The Long Island Savings Bank, FSB 8.61
GreenPoint Bank 6.72
Value Equity Fund:
The Long Island Savings Bank, FSB 9.16
GreenPoint Bank 7.19
ALBANK, FSB 5.08
International Equity Fund:
The Long Island Savings Bank, FSB 11.65
GreenPoint Bank 9.18
ALBANK, FSB 6.49
<PAGE>
Crossland Federal Savings Bank 5.49
Short-Term Investment Fund:
Independence Savings Bank 15.78
Roosevelt Savings Bank 7.90
Onbancorp, Inc. 7.41
The Dime Savings Bank of Williamsburg 6.93
Institutional Group Information Corp. 5.97
The Roslyn Savings Bank 5.33
Intermediate-Term Bond Fund:
The Long Island Savings Bank, FSB 9.48
GreenPoint Bank 6.09
ALBANK, FSB 5.26
Actively Managed Bond Fund:
The Long Island Savings Bank, FSB 9.75
GreenPoint Bank 6.25
ALBANK, FSB 5.41
The addresses of these Trust Participants are as follows: ALBANK,
FSB, Corner of State & North Pearl Streets, Albany, New York 12207; CrossLand
Federal Savings Bank, 211 Montague Street, Brooklyn, New York 11201; The Dime
Savings Bank of Williamsburg, 209 Havemeyer Street, Brooklyn, New York, 11211;
GreenPoint Bank, 41-60 Main Street, Flushing, New York 11355; Independence
Savings Bank, 195 Montague Street, Brooklyn, New York 11201; Institutional Group
Information Corp., 1000 Northern Blvd., Great Neck, New York 11021-5305; The
Long Island Savings Bank, FSB, 201 Old Country Road, Melville, New York
11747-2724; Onbancorp, Inc. 6350 Court Street Road, P. O. Box 4983, Syracuse, NY
13221; Roosevelt Savings Bank, 1122 Franklin Avenue, Garden City, New York
11530; The Roslyn Savings Bank, 1400 Old Northern Boulevard, Roslyn, New York
11576.
No Trustee or officer of the Fund in his individual capacity owns
any of the outstanding units of the Fund.
<PAGE>
INVESTMENT MANAGERS
Investors Inc. serves as investment manager for each Investment
Fund pursuant to an Investment Management Agreement dated August 1, 1993.
Investors Inc. has retained sub-investment adviser for the Emerging Growth
Equity Fund, (Freiss Associates, Inc. ("Freiss") and The Putnam Advisory
Company, Inc. ("Putnam")), and the International Equity Fund (Morgan Grenfell
Investment Services Limited ("Morgan Grenfell")), pursuant to Sub-Investment
Advisory Agreements dated August 1, 1993. Prior to August 1, 1993, each such
sub-investment adviser served directly as investment adviser to the respective
Investment Funds.
With respect to investment managers who received fees from the
Fund for services provided during the last three fiscal years, the Fund incurred
charges of the following total dollar amounts for the periods indicated:
Freiss was paid $348,890, for the fiscal year ended September 30, 1995,
$276,376 for the fiscal year ended September 30, 1994, $241,847 for the
period October 1, 1992 through July 31, 1993 and $59,817 for the period
August 1, 1993 through September 30, 1993. The Fund paid $65,616 to
Investors Inc. for the period October 1, 1994 through September 30,
1995, $223,561 for the period October 1, 1993 through September 30,
1994 and $70,269 for the period August 1, 1993 through September 30,
1993 with respect to this Fund.
Morgan Grenfell was paid $172,841 for the fiscal year ended September
30, 1995, $155,490 for the fiscal year ended September 30, 1994,
$100,832 for the period October 1, 1992 through July 31, 1993 and
$22,152 for the period August 1, 1993 through September 30, 1993. The
Fund paid $57,212 to Investors Inc. for the period October 1, 1994
through September 30, 1995, $205,790 for the period October 1, 1993
through September 30, 1994 and $29,506 for the period August 1, 1993
through September 30, 1993 with respect to this Fund.
Putnam was paid $245,401 for the fiscal year ended September 30, 1995,
$217,230 for the fiscal year ended September 30, 1994, $179,341 for the
period October 1, 1992 through July 31, 1993 and $38,411 for the period
August 1, 1993 through September 30, 1993. The Fund paid $49,308 to
Investors Inc. for the period October 1, 1994 through September 30,
1995, $172,291 for the period October 1, 1993 through September 30,
1994 and $45,843 for the period August 1, 1993 through September 30,
1993 with respect to this Fund.
NFJ Investment Group ("NFJ") was an adviser to the Value Equity Fund
between June 15, 1992 and March 31, 1995. NFJ was paid $80,207 for the
period October 1, 1994 through March 31, 1995, $171,038 for the fiscal
year ended September 30, 1994, $146,861 for the period October 1, 1992
through July 31, 1993, $30,256 for the period August 1, 1993 through
September 30, 1993 and $48,189 for the period June 15, 1992 through
<PAGE>
September 30, 1992. The Fund paid $115,806 to Investors Inc. for the
period October 1, 1994 through March 31, 1995, $276,053 for the period
October 1, 1993 through September 30, 1994 and $42,929 for the period
August 1, 1993 through September 30, 1993 with respect to this Fund.
The Fund incurred charges from Investors Inc. as investment manager of
the Core Equity Fund of $847,061 for the fiscal year ended September
30, 1995, $757,174 for the fiscal year ended September 30, 1994 and
$767,327 for the fiscal year ended September 30, 1993.
The Fund incurred charges from Investors Inc. as investment manager of
the Actively Managed Bond Fund of $455,073 for the fiscal year ended
September 30, 1995, $466,183 for the fiscal year ended September 30,
1994 and $265,765 for the fiscal year ended September 30, 1993.
The Fund incurred charges from Investors Inc. as investment manager of
the Intermediate-Term Bond Fund of $313,881 for the fiscal year ended
September 30, 1995, $335,469 for the fiscal year ended September 30,
1994 and $354,889 for the fiscal year ended September 30, 1993.
The Fund incurred charges from Investors Inc. as investment manager of
the Value Equity Fund of $95,995 for the period April 1, 1995 through
September 30, 1995.
The Fund incurred charges from Investors Inc. as investment manager of
the Short-Term Investment Fund of $72,748 for the fiscal year ended
September 30, 1995, $78,858 for the fiscal year ended September 30,
1994 and $77,429 for the fiscal year ended September 30, 1993.
The Fund incurred no charges from Retirement System Investors Inc. as
investment manager of the Dedicated Bond Fund the fiscal year ended
September 30, 1995. There have been no sales since April 24, 1992.
The sub-investment advisory relationship with NFJ was terminated on March 31,
1995, and Investors Inc. assumed the portfolio management responsibilities for
the Value Equity Fund on April 1, 1995.
BROKERAGE ALLOCATION AND PORTFOLIO TURNOVER
Each investment manager determines the broker to be used, if any,
in each specific securities transaction executed on behalf of the Fund with the
objective of negotiating a combination of the most favorable commission and the
best price obtainable on each transaction, taking into consideration the quality
of execution (generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed to persons or
firms supplying information to an investment manager. The investment information
provided to an investment manager is of the type described in Section 28(e) of
the Securities Exchange Act of 1934 and is designed to augment the manager's own
internal research and investment strategy capabilities. Research services
<PAGE>
furnished by brokers through which the Fund effects securities transactions are
used by those investment managers to whom such services are furnished in
carrying out their investment management responsibilities with respect to all
their client accounts and not all such services may be used by such investment
managers in connection with the Fund. There may be occasions where the
transaction costs charged by a broker may be greater than those which another
broker may charge if the investment manager determines in good faith that the
amount of such transaction cost is reasonable in relationship to the value of
the brokerage and research services provided by the executing broker. No
investment manager has entered into agreements with any brokers regarding the
placement of securities transactions because of research services they provide.
The Fund's investment managers deal in some instances in
securities which are not listed on a national securities exchange but are traded
in the over-the-counter market or the third market. Investment managers may also
purchase listed securities through the third market (i.e., transactions effected
off the exchange with brokers). Where securities transactions are executed in
the over-the-counter market or third market, each investment manager seeks to
deal with primary market makers except in those circumstances where, in their
opinion, better prices and executions may be available elsewhere.
During the Fund's fiscal years ended September 30, 1995, September
30, 1994 and September 30, 1993, the Core Equity Fund paid aggregate brokerage
commissions of $29,445, $19,334 and $55,437, respectively; the Emerging Growth
Equity Fund paid aggregate brokerage commissions of $129,735, $83,981 and
$188,864, respectively; the Value Equity Fund paid aggregate brokerage
commissions of $73,760, $70,169 and $77,856, respectively; and the International
Equity Fund paid aggregate brokerage commissions of $88,119, $97,095 and
$69,074, respectively. The Actively Managed Bond Fund, Intermediate-Term Bond
Fund, Short-Term Investment Fund and Dedicated Bond Fund paid no brokerage
commissions for the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993.
During the Fund's fiscal years ended September 30, 1995, September
30, 1994 and September 30, 1993, the investment managers allocated to persons or
firms supplying investment information to them the following amounts of
transactions in portfolio securities of the respective Investment Funds listed
below and associated brokerage commissions:
Name of Amount of Amount of
Investment Fund Portfolio Transactions Brokerage Commissions
Core Equity Fund $1,752,700 (1995) $ 2,100 (1995)
$ 508,050 (1994) $ 510 (1994)
$ 717,063 (1993) $ 1,500 (1993)
Emerging Growth $24,637,308 (1995) $78,829 (1995)
Equity Fund $ 9,649,387 (1994) $36,675 (1994)
$12,334,782 (1993) $41,882 (1993)
<PAGE>
Value Equity $ 6,964,537 (1995) $15,475 (1995)
Fund $12,072,635 (1994) $24,708 (1994)
$12,556,596 (1993) $22,327 (1993)
International $7,553,606 (1995) $28,719 (1995)
Equity Fund $7,279,121 (1994) $33,604 (1994)
$6,837,578 (1993) $20,113 (1993)
The Fund is required to identify any securities of its "regular
brokers or dealers" (as such term is defined in the Investment Company Act)
which the Fund has acquired during its most recent fiscal year. As of September
30, 1995, the Fund held repurchase agreements issued by Bear, Stearns & Co.,
Inc. valued at $28,163,946.. Bear Stearns & Co., Inc. is a "regular broker or
dealer" of the Fund.
The annual portfolio turnover rates for each of the eight
Investment Funds for the fiscal years ended September 30, 1995 and September 30,
1994, respectively, were as follows: Core Equity Fund (7.91%) and (6.47%),
Emerging Growth Equity Fund (170.54%) and (114.15%), Value Equity Fund (67.06%)
and (40.41%), International Equity Fund (51.40%) and (44.25%), Actively Managed
Bond Fund (18.21%) and (8.54%), Intermediate-Term Bond Fund (15.95%) and
(17.92%), Short-Term Investment Fund (0.00%) and (0.00%) and Dedicated Bond Fund
(0.00%) and (0.00%). High portfolio turnover involves correspondingly greater
brokerage commissions, other transactions costs and a possible increase in
short-term capital gains and losses.
COUNSEL AND AUDITORS
Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New
York, New York, 10022 serves as counsel for the Fund. McGladrey & Pullen, LLP,
555 Fifth Avenue, New York, New York, 10017, have been selected as auditors of
the Fund.
FINANCIAL STATEMENTS
The financial statements required to be included in this Statement
of Additional Information are incorporated herein by reference from the Fund's
Annual Report to unitholders for the fiscal year ended September 30, 1995. Other
portions of the Fund's Annual Report, including Highlights of the Year,
Chairman's Message and Investment Performance and Asset Values, are not
incorporated by reference and therefore do not constitute a part of this
Registration Statement. A copy of the Fund's Annual Report may be obtained
without charge by writing to RSI Retirement Trust, 317 Madison Avenue, New York,
New York 10017, Attention: Stephen P. Pollak, Esq.
<PAGE>
File No. 2-95074
PART C
OTHER INFORMATION
RSI RETIREMENT TRUST
JANUARY 29, 1996
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Included in Prospectus:
- Condensed Financial Information
- Included in Statement of Additional Information by incorporation
by reference from 1995 Annual Report:
- Report dated November 15, 1995 of McGladrey & Pullen on the
combined and individual financial statements of the Core Equity
Fund, Emerging Growth Equity Fund, Value Equity Fund,
International Equity Fund, Actively Managed Bond Fund,
Intermediate-Term Bond Fund, Short-Term Investment Fund and
Dedicated Bond Fund.
- Statement of assets and liabilities as of September 30, l995
for each of the investment funds listed above.
- Statement of investments as of September 30, l995 for each of
the investment funds listed above.
- Statement of operations for the year ended September 30, l995
for each of the investment funds listed above.
- Statement of changes in net assets for the years ended
September 30, 1995 and September 30, 1994 for each of the
investment funds listed above.
The information required under Schedule I is included in the statement of
investments.
Schedule Nos. II-VII and other financial statements for which provision is
made in the applicable accounting regulations of the Securities and
Exchange Commission are omitted because they are not required under the
related instructions, they are inapplicable, or the required information
is presented in the financial statements or notes thereto.
(b) Exhibits:
Exhibit Number Document
1.a. Agreement and Declaration of Trust made as of
October 22, l940, as amended and restated
effective August 1, 1990. (Filed as Exhibit 1 to
Post-Effective Amendment No. 8 to the Registrant's
Registration Statement on Form N-1A filed on July
27, 1990.)
1.b. Amendment No. 1 to the Agreement and Declaration
of Trust as amended and restated effective August
1, 1990. (Filed as Exhibit 1.b to Post-Effective
Amendment No. 11 to the Registrant's Registration
Statement on Form N-1A filed on January 28, 1993.)
1.c. Amendment No. 2 to the Agreement and Declaration
of Trust as amended and restated effective August
1, 1990. (Filed as Exhibit 1.c to Post-Effective
Amendment No. 13 to the Registrant's Registration
Statement on Form N-1A filed on January 30, 1995.)
2. Rules and Procedures of the Fund, as amended.
(Filed as Exhibit 2 to Post-Effective Amendment
No. 8 to the Registrant's Registration Statement
on Form N-1A filed on July 27, 1990.)
3. None.
4. See Exhibits 1.a., 1.b., 1.c. and 2.
5.a. Investment Management Agreement between the Fund
and Retirement System Investors Inc. (Filed as
Exhibit 5.a. to Post-Effective Amendment No. 12 to
the Registrant's Registration Statement on Form
N-1A filed on January 28, 1994.):
5.b. Investment Sub-Advisory Agreements between
Retirement System Investors Inc. and each of the
investment sub-advisers listed below, and Schedule
A thereto for each such Agreement, setting forth
the terms of its respective compensation:
<PAGE>
1. Morgan Grenfell Investment Services
Limited. (Filed as Exhibit 5.b.1.
to Post-Effective Amendment No. 12
to the Registrant's Registration
Statement on Form N-1A filed on
January 28, 1994.)
2. Friess Associates, Inc. (Filed as
Exhibit 5.b.2. to Post-Effective
Amendment No. 12 to the
Registrant's Registration Statement
on Form N-1A filed on January 28,
1994.)
3. The Putnam Advisory Company, Inc.
(Filed as Exhibit 5.b.3. to
Post-Effective Amendment No. 12 to
the Registrant's Registration
Statement on Form N-1A filed on
January 28, 1994.)
6. Distribution Agreement (Filed as Exhibit 6. to
Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-1A
filed on January 28, 1994.)
7. Retirement System for Savings Institutions
Deferred Compensation Plan. (Filed as Exhibit 7.d.
to Post-Effective Amendment No. 3 to the
Registrant's Statement on Form N-1A filed on
January 28, 1988.)
8.a. Custody Agreement dated as of January 11, 1990
between the Fund and The Chase Manhattan Bank,
N.A. (Filed as Exhibit 8.a. to Post-Effective
Amendment No. 6 to the Registrant's Registration
Statement on Form N-1A filed on January 24, 1990.)
8.b. Schedule of Custodial Remuneration for The Chase
Manhattan Bank, N.A. (Filed as Exhibit 8.b. to
Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A filed on
January 24, 1990.)
8.c. Custody Agreement dated December 21, 1989 between
the Fund and Custodial Trust Company. (Filed as
Exhibit 8.c. to Post-Effective Amendment No. 6 to
the Registrant's Registration Statement on Form
N-1A filed on January 24, 1990.)
<PAGE>
8.d. Schedule of Custodial Remuneration for Custodial
Trust Company. (Filed as Exhibit 8.d. to
Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A filed on
January 24, 1990.)
9.a. Undertaking Letter. (Filed as Exhibit 9.a. to
Post-Effective Amendment No. 9 to the Registrant's
Registration Statement on Form N-1A filed on
January 28, 1991.)
9.b. Service Agreement. (Filed as Exhibit 9.b. to
Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-1A
filed on January 28, 1994.)
9.c. Reorganization Agreement. (Filed as Exhibit 9.c.
to Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A
filed on July 27, 1990.)
10.a. Opinion of Milbank, Tweed, Hadley & McCloy. (Filed
as Exhibit 10 to Pre-Effective Amendment No. 1 to
the Registrant's Registration Statement on Form
N-1A filed on June 28, l985.)
10.b. Opinion of Shereff, Friedman, Hoffman & Goodman.
(Filed herewith.)
11.a. Consent of McGladrey & Pullen, LLP. (Filed
herewith.)
11.b. Consent of Milbank, Tweed, Hadley & McCloy. (Filed
as Exhibit 11.c. to Pre-Effective Amendment No. 1
to the Registrant's Registration Statement on Form
N-1A filed on June 28, l985.)
12. 1995 Annual Report to Unitholders, including
report of Independent Auditors. (Filed herewith.)
13. None.
14. Not applicable.
15. None.
<PAGE>
16. Schedule of Computation of Performance Quotations
(unaudited). (Filed as Exhibit 16 to
Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A
filed on January 28, 1992.)
17. Financial Data Schedule. (Filed as Exhibit 27 on
EDGAR.)
18. Not applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of December 31, 1995 the Fund had 255 record holders of units.
The following table sets forth the number of record holders of units for each
Investment Fund as of such date.
Number of
Investment Fund Record Holders
Core Equity Fund 218
Emerging Growth Equity Fund 209
Value Equity Fund 169
International Equity Fund 117
Actively Managed Bond Fund 178
Intermediate-Term Bond Fund 215
Short-Term Investment Fund 97
Dedicated Bond Fund 0
ITEM 27. INDEMNIFICATION.
The Agreement and Declaration of Trust provides with regard to
indemnification that:
(a) The Fund shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Fund) by
reason of the fact that he is or was a Trustee, employee of the Trustees
<PAGE>
performing the duties of the Trustees, or officer of the Fund or is or was
serving at the request of the Trustees as a director or officer of another
corporation, or as an official of a partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to,
the best interest of the Fund, and, with respect to any criminal action or
proceeding, and had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in, or not opposed to, the best interests of the Fund, and, with respect
to any criminal action or proceedings that he had reasonable cause to
believe that his conduct was unlawful.
(b) The Fund shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Fund to procure a judgment in its
favor by reason of the fact that he is or was a Trustee or officer of the
Fund or is or was serving at the request of the Trustees as a director or
officer of another corporation, or as an official of a partnership, joint
venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Fund; except, however, that no indemnification shall be
made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Fund, unless and only to the extent that an
appropriate court shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
(c) To the extent that a Trustee or officer of the Fund has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Except as provided in subsection (c), any indemnification under
subsection (a) or (b) (unless ordered by a court) shall be made by the
Fund only as permitted under any applicable provisions of Title I of
ERISA, and as authorized in the specific case upon a determination that
indemnification of a Trustee or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsection (a) or (b). Such determination shall be made (1) by the
Trustees by a majority vote of a quorum consisting of members who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if such a quorum is obtainable and such quorum so
directs, by independent legal counsel in a written opinion, or (3) by the
Trust Participants.
<PAGE>
(e) Expenses (including attorneys' fees) incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Fund in
advance of the final disposition of such action, suit or proceeding as
authorized by the Trustees upon receipt of an undertaking by or on behalf
of the Trustees or officer to repay such amount unless it shall ultimately
be determined that he is entitled to be indemnified by the Fund as
authorized in this Article; provided that such an undertaking must be
secured by a surety bond or other suitable insurance.
(f) The indemnification shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under any
rule, agreement, vote of Trust Participants or disinterested members of
the Trustees or otherwise, both as to action in his official capacity and
as to action in any capacity while holding such office, and shall continue
as to a person who has ceased to be a Trustee, employee or the Trustee
performing the duties of the Trustees, or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(g) The Fund may purchase and maintain insurance on behalf of any
person who is or was a Trustee or officer of the Fund, or is or was
serving at the request of the Trustees as a director or officer of another
corporation, or as an official of a partnership, joint venture, Fund or
other enterprise against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether
or not the Fund would have the power to indemnify him against such
liability; provided, however, that the Fund shall not purchase or maintain
any such insurance in contravention of any applicable provision of Title I
of ERISA.
(h) Anything to the contrary in the foregoing subsections (a)
through (g) notwithstanding, no Trustee or officer shall be indemnified
against any liability to the Fund or its Participating Trusts to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office, and no Trustee, or officer shall be indemnified in
any other case in which the Investment Company Act would restrict or
prohibit such indemnification.
In addition, the Fund provides for indemnification of
Participating Trusts and Trust Participants under the following conditions:
In case any Participating Trust or Trust Participant or former
Participating Trust or Trust Participant shall be held to be personally
liable solely by reason of his being or having been a Participating Trust
or Trust Participant and not because of his acts or omissions or for some
other reason, the Participating Trust or Trust Participant or former
Participating Trust or Trust Participant (or its successor, in the case of
the Participating Trust, or his heirs, executors, administrators or other
<PAGE>
legal representatives in the case of the Trust Participant) shall be
entitled out of the Fund to be held harmless from and indemnified against
all loss and expense arising from such liability. The Fund shall, upon
request by the Participating Trust or Trust Participant, assume the
defense of any claim made against any Participating Trust or Trust
Participant for any act or obligation of the Fund and satisfy any judgment
thereon.
Insofar as indemnification for liability arising under the
Securities Act of l933 may be permitted to Trustees, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See, "Investment Managers" in the Prospectus and "Investment
Managers" in the Statement of Additional Information for a description of the
investment managers.
The following are, for each investment manager, the directors and
officers who are or have been, at any time during the past two fiscal years,
engaged in any other business, profession, vocation or employment of a
substantial nature for their own account or in the capacity of director,
officer, employee, partner or trustee and a description of such business,
profession, vocation or employment of a substantial nature and, if engaged in
the capacity of director, officer, employee, partner or trustee, the name and
principal business address of the company with which the person specified is so
connected and the nature of such connection:
MORGAN GRENFELL INVESTMENT SERVICES LIMITED:
Other Business,
Positions Profession, Vocation
Name with Manager Employment
Michael Bullock Director -Managing Director
Morgan Grenfell Asset
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
<PAGE>
-Director
Phoenix Travel (London
Wall) Limited
23 Great Winchester
Street
London EC2P 2AX
England
-Director
Morgan Grenfell
Development Capital
Holdings Limited
23 Great Winchester
Street
London EC2P 2AX
England
-Director
MGDC Fund
(Syndications) Limited
c/o 20 Finsbury Circus
London EC2M 1NB
England
-Director
Morgan Grenfell Capital
(G.P.) Limited
23 Great Winchester
Street
London EC2P 2AX
England
-Director
Morgan Grenfell Property
Asset Management Limited
20 Finsbury Circus
London EC2M 1NB
England
-Director
Morgan Grenfell Capital Partner
(Syndications) Limited
c/o 20 Finsbury Circus
London EC2M 1NB
England
-Director
Priorbasic Limited
20 Finsbury Circus
London EC2M 1NB
England
P.N.C. Walker Director - Director
Morgan Grenfell
Asset Management Limited
20 Finsbury Circus
London EC2M 1NB
England
- Director
Morgan Grenfell
Quantitative Investment
Limited
20 Finsbury Circus
London EC2M 1NB
England
- Director
Morgan Grenfell
International Funds
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
- Director
Tokai Morgan Grenfell
International Funds
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
- Director
Asian Pacific
Management SA
2 bd Royal
2953 Luxembourg
<PAGE>
- Director
DB Morgan Grenfell
Asset Mgt. Co. Limited
2 bd Royal
2953 Luxembourg
- Director
M G Management SA
2 bd Royal
2953 Luxembourg
- Director
Euro-Pacific Rim
Management SA
2 bd Royal
2953 Luxembourg
- Director
Nomura World Fund
Management SA
2 bd Royal
2953 Luxembourg
- Director
Global System Fund '87
2 bd Royal
2953 Luxembourg
- Director
System Growth Fund '87
2 bd Royal
2953 Luxembourg
- Director
NM Income and Growth Fund
2 bd Royal
2953 Luxembourg
- Director
Target International
Growth Fund
2 bd Royal
2953 Luxembourg
- Director
Healthcare Global Fund
2 bd Royal
2953 Luxembourg
- Director
Morgan Grenfell Hedged
Funds Limited
20 Finsbury Circus
London EC2M 1NB
A.M. Wheatley Director - Director
Morgan Grenfell
Asset Management Limited
20 Finsbury Circus
London EC2M 1NB
England
<PAGE>
- Director
Morgan Grenfell
Quantitative Investment
Limited
20 Finsbury Circus
London EC2M 1NB
England
- Director
Halstead Educational
Trust 1979 Limited
23 Great Winchester
Street
London EC2P 2AX
England
W.G.M. Thomas Director - Director
MTI Managers Limited
70 St. Albans Road
Watford
Herts WD1 1RP
England
- Director
MTI Nominees Limited
70 St. Albans Road
Watford
Herts WD1 1RP
England
P.W.W. Disney Director - Director
Morgan Grenfell Asset
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
- Director
Crown and Manor
Club Limited
England
- Director
Woodberry Down
Club Limited
England
J.R. Johnston Director - Director
Morgan Grenfell Asset
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
I.D. Kelson Director - Director
Morgan Grenfell Asset
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
G. D. Bamping Director - Director
Morgan Grenfell Asset
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
<PAGE>
M.A. Hall Director - Director
Morgan Grenfell Asset
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
H.F.P. Holding Company - Deputy Company Secretary
Secretary Morgan Grenfell Asset
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
- Company Secretary
Morgan Grenfell
International Fund
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
- Company Secretary
Morgan Grenfell
Investment Management
Limited
20 Finsbury Circus
London EC2M 1NB
England
- Company Secretary
Morgan Grenfell Tokai
International Funds
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
R.L. Lamb Director - Director
Morgan Grenfell Latin
American Companies Trust Plc
20 Finsbury Circus
London EC2M 1NB
<PAGE>
- Director
Morgan Grenfell Asset
Management Limited
20 Finsbury Circus
London EC2M 1NB
England
FRIESS ASSOCIATES, INC.:
Other Business,
Positions Profession, Vocation,
Name with Manager Employment
Foster Stephen President and - Director
Friess Director Brandywine Fund, Inc.
3908 Kennett Pike
P.O. Box 4166
Greenville, DE 19807
- Director
Brandywine
Blue Fund, Inc.
3908 Kennett Pike
P.O. Box 4166
Greenville, DE 19807
Herman A. Friess Director - Attorney at Law
Rice Lake, Wisconsin
THE PUTNAM ADVISORY COMPANY, INC.:
Other Business,
Positions Profession, Vocation,
Name with Manager Employment
Lawrence J. Lasser Director and - President, Chief
President Executive Officer and
Director
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109
<PAGE>
- Director
Marsh & McLennan
Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036
- Director
Inroads/Central New
England, Inc.
99 Bedford Street
Boston, MA 02111
- Vice President and
Trustee
The Putnam Funds
One Post Office Square
Boston, MA 02109
Thomas J. Lucey Director and - Senior Managing
Senior Managing Director and Chief of
Director Institutional Business
Development
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109
Steven Spiegel Director and -Director and Senior Managing
Senior Director Putnam Investments,
Managing Inc.
Director One Post Office Square
Boston, MA 02109
Managing Director
Lehman Brothers, Inc.
200 Vesey Street
World Financial Center
New York, NY 10285
from 1977 to December 1994
John C. Talanian Director - Managing Director and
Director
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109
Takehiko Watanabe Director - Managing Director and
General Manager
Business Development
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109
RETIREMENT SYSTEM INVESTORS INC.:
Other Business,
Positions Profession, Vocation,
Name with Manager Employment
William Dannecker Director - President and Chief
Executive Officer
Retirement System
Group Inc.
317 Madison Avenue
New York, New York 10017
- President and Director
Retirement System
Consultants Inc.
317 Madison Avenue
New York, New York 10017
- President and Director
Retirement System
Distributors Inc.
317 Madison Avenue
New York, New York 10017
- President and Trustee
RSI Retirement Trust
317 Madison Avenue
New York, New York 10017
- President and Director
Retirement System
Fund Inc.
317 Madison Avenue
New York, New York 10017
James P. Coughlin President - Executive Vice President,
Chief Investment Officer
and Director
Retirement System
Group Inc.
317 Madison Avenue
New York, New York 10017
- Registered Principal
Retirement System
Distributors Inc.
317 Madison Avenue
New York, New York 10017
- Executive Vice President
RSI Retirement Trust
317 Madison Avenue
New York, New York 10017
- Executive Vice President
Retirement System
Fund Inc.
317 Madison Avenue
New York, New York 10017
Stephen P. Pollak Vice - Executive Vice President,
President, Counsel, Secretary
Secretary and Director
and Director Retirement System
Group Inc.
317 Madison Avenue
New York, New York 10017
- Vice President, Counsel,
Secretary and Director
Retirement System
Consultants Inc.
317 Madison Avenue
New York, New York 10017
<PAGE>
- Vice President, Secretary
and Director
Retirement System
Distributors Inc.
317 Madison Avenue
New York, New York 10017
- Executive Vice President,
Counsel and Secretary
RSI Retirement Trust
317 Madison Avenue
New York, New York 10017
- Executive Vice President,
Counsel and Secretary
Retirement System
Fund Inc.
317 Madison Avenue
New York, New York 10017
Veronica A. Fisher Treasurer - First Vice President
and Treasurer
Retirement System
Group Inc.
317 Madison Avenue
New York, New York 10017
- Treasurer
Retirement System
Consultants Inc.
317 Madison Avenue
New York, New York 10017
- Treasurer
Retirement System
Distributors Inc.
317 Madison Avenue
New York, New York 10017
- First Vice President and
Assistant Treasurer
RSI Retirement Trust
317 Madison Avenue
New York, New York 10017
- First Vice President and
Assistant
Treasurer
Retirement System
Fund Inc.
317 Madison Avenue
New York, New York 10017
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Retirement System Distributors Inc. acts as a principal
underwriter for Retirement System Fund Inc.
(b) The following information is furnished with respect to the
officers and directors of Retirement System Distributors Inc., 317 Madison
Avenue, New York, New York 10017, Registrant's principal underwriter:
POSITION AND OFFICES
WITH PRINCIPAL POSITION AND OFFICES
UNDERWRITER WITH REGISTRANT
NAME
William Dannecker President and Director President and Trustee
Stephen P. Pollak Vice President, Executive Vice
Secretary and Director President, Counsel and
Secretary
Veronica A. Fisher Treasurer First Vice President
and Assistant Treasurer
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The physical possession of each account, book or other document
of the Fund, will be maintained by the Fund, or The Chase
Manhattan Bank, N.A., Chase Metro Tech Center, Brooklyn, New York
11245, or Custodial Trust Company, 101 Carnegie Center,
Princeton, New Jersey 08540-6231.
ITEM 3L. MANAGEMENT SERVICES.
Retirement System Consultants Inc.
317 Madison Avenue
New York, New York 10017.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of l933 and the
Investment Company Act of l940 the Registrant certifies that it meets all of the
requirements for effectiveness of the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, and the State of New York, on
the 25th day of January 1996.
RSI RETIREMENT TRUST
By /s/William Dannecker
William Dannecker, President
and Trustee
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed below by the following persons, in the
capacities and on the dates indicated.
Signature Title Date
/s/William Dannecker President January 25, 1996
- ------------------------ (Principal
William Dannecker Executive
Officer), Trustee
/s/John F. Meuser Treasurer January 25, 1996
- ------------------------ (Principal
John F. Meuser Financial
and Accounting
Officer)
/s/Herbert G. Chorbajian Trustee January 25, 1996
- ------------------------
Herbert G. Chorbajian
/s/Candace Cox Trustee January 25, 1996
- ------------------------
Candace Cox
/s/Eugene C. Ecker Trustee January 25, 1996
- ------------------------
Eugene C. Ecker
/s/Covington Hardee Trustee January 25, 1996
- ------------------------
Covington Hardee
/s/Ralph L. Hodgkins, Jr. Trustee January 25, 1996
- ------------------------
Ralph L. Hodgkins, Jr.
/s/Maurice E. Kinkade Trustee January 25, 1996
- ------------------------
Maurice E. Kinkade
/s/William G. Lillis Trustee January 25, 1996
- ------------------------
William G. Lillis
/s/William L. Schrauth Trustee January 25, 1996
- ------------------------
William L. Schrauth
/s/William Swan Trustee January 25, 1996
- ------------------------
William Swan
/s/Raymond L. Willis Trustee January 25, 1996
- ------------------------
Raymond L. Willis
<PAGE>
EXHIBIT INDEX
Exhibit Document
EX-99.(B)10.b. Opinion of Shereff, Friedman, Hoffman & Goodman, LLP.
(Filed herewith.)
EX-99.(B)11.a. Consent of McGladrey & Pullen, LLP. (Filed herewith.)
EX-99.(B)12. 1995 Annual Report to Unitholders, including report of
Independent Auditors. (Filed herewith.)
EX - 27.1 Financial Data Schedule.
EX - 27.2 Financial Data Schedule.
EX - 27.3 Financial Data Schedule.
EX - 27.5 Financial Data Schedule.
EX - 27.6 Financial Data Schedule.
EX - 27.7 Financial Data Schedule.
EX - 27.8 Financial Data Schedule.
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 Third Avenue
New York, New York 10022-9998
January 25, 1996
RSI Retirement Trust
317 Madison Avenue
New York, New York 10017
Dear Sirs:
RSI Retirement Trust, a New York common law trust (the "Trust"), is
filing with the Securities and Exchange Commission Post-Effective Amendment
No. 14 ("PEA 14") to its Registration Statement under the Securities Act of
1933, as amended (the "1933 Act") on Form N-1A (File No. 2-95074), relating to
the registration under the 1933 Act of 804,471 additional shares of beneficial
interest (the "Additional Shares"), which are to be offered and sold by the
Trust in the manner and on the terms set forth in the prospectus of the Trust
current and effective under the 1933 Act at the time of sale. Of the Additional
Shares, 798,619 are previously outstanding shares of the Trust which were
redeemed by the Trust during its fiscal year ended September 30, 1994.
According to PEA 14, none of the Additional Shares have previously been used by
the Trust for reduction pursuant to paragraph (a) of Rule 24e-2 under the
Investment Company Act of 1940 (the "1940 Act") in previous filings of
post-effective amendments to the Trust's Registration Statement during the
current year, of for reduction pursuant to paragraph (c) of Rule 24f-2 under
the 1940 Act during the Trust's current fiscal year, of the registration fee
payable by the Trust for the registration of shares for sale under the 1933 Act.
We have provided legal services to the Trust when requested to do so
by the Trust with respect to specific matters since April, 1993. In connection
with the preparation of this opinion, we have examined copies of the Trust's
Declaration of Trust and By-Laws, as currently in effected, and PEA 14.
Based on the foregoing, it is our opinion that:
1. The Trust has been duly organized and is legally existing under
the laws of the State of New York.
2. The Trust is authorized to issue an unlimited number of its
shares of beneficial interest.
3. Subject to the effectiveness of PEA 14 and compliance with
applicable state securities laws, upon the issuance of the Additional Shares for
a consideration not less than the net asset value thereof as required by the
1940 Act and in accordance with the terms of the Trust's Registration Statement,
such Additional Shares will be legally issued and outstanding and fully paid and
non-assessable. However, we note that as set forth in the Registration
Statement, the Trust's shareholders might, under certain circumstances, be
liable for transactions effected by the Trust.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as a part of PEA 14 and with any state securities
commission where such filing is required. In giving this consent we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the 1933 Act.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman, LLP
Shereff, Friedman, Hoffman & Goodman, LLP
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference of our report dated November
15, 1995 on the financial statements of Core Equity Fund, Emerging Growth Equity
Fund, Value Equity Fund, Fund, International Equity Fund, Actively Managed Bond
Fund, Intermediate-Term Bond Fund,Short-Term Investment Fund and Dedicated Bond
Fund, series of RSI Retirement Trust, referred to therein in Post-Effective
Amendment No. 14 to the Registration Statement on Form N-1A, File No. 2-95074,
as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under the caption
"Financial Highlights" and in the Prospectus and Statement of Additional
Information under the caption "Counsel and Auditors."
/s/McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
January 23, 1996
ANNUAL
REPORT
[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
1995
Broker/Dealer:
[LOGO]
Retirement System
Distributors Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
<PAGE>
Table of Contents
- -------------------------------------------------------------------------
President's Message ............................................. 1
Investment Review ............................................... 4
Combined Financial Statements ................................... 21
Financial Statements of Investment Funds ........................ 23
Core Equity Fund .............................................. 23
Value Equity Fund ............................................. 27
Emerging Growth Equity Fund ................................... 30
International Equity Fund ..................................... 36
Actively Managed Bond Fund .................................... 41
Intermediate-Term Bond Fund ................................... 45
Short-Term Investment Fund .................................... 49
Notes to Financial Statements ................................... 52
Independent Auditor's Report .................................... 69
Officers, Consultants, Investment Managers and Custodians ....... 70
Board of Trustees ............................................... 71
[LOGO] is a registered trademark of Retirement System Group Inc.
<PAGE>
PRESIDENT'S
MESSAGE
To Our Unitholders:
Setting savings goals, whether long-term or short-term, is the first step an
individual should take in deciding the appropriate investment mix for his or her
portfolio. It is then that the value of asset allocation, an important component
in investment education programs, comes into play. Different models exist to
assist in determining a suitable investment mix to achieve savings goals. It is
key, however, that an individual periodically review the status of his or her
portfolio to ensure that accumulated balances are in keeping with the desired
asset allocation.
The past two-year period is a prime example of another topic of investment
education--the volatility of returns that can arise within a market cycle. In
1994, investors experienced a situation in which the domestic equity markets
were slightly positive; however, the bond markets finished last year showing
negative results (the worst in many years). Thus far in 1995, both stocks and
bonds are showing double digit results for the nine months ended September 30,
1995.
Considering the market fluctuations of the past two years, individuals
should consider reviewing their savings goals and reassessing their investment
strategies. By examining their accumulated account balances, individuals may
determine that a reallocation of funds among the different investment vehicles
is necessary to stay on track.
The same need applies to qualified plans. Defined benefit plans using the
Trust's asset allocation service benefit from professional investment managers
allocating the plan's assets among a range of investments within the appropriate
tolerance for risk category. Investment performance and its effect on the plan's
asset mix are reviewed on an ongoing basis, and if appropriate, asset allocation
adjustments are made.
In 401(k) and most other defined contribution plans, however, participants
are responsible for their own asset allocation. Periodically, plan participants
need to review their investment strategies and account balances, to ensure that
they are in keeping with the individual's long-term retirement plan strategy.
On behalf of the Board of Trustees, I would like to thank you for choosing
RSI Retirement Trust to help meet your retirement savings goals.
Sincerely,
[Insert Signature]
William Dannecker
President and Trustee
November 27, 1995
<PAGE>
EQUITY FUNDS
Core Equity Fund
The Core Equity Fund is a stock fund that invests in a broadly diversified group
of high-quality, medium to large companies that exhibit sustainable growth in
earnings, and that appear attractively valued. It offers investors the potential
for long-term capital appreciation, with income as a secondary goal.
Managed by Retirement System Investors Inc.
Value Equity Fund
The Value Equity Fund is a growth and income stock fund that seeks capital
appreciation over the longer term. It invests in a broadly diversified group of
financially strong companies with medium to large market capitalizations. These
companies are frequently out of favor with investors, but have had good earnings
growth records in the past and offer prospects for significant earnings and
dividend growth, along with the prospect for capital appreciation. In the view
of the investment manager, these stocks are currently undervalued and selling
below their potential value.
Managed by NFJ Investment Group
(from October 1994-March 1995)
Managed by Retirement System Investors Inc.
(from April 1995-September 1995)
Emerging Growth Equity Fund
The Emerging Growth Equity Fund is a growth stock fund that seeks capital
appreciation by investing primarily in smaller, relatively new companies that,
in the view of the investment manager, have higher than average potential for
earnings growth.
Managed by The Putnam Advisory Company, Inc. and
Friess Associates, Inc.
International Equity Fund
The International Equity Fund is a stock fund that invests primarily in stocks
of companies headquartered in foreign countries in order to take advantage of
opportunities outside the U.S. capital markets. Holdings are concentrated in the
larger markets of Europe, Australia and the Far East. The Fund invests in
companies whose current prices, in the view of the manager, do not reflect their
true earnings potential, and in companies that are misperceived by investors,
and therefore, are selling at "undervalued" prices. The Fund avoids investments
in foreign markets with unacceptable political or economic risks.
Managed by Morgan Grenfell Investment Services Limited
2
<PAGE>
FIXED-INCOME FUNDS
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. At least 65% of the investments in this Fund are in U.S. Government or
U.S. Government Agency issues which have the highest credit rating. At the time
of purchase, at least 75% of the holdings must have a quality rating of "AA" or
better, with a minimum quality rating of "A" for other holdings. This investment
fund's goal is to achieve income and price appreciation.
Managed by Retirement System Investors Inc.
Actively Managed Bond Fund
The Actively Managed Bond Fund invests in high-quality, fixed-income securities
(bonds and other debt securities), with maturities out to 30 years. The Fund's
investment managers frequently adjust the maturity structure of the portfolio to
respond to perceived changes in the relative attractiveness of the fixed-income
market. At the time of purchase, at least 75% of the investments in this Fund
must have a quality rating of "AA" or better, with a minimum rating of "A" for
other holdings, and at least 65% of the investments must be in U.S. Government
or U.S. Government Agency issues. The Fund seeks to achieve both income and
price appreciation.
Managed by Retirement System Investors Inc.
Short-Term Investment Fund
The Short-Term Investment Fund invests in high-quality cash equivalent types of
securities normally maturing in one year or less. While the funds may invest in
U.S. Government instruments with maturities of up to two years, the maximum
average maturity of the Fund's holdings will not exceed one year. This
investment fund offers substantial liquidity and capital preservation.
Managed by Retirement System Investors Inc.
3
<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 are
reasonably valued relative to their earnings growth potential.
Market Environment
Expanding world markets, the continued miniaturization of electronics, and the
drive to enhance productivity continue to sustain robust demand for technology
and communications products holdings. Consumer staples--particularly health
care--benefited from cost reductions, dollar weakness, resumption of unit growth
and a modest return of pricing power. The portfolio's fiscal 1995 results were
also helped by below-average positions in the relatively weak consumer cyclicals
and raw material areas, which suffered from weak unit growth and limited pricing
flexibility.
The Core Fund's results (see below) over the past fiscal year benefited
from meaningful positions in large multi-national growth companies led by
technology (25% of total fund assets) and consumer staple companies (19% of
total). However, the Fund had a lower than market exposure to the financial
sector (7% of total), which also had good returns.
Performance Results
The Core Equity Fund produced a solid return of 31.32% for the one-year
period ended September 30, 1995 and outperformed the S&P 500, an unmanaged
representative index of the broad equity market (performance results are gross,
since expenses are not applicable; this applies to all market index results that
appear in this report), which posted a return of 29.72% for the same one-year
period. Over the long term, the Fund continued to provide strong returns. For
the ten years ended September 30, 1995, the Core Fund produced an average annual
return of 15.15%, while the S&P 500 posted an average annual return of 15.99%
for the same period.
Measuring Risk and Return
Core Equity Fund vs S&P 500
For 10-Year Period Ended 9/30/95
[GRAPH]
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 9/30/95. 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 volatility 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 standard deviations, the relative volatility of each investment
can be determined. A lower standard deviation reflects lower volatility.
4
<PAGE>
Core Equity Fund vs S&P 500
[GRAPH]
Growth of $10,000
-----------------
Core Equity S&P 500
1 year $13,132 $12,972
5 year $20,177 $22,153
10 year $40,974 $44,067
Cumulative Returns
------------------
1 year 31.32% 29.72%
5 year 101.77% 121.55%
10 year 309.74% 340.67%
Average Annual Returns
----------------------
1 year 31.32% 29.72%
5 year 15.07% 17.25%
10 year 15.15% 15.99%
It should be noted that the Core Equity Fund's annualized return for the
ten years ended September 30, 1995, was achieved while taking less risk (as
measured by standard deviation) than the S&P 500 (see chart on page 4). Because
of the Fund's long-term view, the manager employs a buy and hold strategy, a
strategy that has resulted in a relatively low portfolio turnover rate.
When compared to Lipper's Growth and Income Funds grouping of mutual funds,
the Core Equity Fund continued to maintain a superior record. For the one-year
period ended September 30, 1995, the Fund's return of 31.32% was 824 basis
points higher than the 23.08% return of its Lipper benchmark for the same
period. This performance placed the Core Equity Fund in the top 5% of Lipper's
Growth and Income Funds grouping of mutual funds. (The Fund ranked 17th out of
395 funds.) For the long-term period of ten years ended September 30, 1995, the
Fund's average annual return of 15.15% was 1.40% higher than the 13.75%
annualized return the Lipper benchmark posted for the same period, and ranked in
the top 25% of the Lipper Growth and Income Funds grouping. (The Fund placed
29th out of 116 funds; this ranking is based on total return). Past performance
is not a guarantee of future results.
Core Equity Fund vs Lipper Growth and Income Funds Average
For periods ended September 30, 1995
- -------------------------------------------------------------------------------
Annualized
------------------------
1 Year 5 Years 10 Years
------ ------- --------
CORE EQUITY FUND(1) 31.32% 15.07% 15.15%
Lipper Growth & Income
Funds Avg.(2) 23.08 16.08 13.75
(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.
- -------------------------------------------------------------------------------
5
<PAGE>
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 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 price does not adequately reflect their ability to grow
earnings and dividends over time.
For fiscal 1995, the Value Fund was managed by NFJ Investment Group for the
first six months and by Retirement System Investors Inc. (which was appointed
manager effective April, 1995) for the second six months.
Market Environment
For the first quarter of fiscal 1995, value stocks were generally out-of-favor
versus growth stocks. The market as a whole was flat (S&P 500 was -0.03%), but
it was a period of strong performance in both technology and consumer staples
issues, and the portfolio was hurt due to its lighter weightings in these two
positively performing sectors. The second quarter was filled with optimism that
the economy would continue to show strength and the broad equity markets were up
substantially (i.e., the S&P 500, at +9.74% and the DJIA, at +9.17%), and both
value and growth stocks performed well. The portfolio benefited nicely both from
its stock holdings in technology, health care, energy and financials, and
because low P/E, high yield and quality stocks did well during this period.
For the second half of fiscal 1995, the Value Fund returned 14.53% while
the Russell 1000 Value Index, a representative market index, returned 18.48%.
During this period, the new manager (Retirement System Investors Inc.) was
repositioning the Value Fund and finished the period with its largest exposures
in utilities (including telephone), industrial capital goods providers,
financials (principally banks), and consumer staples issues. The changes made to
the portfolio reflect the current manager's philosophy of investing in
high-quality companies selling at reasonable prices. Returns for the second half
of the fiscal year were negatively affected by the speed with which the manager
was able to reposition the portfolio away from consumer cyclical issues, such as
troubled retailers in the midst of internal restucturings, and by the
portfolio's exposure to the relatively weak performing energy sector. An
underweighting in technology issues impeded performance versus market averages
in the fiscal year. Second half returns benefited
Measuring Risk and Return
Value Equity Fund vs
Russell 1000 Value
For 10-Year Period Ended 9/30/95
[GRAPH]
This chart compares the historical average annual total return and the risk (as
measured by the standard deviation) of the Value Equity Fund and the Russell
1000 Value for the ten-year period ended 9/30/95. The Russell 1000 Value is a
representative market index for this Fund. See the Core Equity Fund chart (p. 4)
for a definition of standard deviation.
6
<PAGE>
from the portfolio's exposure to the utility sector, financials, and
pharmaceutical companies.
Performance Results
For the one-year period ended September 30, 1995, the Value Equity Fund produced
a return of 20.63%. For the same period, the Russell 1000 Value, an unmanaged
representative index reflecting the performance of more than 600 stocks with a
less-than-average growth orientation, posted a return of 27.69%. For the five-
and ten-year periods ended September 30, 1995, the Value Equity Fund produced
annual returns of 15.48% and 11.48%, respectively, compared to annualized
returns of 18.16% and 15.39%, respectively, for the Russell 1000 Value. The
Fund's risk profile, as measured by standard deviation, versus the market
(Russell 1000 Value) is reflected in the chart on page 6.
The Value Equity Fund's return of 20.63% for the one-year period ended
September 30, 1995 trailed the 23.08% return of the Lipper Growth and Income
Funds Average, a representative performance benchmark, for the same period. For
the trailing five-year period, the Fund returned 15.48% per year versus 16.08%,
annualized for the Lipper benchmark. Longer term (ten years ended September 30,
1995), the Fund's annualized return of 11.48% trailed the 13.75% annualized
return produced by the Lipper Growth and Income Funds Average. Past performance
is not a guarantee of future results.
Value Equity Fund vs Russell 1000 Value
[GRAPH]
Value Equity Fund vs Lipper Growth
and Income Funds Average
For periods ended September 30, 1995
Growth of $10,000
-----------------
Value Equity Russell 1000
------------ ------------
1 year $12,063 $12,769
5 year $20,535 $23,038
10 year $29,657 $41,832
Cumulative Returns
------------------
1 year 20.63% 27.69%
5 year 105.35% 130.38%
10 year 196.57% 318.32%
Average Annual Returns
----------------------
1 year 20.63% 27.69%
5 year 15.48% 18.16%
10 year 11.48% 15.39%
- -------------------------------------------------------------------------------
Annualized
----------------------
1 Year 5 Years 10 Years
------ ------- ---------
VALUE EQUITY FUND(1) 20.63% 15.48% 11.48%
Lipper Growth & Income Funds
Avg.(2) 23.08 16.08 13.75
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.
- -------------------------------------------------------------------------------
7
<PAGE>
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, 1995, the markets were influenced by
improving economic growth, strong corporate earnings, declining interest rates
and stable inflation. Early in the year, a weaker dollar and healthy economy
favored larger capitalization multi-national and cyclically oriented issues.
With investor confidence growing on the strength of the economy (in early 1995)
and the dollar rebounding, small- to medium- capitalization stocks--which
continued to record very strong earnings gains--performed particularly well. For
the one year ended September 30, 1995, the Russell 2000, a representative index
for this sector, produced a return of 23.36% (with over 85% of this result
arising in the last two quarters of fiscal year 1995). Although strong in
nominal terms, this index result was 636 basis points under the 29.72% return of
the S&P 500, the broad U.S. equity market index. (For fiscal year 1994, the
Russell 2000 return of 2.67% was more in line with the S&P 500, which returned
3.68%).
The Emerging Growth Equity Fund continues to be managed by two investment
managers. As of September 30, 1995, Friess Associates, Inc. ("Friess") was
managing 58.9% of the assets of the Fund and The Putnam Advisory Company, Inc.
("Putnam") was managing the remaining 41.1%.
Friess is a smaller market capitalization, aggressive growth-oriented
manager. At September 30, 1995, Friess maintained over 81% of portfolio assets
concentrated in the consumer staples, technology and capital goods sectors of
the market. Concentrations in all three sectors rose as the year progressed,
from 66% in aggregate at December 31, 1994 to the aggregate weighting noted at
fiscal year end. At September 30, 1995, the portion of the Fund's portfolio
managed by Friess held 72 stocks.
Friess turned in a superior result for fiscal year 1995, with a gross
return of 58.30%, or 34.94 percentage points higher than the Russell 2000. (For
fiscal year 1994,
Measuring Risk and Return
Emerging Growth Equity Fund vs
Russell 2000
For 10-Year Period Ended 9/30/95
[GRAPH]
This chart compares the historical average annual total return and the risk (as
measured by the standard deviation) of the Emerging Growth Equity Fund and the
Russell 2000 for the ten-year period ended 9/30/95. The Russell 2000 is a
representative market index for this Fund. See the Core Equity Fund chart (p. 4)
for a definition of standard deviation.
8
<PAGE>
Friess's gross return of -3.58% underperformed versus the Russell 2000).
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 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 numerous technology sectors--for
example, data processing: software, peripherals, and services, which were in
favor and translated into exceptionally positive investment returns. The
portfolio was also helped by industry shifts into health care services and
medical products.
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.
While technology was the best performing sector throughout the year, specialty
apparel companies, consumer services issues and radio, television and
cable-related beneficiaries of pending telecommunications legislation were also
meaningful contributors to Putnam's performance success. (Putnam's gross return
for its portion of the Fund for fiscal year 1995 was 38.08% versus 13.28% for
fiscal year 1994 and, in both years, the manager significantly outperformed the
market).
At the end of the fiscal year, the top three sectors for Putnam were
consumer cyclicals, consumer staples and technology, with an aggregate
concentration of 84% of the portfolio assets. On September 30, 1995, the portion
of the Fund's portfolio managed by Putnam held 152 stocks, of which only five
overlapped with the holdings of Friess. Accordingly, the Fund continues to
reflect a highly diversified position.
Emerging Growth Equity Fund vs Russell 2000
[CHART]
Growth of $10,000
-----------------
Emerging Growth Russell
Equity 2000
--------------- -------
1 year $14,622 $12,336
5 year $35,124 $26,657
10 year $46,167 $33,220
Cumulative Returns
------------------
1 year 46.22% 23.36%
5 year 251.24% 166.57%
10 year 361.67% 232.20%
Average Annual Returns
----------------------
1 year 46.22% 23.36%
5 year 28.56% 21.66%
10 year 16.53% 12.76%
9
<PAGE>
Performance Results
The Emerging Growth Equity Fund achieved a return of 46.22% for the one-year
period ended September 30, 1995, more than 22 percentage points higher than the
23.36% return for the Russell 2000. Over the long term, the Fund also
outperformed the Russell 2000. For the ten-year period ended September 30, 1995,
the Emerging Growth Fund achieved an average return of 16.53% per year, compared
to the 12.76% return per year for the Russell 2000. The Fund outperformed the
Russell 2000 while taking only slightly more risk (as measured by standard
deviation) than the Russell 2000 index (see chart on page 8).
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, 1995, the Emerging Growth Fund achieved an
outstanding return of 46.22%, or 17.29 percentage points greater than the Lipper
Small Company Growth Funds Average of 28.93%. This return placed the Emerging
Growth Fund in the top 11% of mutual funds in the Lipper Small Company Growth
Funds grouping. (The Fund ranked 29th out of 288 funds.) For the trailing five
years, the Fund's annualized return of 28.56% also ranked very high in the
applicable Lipper universe, with a top 13% achievement (10th out of 79 funds).
Rankings are based on total returns. Over the long term (ten years ended
September 30, 1995), Emerging Growth maintained its performance advantage, with
an annualized return of 16.53%, versus the 15.51% per year return of the Lipper
benchmark. Past performance is not a guarantee of future results.
Emerging Growth Equity Funds vs Lipper Small Company Growth Funds Average
For periods ended September 30, 1995
- -------------------------------------------------------------------------------
Annualized
---------------------
1 Year 5 Years 10 Years
------ ------- --------
EMERGING GROWTH EQUITY FUND(1) 46.22% 28.56% 16.53%
Lipper Small Company Growth Funds Avg.(2) 28.93 23.04 15.51
(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.
- -------------------------------------------------------------------------------
10
<PAGE>
International Equity Fund
The International Equity Fund seeks capital appreciation over time by investing
in stocks that are headquartered in foreign countries 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.
Market Environment
Over the past year, most international markets compared unfavorably with the
domestic U.S. equity market. (This was particularly true for the emerging
markets, as reflected in the MSCI Emerging Free Index, which was down 18.01% for
fiscal 1995.) However, there were some exceptions with Sweden (at +45%) and
Finland (at +54%) benefiting from weaker currencies and particularly attractive
technology and cyclical stocks. For fiscal year 1995, the non-U.S. stock
markets, as measured by the MSCI EAFE Index, returned 5.80% versus the S&P 500
index, which rose 29.72%. (The situation was reversed in fiscal 1994 when the
MSCI EAFE Index was up 9.79%, while the S&P 500 returned 3.68%.)
Throughout much of the year, the weakness of the U.S. dollar had a major
impact on the portfolio manager's performance, particularly in Japan, where
anticipated profit improvements were put on hold as the Yen reached a post-war
high of 79.8 to the dollar. A subsequent rebound in the exchange rate, triggered
by coordinated interest rate cuts in the U.S. and Japan and massive intervention
by the Bank of Japan, led to a significant recovery. Portfolio management did
hedge the Yen throughout the period, and gained added performance as a result of
this activity. In addition, the portfolio holdings in emerging markets was
nominal throughout the year, and this underweighting also was beneficial. At
September 30, 1995, the Fund had a 6% weighting in emerging markets with
holdings in Mexico, Malaysia, South Korea and Singapore. (Morgan Grenfell
finished the year ahead of the index with a gross return of 7.73% for the
International Equity Fund.)
Measuring Risk and Return
International Equity Fund vs
MSCI EAFE
For 10-Year Period Ended 9/30/95
[GRAPH]
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 9/30/95. The MSCI EAFE is a
representative market index for this Fund. See the Core Equity Fund chart (p. 4)
for a definition of standard deviation.
11
<PAGE>
At fiscal year end, the International Fund had a weighting of 33.8% in
Japan versus the MSCI EAFE index weighting of 40.8%, a 29.7% weighting in
Continental Europe (principally in Germany, France, Holland, Sweden and
Switzerland) versus the index weighting of 32.8% and a market weighting in the
United Kingdom of 16.6%.
International Equity Fund vs MSCI EAFE
[GRAPH]
Growth of $10,000
-----------------
International MSCI
Equity EAFE
------------- ----
1 year $10,570 $10,580
5 year $15,903 $16,619
10 year $34,092 $40,127
Cumulative Returns
------------------
1 year 5.70% 5.80%
5 year 59.03% 66.19%
10 year 240.92% 301.27%
Average Annual Returns
----------------------
1 year 5.70% 5.80%
5 year 9.72% 10.69%
10 year 13.05% 14.91%
Performance Results
For the one-year period ended September 30, 1995, the International Equity Fund
provided a return of 5.70%, comparable to the MSCI EAFE Index return of 5.80%.
For the ten years ended September 30, 1995, the International Fund produced an
annualized return of 13.05%, trailing the MSCI EAFE Index per year return of
14.91%. However, the Fund had a much lower risk exposure, as measured by
standard deviation, than the MSCI EAFE Index during this period (see chart on
page 11).
The International Equity Fund's return of 5.70% for the one-year period
ended September 30, 1995 outpaced by more than two percentage points the 3.12%
return of the Lipper International Funds Average, the Fund's benchmark. This
one-year return ranked the Fund in the top 33% of its Lipper grouping (73rd out
of 222 funds; this ranking is based on total return). For the ten-year period
ended September 30, 1995, the International Fund posted an annualized return of
13.05% versus an annualized return of 14.40% 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, 1995
- --------------------------------------------------------------------------------
Annualized
-----------------------
1 Year 5 Years 10 Years
------ ------- --------
INTERNATIONAL EQUITY FUND(1) 5.70% 9.72% 13.05%
Lipper International Funds Avg.(2) 3.12 10.90 14.40
(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.
- --------------------------------------------------------------------------------
12
<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. Since
August 2, 1993, the Fund has been managed exclusively by Retirement System
Investors Inc.
Market Environment
The environment for fixed-income investors improved substantially during the
fiscal year ended September 30, 1995, as interest rates declined in the
intermediate and longer sectors of the yield curve. The bond market's rally
began in November of last year, and strengthened as investors perceived that the
economy was slowing and inflationary pressures would be contained. The market
for bonds was further improved by a promise from a more conservative Congress to
reduce government spending and eventually balance the budget by low money supply
growth, and by sluggish foreign economies. During the fiscal year, the 30-year
Treasury declined from 7.8% to 6.5%, the ten-year Treasury from 7.6% to 6.2%,
the five year from 7.3% to 6.0%, and the two year from 6.6% to 5.8%.
The performance of fixed-income investments varied substantially with
duration in fiscal 1995. Longer durations and a flattening yield curve raised
prices and total return as investors extended out the curve. The yield spread
between the three-month Treasury bill and the 30-year bond narrowed to 109 basis
points at the end of fiscal 1995, from 305 basis points the year before. Short
interest rates moved higher late in 1994 and early 1995 before drifting lower,
while the rest of the yield curve declined more sharply this year. Within
fixed-income sectors, long duration Governments and non-callable corporates
outperformed mortgages and other callable issues in fiscal 1995.
The Actively Managed Bond Fund began fiscal 1995 with a duration of 4.6
years, which was gradually raised to 4.9 years by May, before drifting back to
4.6 years at September 30, 1995. The Lehman Brothers Aggregate Bond Index also
had a modified duration of 4.6 years at the end of fiscal 1995. Investment
changes during the year primarily consisted of buying discount callable Federal
agency issues maturing in five to 15 years, at yields of 55 to 70 basis points
over the comparable Treasury. The source of funds was cash on hand and cash
inflows during the year.
Measuring Risk and Return
Actively Managed Bond Fund vs
Lehman Brothers Aggregate Bond Index
For 10-Year Period Ended 9/30/95
[GRAPH]
This chart compares the historical average annual total return and the risk
(as measured by the standard deviation) of the Actively Managed Bond Fund and
the Lehman Bros. Aggregate Bond Index for the ten-year period ended 9/30/95.
Lehman Bros. is a representative market index for this Fund. See the Core Equity
Fund chart (p. 4) for a definition of standard deviation.
13
<PAGE>
The Fund maintains high quality with 52% in U.S. Treasuries, 15% in Federal
agency notes and bonds, 13% in Federal agency mortgage pass thrus, 12% in agency
collateralized mortgage obligation PACs, 6% in corporates, and 2% in cash as of
fiscal year end. All holdings must have a quality rating of "A" or better.
Actively Managed Bond Fund vs Lehman Brothers
Aggregate Bond Index
[GRAPH]
Growth of $10,000
-----------------
Actively
Managed LB Agg.
Bond Fund Bond Index
---------- ----------
1 year $11,351 $11,405
5 year $16,041 $15,851
10 year $24,159 $25,913
Cumulative Returns
------------------
1 year 13.51% 14.06%
5 year 60.41% 58.51%
10 year 141.59% 159.13%
Average Annual Returns
----------------------
1 year 13.51% 14.06%
5 year 9.91% 9.65%
10 year 9.22% 9.99%
Performance Results
The Actively Managed Bond Fund posted a return of 13.51% for the one-year period
ended September 30, 1995. The Lehman Brothers Aggregate Bond Index, a
representative market index, achieved a return of 14.06% for the same period.
Over the longer term (ten years ended September 30, 1995), the Fund had a return
of 9.22% per year, versus the 9.99% 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 about 14% greater than the market index (see
chart on page 13).
The Actively Managed Bond Fund outperformed its Lipper benchmark, the U.S.
Government Bond Funds Average, for the one-year period ended September 30, 1995,
with a return of 13.51%, compared to the 12.74% return of the benchmark. With
this return, the Fund achieved a top 32% ranking within its Lipper grouping. For
the trailing five years, the Fund's annualized return of 9.91% exceeded the
Lipper benchmark's annualized return of 8.58% by 133 basis points per year, and
ranked in the top 14% of its Lipper grouping (10th out of 76 funds). Over the
long term (ten years ended September 30, 1995), the Fund continued to outpace
the benchmark, with a 9.22% annualized return, versus an 8.36% per year return
for the benchmark. The Fund also achieved a top 24% ranking in the Lipper U.S.
Government Bond Funds Grouping (6th out of 26 funds for this period). Rankings
are based on total return. Past performance is not a guarantee of future
results.
14
<PAGE>
Actively Managed Bond Fund vs Lipper U.S. Government Bond Funds Average
For periods ended September 30, 1995
- --------------------------------------------------------------------------------
Annualized
--------------------
1 Year 5 Years 10 Years
------ ------- --------
ACTIVELY MANAGED BOND FUND(1) 13.51% 9.91% 9.22%
Lipper U.S. Government Bond Funds Avg.(2) 12.74 8.58 8.36
(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 positive environment for fixed-income investors (as discussed under the
Actively Managed Bond Fund) also helped 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 3.1 years during fiscal 1995, compared with a modified duration of 3.0
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, 94% of the holdings were in AAA securities, including 44%
in U.S. Treasuries and 29% in agency mortgage pass thrus and short
collateralized mortgage obligation PACs, 18% in Federal agency notes and bonds
and 2.5% invested in Repos collateralized by U.S. Treasuries. The remaining 6%
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.)
Measuring Risk and Return
Intermediate-Term Bond Fund vs
Lehman Brothers Government-
Intermediate Bond Index
For 10-Year Period Ended 9/30/95
[GRAPH]
This chart compares the historical average annual total return and the risk (as
measured by the standard deviation) of the Intermediate-Term Bond Fund and the
Lehman Bros. Government-Intermediate Bond Index for the ten-year period ended
9/30/95. Lehman Bros. is a representative market index for this Fund. See the
Core Equity Fund chart (p. 4) for a definition of standard deviation.
15
<PAGE>
Intermediate-Term Bond Fund vs Lehman Brothers
Government-Intermediate Bond Index
[GRAPH]
Growth of $10,000
-----------------
Intermediate-
Term LB Gov't-Inter.
Bond Fund Bond Index
------------- ---------------
1 year $11,028 $11,060
5 year $14,665 $14,981
10 year $22,952 $23,346
Cumulative Returns
------------------
1 year 10.28% 10.61%
5 year 46.65% 49.81%
10 year 129.52% 133.46%
Average Annual Returns
----------------------
1 year 10.28% 10.61%
5 year 7.96% 8.42%
10 year 8.66% 8.85%
Performance Results
The Intermediate-Term Bond Fund posted a return of 10.28% for the one-year
period ended September 30, 1995, versus the 10.61% return for the Lehman
Brothers Government-Intermediate Bond Index, a representative market index. For
the ten-year period ended September 30, 1995, the Intermediate-Term Bond Fund
achieved an annual return of 8.66%, while the market returned 8.85% 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 15).
For the one-year period ended September 30, 1995, the Fund had a return of
10.28%, versus 11.34% for the Lipper Intermediate (5 to 10 years maturity) U.S.
Government Funds Average, the Fund's performance benchmark. Over the long term
(ten years ended September 30, 1995), the Fund outpaced the Lipper benchmark by
0.43% per year--8.66% per year versus 8.23%, annualized, respectively. Past
performance is not a guarantee of future results.
Intermediate-Term Bond Fund vs Lipper Intermediate U.S. Government Funds Avg.
For periods ended September 30, 1995
- --------------------------------------------------------------------------------
Annualized
-----------------------
1 Year 5 Years 10 Years
------ ------- --------
INTERMEDIATE-TERM BOND FUND(1) 10.28% 7.96% 8.66%
Lipper Intermediate (5 to 10 years
maturity) U.S. Gov't. Funds Avg.(2) 11.34 8.12 8.23
(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.
- -------------------------------------------------------------------------------
16
<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 continued to move higher in the last quarter of 1994
and early 1995 as the Federal Reserve ratcheted the Fed Funds' rate from 4.75%
at the end of September 1994 to 6.0% in February 1995. Investors then began to
perceive a slowing in the economy, which could restrain further tightening by
the Fed, and money market rates subsequently drifted lower. After the Fed cut
the Fed Funds' rate early in July, from 6.0% to 5.75%, money market rates
declined more sharply on anticipation of further Fed easing. The 90-day Treasury
bill rose from 4.77% at September 30, 1994 to 5.99% in January, 1995, and eased
to 5.41% on September 30, 1995.
The Short-Term Investment Fund's average maturity varied during the fiscal
year depending on the perceived direction of interest rates. Average maturity of
28 days on September 30, 1994 shrank to 15 days in January, 1995, and extended
to 78 days on September 30, 1995, in line with declining rates. The Fund's
maturity benchmark, the Donoghue All-Taxable Money Funds Average, varied from 41
days in September, 1994, to 35 days in January, and 54 days in September, 1995.
Short intersector yield spreads (e.g., one-month commercial paper versus
two-year Treasury note) narrowed from 188 basis points on September 30, 1994 to
10 basis point on September 30, 1995. Most other intersector spreads also
narrowed as the front end of the yield curve flattened during fiscal 1995.
Investment changes during the fiscal year included raising holdings of discount
callable Federal agencies to improve yield. U.S. Treasuries and commercial paper
were reduced. The high quality of the Fund was maintained with 93% of holdings
rated "AA" or better at year end.
Measuring Risk and Return
Short-Term Investment Fund vs
90-Day U.S. Treasury Bills
For 10-Year Period Ended 9/30/95
[GRAPH]
This chart compares the historical average annual total return and the risk (as
measured by the standard deviation) of the Short-Term Investment Fund and the
90-Day U.S. Treasury Bills for the ten-year period ended 9/30/95. T-Bills are a
representative market index for this Fund. See the Core Equity Fund chart (p. 4)
for a definition of standard deviation.
17
<PAGE>
Short-Term Investment Fund vs
90-Day Treasury Bills
[GRAPH]
Growth of $10,000
-----------------
Short-Term 90-Day
Investment Treasury Bills
---------- --------------
1 year $10,517 $10,560
5 year $12,229 $12,481
10 year $17,550 $17,541
Cumulative Returns
------------------
1 year 5.17% 5.60%
5 year 22.29% 24.81%
10 year 75.50% 75.14%
Average Annual Returns
----------------------
1 year 5.17% 5.60%
5 year 4.11% 4.53%
10 year 5.79% 5.76%
Performance Results
For the one-year period ended September 30, 1995, the Short-Term Investment Fund
returned 5.17% versus the 5.35% 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 5.60% for this period.
The Fund's 5.79% annualized return for the ten-year period ended September
30, 1995 was slightly higher than the 5.75% per year return of the Donoghue
benchmark and the 5.76% 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 17). 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, 1995
- -------------------------------------------------------------------------------
Annualized
----------------------
1 Year 5 Years 10 Years
------ ------- --------
SHORT-TERM INVESTMENT FUND1 5.17% 4.11% 5.79%
Donoghue All Taxable Money Funds Avg.2 5.35 4.31 5.75
1. All performance results shown are net of management fees and all related
investment expenses.
2. Reported by the Donoghue Money Fund Reporting Service. The performance
results reflect an unmanaged index, and are net, since expenses are
applicable.
- -------------------------------------------------------------------------------
18
<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.
Dedicated Bond Fund vs Lehman Brothers
Government/Corporate Bond Index
[GRAPH]
Growth of $10,000*
------------------
Dedicated LB Gov't./Corp.
Bond Fund Bond Index
------------ ------------
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
19
<PAGE>
[This page is intentionally left blank]
20
<PAGE>
COMBINED
FINANCIAL STATEMENTS
RSI Retirement Trust
Combined Statement of Assets and Liabilities September 30, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value (Cost
$471,068,343)--Note 2(A) $595,619,475
Cash 1,444,784
Receivable for investments sold 2,700,882
Receivable for units sold 385,820
Dividends and interest receivable 3,910,089
Other assets 112,127
Net gain on forward foreign currency contracts 189,208
-------------
604,362,385
LIABILITIES:
Payable for investments purchased $ 5,968,633
Payable for units redeemed 103,161
Payable to investment managers 274,406
Accrued expenses 512,954 6,859,154
----------- ------------
NET ASSETS--Note 5 $597,503,231
============
Combined Statement of Operations Year Ended September 30, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Interest $18,604,773
Dividends 5,689,869
-----------
Total Income $ 24,294,642
Expenses:
Investment managers' fees--Note 3(A) 2,842,060
Shareholder servicing fees and
expenses--Note 3(B) 2,392,316
Custodian fees and expenses 322,109
Legal and auditing fees 141,857
Consultant fees 75,273
Trustees' fees and expenses--Note 3(C) 165,144
Other 277,570
-----------
Total Expenses 6,216,329
Less fees paid indirectly--Note 4 (58,279)
Less expense reimbursement--Note 3(A) (102,392)
-----------
Net Expenses 6,055,658
------------
INVESTMENT INCOME--NET 18,238,984
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES--Note 4:
Net realized gain (loss) on:
Investments 19,920,828
Foreign currency transactions (114,853)
-----------
19,805,975
-----------
Unrealized appreciation (depreciation) on:
Investments 66,222,403
Foreign currency translation of other assets
and liabilities 204,579
-----------
66,426,982
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES 86,232,957
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $104,471,941
============
See Notes to Financial Statements
21
<PAGE>
RSI Retirement Trust (Continued)
Combined Statement of Changes in Net Assets
- --------------------------------------------------------
Year Ended Year Ended
9/30/95 9/30/94
---------- -----------
OPERATIONS
Investment income--net $ 18,238,984 $ 16,365,895
Net realized gain 19,805,975 18,184,703
Net realized appreciation (depreciation) 66,426,982 (34,441,978)
------------- ------------
Net increase in net assets resulting from
operations 104,471,941 108,620
------------- ------------
CAPITAL TRANSACTIONS--Note 5
Value of units sold 91,722,398 94,578,019
Value of units redeemed (108,767,059) (127,116,659)
------------ ------------
Net (decrease) in net assets resulting
from capital transactions (17,044,661) (32,538,640)
------------- -------------
Net increase (decrease) 87,427,280 (32,430,020)
NET ASSETS at beginning of year 510,075,951 542,505,971
------------- -------------
NET ASSETS at end of year $ 597,503,231 $ 510,075,951
============= =============
See Notes to Financial Statements
22
<PAGE>
FINANCIAL STATEMENTS
OF INVESTMENT FUNDS
Core Equity Fund
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
COMMON STOCKS 89.0%
AEROSPACE 4.5%
127,800 Lockheed Martin Corp. $ 8,578,575
-----------
AUTOMOTIVE & PARTS 1.3%
36,400 Arvin Industries Inc. 778,050
33,281 Chrysler Corp. 1,763,893
-----------
2,541,943
-----------
BANKS 0.3%
3,500 Chase Manhattan Corp. 213,937
5,300 Citicorp 374,975
-----------
588,912
-----------
BASIC MATERIALS 2.8%
37,800 E.I. Du Pont de Nemours & Company 2,598,750
24,800 Phelps Dodge Corp. 1,553,100
19,300 Union Camp Corp. 1,112,163
-----------
5,264,013
-----------
BROADCASTING AND PUBLISHING 0.2%
22,550 Comcast Corp Special-CL A 451,000
-----------
BUILDING PRODUCTS 2.8%
87,000 Armstrong World Industries Inc. 4,828,500
23,000 Martin Marietta Materials 451,375
-----------
5,279,875
-----------
DATA PROCESSING SERVICES 3.4%
11,500 Cisco Systems Inc.* 793,500
2,600 FORE Systems Inc.* 95,550
142,800 Oracle Corp.* 5,479,950
-----------
6,369,000
-----------
DRUG AND HEALTH CARE 13.5%
181,000 Johnson & Johnson 13,416,625
176,900 Merck & Company Inc. 9,906,400
42,400 Pfizer Inc. 2,263,100
-----------
25,586,125
-----------
ELECTRONICS AND ELECTRICAL
EQUIPMENT 11.6%
51,600 Emerson Electric Company 3,689,400
108,200 General Electric Company 6,897,750
39,600 Hewlett Packard Corp. 3,301,650
131,700 Intel Corp. 7,918,463
-----------
21,807,263
-----------
ENERGY 8.7%
40,400 Amoco Corp. 2,590,650
143,000 Dresser Industries Inc. 3,414,124
46,000 Royal Dutch Petroleum Company 5,646,500
76,000 Texaco Inc. 4,911,500
-----------
16,562,774
-----------
See Notes to Financial Statements
23
<PAGE>
Core Equity Fund (Continued)
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
ENGINEERING AND CONSTRUCTION 3.9%
132,900 Fluor Corp. $ 7,442,400
------------
FINANCE 7.1%
90,600 Federal National Mortgage Association 9,377,100
54,000 Morgan (J.P.) & Company Inc. 4,178,250
------------
13,555,350
------------
HOUSEHOLD PRODUCTS 3.8%
94,600 Procter & Gamble Company 7,284,200
------------
MACHINERY 1.4%
7,500 Cincinnati Milacron Inc. 236,250
66,600 Ingersoll-Rand Company 2,497,500
------------
2,733,750
------------
OFFICE AND BUSINESS EQUIPMENT 1.6%
23,100 Xerox Corp. 3,104,063
------------
OTHER 2.2%
43,500 Allied Signal Inc. 1,919,437
28,000 Philip Morris Companies Inc. 2,338,000
------------
4,257,437
------------
SOFTWARE PRODUCTS 3.9%
300 Broderbund Software Inc.* 22,837
120,000 Informix Corp.* 3,900,000
39,000 Microsoft Corp.* 3,529,500
------------
7,452,337
------------
TELECOMMUNICATIONS 16.0%
187,600 American Telephone & Telegraph Corp. 12,334,700
113,600 DSC Communications Corp.* 6,730,800
201,700 GTE Corp. 7,916,725
30,700 Motorola Inc. 2,344,713
21,000 Tellabs Inc.* 884,625
------------
30,211,563
------------
Total Common Stocks (Cost $79,113,387) $169,070,580
------------
*Denotes non-income producing security
Principal
Amount Value
- --------- -----
SHORT-TERM INVESTMENTS 10.5%
REPURCHASE AGREEMENT
$19,986,261 Bear, Stearns & Co. Inc. Dated
9/29/1995 6.30% Due 10/2/1995
Collateralized by 707,000 United States
Treasury Strips Due 2/15/2009 and
121,070,000 United States Treasury
Bonds Due 8/15/2022 (Value $20,386,412) $ 19,986,261
------------
Total Investments (Cost $99,099,648) 99.5% $189,056,841
Other Assets, Less Liabilities 0.5% 884,758
----- ------------
Net Assets 100.0% $189,941,599
===== ============
See Notes to Financial Statements
24
<PAGE>
Core Equity Fund
Statement of Assets and Liabilities September 30, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost $99,099,648)--Note 2(A) $189,056,841
Receivable for investments sold 403,317
Receivable for units sold 195,444
Dividends and interest receivable 605,676
Other assets 27,320
------------
190,288,598
LIABILITIES:
Payable for investments purchased $ 177,240
Payable for units redeemed 5,082
Payable to investment manager 81,087
Accrued expenses 83,590 346,999
----------- ------------
NET ASSETS at value, applicable to 4,066,258
outstanding units of beneficial interest--Note 5 $189,941,599
============
NET ASSET VALUE, offering and redemption price per
unit ($189,941,599 divided by 4,066,258 units) $ 46.71
============
Statement of Operations Year Ended September 30, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends $ 3,598,141
Interest 934,874
-----------
Total Income $ 4,533,015
Expenses:
Investment manager's fees--Note 3(A) 847,061
Shareholder servicing fees and expenses--
Note 3(B) 568,824
Custodian fees and expenses 39,000
Legal and auditing fees 21,199
Consultant fees 11,216
Trustees' fees and expenses--Note 3(C) 20,606
Other 60,508
-----------
Total Expenses 1,568,414
------------
INVESTMENT INCOME--NET 2,964,601
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS--Note 4:
Net realized gain on investments 2,812,350
Unrealized appreciation on investments 39,148,975
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 41,961,325
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 44,925,926
============
See Notes to Financial Statements
25
<PAGE>
Core Equity Fund (Continued)
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Ended Year Ended
9/30/95 9/30/94
------------ -------------
OPERATIONS:
Investment income--net $ 2,964,601 $ 2,199,351
Net realized gain on investments 2,812,350 5,746,741
Unrealized appreciation (depreciation)
on investments 39,148,975 (3,437,517)
------------ ------------
Net increase in net assets resulting
from operations 44,925,926 4,508,575
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 28,004,631 19,983,360
Value of units redeemed (24,532,607) (29,085,529)
------------ ------------
Net increase (decrease) in net assets
resulting from capital transactions 3,472,024 (9,102,169)
------------ ------------
Net increase (decrease) 48,397,950 (4,593,594)
NET ASSETS at beginning of year 141,543,649 146,137,243
------------ ------------
NET ASSETS at end of year $189,941,599 $141,543,649
============ ============
See Notes to Financial Statements
26
<PAGE>
Value Equity Fund
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
COMMON STOCKS 88.8%
AEROSPACE 3.1%
16,600 Lockheed Martin Corp. $1,114,275
4,200 Northrop Grumman Corp. 255,675
----------
1,369,950
----------
AUTOMOBILES 2.9%
9,531 Chrysler Corp. 505,143
25,200 Ford Motor Company 784,350
----------
1,289,493
----------
BANKS 8.4%
23,400 Chase Manhattan Corp. 1,430,324
17,300 Citicorp 1,223,975
23,000 Mellon Bank Corp. 1,026,375
----------
3,680,674
----------
BUILDING PRODUCTS 1.3%
10,000 Armstrong World Industries Inc. 555,000
----------
CHEMICALS 1.8%
11,700 E.I. Du Pont De Nemours & Company 804,375
----------
CONSUMER GOODS AND SERVICES 0.9%
23,600 Maytag Corp. 413,000
----------
DRUG AND HEALTH CARE 7.2%
9,700 American Home Products Corp. 823,287
19,800 Bristol-Myers Squibb Company 1,442,925
15,500 Merck & Company Inc. 868,000
----------
3,134,212
----------
ELECTRONICS AND ELECTRICAL 3.7%
21,700 General Electric Company 1,383,375
3,000 Hewlett Packard Corp. 250,125
----------
1,633,500
----------
ENERGY 5.7%
6,300 Atlantic Richfield Company 676,463
11,100 Texaco Inc. 717,337
45,600 Ultramar Corp. 1,083,000
----------
2,476,800
----------
FINANCIAL SERVICES 3.5%
39,949 Bear Stearns Companies 858,904
6,500 Federal National Mortgage Association 672,750
----------
1,531,654
----------
FOOD SERVICES 0.3%
6,200 Fleming Companies Inc. 148,800
----------
FOREST PRODUCT AND PAPER 1.8%
13,300 Mead Corp. 779,713
----------
HOUSEHOLD PRODUCTS 0.7%
4,000 Procter & Gamble Company 308,000
----------
MACHINERY--GENERAL 4.7%
9,400 Deere & Company 764,924
25,200 GATX Corp. 1,304,100
----------
2,069,024
----------
MATERIALS & SERVICES 3.8%
14,000 Phelps Dodge Corp. 876,750
18,000 PHH Corp. 810,000
-----------
1,686,750
-----------
MEDICAL EQUIPMENT 2.6%
28,000 Baxter International Inc. 1,151,500
-----------
MERCHANDISING 4.9%
22,000 K Mart Corp. 318,999
20,000 Melville Corp. 690,000
16,300 Mercantile Stores Inc. 733,500
16,100 Wal-Mart Stores, Inc. 400,488
-----------
2,142,987
-----------
OFFICE AND BUSINESS EQUIPMENT 2.9%
9,300 Xerox Corp. 1,249,688
-----------
OTHER 6.8%
19,000 Allied Signal Inc. 838,374
7,800 American Brands Inc. 329,550
14,700 Philip Morris Companies Inc. 1,227,450
6,500 United Technologies Corp. 574,438
-----------
2,969,812
-----------
TELECOMMUNICATIONS 11.2%
22,000 American Telephone & Telegraph Corp. 1,446,500
18,700 GTE Corp. 733,975
17,100 Harris Corp. 938,362
20,700 Nynex Corp. 988,425
16,500 US West Inc. 777,563
-----------
4,884,825
-----------
UTILITIES 10.6%
29,100 Cinergy Corp. 811,163
25,000 Detroit Edison Company 806,250
27,600 NICOR Inc. 752,100
30,500 Peoples Energy Corp. 838,750
19,700 Texas Utilities Company 687,038
44,300 Washington Water Power Company 714,338
-----------
4,609,639
-----------
Total Common Stocks (Cost $33,430,439) $38,889,396
-----------
Principal
Amount
- ---------
SHORT TERM INVESTMENTS 11.3%
REPURCHASE AGREEMENT
$4,968,634 Bear, Stearns & Co. Inc. Dated
9/29/1995 6.30% Due 10/2/1995 Collateralized By
9,430,000 United States Treasury Strips Due
8/15/2005 (Value $5,068,625) $ 4,968,634
-----------
Total Investments (Cost $38,399,073) 100.1% $43,858,030
Liabilities, net of assets -0.1% (34,201)
----- -----------
Net Assets 100.0% $43,823,829
===== ===========
See Notes to Financial Statements
27
<PAGE>
Value Equity Fund
Statement of Assets and Liabilities September 30, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost $38,399,073)--Note 2 (A) $43,858,030
Receivable for investments sold 510,295
Receivable for units sold 27,353
Dividends and interest receivable 157,254
Other assets 9,864
-----------
44,562,796
LIABILITIES:
Payable for investments purchased $ 674,962
Payable for units redeemed 802
Payable to investment manager 16,369
Accrued expenses 46,834 738,967
---------- -----------
NET ASSETS at value, applicable to 1,343,011
outstanding units of beneficial interest--Note 5 $43,823,829
===========
NET ASSET VALUE, offering and redemption price per
unit ($43,823,829 divided by 1,343,011 units) $ 32.63
============
Statement of Operations Year Ended September 30, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends $1,545,345
Interest 194,151
----------
Total Income $1,739,496
Expenses:
Investment manager's fees--Note 3(A) 212,145
Shareholder servicing fees and expenses--Note 3(B) 215,718
Custodian fees and expenses 18,255
Legal and auditing fees 19,074
Consultant fees 11,216
Trustees' fees and expenses--Note 3(C) 20,484
Insurance premiums 12,748
Other 15,080
----------
Total Expenses 524,720
Less fees paid indirectly--Note 4 (21,206)
----------
Net Expenses 503,514
----------
INVESTMENT INCOME--NET 1,235,982
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 1,438,305
Unrealized appreciation on investments 4,775,796
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 6,214,101
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,450,083
==========
See Notes to Financial Statements
28
<PAGE>
Value Equity Fund (Continued)
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
Year Ended Year Ended
9/30/95 9/30/94
------- -------
OPERATIONS:
Investment income--net $ 1,235,982 $ 1,082,541
Net realized gain on investments 1,438,305 1,850,734
Unrealized appreciation (depreciation)
on investments 4,775,796 (2,236,034)
----------- -----------
Net increase in net assets resulting
from operations 7,450,083 697,241
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 7,261,555 5,263,921
Value of units redeemed (6,491,239) (8,462,033)
----------- -----------
Net increase (decrease) in net assets
resulting from capital transactions 770,316 (3,198,112)
----------- -----------
Net increase (decrease) 8,220,399 (2,500,871)
NET ASSETS at beginning of year 35,603,430 38,104,301
----------- -----------
NET ASSETS at end of year $43,823,829 $35,603,430
=========== ===========
See Notes to Financial Statements
29
<PAGE>
Emerging Growth Equity Fund
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
COMMON STOCKS 97.0%
AIRLINES 0.7%
51,700 Mesa Airlines, Inc.* $ 523,463
----------
APPAREL AND TEXTILE 3.6%
12,215 Authentic Fitness Corp. 274,838
10,000 Kenneth Cole Productions-CL A* 351,250
10,435 Nautica Enterprises Inc.* 357,399
11,030 St. Johns Knits Inc. 537,713
10,760 Tommy Hilfiger Corp.* 349,700
20,000 Westpoint Stevens* 427,500
15,398 Wolverine World Wide 421,507
----------
2,719,907
----------
AUTOMOTIVE PRODUCTS 0.8%
6,525 Custom Chrome* 145,181
7,550 Edelbrock Corp.* 109,475
23,100 SPX Inc. 343,613
----------
598,269
----------
BROADCASTING AND PUBLISHING 1.4%
4,750 Lin Television Corp.* 144,875
3,000 Mecklermedia Corp.* 54,750
2,340 Renaissance Communications Corp.* 81,900
11,375 Saga Communications Inc.-CL A* 180,578
7,410 SFX Broadcasting Inc.-CL A* 207,480
3,800 Sinclair Broadcast Group Inc.* 105,450
8,525 Young Broadcasting Corp. CL A* 260,013
----------
1,035,046
----------
BUILDING & CONSTRUCTION 0.8%
2,935 Brady, W.H. Company-CL A 211,320
10,445 Fastenal Company 381,243
----------
592,563
----------
BUSINESS AND EQUIPMENT SERVICES 5.9%
900 ABR Information Services Inc.* 22,725
22,475 Accustaff Inc.* 825,956
6,200 Alternative Resources Corp.* 198,400
6,135 America Online Inc.* 421,781
11,100 American Business Information* 224,774
4,100 Analysts International Corp. 131,200
6,160 Cambridge Technology Partners Inc.* 311,080
13,238 Computer Horizons Corp. 264,750
8,673 Concord EFS, Inc.* 258,022
7,762 Fiserv Inc.* 224,128
5,127 Keane Inc.* 148,042
5,800 National Data Corp. 155,875
6,875 On Assignment Inc.* 173,594
7,050 Peak Technologies Group Inc.* 181,538
1,600 PMT Services Inc.* 38,200
5,700 Renaissance Solutions Inc.* 138,225
9,175 Robert Half International Inc.* 313,097
600 Romac International Inc.* 9,750
7,500 SOS Staffing Services* 61,874
10,110 Transaction Network Services* 264,124
----------
4,367,135
----------
COMMERCIAL SERVICES 1.2%
10,000 Landmark Graphics Corp.* 280,000
30,000 Nu-Kote Holdings Inc.* 652,500
----------
932,500
----------
COMMUNICATIONS/NETWORKING 0.8%
31,900 Microcom, Inc.* 598,125
----------
COMPUTER SYSTEMS 0.8%
12,900 Stormedia Inc.* 574,050
----------
CONSTRUCTION AND HOUSING 0.8%
26,400 American Building Company* 620,400
----------
CONSUMER GOODS AND SERVICES 7.1%
19,475 Benson Eyecare Corp.* 192,316
5,575 Blyth Industries Inc.* 260,631
6,330 Cannondale Corp.* 99,698
2,685 Catalina Marketing Corp.* 166,469
7,645 Department 56* 357,404
34,000 Health Plan Services Inc. 692,750
12,100 Loewen Group Inc. 499,125
20,000 Norrell Corp. 635,000
4,900 O'Charleys Inc.* 69,825
6,200 Rexall Sundown Inc.* 103,075
7,650 Scientific Games Holdings Corp.* 283,050
25,000 SITEL Corp.* 612,500
11,875 Sola International Inc.* 262,734
6,300 Speedway Motorsports Inc.* 163,800
10,260 Stewart Enterprises Inc. 366,795
22,300 Toy Biz, Inc.* 535,200
----------
5,300,372
----------
See Notes to Financial Statements
30
<PAGE>
Emerging Growth Equity Fund
(Continued)
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
DATA PROCESSING AND SOFTWARE 1.1%
45,000 Auspex Systems Inc.* $ 703,125
7,000 Sequent Computer Systems Inc.* 139,125
-----------
842,250
-----------
DRUG AND HEALTH CARE 2.0%
27,000 Summit Care Corp.* 648,000
19,100 Wyle Electronics 857,113
-----------
1,505,113
-----------
DRUG AND MEDICAL SUPPLIES 0.8%
5,400 Daig Corp.* 126,900
9,000 Idexx Laboratories Inc.* 328,500
9,700 Igen Inc.* 61,838
4,240 Medisense Inc.* 101,760
-----------
618,998
-----------
ELECTRONICS AND ELECTRICAL 18.7%
19,000 AVX Corp.* 636,500
21,100 Checkpoint Systems Inc.* 556,513
6,500 Cognex Corp.* 308,750
10,432 Credence Systems Corp.* 375,534
800 Cyberoptics Corp.* 26,800
7,950 C.P. Clare Corp.* 202,725
3,800 Eltron International Inc.* 105,450
12,007 Exar Corp.* 420,245
7,000 Flextronics International Ltd.* 180,250
25,000 FSI International Inc.* 818,750
5,355 Harman International Industries Inc. 262,395
8,650 ITI Technologies Inc.* 233,550
45,000 Jabil Circuit, Inc.* 585,000
13,000 Kent Electronics* 570,375
42,450 LSI Industries Inc. 817,163
35,000 LTX Corp.* 437,500
5,675 Maxim Integrated Products Inc.* 419,950
30,000 Mentor Graphics Corp.* 618,750
900 Merix Corp.* 28,800
51,000 Microsemi Corp.* 599,250
21,500 Microtest Inc.* 424,625
12,500 Nellcor Puritan-Bennett Inc.* 612,500
7,575 Oak Industries Inc.* 228,197
36,800 Paradigm Technology Inc.* 1,113,200
2,200 Plasma & Materials Technologies Inc.* 37,400
60,000 Rasterops* 472,500
20,675 Sanmina Corp.* 987,231
37,000 Semtech Corp.* 1,026,750
5,400 Smart Flex Systems Inc.* 90,450
12,100 Telecom Semiconductor Inc.* 133,100
1,780 Ultratech Stepper Inc.* 74,760
5,504 Zebra Technologies Corp.* 293,088
5,800 Zilog Inc.* 241,425
-----------
13,939,476
-----------
FINANCIAL SERVICES 0.7%
19,800 Coast Savings Financial* $ 519,750
---------
FOOD AND BEVERAGES 0.1%
2,300 Ben & Jerry's Home-made Inc. CL A* 42,550
---------
FOOD AND SERVICES 0.8%
9,200 Apple South Inc. 208,150
11,700 Daka International Inc.* 381,712
---------
589,862
---------
INSURANCE 2.2%
12,500 CMAC Investments Corp. 657,813
12,010 HCC Insurance Holdings Inc.* 397,830
8,655 Reinsurance Group of America Inc. 305,089
5,335 Trenwick Group Inc. 282,755
---------
1,643,487
---------
LODGING--MOTELS 1.1%
25,400 Doubletree Corp.* 558,800
11,250 Studio Plus Hotels, Inc.* 258,750
---------
817,550
---------
MACHINE TOOLS 0.8%
18,900 Applied Power Inc. 604,800
---------
MACHINERY 4.2%
17,000 Gleason Corp. 556,750
17,000 Greenfield Industries 514,250
32,000 JLG Industries Inc. 1,408,000
26,400 Veeco Instruments Inc.* 679,799
---------
3,158,799
---------
MACHINERY--GENERAL 0.5%
11,853 Baldor Electric Company 297,807
3,200 Computational System Inc.* 51,199
---------
349,006
---------
MEDICAL 0.8%
23,660 Apria Healthcare Group, Inc.* 573,755
---------
MEDICAL PRODUCTS 1.2%
12,050 Avecor Cardiovascular Inc.* 162,675
3,300 Bio-Vascular Inc.* 59,400
5,850 ICU Medical Inc.* 76,781
6,025 Instent Inc.* 97,906
3,000 Lunar Corp.* 96,750
9,000 Minntech Corp. 144,000
4,400 Research Industries Corp.* 127,600
1,600 Target Therapeutics Inc.* 110,800
---------
875,912
---------
See Notes to Financial Statements
31
<PAGE>
Emerging Growth Equity Fund
(Continued)
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
MEDICAL SERVICES 4.5%
1,900 Access Health Inc.* $ 53,199
8,880 Advantage Health Corp.* 301,920
6,400 American Homepatient Inc.* 160,000
6,500 Community Health Systems* 262,438
6,700 Compdent Corp.* 195,975
5,700 CRA Managed Care Inc.* 121,125
8,175 Genesis Health Ventures Inc.* 292,256
8,585 Health Management Associates* 275,793
15,725 Healthcare Services Group Inc.* 169,044
4,725 Healthwise Of America Inc.* 132,300
2,700 HPR Inc.* 60,750
5,900 Imnet Systems Inc.* 150,450
6,890 Lincare Holdings Inc.* 177,418
7,725 Living Centers Of America* 256,856
9,000 Owen Healthcare Inc.* 146,250
500 Pediatrix Medical Group Inc.* 10,188
5,025 Sierra Health Services* 125,625
3,600 United Dental Care Inc.* 108,000
5,542 Vencor Inc.* 177,344
6,875 Wellcare Management Group Inc.* 159,844
----------
3,336,775
----------
MEDICAL SUPPLIES 2.7%
30,900 I-Stat Corp.* 1,151,025
26,100 PHP Healthcare Corp.* 877,613
----------
2,028,638
----------
METALS 0.8%
35,000 Brockway Holdings* 595,000
----------
OIL & GAS 0.6%
45,000 Varco International Inc.* 455,625
----------
OTHER 7.3%
18,000 AHI Healthcare System Inc.* 279,000
40,000 Allied Waste Industries Inc.* 325,000
18,000 Altron Inc.* 562,500
50,000 Curative Technologies* 687,500
24,300 Diamond Multimedia* 771,525
45,000 Figgie International Inc. CL A* 590,625
40,000 Meridian Data Inc.* 395,000
21,400 Park Electrochemical 692,825
38,000 TCSI Corp.* 560,499
24,000 Telxon Corp. 564,000
----------
5,428,474
----------
PHARMACEUTICALS 0.7%
15,230 Dura Pharmaceuticals Inc.* 449,285
1,700 Gilead Sciences Inc.* 36,975
----------
486,260
----------
POLLUTION CONTROL 0.3%
5,150 United Waste Systems, Inc.* 215,013
----------
RESTAURANTS 0.4%
6,800 Quantum Restaurant Group Inc.* $ 90,950
13,300 Landry's Seafood Restaurants* 239,400
----------
330,350
----------
RETAIL TRADE 3.6%
37,200 Claires Stores Inc. 762,600
13,000 Comp USA, Inc.* 559,000
16,550 Hollywood Entertainment Corp.* 353,756
9,000 Moovies Inc.* 175,500
25,000 NetManage Inc.* 587,499
4,175 Sunglass Hut International* 208,750
1,100 West Marine Inc.* 34,100
----------
2,681,205
----------
SOFTWARE PRODUCTS 11.6%
6,000 Bisys Group Inc.* 150,000
34,300 Black Box Corp.* 617,400
3,500 Business Objects SA ADR* 148,750
20,000 Cognos Inc.* 680,000
6,200 Datalogix International Inc.* 88,350
4,030 Inso Corp.* 127,953
25,075 McAfee Associates Inc.* 1,291,363
7,450 Mercury Interactive Corp.* 204,875
9,600 Network Express Inc.* 151,200
1,600 Novadigm Inc.* 26,800
52,700 PC Docs Group International Inc.* 777,325
85,000 Physician Computer Network* 435,625
14,700 Platinum Software Corp.* 170,888
8,000 PRI Automation Inc.* 320,000
4,723 Project Software* 121,027
35,900 Quarterdeck Corp.* 695,563
20,000 Read-Rite Corp.* 730,000
3,225 Security Dynamics Tech Inc.* 153,188
3,200 Shiva Corp.* 196,000
10,050 Sierra On-Line Inc.* 391,950
3,318 Softkey International Inc.* 146,822
5,000 Spectrum Holobyte Inc.* 62,500
2,100 Spyglass Inc.* 96,075
25,800 Symantec Corp.* 773,999
3,300 Unison Software Inc.* 47,849
5,000 Vantive Corp.* 77,500
----------
8,683,002
----------
TELECOMMUNICATIONS 4.6%
9,300 Cai Wireless Systems Inc.* 95,325
8,503 Centennial Cellular Corp.* 163,683
13,122 Century Communications Corp. CL A* 132,860
4,220 Clear Channel Communications* 319,665
7,750 Colonial Data Technologies Corp.* 143,375
5,175 Commnet Cellular Inc.* 149,428
9,600 Evergreen Media Corp. CL A* 268,800
See Notes to Financial Statements
32
<PAGE>
Emerging Growth Equity Fund
(Continued)
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
TELECOMMUNICATIONS (Continued)
14,820 EZ Communications Inc. CL A* $ 285,285
6,150 Heartland Wireless Communications Inc.* 155,287
4,200 Midcom Communication Inc.* 61,950
8,200 Pairgain Technologies Inc.* 282,899
4,050 P-Com Inc.* 177,188
200 Tel-Save Holdings Inc.* 3,050
33,000 Boston Technology Inc.* 490,875
10,000 Brite Voice Systems* 181,250
38,500 Unitech Industries Inc.* 529,375
-----------
3,440,295
-----------
TRANSPORTATION 1.0%
9,855 Expeditors Int'l Of Wash. Inc. 266,085
3,875 Fritz Companies Inc.* 284,813
7,075 U.S. Delivery Systems Inc.* 203,406
-----------
754,304
-----------
Total Common Stocks (Cost $54,505,120) $72,378,079
-----------
Principal
Amount Value
- --------- -----
SHORT TERM INVESTMENTS 4.3%
REPURCHASE AGREEMENTS
$3,209,051 Bear, Stearns & Co. Inc. Dated 9/29/1995
6.30% Due 10/2/1995 Collateralized by
18,910,000 United States Treasury Bonds
Due 8/15/2022 and 255,000 United States
Treasury Strips Due 8/15/2005
(Value $3,274,988) $ 3,209,051
-----------
Total Investments (Cost $57,714,171) 101.3% $75,587,130
Liabilities, net of assets -1.3% (961,802)
----- -----------
Net Assets 100.0% $74,625,328
===== ===========
* Denotes non-income producing security
See Notes to Financial Statements
33
<PAGE>
Emerging Growth Equity Fund (Continued)
Statement of Assets and Liabilities September 30, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost $57,714,171)--Note 2 (A) $75,587,130
Receivable for investments sold 1,371,515
Receivable for units sold 61,428
Dividends and interest receivable 18,443
Other assets 10,258
-----------
77,048,774
LIABILITIES:
Payable for investments purchased $ 2,267,786
Payable for units redeemed 750
Payable to investment managers 62,518
Accrued expenses and other 92,392 2,423,446
----------- -----------
NET ASSETS at value, applicable to 1,419,334
outstanding units of beneficial interest--Note 5 $74,625,328
===========
NET ASSET VALUE, offering and redemption price
per unit ($74,625,328 divided by 1,419,334 units) $ 52.58
===========
Statement of Operations Year Ended September 30, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends $ 93,438
Interest 197,240
-----------
Total Income $ 290,678
Expenses:
Investment managers' fees--Note 3(A) 712,451
Shareholder servicing fees and
expenses--Note 3(B) 335,804
Custodian fees and expenses 75,446
Legal and auditing fees 24,388
Consultant fees 11,216
Trustees' fees and expenses--Note 3(C) 41,222
Other 32,297
----------
Total Expenses 1,232,824
Less fees paid indirectly--Note 4 (17,073)
----------
Net Expenses 1,215,751
-----------
INVESTMENT (LOSS)--NET (925,073)
REALIZED GAIN AND UNREALIZED GAIN ON
INVESTMENTS--Note 4:
Net realized gain on investments 15,078,221
Unrealized appreciation on investments 9,142,586
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 24,220,807
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,295,734
===========
See Notes to Financial Statements
34
<PAGE>
Emerging Growth Equity Fund (Continued)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Ended Year Ended
9/30/95 9/30/94
---------- ----------
OPERATIONS:
Investment (loss)-net $ (925,073) $ (818,504)
Net realized gain on investments 15,078,221 8,237,825
Unrealized appreciation (depreciation)
on investments 9,142,586 (6,633,162)
----------- ------------
Net increase in net assets resulting
from operations 23,295,734 786,159
----------- ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 11,643,470 9,029,724
Value of units redeemed (8,606,464) (18,168,143)
----------- ------------
Net increase (decrease) in net assets
resulting from capital transactions 3,037,006 (9,138,419)
----------- ------------
Net increase (decrease) 26,332,740 (8,352,260)
NET ASSETS at beginning of year 48,292,588 56,644,848
----------- ------------
NET ASSETS at end of year $74,625,328 $ 48,292,588
=========== ============
See Notes to Financial Statements
35
<PAGE>
International Equity Fund
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
COMMON STOCKS 95.4%
AEROSPACE 0.4%
11,000 British Aerospace $ 127,439
-----------
AIRLINES 0.5%
21,900 British Airways 156,148
-----------
AUTOMOBILES 3.1%
1,800 Autobacs Seven Company 178,817
4,750 Autoliv AB 289,708
24,000 Shinmaywa Industries 205,578
12,000 Volvo AB Series B 294,490
-----------
968,593
-----------
BANKING 6.4%
17,000 Asahi Bank 186,115
25,000 Hang Seng Bank 206,136
15,000 HSBC Holdings 212,952
25,000 Kiyo Bank 123,418
22,500 Malayan Bank Berhad 181,934
23,000 Mitsubishi Trust & Banking 361,384
20,000 National Westminster 200,053
29,666 Overseas Chinese Bank 336,120
918 Shinhan Bank Corp Ac* 20,319
12,000 Sumitomo Trust & Banking 165,436
-----------
1,993,867
-----------
BEVERAGES & TOBACCO 1.1%
21,220 B.A.T. Industries 177,664
22,000 Grand Metropolitan 154,946
-----------
332,610
-----------
BROADCASTING & PUBLISHING 3.2%
29,000 British Sky Broadcast 175,331
34,600 Elsevier NV 445,285
24,300 Reuters Holdings 214,989
13,000 Toppan Printing Company 166,044
-----------
1,001,649
-----------
BUILDING MATERIALS 1.2%
38,000 Blue Circle Industries 185,239
33,500 Williams Holdings 174,967
-----------
360,206
-----------
BUSINESS & PUBLIC SERVICE 2.5%
4,000 Asatsu Inc. 143,945
26,000 Brambles Industries Ltd. 285,337
5,000 Secom Company 334,521
------------
763,803
-----------
CHEMICALS 3.1%
20,000 Asahi Chemical Industries 138,877
1,030 Bayer Ag 264,133
10,000 Kurita Water Inds 273,699
15,000 Nippon Shokubai Company 138,370
28,000 Teisan KK 153,271
-----------
968,350
-----------
COMPUTER SOFTWARE 1.1%
2,150 Sap AG Non Voting Prf 351,295
-----------
CONSTRUCTION & HOUSING 2.7%
8,000 Empresa Ica Soc ADR CV $ 92,000
6,000 Kandenko Company 81,501
24,000 Nishimatsu Construction 294,378
16,000 Sekisui House 199,496
25,000 United Engineers Bhd 160,325
-----------
827,700
-----------
CONSUMER GOODS & SERVICES 5.8%
1,559 Castorama Dubois 254,580
7 Castoramo Dubois--Bonus Rights* 113
2,750 Christian Dior 250,909
33,000 Dixons Group 180,713
30,000 Granada Group 301,504
15,500 Great Universal Stores 146,210
980 L'Oreal 250,681
4,900 Polygram NV 319,917
2,400 Sony Music Entertainment 110,453
-----------
1,815,080
-----------
ELECTRONICS & ELECTRICAL 8.2%
2,000 Advantest 118,806
415 BBC Brown Boveri 483,604
26,000 Canon Inc. 466,505
29,000 General Electric Corp. 145,727
30,000 Hitachi Ltd. 328,439
1,400 Legrand 221,827
20,000 Matsushita Electric Industries 308,165
27 Samsung Electronics GDR (1/2 Voting Shs) 3,069
58 Samsung Electronics GDR (1/2 Voting Shs) 144A 6,960
20,000 Sharp Corp. 281,809
3,600 Sony Corp. 187,575
-----------
2,552,486
-----------
ENERGY 0.2%
16,000 Petronas Gas* 55,765
-----------
ENERGY SOURCES 2.0%
38,200 British Petroleum 287,181
110,000 Monument Oil & Gas* 105,329
29,000 Showa Shell Sekiyu 228,711
-----------
621,221
-----------
FINANCE 1.6%
1,100 Cetelem 171,380
7,500 Grupo Financiero Bancomer GDS 47,775
5,555 Grupo Financiero Bancomer Series L 2,086
14,000 Nomura Securities Company Ltd. 275,321
-----------
496,562
-----------
FOOD & HOUSEHOLD 0.7%
10,000 Ezaki Glico Company 85,962
53,000 Morrison (W) Supermarket 131,696
-----------
217,658
-----------
See Notes to Financial Statements
36
<PAGE>
International Equity Fund
(Continued)
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
FOREST PRODUCTS 1.5%
29,000 Settsu Corp.* $ 86,722
28,500 Stora Kopparbergs Series B 384,678
-----------
471,400
-----------
HEALTH 7.4%
365 Altana AG 215,468
11,650 Astra AB Series B 410,352
11,000 Glaxo Wellcome 133,532
22,000 Medeva 91,227
70 Roche Holding AG 497,107
18,000 Sankyo Company 412,373
25,500 Smithkline Beecham Units 253,857
240 Well Ag Non Vtg Prf 172,037
5,000 Yamanouchi Pharmaceutical 108,466
-----------
2,294,419
-----------
INDUSTRIAL COMPONENTS 0.4%
20,000 NSK 123,266
-----------
INSURANCE 2.6%
8,286 Aegon NV 301,187
44,000 Royal Insurance 245,825
24,000 Tokio Marine & Fire 260,318
-----------
807,330
-----------
MACHINERY & ENGINEERING 3.7%
51,000 Hitachi Zosen Corp. 250,222
26,000 Keppel Corp. 208,587
8,000 Matsushita Electric Works 83,529
12,000 Max Co. 248,154
46,000 Mitsubishi Heavy Industries 354,390
-----------
1,144,882
-----------
MANUFACTURING 0.5%
42,000 Vickers Plc 160,201
-----------
MATERIALS 1.1%
1,650 Cie De St. Gobain 201,617
50,000 NKK Corp 134,316
-----------
335,933
-----------
MERCHANDISING 3.8%
9,200 Ahold NV 347,113
120,000 Asda Group 196,571
12,000 Centros Com Pryca 240,130
7,000 Ito-Yokado Company 388,855
-----------
1,172,669
-----------
METALS 3.3%
69,000 Kawasaki Steel Corp.* 249,005
270,000 Mim Holdings Ltd. 387,203
4,000 Pohang Iron & Steel Sponsored ADR 131,500
40,625 Western Mining Corp. 265,541
-----------
1,033,249
-----------
MISCELLANEOUS 2.7%
551 Gehe AG 263,312
137 Gehe Rights Issue 4 For 1* 63,255
19,500 Genting Berhad 168,551
5,150 Securities AB Series 'B' 185,117
17,000 Severn Trent 168,700
-----------
848,935
-----------
MULTI INDUSTRY 2.6%
10,000 Grupo Carso Sa De ADR CV* 134,950
81,000 Hutchison Whampoa 438,967
36,200 Jardine Matheson 244,350
-----------
818,267
-----------
MULTI-HOLDING COMPANIES 1.4%
222,000 First Pacific Company 236,886
24,000 Swire Pacific 'A' 190,130
-----------
427,016
-----------
PUBLISHING 0.5%
60,000 Mirror Group 161,435
-----------
REAL ESTATE 4.7%
23,000 British Land Company 150,341
40,000 Cheung Kong Holdings 217,809
17,872 City Developments 110,679
101,000 Hong Kong Land Hld. 176,750
21,000 Mitsubishi Estate 236,293
26,000 Mitsui Fudosan Company 313,639
33,300 Sun Hung Kai Property 270,266
-----------
1,475,777
-----------
See Notes to Financial Statements
37
<PAGE>
International Equity Fund
(Continued)
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Shares Value
- ------ -----
TELECOMMUNICATIONS 8.3%
48,300 British Telecom $ 302,720
40 DDI Corp. 331,683
18,760 Ericsson (Lm) Tel Series B Rights 1 For 1* 4,631
18,760 Ericsson (Lm) Tel Series B 463,095
7,080 Nokia AB--Series A 498,554
13,300 Securicor Group--'A' Non Vtg. 229,444
57,000 Technology Resources Inds* 148,714
256,000 Telecom Italia Mobile (spinoff)* 427,645
105,500 Telecom Italia 174,599
-----------
2,581,085
-----------
TEXTILES 0.5%
35,000 Teijin 168,528
-----------
TRANSPORTATION 1.9%
42 East Japan Railway 208,619
28,000 Nippon Yusen Kabush Iki Kaish 166,612
33,000 Tobu Railways Company 204,392
-----------
579,623
-----------
UTILITIES 3.8%
5,150 Emp Nac Electricid 265,061
53,000 Osaka Gas Company 181,594
3,300 Sanofi 211,705
24,000 Tenaga Nasional 91,774
48,000 Tokyo Gas Company 176,627
7,500 Veba AG 298,588
-----------
1,225,349
-----------
WHOLESALE INT'L TRADE 0.9%
25,000 Mitsubishi Corp. 281,302
-----------
Total Investments (Cost $24,815,229) 95.4% $29,721,098
Other Assets, Less Liabilities 4.6% 1,422,483
----- -----------
Net Assets 100.0% $31,143,581
===== ===========
*Denotes non-income producing security.
See Notes to Financial Statements
38
<PAGE>
International Equity Fund (Continued)
Geographical Diversification September 30, 1995
- --------------------------------------------------------------------------------
Percent of Net Assets
---------------------
Country Total
------- -----
Japan 33.8%
United Kingdom 16.6
Sweden 6.5
Hong Kong 6.4
Germany 5.2
France 5.0
Netherlands 4.5
Switzerland 3.1
Australia 3.0
Malaysia 2.6
Spain 2.5
Singapore 2.1
Italy 1.9
Finland 1.6
South Korea 0.5
Mexico 0.1
-----
Total Investments 95.4%
-----
Other Assets Less Liabilities 4.6
-----
Total 100.0%
=====
Statement of Assets and Liabilities September 30, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost $24,815,229)--Note 2(A) $29,721,098
Cash 1,268,754
Receivable for investments sold 415,755
Receivable for units sold 7,635
Dividends and interest receivable 112,906
Other assets 9,022
Net gain on forward foreign currency contracts 189,208
-----------
31,724,378
LIABILITIES:
Payable for investments purchased $ 456,745
Payable to investment managers 44,387
Accrued expenses 79,665 580,797
--------- -----------
NET ASSETS at value, applicable to
773,740 outstanding
units of beneficial interest--Note 5 $31,143,581
===========
NET ASSETS VALUE, offering and
redemption price per unit
($31,143,581 divided by 773,740 units) $ 40.25
===========
See Notes to Financial Statements
39
<PAGE>
International Equity Fund (Continued)
Statement of Operations Year Ended September 30, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends $ 452,945
Interest 73,594
----------
Total Income $ 526,539
Expenses:
Investment managers' fees--Note 3(A) 228,701
Shareholder servicing fees and expenses
--Note 3(B) 167,532
Custodian fees and expenses 89,605
Legal and auditing fees 19,074
Consultant fees 11,216
Trustees' fees and expenses--Note 3(C) 21,014
Insurance premiums 14,518
Other 13,850
----------
Total Expenses 565,510
Less fees paid indirectly--Note 4 (20,000)
----------
Net Expenses 545,510
----------
INVESTMENT (LOSS)--NET (18,971)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCIES--Note 4:
Net realized gain (loss) on:
Investments $ 532,575
Foreign currency transactions (114,853)
----------
417,722
----------
Unrealized appreciation on:
Investments 1,043,273
Foreign currency translation of other
assets and liabilities 204,579
----------
1,247,852
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES 1,665,574
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,646,603
==========
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Ended Year Ended
9/30/95 9/30/94
------------- ------------
OPERATIONS:
Investment (loss)--net $ (18,971) $ (62,984)
Net realized gain 417,722 1,381,013
Net realized appreciation 1,247,852 878,065
------------ -----------
Net increase in net assets resulting
from operations 1,646,603 2,196,094
------------ -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 5,659,129 9,450,659
Value of units redeemed (4,833,851) (4,744,547)
------------ -----------
Net increase (decrease) in net assets
resulting from capital transactions 825,278 4,706,112
------------ -----------
Net increase 2,471,881 6,902,206
NET ASSETS at beginning of year 28,671,700 21,769,494
------------ -----------
NET ASSETS at end of year $ 31,143,581 $28,671,700
============ ===========
See Notes to Financial Statements
40
<PAGE>
Actively Managed Bond Fund
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------- -----
CORPORATE BONDS 6.2%
FINANCIAL SERVICES
$ 500,000 Beneficial Corp. Mtn
9.32% Due 8/4/1997 $ 526,280
1,125,000 Ford Motor Credit Mtn
10.35% Due 10/1/1997 1,203,608
500,000 Ford Motor Credit Mtn Deb
9.20% Due 5/7/1997 520,509
625,000 MBNA CR CARD 1991 A
8.25% Due 6/30/1998 624,856
----------
2,875,253
----------
FOOD AND SERVICES
2,000,000 General Mills Inc. Mtn
8.95% Due 12/18/2000 2,214,138
----------
OIL
1,000,000 Consolidated Natural Gas SF DB
8.625% Due 12/1/2011 1,068,475
----------
PUBLIC UTILITIES
2,285,000 Virginia Electric & Pwr Mtn
10.00% Due 3/22/1999 2,509,577
----------
Total Corporate Bonds (Cost $8,204,059) $ 8,667,443
-----------
UNITED STATES GOVERNMENT
AND AGENCY OBLIGATIONS 90.3%
$ 50,500 Collateralized Mortgage Obligation TR 1
0% Due 5/20/2017 $ 38,887
284,310 Collateralized Mortgage Obligation TR 29
0% Due 5/1/2013 219,413
193,265 Collateralized Mortgage Sec Corp.
7.00% Due 6/1/2006 192,237
1,000,000 Federal Farm Credit Medium Term Note
7.03% Due 2/19/2008 1,015,589
2,000,000 Federal Home Loan Bank Note
7.70% Due 7/12/2010 1,989,192
1,000,000 Federal Home Loan Bank Structured Note
5.75% Due 4/25/1997 1,000,403
250,000 Federal Home Loan Bank Structured Note
7.50% Due 6/16/2009 253,924
2,000,000 Federal Home Loan Mortgage Corp.
7.29% Due 4/7/2004 2,041,828
1,445,000 Federal Home Loan Mortgage Corp.
6.08% Due 10/29/2008 1,367,678
1,000,000 Federal Home Loan Mortgage Corp.
6.84% Due 3/2/2009 988,705
1,000,000 Federal Home Loan Mortgage Corp. CMO 1534G
6.00% Due 5/15/2022 948,799
2,500,000 Federal Home Loan Mortgage Corp. Note
7.05% Due 1/29/2003 2,500,000
1,000,000 Federal Home Loan Mortgage Corp. Note
6.375% Due 3/11/2003 977,717
1,133,498 Federal Home Loan Mortgage Corp. Pool #141001
7.75% Due 9/1/2016 1,137,010
452,885 Federal Home Loan Mortgage Corp. Pool #297625
8.50% Due 6/1/2017 469,293
714,696 Federal Home Loan Mortgage Corp. Pool #533624
8.50% Due 12/1/2007 737,751
583,174 Federal Home Loan Mortgage Corp. Pool #533625
8.50% Due 12/1/2007 601,305
2,000,000 Federal Home Loan Mortgage Corp. Remic Pool #1206-GC
7.00% Due 2/15/2020 1,989,198
2,000,000 Federal Home Loan Mortgage Corp. Remic (Gold) 1197G
6.75% Due 12/15/2006 1,983,498
2,000,000 Federal Home Loan Mortgage Corp. Remic (Gold) 1278G
7.00% Due 11/15/2020 2,008,138
3,000,000 Federal National Mortgage Association CMO 1993-32H
6.00% Due 3/25/2023 2,755,557
2,000,000 Federal National Mortgage Association CMO 1993-76PJ
6.00% Due 6/25/2008 1,856,898
1,000,000 Federal National Mortgage Association Medium Term Note
6.25% Due 1/14/2004 956,309
2,000,000 Federal National Mortgage Association Medium Term Note
7.14% Due 8/28/2002 2,019,318
1,500,000 Federal National Mortgage Association Medium Term Note
5.99% Due 10/27/2008 1,385,969
2,000,000 Federal National Mortgage Association Medium Term Note
7.46% Due 9/30/1999 2,055,478
1,000,000 Federal National Mortgage Association Medium Term Note
6.39% Due 12/9/2003 964,119
1,000,000 Federal National Mortgage Association Note
7.00% Due 8/12/2002 1,004,191
867,525 Federal National Mortgage Association Pass
Thru Pool #050987
6.50% Due 2/1/2009 855,544
1,297,287 Federal National Mortgage Association Pass
Thru Pool #239024
7.00% Due 10/1/2023 1,278,786
1,380,540 Federal National Mortgage Association Pass
Thru Pool #50966
7.00% Due 1/1/2024 1,360,852
1,024,715 Federal National Mortgage Association Pass
Thru Pool #87277
7.50% Due 4/1/2018 1,040,946
3,000,000 Federal National Mortgage Association Remic G92-40L
7.00% Due 7/25/2007 2,983,707
1,000,000 Federal National Mortgage Association Remic #1991-47H
7.50% Due 5/25/2006 1,019,229
556,050 Government National Mortgage Association Custom #152027
8.000% Due 10/20/2016 569,033
20,381 Government National Mortgage Association Custom #209105
8.000% Due 3/20/2017 20,850
415,915 Government National Mortgage Association Jumbo #000675
8.000% Due 12/20/2016 425,626
97,043 Government National Mortgage Association
Jumbo #000710
8.000% Due 2/20/2017 99,277
1,977,983 Government National Mortgage Association Pass
Thru Pool
8.00% Due 11/15/2024 2,032,059
See Notes to Financial Statements
41
<PAGE>
Actively Managed Bond Fund
(Continued)
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Principal
Amount Value
- -------- -----
UNITED STATES GOVERNMENT
AND AGENCY OBLIGATIONS (Continued)
$ 973,956 Government National Mortgage Association
Pass Thru Pool #377003
8.00% Due 8/15/2024 $ 1,000,583
954,953 Government National Mortgage Association
Pass Thru Pool #385850
8.00% Due 8/15/2024 981,061
2,754 Government National Mortgage Association Pool #002919
8.00% Due 2/15/2004 2,828
2,941 Government National Mortgage Association Pool #010855
8.00% Due 7/15/2006 3,027
42,717 Government National Mortgage Association Pool #011192
7.25% Due 4/15/2006 42,820
21,241 Government National Mortgage Association Pool #025811
9.00% Due 1/15/2009 22,469
99,182 Government National Mortgage Association Pool #05214
8.00% Due 7/15/2005 101,982
59,395 Government National Mortgage Association Pool #1350
6.50% Due 3/15/2002 58,950
271,505 Government National Mortgage Association Pool #169957
8.50% Due 7/15/2016 284,597
176,716 Government National Mortgage Association Pool #193256
8.00% Due 3/15/2017 182,220
421,251 Government National Mortgage Association Pool #196754
8.50% Due 2/15/2017 441,168
154,800 Government National Mortgage Association Pool #202887
8.00% Due 4/15/2017 159,621
99,653 Government National Mortgage Association Pool #205624
8.50% Due 3/15/2017 104,364
304,361 Government National Mortgage Association Pool #213606
8.00% Due 4/15/2017 313,841
17,567 Government National Mortgage Association Pool #216159
8.00% Due 4/15/2017 18,114
410,437 Government National Mortgage Association Pool #218150
8.00% Due 6/15/2017 423,222
16,546 Government National Mortgage Association Pool #247493
8.00% Due 7/15/2018 17,056
7,793 Government National Mortgage Association Pool #290013
8.00% Due 4/15/2020 8,025
266,036 Government National Mortgage Association Pool #290123
8.00% Due 6/15/2020 273,966
182,850 Government National Mortgage Association Pool #291195
8.00% Due 5/15/2020 188,301
938,132 Government National Mortgage Association Pool #364979
8.00% Due 4/15/2024 963,779
913,908 Government National Mortgage Association Pool #373826
8.00% Due 9/15/2023 939,378
690,371 Government National Mortgage Association
Sf Pool #226673
9.50% Due 7/15/2017 738,662
1,800,000 United States Strip Zero Coupon
0.0% Due 2/15/2006 933,802
10,020,000 United States Treasury Bonds
9.25% Due 2/15/2016 12,941,441
3,100,000 United States Treasury Notes
8.75% Due 8/15/2000 3,450,688
5,000,000 United States Treasury Notes
7.875% Due 11/15/1999 5,337,500
6,025,000 United States Treasury Notes
6.00% Due 11/30/1997 6,040,063
6,880,000 United States Treasury Notes
5.75% Due 10/31/1997 6,871,400
4,610,000 United States Treasury Notes
5.50% Due 9/30/1997 4,581,188
16,100,000 United States Treasury Notes
5.625% Due 8/31/1997 16,034,570
5,000,000 United States Treasury Stripped Interest Coupon
0.0% Due 5/15/2004 2,924,445
19,180,000 United States Treasury Stripped Interest Coupon
0.0% Due 2/15/2010 7,450,452
1,000,000 United States Treasury Stripped Interest Coupon
0.0% Due 2/15/1999 819,389
7,000,000 United States Treasury Stripped Interest Coupon
0.0% Due 2/15/2002 4,765,103
------------
Total United States Government and Agency
Obligations (Cost $123,508,998) $126,564,388
------------
SHORT TERM INVESTMENTS
UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS 2.4%
$3,400,000 Federal Home Loan Bank Discount Note
6.30% Due 10/2/1995
(Cost $3,399,405) $ 3,399,405
------------
Total Investments (Cost $135,112,462) 98.9% $138,631,236
Other Assets, Less Liabilities 1.1% 1,495,758
----- ------------
Net Assets 100.0% $140,126,994
===== ============
See Notes to Financial Statements
42
<PAGE>
Actively Managed Bond Fund (Continued)
Statement of Assets and Liabilities September 30, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost $135,112,462)--Note 2 (A) $138,631,236
Cash 40,001
Receivable for units sold 24,885
Dividends and interest receivable 1,533,552
Other assets 25,032
------------
140,254,706
LIABILITIES:
Payable for units redeemed $ 421
Payable to investment manager 38,232
Accrued expenses 89,059 127,712
------- ------------
NET ASSETS at value, applicable to 4,736,926
outstanding units of beneficial
interest--Note 5 $140,126,994
============
NET ASSET VALUE, offering and redemption price
per unit ($140,126,994 divided by 4,736,926 units) $ 29.58
============
Statement of Operations Year Ended September 30, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Interest $ 9,156,372
-----------
Total Income $ 9,156,372
Expenses:
Investment manager's fees--Note 3(A) 455,073
Shareholder servicing fees and expenses
--Note 3(B) 520,061
Custodian fees and expenses 43,263
Legal and auditing fees 21,674
Consultant fees 11,216
Trustees' fees and expenses--Note 3(C) 20,606
Insurance premiums 45,205
Other 13,419
-----------
Total Expenses 1,130,517
-----------
INVESTMENT INCOME--NET 8,025,855
REALIZED (LOSS) AND UNREALIZED GAIN ON
INVESTMENTS--Note 4:
Net realized (loss) on investments (89,181)
Unrealized appreciation on investments 9,180,073
-----------
NET REALIZED (LOSS) AND UNREALIZED
GAIN ON INVESTMENTS 9,090,892
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $17,116,747
===========
See Notes to Financial Statements
43
<PAGE>
Actively Managed Bond Fund (Continued)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Ended Year Ended
9/30/95 9/30/94
---------- ----------
OPERATIONS:
Investment income--net $ 8,025,855 $ 7,643,139
Net realized gain (loss) on investments (89,181) 297,408
Unrealized appreciation (depreciation)
on investments 9,180,073 (14,855,294)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 17,116,747 (6,914,747)
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 15,769,704 23,323,590
Value of units redeemed (28,969,909) (27,116,813)
------------ ------------
Net (decrease) in net assets resulting
from capital transactions (13,200,205) (3,793,223)
------------ ------------
Net increase (decrease) 3,916,542 (10,707,970)
NET ASSETS at beginning of year 136,210,452 146,918,422
------------ ------------
NET ASSETS at end of year $140,126,994 $136,210,452
============ ============
See Notes to Financial Statements
44
<PAGE>
Intermediate-Term Bond Fund
Statement of Investments September 30, 1995
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------- -----
CORPORATE BONDS 6.0%
$2,500,000 General Telephone of California
6.75% Due 12/1/1997 $ 2,518,180
1,500,000 Pepsico Inc.
7.625% Due 12/18/1998 1,560,500
1,500,000 New Jersey Bell Telephone Debenture
4.875% Due 11/1/2000 1,394,817
-----------
Total Corporate Bonds (Cost $5,473,179) $ 5,473,497
-----------
MORTGAGE & ASSET BACKED SECURITIES 0.1%
$59 Veterans Administration & Federal Housing
Authority Mortgages 5.25% (Cost $52) $ 59
-----------
UNITED STATES GOVERNMENT
AND AGENCY OBLIGATIONS 90.1%
$2,000,000 Federal Home Loan Bank Note
6.27% Due 1/14/2004 $ 1,930,994
1,000,000 Federal Home Loan Bank Structured Note
5.75% Due 4/25/1997 1,000,403
1,000,000 Federal Home Loan Bank Structured Note
7.30% Due 4/11/2005 1,008,391
1,000,000 Federal Home Loan Mortgage Corp.
7.29% Due 4/7/2004 1,020,914
1,000,000 Federal Home Loan Mortgage Corp.
6.91% Due 6/20/2005 1,001,956
1,354,971 Federal Home Loan Mortgage Corp.
157 REMIC CMO
8.75% Due 7/15/2000 1,397,042
1,500,000 Federal Home Loan Mortgage Corp. CMO 1489G
5.85% Due 10/15/2006 1,452,059
1,000,000 Federal Home Loan Mortgage Corp. CMO 1534F
6.00% Due 4/15/2020 970,059
1,000,000 Federal Home Loan Mortgage Corp.
Gold REMIC 1331H
7.00% Due 11/15/2005 1,008,639
4,146,667 Federal Home Loan Mortgage Corp.
Gold REMIC 1278G
7.00% Due 11/15/2020 4,163,540
1,000,000 Federal Home Loan Mortgage Corp.
Gold REMIC Series 1324Vc
7.00% Due 6/15/2001 1,018,869
2,000,000 Federal Home Loan Mortgage Corp. Note
7.05% Due 1/29/2003 2,000,000
84,239 Federal Home Loan Mortgage Corp. Pool #140536
5.00% Due 10/1/1996 82,903
122,219 Federal Home Loan Mortgage Corp. Pool #309883
7.00% Due 9/1/1998 121,559
331,885 Federal Home Loan Mortgage Corp. Pool #251478
7.00% Due 12/1/1998 330,650
110,746 Federal Home Loan Mortgage Corp. Pool #200070
7.50% Due 4/1/2002 111,851
15,926 Federal Home Loan Mortgage Corp. Pool #297945
7.50% Due 5/1/1997 15,784
182,937 Federal Home Loan Mortgage Corp. Pool #200071
7.50% Due 5/1/2002 184,763
182,368 Federal Home Loan Mortgage Corp. Pool #212242
7.50% Due 7/1/2001 184,050
75,139 Federal Home Loan Mortgage Corp. Pool #212719
7.50% Due 8/1/2001 75,831
236,624 Federal Home Loan Mortgage Corp. Pool #213857
7.50% Due 11/1/2001 238,806
37,594 Federal Home Loan Mortgage Corp. Pool #214040
7.50% Due 12/1/2001 37,940
156,354 Federal Home Loan Mortgage Corp. Pool #320139
8.00% Due 9/1/2001 158,841
74,779 Federal Home Loan Mortgage Corp. Pool #200034
8.50% Due 5/1/2001 76,537
26,061 Federal Home Loan Mortgage Corp. Pool #200030
9.00% Due 3/1/2001 26,832
34,307 Federal Home Loan Mortgage Corp. Pool #200035
9.00% Due 5/1/2001 35,323
130,957 Federal Home Loan Mortgage Corp. Pool #200040
9.00% Due 6/1/2001 134,832
660,000 Federal Home Loan Mortgage Corp. Structured Note
4.90% Due 9/3/2003 652,452
1,275,483 Federal National Mortgage Association CMO 93-244A
0.0% Due 11/25/2023 1,175,407
2,000,000 Federal National Mortgage Association CMO 1993-162C
3.00% Due 8/25/2023 1,769,838
1,000,000 Federal National Mortgage Association CMO G93-3G
6.00% Due 6/25/2018 950,889
2,000,000 Federal National Mortgage Association CMO G93-27Ae
6.00% Due 11/25/2019 1,846,898
1,000,000 Federal National Mortgage Association CMO G93-8Pg
6.50% Due 7/25/2018 973,059
959,145 Federal National Mortgage Association CMO 1991-19G
7.00% Due 2/25/2019 957,782
1,500,000 Federal National Mortgage Association
Medium Term Note
6.24% Due 1/28/2004 1,446,149
1,000,000 Federal National Mortgage Association
Medium Term Note
6.25% Due 1/14/2004 956,309
2,000,000 Federal National Mortgage Association
Medium Term Note
6.38% Due 6/25/2003 1,955,726
2,000,000 Federal National Mortgage Association
Medium Term Note
7.46% Due 9/30/1999 2,055,478
1,000,000 Federal National Mortgage Association Note
7.00% Due 8/12/2002 1,004,191
867,525 Federal National Mortgage Association Pass Thru
Pool #050987
6.50% Due 2/1/2009 855,544
569,286 Federal National Mortgage Association Pool #87277
7.50% Due 4/1/2018 578,303
See Notes to Financial Statements
45
<PAGE>
Intermediate-Term Bond Fund (Continued)
Statement of Investments September 30, 1995
- -------------------------------------------------------------------------------
Principal
Amount Value
- --------- -----
UNITED STATES GOVERNMENT
AND AGENCY OBLIGATIONS (Continued)
$ 196,582 Federal National Mortgage Association Pool #46609
8.00% Due 5/1/2002 $ 202,112
147,387 Federal National Mortgage Association Pool #48103
8.00% Due 5/1/2002 151,534
210,353 Federal National Mortgage Association Pool #47932
8.00% Due 5/1/2002 216,272
175,787 Federal National Mortgage Association Pool #47402
8.00% Due 5/1/2002 180,733
27,294 Federal National Mortgage Association Pool #47137
8.00% Due 5/1/2002 28,062
316,351 Federal National Mortgage Association Pool #46872
8.00% Due 5/1/2002 324,760
54,040 Federal National Mortgage Association Pool #7242
8.50% Due 7/1/2001 55,663
14,543 Federal National Mortgage Association Pool #29658
8.50% Due 7/1/2001 14,979
11,860 Federal National Mortgage Association Pool #31393
8.50% Due 8/1/2001 12,216
5,192 Federal National Mortgage Association Pool #31435
8.50% Due 8/1/2001 5,348
112,643 Federal National Mortgage Association Pool #30409
8.50% Due 9/1/2001 116,027
2,467 Federal National Mortgage Association Pool #24179
9.00% Due 4/1/2001 2,571
30,602 Federal National Mortgage Association Pool #26707
9.00% Due 5/1/2001 31,884
59,032 Federal National Mortgage Association Pool #26607
9.00% Due 5/1/2001 61,507
237,076 Federal National Mortgage Association Pool #28785
9.00% Due 6/1/2001 247,016
123,643 Federal National Mortgage Association Pool #28645
9.00% Due 6/1/2001 128,828
52,297 Federal National Mortgage Association Pool #29470
9.00% Due 7/1/2001 54,490
1,674,157 Federal National Mortgage Association Pool #82407
9.00% Due 3/1/2004 1,752,555
1,500,000 Federal National Mortgage Association REMIC 1992-9G
7.00% Due 7/25/2005 1,508,954
10,000 United States Treasury Bonds
3.50% Due 11/15/1998 9,747
9,875,000 United States Treasury Notes
8.875% Due 11/15/1997 10,458,227
10,000,000 United States Treasury Notes
7.875% Due 11/15/1999 10,675,000
500,000 United States Treasury Notes
3.875% Due 10/31/1995 499,375
3,000,000 United States Treasury Stripped Coupons
0.0% Due 2/15/2000 2,315,067
4,000,000 United States Treasury Stripped Coupons
0.0% Due 8/15/2002 2,641,956
4,000,000 United States Treasury Stripped Coupons
0.0% Due 2/15/1999 3,277,556
11,000,000 United States Treasury Stripped Coupons
0.0% Due 2/15/1998 9,588,578
-----------
Total United States Government and Agency
Obligations (Cost $78,698,412) $81,528,410
-----------
SHORT TERM INVESTMENTS 2.4%
$2,200,000 Federal Home Loan Bank Discounted Note
6.30% Due 10/02/1995
(Cost $2,199,615) $ 2,199,615
-----------
Total Investments (Cost $86,371,258) 98.6% $89,201,581
Other assets, less liabilities 1.4% 1,280,408
----- -----------
Net Assets 100.0% $90,481,989
===== ===========
See Notes to Financial Statements
46
<PAGE>
Intermediate-Term Bond Fund (Continued)
Statement of Assets and Liabilities September 30, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost $86,371,258)--Note 2(A) $89,201,581
Cash 73,917
Receivable for units sold 22,884
Dividends and interest receivable 1,267,029
Other assets 16,477
-----------
90,581,888
LIABILITIES:
Payable for units redeemed $ 90
Payable to investment managers 26,147
Accrued expenses 73,662 99,899
------- -----------
NET ASSETS at value, applicable to 3,230,899
outstanding units of beneficial interest--Note 5 $90,481,989
===========
NET ASSET VALUE, offering and redemption price
per unit ($90,481,989 divided by 3,230,899 units) $ 28.01
===========
Statement of Operations Year Ended September 30, 1995
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Interest $6,378,430
----------
Total Income $ 6,378,430
Expenses:
Investment manager's fees--Note 3(A) 313,881
Shareholder servicing fees and
expenses--Note 3(B) 413,881
Custodian fees and expenses 35,970
Legal and auditing fees 19,074
Consultant fees 11,216
Trustees' fees and expenses--Note 3(C) 20,606
Insurance premiums 31,094
Other 13,435
----------
Total Expenses 859,157
-----------
INVESTMENT INCOME--NET 5,519,273
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS--Note 4:
Net realized gain on investments 148,558
Unrealized appreciation on investments 2,902,615
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 3,051,173
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,570,446
===========
See Notes to Financial Statements
47
<PAGE>
Intermediate-Term Bond Fund (Continued)
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
Year Ended Year Ended
9/30/95 9/30/94
----------- -----------
OPERATIONS:
Investment income-net $ 5,519,273 $ 5,400,952
Net realized gain on investments 148,558 671,412
Unrealized (depreciation) on investments 2,902,615 (8,152,248)
----------- -----------
Net increase (decrease) in net assets
resulting from operations 8,570,446 (2,079,884)
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 11,398,598 16,644,193
Value of units redeemed (19,266,677) (22,599,674)
----------- -----------
Net (decrease) in net assets resulting
from capital transactions (7,868,079) (5,955,481)
----------- -----------
Net increase (decrease) 702,367 (8,035,365)
NET ASSETS at beginning of year 89,779,622 97,814,987
----------- -----------
NET ASSETS at end of year $90,481,989 $89,779,622
=========== ===========
See Notes to Financial Statements
48
<PAGE>
Short-Term Investment Fund
Statement of Investments September 30, 1995
- -------------------------------------------------------------------------------
Principal
Amount Value
- --------- -----
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS 91.9%
$ 1,000,000 Federal Farm Credit Bank
5.70% Due 1/2/1996 $ 999,531
1,000,000 Federal Home Loan Bank
6.12% Due 7/24/1997 996,683
565,000 Federal Home Loan Bank
4.36% Due 4/25/1996 559,976
350,000 Federal Home Loan Bank
4.50% Due 9/23/1996 345,441
350,000 Federal Home Loan Bank
6.16% Due 7/25/1997 349,074
250,000 Federal Home Loan Bank
6.29% Due 8/22/1997 249,847
250,000 Federal Home Loan Bank
6.20% Due 8/1/1997 249,461
200,000 Federal Home Loan Bank
4.80% Due 7/12/1996 198,396
195,000 Federal Home Loan Bank
4.125% Due 1/26/1996 194,127
100,000 Federal Home Loan Bank
4.55% Due 5/28/1996 99,150
250,000 Federal Home Loan Bank
5.67% Due 10/30/1995 249,953
13,800,000 Federal Home Loan Bank Discount Note
6.30% Due 10/2/1995 13,797,585
750,000 Federal Home Loan Bank Discount Note
6.22% Due 11/17/1995 743,910
500,000 Federal Home Loan Bank Discount Note
6.18% Due 11/6/1995 496,910
300,000 Federal Home Loan Bank Note
5.375% Due 11/27/1995 299,764
1,350,000 Federal Home Loan Bank Note
5.00% Due 10/25/1995 1,349,157
500,000 Federal Home Loan Bank (Callable Step-Up)
5.75% Due 5/3/1996 500,338
600,000 Federal Home Loan Mortgage Corp.
4.40% Due 3/11/1996 595,777
200,000 Federal Home Loan Mortgage Corp.
3.94% Due 10/18/1995 199,789
1,000,000 Federal National Mortgage Association Discount Note
5.61% Due 11/6/1995 994,295
555,000 Federal National Mortgage Association Note
5.11% Due 11/13/1995 554,464
1,100,000 United States Treasury Notes
3.875% Due 10/31/1995 1,099,764
-----------
Total United States Government and Agency Obligations
(Cost $25,116,171) $25,123,392
-----------
COMMERCIAL PAPER 9.1%
$ 1,000,000 Coca-Cola Company
5.70% Due 11/3/1995 $ 994,775
1,000,000 General Electric Capital Corp.
5.70% Due 10/5/1995 999,367
500,000 Merrill Lynch
5.73% Due 11/8/1995 496,976
-----------
Total Commercial Paper
(Cost $2,491,118) $ 2,491,118
-----------
CORPORATE NOTES 7.1%
$ 1,000,000 Dow Chemical Company
4.625% Due 10/15/1995 $ 999,365
100,000 Dow Chemical Company
4.625% Due 10/15/1995 99,946
850,000 Merrill Lynch
5.875% Due 12/1/1995 849,738
-----------
Total Corporate Notes
(Cost $1,949,213) $ 1,949,049
-----------
Total Investments
(Cost $29,556,502) 108.1% $29,563,559
Liabilities, net of assets -8.1% (2,203,648)
----- -----------
Net Assets 100.0% $27,359,911
===== ===========
See Notes to Financial Statements
49
<PAGE>
Short-Term Investment Fund (Continued)
Statement of Assets and Liabilities September 30, 1995
- -------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost $29,556,502)--Note 2 (A) $29,563,559
Cash 62,112
Receivable for units sold 46,191
Dividends and interest receivable 215,229
Other assets 14,154
-----------
29,901,245
LIABILITIES:
Payable for investments purchased $2,391,900
Payable for units redeemed 96,016
Payable to investment manager 5,666
Accrued expenses 47,752 2,541,334
---------- -----------
NET ASSETS at value, applicable to 1,416,638
outstanding units of beneficial
interest--Note 5 $27,359,911
===========
NET ASSET VALUE, offering and redemption price
per unit ($27,359,911
divided by 1,416,638 units) $ 19.31
===========
Statement of Operations Year Ended September 30, 1995
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Interest $1,670,112
----------
Total Income $ 1,670,112
Expenses:
Investment manager's fees--Note 3(A) 72,748
Shareholder servicing fees and expenses--
Note 3(B) 170,496
Custodian fees and expenses 20,570
Legal and auditing fees 17,374
Consultant fees 7,977
Trustees' fees and expenses--Note 3(C) 20,606
Insurance premiums 12,008
Other 13,408
----------
Total Expenses 335,187
Less expense reimbursement--Note 3(A) (102,392)
----------
Net Expenses 232,795
-----------
INVESTMENT INCOME--NET 1,437,317
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Realized gain on investments --
Unrealized appreciation on investments 29,085
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 29,085
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,466,402
===========
See Notes to Financial Statements
50
<PAGE>
Short-Term Investment Fund (Continued)
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended Year Ended
9/30/95 9/30/94
---------- ----------
OPERATIONS:
Investment income--net $ 1,437,317 $ 921,400
Net realized gain (loss) on investments -- (430)
Unrealized appreciation (depreciation)
on investments 29,085 (5,788)
----------- -----------
Net increase in net assets resulting
from operations 1,466,402 915,182
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 11,985,311 10,882,572
Value of units redeemed (16,066,312) (16,939,920)
----------- -----------
Net (decrease) in net assets resulting
from capital transactions (4,081,001) (6,057,348)
----------- -----------
Net (decrease) (2,614,599) (5,142,166)
NET ASSETS at beginning of year 29,974,510 35,116,676
----------- -----------
NET ASSETS at end of year $27,359,911 $29,974,510
=========== ===========
See Notes to Financial Statements
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1--GENERAL
Participation in RSI Retirement Trust ("RSI") is limited to IRA's and
trusts established by eligible corporate employers, which includes 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 and restated
effective as of August 1, 1990 ("Trust Agreement"), as a series fund currently
issuing as of September 30, 1995 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 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 each of the two years in the period ended September
30, 1991 and 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.
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;
52
<PAGE>
(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 U.S. 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.
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.
53
<PAGE>
(E) 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 Participating 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 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.
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,
(NFJ Investment Group, Inc. was .50% on next $10 million,
Sub-adviser through March 31, 1995) .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
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Investment Fund Investment Manager Fee
- --------------- ------------------ ---
<S> <C> <C>
Emerging Growth Friess Associates, Inc. (Sub-adviser) 1.00%
Equity Fund The Putnam Advisory Company, Inc. 1.00% on first $25 million,
(Sub-adviser) and .75% over $25 million
International Morgan Grenfell Investment .60% on first $50 million,
Equity Fund Services Limited (Sub-adviser) and .50% over $50 million
Actively Managed Retirement System Investors Inc. .40% on first $50 million,
Bond Fund .30% on next $100 million,
and .20% over $150 million
Intermediate-Term Retirement System Investors Inc. .40% on first $50 million,
Bond Fund .30% on next $100 million,
and .20% over $150 million
Short-Term Retirement System Investors Inc. .25% on first $50 million,
Investment Fund 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 period ended
September 30, 1995, Investors has voluntarily waived a portion of its
investment manager's fee from the Short-Term Investment Fund amounting to
$102,392, to limit the Funds annual expenses to 0.80% of average net
assets.
(B) Shareholder servicing fees and expenses for the period ended September 30,
1995 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:
Average Net Assets Fee
------------------ ---
First $25 million .60%
Next $25 million .50%
Next $25 million .40%
Next $25 million .30%
Over $100 million .20%
(C) Each Trustee who is not an officer of RSI receives an annual fee of $7,000
and a fee of $800 per meeting attended, except that such fee is $400 for a
telephonic meeting. (Committee chairs receive an additional $100 per
meeting.) Such Trustees also participate in a deferred compensation plan
which permits each Trustee to defer payment of a portion of their fees. A
Trustee and several officers of RSI are also officers of Group and its
subsidiaries.
55
<PAGE>
NOTE 4--SECURITIES TRANSACTIONS
The following summarizes the securities transactions, other than short-term
securities, by the various Investment Funds for the period ended September 30,
1995:
Purchases Sales
------------ ------------
Core Equity Fund $ 11,376,271 $ 17,149,263
Value Equity Fund 24,636,733 23,539,329
Emerging Growth Equity Fund 97,321,566 94,812,129
International Equity Fund 15,028,894 13,889,715
Actively Managed Bond Fund 24,085,788 23,633,671
Intermediate-Term Bond Fund 17,104,162 13,304,577
------------ ------------
Total $189,553,414 $186,328,684
============ ============
Net unrealized appreciation (depreciation) consisting of gross unrealized
appreciation and gross unrealized depreciation at September 30, 1995 for each of
the Investment Funds was as follows:
Net Unrealized Gross Gross
Appreciation Unrealized Unrealized
(Depreciation) Appreciation Depreciation
-------------- ------------ ------------
Core Equity Fund $ 89,957,193 $ 90,513,115 $ (555,922)
Value Equity Fund 5,458,957 5,734,868 (275,911)
Emerging Growth Equity Fund 17,872,959 18,875,820 (1,002,861)
International Equity Fund 4,905,869 5,947,655 (1,041,786)
Actively Managed Bond Fund 3,518,774 4,540,349 (1,021,575)
Intermediate-Term Bond Fund 2,830,323 3,204,158 (373,835)
Short-Term Investment Fund 7,057 12,003 (4,946)
------------ ------------ -----------
Total $124,551,132 $128,827,968 $(4,276,836)
============ ============ ===========
As of September 30, 1995, the International Equity Fund had outstanding
forward currency contracts as set forth below. These contracts are reported in
the financial statements at the Fund's net gain of $189,208, which is the
difference between the forward foreign exchange rate at the dates of entry into
the contracts and the forward rates at September 30, 1995.
Contracts to sell
-----------------
104,300,000 Japanese Yen for U.S. $1,265,391, 11/16/1995 181,612
216,700,000 Japanese Yen for U.S. $2,240,951, 12/07/1995 36,246
5,200,000 French Francs for U.S. $1,026,633, 11/30/1995 (28,650)
--------
$189,208
========
56
<PAGE>
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, 1995:
Value of
Securities Value of
Loaned Collateral
----------- -----------
Core Equity Fund $ 929,990 $ 989,649
Value Equity Fund 3,235,630 3,462,862
Emerging Growth Equity Fund 13,458,556 14,203,455
International Equity Fund 1,226,285 1,274,523
Actively Managed Bond Fund 30,044,908 30,562,800
Intermediate-Term Bond Fund 2,374,868 2,405,843
----------- -----------
Total $51,270,237 $52,899,132
=========== ===========
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 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, 1995 the Value Equity Fund, Emerging
Growth Equity Fund and the International Equity Fund each had expenses paid
through brokerage/service arrangements which amounted to $21,206, $17,073 and
$20,000, respectively.
57
<PAGE>
NOTE 5--CAPITAL TRANSACTIONS:
At September 30, 1995 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, 1995 were as follows:
Core Equity Fund Value Equity Fund
--------------------- ----------------------
Units Amount Units Amount
------- ------------ -------- -----------
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
======== ============ ======== ===========
Emerging Growth International
Equity Fund Equity Fund
--------------------- ----------------------
Units Amount Units Amount
------- ------------ -------- -----------
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
======== ============ ======== ===========
Actively Managed Intermediate-Term
Bond Fund Bond Fund
--------------------- ----------------------
Units Amount Units Amount
------- ------------ -------- ------------
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)
========== ============ ======== ============
Short-Term
Investment Fund
---------------------
Units Amount
------- ------------
Units sold 637,944 $ 11,985,311
Units redeemed (853,573) (16,066,312)
-------- ------------
Net (decrease) (215,629) $ (4,081,001)
======== ============
58
<PAGE>
Transactions in the units of beneficial interest of each Investment Fund
for the year ended September 30, 1994 were as follows:
Core Equity Fund Value Equity Fund
----------------------- ----------------------
Units Amount Units Amount
--------- ------------ -------- ------------
Units sold 570,998 $ 19,983,360 200,343 $ 5,263,921
Units redeemed (829,507) (29,085,529) (322,977) (8,462,033)
-------- ------------ -------- ------------
Net (decrease) (258,509) $ (9,102,169) (122,634) $ (3,198,112)
======== ============ ======== ============
Emerging Growth International
Equity Fund Equity Fund
----------------------- ----------------------
Units Amount Units Amount
--------- ------------ -------- ------------
Units sold 257,643 $ 9,029,724 247,306 $ 9,450,659
Units redeemed (509,133) (18,168,143) (128,010) (4,744,547)
-------- ------------ -------- ------------
Net increase (decrease) (251,490) $ (9,138,419) 119,296 $ 4,706,112
======== ============ ======== ============
Actively Managed Intermediate-Term
Bond Fund Bond Fund
------------------------ ----------------------
Units Amount Units Amount
---------- ------------ -------- ------------
Units sold 872,273 $ 23,323,590 645,351 $ 16,644,193
Units redeemed (1,001,418) (27,116,813) (879,421) (22,599,674)
-------- ------------ -------- ------------
Net (decrease) (129,145) $ (3,793,223) (234,070) $ (5,955,481)
======== ============ ======== ============
Short-Term
Investment Fund
---------------------
Units Amount
------- ------------
Units sold 601,384 $ 10,882,572
Units redeemed (938,462) (16,939,920)
-------- ------------
Net (decrease) (337,078) $ (6,057,348)
======== ============
59
<PAGE>
Net assets at September 30, 1995 are comprised as follows:
<TABLE>
<CAPTION>
Core Equity Value Equity Emerging Growth International
Fund Fund Fund Equity Fund
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Paid-in capital (deficit) $ (18,701,457) $(19,587,206) $(11,645,817) $ (419,370)
Accumulated income (loss) 42,360,853 17,029,737 (530,918) (1,482,227)
Accumulated realized gain 76,325,010 40,922,341 68,929,104 27,948,084
Unrealized appreciation 89,957,193 5,458,957 17,872,959 5,097,094
------------ ------------ ------------ -----------
Net Assets $189,941,599 $ 43,823,829 $ 74,625,328 $31,143,581
============ ============ ============ ===========
<CAPTION>
Actively Managed Intermediate-Term Short-Term
Bond Fund Bond Fund Investment Fund
------------- ----------------- ---------------
<S> <C> <C> <C>
Paid-in capital (deficit) $ (34,818,581) $(39,587,883) $(12,376,465)
Accumulated income 138,658,136 113,463,866 38,399,408
Accumulated realized gain 32,768,665 13,775,683 1,329,911
Unrealized appreciation
(depreciation) 3,518,774 2,830,323 7,057
------------ ------------ ------------
Net Assets $140,126,994 $ 90,481,989 $ 27,359,911
============ ============ ============
</TABLE>
60
<PAGE>
NOTE 6--FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CORE EQUITY FUND
---------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 35.57 $ 34.49 $ 30.09 $ 27.68 $ 23.15
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income--net 0.74 0.54 0.56 0.65 0.75
Net realized and unrealized gain
(loss) on investments 10.40 0.54 3.84 1.76 3.78
-------- -------- -------- -------- --------
Total from Investment Operations 11.14 1.08 4.40 2.41 4.53
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 46.71 $ 35.57 $ 34.49 $ 30.09 $ 27.68
======== ======== ======== ======== ========
Total Return 31.32% 3.13% 14.62% 8.71% 19.57%
Ratios to Average Net Assets
Expenses (0.98)% (1.01)% (0.99)% (0.95)% (0.94)%
Investment income--net 1.86% 1.56% 1.74% 2.25% 2.88%
Portfolio Turnover Rate 7.91% 6.47% 13.41% 18.94% 18.88%
Net Assets at End of Year ($1,000's) $189,942 $141,544 $146,137 $134,269 $158,578
</TABLE>
- ---------
*Using average units basis.
61
<PAGE>
<TABLE>
<CAPTION>
VALUE EQUITY FUND
-----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 27.05 $ 26.48 $ 22.94 $ 21.48 $ 15.89
------- ------- ------- ------- -------
Income from Investment Operations:
Investment income--net 0.93 0.79 0.70 0.52 0.45
Net realized and unrealized gain
(loss) on investments 4.65 (0.22) 2.84 0.94 5.14
------- ------- ------- ------- -------
Total from Investment Operations 5.58 0.57 3.54 1.46 5.59
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 32.63 $ 27.05 $ 26.48 $ 22.94 $ 21.48
======= ======= ======= ======= =======
Total Return+ 20.63% 2.15% 15.43% 6.80% 35.18%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses** (1.32)% (1.41)% (1.70)% (1.55)% (1.56)%
Investment income--net 3.24% 3.02% 2.83% 2.32% 2.30%
Portfolio Turnover Rate 67.06% 40.41% 54.46% 14.26% 23.55%
Net Assets at End of Year ($1,000's) $43,824 $35,603 $38,104 $33,417 $37,955
</TABLE>
- ---------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for year ended
9/30/95.
+ On April 1, 1995, Retirement System Investors Inc. became the sole advisor
to Value Equity Fund.
62
<PAGE>
<TABLE>
<CAPTION>
EMERGING GROWTH EQUITY FUND
-----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 35.96 $ 35.52 $ 24.26 $ 23.34 $ 14.97
------- ------- ------- ------- -------
Income from Investment Operations:
Investment income (loss)--net (0.67) (0.57) (0.53) (0.35) (0.23)
Net realized and unrealized gain
(loss) on investments 17.29 1.01 11.79 1.27 8.60
------- ------- ------- ------- -------
Total from Investment Operations 16.62 0.44 11.26 0.92 8.37
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 52.58 $ 35.96 $ 35.52 $ 24.26 $ 23.34
======= ======= ======= ======= =======
Total Return 46.22% 1.24% 46.41% 3.94% 55.91%
Ratios/Supplemental Data
Ratios to Average Net Assets:
Expenses** (2.12)% (2.08)% (2.27)% (2.18)% (2.27)%
Investment (loss)--net (1.61)% (1.64)% (1.78)% (1.43)% (1.19)%
Portfolio Turnover Rate 170.54% 114.15% 145.59% 135.45% 101.10%
Net Assets at End of Year ($1,000's) $74,625 $48,293 $56,645 $40,844 $46,283
</TABLE>
- ---------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for year ended
9/30/95.
63
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
-----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the Year)
Net Asset Value, Beginning of Year $ 38.08 $ 34.36 $ 28.27 $ 29.26 $ 25.31
------- ------- ------- ------- -------
Income from Investment Operations:
Investment income (loss)--net (0.02) (0.09) (0.21) (0.16) 0.15
Net realized and unrealized gain
(loss) on investments 2.19 3.81 6.30 (0.83) 3.80
------- ------- ------- ------- -------
Total from Investment Operations 2.17 3.72 6.09 (0.99) 3.95
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 40.25 $ 38.08 $ 34.36 $ 28.27 $ 29.26
======= ======= ======= ======= =======
Total Return 5.70% 10.83% 21.54% (3.38)% 15.61%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses** (1.90)% (1.96)% (2.83)% (2.69)% (2.58)%
Investment income (loss)--net (0.07)% (0.25)% (0.68)% (0.50)% 0.54%
Portfolio Turnover Rate 51.40% 44.25% 55.02% 52.58% 65.55%
Net Assets at End of Year ($1,000's) $31,143 $28,672 $21,769 $18,997 $22,677
</TABLE>
- ---------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for year ended
9/30/95.
64
<PAGE>
<TABLE>
<CAPTION>
ACTIVELY MANAGED BOND FUND
---------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 26.06 $ 27.43 $ 24.57 $ 21.74 $ 18.44
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment Income--net: 1.64 1.47 1.23 1.54 1.51
Net realized and unrealized
gain (loss) on investments 1.88 (2.84) 1.63 1.29 1.79
-------- -------- -------- -------- --------
Total from Investment Operations 3.52 (1.37) 2.86 2.83 3.30
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 29.58 $ 26.06 $ 27.43 $ 24.57 $ 21.74
======== ======== ======== ======== ========
Total Return 13.51% (4.99)% 11.64% 13.02% 17.90%
Ratios/Supplemental Data
Ratios to Average Net Assets:
Expenses (0.84)% (0.82)% (0.87)% (0.84)% (0.84)%
Investment income--net 5.94% 5.51% 5.22% 6.87% 7.56%
Portfolio Turnover Rate 18.21% 8.54% 170.16% 132.97% 125.32%
Net Assets at End of Year ($1,000's) $140,127 $136,210 $146,918 $189,827 $197,573
</TABLE>
- ------
* Using average units basis.
65
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND FUND
--------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 25.40 $ 25.95 $ 24.20 $ 21.72 $ 19.10
------- ------- ------- -------- --------
Income from Investment Operations:
Investment Income--net: 1.66 1.46 1.48 1.55 1.46
Net realized and unrealized gain
(loss) on investments 0.95 (2.01) 0.27 0.93 1.16
------- ------- ------- -------- --------
Total from Investment Operations 2.61 (0.55) 1.75 2.48 2.62
------- ------- ------- -------- --------
Net Asset Value, End of Year $ 28.01 $ 25.40 $ 25.95 $ 24.20 $ 21.72
======= ======= ======= ======== ========
Total Return 10.28% (2.12)% 7.23% 11.42% 13.72%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses (0.98)% (0.95)% (1.07)% (0.98)% (0.98)%
Investment income--net 6.27% 5.68% 5.95% 6.78% 7.21%
Portfolio Turnover Rate 15.95% 17.92% 12.39% 24.86% 43.70%
Net Assets at End of Year ($1,000's) $90,482 $89,780 $97,796 $117,107 $108,144
</TABLE>
- ---------
* Using average units basis.
66
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENT FUND
-----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/95 9/30/94 9/30/93 9/30/92 9/30/91
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 18.36 $ 17.83 $ 17.43 $ 16.80 $ 15.79
------- ------- ------- ------- -------
Income from Investment Operations:
Investment income--net 0.93 0.53 0.43 0.64 0.99
Net realized and unrealized gain
(loss) on investments 0.02 0.00 (0.03) (0.01) 0.02
------- ------- ------- ------- -------
Total from Investment Operations 0.95 0.53 0.40 0.63 1.01
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 19.31 $ 18.36 $ 17.83 $ 17.43 $ 16.80
======= ======= ======= ======= =======
Total Return 5.17% 2.97% 2.29% 3.75% 6.40%
Ratios/Supplemental Data
Ratios to Average Net Assets:
Expenses (0.80)% (0.80)% (0.89)% (0.79)% (0.79)%
Investment income--net 4.94% 2.92% 2.43% 3.72% 6.06%
Decrease in above expense ratio due
to fee waiver 0.34% 0.32% -- % -- % -- %
Net Assets at End of Year ($1,000's) $27,360 $29,975 $35,117 $34,911 $61,505
</TABLE>
- ---------
* Using average units basis.
67
<PAGE>
DEDICATED BOND FUND (See Note 1)
--------------------------------
Year Year
Ended Ended
9/30/92** 9/30/91
--------- -------
Per Unit Operating Performance:*
(for a unit outstanding throughout the year)
Net Asset Value, Beginning of Year $18.97 $16.36
------ ------
Income from Investment Operations:
Investment income (loss)--net 0.79 1.91
Net realized and unrealized gain
(loss) on investments 0.07 0.70
------ ------
Total from Investment Operations 0.86 2.61
------ ------
Net Asset Value, End of Year $19.83** $18.97
====== ======
Total Return 4.53% 15.95%
Ratios/Supplemental Data
Ratios to Average Net Assets:
Expenses (0.75) (0.68)
Investment income--net 7.45% 10.83%
Portfolio Turnover Rate 0.0% 0.0%
Net Assets at End of Year ($1,000's) $ 0.0 $14,133
- ---------
* Using average units basis.
** Period from October 1, 1991 to April 24, 1992.
68
<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,
Value Equity Fund, Emerging Growth 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, 1995, 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 four 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, 1995, 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,
1995, 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.
[INSERT SIGNATURE]
New York, New York
November 15, 1995
69
<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, Vice President and Treasurer
Durando J. Saccente, Vice President
Veronica A. Fisher, First Vice President and Assistant Treasurer
Denise F. Roche, First Vice President
Herbert Kuhl, Jr., C.F.A., First Vice President
Peter M. Coleman, Second Vice President
Deborah A. Modzelewski, Second Vice President
Kim Vander Putten, Second Vice President
Heidi Viceconte, Second Vice President
CONSULTANTS
- --------------------------------------------------------------------------------
Actuarial--Towers Perrin
Investments--Hewitt Associates
INVESTMENT MANAGERS
- --------------------------------------------------------------------------------
Friess Associates, Inc. The Putnam Advisory Company, Inc.
Morgan Grenfell Investment Retirement System Investors Inc.
Services Limited
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
70
<PAGE>
BOARD OF TRUSTEES
- --------------------------------------------------------------------------------
Herbert G. Chorbajian
Chairman, President and Chief
Executive Officer
ALBANK, FSB, NY
Candace Cox
President
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
Auburn, ME
Maurice E. Kinkade
Director of Development
Maplebrook School
President, KINCO Management
William 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
71
<PAGE>
The information contained herein shall not be construed to be or constitute an
offer or a 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>
ANNUAL REPORT
[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
1995
Broker/Dealer:
[LOGO]
Retirement System
Distributors Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000759947
<NAME> RSI RETIREMENT TRUST
<SERIES>
<NAME> CORE EQUITY FUND
<NUMBER> 1
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 99,099,648
<INVESTMENTS-AT-VALUE> 189,056,841
<RECEIVABLES> 1,204,437
<ASSETS-OTHER> 27,320
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<TOTAL-ASSETS> 190,288,598
<PAYABLE-FOR-SECURITIES> 177,240
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<DIVIDEND-INCOME> 3,598,141
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<NET-INVESTMENT-INCOME> 2,964,601
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000759947
<NAME> RSI RETIREMENT TRUST
<SERIES>
<NAME> EMERGING GROWTH EQUITY FUND
<NUMBER> 2
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000759947
<NAME> RSI RETIREMENT TRUST
<SERIES>
<NAME> VALUE EQUITY FUND
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<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000759947
<NAME> RSI RETIREMENT TRUST
<SERIES>
<NAME> INTERNATIONAL EQUITY FUND
<NUMBER> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000759947
<NAME> RSI RETIREMENT TRUST
<SERIES>
<NAME> SHORT-TERM INVESTMENT FUND
<NUMBER> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000759947
<NAME> RSI RETIREMENT TRUST
<SERIES>
<NAME> INTERMEDIATE-TERM BOND FUND
<NUMBER> 7
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000759947
<NAME> RSI RETIREMENT TRUST
<SERIES>
<NAME> ACTIVELY MANAGED BOND FUND
<NUMBER> 8
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
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