<PAGE>
[logo]
ANNUAL
REPORT
1997
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
BROKER/DEALER:
RETIREMENT SYSTEM
Distributors Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------
<TABLE>
<S> <C>
President's Message...................................................... 1
Investment Review........................................................ 2
Combined Financial Statements............................................ 20
Financial Statements of Investment Funds................................. 22
Core Equity Fund..................................................... 22
Value Equity Fund.................................................... 26
Emerging Growth Equity Fund.......................................... 30
International Equity Fund............................................ 35
Actively Managed Bond Fund........................................... 42
Intermediate-Term Bond Fund.......................................... 48
Short-Term Investment Fund........................................... 53
Notes to Financial Statements............................................ 57
Independent Auditor's Report............................................. 74
Annual Meeting Results................................................... 75
Officers, Consultants, Investment Managers and Custodians................ 77
Board of Trustees........................................................ 78
</TABLE>
[LOGO]
is a registered trademark of Retirement System Group Inc.
<PAGE>
PRESIDENT'S MESSAGE
To Our Unitholders:
The past year was another great year for the stock market, and
a healthy year for the bond market.
While some of the equity funds in the Trust turned in
somewhat disappointing returns for the fiscal year ended
September 1997, the funds' longer-term performances were solid,
with all but one of the funds outperforming their respective
benchmarks for the five-year period ended September 30, 1997.
Overall, the two funds on the fixed-income side of the
Trust turned in strong performances, outperforming their
benchmarks for the one-year period, and most importantly, for
the five- and ten-year periods, as well. As always, the most
critical factor when investing the assets of our unitholders
continues to be investing for the long-term. We are always
mindful of the fact that you are entrusting us with retirement
assets, money that has to be there when needed. Bearing that in
mind, we look to achieve the highest returns possible, while at
the same time staying within prudent risk guidelines.
While the stock market has enjoyed three great years of
equity performance, it is unlikely that this can be sustained
in the coming years. This fact reinforces why it is so critical
for investors to focus on asset allocation among stocks, bonds
and cash in their pursuit to achieve superior long-term
results.
On behalf of the Board of Trustees, I would like to thank
you, our unitholders, for choosing RSI Retirement Trust to help
meet your retirement savings goals. We are committed to doing
whatever it takes to meet and exceed those goals. Thank you for
your continued support.
Sincerely,
[LOGO]
William Dannecker
President and Trustee
October 31, 1997
1
<PAGE>
INVESTMENT REVIEW
CORE EQUITY FUND
The Core Equity Fund seeks capital appreciation over the long
term. The Fund invests in a broadly diversified group of
high-quality, medium-to-large companies which the manager,
Retirement System Investors Inc., believes to be reasonably
valued relative to their earnings growth potential.
MARKET ENVIRONMENT
Continued economic growth, low inflation, benign interest
rates, heavy corporate stock repurchases and huge cash inflow
by mutual fund investors have propelled the stock market over
the past several years. (The most recent 12 months was no
exception with the broad equity market, as measured by the
Standard & Poor's 500 Index, up 40.50%.) Corporate earnings
have benefited from productivity gains from technological
innovations, downsizing of costs and the improved competitive
position of U.S. companies. The surprise has been that
inflation has stayed so low so long, despite strong economic
growth and high utilization of resources and tight labor
markets.
Market valuations at 19 times forward earnings and over 20
times trailing earnings are at the upper end of past ranges.
However, the current level of valuation may be sustained, as
long as economic growth does not get too strong, inflation and
interest rates do not rise, earnings growth and profit margins
stay robust, and supply and demand trends for equities remain
favorable. Conversely, market downside risks could increase if
interest rates rise, profit pressures develop, or if the strong
cash flow trends into equity mutual funds moderate
significantly.
Large cap stocks, which the Fund holds, showed substantial
strength as the period began, but weakened as investor
sentiment became more bearish. Finally, large cap stocks rose
relentlessly until a late summer swoon softened the advance.
Overall, the stock market moved tangibly higher during the
year, setting numerous new highs in the popular averages along
the way.
Portfolio stock selection in the latter part of the year
emphasized defensiveness, focusing on the lower price/earnings
multiple issues as the large cap growth issues become more
sensitive to investor sentiment. The portfolio manager
continues to be a buyer on weakness in individual securities,
where fundamentals remain in place and on corrections in the
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
general market.
MEASURING RISK AND RETURN
CORE EQUITY FUND VS S&P 500
FOR 10-YEAR PERIOD ENDED 9/30/97
CORE EQUITY S&P 500
<S> <C> <C>
Return 13.62% 14.73%
Risk 13.13% 13.45%
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 9/30/97. The S&P 500 Index is an
unmanaged index of common stocks widely used
as a measure of the broad equity market, and is a
representative market index for this Fund.
Standard deviation is a statistical measure of vol-
atility often used as a measure of risk. In general,
the greater the standard deviation, the greater the
tendency to vary from the average annual total
return. By comparing the magnitude of the stan-
dard deviations, the relative volatility of each
investment can be determined. A lower standard
deviation reflects lower volatility.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CORE EQUITY FUND VS S&P 500
<S> <C> <C>
87 $10,000.00 $10,000.00
88 $8,570.09 $8,750.60
89 $11,406.54 $11,626.04
90 $10,903.31 $10,543.40
91 $13,036.87 $13,838.48
92 $14,171.94 $15,368.82
93 $16,244.28 $17,367.87
94 $16,752.94 $18,006.41
95 $21,999.72 $23,357.05
96 $26,643.63 $28,113.43
97 $35,846.68 $39,501.74
Core Equity: $35,847
S&P 500: $39,501
Growth of $10,000
Core Equity S&P 500
1 year 13,454 14,050
5 year 25,294 25,702
10 year 35,847 39,501
Cumulative Returns
1 year 34.54% 40.50%
5 year 152.94% 157.02%
10 year 258.47% 295.01%
Average Annual Returns
1 year 34.54% 40.50%
5 year 20.39% 20.78%
10 year 13.62% 14.73%
</TABLE>
PERFORMANCE RESULTS
The Core Equity Fund returned
34.54% for the one-year period
ended September 30,
1997, underperforming the S&P 500, which posted a 40.50% return
for the same period. The S&P 500 is an unmanaged representative
index of the broad equity market. (All market index results
that appear in this report are gross, since expenses are not
applicable.) For the five and ten years ended September 30,
1997, the Core Fund produced an average annual return of 20.39%
and 13.62%, respectively, while the S&P 500 posted an average
annual return of 20.78% and 14.73% for these same two periods.
It should be noted that the Core Equity Fund's annualized
return for the ten years ended September 30, 1997, was achieved
while taking less risk (as measured by standard deviation) than
the S&P 500 (see chart on page 2).
For the one-year period ended September 30, 1997, the
Fund's return of 34.54% trailed the 35.76% return of its Lipper
benchmark, the Lipper Growth and Income Funds Average, for the
same period. For the longer-term period of five and ten years
ended September 30, 1997, the Fund's annualized return of
20.39% and 13.62% compared favorably with the Lipper
benchmark's annualized returns of 18.66% and 13.17% for the
same two periods. The five-year performance results placed Core
in the top 26% of its Lipper grouping (58th out of 225 funds;
rankings are based on total returns). Past performance cannot
predict future results.
3
<PAGE>
CORE EQUITY FUND VS LIPPER GROWTH AND INCOME FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
CORE EQUITY FUND(1) 34.54% 20.39% 13.62%
Lipper Growth & Income Funds Avg.(2) 35.76 18.66 13.17
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
VALUE EQUITY FUND
The Value Equity Fund seeks income and capital appreciation by
investing in a diversified portfolio of stocks with a below
average price-to-earnings (P/E) ratio and above-average growth
prospects. The portfolio typically has a dividend yield that is
higher than the market itself. The aim of the portfolio
manager, Retirement System Investors Inc., is to produce
above-market returns by choosing stocks whose current prices do
not adequately reflect their ability to grow earnings and
dividends over time. (Retirement System Investors Inc. became
the manager of this Fund effective April 1, 1995.)
MARKET ENVIRONMENT
In fiscal year 1997, value stocks modestly outperformed the
broad equity market (the Russell 1000 Value Index returned
42.31% for the one year ended September 30, 1997 versus the S&P
500 return of 40.50%). Stand out sectors were financial
companies, such as banks and insurers, energy services, and to
a lesser extent, stocks of cyclical companies, whose fortunes
are tied to the economic cycle, especially transportation (air
and trucking), retail and construction materials. The
technology sector of the stock market was, as in 1996, among
the broad market's strongest.
As the year progressed, it became apparent that the economy
was vigorous, with inflation remaining quiescent and nominal
interest rates staying low, an excellent environment for stocks
generally and financial stocks in particular. Strong corporate
earnings, corporate stock buybacks, favorable investor fund
flows, and low interest rates were all positive factors in the
market's rise. Additionally, a few cyclical industry groups
whose companies' operations fare well in an expansion, but
whose prospects had been underappreciated (due to a previous
disbelief that the economic expansion could really continue),
came to life. This includes such groups as trucking and air
transportation, retailing, and certain materials groups.
Additionally, as inflation continued low, pricing power
became an issue for many companies. Most growth companies
generate the bulk of their earnings expansion by turning out
rapidly increasing units. A typical value company, on the other
hand, may experience solid unit growth, but frequently it is
price per unit and attention to cost controls which drives
earnings. In fiscal year 1997, those cyclical industries where
limited supply and strong demand gave companies pricing power,
such as cement and oil drilling, did well on a relative basis
compared to other heavy
4
<PAGE>
industries more subject to either adequate domestic capacity or
foreign competition. Technology stocks, while volatile, again
outperformed the broader market. The market favored cyclical
issues towards the end of the fiscal year partly in a rotation
away from large multinational companies whose earnings suffered
from the strong dollar.
The Fund's weightings in the
following industries helped
performance, as did stock
selection within industries and
the owning of a number of merger
targets: the financial sector,
including money center banks,
brokers and insurers; offshore
oil drilling and oil service;
integrated international energy
companies; "value" technology
issues, both hardware and
software; cement; retail; and
air freight. Certain special
situations
investments--companies with
unique, slow to be recognized
investment appeal--added to the
portfolio's outperformance. The
upwards revaluing of stocks
opportunistically purchased when
temporarily out of favor also
helped portfolio performance.
While underweighted versus the
Russell Index, the portfolio's
exposure to utilities, both
electric and telephone, hurt
performance, as did a moderate
position in oil refining, an
industry we believe is likely to
slowly become significantly more
profitable. (As noted below, the
Value Equity Fund returned
44.59% for the year and compared
favorably with the Russell 1000
Value Index.)
PERFORMANCE RESULTS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
For the one-year period ended September 30,
MEASURING RISK AND RETURN
VALUE EQUITY FUND VS
RUSSELL 1000 VALUE INDEX
FOR 10-YEAR PERIOD ENDED 9/30/97
VALUE EQUITY RUSSELL 1000 VALUE
<S> <C> <C>
Return 12.16% 14.81%
Risk 15.66% 13.11%
This chart compares the historical average annual
total return and the risk (as measured by the stan-
dard deviation) of the Value Equity Fund and the
Russell 1000 Value Index for the ten-year period ended
9/30/97. The Russell 1000 Value Index is a representative
market index for this Fund. See the Core Equity
Fund chart (p. 2) for a definition of standard
deviation.
</TABLE>
1997, the Value Equity Fund returned 44.59%, outpacing the
42.31% return of the Russell 1000 Value Index, an unmanaged
representative index reflecting the performance of 705 stocks
with a less-than-average growth orientation. For the five-and
ten-year periods ended September 30, 1997, the Fund produced
annual returns of 20.12% and 12.16%, respectively, compared to
annualized returns of 21.69% and 14.81% for the Russell 1000
Value Index. The Fund's risk profile, as measured by standard
deviation, versus the market (the Russell 1000 Value) is
reflected in the chart above.
The Value Equity Fund's return of 44.59% for the one-year
period ended September 30, 1997--the best return of any Trust
fund--easily outperformed the 35.76% return of the Lipper
Growth and Income Funds Average, a representative performance
benchmark, for the same period. The Value Fund's performance
placed
5
<PAGE>
it in the top 8% of its Lipper grouping (42nd out of 576
funds). For the five years ended September 30, 1997, the Fund's
annualized return was 20.12%, outpacing the Lipper benchmark
return of 18.66% per annum for the period. For the recent ten-
year period, the Fund returned 12.16% per year versus the
13.17% annualized return for the Lipper benchmark. Past
performance cannot predict future results.
<TABLE>
<CAPTION>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
VALUE EQUITY FUND VS RUSSELL 1000 VALUE INDEX
<S> <C> <C>
87 $10,000.00 $10,000.00
88 $9,231.61 $9,461.53
89 $11,504.09 $12,147.56
90 $8,728.36 $10,293.02
91 $11,798.94 $13,271.05
92 $12,600.91 $14,915.97
93 $14,545.43 $18,699.00
94 $14,858.53 $18,570.93
95 $17,923.62 $23,712.99
96 $21,790.68 $27,969.27
97 $31,507.78 $39,803.60
Value Equity: $31,508
Russell 1000: $39,804
Growth of $10,000
Value Equity Russell 1000
1 year $14,459 $14,231
5 year $25,004 $26,685
10 year $31,508 $39,804
Cumulative Returns
1 year 44.59% 42.31%
5 year 150.04% 166.85%
10 year 215.08% 298.04%
Average Annual Returns
1 year 44.59% 42.31%
5 year 20.12% 21.69%
10 year 12.16% 14.81%
</TABLE>
VALUE EQUITY FUND VS LIPPER GROWTH
AND INCOME FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
VALUE EQUITY FUND(1) 44.59% 20.12% 12.16%
Lipper Growth & Income Funds Avg.(2) 35.76 18.66 13.17
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
EMERGING GROWTH EQUITY FUND
The Emerging Growth Equity Fund, a fund that has above-average
volatility, seeks capital appreciation through investment in
quality growth stocks of smaller companies--those in the $50
million to $750 million capitalization range at time of
purchase.
MARKET ENVIRONMENT
For the one-year period ended September 30, 1997, economic
growth, as measured by the Gross Domestic Product ("GDP"), was
quite strong. For the fourth quarter 1996, the GDP was 4.3%,
annualized; for the first quarter 1997, it stood at 4.9%,
annualized, but declined to 3.3%, annualized, for the second
quarter, 1997. For the final quarter of fiscal year 1997, the
GDP grew
at a 3.5% annual rate. The domestic equity markets during the
period showed strong double digit returns as corporate earnings
growth continued to show solid gains and inflation remained
rather stable (2.2% level for this one-year period). Strong
economic growth and superior stock market results were achieved
despite an interest rate environment that experienced both
rising rates during the first quarter, 1997, followed by
generally declining rates thereafter.
Small capitalization companies peaked on June 5, 1996 and
were quite volatile through the market low, which occurred on
April 25, 1997. During this period, the Russell 2000 Growth
Index, an appropriate benchmark for small capitalization growth
stocks, declined 20.08%, while the broad equity market (S&P 500
Index) was up 14.86%. For the first two quarters of fiscal year
1997, the Russell 2000 Growth Index experienced returns of
+0.27% and -10.49%, respectively. However,
6
<PAGE>
subsequent to the market low for small cap stocks on April
25th, the Russell 2000 Growth Index rose 42.64% through
September 30, 1997 while the broad equity market was up not
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
quite half as much at 24.81%.
MEASURING RISK AND RETURN
EMERGING GROWTH EQUITY FUND VS
RUSSELL 2000 GROWTH INDEX
FOR 10-YEAR PERIOD ENDED 9/30/97
EMERGING GROWTH RUSSELL 2000 GROWTH
<S> <C> <C>
Return 16.59% 10.32%
Risk 22.55% 21.80%
This chart compares the historical average annual
total return and the risk (as measured by the stan-
dard deviation) of the Emerging Growth Equity
Fund and the Russell 2000 Growth Index for the ten-year period
ended 9/30/97. The Russell 2000 Index is a representa-
tive market index for this Fund. See the Core
Equity Fund chart (p. 2) for a definition of stan-
dard deviation.
</TABLE>
The major turnaround in this market--subsequent to its
low--provided for a respectable return for the year, with the
Russell 2000 Growth Index returning 23.35%. The Russell 2000,
an index that includes both small cap value and growth stocks,
rose 33.19% for the one-year period. However, the broad equity
market (which contains a high percentage of large cap stocks),
was up over 40% for the year. (For comparative purposes, in
fiscal year 1996, the Russell 2000 Growth Index rose 12.61% and
the Russell 2000 Index returned 13.13% while the S&P 500
reflected a 20.36% result.)
The Emerging Growth Equity Fund is managed by two
investment managers under sub-advisory agreements with
Retirement System Investors Inc. Effective April 1, 1997, the
HLM Management Company, Inc. ("HLM") replaced The Putnam
Advisory Company, Inc. ("Putnam") whose contract was
terminated. Friess Associates, Inc. ("Friess") has been the
other portfolio manager since January 1, 1990. As of September
30, 1997, Friess was managing 65% of the assets of the Fund and
HLM was managing the remaining 35%.
Friess is a small market capitalization, aggressive
growth-oriented manager. At the start of the year, Friess
maintained over 83% of the portfolio assets in consumer,
technology and energy sectors of the market. Exposure moderated
somewhat in the consumer areas during the year, with large
increases in the energy and financial areas.
Friess turned in an exceptionally strong performance for
fiscal year 1997, with a gross return of 46.21% for its portion
of the Fund, or 22.86% higher than the Russell 2000 Growth
Index. (For fiscal year 1996, Friess' gross return was 20.86%,
and exceeded the 12.61% return of the Russell 2000 Growth Index
by 8.25%.) Of particular importance to the success of Friess'
performance in fiscal year 1997 was the dramatic shift away
from technology in the first half, when the sector was
exceptionally weak. Exposure dropped from almost 33% of the
portfolio to under 20%. In sharp contrast, by early April,
Friess had aggressively added back to its technology positions,
moving total exposure in the second half of the year to almost
30% of the portfolio at a time when technology stocks resumed
their rapid stock price appreciation in the marketplace.
Friess maintains strategic locations in key geographic
areas in the U.S. This structure facilitates Friess' analysts
in making direct contact with company management, as well as
with customers, suppliers and competitors. This enables each
analyst to identify those companies with dramatically positive
sales and earnings growth prospects, strong order flow and
important market share growth trends well before the investment
marketplace in general. At September 30, 1997, the portion of
the Fund's portfolio managed by Friess held 88 stocks (up from
74 holdings at September 30, 1996).
7
<PAGE>
HLM (and Putnam before) invests in small capitalization
stocks and is a more conservative emerging growth company
manager than Friess. It invests in high-quality emerging
companies that are entrepreneurially managed, rapidly growing
and have the potential to become profitable industry leaders.
At time of purchase, the companies will normally have a market
value of $100-$500 million. A substantial majority of HLM's
portfolio companies have completed IPO's within the past four
years. For the six months ended March 31, 1997, when Putnam
managed the portfolio, the gross return was -16.31%, an
underperformance versus the Russell 2000 Growth Index return of
6.06%. During this period, negative performing sectors,
principally technology and health care, were the two major
underachievers, and contributed significantly to the shortfall
in performance vis-a-vis the market.
HLM's gross performance for the six months ended September
30, 1997, at 26.25%, trailed the Russell 2000 Growth Index by
11.19% (the Russell 2000 Growth Index returned 37.44%). HLM
inherited the portfolio from Putnam and restructured it in
April, a month which resulted in serious underperformance, and
significantly affected their results for the six months ended
September 30, 1997. Since the market low, HLM's gross
performance, at 37.59%, achieved a return that was in line with
the Russell 2000 Index, but trailed the Russell 2000 Growth
Index, which returned 42.64%. Larger than normal earnings
surprises in technology and biotechnology, coupled with heavy
weightings in healthcare services and commercial services
(which underperformed during this period), were the principal
reasons for the shortfall in performance. The strongest
contributors to HLM's performance were in energy, electronics,
healthcare and business services sectors.
For the past six months, HLM's industry concentrations have
not shifted meaningfully as the focus has remained on
healthcare, technology and the broadly defined consumer and
business services sector. Although small stocks' performance
was improving in the latter part of the year, it was only in
September that the performance also encompassed the lower end
of the small cap market where HLM focuses, and where 32% of
their portfolio was positioned at fiscal year end. (At
September 30, 1997, the average market cap was $444 million for
HLM and $555 million for Friess.) At September 30, 1997, the
portion of the Fund managed by HLM held 57 stocks, of which
only four overlapped with the Friess holdings. Despite the
major differences in performance results achieved by the
managers, the Fund's net return, as noted below, outperformed
the Russell 2000 Growth Index by 259 basis points for the year.
<TABLE>
<CAPTION>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
EMERGING GROWTH EQUITY FUND VS RUSSELL 2000 GROWTH INDEX
<S> <C> <C>
87 $10,000.00 $10,000.00
88 $9,144.41 $8,394.72
89 $10,550.41 $10,368.05
90 $8,223.09 $7,647.93
91 $12,820.77 $11,531.19
92 $13,326.13 $11,505.87
93 $19,511.30 $14,863.80
94 $19,753.00 $14,994.00
95 $28,882.44 $19,218.90
96 $36,841.87 $21,642.11
97 $46,399.77 $26,696.49
Emerging Growth: $46,400
Russell 2000 Growth: $26,696
Growth of $10,000
Emerging Growth Equity Russell 2000 Growth
1 year $12,594 $12,335
5 year $34,819 $22,203
10 year $46,400 $26,696
Cumulative Returns
1 year 25.94% 23.35%
5 year 248.19% 132.03%
10 year 364.00% 166.96%
Average Annual Returns
1 year 25.94% 23.35%
5 year 28.34% 18.33%
10 year 16.59% 10.32%
</TABLE>
PERFORMANCE RESULTS
The Emerging Growth Equity Fund
achieved a return of 25.94% for
the one-year period
ended September 30, 1997, exceeding the 23.35% return of the
Russell 2000 Growth Index, a representative index that reflects
the performance of the small company growth securities
component of the Russell 2000 Index. Over the longer term (five
and ten years ended September 30, 1997), the Fund also easily
8
<PAGE>
outperformed the Russell 2000 Growth Index, achieving an
average annual return of 28.34% and 16.59% per year,
respectively, compared to the 18.33% and 10.32% return per year
for the Russell 2000 Growth Index. The Fund's risk profile (as
measured by standard deviation) versus the market (the Russell
2000 Index) is reflected in the chart on page 7.
For the one-year period ended September 30, 1997, the
Emerging Growth Fund produced a return of 25.94%, compared to
the Lipper Small Company Growth Funds Average return of 29.79%.
The Fund's five-year return of 28.34%, annualized, outperformed
its Lipper benchmark by 726 basis points and placed it in the
top 4% of its Lipper grouping (5th out of 125 funds). For the
longer term (ten years ended September 30, 1997), the Emerging
Growth Equity Fund, with an annualized return of 16.59%,
reflected a performance advantage over the 14.29% per year
return of the Lipper benchmark. This return placed the Fund in
the top 24% of its Lipper grouping for the same time period
(12th out of 52 funds). Past performance cannot predict future
results.
EMERGING GROWTH EQUITY FUNDS VS LIPPER SMALL COMPANY GROWTH
FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
EMERGING GROWTH EQUITY FUND(1) 25.94% 28.34% 16.59%
Lipper Small Company Growth Funds Avg.(2) 29.79 21.08 14.29
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
INTERNATIONAL EQUITY FUND
The International Equity Fund seeks capital appreciation over
time by investing in stocks that are headquartered in foreign
countries, in order to take advantage of opportunities outside
the U.S. capital markets. While holdings are principally
concentrated in the larger markets abroad (including small
capitalization companies), some investments are also made in
emerging markets. The portfolio manager, Morgan Grenfell
Investment Services Ltd. ("Morgan Grenfell"), looks for
companies whose current prices, in their view, do not reflect
their true earnings potential, and for stocks that are
misperceived by investors, and therefore, are selling at
undervalued prices. (Morgan Grenfell manages under a
sub-advisory agreement with Retirement System Investors Inc.)
MARKET ENVIRONMENT
The continuation of the favorable conditions of 1996, namely,
benign inflation, stable to low interest rates and continuing
improvements in productivity and corporate profits, allowed
Western equity markets to produce strong returns in the year
ended September 30, 1997. Similar returns to the exceptionally
strong performance in the U.S. were also forthcoming in many
European markets, where
9
<PAGE>
lower interest rates, driven by EMU convergence, allowed equity
markets to prosper. Stunning performances were seen from
smaller European markets, such as Finland (+63%) and Spain
(+58%), and "core" Europe--France and Germany--which returned
23.8% and 31.3%, respectively. The returns of these markets
contrasted vividly with the returns produced by the markets of
the East. The Japanese economy, having produced strong growth
in 1996, began to labor under the burden of fiscal tightening,
continued bad debt problems in the construction and banking
industries and various corporate mismanagement scandals. These
factors culminated in the
10
<PAGE>
second quarter, with GDP growth
reflecting the worst figure seen
for 23 years. The stocks sold
off and so the largest market in
the world outside the U.S.
returned -15.7% in dollar terms
during the period under review.
Japan was not alone in
having problems. The minor
markets of Asia underwent
considerable turmoil, as
currency weakness dragged down
equity markets and threatened
the stability of the entire
section. Worst hit was Thailand
(-63.7%), followed by the
Philippines (-48.0%) and
Indonesia (-31.2%). Hong Kong
was a notable exception
(+20.9%), where confidence was
maintained and the hand over to
China in June proceeded without
incident.
In contrast to the emerging
markets of the East were those
in Latin America, which
performed extremely strongly.
Governments aware of the
problems associated with the
Mexican Peso devaluation of 1994
pursued responsible fiscal and
monetary policies, aided by
strong returns in the U.S.,
Mexico (which returned 59.2%),
and Brazil (which was up 60.7%).
Overall, the MSCI Emerging
Markets Free Index returned
6.6%, while the
broader MSCI EAFE returned 12.2% for fiscal year 1997.
The Fund's portfolio manager did not significantly alter
strategy during the year, although the Japanese weighting was
reduced further to 25% versus an average index weighting of
32%. The portfolio's overweighted position in Hong Kong (high
of 8.4%) was reduced in the second quarter and was at a
neutrally weighted position versus the index (3.7%) at fiscal
year end. Small positions in the emerging markets were
maintained. In Europe, the peripheral markets continued to be
favored, with a significant underweighting evident in Germany
(3.9% vs. 8.4%). Latin American positions were also maintained
with a slight preference to Brazil and Mexico. As a result of
strong stock selection, positive asset allocation, and
successful hedging, the International Equity Fund reflected a
gross return of 15.08% for the fiscal year, or 290 basis points
ahead of the non-U.S. stock markets, as measured by the MSCI
EAFE Index, which returned 12.18%. For the past three fiscal
years, the MSCI EAFE Index has significantly trailed the U.S.
stock market performance, with returns of 5.80% in 1995, 8.61%
in 1996 and 12.18% for 1997, versus the S&P 500, which returned
29.72%, 20.36% and 40.50%, respectively, for these periods.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
INTERNATIONAL EQUITY FUND VS
MSCI EAFE
FOR 10-YEAR PERIOD ENDED 9/30/97
INTERNATIONAL EQUITY MSCI EAFE
<S> <C> <C>
Return 5.77% 5.93%
Risk 12.74% 16.16%
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 9/30/97. The MSCI EAFE is a repre-
sentative market index for this Fund. See the
Core Equity Fund chart (p. 2) for a definition of
standard deviation.
</TABLE>
11
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND VS MSCI EAFE
<S> <C> <C>
87 $10,000.00 $10,000.00
88 $8,543.23 $9,916.28
89 $10,221.24 $12,127.44
90 $8,683.07 $8,779.19
91 $10,038.19 $10,701.98
92 $9,698.56 $9,940.56
93 $11,787.85 $12,560.46
94 $13,064.06 $13,791.42
95 $13,808.52 $14,592.62
96 $15,523.87 $15,851.69
97 $17,527.39 $17,783.22
International Equity: $17,527
MSCI EAFE: $17,783
Growth of $10,000
International Equity MSCI EAFE
1 year $11,291 $11,218
5 year $18,072 $17,888
10 year $17,527 $17,783
Cumulative Returns
1 year 12.91% 12.18%
5 year 80.72% 78.88%
10 year 75.27% 77.83%
Average Annual Returns
1 year 12.91% 12.18%
5 year 12.56% 12.33%
10 year 5.77% 5.93%
</TABLE>
PERFORMANCE RESULTS
For the one-year period ended September 30, 1997, the
International Equity Fund returned
12.91%, versus the MSCI EAFE Index return of 12.18%. For the
recent five-year period, at 12.56% annualized, the Fund
outperformed the EAFE Index, which returned 12.33% per annum
for the period. For the ten years ended September 30, 1997, the
International Fund produced a return of 5.77%, annualized,
compared to the MSCI EAFE Index per year return of 5.93%.
During this period, the Fund had a much lower risk exposure, as
measured by standard deviation, than the MSCI EAFE Index (see
chart on page 11).
The International Equity Fund's return of 12.91% for the
one-year period ended September 30, 1997 underperformed the
18.59% return of the Lipper International Funds Average, the
Fund's benchmark. For the trailing five- and ten-year periods
ended September 30, 1997, the Fund returned 12.56% and 5.77%
per annum, respectively, versus an annualized return of 13.80%
and 7.84%, respectively, for the Lipper benchmark. Past
performance cannot predict future results.
INTERNATIONAL EQUITY FUND VS LIPPER INTERNATIONAL FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
INTERNATIONAL EQUITY FUND(1) 12.91% 12.56% 5.77%
Lipper International Funds Avg.(2) 18.59 13.80 7.84
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
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.
The Fund has been managed by
Retirement System Investors Inc.
exclusively since August 2,
1993.
MARKET ENVIRONMENT
The environment for fixed-income
investors was characterized by a
strong economy and low inflation
during the fiscal year ended
September 30, 1997. Interest
rates in the intermediate and
longer maturities traded in a
range of 6% to 7% during the
year. The bond market rallied
during the final quarter of
1996, but reversed early in
1997, when investors perceived
that the economy was stronger
than expected. Reflecting strong
consumer demand, the Federal
Reserve raised the Federal Funds
rate to 5.50% from 5.25% on
March 25. During the second
quarter of 1997, consumer
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
spending slowed and inflation
MEASURING RISK AND RETURN
ACTIVELY MANAGED BOND FUND VS
LEHMAN BROTHERS AGGREGATE BOND INDEX
FOR 10-YEAR PERIOD ENDED 9/30/97
ACTIVELY MANAGED LEHMAN BROS.
<S> <C> <C>
Return 8.70% 9.47%
Risk 5.34% 4.80%
This chart compares the historical average annual
total return and the risk (as measured by the stan-
dard deviation) of the Actively Managed Bond
Fund and the Lehman Bros. Aggregate Bond Index
for the ten-year period ended 9/30/97. Lehman
Bros. is a representative market index for this
Fund. See the Core Equity Fund chart (p. 2) for a
definition of standard deviation.
</TABLE>
continued stable to lower. Interest rates trended lower
throughout most of the second and third quarters of 1997. The
30-year Treasury ended the September 1997 fiscal year at 6.4%
versus 6.9% the year before; the ten-year Treasury declined to
6.1% from 6.7%; the five year Treasury dropped to 6.0% from
6.5%; and the two year Treasury decreased to 5.8% from 6.1%.
Interest rates ranged from lows in July of 6.3% for the 30-year
Treasury and 6.0% for the ten-year Treasury, to highs in March
of 7.1% for the bond and 6.9% for the note.
The performance of fixed-income investments varied with
duration and spreads between sectors in fiscal 1997. Declining
rates and a flattening yield curve raised prices and total
return as investors extended out on the curve. The yield spread
between the three-month Treasury bill and the 30-year bond
contracted to 131 basis points at the end of fiscal 1997, from
176 basis points the year before. Short interest rates were
relatively stable in fiscal 1997, between 5% and 5.50%, despite
the 25 basis points increase in the Federal Funds rate to
5.50%, where it has been maintained since March. Within
fixed-income sectors, long duration Governments and
non-callable corporates outperperformed mortgages and other
callable issues in fiscal 1997.
The Actively Managed Bond Fund began fiscal 1997 with a
duration of 5.3 years, which was gradually raised to 5.8 years
at September 30, 1997. The Lehman
13
<PAGE>
Brothers Aggregate Bond Index had a modified duration of 4.5
years at the end of fiscal 1997. Investment changes during the
year primarily consisted of buying Federal agency bonds and
mortgages to obtain higher yields.
The Fund maintained high quality, with 26% in U.S.
Treasuries, 27% in Federal agency notes and bonds, 11% in
Federal agency mortgage pass thrus, 33% in agency
collateralized mortgage obligations, 2% in corporates, and 1%
in cash, as of fiscal year end. (The quality of holdings is
restricted to "A" or better, and at least 65% of holdings must
be U.S. Government or agency issues.)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ACTIVELY MANAGED BOND FUND VS LEHMAN BROTHERS AGGREGATE BOND INDEX
<S> <C> <C>
87 $10,000.00 $10,000.00
88 $11,018.21 $11,329.43
89 $11,948.75 $12,604.30
90 $12,532.06 $13,556.21
91 $14,774.78 $15,723.20
92 $16,698.08 $17,697.65
93 $18,641.77 $19,464.95
94 $17,710.70 $18,837.01
95 $20,102.94 $21,481.98
96 $20,925.27 $22,535.57
97 $23,032.07 $24,724.87
Actively Managed: $23,032
Lehman Bros. Index: $24,725
Growth of $10,000
Actively Managed Bond Fund LB Agg. Bond Index
1 year $11,007 $10,971
5 year $13,793 $13,971
10 year $23,032 $24,725
Cumulative Returns
1 year 10.07% 9.71%
5 year 37.93% 39.71%
10 year 130.32% 147.25%
Average Annual Returns
1 year 10.07% 9.71%
5 year 6.64% 6.92%
10 year 8.70% 9.47%
</TABLE>
PERFORMANCE RESULTS
The Actively Managed Bond Fund
posted a return of 10.07% for
the one-year period
ended September 30, 1997, outperforming the 9.71% return of the
Lehman Brothers Aggregate Bond Index, a representative market
index. For the recent five-year period, the Fund's annualized
return was 6.64%, compared to the market index return of 6.92%
per annum. Over the longer term, ten years ended September 30,
1997, the Fund had a return of 8.70% per year compared to the
9.47% annualized return of the Lehman Brothers Aggregate Bond
Index. During this ten-year period, the Fund's risk profile, as
measured by standard deviation, exceeded that of 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, 1997, with a return of
10.07%, compared to the 8.71% return of the benchmark. With
this return, the Fund achieved a top 12% ranking within its
Lipper grouping (20th out of 180 funds). Over the longer term
(five and ten years ended September 30, 1997), the Fund
continued to outpace its Lipper benchmark, with annualized
returns of 6.64% and 8.70%, respectively, versus the 5.71% and
8.11% per year returns for the Lipper benchmark. For these
periods, the Fund achieved a top 17% (13th out of 79 funds) and
top 25% ranking (12th out of 49 funds), respectively, in the
Lipper grouping. Past performance cannot predict future
results.
14
<PAGE>
ACTIVELY MANAGED BOND FUND VS LIPPER U.S. GOVERNMENT BOND FUNDS
AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
ACTIVELY MANAGED BOND FUND(1) 10.07% 6.64% 8.70%
Lipper U.S. Government Bond Funds
Avg.(2) 8.71 5.71 8.11
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
---------------------------------------------------------------
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 more favorable environment for fixed-income investors (as
discussed under the Actively Managed Bond Fund) also had a
positive impact on 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 was
increased to 3.4 years at
September 30, 1997, from 3.2
years at the start of fiscal
year 1997, after reaching a low
in April of 2.5 years. The
Lehman Brothers
Government-Intermediate Bond
Index, a representative proxy
for this Fund, reflected a
modified duration of three years
for the year.
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, 100% of
the holdings were in "AAA"
securities, including 8% in U.S.
Treasuries, 55% in agency
mortgage pass thrus and
collateralized mortgage
obligations, and 37% in Federal
agency notes and bonds. (The
quality of holdings is
restricted to "A" or better, and
at least 65% of holdings must be
U.S. Government or agency
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
issues.)
MEASURING RISK AND RETURN
INTERMEDIATE-TERM BOND FUND VS
LEHMAN BROTHERS GOVERNMENT-
INTERMEDIATE BOND INDEX
FOR 10-YEAR PERIOD ENDED 9/30/97
INTERMEDIATE-TERM LEHMAN BROS.
<S> <C> <C>
Return 7.97% 8.38%
Risk 3.71% 3.86%
This chart compares the historical average annual
total return and the risk (as measured by the stan-
dard deviation) of the Intermediate-Term Bond
Fund and the Lehman Bros. Government-Inter-
mediate Bond Index for the ten-year period ended
9/30/97. Lehman Bros. is a representative market
index for this Fund. See the Core Equity Fund chart
(p. 2) for a definition of standard deviation.
</TABLE>
15
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERMEDIATE-TERM LEHMAN BROTHERS GOVERNMENT-
BOND FUND VS INTERMEDIATE BOND INDEX
<S> <C> <C>
1987 $10,000.00 $10,000.00
1988 $11,035.88 $11,062.69
1989 $12,004.06 $12,126.88
1990 $13,033.63 $13,165.97
1991 $14,821.48 $14,955.21
1992 $16,513.81 $16,818.56
1993 $17,707.99 $18,104.80
1994 $17,332.67 $17,833.12
1995 $19,106.89 $19,724.05
1996 $19,993.99 $20,730.40
1997 $21,529.37 $22,353.99
Intermediate-Term Bond: $21,529
Lehman Brothers Index: $22,354
Growth of $10,000
Intermediate-Term Bond Fund LB Gov't-Inter. Bond Index
1 year $10,768 $10,783
5 year $13,037 $13,291
10 year $21,529 $22,354
Cumulative Returns
1 year 7.68% 7.83%
5 year 30.37% 32.91%
10 year 115.29% 123.54%
Average Annual Returns
1 year 7.68% 7.83%
5 year 5.45% 5.86%
10 year 7.97% 8.38%
</TABLE>
PERFORMANCE RESULTS
The Intermediate-Term Bond Fund
posted a return of 7.68% for the
one-year period
ended September 30, 1997, versus the 7.83% return for the
Lehman Brothers Government-Intermediate Bond Index, a
representative market index. For the five years ended September
30, 1997, the Fund returned 5.45%, compared to 5.86% for the
market index. For the ten-year period ended September 30, 1997,
the Intermediate-Term Bond Fund achieved an annualized return
of 7.97%, while the market index returned 8.38% 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, 1997, the Fund
had a return of 7.68% versus 6.99% for the Lipper
Short-Intermediate (one to five years maturity) U.S. Government
Funds Average, the Fund's performance benchmark. This
performance placed the Fund in the top 20% (19th out of 96
funds) in its Lipper grouping. For the recent five- and
ten-year periods, the Fund's annualized returns of 5.45% and
7.97% respectively, outperformed the Lipper benchmark for both
periods by 48 and 26 basis points, per year, respectively. Past
performance cannot predict future results.
INTERMEDIATE-TERM BOND FUND VS LIPPER SHORT-INT. U.S. GOV'T.
FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
INTERMEDIATE-TERM BOND FUND(1) 7.68% 5.45% 7.97%
Lipper Short-Intermediate (1 to 5
years maturity) U.S. Gov't. Funds
Avg.(2) 6.99 4.97 7.71
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index
and are net of all expenses other than sales charges and
redemption fees.
16
<PAGE>
---------------------------------------------------------------
17
<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 were stable in the last quarter of
1996 and most of the first quarter of 1997, until the Federal
Reserve increased the Fed Funds' rate by 25 basis points to
5.50% in late March. With inflationary fears declining, short
interest rates again began to decline in April. The 90-Day
Treasury bill reached its low of 4.93% in May, and then it
became somewhat volatile rising to 5.23% in June and July.
Subsequently, the trend was down and the 90-Day Treasury bill
ended the fiscal year at 5.09% versus 5.16% at September 30,
1996.
During the one year ended September 30, 1997, the
Short-Term Investment Fund's average maturity peaked at 120
days on September 30, 1997, nearly twice the 67 days at
September 30, 1996. Short intersector yield spreads (e.g.,
one-month commercial paper versus two-year Treasury note)
narrowed from 80 basis points on September 30, 1996 to 28 basis
points on September 30, 1997. Most other intersector spreads
also narrowed as the yield curve flattened. Investment changes
during the fiscal year included increasing the average maturity
through purchases of high quality corporate notes and callable
Federal agencies in the six to 12-month maturity range to
increase yield. The high quality of the Fund was maintained,
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
with 100% of holdings rated "AA" or better at year end.
MEASURING RISK AND RETURN
SHORT-TERM INVESTMENT FUND VS
SALOMON BROS. 6-MONTH U.S. TREASURY BILLS
FOR 10-YEAR PERIOD ENDED 9/30/97
SHORT-TERM INVESTMENT SALOMON BROS. T-BILLS
<S> <C> <C>
Return 5.44% 5.86%
Risk 1.00% 0.82%
This chart compares the historical average annual
total return and the risk (as measured by the stan-
dard deviation) of the Short-Term Investment
Fund and the Salomon Bros. 6-Month U.S. Treasury Bills for the
ten-year period ended 9/30/97. T-Bills are a
representative market index for this Fund. See the Core
Equity Fund chart (p. 2) for a definition of stan-
dard deviation.
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SHORT-TERM SALOMON BROS. 6-MONTH U.S.
INVESTMENT FUND VS TREASURY BILLS
<S> <C> <C>
87 $10,000.00 $10,000.00
88 $10,706.35 $10,664.40
89 $11,658.73 $11,586.30
90 $12,630.81 $12,541.72
91 $13,438.73 $13,393.61
92 $13,942.69 $13,997.72
93 $14,262.66 $14,459.49
94 $14,686.62 $15,011.11
95 $15,446.55 $15,897.35
96 $16,190.48 $16,769.02
97 $16,982.40 $17,678.65
Short-Term: $16,982
Salomon Bros. T-Bills: $17,679
Growth of $10,000
Short-Term Investment Salomon Bros. Treasury Bills
1 year $10,489 $10,542
5 year $12,180 $12,630
10 year $16,982 $17,679
Cumulative Returns
1 year 4.89% 5.42%
5 year 21.80% 26.30%
10 year 69.82% 76.79%
Average Annual Returns
1 year 4.89% 5.42%
5 year 4.02% 4.78%
10 year 5.44% 5.86%
</TABLE>
PERFORMANCE RESULTS
For the one-year period ended
September 30,
1997, the Short-Term Investment Fund returned 4.89% versus the
4.86% for the Lipper Retail Money Funds Average, an unmanaged
index of money funds that
18
<PAGE>
reflects performance after fees and expenses are taken out.
Salomon Brothers 6-Month U.S. Treasury Bills (an unmanaged
index which provides a representative proxy for the short-term
fixed-income securities market) returned 5.42% for this period.
For the five-year period ended September 30, 1997, the Fund
returned 4.02% annually, compared to the 4.19% annualized
return of its Lipper benchmark, and the 4.78% return per year
for the Salomon Brothers index. The Fund's 5.44% annualized
return for the ten-year period ended September 30, 1997,
matched the 5.44% per year return of the Lipper benchmark, and
trailed the 5.86% annualized return of the Salomon Brothers
6-Month U.S. Treasury Bills for the same period. Both the Fund
and the Salomon Brothers 6-Month 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 LIPPER RETAIL MONEY FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
-----------------------
1 Year 5 Years 10 Years
---------- ---------- -----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENT FUND(1) 4.89% 4.02% 5.44%
Lipper Retail Money Funds Average(2) 4.86 4.19 5.44
</TABLE>
1. All performance results shown are net of management fees
and all related 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.
---------------------------------------------------------------
DEDICATED BOND FUND
The Dedicated Bond Fund currently has no unitholders. However,
since the Fund remains open to investors, we are required to
provide investment information about the Fund.
The Fund may be used by employers to cover future
retirement benefits for a defined group of retirees by matching
plan assets to liabilities. The Fund seeks to achieve a target
rate of return for each employer's portfolio (i.e., the life of
the retiree liability) that is competitive with the long-term,
high-quality bond yields at the time the employer allocates
assets to the Fund. It provides a predictable cash flow which,
for this Fund, is more important than attempting to maximize
yield in the selection of fixed-income securities.
The following shows the historical performance of the Fund
through April 1992 (when the last investor withdrew from the
Fund), as compared to the Lehman Brothers Government/Corporate
Bond Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DEDICATED LEHMAN BROTHERS GOVERNMENT/
BOND FUND VS CORPORATE BOND INDEX
<S> <C> <C>
6/85 10,000.00 10,000.00
9/85 9,990.00 10,200.00
86 12,199.79 12,310.11
87 12,249.81 12,263.59
88 14,019.90 13,831.47
89 15,539.66 15,396.31
90 16,489.14 16,436.02
91 19,119.15 19,042.22
4/92 19,989.07 19,876.74
Dedicated Bond Fund: $19,989
Lehman Brothers Index: $19,887
GROWTH OF $10,000*
Short-Term Investment 90-Day Treasury Bills
1 year $11,080 $11,078
5 year $15,840 $15,860
Inception** $19,989 $19,877
CUMULATIVE RETURNS*
1 year 10.80% 10.78%
5 year 58.40% 58.60%
Inception** 99.90% 98.77%
AVERAGE ANNUAL RETURNS*
1 year 10.80% 10.78%
5 year 9.64% 9.66%
Inception** 10.67% 10.58%
* All periods ended 4/30/92
** Inception 7/1/85
</TABLE>
19
<PAGE>
COMBINED FINANCIAL STATEMENTS
RSI RETIREMENT TRUST
Combined Statement of Assets and Liabilities September 30,
1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$447,601,618)--Note 2(A) $634,392,119
Cash 720,216
Receivable for investments sold 2,804,040
Receivable for units sold 5,256,096
Dividends and interest receivable 2,708,878
Other assets 141,039
Net gain on forward foreign currency contracts 44,339
------------
646,066,727
LIABILITIES:
Payable for investments purchased $ 2,188,360
Advances from custodian 135,636
Options written, at value (premiums received $17,947) 47,275
Payable for units redeemed 838,094
Payable to investment managers 273,896
Accrued expenses 502,390
Other liabilities 5,020 3,990,671
----------- ------------
NET ASSETS--Note 5 $642,076,056
------------
------------
</TABLE>
Combined Statement of Operations Year Ended September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $17,585,765
Dividends (net of foreign taxes of $28,314) 5,639,264
-----------
Total Income $ 23,225,029
Expenses:
Investment managers's fees--Note 3(A) 3,469,637
Shareholder servicing fees and expenses--Note 3(B) 2,730,235
Custodian fees and expenses 344,212
Legal and auditing fees 147,228
Consultant fees 83,919
Trustees' fees and expenses--Note 3(C) 219,823
Other 326,923
-----------
Total Expenses 7,321,977
Less fees paid indirectly--Note 4 (84,891)
Less expense reimbursement--Note 3(A) (116,575)
-----------
Net Expenses 7,120,511
------------
INVESTMENT INCOME--NET 16,104,518
REALIZED AND UNREALIZED GAIN ON INVESTMENTS, STOCK OPTIONS,
AND FOREIGN CURRENCIES--Note 4:
Net realized gain on:
Investments 87,290,893
Options written 122,201
Foreign currency transactions 155,945
-----------
87,569,039
-----------
Unrealized appreciation (depreciation) on:
Investments 29,209,106
Options written (29,328)
Foreign currency translations of other assets and
liabilities 37,009
-----------
29,216,787
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
FOREIGN CURRENCIES AND STOCK OPTIONS 116,785,826
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $132,890,344
------------
------------
</TABLE>
See Notes to Financial Statements
20
<PAGE>
RSI RETIREMENT TRUST (CONTINUED)
Combined Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
------------- -------------
<S> <C> <C>
OPERATIONS
Investment income--net $ 16,104,518 $ 17,580,891
Net realized gain 87,569,039 34,031,060
Net unrealized appreciation 29,216,787 32,838,455
------------- -------------
Net increase in net assets resulting from operations 132,890,344 84,450,406
------------- -------------
CAPITAL TRANSACTIONS--Note 5
Value of units sold 134,275,808 91,183,749
Value of units redeemed (277,141,568) (121,085,914)
------------- -------------
Net (decrease) in net assets resulting from capital
transactions (142,865,760) (29,902,165)
------------- -------------
Net increase (decrease) (9,975,416) 54,548,241
NET ASSETS at beginning of year 652,051,472 597,503,231
------------- -------------
NET ASSETS at end of year $ 642,076,056 $ 652,051,472
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements
21
<PAGE>
FINANCIAL STATEMENTS OF INVESTMENT FUNDS
CORE EQUITY FUND
Statement of Investments September 30, 1997
--------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- ------------
<C> <S> <C> <C>
COMMON STOCKS 98.7%
AEROSPACE 9.0%
145,000 Allied Signal Inc. $ 6,162,500
4,400 Boeing Corp. 239,525
119,300 Lockheed Martin Corp. 12,720,362
------------
19,122,387
------------
BANKING 6.2%
55,800 BankAmerica Corp. 4,090,838
32,488 Chase Manhattan Corp. 3,833,584
38,900 Citicorp 5,210,169
------------
13,134,591
------------
BUILDING PRODUCTS 3.2%
90,500 Armstrong World
Industries Inc. 6,069,156
22,000 Martin Marietta Materials 792,000
------------
6,861,156
------------
CHEMICALS 2.3%
81,000 E.I. Du Pont De Nemours &
Company 4,986,563
------------
COMPUTER SYSTEMS 5.4%
36,200 EMC Corp.* 2,113,175
84,800 Hewlett Packard Corp. 5,898,900
33,500 International Business
Machines Corp. 3,548,905
------------
11,560,980
------------
DRUG AND HEALTH CARE 9.7%
230,800 Johnson & Johnson 13,299,850
72,800 Merck & Company, Inc. 7,275,450
------------
20,575,300
------------
ELECTRONICS AND
ELECTRICAL 12.8%
25,400 Cisco Systems Inc.* 1,855,788
115,800 Emerson Electric Company 6,672,975
84,400 General Electric Corp. 5,744,475
140,700 Intel Corp. 12,997,163
------------
27,270,401
------------
ENERGY 12.0%
38,400 Amoco Corp. 3,700,800
138,000 Dresser Industries Inc. 5,934,000
157,600 Royal Dutch Petroleum
Company 8,746,800
114,800 Texaco Inc. 7,053,025
------------
25,434,625
------------
</TABLE>
See Notes to Financial Statements 22
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1997
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- ------------
<C> <S> <C> <C>
FINANCIAL SERVICES 9.1%
200,700 Federal National Mortgage
Association $ 9,432,900
46,000 Morgan (J.P.) & Company
Inc. 5,226,750
37,800 Sunamerica, Inc. 1,481,288
44,400 Sunamerica, Inc. Pfd 2,036,850
15,700 Travelers Group, Inc. 1,071,525
------------
19,249,313
------------
FOOD AND SERVICES 0.8%
37,100 Dole Food Company 1,676,455
------------
HOUSEHOLD PRODUCTS 1.0%
31,800 Procter & Gamble Corp. 2,196,187
------------
INSURANCE 2.5%
65,300 Allstate Corp. 5,248,487
------------
MACHINERY / GENERAL 0.1%
1,700 Snap-On Tools Inc. 78,306
------------
MACHINERY AND ENGINEERING 3.0%
14,100 Cincinnati Milacron Inc. 378,938
29,700 Deere & Company 1,596,375
99,900 Ingersoll-Rand Corp. 4,301,944
------------
6,277,257
------------
METALS AND MINING 1.5%
3,600 Aluminum Company of
America 295,200
4,100 Phelps Dodge Corp. 318,263
32,300 Potash Corp of
Saskatchewan 2,535,550
------------
3,149,013
------------
MULTI INDUSTRY 1.6%
82,100 Philip Morris Companies
Inc. 3,412,281
------------
<CAPTION>
Shares Value
- ---------- ------------
<C> <S> <C> <C>
OFFICE AND BUSINESS
EQUIPMENT 3.6%
92,200 Xerox Corp. $ 7,762,087
------------
PHARMACEUTICALS 2.4%
84,800 Pfizer Inc. 5,093,300
------------
RETAIL 0.1%
600 Federated Department
Stores* 25,875
------------
SOFTWARE 6.2%
13,100 Cadence Design Systems
Inc.* 700,850
49,050 Computer Associates
International, Inc. 3,522,403
243,800 Oracle Systems Corp.* 8,883,463
------------
13,106,716
------------
TELECOMMUNICATIONS 6.2%
150,700 GTE Corp. 6,838,013
51,741 Lucent Technologies, Inc. 4,210,424
42,000 Tellabs Inc.* 2,163,000
------------
13,211,437
------------
Total Common and Preferred Stocks (Cost
$73,410,719) $209,432,717
------------
<CAPTION>
Principal
Amount
- ----------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 0.4%
$ 930,082 Bear Stearns & Co. Inc.
Dated 9/30/1997 5.92% Due
10/1/97 Collateralized by
$1,160,000 United States
Treasury Strips Due
2/15/2001 (Value
$951,560) $ 930,082
------------
Total Investments (Cost
$74,340,801) 99.1% $210,362,799
------------
Other Assets, Less Liabilities 0.9% 1,910,623
------ ------------
Net Assets 100.0% $212,273,422
------ ------------
------ ------------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 23
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$74,340,801)--Note 2(A) $210,362,799
Receivable for investments sold 93,434
Receivable for units sold 1,703,187
Dividends and interest receivable 391,270
Other assets 38,741
------------
212,589,431
LIABILITIES:
Payable for units redeemed $ 132,515
Payable to investment managers 93,603
Accrued expenses 89,891 316,009
---------- ------------
NET ASSETS at value, applicable to 2,788,994 outstanding
units of beneficial interest--Note 5 $212,273,422
------------
------------
NET ASSET VALUE offering and redemption price per unit
($212,273,422 divided by 2,788,994 units) $ 76.11
------------
------------
</TABLE>
Statement of Operations Year Ended September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $3,761,748
Interest 262,607
----------
Total Income $ 4,024,355
Expenses:
Investment manager's fees--Note 3(A) 1,131,713
Shareholder servicing fees and expenses--Note 3(B) 690,850
Custodian fees and expenses 43,019
Legal and auditing fees 21,471
Consultant fees 10,917
Trustees' fees and expenses--Note 3(C) 27,646
Other 68,727
----------
Total Expenses 1,994,343
------------
INVESTMENT INCOME--NET 2,030,012
REALIZED AND UNREALIZED GAIN--Note 4:
Net realized gain on:
Investments 45,040,377
Options written 153,070
----------
45,193,447
----------
Unrealized appreciation on investments 19,327,785
----------
NET REALIZED AND UNREALIZED GAIN 64,521,232
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 66,551,244
------------
------------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 2,030,012 $ 2,854,402
Net realized gain 45,193,447 9,678,626
Net unrealized appreciation 19,327,785 26,737,020
------------ ------------
Net increase in net assets resulting from operations 66,551,244 39,270,048
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 25,795,510 17,141,226
Value of units redeemed (97,429,664) (28,996,541)
------------ ------------
Net (decrease) in net assets resulting from capital transactions (71,634,154) (11,855,315)
------------ ------------
Net increase (decrease) (5,082,910) 27,414,733
NET ASSETS at beginning of year 217,356,332 189,941,599
------------ ------------
NET ASSETS at end of year $212,273,422 $217,356,332
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements
25
<PAGE>
VALUE EQUITY FUND
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C> <C>
COMMON STOCKS 97.3%
AEROSPACE 4.3%
22,700 Allied Signal Inc. $ 964,750
8,800 Lockheed Martin Corp. 938,300
8,500 United Technologies Corp. 688,500
-----------
2,591,550
-----------
AUTOMOBILES 3.1%
22,700 Chrysler Corp. 835,644
6,700 Ford Motor Company 303,175
11,300 General Motors Corp. 756,394
-----------
1,895,213
-----------
BANKING 11.4%
8,000 Banc One Corp. 446,500
14,000 BankAmerica Corp. 1,026,375
13,200 Chase Manhattan Corp. 1,557,600
12,900 Citicorp 1,727,794
30,400 Mellon Bank Corp. 1,664,400
10,000 Royal Bank of Canada 491,875
-----------
6,914,544
-----------
CHEMICALS 1.4%
13,700 E.I. Du Pont De Nemours &
Company 843,405
-----------
COMPUTER SYSTEMS 7.5%
19,300 EMC Corp.* 1,126,638
18,600 International Business
Machines Corp. 1,970,437
14,800 Seagate Technology Inc.* 534,650
19,000 Sun Microsystems Inc.* 888,250
-----------
4,519,975
-----------
DRUG AND HEALTH CARE 7.6%
3,900 American Home Products
Corp. 284,700
8,300 Amgen* 397,363
22,300 Bristol-Myers Squibb
Company 1,845,325
14,300 Manor Care Inc 475,475
22,100 Mylan Laboratories 495,869
37,175 Tenet Healthcare
Corporation* 1,082,722
-----------
4,581,454
-----------
ELECTRONICS AND
ELECTRICAL 2.8%
9,900 Intel Corp. 914,513
26,100 Kemet Corp.* 792,788
-----------
1,707,301
-----------
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C> <C>
ENERGY 11.7%
16,521 British Petroleum $ 1,500,313
37,300 Diamond Offshore Drilling 2,058,494
21,600 Dresser Industries Inc. 928,800
10,300 Exxon Corp. 659,843
11,000 Texaco Inc. 675,813
25,800 Tosco Corporation 898,163
10,400 Ultramar Diamond Shamrock 336,050
-----------
7,057,476
-----------
ENTERTAINMENT 1.2%
24,800 Carmike Cinemas* 744,000
-----------
FINANCIAL SERVICES 5.8%
17,000 Federal National Mortgage
Association 799,000
6,150 Sunamerica, Inc. 241,003
32,100 Sunamerica, Inc. Pfd 1,472,588
14,700 Travelers Group, Inc. 1,003,275
-----------
3,515,866
-----------
FOOD AND SERVICES 1.5%
20,300 Dole Food Company 917,306
-----------
FOREST PRODUCTS AND PAPER 0.5%
3,800 Mead Corp. 274,550
-----------
INSURANCE 3.3%
18,100 Allstate Corp. 1,454,788
14,400 Hartford Life 553,500
-----------
2,008,288
-----------
MACHINERY/GENERAL 2.0%
26,800 Snap-On Tools Inc. 1,234,475
-----------
MACHINERY AND ENGINEERING 2.6%
23,400 Cincinnati Milacron Inc. 628,875
17,600 Deere & Company 946,000
-----------
1,574,875
-----------
MATERIALS & SERVICES 5.2%
9,400 Federal Express
Corporation* 752,000
19,700 Medusa Corporation 938,213
4,000 MS Carriers* 106,000
20,000 Southdown Inc 1,092,500
11,200 Werner Enterprises Inc 273,000
-----------
3,161,713
-----------
METALS AND MINING 2.6%
7,200 Aluminum Company of
America 590,400
2,000 Phelps Dodge Corp. 155,250
10,800 Potash Corp of
Saskatchewan 847,800
-----------
1,593,450
-----------
</TABLE>
See Notes to Financial Statements 26
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C> <C>
MULTI INDUSTRY 1.5%
21,700 Philip Morris Companies
Inc. $ 901,906
-----------
OFFICE AND BUSINESS
EQUIPMENT 2.6%
27,600 Lexmark Intl Group Inc -
Cl A* 910,800
7,600 Xerox Corp. 639,825
-----------
1,550,625
-----------
RETAIL 4.6%
25,100 Federated Department
Stores* 1,082,438
18,400 Kmart Finan. $3.875 Conv
Pref T 1,076,400
10,800 Sears Roebuck & Company 614,925
-----------
2,773,763
-----------
SOFTWARE 1.7%
9,200 Cadence Design Systems
Inc.* 492,200
7,200 Computer Associates
International, Inc. 517,050
-----------
1,009,250
-----------
TELECOMMUNICATIONS 5.3%
8,800 Bell Atlantic Corp 707,850
19,700 GTE Corp. 893,888
14,800 MCI Communications 433,825
30,400 U S West Inc.* 1,170,400
-----------
3,205,963
-----------
UTILITIES 7.1%
33,900 Cinergy Corp. 1,133,530
5,400 Duke Power Co. 266,963
25,000 Nicor Inc. 937,500
14,400 Peoples Energy Corp. 542,700
26,300 US West Media Group 586,816
40,500 Washington Water Power
Company 810,000
-----------
4,277,509
-----------
Total Common and Preferred Stocks (Cost
$45,201,718) $58,854,457
-----------
<CAPTION>
Principal
Amount Value
- ---------- -----------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 1.1%
$ 652,341 Bear Stearns & Co. Inc.
Dated 9/30/1997 5.92% Due
10/1/97 Collateralized by
$2,680,000 United States
Treasury Strips Due
2/15/2019 (Value
$665,819) $ 652,341
-----------
</TABLE>
<TABLE>
<CAPTION>
Expiration
Date/
# of Strike
Contracts Price
- ---------- -----------
<C> <S> <C> <C> <C>
LONG CALL OPTIONS
2 S&P 500 Oct
1997/4.5
Total long call options (premiums
paid $4,252) $ 900
-----------
Total Investments (Cost $45,858,311) 98.5% $59,507,698
-----------
WRITTEN COVERED CALL OPTIONS
2 Allstate Corp. Oct 1997/75 (1,150)
12 BankAmerica Corp. Oct
1997/125 (12,750)
12 Diamond Offshore Drilling Dec 1997/85 (15,600)
6 EMC Corp. Oct
1997/42.50 (9,375)
7 Mead Corp. Jan
1998/65.00 (5,950)
7 Travelers Group Inc. Dec
1997/70.00 (2,450)
-----------
Total written call options (premiums received $17,947) $ (47,275)
-----------
</TABLE>
<TABLE>
<S> <C> <C>
Other Assets, Less
Liabilities 1.5 % 928,649
------ -----------
Net Assets 100.0 % $60,389,072
------ -----------
------ -----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 27
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$45,858,311)--Note 2(A) $ 59,507,698
Receivable for investments sold 1,342,540
Receivable for units sold 544,293
Dividends and interest receivable 94,295
Other assets 15,575
------------
61,504,401
LIABILITIES:
Options written, at value (premiums received $17,947) $ 47,275
Payable for investments purchased 953,643
Payable for units redeemed 36,230
Payable to investment managers 21,120
Accrued expenses 57,061 1,115,329
---------- ------------
NET ASSETS at value, applicable to 1,052,751 outstanding
units of beneficial interest--Note 5 $ 60,389,072
------------
------------
NET ASSET VALUE offering and redemption price per unit
($60,389,072 divided by 1,052,751 units) $ 57.36
------------
------------
</TABLE>
Statement of Operations Year Ended September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 1,233,339
Interest 150,452
------------
Total Income $ 1,383,791
Expenses:
Investment manager's fees--Note 3(A) 239,747
Shareholder servicing fees and expenses--Note 3(B) 301,337
Custodian fees and expenses 39,196
Legal and auditing fees 19,072
Consultant fees 10,917
Trustees' fees and expenses--Note 3(C) 27,646
Other 40,526
------------
Total Expenses 678,441
Less fees paid indirectly--Note 4 (9,084)
------------
Net Expenses 669,357
------------
INVESTMENT INCOME--NET 714,434
REALIZED AND UNREALIZED GAIN (LOSS)--Note 4:
Net realized gain (loss) on:
Investments 16,040,493
Options written (30,869)
------------
16,009,624
------------
Unrealized appreciation (depreciation) on:
Investments 4,213,116
Options written (29,328)
------------
4,183,788
------------
NET REALIZED AND UNREALIZED GAIN 20,193,412
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 20,907,846
------------
------------
</TABLE>
See Notes to Financial Statements
28
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
------------ -----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 714,434 $ 963,025
Net realized gain 16,009,624 4,551,286
Net unrealized appreciation 4,183,788 3,977,314
------------ -----------
Net increase in net assets resulting from operations 20,907,846 9,491,625
------------ -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 11,173,465 6,089,364
Value of units redeemed (23,923,187) (7,173,870)
------------ -----------
Net (decrease) in net assets resulting from capital transactions (12,749,722) (1,084,506)
------------ -----------
Net increase 8,158,124 8,407,119
NET ASSETS at beginning of year 52,230,948 43,823,829
------------ -----------
NET ASSETS at end of year $ 60,389,072 $52,230,948
------------ -----------
------------ -----------
</TABLE>
See Notes to Financial Statements
29
<PAGE>
EMERGING GROWTH EQUITY FUND
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C> <C>
COMMON STOCKS 94.7%
APPAREL AND TEXTILE 0.9%
10,000 Dress Barn* $ 240,000
19,000 Goody's Family Clothing,
Inc.* 612,750
-----------
852,750
-----------
AUTOMOTIVE PRODUCTS 1.1%
15,600 Copart Inc.* 274,950
33,000 Keystone Automotive Inds,
Inc.* 697,125
-----------
972,075
-----------
BROADCASTING & PUBLISHING 0.7%
21,400 Metro Networks, Inc* 644,675
-----------
BUILDING AND CONSTRUCTION 2.5%
40,700 Dycom Industries, Inc.* 903,031
20,000 Lone Star Technology* 1,043,750
10,000 NS Group, Inc.* 323,750
-----------
2,270,531
-----------
BUSINESS AND PUBLIC
SERVICES 5.2%
36,300 Americredit Corp.* 1,034,550
20,000 Cotelligent Group Inc.* 410,000
7,400 Edutrek Int'l Inc A* 194,250
15,000 Hagler Bailly, Inc.* 380,625
50,000 Hospitality World Wide
Services* 656,250
11,600 IMC Mortgage, Inc.* 178,350
2,800 Lasalle Partners Inc* 98,000
20,500 Learning Tree
International, Inc.* 581,687
18,100 Medallion Financial Corp 389,150
13,400 Sirrom Capital Corp 695,125
16,200 Viisage Technology Inc* 178,200
-----------
4,796,187
-----------
COMMERCIAL SERVICES 5.6%
13,500 Advanced Health Corp* 298,688
9,300 AHL Services, Inc* 168,563
12,500 Applied Graphics
Technologies* 700,000
37,600 Intelliquest Information
Grp* 789,600
10,000 Jackson Hewitt, Inc.* 375,000
10,200 Lason Holdings Inc.* 280,500
30,900 NFO Research, Inc.* 834,300
44,200 Profit Recovery Group,
Intl.* 801,125
29,500 Superior Services Inc.* 840,750
-----------
5,088,526
-----------
CONSUMER GOODS AND
SERVICES 4.3%
29,300 Ballantyne of Omaha Inc.* 564,025
25,000 Central Garden & Pet
Inc.* 759,375
17,500 French Fragrances, Inc.* 203,438
20,000 Maximus, Inc* 578,750
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C> <C>
20,000 Quicksilver, Inc.* $ 730,000
25,300 Waste Industries Inc* 604,037
20,000 Windmere Corp. 476,250
-----------
3,915,875
-----------
DATA PROCESSING 2.3%
36,200 HPR Inc.* 791,875
12,500 Micros Systems, Inc.* 620,313
28,300 Sequent Computer Systems
Inc.* 700,425
-----------
2,112,613
-----------
ELECTRONICS AND
ELECTRICAL 13.0%
34,100 Actel Corp.* 656,425
8,200 Adflex Solutions* 199,875
42,400 Audiovox Corp--Cl A* 431,950
18,400 Burr-Brown Corp* 614,100
18,000 CFM Technologies Inc.* 695,250
14,400 Electro Science Inds
Inc.* 878,400
50,600 Endosonics Corp.* 736,863
25,000 Exar Corporation* 656,250
23,000 Faro Technologies Inc.* 376,625
26,400 General Cable Corp* 937,200
22,700 Lecroy Corp* 1,004,475
23,100 PMC- Sierra, Inc.* 586,163
15,000 Qlogic* 626,250
17,000 Reptron Electronics Inc.* 310,250
8,800 Sawtek, Inc.* 403,700
28,000 Sipex Corporation* 889,000
15,000 Tech Data Corp.* 690,000
52,000 Viewlogic Systems Inc.* 1,238,250
-----------
11,931,026
-----------
ENERGY 10.5%
27,800 Basin Exploration* 465,650
41,900 Benton Oil & Gas Co* 780,388
28,800 EVI, Inc.* 1,843,200
24,200 Global Industries Ltd.* 964,975
26,000 Oceaneering Intl.* 619,125
59,400 Parker Drilling Co* 902,138
10,000 Precision Drilling Corp.* 638,750
20,000 Quaker State Oil 341,250
31,200 Snyder Oil Corp.* 707,850
30,900 Tom Brown Inc.* 757,050
16,000 Trico Marine Service
Inc.* 554,000
25,000 Veritas Dgc, Inc.* 1,064,062
-----------
9,638,438
-----------
FOOD AND SERVICES 3.1%
15,900 CKE Restaurants, Inc. 667,800
13,600 Dreyer's Grand Ice Cream,
Inc. 693,600
</TABLE>
See Notes to Financial Statements 30
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
FOOD AND SERVICES--Continued
<C> <S> <C> <C>
35,000 Foodmaker, Inc.* $ 658,438
31,800 Logan's Roadhouse, Inc.* 802,950
-----------
2,822,788
-----------
INSURANCE 1.1%
30,000 FPA Medical Management* 1,023,750
-----------
LODGING/MOTELS 1.4%
20,000 Capstar Hotel, Co.* 671,250
27,500 Prime Hospitality Corp.* 620,469
-----------
1,291,719
-----------
MACHINERY AND ENGINEERING 1.7%
30,000 American Eco Corp.* 391,875
25,200 Iteq,inc.* 348,075
13,000 Veeco Instruments Inc.* 820,625
-----------
1,560,575
-----------
MEDICAL SERVICES AND
DRUGS 11.1%
10,000 ABR Information Services
Inc.* 274,375
16,100 Advance Paradigm Inc.* 334,075
52,000 Bio Technology General
Corp.* 776,750
3,500 Boron Lepore & Assoc* 80,938
2,236 Caridovascular Dynamics,
Inc.* 17,609
26,000 Cooper Companies Inc* 955,500
44,500 Coventry Corp.* 731,469
18,100 Curative Health Services,
Inc.* 556,575
22,600 Hanger Orthopedic Group,
Inc.* 337,587
34,700 Healthcare Recoveries,
Inc.* 763,400
32,900 Intensiva Healthcare
Corp* 230,300
9,200 Kos Pharmaceuticals Inc.* 327,750
30,000 Medical Resources Inc.* 581,250
57,300 Novacare, Inc.* 988,425
23,900 Perclose, Inc.* 525,800
32,450 Renal Care Group Inc.* 1,160,086
17,000 Res Care, Inc.* 408,000
19,900 Sunrise Assisted Living
Ltd.* 716,400
9,800 Vertex Pharmaceuticals,
Inc* 369,950
-----------
10,136,239
-----------
MISC MATERIALS AND
COMMODITIES 0.5%
28,000 Altron Inc.* 467,250
-----------
PRINTING 1.5%
28,000 Consolidated Graphics,
Inc.* 1,389,500
-----------
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C> <C>
REAL ESTATE 1.0%
23,550 Fairfield Communities
Inc.* $ 884,596
-----------
RETAIL 5.5%
50,000 Ames Dept Stores Inc.* 737,500
30,000 Cato Corp.--Cl A 268,125
29,800 Delia's, Inc.* 666,775
25,300 Macfrugals* 771,650
20,000 Paul Harris Stores* 547,500
35,000 Stage Stores Inc.* 1,500,625
18,000 Stein Mart, Inc.* 589,500
-----------
5,081,675
-----------
SOFTWARE 12.6%
10,300 Advantage Learning
Systems* 256,213
16,975 Computer Learning
Centers* 657,780
25,000 Creative Computer Inc* 312,500
3,800 Data General Corp.* 101,175
25,000 Digi International Inc.* 353,125
53,000 DSP Communications Inc.* 1,106,375
25,000 DSP Group, Inc.* 981,250
24,000 Insight Enterprises Inc.* 801,000
44,100 Linens 'n Things Inc.* 1,477,350
13,500 Lycos, Inc* 457,313
20,000 Mapics, Inc.* 255,000
12,100 Phoenix Int'l Ltd* 287,375
27,900 Platinum Software Corp.* 320,850
20,000 Pomeroy Computer
Resources* 850,000
31,900 Radisys Corp* 1,602,975
25,000 RWD Technologies Inc* 568,750
16,600 STB Systems, Inc.* 603,825
40,000 System Software* 585,000
-----------
11,577,856
-----------
TECHNOLOGY 0.7%
10,000 General Scanning Inc* 347,500
8,600 Rohr, Inc.* 266,063
-----------
613,563
-----------
TELECOMMUNICATIONS 5.2%
15,000 Allen Telecom, Inc.* 427,500
20,600 Boston Technology Inc.* 697,825
18,900 Cable Design
Technologies* 719,380
32,000 LCC International Inc--Cl
A* 688,000
20,250 Level One Communications* 815,063
12,500 Natural Microsystems
Corp.* 471,875
17,200 Nice Systems Ltd Spons
Adr* 967,500
-----------
4,787,143
-----------
</TABLE>
See Notes to Financial Statements 31
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
TRANSPORTATION 3.2%
<C> <S> <C> <C>
20,700 Allied Holdings, Inc* $ 445,050
44,300 American Freightways
Corp.* 830,625
10,000 Celadon Group, Inc.* 145,000
2,000 Eagle USA Airfreight
Inc.* 67,000
27,000 Hunt (JB) Transport
Services, Inc.* 420,187
23,700 Knight Transport Inc.* 633,975
20,000 Skywest Inc. 395,000
-----------
2,936,837
-----------
Total Common Stocks (Cost $61,565,833) $86,796,187
-----------
<CAPTION>
Principal
Amount Value
- ---------- -----------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT 3.8%
$3,452,832 Bear Stearns & Co. Inc.
Dated 9/30/1997 5.92% Due
10/1/97 Collateralized by
$5,755,000 United States
Treasury Strips Due
2/15/2007 (Value
($3,217,390) and 375,000
United States Treasury
Strips Due 2/15/2001
(Value $307,616) $ 3,452,832
-----------
Total Investments (Cost
$65,018,665) 98.5% $90,249,019
Other Assets, Less Liabilities 1.5% 1,339,639
------ -----------
Net Assets 100.0% $91,588,658
------ -----------
------ -----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 32
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$65,018,665)--Note 2(A) $ 90,249,019
Receivable for investments sold 1,179,851
Receivable for units sold 762,363
Dividends and interest receivable 24,486
Other assets 16,347
------------
92,232,066
LIABILITIES:
Payable for investments purchased $422,223
Payable for units redeemed 57,146
Payable to investment managers 73,658
Accrued expenses 90,381 643,408
---------- ------------
NET ASSETS at value, applicable to 1,084,298 outstanding
units of beneficial interest--Note 5 $ 91,588,658
------------
NET ASSET VALUE offering and redemption price per unit
($91,588,658 divided by 1,084,298 units) $ 84.47
------------
------------
</TABLE>
Statement of Operations Year Ended September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 111,303
Interest 330,192
-----------
Total Income $ 441,495
Expenses:
Investment manager's fees--Note 3(A) 987,520
Shareholder servicing fees and expenses--Note 3(B) 471,372
Custodian fees and expenses 84,021
Legal and auditing fees 21,870
Consultant fees 10,917
Trustees' fees and expenses--Note 3(C) 54,454
Other 46,776
-----------
Total Expenses 1,676,930
Less fees paid indirectly--Note 4 (55,467)
-----------
Net Expenses 1,621,463
-----------
INVESTMENT (LOSS)--NET (1,179,968)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 20,339,766
Unrealized appreciation on investments 1,076,088
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 21,415,854
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $20,235,886
-----------
-----------
</TABLE>
See Notes to Financial Statements
33
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net $ (1,179,968) $ (1,250,419)
Net realized gain 20,339,766 15,317,099
Net unrealized appreciation 1,076,088 6,281,307
------------ ------------
Net increase in net assets resulting from operations 20,235,886 20,347,987
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 15,421,504 10,600,409
Value of units redeemed (36,204,646) (13,437,810)
------------ ------------
Net (decrease) in net assets resulting from capital transactions (20,783,142) (2,837,401)
------------ ------------
Net increase (decrease) (547,256) 17,510,586
NET ASSETS at beginning of year 92,135,914 74,625,328
------------ ------------
NET ASSETS at end of year $ 91,588,658 $ 92,135,914
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements
34
<PAGE>
INTERNATIONAL EQUITY FUND
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -------- ------------
<C> <S> <C> <C>
COMMON STOCKS 97.1%
APPAREL AND TEXTILE 1.3%
5,200 Gucci Group Nv $ 240,473
5,900 Hennes & Mauritz Ser "B" 257,943
------------
498,416
------------
AUTOMOBILES 3.2%
11,000 Bridgestone Corp 264,228
15,230 Scania Ab 461,973
20,000 Suzuki Motor Corp. 192,166
18,000 UMW Hldgs Berhad 36,094
290 Volkswagen Ag 201,221
------------
1,155,682
------------
BANKING 8.6%
4,000 Banco Popular Esp 257,434
14,000 Bank of Tokyo-Mitsubishi Bank 266,713
24,200 Barclays Plc Ord 654,607
4,700 Credit Commercial De France 275,715
13,231 Far East Bank & Trust 19,837
21,000 Guoco Group 83,853
3,150 HSBC Holdings UK 111,973
5,200 HSBC Holdings HK 174,039
500 Malayan Banking Bhd 2,514
19,350 National Westminster 292,731
7,900 Nordbanken AB 269,845
20,678 Overseas Chinese Bank 143,260
14,000 Standard Chartered Plc 191,780
12,000 Sumitomo Trust & Bank 119,275
33,000 Westpac Banking Corporation 207,899
------------
3,071,475
------------
BROADCASTING & PUBLISHING 1.3%
14,900 Flextech Ord Gbp* 144,778
2,200 Wolters Kluwer Cva 296,811
------------
441,589
------------
BUILDING PRODUCTS 2.1%
4,464 Asia Cement GDS 66,675
28,000 Blue Circle Industries 181,377
68,000 Boral Limited 205,877
46,000 Cemex SA 273,320
------------
727,249
------------
<CAPTION>
Shares Value
- -------- ------------
<C> <S> <C> <C>
BUSINESS AND PUBLIC SERVICES 6.4%
8,000 Asatsu Inc. $ 202,105
12,000 Canon Inc. 350,868
7,244 Getronics Nv 226,851
18,742 Logica 267,487
1,460 SAP AG Non Voting Preferred 391,000
5,000 Secom Company 337,532
52,500 Securicor Group 228,983
10,100 Securitas Ab 240,429
------------
2,245,255
------------
CHEMICALS 4.1%
40,000 Asahi Chemical Industries 201,774
6,660 Basf AG 240,956
390 Clariant Ag-reg 314,197
3,000 Novo-Nordisk AS 335,476
13,000 Shin-etsu Chemical Co. 357,494
------------
1,449,897
------------
CONSTRUCTION AND HOUSING 1.6%
282,200 DMCI Holdings Inc.* 22,592
3,000 Hyundai Eng And Con-St 59,076
16,000 Kajima Corp. 70,372
12,000 Sekisui House 114,305
6,450 Skanska Ab 280,713
------------
547,058
------------
CONSUMER GOODS AND SERVICES 0.6%
3,100 Cap Gemini SA 201,189
------------
ELECTRONICS AND ELECTRICAL 13.8%
6,900 Advanced Semiconductor GDR* 168,188
2,700 Alcatel Alsthom 359,107
5,030 ASM Lithography 505,929
12,000 Ericsson Tel 576,856
36,300 General Electric Corp. 229,572
32,000 Hitachi Ltd. 278,309
19,000 Matsushita Electric Industrial
Corp. 343,082
7,000 Matsushita Electric Works 73,056
3,940 Nokia AB 374,889
5,800 Philips Electronic 490,958
4,000 Rohm Co. 470,475
982 Samsung Electronics 71,441
5,070 SGS-Thomson Micro* 477,752
4,600 Sony Corp. 434,361
------------
4,853,975
------------
</TABLE>
See Notes to Financial Statements 35
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -------- ------------
ENERGY 4.2%
<C> <S> <C> <C>
139,600 Centrica Plc Ord $ 208,597
35,628 ENI Spa 224,233
49,000 Lasmo Ord 215,301
4,100 PTT Exploration and Prd 54,892
44,700 Shell Transport & Trading 327,465
3,900 Total 446,393
------------
1,476,881
------------
FINANCIAL SERVICES 2.6%
2,410 Cetelem 274,629
40,000 Fomento Econ Mexico 344,672
4,167 ING Groep NV 191,433
7,000 Nomura Securities Company Ltd. 91,030
------------
901,764
------------
FOOD AND SERVICES 2.7%
167,000 Goodman Fielder Lt 269,675
29,500 Grand Metropolitan 282,113
37,200 Morrison Supermarket 126,496
190 Nestle SA 265,060
------------
943,344
------------
FOREST PRODUCTS AND PAPER 0.8%
7,500 Mo Och Domsjo 281,900
------------
HEALTH AND PERSONAL CARE 8.1%
140 Ares Serono Group B 252,570
14,000 Astra Ab-A Shares 258,491
34,500 British Biotech 87,777
16,000 Glaxo Wellcome 360,428
56,000 Kalbe Farma 42,412
14,526 Medeva 49,042
275 Novartis AG 422,270
25 Roche Holding Ag 222,066
15,000 Sankyo Company 519,345
29,100 Smithkline Beecham 284,400
2,110 Synthelabo 249,691
5,000 Yamanouchi Pharm 123,417
------------
2,871,909
------------
INDUSTRIAL COMPONENTS 2.0%
31,454 BICC 84,346
20,000 NSK 85,481
19,000 Sumitomo Electric Industries 272,262
3,967 Valeo 260,133
------------
702,222
------------
<CAPTION>
Shares Value
- -------- ------------
<C> <S> <C> <C>
INSURANCE 3.7%
12,100 Malaysian Assurance Alliance $ 32,662
40,146 Royal & Sun Alliance Insurance
Group 381,653
6,000 Skandia Forsakrings Ab 268,250
24,000 Tokio Marine & Fire 288,248
775 Zurich Versicherun 337,798
------------
1,308,611
------------
LEISURE 1.6%
12,500 Granada Group 176,886
48,000 Magnum Cp Bhd 42,202
29,200 Rank Group Ord 172,405
4,900 Sony Music Entertainment 170,464
------------
561,957
------------
MACHINERY AND ENGINEERING 5.3%
220 ABB AG 324,485
12,600 British Aerospace 338,589
6,890 Cardo AB 213,993
4,794 IHC Caland Nv 302,424
45,000 Kawasaki Heavy Industries 155,430
18,000 Mitsubishi Heavy Industries 98,551
68,000 Rolls Royce 281,209
33,000 Utd Tractors 45,693
36,600 Vickers Plc 126,229
------------
1,886,603
------------
METALS AND MINING 3.7%
30,000 Mitsubishi Materials 89,953
160,000 NKK Corp. 214,695
59,000 North Ltd. 208,279
20 Pohang Iron & Steel 1,230
13,000 Ssab (svenskt Stal) Ser "A" 268,316
910 Thyssen Ag 212,534
15,000 Usinor Sacilor 303,175
------------
1,298,182
------------
MATERIALS AND COMMODITIES 1.4%
7,000 De Beers Cons Mines ADR 206,063
42,000 Ioi Corp. 42,498
1,800 SGL Carbon AG 262,940
------------
511,501
------------
MULTI INDUSTRY 1.2%
28,000 Hutchison Whampoa 275,893
38,000 Wharf Holdings 139,950
------------
415,843
------------
</TABLE>
See Notes to Financial Statements 36
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -------- ------------
REAL ESTATE 2.8%
<C> <S> <C> <C>
26,000 Cheung Kong Holdings $ 292,305
49,000 DBS Land 119,135
67,000 Hong Kong Land Hld ADR 227,800
13,000 Mitsubishi Estate 189,515
13,000 Mitsui Fudosan Co. 158,288
------------
987,043
------------
RETAIL 2.4%
7,341 Ahold Ntfl 198,523
3,800 Familymart Co 166,190
7,000 Ito-yokado Co. 379,196
7,576 Kingfisher Plc Ord 103,462
------------
847,371
------------
TELECOMMUNICATIONS 5.8%
41,300 British Telecom 273,202
46 DDI Corp. 230,897
32,883 General Cable Corp* 60,556
34 Nippon Tel & Tel Corp. 312,600
60,300 Telecom Ital Mobile 239,159
60,000 Telecom Services Telecom
Italia Spa 233,279
7,000 Telefonica De Espana 220,092
8,000 Telefonos De Mexico ADR 414,000
28,000 Tenaga Nasional 75,581
------------
2,059,366
------------
TRANSPORTATION 1.3%
16,100 British Airways 176,464
8,900 Railtrack Group Plc Ord 128,962
33,000 Tobu Railways Co 135,849
------------
441,275
------------
<CAPTION>
Shares Value
- -------- ------------
<C> <S> <C> <C>
UTILITIES 3.7%
10,000 Electrobras Cent El ADR Repr
50 Pfd Cl B Shs $ 277,935
46,000 Hong Kong Electric 171,196
14,170 Manila Electric Co B 49,090
20,300 National Power Ord 186,754
2,300 Telebras Telec Bra ADR Repr
1000 Pfd* 296,125
5,180 Veba Ag 302,232
------------
1,283,332
------------
WHOLESALE INTERNATIONAL TRADE 0.8%
30,000 Mitsubishi Corp. 290,733
------------
Total Equity Securities (Cost $28,052,593) $ 34,261,622
------------
<CAPTION>
Principal
Amount
- --------
<C> <S> <C> <C>
FIXED INCOME INVESTMENTS
$100,000 Yang Ming Marine
2.00% Convertible Bonds
Due 06/10/2001, (Cost
$115,212) 0.3% $ 111,500
------------
Total Investments (Cost $28,167,805) 97.4% $ 34,373,122
Other Assets, Less Liabilities 2.6% 903,173
------ ------------
Net Assets 100.0% $ 35,276,295
------ ------------
------ ------------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 37
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Geographical Diversification September 30, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of Net Assets
--------------------------------------------
Common and
Preferred Bonds and
Country Stocks Notes Total
- ---------------------------------------------- ---------------- -------------- ----------
<S> <C> <C> <C>
Japan 22.7% - % 22.7%
United Kingdom 19.0 - 19.0
Sweden 9.6 - 9.6
France 8.1 - 8.1
Netherlands 6.9 - 6.9
Switzerland 6.1 - 6.1
Germany 4.6 - 4.6
Hong Kong 3.9 - 3.9
Mexico 2.9 - 2.9
Australia 2.5 - 2.5
Spain 2.1 - 2.1
Italy 2.0 - 2.0
Finland 1.1 - 1.1
Denmark 1.0 - 1.0
Brazil 0.8 - 0.8
Singapore 0.7 - 0.7
Malaysia 0.7 - 0.7
Taiwan 0.7 0.3 1.0
South Africa 0.6 - 0.6
South Korea 0.4 - 0.4
Philippines 0.3 - 0.3
Thailand 0.2 - 0.2
Indonesia 0.2 - 0.2
--
--- ---
Total Investments 97.1% 0.3% 97.4%
Other Assets Less Liabilities 2.6%
---
Total 100.0%
---
---
</TABLE>
See Notes to Financial Statements
38
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$28,167,805)--Note 2(A) $ 34,373,122
Cash 564,989
Receivable for investments sold 188,215
Receivable for units sold 381,416
Dividends and interest receivable 123,191
Other assets 4,158
Net gain on forward foreign currency contracts 44,339
------------
35,679,430
LIABILITIES:
Payable for investments purchased $ 299,520
Payable for units redeemed 13,095
Payable to investment managers 16,546
Accrued expenses 73,974 403,135
--------- ------------
NET ASSETS at value, applicable to 690,533
outstanding units of beneficial interest--Note 5 $ 35,276,295
------------
------------
NET ASSET VALUE offering and redemption price per
unit
($35,276,295 divided by 690,533 units) $ 51.09
------------
------------
</TABLE>
See Notes to Financial Statements
39
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Operations Year Ended September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign taxes of $28,314) $ 532,874
Interest 63,206
-------------
Total Income $ 596,080
Expenses:
Investment managers's fees--Note 3(A) 295,633
Shareholder servicing fees and expenses--Note
3(B) 209,614
Custodian fees and expenses 105,338
Legal and auditing fees 26,496
Consultant fees 18,417
Trustees' fees and expenses--Note 3(C) 27,646
Other 40,343
-------------
Total Expenses 723,487
Less fees paid indirectly--Note 4 (20,340)
-------------
Net Expenses 703,147
-------------
INVESTMENT (LOSS)--NET (107,067)
REALIZED AND UNREALIZED GAIN--Note 4:
Net realized gain on:
Investments 3,863,751
Foreign currency transactions 155,945
-------------
4,019,696
-------------
Unrealized appreciation on:
Investments 507,845
Foreign currency translations of other assets
and liabilities 37,009
-------------
544,854
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES 4,564,550
-------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 4,457,483
-------------
-------------
</TABLE>
See Notes to Financial Statements
40
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net $ (107,067) $ (71,627)
Net realized gain 4,019,696 3,827,368
Net unrealized appreciation 544,854 599,795
------------ ------------
Net increase in net assets resulting from operations 4,457,483 4,355,536
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 9,216,371 8,808,775
Value of units redeemed (17,999,512) (4,705,939)
------------ ------------
Net increase (decrease) in net assets resulting from
capital transactions (8,783,141) 4,102,836
------------ ------------
Net increase (decrease) (4,325,658) 8,458,372
NET ASSETS at beginning of year 39,601,953 31,143,581
------------ ------------
NET ASSETS at end of year $ 35,276,295 $ 39,601,953
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements
41
<PAGE>
ACTIVELY MANAGED BOND FUND
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
CORPORATE BONDS 1.7%
$ 496,000 Consolidated Natural Gas
Sf Db 8.625% Due
12/01/2011 $ 521,675
2,000,000 Pepsico Inc.
Structured Medium Term
Note
6.00% Due 03/04/2008 1,937,390
------------
Total Corporate Bonds
(Cost $2,484,811) $ 2,459,065
------------
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS 96.2%
$ 30,018 Collateralized Mortgage
Obligation
TR 1
0.00% Due 5/20/2017 $ 24,865
183,903 Collateralized Mortgage
Obligation
TR 29
0.00% Due 5/01/2013 139,774
127,361 Collateralized Mortgage
Sec Corp. 7.00% Due
6/1/2006 127,118
1,000,000 Federal Home Loan Bank
7.50% Due 04/11/2006 1,001,635
2,000,000 Federal Home Loan Bank
Structured Note
6.625% Due 12/20/2005 2,003,788
10,000,000 Federal Home Loan Bank
0.00% Due 07/10/2017 2,156,670
10,000,000 Federal Home Loan Bank
0.00% Due 06/26/2017 2,204,760
8,000,000 Federal Home Loan Bank
0.00% Due 06/25/2012 2,658,344
15,000,000 Federal Home Loan Bank
0.00% Due 07/14/2017 3,294,405
10,000,000 Federal Home Loan Bank
0.00% Due 07/02/2012 3,313,130
28,000,000 Federal Home Loan Bank
0.00% Due 07/25/2017 6,194,272
249,506 Federal Home Loan
Mortgage Corp. Pool
#297625 8.50% Due
6/1/2017 262,403
358,780 Federal Home Loan
Mortgage Corp. Pool
#533625 8.50% Due
12/1/2007 373,365
500,000 Federal Home Loan
Mortgage Corp. 7.13%
Due 09/15/2005 500,737
482,084 Federal Home Loan
Mortgage Corp. Pool
#533624 8.50% Due
12/01/2007 503,200
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 806,849 Federal Home Loan
Mortgage Corp. Pool
#141001 7.75% Due
9/1/2016 $ 825,866
1,000,000 Federal Home Loan
Mortgage Corp. FHR 1617
H 6.50% Due 10/15/2023 945,147
1,000,000 Federal Home Loan
Mortgage Corp. 6.59%
Due 12/09/2008 987,463
1,000,000 Federal Home Loan
Mortgage Corp. 6.53%
Due 2/23/2006 991,022
1,000,000 Federal Home Loan
Mortgage Corp. 7.09%
Due 11/24/2006 1,005,844
1,500,000 Federal Home Loan
Mortgage Corp. 6.84%
Due 3/2/2009 1,484,630
1,645,000 Federal Home Loan
Mortgage Corp. 6.08%
Due 10/29/2008 1,583,107
3,234,000 Federal Home Loan
Mortgage Corp. Remic
1505Q 7.00% Due
05/15/2023 3,157,787
367,713 Federal Home Loan
Mortgage Corp. Remic
1574V 6.50% Due
03/15/2023 337,656
622,122 Federal Home Loan
Mortgage Corp. Remic
1360B 7.50% Due
04/15/2022 615,031
753,071 Federal Home Loan
Mortgage Corp. Remic
1574U 6.50% Due
09/15/2023 703,945
708,000 Federal Home Loan
Mortgage Corp. Remic
1966N 7.50% Due
09/15/2026 706,338
750,000 Federal Home Loan
Mortgage Corp. Remic
Series 1976, Class Z
8.00% Due 03/15/2023 735,718
803,309 Federal Home Loan
Mortgage Corp. Remic
1527OZ 7.50% Due
05/15/2023 788,559
1,450,000 Federal Home Loan
Mortgage Corp. Remic
1948BC 7.50% Due
08/15/2024 1,433,674
10,000,000 Federal Home Loan
Mortgage Corp. 0.00%
Due 08/07/2017 2,143,980
2,493,000 Federal Home Loan
Mortgage Corp. Remic
1966P 7.50% Due
08/15/2026 2,481,051
</TABLE>
See Notes to Financial Statements 42
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 2,728,174 Federal Home Loan
Mortgage Corp. Remic
1946AB 7.50% Due
06/15/2024 $ 2,688,501
3,000,000 Federal Home Loan
Mortgage Corp. Remic
1966V 7.50% Due
06/15/2027 2,928,753
1,000,000 Federal Home Loan
Mortgage Corp. Note
6.375% Due 3/11/2003 991,483
200,000 Federal National Mortgage
Association Medium Term
Note 6.69% Due
02/02/2011 197,284
500,000 Federal National Mortgage
Association FNR 93-61HB
6.75% Due 3/25/2022 495,305
500,000 Federal National Mortgage
Association Medium Term
Note 7.74% Due
10/24/2006 497,993
640,383 Federal National Mortgage
Association Pool #87277
7.50% Due 4/1/2018 658,020
667,602 Federal National Mortgage
Association Pool
#050987 6.50% Due
2/1/2009 665,399
678,235 Federal National Mortgage
Association Remic
1992-2101 7.50% Due
04/25/2022 672,991
838,700 Federal National Mortgage
Association Remic
#1991-47H 7.50% Due
5/25/2006 855,595
1,015,000 Federal National Mortgage
Association Remic Fnr
93-226C 6.00% Due
12/25/2023 950,007
987,019 Federal National Mortgage
Association Remic
1993-4M 7.50% Due
03/25/2022 981,699
1,000,000 Federal National Mortgage
Association Medium Term
Note 6.25% Due
1/14/2004 983,088
1,000,000 Federal National Mortgage
Association Medium Term
Note 6.39% Due
12/9/2003 984,976
1,024,663 Federal National Mortgage
Association Pass Thru
Pool#239024 7.00% Due
10/1/2023 1,024,581
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 1,000,000 Federal National Mortgage
Association Medium Term
Note 7.65% Due
10/6/2006 $ 1,033,119
1,150,000 Federal National Mortgage
Association Medium Term
Note 6.71% Due
2/13/2006 1,137,056
1,170,591 Federal National Mortgage
Association Pass Thru
Pool#50966 7.00% Due
1/1/2024 1,170,497
2,000,000 Federal National Mortgage
Association Medium Term
Note 7.84% Due
12/23/2011 2,020,282
3,055,000 Federal National Mortgage
Association CMO
1993-32H 6.00% Due
3/25/2023 2,909,307
3,007,807 Federal National Mortgage
Association Pass Thru
Pool #050965 6.50% Due
1/1/2024 2,944,733
3,032,547 Federal National Mortgage
Association Remic
1994-69 Class CA 7.25%
Due 03/25/2023 3,006,119
661,000 Federal National Mortgage
Association Remic
1994-3PL 5.50% Due
01/25/2024 582,143
707,035 Federal National Mortgage
Association Remic
X-225C Class NE 6.50%
Due 12/25/2022 663,439
1,165,000 Federal National Mortgage
Association Remic
Series 1997-56 Class H
7.50% Due 05/18/2026 1,167,541
1,347,000 Federal National Mortgage
Association Remic
1997-42U 7.50% Due
08/18/2025 1,332,916
1,461,809 Federal National Mortgage
Association Remic
1993-252V 6.50% Due
02/25/2023 1,360,440
1,592,045 Federal National Mortgage
Association Remic
Series 1997-51, Class C
7.50% Due 11/18/2013 1,565,056
2,259,639 Federal National Mortgage
Association Remic
X-130A, Class T 6.50%
Due 12/25/2022 2,123,110
3,000,000 Federal National Mortgage
Association Remic,
Series 1997-52, Class
CD 7.50% Due 09/18/2025 2,948,994
</TABLE>
See Notes to Financial Statements 43
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 3,820,119 Federal National Mortgage
Association Remic
1993-247C 7.00% Due
03/25/2023 $ 3,763,447
5,000,000 Federal National Mortgage
Association Remic,
Series 1997-52, Class
CE 7.50% Due 02/18/2026 4,880,745
1,636 Government National
Mortgage Association
Pool #010855 8.00% Due
07/15/2006 1,712
1,743 Government National
Mortgage Association
Pool #002919 8.00% Due
2/15/2004 1,813
6,005 Government National
Mortgage Association
Pool #290013 8.00% Due
4/15/2020 6,275
11,694 Government National
Mortgage Association
Pool #247493 8.00% Due
7/15/2018 12,260
12,307 Government National
Mortgage Association
Pool #216159 8.00% Due
4/15/2017 12,905
16,254 Government National
Mortgage Association
Custom #209105 8.00%
Due 3/20/2017 16,964
15,757 Government National
Mortgage Association
Pool #025811 9.00% Due
1/15/2009 17,015
30,204 Government National
Mortgage Association
Pool #011192 7.25% Due
4/15/2006 30,928
34,881 Government National
Mortgage Association
Pool #1350 6.50% Due
3/15/2002 35,002
64,983 Government National
Mortgage Association
Pool #205624 8.50% Due
3/15/2017 69,020
69,018 Government National
Mortgage Association
Jumb #000710 8.00% Due
2/20/2017 72,032
78,955 Government National
Mortgage Association
Pool #05214 8.00% Due
7/15/2005 82,375
132,819 Government National
Mortgage Association
Pool #202887 8.00% Due
4/15/2017 139,277
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 146,475 Government National
Mortgage Association
Pool #193256 8.00% Due
3/15/2017 $ 153,598
155,923 Government National
Mortgage Association
Pool #291195 8.00% Due
5/15/2020 162,963
191,576 Government National
Mortgage Association
Pool #169957 8.50% Due
7/15/2016 203,546
199,260 Government National
Mortgage Association
Pool #290123 8.00% Due
6/15/2020 208,257
237,480 Government National
Mortgage Association
Pool #218150 8.00% Due
6/15/2017 249,028
239,306 Government National
Mortgage Association
Pool #213606 8.00% Due
4/15/2017 250,943
284,246 Government National
Mortgage Association
Pool #196754 8.50% Due
2/15/2017 301,904
303,428 Government National
Mortgage Association
Jumbo #000675 8.00% Due
12/20/2016 316,470
373,230 Government National
Mortgage Association
Pool #226673 9.50% Due
07/15/2017 406,495
434,974 Government National
Mortgage Association
Custom #152027 8.00%
Due 10/20/2016 453,669
604,744 Government National
Mortgage Association
Pool #364979 8.00% Due
04/15/2024 626,273
753,093 Government National
Mortgage Association
Pool #373826 8.00% Due
9/15/2023 781,289
773,649 Government National
Mortgage Association
Pass Thru Pool #385850
8.00% Due 8/15/2024 801,191
790,326 Government National
Mortgage Association
Pass Thru Pool #377003
8.00% Due 8/15/2024 818,462
1,629,879 Government National
Mortgage Association
Pass Through 8.00% Due
11/15/2024 1,687,903
</TABLE>
See Notes to Financial Statements 44
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$10,020,000 United States Treasury
Bonds 9.25% Due
2/15/2016 $ 13,013,475
7,000,000 United States Treasury
Notes 6.50% Due
5/15/2005 7,150,940
2,000,000 United States Treasury
Zero Coupons 0.00% Due
2/15/2002 1,543,800
5,000,000 United States Treasury
Zero Coupons 0.00% Due
5/15/2004 3,349,950
6,800,000 United States Treasury
Zero Coupons 0.00% Due
2/15/2006 4,061,980
19,180,000 United States Treasury
Zero Coupons 0.00% Due
2/15/2010 8,755,285
------------
Total United States Government and Agency
Obligations (Cost $137,024,133) $141,664,902
------------
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 0.6%
$ 850,000 United States Government
Repurchase Agreement
Dated 9/30/97 6.15% Due
10/1/1997 Collateralized
by 1,350,000 Federal Home
Loan Mortgage Corp. Due
9/1/2008 (Value $850,000) $ 850,000
------------
Total Investments (Cost
$140,358,944) 98.5% $144,973,967
Other Assets, Less Liabilities 1.5% 2,164,839
------ ------------
Net Assets 100.0% $147,138,806
------ ------------
------ ------------
</TABLE>
See Notes to Financial Statements 45
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$140,358,944)--Note 2(A) $144,973,967
Cash 63,171
Receivable for units sold 1,275,754
Interest receivable 1,053,544
Other assets 33,239
------------
147,399,675
LIABILITIES:
Payable for units redeemed $134,551
Payable to investment managers 41,755
Accrued expenses 84,563 260,869
------- ------------
NET ASSETS at value, applicable to 4,341,073
outstanding units of beneficial interest--Note 5 $147,138,806
------------
------------
NET ASSET VALUE offering and redemption price per
unit ($147,138,806 divided by 4,341,073 units) $ 33.89
------------
------------
</TABLE>
Statement of Operations Year Ended September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $10,403,000
----------
Total Income $10,403,000
Expenses:
Investment manager's fees--Note 3(A) 485,096
Shareholder servicing fees and expenses--Note 3(B) 541,659
Custodian fees and expenses 34,933
Legal and auditing fees 21,870
Consultant fees 10,917
Trustees' fees and expenses--Note 3(C) 27,139
Other 54,374
----------
Total Expenses 1,175,988
----------
INVESTMENT INCOME--NET 9,227,012
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 1,219,640
Unrealized appreciation on investments 3,740,985
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 4,960,625
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,187,637
----------
----------
</TABLE>
See Notes to Financial Statements
46
<PAGE>
ACTIVELY MANAGED BOND FUND
(CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 9,227,012 $ 8,692,376
Net realized gain (loss) 1,219,640 (15,324)
Net unrealized appreciation (depreciation) 3,740,985 (2,644,736)
------------ ------------
Net increase in net assets resulting from operations 14,187,637 6,032,316
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 36,098,759 28,269,160
Value of units redeemed (53,451,868) (24,124,192)
------------ ------------
Net increase (decrease) in net assets resulting from
capital
transactions (17,353,109) 4,144,968
------------ ------------
Net increase (decrease) (3,165,472) 10,177,284
NET ASSETS at beginning of year 150,304,278 140,126,994
------------ ------------
NET ASSETS at end of year $147,138,806 $150,304,278
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements
47
<PAGE>
INTERMEDIATE-TERM BOND FUND
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT & AGENCY
OBLIGATIONS 98.5%
$ 276,738 Collateralized Mortgage
Obligation Trust
Remic 27A
7.25% Due 04/23/2017 $ 281,633
430,000 Federal Farm Credit Bank
Medium Term Note
7.21% Due 08/06/2007 431,490
500,000 Federal Home Loan Bank
Structured Note
6.85% Due 05/08/2006 500,999
500,000 Federal Home Loan Bank
7.34% Due 09/20/2005 500,764
2,000,000 Federal Home Loan Bank
7.50% Due 04/11/2006 2,003,270
250,000 Federal Home Loan Bank
7.74% Due 05/23/2005 250,184
100,000 Federal Home Loan Bank
7.74% Due 10/01/2003 100,000
300,000 Federal Home Loan Bank
Structured Note
7.00% Due 11/22/2005 299,410
2,000,000 Federal Home Loan Bank
Structured Note
6.75% Due 04/10/2006 2,028,214
2,000,000 Federal Home Loan Bank
Notes
6.27% Due 1/14/2004 1,970,532
1,000,000 Federal Home Loan
Mortgage Corp.
6.355% Due 8/8/2005 988,819
1,500,000 Federal Home Loan
Mortgage Corp.
6.91% Due 6/20/2005 1,521,219
465,000 Federal Home Loan
Mortgage Corp.
7.35% Due 06/01/2005 466,638
1,000,000 Federal Home Loan
Mortgage Corp.
7.25% Due 07/17/2007 1,001,106
660,000 Federal Home Loan
Mortgage Corp.
Structured Note
6.70% Due 9/3/2003 657,526
1,748,477 Federal Home Loan
Mortgage Corp.
Remic Series 1379 Class
I
7.50% Due 03/15/2022 1,738,110
400,000 Federal Home Loan
Mortgage Corp.
Remic Series 32 Class E
7.50% Due 03/25/2005 409,848
2,253,408 Federal Home Loan
Mortgage Corp.
Remic 27a
7.00% Due 04/15/2022 2,227,546
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 606,662 Federal Home Loan
Mortgage Corp.
Remic 1680e
6.50% Due 2/15/2024 $ 601,987
1,300,422 Federal Home Loan
Mortgage Corp.
Remic 1681K
7.00% Due 08/15/2023 1,293,819
1,199,631 Federal Home Loan
Mortgage Corp.
Remic 1706Lb
7.00% Due 06/15/2023 1,183,739
1,880,441 Federal Home Loan
Mortgage Corp.
Remic 1946h
7.60% Due 11/15/2024 1,881,650
788,738 Federal Home Loan
Mortgage Corp.
Gold Remic
7.00% Due 11/15/2005 795,277
678,228 Federal Home Loan
Mortgage Corp.
157 Remic Cmo
8.75% Due 07/15/2000 698,161
1,606,264 Federal Home Loan
Mortgage Corp.
Remic, 1462A
7.50% Due 02/15/2022 1,589,005
12,112 Federal Home Loan
Mortgage Corp.
Pool #200030
9.00% Due 03/01/2001 12,509
36,610 Federal Home Loan
Mortgage Corp.
Pool #200034
8.50% Due 05/01/2001 37,498
16,896 Federal Home Loan
Mortgage Corp.
Pool #200035
9.00% Due 05/01/2001 17,450
66,736 Federal Home Loan
Mortgage Corp.
Pool #200040
9.00% Due 06/01/2001 68,924
57,927 Federal Home Loan
Mortgage Corp.
Pool #200070
7.50% Due 04/01/2002 58,114
94,390 Federal Home Loan
Mortgage Corp.
Pool #200071
7.50% Due 05/01/2002 94,695
87,975 Federal Home Loan
Mortgage Corp.
Pool #212242
7.50% Due 07/01/2001 88,264
18,979 Federal Home Loan
Mortgage Corp.
Pool #212719
7.50% Due 08/01/2001 19,041
</TABLE>
See Notes to Financial Statements 48
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 71,195 Federal Home Loan
Mortgage Corp.
Pool #213857
7.50% Due 11/01/2001 $ 71,429
26,624 Federal Home Loan
Mortgage Corp.
Pool #214040
7.50% Due 12/01/2001 26,710
49,840 Federal Home Loan
Mortgage Corp.
Pool #251478
7.00% Due 12/01/1998 49,627
12,813 Federal Home Loan
Mortgage Corp.
Pool #309883
7.00% Due 09/01/1998 12,780
36,692 Federal Home Loan
Mortgage Corp.
Pool #320139
8.00% Due 09/01/2001 37,280
343,078 Federal Home Loan
Mortgage Corp.
Remic 1406n
8.00% Due 01/15/2022 346,314
250,000 Federal National Mortgage
Association
7.59% Due 10/04/2006 256,063
1,000,000 Federal National Mortgage
Association
Medium Term Note
6.69% Due 02/27/2006 988,032
1,000,000 Federal National Mortgage
Association
Medium Term Note
6.25% Due 1/14/2004 983,088
2,000,000 Federal National Mortgage
Association
Medium Term Note
6.38% Due 6/25/2003 1,978,604
1,500,000 Federal National Mortgage
Association
Medium Term Note
6.24% Due 1/28/2004 1,462,631
1,297,000 Federal National Mortgage
Association
Remic Series 1991-173
Class Pk
7.00% Due 01/25/2021 1,298,770
180,421 Federal National Mortgage
Association
Remic, 1991-56K
8.60% Due 02/25/2020 182,116
1,000,000 Federal National Mortgage
Association
Medium Term Note
6.58% Due 3/1/2006 990,016
2,500,000 Federal National Mortgage
Association
Medium Term Note
7.44% Due 11/06/2006 2,540,028
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 1,000,000 Federal National Mortgage
Association
Medium Term Note
7.29% Due 11/08/2006 $ 1,008,769
500,000 Federal National Mortgage
Association
Medium Term Note
7.65% Due 10/06/2006 516,560
500,000 Federal National Mortgage
Association
Medium Term Note
6.75% Due 02/03/2006 495,003
400,000 Federal National Mortgage
Association
Medium Term Note
7.43% Due 06/13/2007 409,638
400,000 Federal National Mortgage
Association
Medium Term Note
7.34% Due 12/18/2006 402,411
1,000,000 Federal National Mortgage
Association
CMO 1994-10m
6.50% Due 06/25/2023 984,099
376,000 Federal National Mortgage
Association
Remic 1992-131H
7.50% Due 06/25/2021 382,671
1,000,000 Federal National Mortgage
Association
Remic 1992-138P
7.50% Due 08/25/2022 1,010,876
883,747 Federal National Mortgage
Association
Remic 1992-181B
7.50% Due 03/25/2022 875,100
2,334,000 Federal National Mortgage
Association
Remic 1993-20L
7.00% Due 12/25/2022 2,305,927
1,116,000 Federal National Mortgage
Association
Remic 1995-23U
7.50% Due 04/25/2023 1,109,695
1,186,279 Federal National Mortgage
Association
Remic 1995-7C
7.55% Due 12/25/2023 1,178,789
2,740,000 Federal National Mortgage
Association
Remic 1997-42O
7.50% Due 12/18/2025 2,697,314
763,028 Federal National Mortgage
Association
Remic
7.00% Due 7/25/2005 765,013
2,838,000 Federal National Mortgage
Association
CMO 1993-162c
3.00% Due 8/25/2023 2,678,740
</TABLE>
See Notes to Financial Statements 49
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 265,031 Federal National Mortgage
Association
CMO 93-244a
0.00% Due 11/25/2023 $ 249,765
1,170,000 Federal National Mortgage
Association
Remic Fnr1993-38v
5.757% Due 8/25/2021 1,107,875
1,480,775 Federal National Mortgage
Association
Remic X-225c
6.25% Due 9/25/2022 1,436,116
2,000,000 Federal National Mortgage
Association
Remic 1995-5e
8.00% Due 10/25/2007 2,021,552
2,913 Federal National Mortgage
Association
Pool #31435
8.50% Due 08/01/2001 3,015
667,602 Federal National Mortgage
Association
Pool #050987
6.50% Due 2/1/2009 665,399
30,220 Federal National Mortgage
Association
Pool #26607
9.00% Due 05/01/2001 31,330
16,309 Federal National Mortgage
Association
Pool #26707
9.00% Due 05/01/2001 16,908
76,032 Federal National Mortgage
Association
Pool #28645
9.00% Due 06/01/2001 78,826
142,427 Federal National Mortgage
Association
Pool #28785
9.00% Due 06/01/2001 147,660
28,974 Federal National Mortgage
Association
Pool #29470
9.00% Due 07/01/2001 30,038
5,309 Federal National Mortgage
Association
Pool #29658
8.50% Due 07/01/2001 5,495
68,319 Federal National Mortgage
Association
Pool #30409
8.50% Due 09/01/2001 70,707
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 114,606 Federal National Mortgage
Association
Pool #46609
8.00% Due 05/01/2002 $ 117,458
190,722 Federal National Mortgage
Association
Pool #46872
8.00% Due 05/01/2002 195,000
10,487 Federal National Mortgage
Association
Pool #47137
8.00% Due 05/01/2002 10,748
132,232 Federal National Mortgage
Association
Pool #47402
8.00% Due 05/01/2002 135,522
110,355 Federal National Mortgage
Association
Pool #47932
8.00% Due 05/01/2002 113,100
72,981 Federal National Mortgage
Association
Pool #48103
8.00% Due 05/01/2002 74,797
25,309 Federal National Mortgage
Association
Pool #7242
8.50% Due 07/01/2001 26,194
940,721 Federal National Mortgage
Association
Pool #82407
9.00% Due 3/1/2004 983,110
355,769 Federal National Mortgage
Association
Pool #87277
7.50% Due 4/1/2018 365,566
10,000 United States Treasury
Bonds
3.50% Due 11/15/1998 9,937
3,000,000 United States Treasury
Zero Coupons
0.00% Due 2/15/2000 2,614,650
4,000,000 United States Treasury
Zero Coupons
0.00% Due 8/15/2002 2,996,080
------------
Total Investments (Cost $66,316,551) 98.5% $ 67,368,382
Other Assets, Less Liabilities 1.5% 1,020,386
------ ------------
Net Assets 100.0% $ 68,388,768
------ ------------
------ ------------
</TABLE>
See Notes to Financial Statements 50
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$66,316,551)--Note 2(A) $67,368,382
Receivable for units sold 547,352
Interest receivable 730,372
Other assets 19,067
-----------
68,665,173
LIABILITIES:
Advances from custodian $135,636
Payable for units redeemed 51,131
Payable to investment managers 21,871
Accrued expenses 62,747
Other liabilities 5,020 276,405
-------- -----------
NET ASSETS at value, applicable to 2,167,435
outstanding units of
beneficial interest--Note 5 $68,388,768
-----------
-----------
NET ASSET VALUE offering and redemption price per
unit
($68,388,768 divided by 2,167,435 units) $ 31.55
-----------
-----------
</TABLE>
Statement of Operations Year Ended September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $4,974,200
----------
Total Income $4,974,200
Expenses:
Investment manager's fees--Note 3(A) 265,854
Shareholder servicing fees and expenses--Note 3(B) 362,273
Custodian fees and expenses 23,596
Legal and auditing fees 19,074
Consultant fees 10,917
Trustees' fees and expenses--Note 3(C) 27,646
Other 41,672
----------
Total Expenses 751,032
----------
INVESTMENT INCOME--NET 4,223,168
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 786,866
Unrealized appreciation on investments 321,150
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,108,016
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,331,184
----------
----------
</TABLE>
See Notes to Financial Statements
51
<PAGE>
INTERMEDIATE-TERM BOND FUND
(CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 4,223,168 $ 5,119,618
Net realized gain 786,866 672,005
Net unrealized appreciation (depreciation) 321,150 (2,099,642)
----------- -----------
Net increase in net assets resulting from operations 5,331,184 3,691,981
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 17,101,876 8,291,530
Value of units redeemed (28,798,252) (27,711,540)
----------- -----------
Net (decrease) in net assets resulting from capital
transactions (11,696,376) (19,420,010)
----------- -----------
Net (decrease) (6,365,192) (15,728,029)
NET ASSETS at beginning of year 74,753,960 90,481,989
----------- -----------
NET ASSETS at end of year $68,388,768 $74,753,960
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
52
<PAGE>
SHORT-TERM INVESTMENT FUND
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
CORPORATE NOTES 4.2%
$ 50,000 E. I. DuPont DeNemours
5.59% Due 10/08/1997
(Cost $49,996) $ 49,996
500,000 Florida Power and Light
Medium Term Note
5.50% Due 3/11/1998 499,705
578,000 Wal-Mart Stores 5.50% Due
03/01/1998 577,479
------------
Total Corporate Notes (Cost $1,126,650) $ 1,127,180
------------
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS 55.6%
$ 100,000 Federal Farm Credit Bank
Medium Term Note 6.26%
Due 10/15/1998 $ 100,067
145,000 Federal Farm Credit Bank
Medium Term Note 5.10%
Due 03/10/1998 144,749
500,000 Federal Farm Credit Bank
Medium Term Note 5.73%
Due 02/03/1998 500,369
250,000 Federal Home Loan Bank
5.61% Due 1/26/1998 250,066
400,000 Federal Home Loan Bank
5.49% Due 1/16/1998 399,966
200,000 Federal Home Loan Bank
5.11% Due 02/23/1998 199,653
30,303 Federal Home Loan Bank
5.15% Due 09/01/1998 30,140
500,000 Federal Home Loan Bank
6.02% Due 10/30/1998 500,229
500,000 Federal Home Loan Bank
5.905% Due 10/21/1998 500,500
475,000 Federal Home Loan Bank
6.00% Due 12/17/1998 474,989
500,000 Federal Home Loan Bank
6.025% Due 11/20/1998 500,180
600,000 Federal Home Loan Bank
5.70% Due 04/15/1998 600,115
450,000 Federal Home Loan Bank
6.20% Due 10/16/1998 450,274
100,000 Federal Home Loan Bank
5.04% Due 10/01/1998 99,275
450,000 Federal Home Loan Bank
5.27% Due 05/13/1998 449,054
100,000 Federal Home Loan Bank
6.07% Due 03/25/1999 100,000
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 670,000 Federal Home Loan Bank
5.71% Due 06/19/1998 $ 667,595
100,000 Federal Home Loan
Mortgage Corp. 5.31%
Due 04/29/1998 99,836
300,000 Federal Home Loan
Mortgage Corp. 5.84%
Due 04/08/1998 300,413
500,000 Federal Home Loan
Mortgage Corp. 6.07%
Due 11/20/1998 500,045
200,000 Federal Home Loan
Mortgage Corp. 5.275%
Due 3/11/1998 199,766
600,000 Federal Home Loan
Mortgage Corp. 5.55%
Due 09/07/1998 599,866
100,000 Federal Home Loan
Mortgage Corp. 5.50%
Due 10/30/1998 99,813
250,000 Federal National Mortgage
Association
5.35% Due 08/12/1998 249,154
200,000 Federal National Mortgage
Association
5.30% Due 03/11/1998 199,787
100,000 Federal National Mortgage
Association
5.41% Due 06/25/1998 99,870
250,000 Federal National Mortgage
Association
5.25% Due 05/13/1998 249,445
500,000 Federal National Mortgage
Association
Medium Term Note 5.92%
Due 04/03/1998 500,000
300,000 Federal National Mortgage
Association
Medium Term Note 5.53%
Due 12/16/1997 300,000
100,000 Federal National Mortgage
Association
Medium Term Note 5.20%
Due 04/30/1998 99,823
500,000 Federal National Mortgage
Association
Medium Term Note 5.40%
Due 3/18/1998 499,825
300,000 Federal National Mortgage
Association
Medium Term Note 5.25%
Due 04/22/1998 299,590
1,100,000 Federal National Mortgage
Association
Medium Term Note 5.62%
Due 02/23/1998 1,100,545
500,000 Federal National Mortgage
Association
Medium Term Note 5.16%
Due 08/26/1998 497,760
250,000 Federal National Mortgage
Association
Medium Term Note 5.35%
Due 10/13/1998 248,513
</TABLE>
See Notes to Financial Statements 53
<PAGE>
SHORT-TERM INVESTMENT FUND (CONTINUED)
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 40,000 Federal National Mortgage
Association
Medium Term Note 4.75%
Due 10/26/1998 $ 39,598
200,000 Federal National Mortgage
Association
Medium Term Note 5.42%
Due 11/02/1998 199,534
50,000 Federal National Mortgage
Association
Medium Term Note 5.77%
Due 08/25/1998 50,042
250,000 Federal National Mortgage
Association
Medium Term Note 5.55%
Due 09/08/1998 249,943
100,000 Tennessee Valley
Authority 5.125 Due
03/04/1998 99,828
200,000 Federal National Mortgage
Association Medium Term
Note 5.65% Due
10/20/1997 199,989
30,000 Federal National Mortgage
Association 5.35% Due
10/10/1997 30,000
200,000 Federal Farm Credit Bank
Medium Term Note 5.36%
Due 01/29/1998 199,891
<CAPTION>
Principal
Amount Value
- ----------- ------------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (Continued)
$ 1,000,000 Federal Home Loan Bank
5.685% Due 11/20/1997 $ 999,981
100,000 Federal Home Loan
Mortgage Corp. 5.40%
Due 03/16/1998 99,924
250,000 Federal National Mortgage
Association
5.35% Due 10/10/1997 249,969
500,000 Federal National Mortgage
Association
Medium Term Note 5.80%
Due 10/10/1997 499,981
------------
Total Short Term United States Government
and Agency Obligations (Cost $15,013,891) $ 15,029,952
------------
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 42.2%
$11,400,000 United States Government
Repurchase Agreement
Dated 9/30/97 6.15% Due
10/1/1997
Collateralized by
$86,000,000 REFCO
Strips Due 1/15/2030
(Value $11,400,000) $ 11,400,000
------------
Total Investments (Cost $27,540,541) 102.0% $ 27,557,132
Liabilities, net of other assets -2.0% (536,097)
------ ------------
Net Assets 100.0% $ 27,021,035
------ ------------
------ ------------
</TABLE>
See Notes to Financial Statements 54
<PAGE>
SHORT-TERM INVESTMENT FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$27,540,541)--Note 2(A) $27,557,132
Cash 92,056
Receivable for units sold 41,731
Interest receivable 291,720
Other assets 13,912
-----------
27,996,551
LIABILITIES:
Payable for investments purchased $512,974
Payable for units redeemed 413,426
Payable to investment managers 5,343
Accrued expenses 43,773 975,516
-------- -----------
NET ASSETS at value, applicable to 1,272,760
outstanding units of
beneficial interest--Note 5 $27,021,035
-----------
-----------
NET ASSET VALUE offering and redemption price per
unit
($27,021,035 divided by 1,272,760 units) $ 21.23
-----------
-----------
</TABLE>
Statement of Operations Year Ended September 30, 1997
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $1,402,108
---------
Total Income $1,402,108
Expenses:
Investment manager's fees--Note 3(A) 64,074
Shareholder servicing fees and expenses--Note 3(B) 153,130
Custodian fees and expenses 14,109
Legal and auditing fees 17,375
Consultant fees 10,917
Trustees' fees and expenses--Note 3(C) 27,646
Printing and Postage 16,687
Other 17,818
---------
Total Expenses 321,756
Less expense reimbursement--Note 3(A) (116,575)
---------
Net Expenses 205,181
----------
INVESTMENT INCOME--NET 1,196,927
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Unrealized appreciation on investments 22,137
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 22,137
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,219,064
----------
----------
</TABLE>
See Notes to Financial Statements
55
<PAGE>
SHORT-TERM INVESTMENT FUND
(CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/97 9/30/96
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 1,196,927 $ 1,273,516
Net unrealized appreciation (depreciation) 22,137 (12,603)
----------- -----------
Net increase in net assets resulting from operations 1,219,064 1,260,913
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 19,468,323 11,983,285
Value of units redeemed (19,334,439) (14,936,022)
----------- -----------
Net increase (decrease) in net assets resulting from
capital
transactions 133,884 (2,952,737)
----------- -----------
Net increase (decrease) 1,352,948 (1,691,824)
NET ASSETS at beginning of year 25,668,087 27,359,911
----------- -----------
NET ASSETS at end of year $27,021,035 $25,668,087
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1--GENERAL
Participation in RSI Retirement Trust ("RSI") is limited to
IRA's and trusts established by eligible employers, which
include banks, savings banks, credit unions, savings and loan
associations and other organizations determined by the Trustees
of RSI to have business interests in common with organizations
participating in RSI. Such trusts are exempt from taxation
under Section 501(a) of the Internal Revenue Code ("Code") and
have been established under pension or profit sharing plans
which are qualified under Section 401 of the Code
("Participating Plans").
In order to provide investment products to Participating
Plans, RSI operates, pursuant to an Agreement and Declaration
of Trust amended effective as of August 31, 1984 ("Trust
Agreement"), as a series fund currently issuing as of September
30, 1997 seven classes of units of beneficial interest: Core
Equity Fund, Emerging Growth Equity Fund, Value Equity Fund,
International Equity Fund, Actively Managed Bond Fund,
Intermediate-Term Bond Fund and Short-Term Investment Fund
("Investment Funds"). The Trust Agreement was amended in 1984
to provide for the continued operation of RSI as an open-end
management investment company under the Investment Company Act
of 1940 ("Act"). Retirement System Distributors Inc.
("Distributors") acts as the distributor of the Investment
Funds' units of beneficial interest. The Distributor is a
wholly owned subsidiary of Retirement System Group Inc.
("RSGROUP-Registered Trademark-").
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 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 primary exchange on which
the security is listed, or, if there were no sales on
that day, at its last reported closing or bid price.
(2)each unlisted security quoted on the NASDAQ is valued at
the last current bid price obtained from the NASDAQ;
57
<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 identification 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.
58
<PAGE>
(D) FEDERAL INCOME TAXES: RSI has received a determination
letter from the Internal Revenue Service stating that it is
exempt from taxation under Section 501(a) of the Internal
Revenue Code with respect to funds derived from
Participating Plans which are pension or profit sharing
trusts maintained in conformity with Section 401 of the
Code.
(E) ACCOUNTING ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the
date of the financial statements and the reported amounts
of increase and decrease in net assets from operations
during the period. Actual results could differ from those
estimates.
(F) OTHER: RSI accounts separately for the assets, liabilities
and operations of each Investment Fund. Expenses directly
attributed to each Investment Fund are charged to that
Investment Fund's operations; expenses which are applicable
to all Investment Funds are allocated among them.
Administrative expenses incurred by RSI relating to the
administration of Plans of Participation are charged to
Full Participation Employers (as defined in the Trust
Agreement) and are not included in the operation of the
Investment Funds.
The Investment Funds may enter into financial futures
contracts which require initial margin deposits of cash or
U.S. Government securities equal to approximately 10% of
the value of the contract. During the period the financial
futures are open, changes in the value of the contracts are
recognized by "marking to market" on a daily basis to
reflect the market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments
are made or received to reflect daily unrealized gains or
losses. The Investment Funds are exposed to market risk as
a result of movements in securities, values and interest
rates.
(G) OPTIONS VALUATION: The Investment Funds may write call
options on equity securities. Premiums received for call
options written are recorded as a liability and "marked to
market" daily to reflect the current value of the option
written. If the written option is exercised prior to
expiration, the premium received is treated as a realized
gain. If the written option is exercised, the premium
received is added to the sale proceeds of the underlying
security.
NOTE 3--INVESTMENT MANAGERS' FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
(A) Retirement System Investors Inc. ("Investors") is the
Investment Advisor for each Investment Fund. Investors has
retained sub-advisors to manage the International Equity
Fund and the Emerging Growth Equity Fund. Investors acts as
Investment Manager to the remaining Trust Investment Funds,
and in the
59
<PAGE>
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.
Beginning April 1, 1997, HLM Management Company, Inc.
became one of the two sub-advisors to the Emerging Growth
Equity Fund, replacing The Putnam Advisory Company, Inc.
Friess Associates, Inc. continues to be the other sub-
advisor to the Emerging Growth Equity Fund.
Fees incurred by Investors pursuant to the provisions of
its investment management contracts are payable monthly to
Investors and quarterly to all sub-advisors and are
computed based on the value of the net assets of each
Investment Fund determined on a monthly or quarterly bases
as appropriate at the rates listed in the following table.
<TABLE>
<CAPTION>
INVESTMENT FUND INVESTMENT MANAGER FEE
- ------------------------- ------------------------------------- -----------------------------
<S> <C> <C>
Core Equity Fund Retirement System Investors Inc. .60% on first $50 million,
.50% on next $150 million,
and .40% over $200 million
Value Equity Fund Retirement System Investors Inc. .60% on first $10 million,
.50% on next $10 million,
.40% on next $20 million,
.30% on next $20 million,
.20% on next $40 million,
.15% on next $50 million,
and .10% over $150 million
Emerging Growth Equity Friess Associates, Inc. (Sub-adviser) 1.00%
Fund
The Putnam Advisory Company, Inc. 1.00% on first $25 million,
(Sub-adviser until 3/31/97) and .75% over $25 million
HLM Management Company, Inc. 1.00% on first $25 million,
(Sub-adviser, commencing 4/1/97) .80% on next $25 million,
and .60% over $50 million
International Equity Fund Morgan Grenfell Investment .60% on first $50 million,
Services Limited (Sub-adviser) and .50% over $50 million
Actively Managed Bond Retirement System Investors Inc. .40% on first $50 million,
Fund .30% on next $100 million,
and .20% over $150 million
Intermediate-Term Bond Retirement System Investors Inc. .40% on first $50 million,
Fund .30% on next $100 million,
and .20% over $150 million
Short-Term Investment Retirement System Investors Inc. .25 on first $50 million,
Fund and .20% over $50 million
</TABLE>
60
<PAGE>
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, 1997, Investors has voluntarily waived a
portion of its investment manager's fee from the Short-Term
Investment Fund amounting to $116,575, to limit the Fund's
annual expenses to 0.80% of average net assets.
(B) Shareholder servicing fees and expenses for the period
ended September 30, 1997 consist of fees paid to Retirement
System Consultants Inc. (a subsidiary of RSGROUP), under a
contract for providing administrative services for the
Investment Funds. The fee arrangement applicable for each
of the investment funds is as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS FEE
- --------------------------------- ---------
<S> <C>
First $25 million .60%
Next $25 million .50%
Next $25 million .40%
Next $25 million .30%
Over $100 million .20%
</TABLE>
(C) Each Trustee who is not an officer of RSI receives an
annual fee of $9,500 and a fee of $950 per meeting
attended, except that such fee is $400 for a telephonic
meeting. 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 RSGROUP and its
subsidiaries.
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, 1997:
<TABLE>
<CAPTION>
PURCHASES SALES
---------------- ----------------
<S> <C> <C>
Core Equity Fund $ 12,171,006 $ 74,324,178
Value Equity Fund 53,706,423 64,129,641
Emerging Growth Equity Fund 143,027,013 167,436,438
International Equity Fund 22,024,857 31,276,220
Actively Managed Bond Fund 97,377,396 107,429,544
Intermediate-Term Bond Fund 47,394,623 55,374,189
</TABLE>
61
<PAGE>
Net unrealized appreciation (depreciation) consisting of
gross unrealized appreciation and gross unrealized depreciation
at September 30, 1997 for each of the Investment Funds was as
follows:
<TABLE>
<CAPTION>
NET UNREALIZED GROSS
APPRECIATION GROSS UNREALIZED UNREALIZED
(DEPRECIATION) APPRECIATION DEPRECIATION
---------------- ---------------- --------------
<S> <C> <C> <C>
Core Equity Fund $ 136,021,998 $ 136,021,998 $ 0
Value Equity Fund 13,620,059 13,768,223 (148,164)
Emerging Growth Equity Fund 25,230,354 25,850,354 (620,000)
International Equity Fund 6,241,743 8,257,529 (2,015,786)
Actively Managed Bond Fund 4,615,023 4,814,839 (199,816)
Intermediate-Term Bond Fund 1,051,831 1,098,387 (46,556)
Short-Term Investment Fund 16,591 18,775 (2,184)
</TABLE>
As of September 30, 1997, the International Equity Fund has
outstanding forward currency contracts as set forth below.
These contracts are reported in the financial statements at the
Fund's net gain of $44,339, 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, 1997.
<TABLE>
<CAPTION>
CONTRACTS TO SELL
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6,740,000 French Francs for
U.S. $1,112,634 10/24/1997 (30,201)
1,470,000 German Marks for U.S.
$819,147 10/24/1997 (18,062)
735,000 German Marks for U.S.
$404,541 10/24/1997 14,064
3,370,000 French Francs for
U.S. $549,057 10/24/1997 22,361
106,310,000 Japanese Yen for U.S.
$932,585 11/13/1997 40,644
3,370,000 French Francs for
U.S. $567,073 10/24/1997 4,344
735,000 German Marks for U.S.
$415,592 10/24/1997 3,012
88,900,000 Japanese Yen for U.S.
$754,048 11/13/1997 8,177
--------
$ 44,339
--------
--------
</TABLE>
62
<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, 1997:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
-------------- --------------
<S> <C> <C>
Core Equity Fund $ 374,607 $ 389,647
Value Equity Fund 569,589 602,467
Emerging Growth Equity Fund 18,456,616 19,425,257
International Equity Fund 598,654 635,275
Actively Managed Bond Fund 17,427,352 17,776,872
Intermediate Term Bond Fund 5,174,232 5,267,676
</TABLE>
These securities lending arrangements may result in
significant credit exposure in the event the counterparty to
the transaction was unable to fulfill its contractual
obligations. In accordance with industry practice, the
securities lending agreements are generally collaterized by
cash or securities with a market value in excess of the
Investment Funds obligation under the contract. The Investment
Funds attempt to 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.
In June 1996, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS 125"). SFAS 125 provides
accounting and reporting standards for transfers of financial
assets, including repurchase agreements and securities lending
arrangements, and establishes new requirements for pledged
collateral. RSI will adopt this pronouncement effective January
1, 1998.
For the year ended September 30, 1997 the Emerging Growth
Equity Fund, Value Equity Fund, and the International Equity
Fund each had expenses paid through brokerage/service
arrangements which amounted to $55,467, $9,084 and $20,340
respectively.
63
<PAGE>
NOTE 5--CAPITAL TRANSACTIONS:
At September 30, 1997 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, 1997 were as
follows:
<TABLE>
<CAPTION>
Core Equity Value Equity
Fund Fund
------------------------ -----------------------
Units Amount Units Amount
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Units sold 396,478 $ 25,795,510 227,658 $ 11,173,465
Units redeemed (1,449,971) (97,429,664) (491,588) (23,923,187)
---------- ------------ --------- ------------
Net (decrease) (1,053,493) $(71,634,154) (263,930) $(12,749,722)
---------- ------------ --------- ------------
---------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
Emerging Growth International
Equity Fund Equity Fund
----------------------- -----------------------
Units Amount Units Amount
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Units sold 227,146 $ 15,421,504 199,932 $ 9,216,371
Units redeemed (516,504) (36,204,646) (384,652) (17,999,512)
--------- ------------ --------- ------------
Net (decrease) (289,358) $(20,783,142) (184,720) $ (8,783,141)
--------- ------------ --------- ------------
--------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
Actively Managed Intermediate-Term
Bond Fund Bond Fund
------------------------ -----------------------
Units Amount Units Amount
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Units sold 1,111,406 $ 36,098,759 559,693 $ 17,101,876
Units redeemed (1,652,565) (53,451,868) (943,239) (28,798,252)
---------- ------------ --------- ------------
Net (decrease) (541,159) $(17,353,109) (383,546) $(11,696,376)
---------- ------------ --------- ------------
---------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
Short-Term
Investment Fund
-----------------------
Units Amount
--------- ------------
<S> <C> <C>
Units sold 943,098 $ 19,468,323
Units redeemed (938,236) (19,334,439)
--------- ------------
Net (decrease) 4,862 $ 133,884
--------- ------------
--------- ------------
</TABLE>
64
<PAGE>
Transactions in the units of beneficial interest of each
Investment Fund for the year ended September 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Core Equity Value Equity
Fund Fund
----------------------- ----------------------
Units Amount Units Amount
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Units sold 338,372 $ 17,141,226 171,011 $ 6,089,364
Units redeemed (562,143) (28,996,541) (197,341) (7,173,870)
--------- ------------ --------- -----------
Net (decrease) (223,771) $(11,855,315) (26,330) $(1,084,506)
--------- ------------ --------- -----------
--------- ------------ --------- -----------
</TABLE>
<TABLE>
<CAPTION>
Emerging Growth International
Equity Fund Equity Fund
----------------------- ----------------------
Units Amount Units Amount
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Units sold 182,662 $ 10,600,409 209,851 $ 8,808,775
Units redeemed (228,340) (13,437,810) (108,338) (4,705,939)
--------- ------------ --------- -----------
Net increase (decrease) (45,678) $ (2,837,401) 101,513 $ 4,102,836
--------- ------------ --------- -----------
--------- ------------ --------- -----------
</TABLE>
<TABLE>
<CAPTION>
Actively Managed Intermediate-Term
Bond Fund Bond Fund
----------------------- -----------------------
Units Amount Units Amount
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Units sold 942,767 $ 28,269,160 289,856 $ 8,291,530
Units redeemed (797,462) (24,124,192) (969,774) (27,711,540)
--------- ------------ --------- ------------
Net increase (decrease) 145,305 $ 4,144,968 (679,918) $(19,420,010)
--------- ------------ --------- ------------
--------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
Short-Term
Investment Fund
-----------------------
Units Amount
--------- ------------
<S> <C> <C>
Units sold 608,462 $ 11,983,285
Units redeemed (757,202) (14,936,022)
--------- ------------
Net (decrease) (148,740) $ (2,952,737)
--------- ------------
--------- ------------
</TABLE>
65
<PAGE>
Net Assets at September 30, 1997 are comprised as follows:
<TABLE>
<CAPTION>
Emerging
Core Equity Growth Value Equity International
Fund Equity Fund Fund Equity Fund
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Paid-in capital (deficit) $(102,190,926) $(35,266,360) $(33,421,434) $(5,099,675)
Accumulated income 47,245,267 (2,961,305) 18,707,196 (1,660,921)
Accumulated realized gain 131,197,083 104,585,969 61,483,251 35,795,148
Unrealized appreciation 136,021,998 25,230,354 13,620,059 6,241,743
------------- ------------ ------------ -----------
$ 212,273,422 $ 91,588,658 $ 60,389,072 $35,276,295
------------- ------------ ------------ -----------
------------- ------------ ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
Short-Term Actively
Investment Intermediate-Term Managed
Fund Bond Fund Bond Fund
-------------- --------------- ------------
<S> <C> <C> <C>
Paid-in capital (deficit) $(15,195,318) $ (70,704,269) $(48,026,722)
Accumulated income 40,869,851 122,806,652 156,577,524
Accumulated realized gain 1,329,911 15,234,554 33,972,981
Unrealized appreciation 16,591 1,051,831 4,615,023
-------------- --------------- ------------
$ 27,021,035 $ 68,388,768 $147,138,806
-------------- --------------- ------------
-------------- --------------- ------------
</TABLE>
NOTE 6--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
The Investment Funds activity during the year in writing
equity call options had off-balance sheet risk of accounting
loss. These financial instruments involve market risk in excess
of the amount recognized in the Statement of Assets and
Liabilities. A written equity call option obligates the
Investment Funds to deliver the underlying security upon
exercise by the holder of the option. The Investment Funds
cover options written by owning the underlying security.
A summary of the Investment Funds option transactions
written for the year follows:
<TABLE>
<CAPTION>
Number of
Options Premiums
CORE EQUITY FUND Contracts Received
--------- ----------
<S> <C> <C>
Contracts outstanding at September 30, 1996 380 $ 72,005
Options written 215 83,971
Options exercised (21 ) (2,906)
Options expired (574 ) (153,070)
--------- ----------
Contracts outstanding at September 30, 1997 0 $ 0
--------- ----------
--------- ----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Options Premiums
VALUE EQUITY FUND Contracts Received
--------- ----------
<S> <C> <C>
Contracts outstanding at September 30, 1996 0 --
Options written 251 $56,151
Options exercised (31 ) (3,679 )
Options expired (174 ) (34,525 )
--------- ----------
Contracts outstanding at September 30, 1997 46 $17,947
--------- ----------
--------- ----------
</TABLE>
66
<PAGE>
NOTE 7--FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CORE EQUITY FUND
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 56.57 $ 46.71 $ 35.57 $ 34.49 $ 30.09
-------- -------- -------- -------- --------
Income from Investment
Operations:
Investment income--net 0.60 0.72 0.74 0.54 0.56
Net realized and unrealized
gain on investments 18.94 9.14 10.40 0.54 3.84
-------- -------- -------- -------- --------
Total from Investment
Operations 19.54 9.86 11.14 1.08 4.40
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 76.11 $ 56.57 $ 46.71 $ 35.57 $ 34.49
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return 34.54% 21.11% 31.32% 3.13% 14.62%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses (0.90)% (0.92)% (0.98)% (1.01)% (0.99)%
Investment income--net 0.92% 1.40% 1.86% 1.56% 1.74%
Portfolio Turnover Rate 5.68% 9.95% 7.91% 6.47% 13.41%
Average Commission Rate Paid (per
share)+ $0.0595 $0.0500 -- -- --
Net Assets at End of the Year
($1,000's) $212,273 $217,356 $189,942 $141,544 $146,137
</TABLE>
-----------------------------------------
* Using average units basis.
+ Required by regulations issued in 1995.
67
<PAGE>
<TABLE>
<CAPTION>
VALUE EQUITY FUND
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 39.67 $ 32.63 $ 27.05 $ 26.48 $ 22.94
-------- -------- -------- -------- --------
Income from Investment
Operations:
Investment income--net 0.60 0.72 0.93 0.79 0.70
Net realized and unrealized gain
(loss) on investments 17.09 6.32 4.65 (0.22) 2.84
-------- -------- -------- -------- --------
Total from Investment
Operations 17.69 7.04 5.58 0.57 3.54
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 57.36 $ 39.67 $ 32.63 $ 27.05 $ 26.48
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return 44.59% 21.58% 20.63% 2.15% 15.43%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses** (1.20)% (1.20)% (1.32)% (1.41)% (1.70)%
Investment income--net 1.26% 1.98% 3.24% 3.02% 2.83%
Portfolio Turnover Rate 99.25% 61.53% 67.06% 40.41% 54.46%
Average Commission Rate Paid (per
share)+ $0.0601 $0.0100 -- -- --
Net Assets at End of the Year
($1,000's) $60,389 $52,231 $43,824 $35,603 $38,104
</TABLE>
-----------------------------------------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for
the years ended 9/30/97, 9/30/96 and 9/30/95.
+ Required by regulations issued in 1995.
68
<PAGE>
<TABLE>
<CAPTION>
EMERGING GROWTH EQUITY FUND
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 67.07 $ 52.58 $ 35.96 $ 35.52 $ 24.26
-------- -------- -------- -------- --------
Income from Investment
Operations:
Investment (loss)--net (0.95) (0.90) (0.67) (0.57) (0.53)
Net realized and unrealized gain
on investments 18.35 15.39 17.29 1.01 11.79
-------- -------- -------- -------- --------
Total from Investment
Operations 17.40 14.49 16.62 0.44 11.26
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 84.47 $ 67.07 $ 52.58 $ 35.96 $ 35.52
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return 25.94% 27.56% 46.22% 1.24% 46.41%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses** (1.98)% (1.91)% (2.12)% (2.08)% (2.27)%
Investment income--net (1.39)% (1.54)% (1.61)% (1.64)% (1.78)%
Portfolio Turnover Rate 177.68% 150.40% 170.54% 114.15% 145.59%
Average Commission Rate Paid (per
share)+ $0.0577 $0.0200 -- -- --
Net Assets at End of the Year
($1,000's) $91,589 $92,136 $74,625 $48,293 $56,645
</TABLE>
-----------------------------------------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for
the years ended 9/30/97, 9/30/96 and 9/30/95.
+ Required by regulations issued in 1995.
69
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 45.25 $ 40.25 $ 38.08 $ 34.36 $ 28.27
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment (loss)--net (0.14) (0.08) (0.02) (0.09) (0.21)
Net realized and unrealized gain
on investments 5.98 5.08 2.19 3.81 6.30
-------- -------- -------- -------- --------
Total from Investment
Operations 5.84 5.00 2.17 3.72 6.09
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 51.09 $ 45.25 $ 40.25 $ 38.08 $ 34.36
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return 12.91% 12.42% 5.70% 10.83% 21.54%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses** (1.96)% (1.93)% (1.90)% (1.96)% (2.83)%
Investment income--net (0.29)% (0.20)% (0.07)% (0.25)% (0.68)%
Portfolio Turnover Rate 61.87% 51.29% 51.40% 44.25% 55.02%
Average Commission Rate Paid (per
share)+ $0.0200 $0.0200 -- -- --
Net Assets at End of the Year ($1,000's) $35,276 $39,602 $31,143 $28,672 $21,769
</TABLE>
-----------------------------------------
* Using average units basis.
** Ratio reflects fees paid with brokerage commissions only for
the years ended 9/30/97, 9/30/96 and 9/30/95.
+ Required by regulations issued in 1995.
70
<PAGE>
<TABLE>
<CAPTION>
ACTIVELY MANAGED BOND FUND
--------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 30.79 $ 29.58 $ 26.06 $ 27.43 $ 24.57
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income--net 2.04 1.80 1.64 1.47 1.23
Net realized and unrealized
gain (loss) on investments 1.06 (0.59) 1.88 (2.84) 1.63
-------- -------- -------- -------- --------
Total from Investment
Operations 3.10 1.21 3.52 (1.37) 2.86
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 33.89 $ 30.79 $ 29.58 $ 26.06 $ 27.43
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return 10.07 % 4.09 % 13.51 % (4.99)% 11.64 %
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses (0.81)% (0.80)% (0.84)% (0.82)% (0.87)%
Investment income--net 6.32 % 5.94 % 5.95 % 5.51 % 5.22 %
Portfolio Turnover Rate 69.29 % 17.14 % 18.21 % 8.54 % 170.16 %
Net Assets at End of the Year
($1,000's) $147,139 $150,304 $140,127 $136,210 $146,918
</TABLE>
-----------------------------------------
* Using average units basis.
71
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND FUND
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 29.30 $ 28.01 $ 25.40 $ 25.95 $ 24.20
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income--net 1.78 1.74 1.66 1.46 1.48
Net realized and unrealized
gain (loss) on investments 0.47 (0.45) 0.95 (2.01) 0.27
-------- -------- -------- -------- --------
Total from Investment
Operations 2.25 1.29 2.61 (0.55) 1.75
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 31.55 $ 29.30 $ 28.01 $ 25.40 $ 25.95
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return 7.68% 4.61% 10.28% (2.12)% 7.23%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses (1.04)% (0.98)% (0.98)% (0.95)% (1.07)%
Investment income--net 5.86% 6.06% 6.27% 5.68% 5.95%
Portfolio Turnover Rate 67.95% 13.20% 15.95% 17.92% 12.39%
Net Assets at End of the Year
($1,000's) $68,389 $74,754 $90,482 $89,780 $97,796
</TABLE>
-----------------------------------------
* Using average units basis.
72
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENT FUND
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance:*
(for a unit outstanding throughout the
year)
Net Asset Value, Beginning of Year $ 20.24 $ 19.31 $ 18.36 $ 17.83 $ 17.43
-------- -------- -------- -------- --------
Income from Investment Operations:
Investment income--net 0.97 0.94 0.93 0.53 0.43
Net realized and unrealized gain
(loss) on investments 0.02 (0.01) 0.02 0.00 (0.03)
-------- -------- -------- -------- --------
Total from Investment Operations 0.99 0.93 0.95 0.53 0.40
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 21.23 $ 20.24 $ 19.31 $ 18.36 $ 17.83
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return 4.89% 4.82% 5.17% 2.97% 2.29%
Ratios/Supplemental Data
Ratios to Average Net Assets
Expenses (0.80)% (0.80)% (0.80)% (0.80)% (0.89)%
Investment income--net 4.67% 4.76% 4.94% 2.92% 2.43%
Decrease in above expense ratio due to
fee waiver 0.45% 0.39% 0.34% 0.32% --
Net Assets at End of the Year ($1,000's) $27,021 $25,668 $27,360 $29,975 $35,117
</TABLE>
-----------------------------------------
* Using average units basis.
73
<PAGE>
INDEPENDENT AUDITOR'S REPORT
---------------------------------------------------------------
To the Unitholders and Board of Trustees
RSI Retirement Trust
We have audited the combined and individual statements of
assets and liabilities, including the statements of
investments, of the Core Equity Fund, Emerging Growth Equity
Fund, Value Equity Fund, International Equity Fund, Actively
Managed Bond Fund, Intermediate-Term Bond Fund and Short-Term
Investment Fund (the "Investment Funds") of the RSI Retirement
Trust as of September 30, 1997, and the related statements of
operations for the year then ended, statements of changes in
net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the
period then ended. 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, 1997, 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 financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Investment Funds of RSI
Retirement Trust at September 30, 1997, the results of their
operations, the changes in their net assets and the financial
highlights for the periods indicated, in conformity with
generally accepted accounting principles.
[SIGNATURE]
New York, New York
October 31, 1997
74
<PAGE>
1997 ANNUAL MEETING
RESULTS
On July 29, 1997, RSI held its Annual Meeting of Trust
Participants to consider: (1) the election of five Trustees for
terms of three years; (2) ratification or rejection of
McGladrey & Pullen, LLP as independent accountants of RSI for
the fiscal year ending September 30, 1997; (3) to approve the
new investment sub-advisory agreement between RSI and HLM
Management Company, Inc., and (4) to approve the new management
agreement between RSI and Retirement System Investors Inc.
These results, which are unauditied, follow.
<TABLE>
<CAPTION>
PROPOSAL 1: ELECTION OF TRUSTEES
- --------------------------------------------------------------------
SHARES % OF SHARES % OF OUTSTANDING SHARES
<S> <C> <C> <C>
NOMINEE:
Herbert G. Chorbajian
FOR 10,374,680 99.98 74.60
AGAINST 1,653 .02 .01
ABSTAIN 0 -- --
NOMINEE:
James P. Cronin
FOR 10,375,203 99.99 74.60
AGAINST 1,130 .01 .01
ABSTAIN 0 -- --
NOMINEE:
Ralph L. Hodgkins, Jr.
FOR 10,374,968 99.99 74.60
AGAINST 1,365 .01 .01
ABSTAIN 0 -- --
NOMINEE:
William L. Schrauth
FOR 10,374,680 99.98 74.60
AGAINST 1,653 .02 .01
ABSTAIN 0 -- --
NOMINEE:
William E. Swan
FOR 10,375,203 99.99 74.60
AGAINST 1,130 .01 .01
ABSTAIN 0 -- --
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
PROPOSAL 2: APPROVAL OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------
SHARES % OF SHARES % OF OUTSTANDING SHARES
<S> <C> <C> <C>
FOR 10,370,714 99.95 74.57
AGAINST 2,529 .02 .02
ABSTAIN 3,090 .03 .02
<CAPTION>
PROPOSAL 3: APPROVAL OF INVESTMENT SUB-ADVISORY AGREEMENT
- --------------------------------------------------------------------
SHARES % OF SHARES % OF OUTSTANDING SHARES
<S> <C> <C> <C>
FOR 895,737 99.83 73.45
AGAINST 711 .08 .06
ABSTAIN 775 .09 .06
<CAPTION>
PROPOSAL 4: APPROVAL OF NEW MANAGEMENT AGREEMENT
- --------------------------------------------------------------------
SHARES % OF SHARES % OF OUTSTANDING SHARES
<S> <C> <C> <C>
FOR 894,211 99.67 73.33
AGAINST 2,266 .25 .19
ABSTAIN 746 .08 .06
</TABLE>
76
<PAGE>
OFFICERS
---------------------------------------------------------------
William Dannecker, President
James P. Coughlin, C.F.A., Executive Vice President and Chief
Investment Officer
Stephen P. Pollak, Esq., Executive Vice President, Counsel and
Secretary
John F. Meuser, Senior Vice President and Treasurer
Durando J. Saccente, Senior Vice President
Veronica A. Fisher, Vice President and Assistant Treasurer
Chris R. Kaufman, First Vice President
Herbert Kuhl, Jr., C.F.A., First Vice President
Stephen A. Hughes, Second Vice President
Deborah A. Modzelewski, Second Vice President
Heidi Viceconte, Second Vice President
CONSULTANTS
---------------------------------------------------------------
Actuarial--Retirement System Consultants Inc.
Administrative and Recordkeeping--Retirement System Consultants
Inc.
Investments--Hewitt Associates
INVESTMENT MANAGERS
---------------------------------------------------------------
Friess Associates, Inc.
HLM Management Company, Inc. (Replaced The Putnam Advisory
Company, Inc., effective April 1, 1997)
Morgan Grenfell Investment Services Limited
Retirement System Investors Inc.
CUSTODIANS
---------------------------------------------------------------
The Chase Manhattan Bank
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
77
<PAGE>
BOARD OF TRUSTEES
---------------------------------------------------------------
Herbert G. Chorbajian
Chairman, President and Chief Executive Officer
ALBANK, FSB, NY
Candace Cox
President and Chief Investment Officer
NYNEX Asset Management Co., NY
James P. Cronin
President, Treasurer and Chief Executive Officer
The Dime Savings Bank, Norwich, CT
William Dannecker
President and Chief Executive Officer
Retirement System Group Inc., NY
Eugene C. Ecker
Pension and Group Insurance Consultant
Covington Hardee
Retired Chairman
The Lincoln Savings Bank, FSB, NY
Ralph L. Hodgkins, Jr.
Retired Chief Executive Officer
Mid Maine Savings Bank, FSB, ME
Maurice E. Kinkade
Director of Development
Maplebrook School
President, KINCO Management
Willliam G. Lillis
Real Estate Consultant
William L. Schrauth
President and Chief Executive Officer
The Savings Bank of Utica, NY
William E. Swan
President and Chief Executive Officer
Lockport Savings Bank, NY
Raymond L. Willis
Private Investments
78
<PAGE>
THE INFORMATION CONTAINED HEREIN SHALL NOT BE CONSTRUED TO BE OR CONSTITUTE AN
OFFER OR SOLICITATION OF AN OFFER TO BUY UNITS IN THE RSI RETIREMENT TRUST.
SALES OF UNITS IN THE TRUST MAY BE MADE ONLY IN THOSE STATES WHERE SUCH UNITS
ARE EXEMPT FROM REGISTRATION OR HAVE BEEN QUALIFIED FOR SALE. TOTAL RETURNS ARE
BASED ON HISTORICAL RESULTS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
FUTURE PERFORMANCE AND UNIT NET ASSET VALUE WILL FLUCTUATE SO THAT UNITS, IF
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS MATERIAL MUST
BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
<PAGE>
ANNUAL REPORT
1997
RSI RETIREMENT TRUST
[LOGO]
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
BROKER/DEALER:
RETIREMENT SYSTEM
Distributors Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
