[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
N/I Micro Cap Fund
N/I Growth Fund
N/I Growth & Value Fund
Annual Report
August 31, 1997
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[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LETTER TO SHAREHOLDERS
September 30, 1997
Fellow Shareholder:
It gives me great pleasure to report the results of the N/I FAMILY OF MUTUAL
FUNDS for the fiscal year ended August 31, 1997. As we mentioned in our first
report last year, it is our custom in each annual report to give you a detailed
perspective on the most recent year, as well as insights into how we approach
the investment of your portfolio and how we approach the business of investing
generally.
MARKET AND ECONOMIC COMMENTARY
It's been a great time to be a U.S. equity investor! The stock market continues
to roll along generating returns that are significantly above its long-term
average. Last year I referred to the investor's "nirvana" of "low inflation and
high profit growth" as being "unsustainable." Well, it has been sustained over
the last year, and the economy continues to walk the tightrope between growth
and inflation longer than we believed possible. Even the long-standing problem
of the U.S. budget deficit seems to be disappearing with some fiscal restraint
and healthy tax receipts. Profit growth has continued to be quite high,
especially in the technology, consumer cyclical and consumer noncyclical sectors
of the economy. All of our portfolios have a healthy exposure to these areas of
the economy, though more because our models find specific investment
opportunities than because we see strong year-over-year profit growth.
Corporate profit growth has significantly exceeded the overall growth of
economy, as measured by GDP, for several years now, leading many to question its
sustainability. The differential between the two, which cannot last forever, is
largely attributed to lower borrowing costs in recent years, lower tax rates
related to more overseas business (which has beneficial tax rates), and massive
writedowns of unproductive corporate assets. Such changes have resulted in
stronger balance sheets. However, since most of the benefits of these events
have already accrued, they will be harder to come by in the future. It is likely
we will soon see profit growth start to regress toward the overall rate of GDP
growth.
Inflation continues to be lower than expectations despite the historically
strong relationship between price increases and economic growth. Consumer and
producer prices have been tame, and wage pressures continue to be surprisingly
weak. It appears that improved productivity growth has allowed companies to sell
more products and services with less relative labor input, keeping a lid on wage
pressures (although our own experience trying to hire systems and trading
professionals suggests a tight labor market and skyrocketing salaries, at least
in those areas!). It remains to be seen which cries "uncle" first, growth or
inflation, but one of the two has to give at some point.
What could disrupt all this good news? Any acceleration of economic growth or
modest price or wage pressure will likely move the Fed to raise short-term
interest rates to preemptively keep prices in check. Such a change in policy
could slow the rate of economic growth, and depress the growth of corporate
earnings. If rates do move up, fixed income securities would start to look more
appealing and investors would start to shift assets out of equities and into
bonds. Earnings of large multinational U.S. companies could also be at risk due
to their large and increasing exposure to the foreign exchange markets. The U.S.
dollar has risen to high levels versus other major world currencies, pushing up
the effective prices of exported goods. This effect has started to evidence
itself in the recently pre-announced poor earnings by some of the largest and
best-known U.S. companies. Slower profit growth may also occur as the benefits
of the restructurings mentioned above become harder to come by.
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Although we do not make macroeconomic forecasts for our investment strategies
(our portfolios are well diversified into most major sectors of the U.S.
economy, and have economic exposures similar to their benchmarks), the economic
landscape does influence our investment process. The stability of economic
growth, or more importantly, the perception of its stability, can influence the
performance of our EstrendTM stock selection model. When economic growth is
stable and the market is not inclined to change its mind about the direction of
the economy, EstrendTM tends to work quite well because the tendency of analysts
to trend their forecasts is preserved. Also, the tendency of the market to
second-guess analysts' forecasts and disconnect stock prices from short-term
analysts' forecasts is minimized. The occurrence of any of the disruptions
referred to in the previous paragraph could cause our EstrendTM model to falter.
In such an event, our Fair Value model usually provides good performance because
value-based mispricings are often corrected at these economic inflection points.
Corporate earnings have continued their long streak of coming in, on average,
ahead of analysts' expectations. This has resulted in increased estimates for
future earnings which, in turn, has provided added support to stock prices. Some
of these data on earnings surprises are illusory, however, as corporate
America's investor relations departments have become increasingly adept at
playing the game of lowering analysts' and investors' expectations to levels
that can be exceeded. This "expectations adjustment" ritual is increasingly
common and can be seen in a comparison of actual earnings with expectations from
two or three months earlier, prior to the companies' guiding street analysts
down. This comparison shows that earnings have come in positively, but less than
the announced earnings would suggest.
Larger stocks outperformed smaller stocks by a significant margin again last
year. The S&P 500 Composite Index of large companies returned +43.9% in the
twelve months ended August 31, 1997, compared with the +29.0% return of the
smaller stock Russell 2000 Index. This is a continuation of a trend started in
1994, from which time the S&P 500 has outperformed the Russell 2000 by +111.2%
to +75.0%. Since July of this year, however, the Russell 2000 has beaten the S&P
500 with an advantage of +8.3% to +2.1%. Given the strong tendency of "mean
reversion" between the returns of the two indices, and other fundamental factors
favoring smaller companies (such as the strong U.S. dollar), we would not be
surprised to see smaller stocks continue to outperform larger stocks. Such
outperformance by smaller companies, if it occurs, would benefit all of our
funds as they have much smaller median capitalizations than the S&P 500.
STOCK SELECTION MODELS
Recall that we attempt to identify attractive stocks for your portfolio using
the "opinions" of two different and complementary stock selection models, our
EstrendTM model and our Fair Value model. EstrendTM identifies stocks which have
experienced recent positive earnings news such as an earnings announcement which
was higher than consensus expectations or an earnings forecast revision by some
of the analysts on Wall Street (Numeric Investors L.P. employs no conventional
analysts; our models rely on the consensus of Wall Street opinion). The model is
designed to earn excess returns from the behavioral tendency of the market and
Wall Street security analysts to underreact to this news. This means that stocks
that have experienced such good news will often demonstrate a strong tendency to
drift upward for a period of time following the release of the news. Our
computer systems and models identify these investment opportunities quickly, and
we purchase the stocks with the best of these characteristics for your
portfolio.
Our Fair Value model looks at stocks quite differently than EstrendTM. Fair
Value seeks to identify stocks which have lower market prices than appropriate
given their earnings power, balance sheet, growth potential and risk. The market
overreacts to some lingering bad news about these companies due to irrational
fear (don't let anyone tell you that investors are always rational!) of its
impact on the company. Holders of these stocks would rather sell their shares at
these low levels than wait for a recovery because they don't want to show their
"mistakes" in their portfolio. Such a mentality is common among undisciplined
investors, causing undue selling pressure on these stocks. Our Fair Value model
avoids these emotional entanglements and identifies stocks which have had their
market prices pushed away from their "equilibrium" values, hoping to profit when
the market becomes more rational and recognizes the buying opportunity created
by those investors rushing for the exits.
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RECENT INVESTMENTS
So much for theory. The best way to describe what we really do with your money
is to give you two examples of actual investments we have made in the funds over
the past year.
In early April of 1997, we purchased for some of the funds the stock of Jabil
Circuit, Inc. (ticker JBIL) ("Jabil"), a contract electronics manufacturer
performing circuit board and systems assembly for manufacturers of PCs, computer
peripherals, and communications equipment. The company had recently announced
very good quarterly earnings of $0.29 per share, compared with Wall Street
expectations of about $0.23 per share. The company's good earnings were driven
by strong sales growth to data communications companies such as 3COM, and better
margins due to the economies of scale derived from sales growth. Following the
earnings release, the stock price jumped to around $24 and looked only
moderately attractive relative to other investment opportunities. On April 1,
however, the stock had backed off about 10% to the $211/2 level and our models
saw an opportunity, so we purchased the stock. Our EstrendTM model ranked the
stock highly at that point.
The strong score was driven by the good earnings performance and subsequent
forecast revisions made by the Wall Street security analysts following the
company. The EstrendTM model was betting that Jabil company management was
likely to be able to deliver comparably good earnings in future quarters. The
analysts believed the same and raised their estimates following the earnings
release, but not so much that they would have to lower them in the future if
earnings growth slowed. They like to keep some upward forecast revision
potential out of their new earnings estimates, believing that it is safer to be
too low than too high relative to a company's true earnings potential. Such
predictably conservative behavior creates an opportunity for a disciplined
process such as ours to identify behavioral or psychological patterns and profit
from their strong persistence.
Jabil went on to report extremely strong earnings in the subsequent quarter (in
June reporting $0.38 per share compared with expectations of $0.32), and
analysts have raised their fiscal 1997 earnings estimates from $1.15 in April to
$1.35 in August. The stock recently rose to the $62 level causing a weakening of
the signal from our Fair Value model. This model score became less attractive
due to the significant price appreciation in the stock. The Fair Value model
ignores the recent earnings surprises and CHANGES to earnings forecasts and
looks only at the LEVEL of earnings and other fundamental measures, relative to
a security's price. In April, Jabil was selling for $22 with $1.15 in earnings
and a 25+% earnings growth rate. In August, the shares had risen to over $60
with $1.35 in earnings and the same 25+% growth rate. The Fair Value model,
which found the stock reasonably priced in April, found it quite overpriced and
in need of much higher estimate revisions to hold it in the portfolios.
Consequently, we began to sell the position in August.
We wouldn't want you to think that all the decisions we make turn out so well.
In November 1996 we purchased shares of a software company called Project
Software & Development (ticker PSDI). This company develops and sells
client/server applications software to plan and manage the maintenance of a
customer's capital equipment and track the related spare parts. The company had
been growing rapidly and delivering extremely strong quarterly earnings relative
to expectations, reporting in early November $0.37 per share compared with $0.31
consensus expectations. Security analysts raised their estimates and the company
reported another good quarter in January, delivering $0.35 compared with a $0.32
consensus. We had purchased the stock at about $38 per share, following the
November earnings release, and based on a strong EstrendTM score. The investment
looked good for a while, appreciating to about $46 in January 1997. Earnings
estimates for the company's September 1997 fiscal year had lifted over the same
period from $1.38 to $1.53.
Prior to the market opening on April 1, 1997 (April Fool's Day!), the company
announced that earnings for the next quarter would be $0.15 per share, far short
of the consensus of $0.29. Management blamed the problems on heightened
competition from foreign competitors such as SAP and Baan, which caused slow
sales in Europe. The stock collapsed to about $15 and we sold most of our
position due to the resultant negative EstrendTM score which suggested to us
that further negative quarterly announcements and estimate revisions were
likely. Estimates were ultimately cut to the $1.16 level, though the stock has
since recovered some of its lost ground. We typically sell a position after such
news if the stock has little support from our EstrendTM or Fair Value models
because we can usually earn better returns investing the "dead money" in more
dynamic, higher ranked names. The failure of the models on this stock was not
foreseeable, but occurs occasionally and is one of the unpleasant realities of
our job.
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PORTFOLIO RETURNS
The Growth portfolio earned a return of +37.69% for the fiscal year ended August
31, 1997. Performance was gratifying on an absolute basis, and compared to its
benchmark, the Russell 2500 Growth Index (an unmanaged index of smaller and
medium capitalization growth stocks), which returned +23.86% over the same
period. The strong relative performance can be attributed to good performance by
both of our stock selection models (see below). Since inception on June 3, 1996,
the fund has returned +35.85%, compared with the Russell 2500 Growth Index
return of +13.26% over the same period.
The Growth & Value portfolio returned +49.11% for the fiscal year ended August
31, 1997. The fund's return, while solid in absolute terms, also compares
favorably with its benchmark, the Standard & Poor's 400 MidCap Index (an
unmanaged index of medium capitalization stocks), which returned +37.27% over
the same period. Since inception on June 3, 1996, the fund has returned +43.64%,
compared with the S&P 400 Index return of +33.33% over the same period.
The Micro Cap portfolio returned +58.41% for the fiscal year ended August 31,
1997. These returns are very favorable on an absolute basis, and also compared
to its benchmark, the Russell 2000 Growth Index, an unmanaged index of smaller
capitalization growth stocks, which returned +20.12% over the same period. Since
its inception on June 3, 1996, the fund has returned +54.05%, compared with the
Russell 2000 Growth Index return of +5.89%.
PERFORMANCE ATTRIBUTION
Because the different portfolios are managed in a similar fashion using the same
investment models (the main differences being sector composition and the size
and growth character of stocks they are constrained to selecting), performance
attribution can be generalized to all of them.
The funds' strong ABSOLUTE performance can be attributed to remarkably strong
profit growth across the market, with essentially no offsetting negative news to
cause fear of inflation or its attendant back-up in interest rates. This is
about as good as it gets in equity investing. Please have realistic expectations
about the long-term return potential of the market as the odds are against such
favorable market conditions and positive "animal spirits" continuing unchanged.
Good RELATIVE performance in all portfolios is largely attributed to both of our
stock selection models performing well through most of the last year, as well as
ease of implementation allowed by the portfolios' small size. Our EstrendTM
model generated positive stock selection insights in nine of the last twelve
months, while Fair Value worked in ten of twelve. The models were designed to
provide independent insights about investment opportunities cross-sectionally,
and to be complementary with each other through time. This design worked well
during the past year as we experienced no months in which both models jointly
failed to provide good investment insights. This does not mean they will never
fail together--in fact they will from time to time. But we do explicitly try to
limit the frequency of these joint failures. Also, even if both models are
performing well, our execution of suggested trades may be hampered by available
market liquidity in those stocks, causing delays in executing and higher
transaction costs. In this event, performance of the funds may be poor despite
the good model performance. We hope to minimize the frequency of these
occurrences by keeping our asset base small and more manageable.
Economic sectors in which we experienced particularly good performance in the
Growth and Micro Cap portfolios included consumer cyclicals (good investments in
small retailers and apparel manufacturers), consumer noncyclicals (cosmetics,
vitamins and foods), and technology (particularly software and personal computer
manufacturers and retailers). In the Growth & Value portfolio we give ourselves
high marks for the good success in technology, energy (our Fair Value model was
particularly successful in some of its oil and gas exploration and oil field
service stocks), and financial stocks (especially regional banks and consumer
finance stocks). In the future we expect these sectors to have repeat
performances in their success rates because our models tend to have predictably
better performance in the types of stocks found in these sectors. Some of the
fundamental characteristics found in these stocks are embodied in the "skill"
adjustments we make to our model scores, causing us to favor one model's
importance over the other's, stock by stock. We expect such adjustments to cause
us to have more persistent success in certain types of stocks, as described
above.
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Your funds will continue to be virtually fully invested in the stocks our models
find the most attractive. We never attempt to "time the market," by raising cash
levels when we think the market is overvalued, or becoming relatively more
invested if we think the market is cheap. Our belief is that such "guessing" is
an effort in vain, unlikely to improve returns. Our fully-invested posture
obviously helps returns in rising markets, but will not cushion the fall in a
down market. We rely on you to make your own asset allocation decisions,
investing with us only those assets you want fully exposed to the US equity
market.
PORTFOLIO ACTIVITY
As is customary we will make a distribution in December. If the distribution
were paid today it would be approximately $2.20 per share for the Micro Cap
Fund, $2.30 for the Growth Fund, and $2.50 for the Growth & Value Fund. These
distributions (which are likely to change between now and the distribution date
this December) reflect extremely strong market returns, even better portfolio
returns, and the relatively high turnover of holdings in these investment
strategies. We expect the funds to continue to have high turnover, as
deliberately and quickly changing stock positions in response to mispricing
opportunities or changes in earnings potential is one of the critical elements
of our investment program.
Portfolio turnover and the tax implications of having higher dividend
distributions from the more frequent realization of gains or high dividend
yields has become the subject of some debate recently. As mentioned in the
funds' prospectus, we would like to not have to worry about the tax implications
of having large annual dividend distributions by having shareholders use our
funds (and other actively managed mutual funds) in their retirement accounts
where they pay no taxes until the investment is liquidated at retirement--this
is the most tax-efficient way to invest in any actively managed equity fund with
turnover higher than 50% per year. However, we realize that much of the
investment in our funds is from taxable investors. For these investors, we hope
to be able to continue to generate enough "excess return" over our benchmarks to
"pay" for the extra tax burden and the loss of some of the compounding benefit
caused by high current distributions. The lower compound return results when
taxes are paid frequently as a result of taxable dividend distributions (often
taxed at higher ordinary income tax rates), instead of being paid at the end of
investment horizon many years later at lower long-term capital gains rates.
We have analyzed the "cost" of turnover for a taxable investor as the
incremental return required by our investment strategy over its benchmark, to
equate the after-tax returns of our fund with the after-tax returns of its
benchmark. This analysis is subject to many assumptions about market returns,
tax rates, holding periods, turnover of the benchmark index and the fund,
dividend yields and other factors. VERY GENERALLY speaking, however, with
"normal" (10% per year) assumptions about the long-term returns for the U.S.
equity market, and under current tax law, for an investor in the 31% marginal
tax bracket, we would need to earn returns of about 1.2% per year over our
benchmark over twenty years to provide the same after-tax result as the lower
turnover benchmark. If the investor's time horizon is shorter, the required
excess return we would need to generate would be modestly lower, and if the
investor is in a higher tax bracket or if market returns are greater in the
future, the required hurdle would be higher.
We hope to be able to generate enough excess return over our benchmark to beat
it on an after-tax basis. Our business strategy of strictly limiting the amount
of assets we will take into these funds should make it easier to earn better
returns, but there can be no assurance we will be able to do so.
CLOSING OF THE MICRO CAP AND GROWTH FUNDS
On August 8, 1997, we closed the Micro Cap and Growth funds to new investors to
keep the funds small enough to more easily achieve our excess return objectives.
As a result of continuing investment from existing investors into the Micro Cap
fund, we took the additional step of further restricting investment by existing
shareholders in that fund to $25,000 per fiscal year per account. Restrictions
may be tightened in the future for any of the funds. Such change is likely to
occur without notice to prevent a sudden influx of cash from anxious investors.
The asset growth in these funds has been gratifying. However, we want to ensure
we are not too burdened by assets to be able to easily implement our investment
strategies. We apologize for the inconvenience caused by restricting access to
the funds, but we have done it solely with your best interests at heart.
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NEW SHAREHOLDER SERVICES
We are currently offering some enhanced shareholder services which you might
find helpful. We now have automated information on your account available 24
hours a day via telephone. With this service you can access account balances,
and transaction and dividend information. By Spring we hope to have similar
services plus purchase and redemption capabilities available on the Internet. It
is always a challenge to balance the desire for the best shareholder services
with the desire to keep our expenses to a minimum. Different investors have
different preferences. It is our continuing goal to find ways to reduce
unnecessary expenses to be able to provide better shareholder services at the
same overall prices. Please let us know if you find our services satisfactory,
and especially if you don't!
We thank you again for the confidence you have placed in us by allowing us to
manage some portion of your investment portfolio. We will stand by our
commitment to i) keep the funds small enough to not fritter away your investment
dollars on the high transactions costs which accompany large pools of assets,
ii) keep expenses significantly below the industry averages and not waste your
assets on self-serving sales and marketing fees and loads, and iii) continue to
improve our investment program with leading edge research.
Respectfully,
/S/Signature
John C. Bogle, Jr.
Director of Portfolio Management
Numeric Investors L.P.
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[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
Comparison of Change in Value of $10,000 investment in
N/I Micro Cap Fund(1)(2) vs. Russell 2000 Growth Index
[Line Graph Omitted-Plot Points as Follows:]
Russell 2000 Micro Cap
Growth Index Fund
6/3/96 10,000 10,000 D
6/30/96 9,350 9,825 O
9/30/96 9,269.8 10,816.7 L
12/31/96 9,294.64 11,685 L
3/31/97 8,319.6 10,859.3 A
6/30/97 9,779.68 13,469.9 R
8/31/97 10,588.8 15,404.9 S
Past performance is not predictive of future performance
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Micro Cap Fund $15,405
Russell 2000 Growth Index $10,589
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- --------------------------------------------------------------------------------
Total Returns
ONE YEAR ENDED AVERAGE
AUGUST 31, 1997 ANNUAL(3)
--------------- ---------
Micro Cap Fund 58.41% 41.43%
Russell 2000 Growth Index 20.12% 4.70%
- --------------------------------------------------------------------------------
- ----------
(1) The chart assumes a hypothetical $10,000 initial investment in the Fund and
reflects all Fund expenses.Investors should note that the Fund is an
aggressively managed mutual fund while the indices are either unmanaged and
do not incur expenses and/or are not available for investment.
(2) Numeric Investors L.P. waived a portion of its advisory fee and agreed to
voluntarily reimburse a portion of the Fund's operating expenses, if
necessary, to maintain the expense limitation as set forth in the notes to
the financial statements.Total returns shown include fee waivers and
expense reimbursements, if any; total returns would have been lower had
there been no assumption of fees and expenses in excess of expense
limitations.
(3) For the period June 3, 1996 (commencement of operations) through August 31,
1997.
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[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH FUND
Comparison of Change in Value of $10,000 investment in
N/I Growth Fund(1)(2) vs. Russell 2500 Growth Index
[Line Graph Omitted-Plot Points as Follows:]
Russell 2500 Growth Fund
Growth Index
6/3/96 10,000 10,000 D
6/30/96 9,499 9,783.3 O
9/30/96 9,629.79 10,925 L
12/31/96 9,720.12 11,041.6 L
3/31/97 8,942.42 10,032.5 A
6/30/97 10,396.7 12,067.4 R
8/31/97 11,326.7 13,585.2 S
Past performance is not predictive of future performance
- --------------------------------------------
Growth Fund $13,585
Russell 2500 Growth Index $11,326
- --------------------------------------------
- --------------------------------------------------------------------------------
Total Returns
ONE YEAR ENDED AVERAGE
AUGUST 31, 1997 ANNUAL(3)
--------------- ---------
Growth Fund 37.69% 27.86%
Russell 2500 Growth Index 23.86% 10.51%
- --------------------------------------------------------------------------------
- -------------
(1) The chart assumes a hypothetical $10,000 initial investment in the Fund and
reflects all Fund expenses.Investors should note that the Fund is an
aggressively managed mutual fund while the indices are either unmanaged and
do not incur expenses and/or are not available for investment.
(2) Numeric Investors L.P. waived a portion of its advisory fee and agreed to
voluntarily reimburse a portion of the Fund's operating expenses, if
necessary, to maintain the expense limitation as set forth in the notes to
the financial statements.Total returns shown include fee waivers and
expense reimbursements, if any; total returns would have been lower had
there been no assumption of fees and expenses in excess of expense
limitations.
(3) For the period June 3, 1996 (commencement of operations) through August 31,
1997.
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[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH & VALUE FUND
Comparison of Change in Value of $10,000 investment in
N/I Growth & Value Fund(1)(2) vs. S&P 400 Midcap Index
[Line Graph Omitted-Plot Points as Follows:]
S&P 400 Growth & Value
Midcap Index Fund
6/1/96 10,000 10,000 D
6/30/96 9,850 9,775 O
9/30/96 10,136.5 10,158.3 L
12/31/96 10,750.1 11,141.4 L
3/31/97 10,590.5 10,840.1 A
6/30/97 12,146.4 12,899.3 R
8/31/97 13,332.8 14,364.2 S
Past performance is not predictive of future performance
- -------------------------------------------
Growth & Value Fund $14,364
S&P 400 Midcap Index $13,333
- -------------------------------------------
- --------------------------------------------------------------------------------
Total Returns
ONE YEAR ENDED AVERAGE
AUGUST 31, 1997 ANNUAL(3)
Growth & Value Fund 49.11% 33.71%
S&P 400 Midcap Index 37.27% 25.95%
- --------------------------------------------------------------------------------
- --------------
(1) The chart assumes a hypothetical $10,000 initial investment in the Fund and
reflects all Fund expenses.Investors should note that the Fund is an
aggressively managed mutual fund while the indices are either unmanaged and
do not incur expenses and/or are not available for investment.
(2) Numeric Investors L.P. waived a portion of its advisory fee and agreed to
voluntarily reimburse a portion of the Fund's operating expenses, if
necessary, to maintain the expense limitation as set forth in the notes to
the financial statements.Total returns shown include fee waivers and
expense reimbursements, if any; total returns would have been lower had
there been no assumption of fees and expenses in excess of expense
limitations.
(3) For the period June 3, 1996 (commencement of operations) through August 31,
1997.
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[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS--92.9%
AEROSPACE--1.2%
11,600 Ducommun, Inc.* ................... $ 432,100
46,200 Rohr, Inc.* ....................... 1,250,287
----------
1,682,387
----------
APPAREL--1.6%
65,400 North Face, Inc., (The)*/** ....... 1,451,062
52,900 Tarrant Apparel Group*/** ......... 819,950
----------
2,271,012
----------
AUTOMOBILE PARTS & EQUIPMENT--1.7%
52,700 Excel Industries Inc. ............. 1,343,850
41,600 Standard Products Co. (The) ....... 1,102,400
----------
2,446,250
----------
CHEMICALS--0.5%
21,300 Carbide/Graphite Group, Inc. (The)* 705,562
----------
COMMERCIAL PRINTING--1.1%
53,400 Mail-Well Corp., Inc.* ............ 1,491,862
----------
COMPUTER COMPONENTS--1.7%
35,000 CHS Electronics, Inc.* ............ 1,351,875
64,700 Printronix, Inc.* ................. 1,091,812
----------
2,443,687
----------
COMPUTERS, SOFTWARE & SERVICING--13.9%
52,300 Applied Voice Technology, Inc.*/** 1,242,125
31,100 Arbor Software Corp.* ............. 1,232,337
38,200 Aspect Development, Inc.* ......... 1,461,150
71,700 AXENT Technologies, Inc.*/** ...... 1,299,562
14,400 Citrix Systems, Inc.* ............. 727,200
130,000 Compucom Systems, Inc.* ........... 1,308,125
23,600 Computer Learning Centers, Inc.* .. 1,132,800
80,700 CyberMedia, Inc.*/** .............. 1,704,787
74,300 Deltek Systems, Inc.*/** .......... 1,671,750
68,200 HMT Technology Corp.*/** .......... 1,159,400
21,700 MindSpring Enterprises, Inc.* ..... 336,350
51,700 Pinnacle Systems, Inc.*/** ........ 1,318,350
73,800 Procom Technology, Inc.* .......... 765,675
69,600 QuadraMed Corp.*/** ............... 1,218,000
82,300 Simulated Sciences, Inc.* ......... 1,162,487
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
COMPUTERS, SOFTWARE & SERVICING--(CONTINUED)
38,800 Symantec Corp.* $ 933,625
50,000 Versant Object Technology Corp.* .. 587,500
16,200 Visio Corp. * ..................... 558,900
----------
19,820,123
----------
COSMETICS--0.8%
61,300 Chattem, Inc.* .................... 1,103,400
----------
ELECTRICAL EQUIPMENT--2.7%
28,200 C&D Technologies, Inc. ............ 1,126,237
38,400 Encore Wire Corp.* ................ 1,324,800
91,400 Telcom Semiconductor, Inc.* ....... 1,456,687
----------
3,907,724
----------
ELECTRONIC COMPONENTS & ACCESSORIES--1.0%
6,000 ADFlex Solutions, Inc.* ........... 153,000
53,600 Cyberoptics Corp.*/** ............. 1,199,300
----------
1,352,300
----------
ELECTRONICS--4.5%
20,200 DII Group, Inc. */** .............. 1,105,950
17,500 Jabil Circuit, Inc.* .............. 1,036,875
33,800 Micrel, Inc.*/** .................. 1,208,350
40,300 RF Monolithics, Inc.*/** .......... 800,962
110,800 TranSwitch Corp.* ................. 1,267,275
14,900 Veeco Instruments, Inc.*/** ....... 925,662
----------
6,345,074
----------
ENTERTAINMENT--0.9%
108,700 Nimbus CD International, Inc.* .... 1,209,287
----------
ENVIRONMENTAL SERVICES--0.9%
53,200 Tetra Tech, Inc.* ................. 1,236,900
----------
FINANCIAL SERVICES--3.7%
51,000 ACC Consumer Finance Corp.* ....... 1,078,969
66,400 Consumer Portfolio Services, Inc.* 1,170,300
22,600 FIRSTPLUS Financial Group, Inc.* .. 1,039,600
1,700 New Century Financial Corp.*/** ... 28,687
39,000 Resource Bancshares Mortgage
Group ........................... 658,125
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
FINANCIAL SERVICES--(CONTINUED)
40,750 Southern Pacific Funding Corp.*/** $ 608,703
25,000 Trans Financial Bancorp, Inc. ..... 726,562
----------
5,310,946
----------
FOOD & AGRICULTURE--2.7%
28,200 Earthgrains Co.** ................. 1,156,200
52,500 Herbalife International, Inc.** ... 1,240,312
67,000 Michael Foods, Inc. ............... 1,448,875
----------
3,845,387
----------
HOSPITAL MANAGEMENT--0.8%
38,400 FPA Medical Management, Inc.* ..... 1,113,600
----------
HOUSEHOLD PRODUCTS--1.3%
35,200 Helen of Troy Ltd.* ............... 1,152,800
33,100 Windmere-Durable Holdings, Inc.** . 628,900
----------
1,781,700
----------
INSURANCE--0.6%
30,200 John Alden Financial Corp. ........ 862,587
----------
INSURANCE - PROPERTY & CASUALTY--1.2%
30,600 RLI Corp. ......................... 1,158,975
12,400 Selective Insurance Group, Inc. ... 610,700
----------
1,769,675
----------
LEASING--0.2%
14,900 Leasing Solutions, Inc.* .......... 243,987
----------
LEISURE & ENTERTAINMENT--3.0%
39,850 Fairfield Communities, Inc.* ...... 1,424,637
73,000 Funco, Inc.* ...................... 1,596,875
67,400 Harveys Casino Resorts ............ 1,162,650
1,900 Trendwest Resorts, Inc.*/** ....... 34,675
----------
4,218,837
----------
MACHINERY--3.2%
17,100 Asyst Technologies, Inc.*/** ...... 584,606
39,300 Hirsch International Corp.* ....... 1,002,150
14,900 Manitowoc Co., Inc. ............... 538,262
67,800 OmniQuip International, Inc.* ..... 1,356,000
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
MACHINERY--(CONTINUED)
48,700 Terex Corp.* ...................... $1,053,138
----------
4,534,156
----------
MEDICAL & MEDICAL SERVICES--6.6%
48,200 Advanced Health Corp.*/** ......... 1,156,800
53,500 Hanger Orthopedic Group, Inc.* .... 648,688
55,600 Hooper Holmes, Inc. ............... 1,383,050
70,300 Osteotech, Inc.* .................. 1,291,763
44,800 PMR Corp.*/** ..................... 1,047,200
27,900 RehabCare Group, Inc.* ............ 864,900
44,900 Renal Care Group, Inc.*/** ........ 1,464,863
33,900 RoTech Medical Corp. * ............ 610,200
69,400 Veterinary Centers of America, Inc.* 962,925
----------
9,430,389
----------
MEDICAL INSTRUMENTS & SUPPLIES--6.2%
45,200 Acuson Corp.* ..................... 1,217,575
104,900 Excel Technology, Inc.* ........... 1,376,813
70,400 Healthdyne Technologies, Inc.* .... 1,188,000
46,600 Maxxim Medical Inc.* .............. 981,513
7,500 Sabratek Corp.* ................... 271,875
21,800 Safeskin Corp.*/** ................ 724,850
16,500 Spine-Tech, Inc.*/** .............. 775,500
38,500 Vivus, Inc.*/** ................... 1,029,875
49,200 Wesley Jessen VisionCare, Inc.* ... 1,279,200
----------
8,845,201
----------
OIL & GAS FIELD EXPLORATION--4.0%
10,100 Atwood Oceanics, Inc.* ............ 915,944
26,600 Cliffs Drilling Co.* .............. 1,268,488
17,100 Gulf Island Fabrication, Inc.* .... 692,550
39,400 Patterson Energy, Inc.* ........... 1,507,050
78,700 Tesoro Petroleum Corp.*/** ........ 1,347,738
----------
5,731,770
----------
OIL EQUIPMENT & SERVICES--1.1%
51,500 Trico Marine Services, Inc. * ..... 1,596,500
----------
PAPER & FOREST PRODUCTS--0.3%
15,900 Mosinee Paper Corp. ............... 473,025
----------
PHARMACEUTICALS--0.9%
53,800 Bindley Western Industries, Inc.** 1,355,088
----------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
PRINTING--0.8%
24,600 Consolidated Graphics, Inc.* ...... $1,193,100
----------
PRINTING & PUBLISHING--0.9%
31,900 Merrill Corp. ..................... 1,291,950
----------
RECREATIONAL--0.5%
50,700 Bally Total Fitness Holding Corp.* 703,463
----------
RESTAURANTS--1.7%
72,900 Apple South, Inc.** ............... 1,180,069
52,900 Logan's Roadhouse, Inc.* .......... 1,296,050
----------
2,476,119
----------
RETAIL - MERCHANDISING--1.5%
53,500 Ames Department Stores*/** ........ 902,813
64,300 Fred's, Inc. Class A .............. 1,277,963
----------
2,180,776
----------
RETAIL - SPECIALTY--1.4%
31,800 Action Performance Companies,
Inc.*/** ........................ 1,037,475
40,000 Party City Corp.* ................. 960,000
----------
1,997,475
----------
RETAIL - SPECIALTY APPAREL--3.3%
58,900 Abercrombie & Fitch Co.* .......... 1,413,600
46,200 Dress Barn, Inc., (The)* .......... 947,100
97,700 Genesco, Inc.* .................... 1,215,144
31,300 Goody's Family Clothing, Inc.*/** . 1,068,113
----------
4,643,957
----------
SAVINGS & LOAN ASSOCIATION--0.5%
23,300 HUBCO, Inc. ....................... 713,563
----------
SERVICES - EQUIP. RENT & LEASE--1.0%
62,100 Renters Choice, Inc.* ............. 1,381,725
----------
STEEL--0.9%
29,800 Lone Star Technologies, Inc.*/** .. 1,216,213
----------
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
STEEL PIPE & TUBES--1.1%
46,700 Maverick Tube Corp.*/** ......... $ 1,523,588
------------
TELECOMMUNICATIONS--0.9%
151,100 American Communications
Services, Inc.* ............... 1,341,013
------------
TELECOMMUNICATIONS EQUIPMENT--4.4%
44,100 CellStar Corp.*/** .............. 1,469,081
31,150 Davox Corp.*/** ................. 903,350
34,000 Powerwave Technologies, Inc.*/** 1,328,142
27,700 Spectrian Corp.*/** ............. 1,218,800
48,500 World Access, Inc.* ............. 1,285,250
------------
6,204,623
------------
TEXTILES--1.3%
25,000 Cutter & Buck, Inc.* ............ 493,750
58,200 Quaker Fabric Corp.* ............ 1,338,600
------------
1,832,350
------------
TOBACCO--0.8%
33,700 Consolidated Cigar Holdings, Inc.* 1,116,313
------------
TRANSPORTATION--0.7%
32,100 Hvide Marine, Inc.*/** .......... 991,088
------------
TRUCKING & FREIGHT--0.8%
36,000 USFreightways Corp. ............. 1,080,000
------------
UTILITIES--0.8%
61,300 Calpine Corp.* .................. 1,134,050
------------
WHOLESALE - SPECIALTY EQUIPMENT--1.3%
21,400 InaCom Corp.*/** ................ 738,300
42,200 MicroAge, Inc.* ................. 1,147,313
------------
1,885,613
------------
Total Common Stocks
(Cost $110,671,959) ........... 132,035,395
------------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED)
AUGUST 31, 1997
- ---------------------------------------------------------
PRINCIPAL MARKET
AMOUNT (000'S) VALUE
- ---------------------------------------------------------
SHORT-TERM INVESTMENT--8.8%
REPURCHASE AGREEMENT--8.8%
12,483 Bear, Stearns & Co. Inc.
(Agreement dated 08/29/97 to be
repurchased at $12,491,561)
5.450%, 09/02/97
(Cost $12,483,272) (Note 6) ....$ 12,483,272
------------
Total Investments -- 101.7%
(Cost $123,155,231) ............ 144,518,667
------------
Liabilities in Excess of
Other Assets -- (1.7%) ......... (2,399,168
------------
Net Assets -- 100.0% .............$142,119,499
============
- ---------------
* Non-income producing.
** Security or a portion thereof is out on loan.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS--95.7%
ADVERTISING--0.5%
20,300 Valassis Communications, Inc.* .... $ 616,612
----------
AEROSPACE--1.6%
6,900 Alliant Techsystems, Inc.* ........ 445,481
51,500 Rohr, Inc.* ....................... 1,393,719
----------
1,839,200
----------
AGRICULTURE PRODUCTS - LIVESTOCK & ANIMAL
SPECIALTY--0.9%
19,400 Smithfield Foods, Inc.* ........... 1,069,425
----------
AIR TRANSPORT--1.4%
33,500 Airborne Freight Corp. ............ 1,649,875
----------
APPAREL--3.3%
29,700 Jones Apparel Group, Inc.*/** ..... 1,490,569
54,300 Nautica Enterprises, Inc.* ........ 1,293,019
48,000 North Face, Inc., (The)*/** ....... 1,065,000
----------
3,848,588
----------
BEVERAGES--0.8%
23,600 Canandaigua Brands, Inc. Class A* . 961,700
----------
BUILDING PRODUCTS & CONSTRUCTION
SUPPLIES--0.3%
13,050 Hughes Supply, Inc. ............... 334,406
----------
COMMERCIAL PRINTING--0.9%
36,550 Mail-Well Corp., Inc.* ............ 1,021,116
----------
COMMERCIAL SERVICES--2.0%
28,200 Caribiner International, Inc.*/** . 1,191,450
24,600 Computer Task Group, Inc. ......... 1,099,312
----------
2,290,762
----------
COMPUTER & OFFICE EQUIPMENT--0.7%
22,900 Lexmark International Group, Inc.
Class A*/** ..................... 801,500
----------
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
COMPUTER COMPONENTS--1.7%
35,900 CHS Electronics, Inc.* ........... $ 1,386,637
16,100 Quantum Corp.* ................... 564,506
-----------
1,951,143
-----------
COMPUTERS, SOFTWARE & SERVICING--12.6%
38,700 Arbor Software Corp.* ............ 1,533,487
12,300 Avid Technology, Inc.* ........... 405,900
37,400 AXENT Technologies, Inc.*/** ..... 677,875
17,800 Citrix Systems, Inc.* ............ 898,900
19,700 Computer Learning Centers, Inc.* . 945,600
14,600 Compuware Corp.* ................. 901,550
13,500 HBO & Co. ........................ 966,937
15,100 Lycos, Inc.* ..................... 472,819
21,800 Manugistics Group, Inc.* ......... 923,775
33,100 Scopus Technology, Inc.* ......... 819,225
32,700 Security Dynamics Technologies,
Inc.* .......................... 1,285,519
11,800 Stratus Computer, Inc.* .......... 654,900
90,900 Symantec Corp.* .................. 2,187,281
16,300 Visio Corp.* ..................... 562,350
25,100 Yahoo! Inc.*/** .................. 1,493,450
-----------
14,729,568
-----------
ELECTRICAL EQUIPMENT--0.8%
29,200 Encore Wire Corp.* ............... 1,007,400
-----------
ELECTRONICS--6.3%
36,700 Advanced Energy Industries, Inc.*/** 1,156,050
25,100 DII Group, Inc.*/** .............. 1,374,225
28,800 Jabil Circuit, Inc.*/** .......... 1,706,400
32,400 Micrel, Inc.*/** ................. 1,158,300
10,600 Sanmina Corp.* ................... 840,050
21,900 SpeedFam International, Inc.*/** . 1,201,762
-----------
7,436,787
-----------
ENVIRONMENTAL SERVICES--0.4%
21,000 Tetra Tech, Inc.* ................ 488,250
-----------
FINANCIAL SERVICES--4.8%
44,200 AMRESCO, Inc.* ................... 1,317,712
49,300 FIRSTPLUS Financial Group,
Inc.*/** ....................... 2,267,800
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
FINANCIAL SERVICES--(CONTINUED)
12,000 Metris Companies, Inc.** .......... $ 466,500
2,100 New Century Financial Corp.*/** ... 35,437
16,800 Sirrom Capital Corp. .............. 602,700
61,750 Southern Pacific Funding Corp.*/** 922,391
----------
5,612,540
----------
FOOD & AGRICULTURE--2.4%
39,300 Earthgrains Co.** ................. 1,611,300
20,600 Interstate Bakeries Corp.** ....... 1,207,675
----------
2,818,975
----------
HOSPITAL MANAGEMENT--1.9%
76,900 FPA Medical Management, Inc.* ..... 2,230,100
----------
HOTEL--0.6%
41,700 Servico, Inc.* .................... 682,837
----------
HOUSEHOLD PRODUCTS--0.9%
28,800 Blyth Industries, Inc.*/** ........ 1,063,800
----------
INDUSTRIAL--0.9%
28,400 Cognex Corp.* ..................... 1,086,300
----------
INSURANCE--0.9%
37,500 John Alden Financial Corp. ........ 1,071,094
----------
INSURANCE - PROPERTY & CASUALTY--1.0%
21,000 Everest Reinsurance Holdings, Inc. 759,937
9,000 Vesta Insurance Group, Inc. ....... 443,812
----------
1,203,749
----------
LEISURE & ENTERTAINMENT--1.3%
19,400 Anchor Gaming* .................... 1,552,000
1,700 Trendwest Resorts, Inc.*/** ....... 31,025
----------
1,583,025
----------
MACHINERY--0.4%
4,200 Asyst Technologies, Inc.*/** ...... 143,587
19,500 Terex Corp.* ...................... 421,687
----------
565,274
----------
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
MANUFACTURING--0.5%
26,500 MascoTech, Inc.** ................. $ 554,844
----------
MARINE TRANSPORTATION--0.6%
18,600 Halter Marine Group, Inc.* ........ 735,863
----------
MEDICAL & MEDICAL SERVICES--2.8%
34,100 Integrated Health Services, Inc.** 1,125,300
23,200 Renal Care Group, Inc.* .......... 756,900
23,900 Total Renal Care Holdings, Inc.* . 1,093,425
6,500 Wellpoint Health Networks Inc.*/** 353,437
----------
3,329,062
----------
MEDICAL INSTRUMENTS & SUPPLIES--5.4%
40,600 Acuson Corp.* ..................... 1,093,663
27,100 Sabratek Corp.*/** ................ 982,375
20,700 Safeskin Corp.* ................... 688,275
20,300 Spine-Tech, Inc.*/** .............. 954,100
15,500 STERIS Corp.* ..................... 581,250
40,000 Vivus, Inc.*/** ................... 1,070,000
30,400 Waters Corp.* ..................... 1,012,700
----------
6,382,363
----------
METALS--0.3%
17,500 RMI Titanium Co.*/** .............. 366,406
----------
OFFICE PRODUCTS--0.5%
19,000 U.S. Office Products Co.*/** ...... 622,250
----------
OIL & GAS FIELD EXPLORATION--6.1%
6,400 Atwood Oceanics, Inc.* ............ 580,400
39,200 Cliffs Drilling Co.* .............. 1,869,350
77,700 Comstock Resources, Inc.* ......... 951,825
18,500 Nuevo Energy Co.*/** .............. 940,031
43,100 Patterson Energy, Inc.* ........... 1,648,575
28,200 Vintage Petroleum, Inc.** ......... 1,210,838
----------
7,201,019
----------
OIL EQUIPMENT & SERVICES--3.1%
20,000 Key Energy Group, Inc.* ........... 517,500
26,000 SEACOR SMIT, Inc.*/** ............. 1,407,250
56,300 Trico Marine Services, Inc.* ...... 1,745,300
----------
3,670,050
----------
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
PHARMACEUTICALS--0.9%
24,000 Agouron Pharmaceuticals, Inc.*/** $ 1,056,000
-----------
PRINTING--0.9%
21,900 Consolidated Graphics, Inc.* ..... 1,062,150
-----------
PULP MILLS--0.4%
12,100 Buckeye Cellulose Corp.* ......... 476,438
-----------
RADIO BROADCASTING STATIONS--0.4%
8,200 Heftel Broadcasting Corp.* ....... 508,400
-----------
RECREATIONAL--0.5%
19,400 Polaris Industries, Inc.** ....... 557,750
-----------
RESTAURANTS--1.7%
30,200 Landry's Seafood Restaurants, Inc.* 724,800
28,500 Showbiz Pizza Time, Inc.* ........ 666,188
28,600 Sonic Corp.* ..................... 632,775
-----------
2,023,763
-----------
RETAIL - CATALOG & MAIL ORDER HOUSES--2.5%
15,100 Brylane, Inc.*/** ................ 639,863
34,600 Fingerhut Companies, Inc. ........ 700,650
35,100 Micro Warehouse, Inc.* ........... 916,988
15,300 Williams-Sonoma, Inc.*/** ........ 684,675
-----------
2,942,176
-----------
RETAIL - COMPUTER & COMPUTER SOFTWARE
STORES--2.0%
15,500 CDW Computer Centers, Inc.*/** ... 1,129,563
41,300 CompUSA, Inc.* ................... 1,277,719
-----------
2,407,282
-----------
RETAIL - FOOD--0.7%
25,100 Whole Foods Market, Inc.*/** ..... 853,400
-----------
RETAIL - FURNITURE STORES--0.7%
10,600 Ethan Allen Interiors Inc. ....... 779,100
-----------
RETAIL - SPECIALTY--1.3%
52,600 General Nutrition Companies, Inc.* 1,459,650
-----------
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
RETAIL - SPECIALTY APPAREL--2.8%
48,000 Genesco Inc.* .................... $ 597,000
10,600 Goody's Family Clothing, Inc.*/** 361,725
35,100 Pacific Sunwear of California*/** 1,342,575
14,200 Ross Stores, Inc.** .............. 417,125
20,000 TJX Cos., Inc. ................... 550,000
-----------
3,268,425
-----------
STEEL PIPE & TUBES--1.4%
51,000 Maverick Tube Corp.*/** .......... 1,663,875
-----------
TELECOMMUNICATIONS EQUIPMENT--6.1%
16,600 Aspect Development, Inc.* ........ 634,950
46,600 CellStar Corp.*/** ............... 1,552,363
32,950 Davox Corp.*/** .................. 955,550
21,200 Digital Microwave Corp.* ......... 871,850
23,100 Spectrian Corp.*/** .............. 1,016,400
17,000 Superior TeleCom Inc.* ........... 642,813
56,700 World Access, Inc.* .............. 1,502,550
-----------
7,176,476
-----------
TOBACCO--1.0%
34,000 Consolidated Cigar Holdings Inc.* 1,126,250
-----------
TOYS--0.2%
13,000 Galoob Toys, Inc.* ............... 269,750
-----------
TRUCKING & FREIGHT--0.9%
22,100 American Freightways Corp.* ...... 353,600
22,700 USFreightways Corp. .............. 681,000
-----------
1,034,600
-----------
WHOLESALE - SPECIALTY EQUIPMENT--2.7%
17,600 InaCom Corp.*/** ................. 607,200
32,600 MicroAge, Inc.* .................. 886,313
43,300 Tech Data Corp.* ................. 1,685,994
-----------
3,179,507
-----------
Total Common Stocks
(Cost $97,401,299) ............. 112,670,875
-----------
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED)
AUGUST 31, 1997
- ---------------------------------------------------------
PRINCIPAL MARKET
AMOUNT (000'S) VALUE
- ---------------------------------------------------------
SHORT-TERM INVESTMENT--6.2%
REPURCHASE AGREEMENT--6.2%
7,317 Bear, Stearns & Co. Inc.
(Agreement dated 08/29/97 to be
repurchased at $7,321,737)
5.450%, 09/02/97
(Cost $7,317,306) (Note 6) .... $ 7,317,306
------------
Total Investments -- 101.9%
(Cost $104,718,605) ........... 119,988,181
------------
Liabilities in Excess of
Other Assets-- (1.9%) ......... (2,264,283
------------
Net Assets -- 100.0% ............ $117,723,898
============
- --------------
* Non-income producing.
** Security or a portion thereof is out on loan.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH & VALUE FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS--96.5%
ADVERTISING--1.0%
17,600 Valassis Communications, Inc.* .... $ 534,600
----------
AEROSPACE--1.2%
1,700 Northrop Grumman Corp. ............ 199,006
4,900 Thiokol Corp. ..................... 390,162
----------
589,168
----------
AGRICULTURE PRODUCTS - LIVESTOCK & ANIMAL
SPECIALTY--0.7%
6,500 Smithfield Foods, Inc.* ........... 358,312
----------
AIR TRANSPORT--2.0%
14,100 Continental Airlines, Inc. Class B*/** 516,412
2,700 Delta Air Lines, Inc. ............. 233,550
9,100 U.S. Airways Group Inc.*/** ....... 310,537
----------
1,060,499
----------
APPAREL--2.4%
13,000 Jones Apparel Group, Inc.* ........ 652,437
25,500 Nautica Enterprises, Inc.* ........ 607,219
----------
1,259,656
----------
AUTOMOBILE PARTS & EQUIPMENT--0.6%
5,400 Borg-Warner Automotive, Inc. ...... 281,475
----------
AUTOMOBILES & TRUCKS--1.2%
17,900 Chrysler Corp. .................... 628,737
----------
BANKS--1.1%
7,600 UnionBanCal Corp. ................. 587,575
----------
BEVERAGES--1.0%
14,700 Adolph Coors Company Class B** .... 542,062
----------
BROKERAGE--1.7%
21,728 Bear Stearns Companies Inc. (The) . 859,614
----------
CHEMICALS--1.1%
14,600 Ethyl Corp. ....................... 131,400
6,300 Hercules, Inc. .................... 325,631
8,700 Terra Industries Inc. ............. 116,362
----------
573,393
----------
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT--1.0%
14,700 Lexmark International Group, Inc.
Class A*/** ..................... $ 514,500
----------
COMPUTER COMMUNICATIONS EQUIPMENT--0.9%
13,600 Bay Networks, Inc.* ............... 481,100
----------
COMPUTER COMPONENTS--0.7%
10,900 Quantum Corp.* .................... 382,181
----------
COMPUTERS--2.9%
2,700 Compaq Computer Corp.* ............ 176,850
4,200 Dell Computer Corp.* .............. 344,662
2,200 International Business Machines
Corp.** ......................... 221,925
10,300 Silicon Graphics, Inc.* /** ....... 282,606
10,900 Sun Microsystems, Inc.* ........... 523,200
----------
1,549,243
----------
COMPUTERS, SOFTWARE & SERVICING--8.6%
8,200 Citrix Systems, Inc * ............. 414,100
4,400 Computer Associates International,
Inc. ............................ 294,250
9,800 Compuware Corp.* .................. 605,150
6,700 HBO & Co. ......................... 479,887
7,900 Remedy Corp.* ..................... 304,644
12,000 Security Dynamics Technologies,
Inc.* ........................... 471,750
8,600 Stratus Computer, Inc.* ........... 477,300
15,800 Sykes Enterprises, Inc.*/** ....... 422,650
28,800 Symantec Corp.* ................... 693,000
9,800 Visio Corp.* ...................... 338,100
----------
4,500,831
----------
ELECTRICAL EQUIPMENT--0.5%
4,700 Tektronix, Inc. ................... 261,144
----------
ELECTRONICS--3.1%
10,900 Jabil Circuit, Inc.* .............. 645,825
14,100 Johnson Controls, Inc. ............ 672,394
7,300 SCI Systems, Inc.*/** ............. 286,981
----------
1,605,200
----------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH & VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
ENERGY--1.0%
8,700 Coastal Corp. (The) ............... $ 502,425
----------
FINANCE--0.6%
7,400 Green Tree Financial Corp.* ....... 325,138
----------
FINANCIAL SERVICES--5.5%
5,450 AmSouth Bancorporation ............ 229,241
11,000 Dun & Bradstreet Corp. ............ 308,000
13,000 FIRSTPLUS Financial Group, Inc.* .. 598,000
3,800 Franklin Resources, Inc . ......... 294,025
4,300 Salomon, Inc. ..................... 257,463
7,900 Signet Banking Corp. .............. 409,319
18,200 Southtrust Corp. .................. 814,450
----------
2,910,498
----------
FOOD & AGRICULTURE--2.0%
24,900 Flowers Industries, Inc. .......... 460,650
10,200 Interstate Bakeries Corp. ......... 597,975
----------
1,058,625
----------
FOOD DISTRIBUTION--1.5%
9,800 Dean Foods Co. .................... 434,875
13,600 Great Atlantic & Pacific Tea Co., Inc.
(The) ........................... 340,850
----------
775,725
----------
HEALTH CARE DIVERSIFIED--0.8%
20,100 Olsten Corp. ...................... 376,875
----------
HOUSEHOLD PRODUCTS--1.5%
7,100 Blyth Industries, Inc.*/** ........ 262,256
10,300 Lancaster Colony Corp. ............ 533,669
----------
795,925
----------
HOUSING--1.2%
14,800 USG Corp. ......................... 634,550
----------
INSURANCE--0.6%
6,000 Exel Limited ...................... 329,250
----------
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
INSURANCE - PROPERTY & CASUALTY--2.5%
14,400 Everest Reinsurance Holdings, Inc. $ 521,100
7,100 Fremont General Corp. ............. 283,113
16,900 TIG Holdings, Inc. ................ 528,125
----------
1,332,338
----------
LOCAL TELEPHONE--0.7%
13,600 Cincinnati Bell, Inc. ............. 366,350
----------
MEDICAL & MEDICAL SERVICES--1.5%
16,300 Integrated Health Services, Inc. .. 537,900
4,900 Wellpoint Health Networks Inc.*/** 266,438
----------
804,338
----------
MEDICAL INSTRUMENTS & SUPPLIES--0.7%
13,400 Vivus, Inc.*/** ................... 358,450
----------
METAL FABRICATING--0.7%
29,900 LTV Corp. (The) ................... 388,700
----------
METAL MINING--3.5%
10,000 AK Steel Holding Corp.** .......... 452,500
16,600 Asarco Inc. ....................... 510,450
15,000 Cyprus Amax Minerals Co.** ........ 378,750
14,700 USX-US Steel Group, Inc. .......... 516,338
----------
1,858,038
----------
MISCELLANEOUS FOOD PREPARATIONS--0.8%
16,900 McCormick & Co., Inc.** ........... 399,263
----------
MOTELS/ RESTAURANTS--0.5%
7,200 Sun International Hotels Ltd.* .... 242,100
----------
NATIONAL COMMERCIAL BANKS--0.3%
3,300 First Union Corp. ................. 158,606
----------
NATURAL GAS--3.0%
6,000 Columbia Gas System, Inc. (The) ... 396,000
12,800 El Paso Natural Gas Co. ........... 720,000
12,400 MCN Corporation ................... 380,525
1,400 National Fuel Gas Co. ............. 62,213
----------
1,558,738
----------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH & VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
OFFICE PRODUCTS--1.2%
14,100 U.S. Office Products Co.*/** ...... $ 461,775
2,400 Xerox Corp. ....................... 181,200
----------
642,975
----------
OIL & GAS FIELD EXPLORATION--2.1%
4,900 Apache Corp. ...................... 194,469
2,500 ENSCO International Inc. .......... 158,750
15,100 Nabors Industries, Inc.* .......... 520,006
5,300 Tidewater, Inc. ................... 278,250
----------
1,151,475
----------
OIL DOMESTIC--0.5%
7,400 Valero Energy Corp. ............... 246,513
----------
OIL EQUIPMENT & SERVICES--1.0%
8,400 Cooper Cameron Corp.* ............. 544,950
----------
OIL INTERNATIONAL--2.0%
29,400 Occidental Petroleum Corp. ........ 689,063
11,200 USX-Marathon Group ................ 364,700
----------
1,053,763
----------
PAPER--0.0%
600 Westvaco Corp. .................... 20,325
----------
PAPER & FOREST PRODUCTS--0.5%
4,300 Consolidated Papers, Inc. ......... 250,744
----------
PHARMACEUTICALS--2.3%
15,800 Bergen Brunswig Corp. ............. 663,600
15,200 Dura Pharmaceuticals, Inc.* ....... 541,500
----------
1,205,100
----------
PRIMARY METAL PRODUCTS--0.9%
11,300 Trinity Industries, Inc.** ........ 449,175
----------
RADIO BROADCASTING STATIONS--0.7%
8,700 Jacor Communications, Inc.*/** .... 382,800
----------
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
RETAIL - COMPUTER & COMPUTER SOFTWARE
STORES--2.0%
5,800 CDW Computer Centers, Inc.*/** .... $ 422,675
20,700 CompUSA, Inc.* .................... 640,406
----------
1,063,081
----------
RETAIL - DEPARTMENT STORES--0.6%
6,000 Proffitt's, Inc.*/** .............. 322,125
----------
RETAIL - SPECIALTY--2.1%
22,300 General Nutrition Companies, Inc.* 618,825
34,200 OfficeMax, Inc.* .................. 506,588
----------
1,125,413
----------
RETAIL - SPECIALTY APPAREL--2.6%
13,000 Ross Stores, Inc. ................. 381,875
15,800 TJX Cos., Inc. .................... 434,500
12,000 Tommy Hilfiger Corp.* ............. 523,500
----------
1,339,875
----------
SAVINGS & LOAN ASSOCIATION--4.6%
12,595 Charter One Financial, Inc.** ..... 684,853
7,600 Golden West Financial Corp. ....... 625,575
8,800 H.F. Ahmanson & Co.* .............. 446,600
10,900 Washington Mutual, Inc. ........... 652,638
----------
2,409,666
----------
SERVICES - COMPUTER INTEGRATED SYSTEMS
DESIGN--0.8%
8,700 Comverse Technology, Inc.* ........ 399,656
----------
SERVICES - EMPLOYMENT AGENCIES--0.3%
4,700 Kelly Services, Inc. Class A ...... 157,450
----------
TELECOMMUNICATIONS--0.4%
7,200 WorldCom, Inc.* ................... 215,550
----------
TELECOMMUNICATIONS EQUIPMENT--2.1%
18,500 CellStar Corp.*/** ................ 616,281
6,500 Lucent Technologies, Inc. ......... 506,188
----------
1,122,469
----------
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
GROWTH & VALUE FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED)
AUGUST 31, 1997
- ---------------------------------------------------------
MARKET
SHARES VALUE
- ---------------------------------------------------------
TOBACCO--1.5%
22,300 RJR Nabisco Holdings Corp. ....... $ 776,319
-----------
TRANSPORTATION--1.0%
7,900 Union Pacific Corp. .............. 513,006
-----------
TRANSPORTATION EQUIPMENT--0.8%
6,500 GATX Corp. ....................... 406,656
-----------
UTILITIES--3.5%
4,900 Ameritech Corp. .................. 307,169
20,700 Entergy Corp. .................... 513,619
18,500 Illinova Corp. ................... 425,500
12,500 Montana Power Co. ................ 288,281
6,000 New York State Electric & Gas Corp. 146,250
6,600 Unicom Corp.** ................... 155,925
-----------
1,836,744
-----------
WHOLESALE - GROCERIES & GENERAL LINE--1.3%
17,900 SUPERVALU, Inc. .................. 702,575
-----------
WHOLESALE - SPECIALTY EQUIPMENT--1.1%
14,700 Tech Data Corp.* ................. 572,381
-----------
Total Common Stocks
(Cost $46,726,471) ............. 50,656,008
-----------
- ---------------------------------------------------------
PRINCIPAL MARKET
AMOUNT (000'S) VALUE
- ---------------------------------------------------------
SHORT-TERM INVESTMENT--14.2%
REPURCHASE AGREEMENT--14.2%
7,438 Bear, Stearns & Co Inc.
(Agreement dated 08/29/97 to be
repurchased at $7,442,461)
5.450%, 09/02/97
(Cost $7,437,957) (Note 6) ..... $ 7,437,957
-----------
Total Investments -- 110.7%
(Cost $54,164,428) ............. 58,093,965
-----------
Liabilities in Excess of
Other Asset -- (10.7%) ......... (5,603,145)
-----------
Net Assets -- 100.0% ............. $52,490,820
===========
- ---------------
* Non-income producing.
** Security or a portion thereof is out on loan.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997
<TABLE>
<CAPTION>
MICRO CAP GROWTH GROWTH & VALUE
FUND FUND FUND
-------------- -------------- --------------
ASSETS
<S> <C> <C> <C>
Investments, at value (cost -- $123,155,231, $104,718,605,
$54,164,428, respectively) ................................... $144,518,667 $119,988,181 $58,093,965
Collateral received for securities loaned ....................... 24,654,119 25,480,464 6,141,474
Receivable for investments sold ................................. 2,811,089 2,328,477 2,168,222
Receivable for Fund shares sold ................................. 1,397,440 122,764 211,012
Dividends and interest receivable ............................... 76,939 42,525 60,484
Prepaid expenses and other assets ............................... 17,219 18,742 7,642
------------ ------------ -----------
Total assets ................................................. 173,475,473 147,981,153 66,682,799
------------ ------------ -----------
LIABILITIES
Payable upon return of securities loaned ........................ 24,654,119 25,480,464 6,141,474
Payable for investments purchased ............................... 6,366,294 4,479,699 7,718,659
Payable for Fund shares redeemed ................................ 196,048 161,639 273,912
Accrued expenses and other liabilities .......................... 139,513 135,453 57,934
------------ ------------ -----------
Total liabilities ............................................ 31,355,974 30,257,255 14,191,979
------------ ------------ -----------
NET ASSETS
Capital stock, $0.001 par value ................................. 7,694 7,227 3,059
Paid-in capital ................................................. 112,094,874 92,652,520 42,931,568
Undistributed net investment income/(loss) ...................... (41,229) (271,733) 153,088
Accumulated net realized gain from investments .................. 8,694,724 10,066,308 5,473,568
Net unrealized appreciation on investments ...................... 21,363,436 15,269,576 3,929,537
------------ ------------ -----------
Net assets applicable to shares outstanding .................. $142,119,499 $117,723,898 $52,490,820
============ ============ ===========
Net assets ......................................................... $142,119,499 $117,723,898 $52,490,820
------------ ------------ -----------
Shares outstanding ................................................. 7,694,317 7,226,740 3,059,247
------------ ------------ -----------
Net asset value, offering and redemption price per share ........... $18.47 $16.29 $17.16
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
MICRO CAP GROWTH GROWTH & VALUE
FUND FUND FUND
------------- ----------- --------------
INVESTMENT INCOME
<S> <C> <C> <C>
Dividends ....................................................... $ 188,127 $ 131,954 $ 350,510
Interest ........................................................ 271,972 289,810 85,800
----------- ----------- ----------
460,099 421,764 436,310
----------- ----------- ----------
EXPENSES
Advisory fees. .................................................. 368,604 509,145 183,069
Co-Administration fees .......................................... 112,152 127,652 87,203
Administrative services fees .................................... 73,721 101,829 36,614
Transfer agent fees and expenses ................................ 62,137 79,842 50,460
Custodian fees and expenses ..................................... 34,885 62,450 32,862
Federal and state registration fees. ............................ 34,292 31,505 23,865
Printing ........................................................ 19,007 24,523 17,224
Audit and legal fees ............................................ 4,106 6,148 2,708
Other. .......................................................... 5,963 8,701 6,854
----------- ----------- ----------
Total expenses before waivers and reimbursements ............. 714,867 951,795 440,859
Less: waivers and reimbursements ............................. (223,415) (272,935) (196,768)
----------- ----------- ----------
Total expenses after waivers and reimbursements .............. 491,452 678,860 244,091
----------- ----------- ----------
Net investment income/(loss) .................................... (31,353) (257,096) 192,219
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investments .............................. 9,346,125 10,621,079 5,488,625
Net change in unrealized appreciation on investments ............ 20,739,610 14,212,378 3,920,436
----------- ----------- ----------
Net realized and unrealized gain on investments ................. 30,085,735 24,833,457 9,409,061
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... $30,054,382 $24,576,361 $9,601,280
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MICRO CAP FUND GROWTH FUND
-------------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
FISCAL JUNE 3, 1996* FISCAL JUNE 3, 1996*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1997 AUGUST 31, 1996
--------------- --------------- --------------- ---------------
INCREASE/(DECREASE) IN NET ASSETS FROM
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income/(loss) .......... $ (31,353) $ 13,553 $ (257,096) $ 22,490
Net realized gain/(loss) from
investments ........................ 9,346,125 (651,401) 10,621,079 (554,771)
Net change in unrealized appreciation
on investments ..................... 20,739,610 623,826 14,212,378 1,057,198
------------ ----------- ------------ -----------
Net increase/(decrease) in net assets
resulting from operations .......... 30,054,382 (14,022) 24,576,361 524,917
------------ ----------- ------------ -----------
Dividends to shareholders from:
Net investment income .............. (23,429) -- (37,127) --
------------ ----------- ------------ -----------
Increase in net assets derived from capital
share transactions .................... 97,988,446 14,114,122 66,428,932 26,230,815
------------ ----------- ------------ -----------
Total increase in net assets .......... 128,019,399 14,100,100 90,968,166 26,755,732
NET ASSETS
Beginning of period ................... 14,100,100 -- 26,755,732 --
------------ ----------- ------------ -----------
End of period (including undistributed
net investment income of
$153,088 for the Growth &
Value Fund) ........................ $142,119,499 $14,100,100 $117,723,898 $26,755,732
============ =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
GROWTH & VALUE FUND
--------------------------------
FOR THE FOR THE PERIOD
FISCAL JUNE 3, 1996*
YEAR ENDED THROUGH
AUGUST 31, 1997 AUGUST 31, 1996
--------------- ---------------
INCREASE/(DECREASE) IN NET ASSETS FROM
OPERATIONS
<S> <C> <C>
Net investment income/(loss) .......... $ 192,219 $ 9,319
Net realized gain/(loss) from
investments ........................ 5,488,625 (15,057)
Net change in unrealized appreciation
on investments ..................... 3,920,436 9,101
----------- ----------
Net increase/(decrease) in net assets
resulting from operations .......... 9,601,280 3,363
----------- ----------
Dividends to shareholders from:
Net investment income .............. (48,450) --
----------- ----------
Increase in net assets derived from capita
share transactions .................... 39,124,840 3,809,787
----------- ----------
Total increase in net assets .......... 48,677,670 3,813,150
NET ASSETS
Beginning of period ................... 3,813,150 --
----------- ----------
End of period (including undistributed
net investment income of
$153,088 for the Growth &
Value Fund) ........................ $52,490,820 $3,813,150
=========== ==========
<FN>
- ----------------
*Commencement of operations.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each share
outstanding, total investment return, ratios to average net assets and other
suppemental data for the respective periods. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MICRO CAP FUND GROWTH FUND
-------------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
FISCAL JUNE 3, 1996* FISCAL JUNE 3, 1996*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1997 AUGUST 31, 1996
--------------- --------------- --------------- ---------------
PER SHARE OPERATING PERFORMANCE**
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 11.67 $ 12.00 $ 11.84 $ 12.00
-------- ------- -------- -------
Net investment income/(loss)(1) .......... (0.01) 0.01 (0.04) 0.01
Net realized and unrealized gain/(loss)
on investments(2) ..................... 6.82 (0.34) 4.50 (0.17)
-------- ------- -------- -------
Net increase/(decrease) in net assets
resulting from operations ............. 6.81 (0.33) 4.46 (0.16)
-------- ------- -------- -------
Dividends to shareholders from:
Net investment income .................... (0.01) -- (0.01) --
-------- ------- -------- -------
Net asset value, end of period ........... $ 18.47 $ 11.67 $ 16.29 $ 11.84
======== ======= ======== =======
Total investment return(3) ............... 58.41% (2.75)% 37.69% (1.33)%
======== ======= ======== =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $142,119 $14,100 $117,724 $26,756
Ratio of expenses to average net
assets(1)(4) .......................... 1.00% 1.00%(5) 1.00% 1.00%(5)
Ratio of net investment income/(loss)
to average net assets(1) .............. (0.06)% 0.73%(5) (0.38)% 0.71%(5)
Portfolio turnover rate .................. 233.49% 42.92%(6) 266.25% 19.21%(6)
Average commission rate per share(7) ..... $0.0327 $0.0339 $0.0397 $0.0365
</TABLE>
<TABLE>
<CAPTION>
GROWTH & VALUE FUND
--------------------------------
FOR THE FOR THE PERIOD
FISCAL JUNE 3, 1996*
YEAR ENDED THROUGH
AUGUST 31, 1997 AUGUST 31, 1996
--------------- ---------------
PER SHARE OPERATING PERFORMANCE**
<S> <C> <C>
Net asset value, beginning of period ..... $ 11.56 $ 12.00
------- -------
Net investment income/(loss)(1) .......... 0.08 0.03
Net realized and unrealized gain/(loss)
on investments(2) ..................... 5.58 (0.47)
------- -------
Net increase/(decrease) in net assets
resulting from operations ............. 5.66 (0.44)
------- -------
Dividends to shareholders from:
Net investment income .................... (0.06) --
------- -------
Net asset value, end of period ........... $ 17.16 $ 11.56
======= =======
Total investment return(3) ............... 49.11% (3.67)%
======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $52,491 $ 3,813
Ratio of expenses to average net
assets(1)(4) .......................... 1.00% 1.00%(5)
Ratio of net investment income/(loss)
to average net assets(1) .............. 0.79% 1.89%(5)
Portfolio turnover rate .................. 263.83% 5.25%(6)
Average commission rate per share(7) ..... $0.0369 $0.0363
<FN>
- ------------
* Commencement of operations.
** Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on actual shares outstanding on the dates of distributions.
(1) Reflects waivers and reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
are not in accord with the changes in the aggregate gains and losses in
investments during the respective periods because of the timing of sales
and repurchases of Fund shares in relation to fluctuating net asset value
during the respective periods.
(3) Total investment return is calculated assuming a purchase of shares on the
first day and a sale of shares on the last day of each period reported and
includes reinvestments of dividends and distributions, if any. Total
investment returns are not annualized.
(4) Without the waiver of advisory, administration and transfer agent fees and
without the reimbursement of certain operating expenses, the ratio of
expenses to average net assets annualized for the periods ended August 31,
1997 and August 31, 1996, respectively, would have been 1.45% and 3.45% for
the n/i Micro Cap Fund, 1.40% and 2.62% for the n/i Growth Fund and 1.81%
and 8.98% for the n/i Growth & Value Fund.
(5) Annualized.
(6) Not annualized.
(7) Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the periods subject to such
commissions.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of
Maryland on February 29, 1988 and is registered under the Investment Company Act
of 1940, as amended, (the "Investment Company Act") as an open-end management
investment company. RBB is a "series fund", which is a mutual fund divided into
separate portfolios. Each portfolio is treated as a separate entity for certain
matters under the Investment Company Act, and for other purposes, and a
shareholder of one portfolio is not deemed to be a shareholder of any other
portfolio. Currently RBB has twenty investment portfolios, including the n/i
family of mutual funds ("n/i Family") which consists of three diversified
portfolios: n/i Micro Cap Fund, n/i Growth Fund and n/i Growth & Value Fund
(each a "Fund", collectively the "Funds").
RBB has authorized capital of thirty billion shares of common stock of which
13.67 billion are currently classified into seventy-nine classes. Each class
represents an interest in one of twenty investment portfolios of RBB. The
classes have been grouped into sixteen separate "families", nine of which have
begun investment operations.
PORTFOLIO VALUATION -- The net asset value of each Fund is determined as of 4:00
p.m. eastern time on each business day. Each Fund's securities are valued at the
last reported sales price on the national securities exchange or national
securities market on which such shares are primarily traded. If no sales are
reported, as in the case of some securities traded over-the-counter, portfolio
securities are valued at the mean between the last reported bid and asked
prices. Securities for which market quotations are not readily available are
valued at fair market value as determined in good faith by or under the
direction of RBB's Board of Directors. With the approval of the RBB's Board of
Directors, each Fund may use a pricing service, bank or broker-dealer
experienced in such matters to value its securities. The preparation of
financial statements requires the use of estimates by management. Short-term
obligations with maturities of 60 days or less are valued at amortized cost
which approximates market value. Expenses and fees, including investment
advisory and administration fees are accrued daily and taken into account for
the purpose of determining the net asset value of each Fund.
REPURCHASE AGREEMENTS -- Each Fund has agreed to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed-upon time and price ("repurchase agreements"). The financial
institutions with whom each Fund enters into repurchase agreements are banks and
broker/dealers which Numeric Investors L.P. (the Funds' investment adviser or
"Numeric") considers creditworthy pursuant to criteria approved by RBB's Board
of Directors. The seller under a repurchase agreement will be required to
maintain the value of the securities as collateral, subject to the agreement at
not less than the repurchase price plus accrued interest. Numeric marks to
market daily the value of the collateral, and, if necessary, requires the seller
to maintain additional securities, to ensure that the value is not less than the
repurchase price. Default by or bankruptcy of the seller would, however, expose
each Fund to possible loss because of adverse market action or delays in
connection with the disposition of the underlying securities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME -- Transactions are accounted for
on the trade date. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and income tax
purposes in determining realized gains and losses on investments. Interest
income is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. Expenses not directly attributable to a specific Fund are
allocated based on relative net assets of each Fund.
26
<PAGE>
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N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS -- Dividends from net investment income, if any,
will be declared and paid at least annually to shareholders. Distributions from
net realized capital gains, if any, will be distributed at least annually.
Income and capital gain distributions are determined in accordance with U.S.
federal income tax regulations which may differ from generally accepted
accounting principles.
U.S. FEDERAL TAX STATUS -- No provision is made for U.S. federal income taxes as
it is each Fund's intention to continue to qualify for and elect the tax
treatment applicable to regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended, and make the requisite distributions
to its shareholders which will be sufficient to relieve it from U.S. federal
income and substantially all excise taxes.
2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Numeric Investors L.P. serves as each Fund's investment adviser. For its
advisory services, Numeric is entitled to receive 0.75% of each Fund's average
daily net assets, computed daily and payable monthly.
The adviser has voluntarily agreed to limit each Fund's total operating expenses
for the current and the following fiscal year to the extent that such expenses
exceeded 1.00% of each Fund's average daily net assets. As necessary, this
limitation is effected in waivers of advisory fees and reimbursements of
expenses exceeding the advisory fee. For the year ended August 31, 1997,
investment advisory fees, waivers and reimbursements of expenses were as
follows:
GROSS NET EXPENSE
FUND ADVISORY FEES WAIVERS ADVISORY FEES REIMBURSEMENT
- ---- ------------- ---------- ------------ -------------
n/i Micro Cap Fund ...... $368,604 $(120,320) $248,284 --
n/i Growth Fund ......... 509,145 (153,302) 355,843 --
n/i Growth & Value Fund . 183,069 (92,307) 90,762 $(21,893)
The Funds will not pay Numeric at a later time for any amounts it may waive or
any amounts which Numeric has assumed.
PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of PNC Bank, National
Association, and Bear Stearns Funds Management Inc. ("BSFM"), a wholly-owned
subsidiary of The Bear Stearns Companies Inc., serve as co-administrators for
each of the Funds. For providing administrative services PFPC is entitled to
receive a monthly fee equal to an annual rate of 0.125% of each Fund's average
daily net assets, subject to a minimum monthly fee of $6,250 per Fund. BSFM is
entitled to receive a monthly fee equal to an annual rate of 0.05% of each
Fund's average daily net assets.
27
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N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the year ended August 31, 1997, PFPC, at their discretion, voluntarily
agreed to waive a portion of their co-administration fees for each of the Funds.
For the year ended August 31, 1997, PFPC's co-administration fees and related
waivers were as follows:
<TABLE>
<CAPTION>
PFPC GROSS PFPC NET PFPC
FUND CO-ADMINISTRATION FEES WAIVERS CO-ADMINISTRATION FEES
- ---- ---------------------- ---------- ----------------------
<S> <C> <C> <C>
n/i Micro Cap Fund ...... $87,578 $(26,117) $61,461
n/i Growth Fund ......... 93,709 (20,169) 73,540
n/i Growth & Value Fund . 75,000 (35,276) 39,724
</TABLE>
In addition, PFPC serves as each Fund's transfer and disbursing agent. PFPC, at
their discretion, voluntarily agreed to waive a portion of their transfer agency
fees for each of the Funds. For the year ended August 31, 1997, transfer agency
fees and waivers were as follows:
GROSS NET
TRANSFER AGENCY TRANSFER AGENCY
FUND FEES WAIVERS FEES
- ---- -------------- --------- ---------------
n/i Micro Cap Fund ...... $62,137 $(18,001) $44,136
n/i Growth Fund ......... 79,842 (18,001) 61,841
n/i Growth & Value Fund . 50,460 (18,001) 32,459
Counsellors Funds Services, Inc. ("Counsellors"), a wholly-owned subsidiary of
Warburg, Pincus Counsellors, Inc., provides certain administrative services to
each of the Funds. As compensation for such administrative services, Counsellors
is entitled to receive a monthly fee equal to an annual rate of 0.15% of each
Funds average daily net assets.
For the year ended August 31, 1997 Counsellors has, at its discretion,
voluntarily agreed to waive a portion of its administrative services fees for
each of the Funds. For the year ended August 31, 1997, administrative services
fees and waivers were as follows:
GROSS
ADMINISTRATIVE NET ADMINISTRATIVE
FUND SERVICES FEES WAIVERS SERVICES FEES
- ---- -------------- -------- ------------------
n/i Micro Cap Fund ....... $ 73,721 $(58,977) $14,744
n/i Growth Fund .......... 101,829 (81,463) 20,366
n/i Growth & Value Fund .. 36,614 (29,291) 7,323
These fees are computed daily and paid monthly.
28
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N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at August 31,
1997 were $123,412,765, $104,793,436 and $54,301,982 for n/i Micro Cap Fund, n/i
Growth Fund and n/i Growth & Value Fund, respectively. Accordingly, the net
unrealized appreciation/(depreciation) of investments are as follows:
FUND APPRECIATION DEPRECIATION NET APPRECIATION
- ---- ------------ ------------ ----------------
n/i Micro Cap Fund ........ $22,276,049 $(1,170,147) $21,105,902
n/i Growth Fund ........... 16,808,823 (1,614,078) 15,194,745
n/i Growth & Value Fund ... 4,194,724 (402,741) 3,791,983
For the year ended August 31, 1997, aggregate purchases and sales of investment
securities (excluding short-term investments) were as follows:
FUND PURCHASES SALES
- ---- ------------ ------------
n/i Micro Cap Fund ......... $199,266,230 $110,111,625
n/i Growth Fund ............ 237,103,083 173,171,142
n/i Growth & Value Fund .... 99,326,892 61,552,917
For the year ended August 31, 1997, purchases include $3,305,056, $2,664,711 and
$2,843,688 of investment securities received from shareholders in exchange for
253,845 shares, 202,025 shares and 212,215 shares sold by the n/i Micro Cap
Fund, n/i Growth Fund and n/i Growth & Value Fund, respectively.
4. CAPITAL SHARE TRANSACTIONS
As of August 31, 1997 each Fund has 50,000,000 shares of $0.001 par value common
stock authorized.
Transactions in capital shares for the respective periods were as follows:
N/I MICRO CAP FUND
-----------------------------------------------------
FOR THE FOR THE
YEAR ENDED PERIOD JUNE 3, 1996*
AUGUST 31, 1997 THROUGH AUGUST 31, 1996
-------------------- ------------------------
SHARE VALUE SHARE VALUE
--------- ------------ --------- -----------
Sales ................ 7,698,447 $116,335,001 1,217,175 $14,212,327
Repurchases .......... (1,214,056) (18,368,326) (8,810) (98,205)
Reinvestments ........ 1,561 21,771 -- --
--------- ------------ --------- -----------
Net increase ......... 6,485,952 $ 97,988,446 1,208,365 $14,114,122
========= ============ ========= ===========
29
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[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
N/I GROWTH FUND
-----------------------------------------------------
FOR THE FOR THE
YEAR ENDED PERIOD JUNE 3, 1996*
AUGUST 31, 1997 THROUGH AUGUST 31, 1996
-------------------- ------------------------
SHARE VALUE SHARE VALUE
--------- ------------ ----------- -----------
Sales ................. 6,432,891 $85,903,977 2,384,034 $27,674,950
Repurchases ........... (1,468,234) (19,510,716) (124,620) (1,444,135)
Reinvestments ......... 2,669 35,671 -- --
--------- ------------ ---------- -----------
Net increase .......... 4,967,326 $66,428,932 2,259,414 $26,230,815
========= ============ ========== ===========
N/I GROWTH & VALUE FUND
-----------------------------------------------------
FOR THE FOR THE
YEAR ENDED PERIOD JUNE 3, 1996*
AUGUST 31, 1997 THROUGH AUGUST 31, 1996
-------------------- ------------------------
SHARE VALUE SHARE VALUE
--------- ----------- --------- ----------
Sales .................. 3,065,874 $44,012,804 336,865 $3,890,583
Repurchases ............ (339,841) (4,933,777) (7,078) (80,796)
Reinvestments .......... 3,427 45,813 -- --
--------- ----------- --------- ----------
Net increase ........... 2,729,460 $39,124,840 329,787 $3,809,787
========= ============ ========== ==========
- -----------
* Commencement of operations
5. SECURITIES LENDING
Loans of securities are required at all times to be secured by collateral at
least equal to 102% of the market value of the securities on loan. However, in
the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings. In the event that the borrower fails to return securities, and cash
collateral being maintained by the borrower is insufficient to cover the value
of loaned securities and provided such collateral insufficiency is not the
result of investment losses, the lending agent has agreed to pay the amount of
the shortfall to the Funds. The market value of securities on loan to brokers
and the related collateral cash and indemnification received at August 31, 1997,
was as follows:
VALUE OF SECURITIES VALUE OF COLLATERAL
FUND ON LOAN AND INDEMNIFICATION
- ---- ------------------- ------------------
n/i Micro Cap Fund ............ $23,837,309 $24,654,119
n/i Growth Fund ............... 24,740,793 25,480,464
n/i Growth & Value Fund ....... 5,928,700 6,141,474
The collateral was reinvested into repurchase agreements which was in turn
collateralized by U.S. Government Agency securities.
During the fiscal year ended August 31, 1997, income from securities lending was
$26,390, $47,089 and $8,457 for n/i Micro Cap Fund, n/i Growth Fund and n/i
Growth & Value Fund, respectively. Such income from securities lending is
included under the caption INTEREST in the Statement of Operations.
30
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N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
6. COLLATERAL FOR REPURCHASE AGREEMENTS
Listed below is the collateral associated with the repurchase agreements with
Bear, Stearns &Co. Inc., outstanding at August 31, 1997:
MICRO CAP FUND PRINCIPAL
ISSUER AMOUNT (000'S) MATURITY MARKET VALUE
- ---- -------------- -------- ------------
U.S. Treasury Strips* ....... 11,218 05/15/17 $2,972,770
U.S. Treasury Strips* ....... 8,245 08/15/17 2,146,256
U.S. Treasury Strips* ....... 35,000 10/15/21 6,857,900
U.S. Treasury Strips* ....... 4,645 11/15/24 757,739
-----------
Total ....................................................... $12,734,665
===========
GROWTH FUND PRINCIPAL
ISSUER AMOUNT (000'S) MATURITY MARKET VALUE
- ---- ------------- -------- ------------
U.S. Treasury Strips* ....... 28,070 05/15/17 $7,464,936
==========
<TABLE>
<CAPTION>
GROWTH & VALUE FUND PRINCIPAL ACCRUED TOTAL
ISSUER AMOUNT (000'S) MATURITY INTEREST RATE MARKET VALUE INTEREST VALUE
- ---- -------------- -------- ------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Federal Home Loan Mortgage Corporation ........ 62,159 08/15/05 7.000% $531,836 $56,626 $588,462
Federal Home Loan Mortgage Corporation ........ 20 08/15/07 7.592% 158,829 -- 158,829
Federal HomeLoan Mortgage Corporation ......... 4,840 10/15/22 9.716% 4,952,772 19,594 4,972,366
Federal Home Loan Mortgage Corporation ........ 1,890 11/15/99 4.922% 1,863,597 7,493 1,871,090
---------- ------- ----------
Total ................................................................................ $7,507,034 $83,713 $7,590,747
========== ======= ==========
<FN>
- ----------
*Zero Coupon.
</FN>
</TABLE>
31
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N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE RBB FUND, INC.:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the n/i Micro Cap Fund, n/i Growth Fund and n/i
Growth & Value Fund of The RBB Fund, Inc., as of August 31, 1997 and the related
statement of operations, the statement of changes in net assets and the
financial highlights for the period June 3, 1996 (commencement of operations)
through August 31, 1996 and the year ended August 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund'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 investments owned by the
custodian and brokers as of August 31, 1997. 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
n/i Micro Cap Fund, n/i Growth Fund and n/i Growth & Value Fund of The RBB Fund,
Inc., as of August 31, 1997 and the results of their operations, the changes in
their net assets and their financial highlights for the period June 3, 1996
(commencement of operations) through August 31, 1996 and the year ended August
31, 1997, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 17, 1997
32
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N/I FAMILY OF MUTUAL FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
SHAREHOLDER TAX INFORMATION -- (UNAUDITED)
Each Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of each Fund's fiscal year
end (August 31, 1997) as to the U.S. federal tax status of distributions
received by each Fund's shareholders in respect of such fiscal year.During the
fiscal year ended August 31, 1997, the following dividends and distributions per
share were paid by each of the Funds:
ORDINARY
FUND INCOME
- ---- --------
n/i Micro Cap Fund ........................................ $.012
n/i Growth Fund ........................................... .010
n/i Growth &Value Fund .................................... .060
The percentage of total ordinary income dividends from the Micro Cap Fund,Growth
Fund and Growth &Value Fund qualifying for the corporate dividends received
deduction for each Fund is 100%.
These amounts were reported to shareholders as income in 1996. Because each
Fund's fiscal year is not the calendar year, another notification will be sent
with respect to calendar year 1997. The second notification, which will reflect
the amount to be used by calendar year taxpayers on their U.S. federal income
tax returns, will be made in conjunction with Form 1099-DIV and will be mailed
in January 1998.
Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their dividend. They will generally not be entitled to a foreign tax
credit or deduction for the withholding taxes paid by the Funds, if any.
In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs)
need not be reported as taxable income for U.S. federal income tax purposes.
However, some retirement trusts (e.g., corporate,Keogh and 403(b)(7) plans) may
need this information for their annual information reporting.
Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Funds.
33
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[Logo Graphic Omitted]
N/I FAMILY OF MUTUAL FUNDS
One Memorial Drive
Cambridge, MA 02142
1-800-numeric [686-3742]
http://www.numeric.com
INVESTMENT ADVISER
Numeric Investors L.P.
One Memorial Drive
Cambridge, MA 02142
CO-ADMINISTRATORS
Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167
PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
DISTRIBUTOR
Counsellors Funds Services, Inc.
466 Lexington Avenue
New York, NY 10017
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 05840
TRANSFER AGENT
PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
COUNSEL
Drinker Biddle & Reath L.L.P.
1345 Chestnut Street
Philadelphia, PA 19107
This report is submitted for the general information of the shareholders of each
Fund.It is not authorized for the distribution to prospective investors in each
Fund unless it is preceded or accompanied by a current prospectus which includes
details regarding each Fund's objectives, policies and other information. Total
investment return is based on historical results and is not intended to indicate
future performance. The investment return and principal value of an investment
in each Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than original cost.
