(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
N/I NUMERIC INVESTORS
Micro Cap Fund
N/I NUMERIC INVESTORS
Growth Fund
N/I NUMERIC INVESTORS
Growth & Value Fund
N/I NUMERIC INVESTORS
Larger Cap Value Fund
Annual Report
August 31, 1998
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP VALUE FUND
ADVISER'S REPORT
September 30, 1998
Fellow Shareholder:
I am pleased to report the results of the N/I NUMERIC INVESTORS FAMILY OF FUNDS
for the fiscal year ended August 31, 1998. In this report you will get our
customary annual review which includes 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. We hope that this
report will shed some light on last year's performance. In addition, we like to
take this opportunity each year to educate you and provide some professional
guidance and practical advice about how you can best achieve your investment
goals, whether it is through your investment with us, with other managers, or on
your own.
MARKET AND ECONOMIC COMMENTARY
In stark contrast with the last few years, it was a disappointing finish to an
otherwise mediocre year. Through June, things looked quite good, with all
portfolios showing good gains since last August. Returns finally capitulated,
however, diving 15% to 30% or so, depending on your choice of benchmark, over
the course of the last two months, with most of the damage occurring in August.
As you will see later in this report, few sectors of the economy were spared.
The unsustainable "nirvana" of low inflation and high profit growth which
persisted for much of the past few years has finally proven itself, well,
unsustainable. We had been forecasting that either profit growth would have to
slow measurably or inflation would have to worsen. Profits blinked first as
weakening economies and currencies from the Far East, spreading to Russia and
most recently to Latin America have begun to hurt the margins and growth
prospects of U.S. firms, especially those with a larger international book of
business. It is likely that the employment gains and resulting high consumer
confidence that have propelled U.S. economic growth will start to weaken over
the next year.
Corporate profit growth, which in recent years substantially exceeded the
overall growth of the economy, as measured by Gross Domestic Product (GDP), has
finally started to decelerate. The benefits of lower borrowing costs, lower tax
rates related to more overseas business (which has beneficial tax rates), and
write-downs of unproductive corporate assets, have worked their way through the
income statement and now offer few additional opportunities for substantial
improvement. We expect much more modest profit growth for the foreseeable future
as worsening international economies close in on the U.S. and continue to drag
down margins for domestic companies.
Inflation, at least as reflected in the Consumer Price Index (CPI), continues to
be tame. Some other indicators such as wages and prices for services (as opposed
to goods) suggest that the news is not as good as the oft-watched CPI suggests.
However, for the time being it appears that improved productivity has allowed
companies to sell more products and services with less relative labor input.
Higher productivity, along with cheaper input prices and the heightened
competition from U.S. Dollar-cheapened foreign goods, has reduced the pricing
power of U.S. companies.
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As of the end of September 1998, the inflation outlook continues to be quite
benign as weakening economic conditions abroad, and to a certain extent in the
U.S., should allow few opportunities for companies to raise prices. The economic
collapse that began in Asia has reduced demand for many commodities, from soy
beans to copper to livestock. Prices for these goods have dropped significantly
over the past year. The price of oil, which is also down since last year, is one
of the few commodities showing signs of a bottom, due largely to production
cutbacks and lower inventories which have raised prices since this past spring.
Fears of deflation and the collapse of commodity prices have had a major impact
on the share prices of commodity-based companies, including basic industries
such as metals and papers, oil and gas producers and oil field service
companies. These companies are generally thought to be somewhat defensive in
down markets, but this past summer they provided no shelter from the market's
storm. Weakening economies, currencies and political leadership around the globe
have worsened the profit outlook for these companies. The profits of these
companies have been hit harder than many thought possible, especially
considering that other parts of the U.S. economy continue to grow so strongly.
Reflecting both low inflation and weakening profits, the yields on U.S. Treasury
Securities have come down substantially over the past year. As shown below,
yields have dropped from over 6.6% to below 5.3% at the long end of the curve,
and from over 5.5% to under 4.9% on the one-year Bill. (The dates shown on this
and subsequent graphics in this report use a typical computer convention of YYMM
to reflect the year and month, respectively, of the data. Thus, 9808, though not
Y2K compliant, nonetheless represents August 1998.) Whereas declining rates
provided the fuel to power stocks to higher multiples for most of the past year,
the dramatic drop in rates in August signaled the economic growth was likely to
be lower going forward. The interest rate-driven rise in equity multiples
succumbed to the fear that earnings would turn south.
----------------------------------------------------
Interest Rates on U.S. Treasury Securities
Percent Yield to Maturity
----------------------------------------------------
Yield to Maturity (%)
---------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Month-end YTM 1 Year 5 Year 30 Year
9708 5.56% 6.22% 6.61%
9709 5.44% 5.99% 6.40%
9710 5.35% 5.72% 6.15%
9711 5.53% 5.82% 6.04%
9712 5.48% 5.71% 5.92%
9801 5.26% 5.43% 5.87%
9802 5.41% 5.66% 6.02%
9803 5.38% 5.61% 5.93%
9804 5.38% 5.64% 5.95%
9805 5.39% 5.53% 5.78%
9806 5.37% 5.47% 5.63%
9807 5.35% 5.5% 5.71%
9808 4.85% 4.79% 5.26%
In addition to the rates themselves, the shape of the yield curve sometimes
signals the direction of future economic growth. It is generally believed that
when the yield curve flattens, that is when long rates drop relative to short
rates (shown in the chart below dropping from 1.05% to 0.41%), the economy is
poised to slow down. This would certainly seem to be the case now, based on the
international economic crises, and the mounting evidence that U.S. profit growth
is slowing. Federal Reserve Chairman Alan Greenspan has recently suggested that
weak international economies will slow the growth of U.S. expansion and has
reduced the Federal Funds rate by one-quarter of one percent, to 5.25%. This
cautious move is the first clear indication of the Fed's concern about slower
economic growth and confidence that inflation will remain tame. Despite the
feeling that the Fed could have acted more boldly with a larger rate cut, the
recent cut suggests a shift in policy that is likely to remain in place, with
more rate cuts ahead, as the future of U.S. and international growth becomes
clearer.
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----------------------------------------------------
Slope of US Treasury Yield Curve
Yield to Maturity of 30 Yr Bond minus 1 Yr Bill
----------------------------------------------------
Yield to Maturity difference (%)
--------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Month-end difference 1 Year
9708 1.05%
9709 0.96%
9710 0.8%
9711 0.51%
9712 0.44%
9801 0.61%
9802 0.61%
9803 0.55%
9804 0.57%
9805 0.39%
9806 0.26%
9807 0.36%
9808 0.41%
Although we do not make macroeconomic forecasts (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
the absolute returns of our portfolios. The chart below shows the cumulative
monthly returns (price-only, dividends excluded) for the twelve months from
August 31, 1997 for the equal-weighted stocks in four of the eight economic
sectors into which we divide our 2,400 stock universe of investable names (the
next chart shows the returns to the other four sectors). As is evident from the
first chart, the consumer driven economy performed relatively better than the
more commodity-like sectors. Global deflation, in lockstep with weakening
currencies and economies has severely impacted the prices of
economically-sensitive basic industry and energy stocks. Falling prices for
basic commodities, oil, and natural gas has obviously had a major impact on
these stocks.
----------------------------------------------------
Return to Numeric's Economic Sectors
Cumulative Monthly Returns from 8/31/97 to 8/31/98
----------------------------------------------------
Cumulative Returns From 8/31/97(%)
----------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Month Basic Industry Consumer Non-CyclicalConsumer Cyclical Energy
9708 0 0 0 0
9709 3.05 7.41 6.87 9.62
9710 -5.46 3.46 1.7 9.2
9711 -6.55 5.13 2.25 -0.45
9712 -8.36 6.93 3.56 -2.09
9801 -7.84 8.04 2.45 -12
9802 -2.84 19.07 10.98 -7.41
9803 2.19 26.93 15.36 -2.59
9804 4.82 27.26 14.07 1.31
9805 -2.2 23.73 8.89 -6.92
9806 -8.31 27.24 9.1 -13.1
9807 -15.72 17.51 2.36 -28.41
9808 -31.56 -7.06 -16.6 -46.6
The other four economic sectors, shown below, reflect poor returns for
technology and industrial stocks, both economically sensitive, while financial
stocks and especially utility stocks held up very well. Both are more interest
rate sensitive, reflecting the substantial drop in interest rates over the
course of the past year. The two groups had virtually identical eleven-month
performance until August when the bottom dropped out on the financial sector.
Interestingly, these stocks took their biggest hit in August, just when interest
rates saw their largest drop. This unexpected result is related to the huge
trading losses incurred by most of the large banks and brokerage firms on
positions in Russian and other emerging market securities.
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----------------------------------------------------
Return to Numeric's Economic Sectors
Cumulative Monthly Returns from 8/31/97 to 8/31/98
----------------------------------------------------
Cumulative Returns From 8/31/97(%)
----------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Financial Industrial Technology Utility
9708 0 0 0 0
9709 9.26 4.78 5.97 6.24
9710 7.51 0.3 -4.44 6.35
9711 10.44 0.21 -7.21 13.69
9712 18.14 -0.11 -10.88 21.27
9801 13.04 -0.92 -10.12 20.33
9802 22.3 7.99 0.51 25.19
9803 29.1 13.05 2.33 34.8
9804 31.81 13.96 5.45 30.46
9805 27.53 8.42 -5.87 26.02
9806 29.52 5.82 -3.46 29.75
9807 25.25 -2.09 -10.74 25.17
9808 -3.13 -21.7 -32.7 17.2
In terms of differential performance by market capitalization, larger stocks
have continued to outperform smaller stocks by a significant margin. The S&P 500
index of large companies returned +8.1% in the twelve months ended August 31,
1998, compared with the -19.4% return of the smaller stock Russell 2000 Index,
for a 27.5% advantage. This is a continuation of a trend started in 1994, from
which time the total return of the S&P 500 has outperformed the Russell 2000 by
+128.3% to +39.7% (see chart below), which translates to an amazing +11.9% per
year advantage for the big guys. This four-plus year string of larger stocks
outperforming smaller is going to have a difficult time sustaining itself, given
the strong tendency of "mean reversion" between the returns of the two indices.
Also working in favor of the smaller stocks going forward is their relatively
lower exposure to the U.S. dollar, which continues to be quite strong. We would
not be surprised to see a reversal of fortunes in which smaller stocks start to
outperform larger stocks. If it occurs, such outperformance by smaller companies
would benefit all of our funds as they all have a smaller median capitalization
than the S&P 500.
----------------------------------------------------
Performance of Larger Versus Smaller Stocks
S&P 500 vs. Russell 2000
----------------------------------------------------
Cumulative Returns (%) Since 12/31/93
-------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
RUSSELL 2000 INDEX S&P 500 INDEX
JAN 94 3.13% 3.36%
FEB 94 2.76% 0.55%
MAR 94 -2.65% -3.82%
APR 94 -2.08% -2.57%
MAY 94 -3.18% -0.99%
JUN 94 -6.44% -3.44%
JUL 94 -4.91% -0.25%
AUG 94 0.39% 3.81%
SEP 94 0.04% 1.3%
OCT 94 -0.36% 3.64%
NOV 94 -4.39% -0.16%
DEC 94 -1.83% 1.3%
JAN 95 -3.07% 3.93%
FEB 95 0.97% 7.96%
MAR 95 2.7% 11.16%
APR 95 4.98% 14.44%
MAY 95 6.79% 18.97%
JUN 95 12.33% 21.76%
JUL 95 18.8% 25.85%
AUG 95 21.25% 26.19%
SEP 95 23.42% 31.49%
OCT 95 17.9% 31.02%
NOV 95 22.85% 36.79%
DEC 95 26.09% 39.32%
JAN 96 25.96% 44.1%
FEB 96 29.89% 45.49%
MAR 96 32.53% 46.92%
APR 96 39.62% 49.11%
MAY 96 45.12% 52.95%
JUN 96 39.16% 53.58%
JUL 96 27% 46.75%
AUG 96 34.38% 49.89%
SEP 96 39.63% 58.33%
OCT 96 37.48% 62.74%
NOV 96 43.14% 75.13%
DEC 96 46.9% 71.71%
JAN 97 49.83% 82.39%
FEB 97 46.2% 83.87%
MAR 97 39.3 % 76.22%
APR 97 39.69% 86.69%
MAY 97 55.23% 98.13%
JUN 97 61.88% 106.95%
JUL 97 69.41% 123.55%
AUG 97 73.29% 111.19%
SEP 97 85.97% 122.7%
OCT 97 77.8% 115.35%
NOV 97 76.65% 125.21%
DEC 97 79.74% 129.04%
JAN 98 76.91% 131.63%
FEB 98 89.99% 148.28%
MAR 98 97.82% 160.99%
APR 98 98.92% 163.73%
MAY 98 88.2% 159.12%
JUN 98 88.6% 169.67%
JUL 98 73.33% 166.73%
AUG 98 39.7% 128.3%
STOCK SELECTION MODELS
Recall that we identify attractive stocks for your portfolio using the
"opinions" of two different and complementary stock selection models, our
Estrend(TRADE MARK) model and our Fair Value model. Estrend(TRADE MARK)
identifies stocks that have experienced recent
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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 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 such good news. This means that stocks that have experienced good
news such as a positive analyst earnings forecast or an upward revision to an
analyst's earnings forecast, will demonstrate a strong tendency to drift upward
for a period of time following the release of the news. Our 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 from Estrend(TRADE MARK).
Fair Value seeks to identify stocks which have lower market prices than
appropriate given their earnings power, quality of earnings, balance sheet
strength, growth potential and risk. The market might overreact to bad news
about these companies due to an irrational fear 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
portfolios. 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 that have had their market prices
pushed away from their "equilibrium" or "fair" values, profiting when the market
becomes more rational and recognizes the buying opportunity created by those
investors rushing for the exits.
These two models are important for their selections of individual stocks. What
is also important, however, is how well they perform at different periods of
time, specifically, how well one model performs when the other might be
faltering. This interaction between the two models is best demonstrated in a
graph, shown below, which plots the monthly performance of the two models.
----------------------------------------------------
Performance of Numeric's Stock Models
Monthly Returns - 9601 through 9808
----------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Fair Value Performance% Estrend(TRADE MARK) Performance (%)
9601 0.10 0.99
9602 1.02 2.05
9603 0.17 1.00
9604 1.46 0.91
9605 1.26 -0.09
9606 2.32 0.64
9607 2.02 1.98
9608 0.23 0.96
9609 4.12 -0.18
9610 1.04 2.09
9611 -1.12 2.74
9612 1.43 1.60
9701 0.28 1.22
9702 -2.53 1.65
9703 0.85 0.36
9704 3.07 -0.64
9705 -1.32 2.67
9706 3.24 0.50
9707 1.94 1.34
9708 1.51 1.01
9709 1.87 1.69
9710 1.95 2.34
9711 1.62 -0.17
9712 1.42 -0.72
9801 -1.36 1.39
9802 0.61 1.19
9803 2.3 0.61
9804 0.34 0.41
9805 1.19 0.04
9806 6.2 -1.97
9807 1.74 -2.78
9808 1.14 -2.87
9809 1.59 -0.07
It is important to note that these data are simulated and do not include the
transaction costs that would need to be incurred to implement the investment
strategy. Also, the returns shown here are all market relative, meaning that
when they are positive, the models are only beating the market, not providing
necessarily a positive absolute return. Each one of the points on the graph
represents one month's performance data, and its relative position horizontally
and vertically gives the performance of the Estrend(TRADE MARK) and Fair Value
model, respectively. For example, the furthest observation to the right shows
that in that month (June 1998), the Estrend(TRADE MARK) model worked well,
returning +6% relative to the market, while the value model performed poorly,
returning -2%. Important is the fact that most of the observations are above the
horizontal axis and right of the vertical axis. This means that each model is
generally good at forecasting returns, delivering a positive outcome in most
months. Also, the general shape of these monthly data is sloped from upper left
to lower right, showing a powerful negative relationship between the two models.
This means that when one model fails, the other tends to do a good job of
picking up the slack. For these data points, there are no observations in the
lower left quadrant, suggesting that over this
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period there were no months in which both models failed at the same time. Please
do not assume they will never jointly fail; however, we do try to minimize the
number of such instances.
RESEARCH INTO PORTFOLIO CONSTRUCTION
In constructing the portfolios for the four investment strategies, we pay close
attention to the economic composition of the benchmarks for each fund and cause
the portfolios to have a "look and feel" similar to these benchmarks.
Historically, we allowed the Growth and the Micro Cap portfolios to make
"bottom-up" sector "bets" that differ from their benchmarks by up to 10%, while
constraining Growth & Value to a 5% difference and Larger Cap Value to a 2%
difference, reflecting the amount of aggressiveness we felt investors were
looking for. Recent research has shown that we can modestly lower the volatility
of the smaller and mid-cap portfolios relative to their benchmarks, without a
significant sacrifice of return, by further constraining these bets to within 3%
of benchmark weight.
We also performed research which showed that we could increase the number of
holdings in the portfolio, thereby reducing the average size of each position,
to lower the cost of trading the smaller cap stocks owned by the Micro Cap and
Growth portfolios. Recall that we pay close attention to the costs of trading
the stocks for our portfolios and are painfully aware how much the cost of
trading eats up the returns of our investment ideas. We have found that by
reducing the average position size, there is a give-up to the "gross return" of
our investment ideas, that is the return of these ideas before trading costs are
incurred. However, this lower gross return is offset by a more-than-commensurate
reduction in the cost of trading these stocks. The result is an increase in "net
return" after trading costs are incurred.
Our research into transaction costs has also allowed us to explicitly
incorporate into the expected returns of the stocks we evaluate the expected
cost of trading them. This is important to improving your returns because of the
large and direct impact trading costs have on the returns to a stock. Consider
two stocks with excess returns of +5% per year in the case of stock A and +6%
per year in the case of stock B. In the past, we would have preferred B to A,
but if the cost of trading A is only 1% round-trip because it is so liquid and
easy to trade, compared with 3% round-trip for less-liquid B, the net excess
return to A is 4%, making it a better choice than B. The explicit accounting for
such predictable trading costs will improve the net relative returns that we can
deliver for your portfolio.
We will continue to evaluate the tradeoffs between gross return and transaction
costs to position the portfolio to achieve the best return/risk structure.
PORTFOLIO RETURNS
GROWTH FUND
The Growth portfolio earned a return of -29.03% for the fiscal year ended August
31, 1998. Performance was disappointing on an absolute basis, and when compared
to its benchmark, the Russell 2500 Growth Index (an unmanaged index of smaller
and medium capitalization growth stocks), which returned -25.53% over the same
period. Over the longer term and despite the disappointing recent year, the
relative results of the fund are still quite good. Since inception on June 3,
1996, the fund has returned -3.59%, compared with the Russell 2500 Growth Index
return of -15.66% over the same period.
Most of the fund's current investments are concentrated in the technology and
consumer cyclical and non-cyclical stocks. These stocks, especially those with
higher growth rates, have characteristics that suggest that the Estrend(TRADE
MARK) model is a better predictor of future returns. Estrend(TRADE MARK) is thus
the model that has the greatest influence on our picks in this portfolio. As
shown in the next chart, sector differences from the benchmark are modest, with
the largest underweight in the industrial sector at -2.3%; the largest
overweight in technology at +1.3%.
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----------------------------------------------------
Economic Sector Diversification
N/I NUMERIC INVESTORS Growth Fund
----------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Basic Industry 2.3%
Consumer Cyclical 19.7%
Consumer Non-Cyclical 21.5%
Energy 2.3%
Financial 6.9%
Industrial 13.3%
Technology 29.0%
Utility 0.6%
Cash & Cash Equivalents 4.4%
----------------------------------------------------
Sector Deviation of N/I NUMERIC INVESTORS Growth Fund
Difference between Fund and Russell 2500 Growth Index
----------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Economic Sector Difference from Benchmark (%)
Basic Industry -0.43%
Consumer Cyclical 1.14%
Consumer Non-Cyclical -0.41%
Energy -0.86%
Financial -0.99%
Industrial -2.27%
Technology 1.3%
Utility -1.88%
GROWTH & VALUE FUND
The Growth & Value portfolio returned -8.97% for the fiscal year ended August
31, 1998. The fund's return, while disappointing in absolute terms, compares
favorably with its benchmark, the S&P MidCap 400 Index (an unmanaged index of
medium capitalization stocks), which returned -9.37% over the same period.
Longer term returns also continue to look quite strong; since inception on June
3, 1996, the fund has returned +30.76%, compared with the S&P MidCap 400 Index
return of +20.83% over the same period.
This portfolio is very well diversified with no one sector accounting for more
than 17% of the portfolio. Stock selection for this portfolio is influenced
about equally by the Estrend(TRADE MARK) and the Fair Value models. Its largest
overweight relative to its benchmark is in consumer cyclical stocks, and its
largest underweight is in utilities. The most successful investments over the
past year were made in technology, consumer cyclical and financial stocks.
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----------------------------------------------------
Economic Sector Diversification
N/I NUMERIC INVESTORS Growth & Value Fund
----------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Basic Industry 6.5%
Consumer Cyclical 12.8%
Consumer Non-Cyclical 15.6%
Energy 5.4%
Financial 13.5%
Industrial 13.3%
Technology 16.7%
Utility 11.9%
Cash & Cash Equivalents 4.3%
----------------------------------------------------
Sector Deviation of N/I NUMERIC INVESTORS Growth & Value Fund
Difference between Fund and S&P MidCap 400 Index
----------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Economic Sector Difference from Benchmark (%)
Basic Industry 0.27%
Consumer Cyclical 1.61%
Consumer Non-Cyclical -0.67%
Energy 0.81%
Financial -0.35%
Industrial -1.92%
Technology -1.19%
Utility -2.86%
LARGER CAP VALUE FUND
The Larger Cap Value portfolio, started on December 9, 1997, returned -9.67% for
its short first fiscal year ended August 31, 1998. These returns are poor on an
absolute basis, and compared to its benchmark, the Russell 1000 Value Index, an
unmanaged index of larger capitalization stocks with value characteristics,
which returned -6.08% over the same period. As described below the poor returns
this summer to "value" investment strategies generally has been the major source
of underperformance.
Shown below are the sector exposures of Larger Cap Value. As you would expect,
we continue to have our greatest exposure in financial and utility stocks. These
stocks are most responsive to the Fair Value model, thus, we substantially
de-emphasize the Estrend(TRADE MARK) model for this fund. The next chart shows
that these sector exposures are all quite close to those of the benchmark
portfolio, indicating comparable economic risk to that contained in our
benchmark.
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----------------------------------------------------
Economic Sector Diversification
N/I NUMERIC INVESTORS Larger Cap Value Fund
----------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Basic Industry 5.4%
Consumer Cyclical 11.8%
Consumer Non-Cyclical 6.2%
Energy 11.1%
Financial 27.3%
Industrial 8.2%
Technology 5.6%
Utility 19.4%
Cash & Cash Equivalents 5.0%
---------------------------------------------------------------
Sector Deviation of N/I NUMERIC INVESTORS Larger Cap Value Fund
Difference between Fund and Russell 1000 Value Index
---------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Economic Sector Difference from Benchmark (%)
Basic Industry -0.4%
Consumer Cyclical -0.23%
Consumer Non-Cyclical -0.17%
Energy -1.21%
Financial -0.33%
Industrial -0.71%
Technology -0.79%
Utility -1.16%
MICRO CAP FUND
The Micro Cap portfolio returned -20.74% for the fiscal year ended August 31,
1998. These returns are poor on an absolute basis, but gratifying compared to
its benchmark, the Russell 2000 Growth Index, an unmanaged index of smaller
capitalization growth stocks, which returned -26.30% over the same period. Since
its inception on June 3, 1996, the fund has returned +22.10%, comparing very
favorably with the Russell 2000 Growth Index return of -21.96%.
Technology continues to dominate the fund, with secondary emphasis in consumer
cyclical and non-cyclical names. In the past we have had good success finding
successful companies in these areas, with the primary dependence on the
Estrend(TRADE MARK) model, and have made most of our best investments over the
past year in these areas. The next chart shows that the bets we are making
relative to our benchmark are modest, and reflect the above-discussed effort to
look a bit more like our benchmark.
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----------------------------------------------------
Economic Sector Diversification
N/I NUMERIC INVESTORS Micro Cap Fund
----------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Percent of Portfolio
Basic Industry 1.3%
Consumer Cyclical 20.6%
Consumer Non-Cyclical 18.3%
Energy 1.9%
Financial 8.4%
Industrial 14.5%
Technology 30.2%
Utility 0.7%
Cash & Cash Equivalents 4.1%
--------------------------------------------------------
Sector Deviation of N/I NUMERIC INVESTORS Micro Cap Fund
Difference between Fund and Russell 2000 Growth Index
--------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Economic Sector Difference from Benchmark (%)
Basic Industry -1.03%
Consumer Cyclical 3.43%
Consumer Non-Cyclical -0.3%
Energy -0.43%
Financial -3.35%
Industrial -2.54%
Technology 2.46%
Utility -2.39%
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' weak ABSOLUTE performance can be attributed to weakening profit
growth and faltering stock prices across virtually the entire market, but
especially in smaller cap stocks. This unpleasant turn of events is primarily
attributed to dramatically worsening economic and political conditions in the
Far East, Russia, and even in Latin America, specifically Brazil. These problems
have negatively impacted returns for all portfolios, but particularly the Micro
Cap and Growth portfolios. The heavy exposure to technology, consumer cyclical
and generally smaller stocks hurt both of these portfolios. Growth & Value was
hurt by a heavy exposure to technology and consumer non-cyclical stocks. Larger
Cap Value was hurt by its heavy exposure to financial stocks and utility stocks.
Both groups had risen significantly prior to our starting the fund in December.
Financial stocks were especially hard hit in August.
10
<PAGE>
As much as poor ABSOLUTE performance is frustrating, we feel greater pain in
poor RELATIVE performance, which is more directly attributable to us. The weak
relative performance of the Growth fund is attributed to difficulty early in the
fiscal year implementing the investment ideas generated by our models. We found
ourselves attempting too many large trades which pushed up the cost of
transacting. This served to reduce realized returns. Since this spring, however,
we have significantly improved our execution approach, resulting in a marked
improvement in realized returns. Good relative performance in the Growth & Value
and Micro Cap portfolios is largely attributed to our Estrend(TRADE MARK) model
performing well through most of the last year, as well as ease of implementation
allowed by the portfolios' small size. Larger Cap Value had been performing well
until June, when the reward to "value" strategies disappeared. The poor returns
to "value" over this period are related to market fears, perhaps well founded,
that the international economic crises would have a very negative influence on
the earnings of many U.S. companies. The prospect of such a large hit to
earnings calls into question the level of support that a "cheap" value stock can
provide. In these cases, cheap stocks can get cheaper, and "value" fails as an
investment strategy. Only when the market becomes more optimistic about economic
growth will value strategies reemerge as viable. A catalyst for such optimism
can be an interest rate cut or more favorable economic statistics indicating
better growth ahead.
We know that active managers must always accept some periods of disappointment,
but that inevitability does not make these unpleasant periods any easier to
take. The good that does come out of such bouts with poor returns is a
redoubling of our research efforts to learn from our mistakes and improve our
process.
As shown in the chart below, our Estrend(TRADE MARK) model generated positive
stock selection insights in eleven of the last twelve months (in simulation, and
excluding the costs of transacting), while Fair Value worked in seven of twelve.
The models' complementary payoff patterns 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 explicitly try to limit the frequency of
these joint failures in designing the models. Particularly noteworthy was the
performance of Estrend(TRADE MARK) in June, July and August when Fair Value
failed miserably. This was a period when most other value-oriented managers
performed poorly, so having any exposure to the Estrend(TRADE MARK) model was
helpful. Those funds most exposed to our Estrend(TRADE MARK) model, the Micro
Cap and the Growth portfolios, and to a certain extent the Growth & Value
portfolio, benefited the most during this period. Larger Cap Value, on the other
hand, was hurt by its primary dependence on Fair Value.
-----------------------------------------------------
Performance of Numeric's Stock Models
Monthly Returns to Estrend(TRADE MARK) and Fair Value
-----------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Estrend(TRADE MARK) Fair Value
9709 1.87% 1.69%
9710 1.95% 2.34%
9711 1.62% -0.17%
9712 1.42% -0.72%
9801 -1.36% 1.39%
9802 0.61% 1.19%
9803 2.3% 0.61%
9804 0.34% 0.41%
9805 1.19% 0.04%
9806 6.2% -1.97%
9807 1.74% -2.78%
9808 1.14% -2.87%
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 (and
that's what it really is, even for the "pros") is an effort in vain, unlikely to
improve returns. Our fully-invested posture helps returns in rising markets, but
did not cushion our fall in the down market we had this summer. We rely on you
to make your own asset allocation decisions, investing with us only those assets
you want fully exposed to the U.S. equity market.
11
<PAGE>
FUND CLOSINGS
The Micro Cap and Growth funds continue to be closed to new investors to keep
the funds small enough to more easily achieve our excess return objectives.
Closing the funds last year proved to be a helpful step in allowing us to
maximize the returns that we could realize from our investment insights. It is
important to note that closing funds and limiting assets under management does
not guarantee you will have good absolute, or even relative returns in these
portfolios. What it does, however, is substantially improve the chances that we
will not waste as much of the power of our stock selection models trading these
stocks as we would if we managed a much larger asset base.
We will close the Growth & Value fund when it reaches $200 million in assets.
Given the volatility in the global equity markets and the uncertainty that it
has caused investors, we expect that cash flows into the fund will be lower for
the next few months. So we don't know when the fund will reach its targeted
closing level. We expect to close the fund on pretty much the same terms we
closed the Growth fund, that is, allowing existing investors to purchase
additional shares without limitation. This policy has worked well for the Growth
fund, resulting in essentially no net inflows since closing. As always, however,
we reserve the right to change any closing policies if doing so is deemed to be
in the best interests of the shareholders.
NEW SHAREHOLDER SERVICES
We are going to be contacting all of our shareholders again shortly to try to
get as many e-mail addresses from you as possible. We want to do a better job of
providing you (but not overwhelming you!) with timely information about the
markets, your investment with us, other offerings in which you might be
interested, and general information about ideas that you might find helpful in
managing your investments. We promise not to redistribute these addresses to
anyone, so you won't have to worry about getting inundated with massive amounts
of "junk mail." We also hope to be improving our Internet-based services this
year to make communicating and doing business with us even easier.
YEAR 2000 COMPLIANCE
Numeric Investors has an intensive research and systems effort in place to bring
all of our computer systems up to date to be fully ready for the "millennium
bug" at the end of next year. We are confident that we will be "Y2K-compliant"
by March 1999. This means ensuring that all of our internal systems, as well as
interactions with the outside world, including brokers and data vendors, are
fully capable of handling the proper new date formats to run all aspects of our
business. We will keep you updated on our progress in this initiative.
We thank you again for the confidence you have placed in us by allowing us to
manage some portion of your investment portfolio. Your continuing confidence is
especially gratifying given the recent market volatility, during which we have
experienced only a small amount of redemption activity, resulting in no
disruption to how we manage your assets. We stand by our commitment to i) keep
the funds small enough to not fritter away your investment dollars on the high
transaction 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/ JOHN C. BOGLE, JR.
- --------------------------
John C. Bogle, Jr.
Managing Director
Numeric Investors L.P.
12
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
Comparison of Change in Value of $10,000 Investment in
N/I NUMERIC INVESTORS Micro Cap Fund(1)(2) vs. Russell 2000 Growth Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Russell 2000
Micro Cap Fund Growth Index
6/3/96 $10,000 $10,000
8/31/96 $ 9,725 $ 8,815.78
11/30/96 $11,392 $ 9,116.86
2/28/97 $11,426 $ 8,951.58
5/31/97 $12,194 $ 9,459.02
8/31/97 $15,405 $10,588.8
11/30/97 $15,547 $10,490.9
2/28/98 $16,354 $11,272.1
5/31/98 $16,188.6 $10,958.1
8/31/98 $12,209.8 $ 7,803.93
- ----------------------------------------------------
Micro Cap Fund $12,210
Russell 2000 Growth Index $7,804
- ----------------------------------------------------
- -------------------------------------------------------------------------
Total Returns
ONE YEAR ENDED AVERAGE
AUGUST 31, 1998 ANNUAL(3)
--------------- ---------
Micro Cap Fund (20.74)% 9.29%
Russell 2000 Growth Index (26.30)% (10.45)%
- -------------------------------------------------------------------------
- --------------
(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 index is unmanaged, does not
incur expenses and is 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, as
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,
1998.
13
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH FUND
Comparison of Change in Value of $10,000 Investment in
N/I NUMERIC INVESTORS Growth Fund(1)(2) vs. Russell 2500 Growth Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Russell 2500
Growth Fund Growth Index
6/3/96 $10,000 $10,000
8/31/96 $ 9,867 $ 9,144.23
11/30/96 $10,925 $ 9,672.72
2/28/97 $10,575 $ 9,572.28
5/31/97 $11,384 $10,059.7
8/31/97 $13,585 $11,326.7
11/30/97 $13,402 $11,195.7
2/28/98 $13,754 $11,953.8
5/31/98 $13,111.5 $11,707
8/31/98 $ 9,640.78 $ 8,434.27
- ----------------------------------------------------
Growth Fund $9,641
Russell 2500 Growth Index $8,434
- ----------------------------------------------------
- --------------------------------------------------------------------------
Total Returns
ONE YEAR ENDED AVERAGE
AUGUST 31, 1998 ANNUAL(3)
--------------- ---------
Growth Fund (29.03)% (1.62)%
Russell 2500 Growth Index (25.53)% (7.30)%
- --------------------------------------------------------------------------
- -----------
(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 index is unmanaged, does not
incur expenses and is 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, as
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,
1998.
14
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH & VALUE FUND
Comparison of Change in Value of $10,000 Investment in
N/I NUMERIC INVESTORS Growth & Value Fund(1)(2) vs. S&P MidCap 400 Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Growth & Value S&P MidCap
Fund 400 Index
6/3/96 $10,000 $10,000
8/31/96 $ 9,633 $ 9,713.02
11/30/96 $11,158 $10,738.2
2/28/97 $11,334 $11,061.9
5/31/97 $12,397 $11,814.8
8/31/97 $14,364 $13,333.3
11/30/97 $14,732 $13,687.6
2/28/98 $16,232 $15,103.5
5/31/98 $16,684.7 $15,350.2
8/31/98 $13,076.4 $12,084.4
- ----------------------------------------------------
Growth & Value Fund $13,076
S&P MidCap 400 Index $12,083
- ----------------------------------------------------
- ----------------------------------------------------
Total Returns
ONE YEAR ENDED AVERAGE
AUGUST 31, 1998 ANNUAL(3)
--------------- ---------
Growth & Value Fund (8.97)% 12.68%
S&P MidCap 400 Index (9.37)% 8.79%
- ----------------------------------------------------
- ---------------
(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 index is unmanaged, does not
incur expenses and is 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, as
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,
1998.
15
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
LARGER CAP VALUE FUND
Comparison of Change in Value of $10,000 Investment in
N/I NUMERIC INVESTORS Larger Cap Value Fund(1)(2) vs. Russell 1000 Value Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Larger Cap Russell 1000
Value Fund Vaue Index
---------- ------------
11/30/97 $10,000 $10,000
12/31/97 $10,058 $10,014
1/31/98 $10,100 $ 9,872.8
2/28/98 $10,917 $10,537.2
3/31/98 $11,675 $11,182.1
4/30/98 $11,650 $11,257
5/31/98 $11,433 $11,090.4
6/30/98 $11,375 $11,232.4
7/31/98 $10,875 $11,033.6
8/31/98 $ 9,033 $ 9,391.78
- ----------------------------------------------------
Larger Cap Value Fund $9,033
Russell 1000 Value Index $9,392
- ----------------------------------------------------
Total Returns
FOR THE FISCAL PERIOD ENDED
AUGUST 31, 1998(3)
----------------------------
Larger Cap Value Fund (9.67)%
Russell 1000 Value Index (6.08)%
- ----------------------------------------------------
- ------------------
(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 index is unmanaged, does not
incur expenses and is 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, as
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 December 9, 1997 (commencement of operations) through August
31, 1998.
16
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS--88.9%
ADVERTISING--0.3%
12,900 Big Flower Holdings, Inc.*/** .... $ 272,512
---------
AEROSPACE--2.4%
6,600 Alliant Techsystems, Inc.* ....... 433,125
35,400 Aviall, Inc.** ................... 451,350
36,000 BE Aerospace, Inc.* .............. 749,250
41,300 Ducommun, Inc.* .................. 709,844
---------
2,343,569
---------
AIRCRAFT ENGINES & PARTS--0.4%
14,500 Aviation Sales Co.*/** ........... 369,750
---------
AIRLINES--0.7%
29,000 Atlas Air, Inc.*/** .............. 688,750
---------
APPAREL--0.3%
16,900 Tarrant Apparel Group* ........... 333,775
---------
AUTOMOBILE--0.5%
37,100 United Auto Group, Inc.*/** ...... 493,894
---------
AUTOMOBILE PARTS & EQUIPMENT--0.6%
18,300 BREED Technologies, Inc.*/** ..... 133,819
42,300 Group 1 Automotive, Inc.*/** ..... 502,312
100 Standard Products Co. (The)** .... 2,550
---------
638,681
---------
AUTOMOBILES - TRUCKS, MOBIL HOMES--0.9%
46,000 Sonic Automotive, Inc.*/** ....... 848,125
---------
BEVERAGES--0.6%
13,300 Canandaigua Brands, Inc., Class A* 555,275
---------
BUSINESS SERVICES--0.9%
15,700 ADVO, Inc.* ...................... 390,537
8,220 Metzler Group, Inc. (The)*/** .... 230,160
7,400 Standard Register Co. (The) ...... 232,175
---------
852,872
---------
COMMERCIAL SERVICES--0.9%
51,000 Quanta Services, Inc.* ........... 669,375
26,400 United Road Services, Inc.* ...... 267,300
---------
936,675
---------
COMPUTER COMPONENTS--8.2%
9,300 Alpine Group, Inc. (The) ......... 132,525
25,800 Apex PC Solutions, Inc.*/** ...... 441,825
40,100 Applied Micro Circuits Corp.* .... 761,900
17,900 ATL Products, Inc.* .............. 346,812
7,300 Broadcom Corp.* .................. 374,125
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
COMPUTER COMPONENTS--(CONTINUED)
37,800 Cybex Computer Products Corp.* ...... $ 935,550
36,400 Excel Switching Corp.*/** ........... 609,700
58,000 InterVoice, Inc.*/** ................ 862,750
36,500 NeoMagic Corp.*/** .................. 469,937
28,700 Proxim, Inc.* ....................... 401,800
16,400 QLogic Corp.* ....................... 776,950
56,200 Splash Technology Holdings, Inc.*/** 843,000
45,300 TranSwitch Corp.* ................... 713,475
31,600 Xircom, Inc.* ....................... 493,750
----------
8,164,099
----------
COMPUTERS, SOFTWARE & SERVICING--13.8%
22,700 Analysts International Corp. ........ 479,537
42,000 Ardent Software, Inc.* .............. 430,500
10,200 AVT Corp.*/** ....................... 200,175
50,400 Best Software, Inc.* ................ 886,725
40,300 Brooktrout Technology, Inc.* ........ 392,925
35,200 Caere Corp.* ........................ 352,000
26,200 Complete Business Solutions, Inc.*/** 396,275
10,500 Computer Task Group, Inc. ........... 269,719
17,700 Concord Communications, Inc.*/** .... 473,475
13,600 Data Dimensions, Inc.* .............. 113,050
11,300 Inso Corp.* ......................... 175,150
31,100 Intelligroup, Inc.*/** .............. 651,156
7,300 International Telecommunication Data
Systems, Inc.*/** ................... 143,263
18,600 Jack Henry & Associates, Inc.** ..... 737,025
29,800 MAPICS, Inc.* ....................... 517,775
28,000 Maxwell Technologies, Inc.** ........ 539,000
22,300 New Era of Networks, Inc.* .......... 638,337
40,800 PC Connection, Inc.* ................ 612,000
43,000 Pegasystems, Inc.*/** ............... 671,875
21,200 Peregrine Systems, Inc.*/** ......... 495,550
3,500 Pinnacle Systems, Inc.* ............. 105,437
6,150 Progress Software Corp.* ............ 111,084
33,400 QuadraMed Corp.*/** ................. 793,250
78,100 Secure Computing Corp.*/** .......... 497,887
40,800 Software Spectrum, Inc.*/** ......... 637,500
37,800 SPR, Inc.* .......................... 548,100
15,100 Summit Design, Inc.* ................ 90,600
48,300 THQ, Inc.* .......................... 546,394
31,400 Timberline Software Corp.** ......... 451,866
25,800 TSI International Software Ltd.* .... 693,375
----------
13,651,005
----------
CONSTRUCTION--0.7%
21,000 NVR, Inc.*/** ....................... 683,812
----------
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
CONSUMER PRODUCTS--0.2%
14,000 Fossil, Inc.* ......................... $ 231,000
---------
COSMETICS--0.7%
41,000 Helen of Troy Ltd.*/** ................ 712,375
---------
ELECTRICAL EQUIPMENT--3.1%
7,800 AMETEK, Inc. .......................... 152,100
24,500 C&D Technologies, Inc. ................ 535,937
33,400 General Cable Corp. ................... 668,000
17,400 Kuhlman Corp. ......................... 411,075
22,800 Optical Coating Laboratory, Inc. ...... 359,100
98,800 Power Intergrations, Inc.* ............ 901,550
---------
3,027,762
---------
ELECTRONIC COMPONENTS & ACCESSORIES--1.2%
24,700 CTS Corp. ............................. 700,862
31,400 DSP Group, Inc.*/** ................... 447,450
---------
1,148,312
---------
ELECTRONICS--0.8%
30,000 Aeroflex, Inc.* ....................... 200,625
73,200 Polycom, Inc.*/** ..................... 558,150
---------
758,775
---------
FINANCIAL SERVICES--3.7%
36,400 Advanta Corp., Class A** .............. 411,775
4,100 Doral Financial Corp. ................. 61,500
33,400 Franchise Mortgage Acceptance Co.* .... 538,575
13,800 HealthCare Financial Partners, Inc.*/** 420,900
90,600 Long Beach Financial Corp.* ........... 724,800
4,800 Metris Companies, Inc.** .............. 283,200
30,100 Resource America, Inc., Class A ....... 419,519
31,800 Resource Bancshares Mortgage Group,
Inc. ............................... 500,850
21,800 Waddell & Reed Financial, Inc.** ...... 362,425
---------
3,723,544
---------
FOOD & AGRICULTURE--0.9%
26,900 Pilgrim's Pride Corp., Class B ........ 526,231
17,200 Ralcorp Holdings, Inc.* ............... 332,175
---------
858,406
---------
FOOD PREPARATION--0.9%
58,500 Omega Protein Corp.* .................. 599,625
17,800 Worthington Foods, Inc. ............... 289,250
---------
888,875
---------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
FOOTWEAR--0.3%
17,000 Candies, Inc.* ........................ $ 91,906
13,400 Maxwell Shoe Co., Inc.* ............... 175,875
---------
267,781
---------
HEALTHCARE--1.2%
17,500 CareMatrix Corp.* ..................... 301,875
19,500 Pediatrix Medical Group, Inc.*/** ..... 759,281
12,600 RehabCare Group, Inc.*/** ............. 181,125
---------
1,242,281
---------
HOUSEHOLD FURNITURE--0.6%
29,900 Stanley Furniture Co., Inc.* .......... 598,000
---------
INDUSTRIAL MACHINERY--1.8%
18,000 Astec Industries, Inc.* ............... 634,500
30,200 JLG Industries, Inc. .................. 443,563
45,800 Terex Corp.* .......................... 721,350
---------
1,799,413
---------
INSURANCE--0.9%
44,400 Automobile Protection Corp.* .......... 277,500
17,300 Frontier Insurance Group, Inc. ........ 238,956
18,300 INSpire Insurance Solutions, Inc.*/** . 336,262
---------
852,718
---------
INSURANCE - PROPERTY & CASUALTY--1.6%
16,000 Acceptance Insurance Co., Inc.* ....... 304,000
17,200 Chartwell Re Corp. .................... 452,575
17,400 LandAmerica Financial Group, Inc. ..... 864,562
---------
1,621,137
---------
INSURANCE - TITLE INSURANCE--1.3%
31,000 Fidelity National Financial, Inc. ..... 858,312
18,400 Triad Guaranty, Inc.* ................. 461,150
---------
1,319,462
---------
LEISURE & ENTERTAINMENT--2.2%
26,800 Activision, Inc.*/** .................. 271,350
3,900 Anchor Gaming, Inc.* .................. 187,200
36,500 Coastcast Corp.* ...................... 367,281
10,100 K2, Inc.** ............................ 186,219
66,900 Media Arts Group, Inc.*/** ............ 660,638
22,500 Travel Services International, Inc.*/** 489,375
---------
2,162,063
---------
MANUFACTURING--0.5%
24,700 MotivePower Industries, Inc.*/** ...... 494,000
---------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
MEDICAL INSTRUMENTS & SUPPLIES--3.5%
32,800 Ocular Sciences, Inc.* ............. $ 580,150
40,700 Physio-Control International Corp.* 1,042,938
14,000 ResMed, Inc.*/** ................... 518,000
5,600 Ventana Medical Systems, Inc.* ..... 112,000
16,000 VISIX, Inc.*/** .................... 768,000
28,400 Wesley Jessen VisionCare, Inc.* .... 482,800
----------
3,503,888
----------
MEDICAL & MEDICAL SERVICES--5.5%
61,500 AmeriPath, Inc.*/** ................ 707,250
28,266 Bindley Western Industries, Inc.** . 741,983
15,900 Biomatrix, Inc.*/** ................ 696,619
36,600 Dendrite International, Inc.* ...... 722,850
46,900 Hanger Orthopedic Group, Inc.* ..... 700,569
52,300 Osteotech, Inc.* ................... 1,196,363
28,000 Physician Reliance Network, Inc.*/** 222,250
15,900 Province Healthcare Co.* ........... 429,300
----------
5,417,184
----------
METALS--1.1%
50,500 Metals USA, Inc.*/** ............... 583,906
29,400 RMI Titanium Co.*/** ............... 525,525
----------
1,109,431
----------
MISCELLANEOUS FURNITURE & FIXTURES--0.6%
24,000 Cost Plus, Inc. .................... 619,500
----------
MOTOR HOMES--0.9%
12,400 Monaco Coach Corp.* ................ 268,150
30,300 National R.V. Holdings, Inc.*/** ... 598,425
----------
866,575
----------
OFFICE FURNITURE--0.2%
14,400 Winsloew Furniture, Inc.* .......... 223,200
----------
OIL DOMESTIC--0.7%
44,900 Houston Exploration Co. (The)*/** .. 656,663
----------
OIL EQUIPMENT & SERVICES--0.8%
7,000 Daniel Industries, Inc.** .......... 77,875
16,300 Friede Goldman International, Inc.* 170,131
37,300 Gulf Island Fabrication, Inc.* ..... 373,000
13,400 Veritas DGC, Inc.* ................. 201,000
----------
822,006
----------
OIL & GAS FIELD EXPLORATION--0.6%
21,000 Evergreen Resources, Inc.* ......... 288,750
96,600 Patina Oil & Gas Corp.** ........... 344,138
----------
632,888
----------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
PHARMACEUTICALS--2.0%
34,500 Alpharma, Inc., Class A** .......... $ 819,375
30,600 D&K Healthcare Resources, Inc.* .... 451,350
17,800 Medicis Pharmaceutical Corp.,
Class A*/** ........................ 582,950
6,100 Roberts Pharmaceutical Corp.* ...... 104,463
---------
1,958,138
---------
REAL ESTATE--0.8%
62,400 Bluegreen Corp.*/** ................ 468,000
13,400 CB Richard Ellis Services, Inc.* ... 367,663
---------
835,663
---------
RESEARCH--0.7%
27,300 Kendle International, Inc.* ........ 663,731
---------
RESIDENTIAL CONSTRUCTION--2.0%
42,600 Beazer Homes USA, Inc.*/** ......... 910,575
37,900 M.D.C. Holdings, Inc.** ............ 606,400
40,500 Standard Pacific Corp. ............. 478,406
---------
1,995,381
---------
RESTAURANTS--0.6%
128,800 Taco Cabana, Inc.* ................. 627,900
---------
RETAIL - CATALOG & MAIL ORDER--0.5%
28,300 Micro Warehouse, Inc.* ............. 459,875
---------
RETAIL - LUMBER & OTHER BUILDING PRODUCTS--0.3%
16,100 Eagle Hardware & Garden, Inc. ...... 344,137
---------
RETAIL - SPECIALTY--2.4%
20,700 Action Performance Companies, Inc.* 478,688
40,500 Brauns Fashion Corp.*/** ........... 313,875
11,600 Columbia Sportswear Co.* ........... 147,900
11,700 Hot Topic, Inc.** .................. 184,275
18,600 Musicland Stores Corp.*/** ......... 174,375
30,150 Pacific Sunwear of California, Inc.* 550,238
31,600 Trans World Entertainment Corp.* ... 537,200
---------
2,386,551
---------
RETAIL - SPECIALTY APPAREL--3.2%
8,800 Abercrombie & Fitch Co., Class A* .. 378,400
13,150 American Eagle Outfitters, Inc.*/** 460,250
24,800 AnnTaylor Stores Corp.*/** ......... 602,950
26,900 Buckle, Inc. (The)* ................ 527,913
72,300 Chico's Fas, Inc.* ................. 921,825
6,300 Timberland Co. (The), Class A*/** .. 268,537
---------
3,159,875
---------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
SERVICES - EMPLOYMENT AGENCIES--0.6%
9,800 AHL Services, Inc.* .............. $ 270,725
27,350 Labor Ready, Inc.* ............... 311,106
---------
581,831
---------
SERVICES - MANAGEMENT SERVICES--0.6%
29,400 SM&A Corp. ....................... 621,075
---------
SERVICES - NURSING & PERSONAL CARE
FACILITIES--0.4%
57,800 Capital Senior Living Corp.*/** .. 437,113
---------
SURGICAL & MEDICAL INSTRUMENTS--0.4%
12,300 Xomed Surgical Products, Inc.*/** 365,925
---------
TELECOMMUNICATIONS--0.3%
42,400 Advanced Communications Group, Inc.* 254,400
---------
TELECOMMUNICATIONS EQUIPMENT--3.2%
30,200 ANADIGICS, Inc.* ................. 383,162
26,900 DSP Communications, Inc.* ........ 307,669
4,500 GeoTel Communications Corp.* ..... 157,500
29,900 Melita International Corp.*/** ... 250,413
48,200 RF Micro Devices, Inc.*/** ....... 626,600
12,700 Superior TeleCom, Inc. ........... 484,188
26,200 Tekelec, Inc.* ................... 473,238
2,000 Terayon Communications Systems,
Inc.*/** ....................... 19,250
28,400 World Access, Inc.*/** ........... 543,150
---------
3,245,170
---------
TOYS--0.9%
92,900 Galoob Toys, Inc.* ............... 685,138
28,300 JAKKS Pacific, Inc.* ............. 222,863
---------
908,001
---------
TRANSPORT--0.4%
13,200 Allied Holdings, Inc.* ........... 135,300
12,800 Varlen Corp.** ................... 281,600
---------
416,900
---------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
WASTE MANAGEMENT--0.7%
46,200 KTI, Inc.*/** .................... $ 710,325
-----------
WHOLESALE - FARM PRODUCT RAW
MATERIALS--0.2%
20,000 Northland Cranberries, Inc. ...... 195,000
-----------
WHOLESALE - SPECIALTY EQUIPMENT--1.7%
50,500 CHS Electronics, Inc.*/** ........ 637,563
15,800 Insight Enterprises, Inc.* ....... 671,500
50,500 Savoir Technology Group, Inc.*/** 366,125
-----------
1,675,188
-----------
Total Common Stocks
(Cost $110,998,909) ............ 88,232,212
-----------
PRINCIPAL
AMOUNT (000's)
- --------------
SHORT-TERM INVESTMENT--10.9%
REPURCHASE AGREEMENT--10.9%
$10,806 Bear, Stearns & Co., Inc.
(Agreement dated 08/31/98 to be
repurchased at $10,807,389)
5.71%, 09/01/98
(Cost $10,805,678) (Note 6) ..... 10,805,678
-----------
Total Investments -- 99.8%
(Cost $121,804,587) ............. 99,037,890
-----------
Other Assets in Excess of
Liabilities -- 0.2% ............. 228,543
-----------
Net Assets -- 100.0% ............ $99,266,433
===========
- ------------
* Non-income producing.
** Security or a portion thereof is out on loan.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS--95.9%
ADVERTISING--0.4%
5,500 Big Flower Holdings, Inc.*/** ....... $ 116,187
6,500 Snyder Communications, Inc.* ........ 195,812
---------
311,999
---------
AEROSPACE--3.5%
9,200 Alliant Techsystems, Inc.* .......... 603,750
28,900 BE Aerospace, Inc.* ................. 601,481
21,800 B.F. Goodrich Co. (The) ............. 589,963
3,300 Cordant Technologies, Inc. .......... 117,562
17,500 Sundstrand Corp. .................... 797,344
---------
2,710,100
---------
AIRLINES--1.1%
6,000 Alaska Air Group, Inc.*/** .......... 233,625
12,700 America West Holdings Corp.* ........ 246,856
17,700 Atlas Air, Inc.*/** ................. 420,375
---------
900,856
---------
APPAREL--1.3%
19,500 Fruit of the Loom, Inc., Class A* ... 437,531
11,800 Tommy Hilfiger Corp.* ............... 551,650
---------
989,181
---------
AUTOMOBILE--0.6%
34,100 United Auto Group, Inc.*/** ......... 453,956
---------
AUTOMOBILE PARTS & EQUIPMENT--0.2%
15,000 BREED Technologies, Inc.*/** ........ 109,687
4,900 Tower Automotive, Inc.*/** .......... 89,731
---------
199,418
---------
BANKS--0.1%
2,200 Star Banc Corp.** ................... 120,725
---------
BEVERAGES--0.9%
2,900 Beringer Wine Estates Holdings, Inc.,
Class B* ............................ 88,450
15,000 Canandaigua Brands, Inc., Class A* .. 626,250
---------
714,700
---------
BUILDING PRODUCTS--0.3%
7,300 Texas Industries, Inc.** ............ 264,169
---------
BUSINESS SERVICES--1.0%
26,600 ADVO, Inc.* ......................... 661,675
3,900 InaCom Corp.*/** .................... 75,075
---------
736,750
---------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
CHEMICALS - SPECIALTY--0.3%
10,300 Engelhard Corp. ..................... $ 189,262
1,100 W.R. Grace & Co.* ................... 14,163
---------
203,425
---------
COMMERCIAL PRINTING--0.8%
38,900 Mail-Well, Inc.*/** ................. 646,712
---------
COMMERCIAL SERVICES--1.0%
22,900 ACNielsen Corp.* .................... 459,431
33,400 Seitel, Inc.* ....................... 300,600
9,000 TeleSpectrum Worldwide Inc.* ........ 32,625
---------
792,656
---------
COMPUTER COMPONENTS--6.4%
31,300 Apex PC Solutions, Inc.*/** ......... 536,012
40,000 Applied Micro Circuits Corp.* ....... 760,000
5,100 Broadcom Corp.* ..................... 261,375
34,600 InterVoice, Inc.* ................... 514,675
31,900 Microchip Technology, Inc.*/** ...... 584,169
52,400 NeoMagic Corp.*/** .................. 674,650
10,400 QLogic Corp.* ....................... 492,700
1,900 SMART Modular Technologies, Inc.* ... 28,975
45,500 Splash Technology Holdings, Inc.*/** 682,500
28,600 Xircom, Inc.* ....................... 446,875
---------
4,981,931
---------
COMPUTERS, SOFTWARE & SERVICING--13.6%
20,300 American Management Systems, Inc.* .. 543,025
4,800 Autodesk, Inc. ...................... 112,200
11,300 Brooktrout Technology, Inc.* ........ 110,175
7,800 CIBER, Inc.*/** ..................... 195,975
13,500 Complete Business Solutions, Inc.*/** 204,187
16,300 Computer Horizons Corp.* ............ 381,012
13,000 Computer Task Group, Inc. ........... 333,937
14,600 Compuware Corp.* .................... 663,387
16,300 Concord Communications, Inc.*/** .... 436,025
3,900 Data Dimensions, Inc.* .............. 32,419
4,900 Electronic Arts Inc.* ............... 186,812
17,400 Intelligroup, Inc.*/** .............. 364,312
4,000 J.D. Edwards & Co.* ................. 162,000
2,300 Jack Henry & Associates, Inc.** ..... 91,137
19,800 Keane, Inc.* ........................ 831,600
14,000 Learning Company, Inc. (The)* ....... 247,625
21,900 Mastech Corp.* ...................... 449,634
10,600 MindSpring Enterprises, Inc.* ....... 284,875
8,300 Network Appliance, Inc.* ............ 346,006
15,800 New Era of Networks, Inc.* .......... 452,275
11,700 Pegasystems, Inc.*/** ............... 182,812
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
COMPUTERS, SOFTWARE & SERVICING--(CONTINUED)
12,100 Peregrine Systems, Inc.*/** .......... $ 282,837
20,800 Pixar, Inc.*/** ...................... 599,300
16,400 Pomeroy Computer Resources, Inc.* .... 217,300
36,400 QuadraMed Corp.*/** .................. 864,500
24,700 Reynolds & Reynolds Co. (The), Class A 311,837
14,200 Siebel Systems, Inc.* ................ 266,250
5,400 Systems & Computer Technology Corp.* . 73,575
50,550 THQ, Inc.* ........................... 571,847
12,100 Transaction Systems Architects, Inc. .
Class A*/** ........................ 400,812
7,100 VERITAS Software Corp.*/** ........... 318,612
1,700 Wind River Systems, Inc.* ............ 63,750
----------
10,582,050
----------
CONSTRUCTION--0.4%
6,500 Foster Wheeler Corp.** ............... 80,031
4,800 J. Ray McDermott, S.A.* .............. 134,100
4,300 NVR, Inc.*/** ........................ 140,019
----------
354,150
----------
COSMETICS--0.6%
24,700 Helen of Troy Ltd.* .................. 429,162
----------
ELECTRICAL EQUIPMENT--3.5%
6,900 Applied Power Inc. ................... 171,206
18,600 C&D Technologies, Inc. ............... 406,875
41,150 General Cable Corp. .................. 823,000
8,800 Kuhlman Corp. ........................ 207,900
19,500 Symbol Technologies, Inc. ............ 799,500
5,700 Tecumseh Products Co., Class A ....... 271,106
1,800 Uniphase Corp.* ...................... 71,887
----------
2,751,474
----------
ELECTRONIC COMPONENTS & ACCESSORIES--0.7%
12,600 CTS Corp. ............................ 357,525
11,700 DSP Group, Inc.*/** .................. 166,725
----------
524,250
----------
ELECTRONICS--1.8%
13,600 Aeroflex, Inc.* ...................... 90,950
1,900 Cable Design Technologies* ........... 26,719
54,100 CHS Electronics, Inc.*/** ............ 683,013
2,100 Essex International, Inc.* ........... 39,375
5,300 Micrel, Inc.*/** ..................... 154,031
21,200 Polycom, Inc.*/** .................... 161,650
10,400 Windmere-Durable Holdings, Inc.* ..... 247,000
----------
1,402,738
----------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
ENTERTAINMENT--0.1%
7,700 Fairfield Communities, Inc.* .......... $ 75,075
---------
FINANCIAL SERVICES--3.4%
32,500 Advanta Corp., Class A ................ 367,656
4,400 AmeriCredit Corp.*/** ................. 109,725
5,900 Doral Financial Corp. ................. 88,500
8,500 FIRSTPLUS Financial Group, Inc.*/** ... 193,375
15,100 HealthCare Financial Partners, Inc.*/** 460,550
17,400 IMC Mortgage Co.* ..................... 117,450
8,900 Metris Companies, Inc.** .............. 525,100
19,800 Resource America, Inc., Class A ....... 275,962
1,900 SEI Investments Co. ................... 118,275
38,000 Sirrom Capital Corp.** ................ 211,375
10,100 Waddell & Reed Financial, Inc.** ...... 167,912
---------
2,635,880
---------
FOOD & AGRICULTURE--4.7%
28,300 Chiquita Brands International, Inc.** . 316,606
13,800 Corn Products International, Inc.* .... 326,887
18,300 Earthgrains Co. (The) ................. 503,250
45,400 Fleming Co., Inc. ..................... 541,962
8,200 Flowers Industries, Inc. .............. 146,063
22,200 Fresh Del Monte Produce Inc.* ......... 355,200
14,400 Pilgrim's Pride Corp., Class B ........ 281,700
22,600 Ralcorp Holdings, Inc.* ............... 436,463
6,500 Smithfield Foods, Inc.* ............... 118,625
12,400 Suiza Foods Corp.*/** ................. 599,850
---------
3,626,606
---------
HEALTHCARE--1.6%
12,900 PacifiCare Health Systems, Inc.,
Class B*/** ........................... 812,700
8,700 Pediatrix Medical Group, Inc.*/** ..... 338,756
3,300 Trigon Healthcare, Inc.* .............. 91,163
---------
1,242,619
---------
HOUSEHOLD PRODUCTS--0.3%
10,600 Blyth Industries, Inc.*/** ............ 243,138
---------
HOUSEWARES--0.1%
3,000 Libbey Inc. ........................... 91,688
---------
INDUSTRIAL MACHINERY--1.0%
20,200 JLG Industries, Inc. .................. 296,688
32,300 Terex Corp.* .......................... 508,725
---------
805,413
---------
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
INSURANCE--1.4%
19,200 Automobile Protection Corp.* .......... $ 120,000
18,100 Century Business Services, Inc.*/** ... 346,163
10,600 Conseco, Inc. ......................... 292,825
8,600 Frontier Insurance Group, Inc. ........ 118,788
1,700 Hartford Life, Inc., Class A .......... 87,125
5,850 INSpire Insurance Solutions, Inc.*/** . 107,494
---------
1,072,395
---------
INSURANCE - PROPERTY & CASUALTY--0.9%
13,500 LandAmerica Financial Group, Inc. ..... 670,781
---------
INSURANCE - TITLE INSURANCE--1.0%
28,720 Fidelity National Financial, Inc.** ... 795,185
---------
INTEGRATED CIRCUITS--0.5%
13,500 Vitesse Semiconductor Corp.* .......... 366,188
---------
LEISURE & ENTERTAINMENT--1.2%
5,000 Anchor Gaming, Inc.* .................. 240,000
5,900 Avis Rent A Car, Inc.* ................ 92,556
2,600 Coastcast Corp.* ...................... 26,163
14,600 Hertz Corp. (The) ..................... 551,150
---------
909,869
---------
MANUFACTURING--0.6%
10,200 AptarGroup, Inc. ...................... 289,425
9,100 MotivePower Industries, Inc.*/** ...... 182,000
---------
471,425
---------
MEDICAL INSTRUMENTS & SUPPLIES--6.3%
26,900 Arterial Vascular Engineering, Inc.*/** 941,500
7,600 Beckman Coulter, Inc. ................. 420,850
1,400 Guidant Corp. ......................... 86,450
25,400 Ocular Sciences, Inc.* ................ 449,263
19,900 Safeskin Corp.* ....................... 671,625
19,600 VISIX, Inc.*/** ....................... 940,800
16,900 Waters Corp.*/** ...................... 910,488
26,400 Wesley Jessen VisionCare, Inc.* ....... 448,800
---------
4,869,776
---------
MEDICAL & MEDICAL SERVICES--3.2%
16,666 Bindley Western Industries, Inc. ...... 437,483
10,600 Biomatrix, Inc.*/** ................... 464,413
23,000 Dendrite International, Inc.* ......... 454,250
16,500 Integrated Health Services, Inc. ...... 319,688
2,700 Lincare Holdings Inc.*/** ............. 91,631
5,700 Medical Manager Corp.*/** ............. 73,388
28,600 Osteotech, Inc.* ...................... 654,225
---------
2,495,078
---------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
METALS--0.7%
31,300 RMI Titanium Co.*/** .............. $ 559,488
---------
METALS & MINING--0.1%
8,800 Cyprus Amax Minerals Co. .......... 80,850
---------
MOTOR HOMES--0.3%
11,250 National R.V. Holdings, Inc.*/** .. 222,187
---------
OFFICE & BUSINESS EQUIPMENT--1.1%
2,900 Knoll, Inc.* ...................... 75,219
13,300 United Stationers, Inc. ........... 788,025
---------
863,244
---------
OIL EQUIPMENT & SERVICES--1.5%
29,500 Friede Goldman International, Inc.* 307,906
3,400 Gulf Island Fabrication, Inc.* .... 34,000
6,900 National-Oilwell, Inc.* ........... 53,475
11,500 SEACOR SMIT, Inc.*/** ............. 396,750
24,300 Veritas DGC, Inc.* ................ 364,500
---------
1,156,631
---------
OIL & GAS--0.3%
16,700 Tesoro Petroleum Corp.*/** ........ 215,013
---------
PHARMACEUTICALS--1.6%
12,400 Alpharma, Inc., Class A** ......... 294,500
13,400 ICN Pharmaceuticals, Inc. ......... 206,025
12,900 Medicis Pharmaceutical Corp.,
Class A*/** ....................... 422,475
20,400 Roberts Pharmaceutical Corp.* ..... 349,350
---------
1,272,350
---------
PUBLISHING - NEWSPAPERS--1.0%
54,000 Hollinger International Inc.** .... 756,000
---------
RADIO BROADCASTING STATIONS--0.2%
2,600 Jacor Communications, Inc.*/** .... 153,400
---------
RESIDENTIAL CONSTRUCTION--0.5%
1,900 D.R. Horton, Inc.** ............... 30,400
11,900 M.D.C. Holdings, Inc.** ........... 190,400
12,700 Standard Pacific Corp. ............ 150,019
---------
370,819
---------
RESTAURANTS--1.0%
26,300 CKE Restaurants, Inc.** ........... 815,300
---------
RETAIL - BUILDING PRODUCTS--0.1%
4,000 Eagle Hardware & Garden, Inc.* .... 85,500
---------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
RETAIL - CATALOG & MAIL ORDER--0.7%
5,300 Fingerhut Companies, Inc. .......... $ 128,525
26,900 Micro Warehouse, Inc.* ............. 437,125
---------
565,650
---------
RETAIL - JEWELRY STORES--0.2%
5,100 Zale Corp.* ........................ 117,300
---------
RETAIL - SPECIALTY--2.4%
7,300 Action Performance Companies, Inc.* 168,813
5,700 Best Buy Co., Inc.* ................ 224,438
10,300 Dollar Tree Stores, Inc.* .......... 298,700
13,900 Linens 'n Things, Inc.* ............ 324,913
51,200 Musicland Stores Corp.*/** ......... 480,000
20,600 Trans World Entertainment Corp.* ... 350,200
---------
1,847,064
---------
RETAIL - SPECIALTY APPAREL--5.4%
14,400 Abercrombie & Fitch Co., Class A* .. 619,200
21,225 American Eagle Outfitters, Inc.* ... 742,875
20,700 AnnTaylor Stores Corp.*/** ......... 503,269
18,000 Buckle, Inc. (The)* ................ 353,250
23,800 Footstar, Inc.*/** ................. 693,175
32,000 Goody's Family Clothing, Inc.* ..... 576,000
16,800 Intimate Brands, Inc.** ............ 310,800
14,500 Pacific Sunwear of California, Inc.* 264,625
2,800 Timberland Co. (The), Class A* ..... 119,350
---------
4,182,544
---------
SAVINGS & LOAN ASSOCIATIONS--0.6%
2,500 Bank United Corp., Class A ......... 83,125
13,539 HUBCO, Inc. ........................ 358,783
---------
441,908
---------
SERVICES - COMPUTER INTEGRATED SYSTEMS
Design--1.3%
23,500 Comverse Technology, Inc.* ......... 904,750
5,800 FORE Systems, Inc.* ................ 100,050
---------
1,004,800
---------
SERVICES - EMPLOYMENT AGENCIES--1.1%
28,675 Labor Ready, Inc.* ................. 326,178
5,400 Robert Half International, Inc.* ... 259,200
12,400 Romac International, Inc.* ......... 232,500
---------
817,878
---------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
SHIP & BOAT BUILDING & REPAIRING--0.3%
25,200 Halter Marine Group, Inc.*/** ...... $ 226,800
---------
STEEL--0.2%
12,600 Oregon Steel Mills, Inc.** ......... 118,913
---------
TELECOMMUNICATIONS--2.8%
9,600 International Telecommunication Data
Systems, Inc.*/** ................ 188,400
19,000 MRV Communications, Inc.*/** ....... 106,281
18,200 QUALCOMM Inc.* ..................... 799,663
10,700 Qwest Communications International,
Inc.* ............................ 267,500
6,100 Tellabs, Inc.* ..................... 257,725
22,800 TranSwitch Corp.* .................. 359,100
12,000 WinStar Communications, Inc.*/** ... 219,000
---------
2,197,669
---------
TELECOMMUNICATIONS EQUIPMENT--3.5%
28,100 ANADIGICS, Inc.*/** ................ 356,519
45,000 DSP Communications, Inc.* .......... 514,688
2,900 GeoTel Communications Corp.* ....... 101,500
9,650 Superior TeleCom, Inc. ............. 367,906
48,600 Tekelec, Inc.* ..................... 877,838
1,600 Terayon Communications Systems,
Inc.*/** ......................... 15,400
24,600 World Access, Inc.* ................ 470,475
---------
2,704,326
---------
TEXTILES--0.8%
20,500 WestPoint Stevens Inc.* ............ 607,313
---------
TOBACCO--0.2%
5,700 Universal Corp. .................... 179,550
---------
TOYS--0.2%
25,900 Galoob Toys, Inc.* ................. 191,013
---------
TRANSPORT--1.3%
1,500 CNF Transportation, Inc. ........... 46,875
7,600 Coach USA, Inc.* ................... 199,975
1,900 J.B. Hunt Transport Services, Inc. . 32,181
12,800 M.S. Carriers, Inc.* ............... 273,600
21,300 USFreightways Corp. ................ 477,919
---------
1,030,550
---------
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
VITAMINS & NUTRITIONAL SUPPLIES--1.1%
9,700 NBTY, Inc.* ...................... $ 88,513
34,500 Rexall Sundown, Inc.*/** ......... 629,625
5,500 Twinlab Corp.* ................... 160,188
-----------
878,326
-----------
WASTE MANAGEMENT--0.1%
6,000 Allied Waste Industries, Inc.* ... 114,000
-----------
WHOLESALE - SPECIALTY EQUIPMENT--0.5%
9,600 Insight Enterprises, Inc.* ....... 408,000
-----------
Total Common Stocks
(Cost $99,299,968) ............. 74,625,904
-----------
PRINCIPAL
AMOUNT (000's)
- --------------
SHORT-TERM INVESTMENT--4.8%
REPURCHASE AGREEMENT--4.8%
$3,762 Bear, Stearns & Co., Inc.
(Agreement dated 08/31/98 to be
repurchased at $3,762,937)
5.71%, 09/01/98
(Cost $3,762,341) (Note 6) ..... 3,762,341
-----------
Total Investments -- 100.7%
(Cost $103,062,309) ............ 78,388,245
-----------
Liabilities in Excess of
Other Assets -- (0.7%).......... (548,701)
-----------
Net Assets -- 100.0% ............. $77,839,544
===========
- ------------
* Non-income producing.
** Security or a portion thereof is out on loan.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH & VALUE FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS--96.1%
ADVERTISING--0.6%
22,600 Snyder Communications, Inc.* ......... $ 680,825
----------
AEROSPACE--4.4%
37,700 B.F. Goodrich Co. (The) .............. 1,020,256
30,100 Cordant Technologies, Inc. ........... 1,072,312
32,200 Gulfstream Aerospace Corp.*/** ....... 1,131,025
36,400 Sundstrand Corp. ..................... 1,658,475
----------
4,882,068
----------
AIR TRANSPORT--0.5%
29,300 Airborne Freight Corp.** ............. 571,350
----------
AIRLINES--2.1%
45,600 America West Holdings Corp.* ......... 886,350
5,300 AMR Corp.* ........................... 288,850
18,800 UAL Corp.* ........................... 1,133,875
----------
2,309,075
----------
APPAREL--2.9%
50,000 Fruit of the Loom, Inc., Class A* 1,121,875
48,900 Jones Apparel Group, Inc.* ........... 947,437
19,700 Tommy Hilfiger Corp.* ................ 920,975
8,700 Warnaco Group, Inc. (The), Class A.... 237,075
----------
3,227,362
----------
AUTO - TRUCKS--0.4%
7,300 General Motors Corp. ................. 421,575
----------
AUTOMOBILE PARTS & EQUIPMENT--0.9%
52,900 Meritor Automotive, Inc. ............. 938,975
----------
BANKS--4.3%
29,100 Banc One Corp. ....................... 1,105,800
500 First Union Corp. .................... 24,250
10,000 National City Corp. .................. 587,500
44,600 Pacific Century Financial Corp. ...... 657,850
47,500 Union Planters Corp. ................. 1,911,875
15,000 Washington Mutual, Inc.** ............ 480,000
----------
4,767,275
----------
BROKERAGE--0.7%
19,435 Bear Stearns Companies Inc. (The) 717,880
----------
CHEMICALS - DIVERSIFIED--1.5%
35,100 Hercules Inc. ........................ 897,244
36,000 Solutia Inc. ......................... 807,750
----------
1,704,994
----------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
CHEMICALS - SPECIALTY--2.0%
13,700 Crompton & Knowles Corp. ............. $ 200,362
67,100 Engelhard Corp. ...................... 1,232,962
61,100 W.R. Grace & Co.* .................... 786,663
----------
2,219,987
----------
COMMERCIAL PRINTING--0.7%
48,400 Mail-Well, Inc.*/** .................. 804,650
----------
COMMERCIAL SERVICES--1.0%
56,300 ACNielsen Corp.* ..................... 1,129,519
----------
COMPUTER COMPONENTS--1.6%
51,000 Microchip Technology, Inc.*/** ....... 933,937
16,400 Sanmina Corp.*/** .................... 506,350
21,200 Seagate Technology, Inc.* ............ 371,000
----------
1,811,287
----------
COMPUTERS, SOFTWARE & SERVICING--11.4%
9,900 America Online, Inc. ................. 811,181
38,200 American Management Systems, Inc.* ... 1,021,850
17,200 CIBER, Inc.*/** ...................... 432,150
950 Citrix Systems, Inc.* ................ 54,744
24,700 Computer Horizons Corp.* ............. 577,362
47,100 Compuware Corp.* ..................... 2,140,106
19,900 Electronic Arts Inc.* ................ 758,687
2,800 J.D. Edwards & Co.* .................. 113,400
35,900 Keane, Inc.* ......................... 1,507,800
55,700 Learning Company, Inc. (The)* ........ 985,194
34,800 Mastech Corp.* ....................... 714,487
19,200 Pixar, Inc.*/** ...................... 553,200
97,400 Reynolds & Reynolds Co. (The), Class A 1,229,675
36,116 Siebel Systems, Inc.* ................ 677,175
16,900 VERITAS Software Corp.*/** ........... 758,387
10,300 Visio Corp.* ......................... 216,300
----------
12,551,698
----------
CONTAINERS - METAL & GLASS--0.5%
16,000 Crown Cork & Seal Co., Inc.** ........ 524,000
----------
DRILLING OIL & GAS WELLS--0.2%
9,200 Transocean Offshore Inc. ............. 225,975
----------
ELECTRONICS--1.2%
5,000 Avnet, Inc. .......................... 236,250
13,600 Eastman Kodak Co. .................... 1,062,500
----------
1,298,750
----------
FINANCIAL SERVICES--0.7%
22,300 FIRSTPLUS Financial Group, Inc.*/** .. 507,325
4,400 SEI Investments Co. .................. 273,900
----------
781,225
----------
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH & VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
FOOD & AGRICULTURE--5.6%
19,400 ConAgra, Inc. ..........................$ 480,150
27,100 Earthgrains Co. (The) .................. 745,250
69,100 Flowers Industries, Inc. ............... 1,230,844
18,700 IBP, Inc. .............................. 309,719
12,300 International Home Foods, Inc.* ........ 206,025
59,500 Interstate Bakeries Corp.** ............ 1,550,719
5,600 Safeway Inc.* .......................... 220,500
16,400 Smithfield Foods, Inc.* ................ 299,300
22,200 Suiza Foods Corp.*/** .................. 1,073,925
----------
6,116,432
----------
HEALTHCARE--1.4%
23,900 PacifiCare Health Systems, Inc.,
Class B ............................... 1,505,700
----------
HOUSEHOLD PRODUCTS--0.8%
39,900 Blyth Industries, Inc.* ................ 915,206
----------
INSURANCE--1.0%
31,100 Conseco, Inc.** ........................ 859,137
9,200 Old Republic International Corp. ....... 205,275
----------
1,064,412
----------
INSURANCE - PROPERTY & CASUALTY--1.7%
27,900 Everest Reinsurance Holdings, Inc. ..... 976,500
10,900 First American Financial Corp. (The) ... 280,675
36,600 Reliance Group Holdings, Inc. .......... 462,075
5,700 Travelers Property Casualty Corp.,
Class A .............................. 187,744
----------
1,906,994
----------
INTEGRATED CIRCUITS--1.0%
39,600 Vitesse Semiconductor Corp.* ........... 1,074,150
----------
LEISURE & ENTERTAINMENT--1.3%
18,800 Brunswick Corp. ........................ 280,825
30,400 Hertz Corp. (The) ...................... 1,147,600
----------
1,428,425
----------
LUMBER & WOOD PRODUCTS--0.7%
37,000 Georgia-Pacific Corp., (Timber Group) .. 744,625
----------
MACHINE TOOLS--0.3%
12,200 Kennametal Inc. ........................ 316,438
----------
MANUFACTURING--2.1%
12,000 Lancaster Colony Corp. ................. 346,500
23,800 Trinity Industries, Inc. ............... 719,950
21,900 Tyco International Ltd. ................ 1,215,450
----------
2,281,900
----------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
MEDICAL INSTRUMENTS & SUPPLIES--4.6%
36,900 Arterial Vascular Engineering, Inc.*/** $1,291,500
23,800 Beckman Coulter, Inc. ................. 1,317,925
6,700 Guidant Corp. ......................... 413,725
10,800 Mallinckrodt, Inc. .................... 247,050
19,600 Safeskin Corp.* ....................... 661,500
20,400 Waters Corp.*/** ...................... 1,099,050
----------
5,030,750
----------
MEDICAL & MEDICAL SERVICES--0.8%
47,600 Integrated Health Services, Inc.** .... 922,250
----------
NETWORKING--0.3%
8,600 International Network Services* ....... 283,800
----------
OFFICE & BUSINESS EQUIPMENT--0.3%
13,800 Knoll, Inc.* .......................... 357,938
----------
OIL DOMESTIC--4.7%
23,800 Amerada Hess Corp.** .................. 1,169,175
6,100 Kerr-McGee Corp. ...................... 235,613
40,900 National Fuel Gas Co.** ............... 1,682,013
23,700 Pennzoil Co. .......................... 847,275
46,100 USX-Marathon Group** .................. 1,198,600
----------
5,132,676
----------
OIL & GAS FIELD EXPLORATION--2.7%
94,800 Global Industries Ltd.*/** ............ 888,750
37,400 MCN Energy Group, Inc.** .............. 656,838
39,500 Murphy Oil Corp. ...................... 1,394,844
----------
2,940,432
----------
PAPER & FOREST PRODUCTS--0.9%
35,400 Mead Corp. (The) ...................... 969,075
----------
PHARMACEUTICALS--0.3%
25,400 ICN Pharmaceuticals, Inc. ............. 390,525
----------
PUBLISHING - NEWSPAPERS--0.5%
42,600 Hollinger International Inc.** ........ 596,400
----------
RADIO BROADCASTING STATIONS--0.7%
12,600 Jacor Communications, Inc.*/** ........ 743,400
----------
RESTAURANTS--1.0%
37,400 CKE Restaurants, Inc.** ............... 1,159,400
----------
RETAIL - CATALOG & MAIL ORDER--0.3%
14,000 Fingerhut Companies, Inc. ............. 339,500
----------
RETAIL - SPECIALTY--1.2%
13,100 Dollar Tree Stores, Inc.* ............. 379,900
25,700 Linens 'n Things, Inc.* ............... 600,738
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
GROWTH & VALUE FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
RETAIL - SPECIALTY--(CONTINUED)
12,200 Staples, Inc.*/** ................... $ 330,925
----------
1,311,563
----------
RETAIL - SPECIALTY APPAREL --0.8%
21,300 Abercrombie & Fitch Co., Class A* ... 915,900
----------
SAVINGS & LOAN ASSOCIATION--5.2%
23,700 Bank United Corp., Class A .......... 788,025
57,400 Charter One Financial, Inc.** ....... 1,320,200
62,600 Dime Bancorp, Inc. .................. 1,189,400
5,300 Golden West Financial Corp. ......... 403,463
22,100 HUBCO, Inc. ......................... 585,650
45,800 Peoples Heritage Financial Group, Inc.** 718,487
31,370 Washington Federal, Inc. ............ 709,746
----------
5,714,971
----------
SERVICES - COMPUTER INTEGRATED SYSTEMS
DESIGN--1.3%
33,800 Comverse Technology, Inc.* .......... 1,301,300
8,200 FORE Systems, Inc.* ................. 141,450
----------
1,442,750
----------
SERVICES - EMPLOYMENT AGENCIES--1.3%
20,400 Robert Half International, Inc.* .... 979,200
24,800 Romac International, Inc.* .......... 465,000
----------
1,444,200
----------
STEEL--0.5%
54,100 LTV Corp. (The) ..................... 294,169
10,800 USX-U.S. Steel Group, Inc. .......... 226,125
----------
520,294
----------
TELECOMMUNICATIONS--7.0%
11,500 BellSouth Corp. ..................... 788,469
40,050 Century Telephone Enterprises, Inc. . 1,817,269
9,900 GTE Corp. ........................... 495,000
26,600 QUALCOMM Inc.* ...................... 1,168,738
35,600 Qwest Communications International Inc.* 890,000
36,600 SBC Communications, Inc. ............ 1,390,800
15,300 Tellabs, Inc.* ...................... 646,425
28,300 WinStar Communications, Inc.*/** .... 516,475
----------
7,713,176
----------
TEXTILES--0.6%
6,900 Mohawk Industries, Inc.* ............ 183,281
15,900 WestPoint Stevens Inc.* ............. 471,038
----------
654,319
----------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
TOBACCO--0.5%
16,600 Universal Corp. ..................... $ 522,900
------------
TRANSPORT--0.8%
17,800 CNF Transportation, Inc. ............ 556,250
10,900 Coach USA, Inc.* .................... 286,806
------------
843,056
------------
UTILITIES--4.5%
16,100 Baltimore Gas and Electric Co. ...... 496,081
80,500 Conectiv, Inc. ...................... 1,640,187
40,800 Entergy Corp.** ..................... 1,175,550
6,100 GPU, Inc.** ......................... 229,131
19,800 Northeast Utilities ................. 297,000
9,200 PECO Energy Co. ..................... 315,100
21,600 Public Service Enterprise Group, Inc. 791,100
------------
4,944,149
------------
VITAMINS & NUTRITIONAL SUPPLIES--0.8%
51,400 Rexall Sundown, Inc.*/** ............ 938,050
------------
WHOLESALE - SPECIALTY EQUIPMENT--1.0%
33,350 CHS Electronics, Inc.*/** ........... 421,044
14,800 Ingram Micro, Inc., Class A* ........ 666,000
------------
1,087,044
------------
Total Common Stocks
(Cost $135,883,285) ............... 105,841,270
------------
PRINCIPAL
AMOUNT (000's)
- --------------
SHORT-TERM INVESTMENT--3.9%
REPURCHASE AGREEMENT--3.9%
$4,374 Bear, Stearns & Co., Inc.
(Agreement dated 08/31/98 to be
repurchased at $4,374,547)
5.71%, 09/01/98
(Cost $4,373,855) (Note 6).......... 4,373,855
------------
Total Investments -- 100.0%
(Cost $140,257,140) ................ 110,215,125
------------
Liabilities in Excess of
Other Assets -- 0.0% ............. (38,929)
------------
Net Assets -- 100.0% ............... $110,176,196
============
- ------------
* Non-income producing.
** Security or a portion thereof is out on loan.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
LARGER CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
COMMON STOCKS--95.2%
AEROSPACE--4.2%
9,900 B.F. Goodrich Co. (The) .......... $ 267,919
6,500 Cordant Technologies Inc. ........ 231,562
7,800 Gulfstream Aerospace Corp.*/** ... 273,975
6,400 Sundstrand Corp. ................. 291,600
---------
1,065,056
---------
AIR TRANSPORT--0.6%
7,400 Airborne Freight Corp. ........... 144,300
---------
AIRCRAFT & PARTS--0.7%
700 Lockheed Martin Corp. ............ 61,206
1,900 Northrop Grumman Corp. ........... 120,413
---------
181,619
---------
AIRLINES--3.9%
3,200 Alaska Air Group, Inc.*/** ....... 124,600
10,200 America West Holdings Corp.* ..... 198,262
6,100 AMR Corp.* ....................... 332,450
5,500 UAL Corp.* ....................... 331,719
---------
987,031
---------
APPAREL--1.7%
11,700 Fruit of the Loom, Inc., Class A* 262,519
2,800 Tommy Hilfiger Corp.* ............ 130,900
1,500 Warnaco Group, Inc. (The), Class A 40,875
---------
434,294
---------
AUTO - TRUCKS--1.4%
6,200 General Motors Corp. ............. 358,050
---------
AUTOMOBILE PARTS & EQUIPMENT--1.2%
4,800 Cummins Engine Co., Inc. ......... 195,300
5,900 Meritor Automotive, Inc. ......... 104,725
---------
300,025
---------
BANKS--14.9%
2,100 AmSouth Bancorporation** ......... 72,187
15,200 Banc One Corp. ................... 577,600
1,300 Chase Manhattan Corp. ............ 68,900
12,800 First Union Corp. ................ 620,800
2,900 Fleet Financial Group, Inc. ...... 190,131
4,600 Imperial Bancorp ................. 94,875
13,900 KeyCorp .......................... 354,450
9,500 National City Corp. .............. 558,125
1,100 NationsBank Corp. ................ 62,700
8,000 North Fork Bancorporation, Inc. .. 152,000
8,500 Pacific Century Financial Corp. .. 125,375
400 Star Banc Corp.** ................ 21,950
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
BANKS--(CONTINUED)
6,800 TCF Financial Corp. .................. $ 150,025
8,900 Union Planters Corp. ................. 358,225
10,825 Washington Mutual, Inc.** ............ 346,400
---------
3,753,743
---------
BREWERY--0.6%
3,000 Anheuser-Busch Companies, Inc. ....... 138,375
---------
BROKERAGE--1.6%
8,781 Bear Stearns Companies Inc. (The) .... 324,348
2,100 Lehman Brothers Holdings Inc. ........ 82,687
---------
407,035
---------
BUSINESS DATA PROCESSING--0.2%
1,100 Shared Medical Systems Corp.** ....... 58,712
---------
CHEMICALS - DIVERSIFIED--1.0%
10,000 Hercules Inc. ........................ 255,625
---------
CHEMICALS - SPECIALTY--1.1%
9,000 Engelhard Corp. ...................... 165,375
8,200 W.R. Grace & Co.* .................... 105,575
---------
270,950
---------
COMPUTER COMPONENTS--0.2%
3,300 Seagate Technology, Inc.* ............ 57,750
---------
COMPUTER & OFFICE EQUIPMENT--0.1%
300 Xerox Corp. .......................... 26,344
---------
COMPUTERS, SOFTWARE & SERVICING--2.8%
7,000 Compaq Computer Corp. ................ 195,562
100 Electronic Data Systems Corp. ........ 3,350
1,400 International Business Machines Corp. 157,675
5,500 Learning Company, Inc. (The)* ........ 97,281
7,900 Reynolds & Reynolds Co. (The), Class A 99,737
3,900 Sun Microsystems, Inc.* .............. 154,537
---------
708,142
---------
CONTAINERS - METAL & GLASS--0.6%
4,300 Crown Cork & Seal Co., Inc.** ........ 140,825
---------
DRILLING OIL & GAS WELLS--0.5%
5,000 Transocean Offshore Inc. ............. 122,812
---------
ELECTRICAL EQUIPMENT--0.5%
4,200 General Cable Corp. .................. 84,000
1,900 Tektronix, Inc. ...................... 28,856
---------
112,856
---------
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
LARGER CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
ELECTRONICS--2.4%
1,500 Avnet, Inc. ............................$ 70,875
6,500 Eastman Kodak Co. ...................... 507,812
500 Honeywell Inc. ......................... 31,250
---------
609,937
---------
ENERGY--1.4%
12,900 Coastal Corp. (The) .................... 335,400
900 Equitable Resources, Inc. .............. 19,687
---------
355,087
---------
FABRICATED STRUCTURAL METAL
PRODUCTS--0.3%
1,700 Precision Castparts Corp. .............. 64,069
---------
FINANCIAL SERVICES--0.4%
2,200 Countrywide Credit Industries, Inc. .... 82,362
600 Deluxe Corp. ........................... 17,400
---------
99,762
---------
FOOD & AGRICULTURE--2.8%
7,100 ConAgra, Inc. .......................... 175,725
2,200 Corn Products International, Inc.* ..... 52,112
9,300 Flowers Industries, Inc. ............... 165,656
400 General Mills, Inc. .................... 26,175
2,700 IBP, Inc. .............................. 44,719
9,600 Interstate Bakeries Corp.** ............ 250,200
100 Smithfield Foods, Inc.* ................ 1,825
---------
716,412
---------
INSURANCE--5.0%
2,100 Aetna Inc. ............................. 126,394
5,700 Allstate Corp. ......................... 213,750
2,900 CIGNA Corp. ............................ 168,744
12,900 Conseco, Inc. .......................... 356,363
4,700 MGIC Investment Corp.* ................. 195,050
8,900 Old Republic International Corp. ....... 198,581
---------
1,258,882
---------
INSURANCE - PROPERTY & CASUALTY--2.3%
7,400 Everest Reinsurance Holdings, Inc. ..... 259,000
5,100 Reliance Group Holdings, Inc. .......... 64,388
2,500 St. Paul Companies, Inc. (The) ......... 76,406
5,400 Travelers Property Casualty Corp.,
Class A .............................. 177,863
---------
577,657
---------
LEISURE & ENTERTAINMENT--0.4%
6,700 Brunswick Corp. ........................ 100,081
---------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
LUMBER & WOOD PRODUCTS--0.3%
3,200 Georgia-Pacific Corp., (Timber Group) $ 64,400
---------
MACHINE TOOLS--0.3%
2,800 Kennametal Inc. ..................... 72,625
---------
MACHINERY--0.1%
1,000 Case Corp. .......................... 27,000
---------
MANUFACTURING--1.3%
1,100 American Standard Companies Inc. .... 43,038
2,600 Premark International, Inc. ......... 68,738
6,900 Trinity Industries, Inc. ............ 208,725
---------
320,501
---------
MEDICAL INSTRUMENTS & SUPPLIES--1.0%
3,700 Beckman Coulter, Inc. ............... 204,888
1,800 Mallinckrodt, Inc. .................. 41,175
---------
246,063
---------
MEDICAL & MEDICAL SERVICES--0.6%
8,100 Integrated Health Services, Inc.** .. 156,937
---------
OIL DOMESTIC--7.0%
8,800 Amerada Hess Corp. .................. 432,300
1,400 Helmerich & Payne, Inc.** ........... 22,750
7,700 Kerr-McGee Corp. .................... 297,413
4,200 National Fuel Gas Co. ............... 172,725
7,800 Occidental Petroleum Corp. .......... 144,300
7,700 Pennzoil Co. ........................ 275,275
16,300 USX-Marathon Group** ................ 423,800
---------
1,768,563
---------
OIL EQUIPMENT & SERVICES--0.4%
5,400 Baker Hughes Inc. ................... 98,550
---------
OIL & GAS FIELD EXPLORATION--2.4%
9,200 Apache Corp.* ....................... 210,450
5,800 MCN Energy Group, Inc.** ............ 101,863
4,400 Murphy Oil Corp. .................... 155,375
4,400 Noble Affiliates, Inc. .............. 101,750
2,100 Tidewater, Inc.** ................... 44,100
---------
613,538
---------
PAPER & FOREST PRODUCTS--1.5%
11,100 Mead Corp. (The) .................... 303,863
3,400 Westvaco Corp. ...................... 71,400
---------
375,263
---------
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
LARGER CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED)
AUGUST 31, 1998
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
PETROLEUM REFINING--0.5%
5,900 Ultramar Diamond Shamrock Corp. ..... $ 136,438
---------
PRINTING--0.8%
2,800 McGraw-Hill Companies, Inc. (The) ... 213,500
---------
PUBLISHING - NEWSPAPERS--0.4%
7,900 Hollinger International Inc.** ...... 110,600
---------
RESIDENTIAL CONSTRUCTION--0.6%
8,800 D.R. Horton, Inc.** ................. 140,800
---------
RETAIL - CATALOG & MAIL ORDER--0.3%
3,400 Fingerhut Companies, Inc. ........... 82,450
---------
RETAIL - JEWELRY STORES--0.1%
1,400 Zale Corp.* ......................... 32,200
---------
RETAIL - SPECIALTY APPAREL--1.7%
2,700 Footstar, Inc.*/** .................. 78,638
9,000 Intimate Brands, Inc.** ............. 166,500
5,400 Ross Stores, Inc. ................... 196,425
---------
441,563
---------
SAVINGS & LOAN ASSOCIATION--3.8%
11,500 Charter One Financial, Inc. ......... 264,500
13,700 Dime Bancorp, Inc. .................. 260,300
3,000 Golden West Financial Corp. ......... 228,375
2,000 HUBCO, Inc. ......................... 53,000
6,700 Peoples Heritage Financial Group, Inc. 105,106
2,150 Washington Federal, Inc. ............ 48,644
---------
959,925
---------
STEEL--0.5%
4,800 LTV Corp. (The) ..................... 26,100
5,300 USX-U.S. Steel Group, Inc. .......... 110,969
---------
137,069
---------
TELECOMMUNICATIONS--13.7%
18,000 AT&T Corp. .......................... 902,250
18,400 Bell Atlantic Corp. ................. 811,900
9,400 BellSouth Corp. ..................... 644,488
6,700 GTE Corp. ........................... 335,000
20,300 SBC Communications, Inc. ............ 771,400
---------
3,465,038
---------
- ---------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
TOBACCO--0.2%
1,200 Universal Corp. ..................... $ 37,800
----------
TRANSPORT--0.3%
2,200 CNF Transportation, Inc. ............ 68,750
----------
UTILITIES--4.6%
6,600 Baltimore Gas and Electric Co. ...... 203,363
9,600 Conectiv, Inc. ...................... 195,600
10,100 Entergy Corp. ....................... 291,006
1,100 GPU, Inc. ........................... 41,319
1,400 Northeast Utilities ................. 21,000
4,900 PECO Energy Co. ..................... 167,825
6,600 Public Service Enterprise Group, Inc. 241,725
----------
1,161,838
----------
Total Common Stocks
(Cost $30,347,714) ................ 24,036,842
----------
PRINCIPAL
AMOUNT (000's)
- --------------
SHORT-TERM INVESTMENT--3.8%
REPURCHASE AGREEMENT--3.8%
$974 Bear, Stearns & Co., Inc.
(Agreement dated 08/31/98 to be
repurchased at $973,869)
5.71%, 09/01/98
(Cost $973,715) (Note 6) ........... 973,715
-----------
Total Investments -- 99.0%
(Cost $31,321,429) ................. 25,010,557
-----------
Other Assets in Excess of
Liabilities -- 1.0% ............... 245,994
-----------
Net Assets -- 100.0% ............... $25,256,551
===========
- ------------
* Non-income producing.
** Security or a portion thereof is out on loan.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<TABLE>
<CAPTION>
MICRO CAP GROWTH GROWTH & VALUE LARGER CAP VALUE
FUND FUND FUND FUND
------------ ------------ -------------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (cost - $121,804,587,
$103,062,309, $140,257,140, $31,321,429,
respectively) ...................................... $ 99,037,890 $ 78,388,245 $110,215,125 $ 25,010,557
Cash (Note 1) ....................................... 122,475 -- -- --
Collateral received for securities loaned (Note 5) .. 29,298,595 23,933,367 19,072,529 1,535,104
Receivable for investments sold ..................... 6,720,478 1,605,707 5,267,690 1,101,228
Receivable for Fund shares sold ..................... 20,925 5,443 147,323 14,200
Dividends and interest receivable ................... 62,159 51,660 150,730 54,401
Receivable from investment adviser .................. -- -- -- 230
Prepaid expenses .................................... 20,558 19,657 28,538 1,934
------------ ------------ ------------ ------------
Total assets ....................................... 135,283,080 104,004,079 134,881,935 27,717,654
------------ ------------ ------------ ------------
LIABILITIES
Payable upon return of securities loaned (Note 5) ... 29,298,595 23,933,367 19,072,529 1,535,104
Payable for investments purchased ................... 6,077,777 1,712,264 4,308,798 783,416
Payable for Fund shares redeemed .................... 201,007 419,141 1,200,943 97,644
Accrued expenses and other liabilities .............. 104,518 99,763 123,469 44,939
Payable on open futures transactions (Note 1) ....... 334,750 -- -- --
------------ ------------ ------------ ------------
Total liabilities .................................. 36,016,647 26,164,535 24,705,739 2,461,103
------------ ------------ ------------ ------------
NET ASSETS
Capital stock, $0.001 par value ..................... 7,931 7,980 8,287 2,330
Paid-in capital ..................................... 114,561,676 104,785,180 129,300,784 31,014,993
Undistributed net investment income ................. -- -- 305,148 137,375
Accumulated net realized gain/(loss) from investments
and futures transactions, if any ................... 8,046,473 (2,279,552) 10,603,992 412,725
Net unrealized depreciation on investments and
futures transactions, if any ....................... (23,349,647) (24,674,064) (30,042,015) (6,310,872)
------------ ------------ ------------ ------------
Net assets applicable to shares outstanding ......... $ 99,266,433 $ 77,839,544 $110,176,196 $ 25,256,551
============ ============ ============ ============
Shares outstanding ..................................... 7,931,287 7,980,631 8,286,895 2,330,416
------------ ------------ ------------ ------------
Net asset value, offering and redemption
price per share ...................................... $12.52 $9.75 $13.30 $10.84
====== ===== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
MICRO CAP GROWTH GROWTH & VALUE LARGER CAP VALUE
FUND FUND FUND FUND*
------------ ------------ -------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends .................................. $ 245,451** $ 183,498 $ 1,063,296** $ 192,848
Interest ................................... 586,814 416,102 408,635 53,196
------------ ------------ ------------ ------------
832,265 599,600 1,471,931 246,044
------------ ------------ ------------ ------------
EXPENSES
Advisory fees .............................. 1,053,490 904,044 812,098 81,496
Co-Administration fees ..................... 245,815 210,944 189,726 59,666
Administrative services fees ............... 210,698 180,809 162,420 16,299
Transfer agent fees and expenses ........... 76,078 69,463 90,658 30,594
Custodian fees and expenses ................ 68,934 62,151 55,970 17,754
Printing ................................... 29,645 27,067 16,451 3,243
Federal and state registration fees ........ 16,308 17,261 16,419 20,054
Audit and legal fees ....................... 15,366 15,961 14,524 5,799
Other ...................................... 14,961 12,392 9,971 3,847
------------ ------------ ------------ ------------
Total expenses before waivers and
reimbursements ......................... 1,731,295 1,500,092 1,368,237 238,752
Less: waivers and reimbursements ......... (326,641) (294,700) (285,440) (130,083)
------------ ------------ ------------ ------------
Total expenses after waivers and
reimbursements ......................... 1,404,654 1,205,392 1,082,797 108,669
------------ ------------ ------------ ------------
Net investment income/(loss) ............... (572,389) (605,792) 389,134 137,375
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FUTURES TRANSACTIONS:
Net realized gain from:
Investments ............................... 19,251,044 7,631,010 15,859,151 411,917
Futures transactions ...................... 149,475 -- -- 808
Net change in unrealized appreciation/
(depreciation) on:
Investments ............................... (44,130,133) (39,943,640) (33,971,552) (6,310,872)
Futures transactions ...................... (582,950) -- -- --
------------ ------------ ------------ ------------
Net realized and unrealized loss on
investments and futures transactions ...... (25,312,564) (32,312,630) (18,112,401) (5,898,147)
------------ ------------ ------------ ------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................... $(25,884,953) $(32,918,422) $(17,723,267) $ (5,760,772)
============ ============ ============ ============
</TABLE>
- ------------
* Commenced operations on December 9, 1997.
** Net of foreign withholding taxes of $655 and $835, respectively.
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MICRO CAP GROWTH
FUND FUND
------------------------------ -----------------------------
FOR THE FOR THE FOR THE FOR THE
FISCAL FISCAL FISCAL FISCAL
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income/(loss) ........................... $ (572,389) $ (31,353) $ (605,792) $ (257,096)
Net realized gain from investments and
futures transactions, if any .......................... 19,400,519 9,346,125 7,631,010 10,621,079
Net change in unrealized appreciation/
(depreciation) on investments and
futures transactions, if any .......................... (44,713,083) 20,739,610 (39,943,640) 14,212,378
------------- ------------- ------------- -------------
Net increase/(decrease) in net assets
resulting from operations ............................. (25,884,953) 30,054,382 (32,918,422) 24,576,361
------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................. -- (23,429) -- (37,127)
Net realized capital gains ............................. (19,435,152) -- (19,099,345) --
------------- ------------- ------------- -------------
Total dividends and distributions to shareholders ...... (19,435,152) (23,429) (19,099,345) (37,127)
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS (NOTE 4) ............................... 2,467,039 97,988,446 12,133,413 66,428,932
------------- ------------- ------------- -------------
Total increase/(decrease) in net assets ................ (42,853,066) 128,019,399 (39,884,354) 90,968,166
NET ASSETS
Beginning of period .................................... 142,119,499 14,100,100 117,723,898 26,755,732
------------- ------------- ------------- -------------
End of period .......................................... $ 99,266,433 $ 142,119,499 $ 77,839,544 $ 117,723,898
============= ============= ============= =============
<CAPTION>
GROWTH & VALUE LARGER CAP VALUE
FUND FUND
------------------------------- ---------------------
FOR THE FOR THE FOR THE PERIOD
FISCAL FISCAL DECEMBER 9, 1997*
YEAR ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31,
1998 1997 1998
------------- ------------- -----------
<S> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income/(loss) ........................... $ 389,134 $ 192,219 $ 137,375
Net realized gain from investments and
futures transactions, if any .......................... 15,859,151 5,488,625 412,725
Net change in unrealized appreciation/
(depreciation) on investments and
futures transactions, if any .......................... (33,971,552) 3,920,436 (6,310,872)
------------- ------------- ------------
Net increase/(decrease) in net assets
resulting from operations ............................. (17,723,267) 9,601,280 (5,760,772)
------------- ------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................. (237,074) (48,450) --
Net realized capital gains ............................. (10,728,727) -- --
------------- ------------- ------------
Total dividends and distributions to shareholders ...... (10,965,801) (48,450) --
------------- ------------- ------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL
SHARE TRANSACTIONS (NOTE 4) ............................. 86,374,444 39,124,840 31,017,323
------------- ------------- ------------
Total increase/(decrease) in net assets ................ 57,685,376 48,677,670 25,256,551
NET ASSETS
Beginning of period .................................... 52,490,820 3,813,150 --
------------- ------------- ------------
End of period .......................................... $ 110,176,196(a) $ 52,490,820(b) $ 25,256,551(c)
============= ============= ============
</TABLE>
- --------
* Commencement of operations.
(a) Includes undistributed net investment income of $305,148.
(b) Includes undistributed net investment income of $153,088.
(c) Includes undistributed net investment income of $137,375.
The accompanying notes are an integral part of the financial statements.
34 & 35
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF 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
supplemental data for the respective periods. This information has been derived
from information provided in the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MICRO CAP FUND
-------------------------------------------------------
FOR THE PERIOD
FOR THE FISCAL FOR THE FISCAL JUNE 3, 1996*
YEAR ENDED YEAR ENDED THROUGH
AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of period ..... $ 18.47 $ 11.67 $ 12.00
------- -------- -------
Net investment income/(loss)(1) .......... (0.07) (0.01) 0.01
Net realized and unrealized gain/(loss) on
investments and futures transactions,
if any(2) .............................. (3.23) 6.82 (0.34)
------- -------- -------
Net increase/(decrease) in net
assets resulting from operations ....... (3.30) 6.81 (0.33)
------- -------- -------
Dividends and distributions to
shareholders from:
Net investment income .................... -- (0.01) --
Net realized capital gains ............... (2.65) -- --
------- -------- -------
Total dividends and distributions
to shareholders ........................ (2.65) (0.01) --
------- -------- -------
Net asset value, end of period ........... $ 12.52 $ 18.47 $ 11.67
======= ======== =======
Total investment return(3) ............... (20.74)% 58.41% (2.75)%
======= ======== =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) ........................ $99,266 $142,119 $14,100
Ratio of expenses to average net
assets(1)(4) ........................... 1.00% 1.00% 1.00%(5)
Ratio of net investment income/(loss)
to average net assets(1) ............... (0.41)% (0.06)% 0.73%(5)
Portfolio turnover rate .................. 408.70% 233.49% 42.92%
<CAPTION>
GROWTH FUND
------------------------------------------------------------
FOR THE PERIOD
FOR THE FISCAL FOR THE FISCAL JUNE 3, 1996*
YEAR ENDED YEAR ENDED THROUGH
AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of period ..... $ 16.29 $ 11.84 $ 12.00
------- -------- -------
Net investment income/(loss)(1) .......... (0.07) (0.04) 0.01
Net realized and unrealized gain/(loss) on
investments and futures transactions,
if any(2) .............................. (3.98) 4.50 (0.17)
------- -------- -------
Net increase/(decrease) in net
assets resulting from operations ....... (4.05) 4.46 (0.16)
------- -------- -------
Dividends and distributions to
shareholders from:
Net investment income .................... -- (0.01) --
Net realized capital gains ............... (2.49) -- --
------- -------- -------
Total dividends and distributions
to shareholders ........................ (2.49) (0.01) --
------- -------- -------
Net asset value, end of period ........... $ 9.75 $ 16.29 $ 11.84
======= ======== =======
Total investment return(3) ............... (29.03)% 37.69% (1.33)%
======= ======== =======
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ........................ $77,840 $117,724 $26,756
Ratio of expenses to average net
assets(1)(4) ........................... 1.00% 1.00% 1.00%(5)
Ratio of net investment income/(loss)
to average net assets(1) ............... (0.50)% (0.38)% 0.71%(5)
Portfolio turnover rate ................ 338.40% 266.25% 19.21%
<CAPTION>
GROWTH & VALUE FUND LARGER CAP VALUE FUND
----------------------------------------------------------- ---------------------
FOR THE PERIOD FOR THE PERIOD
FOR THE FISCAL FOR THE FISCAL JUNE 3, 1996* DECEMBER 9, 1997*
YEAR ENDED YEAR ENDED THROUGH THROUGH
AUGUST 31, 1997 AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1998
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of period ..... $ 17.16 $ 11.56 $12.00 $ 12.00
-------- ------- ------ -------
Net investment income/(loss)(1) .......... 0.05 0.08 0.03 0.06
Net realized and unrealized gain/(loss) on
investments and futures transactions,
if any(2) .............................. (1.24) 5.58 (0.47) (1.22)
-------- ------- ------ -------
Net increase/(decrease) in net
assets resulting from operations ....... (1.19) 5.66 (0.44) (1.16)
-------- ------- ------ -------
Dividends and distributions to
shareholders from:
Net investment income .................... (0.06) (0.06) -- --
Net realized capital gains ............... (2.61) -- -- --
-------- ------- ------ -------
Total dividends and distributions
to shareholders ........................ (2.67) (0.06) -- --
-------- ------- ------ -------
Net asset value, end of period ........... $ 13.30 $ 17.16 $11.56 $ 10.84
======== ======= ====== =======
Total investment return(3) ............... (8.97)% 49.11% (3.67)% (9.67)%
======== ======= ====== =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) ........................ $110,176 $52,491 $3,813 $25,257
Ratio of expenses to average net
assets(1)(4) ........................... 1.00% 1.00% 1.00%(5) 1.00%(5)
Ratio of net investment income/(loss)
to average net assets(1) ............... 0.36% 0.79% 1.89%(5) 1.26%(5)
Portfolio turnover rate .................. 341.73% 263.83% 5.25% 166.81%
</TABLE>
- -------------
* 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 each share outstanding throughout the respective
periods are not in accord with the changes in the aggregate gains and
losses on 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 for the periods ended August 31, 1998,
August 31, 1997 and August 31, 1996, respectively, would have been 1.23%,
1.45% and 3.45% for the N/I NUMERIC INVESTORS Micro Cap Fund, 1.24%, 1.40%,
and 2.62% for the N/I NUMERIC INVESTORS Growth Fund, 1.26%, 1.81% and 8.98%
for the N/I NUMERIC INVESTORS Growth & Value Fund, and 2.20% for the N/I
NUMERIC INVESTORS Larger Cap Value Fund for the period December 9, 1997
through August 31, 1998.
(5) Annualized.
The accompanying notes are an integral part of the financial statements.
36 & 37
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP 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-six investment portfolios, including
the N/I NUMERIC INVESTORS FAMILY OF FUNDS ("n/i numeric investors Family") which
consists of four diversified portfolios: N/I NUMERIC INVESTORS Micro Cap Fund
("Micro Cap Fund"), N/I NUMERIC INVESTORS Growth Fund ("Growth Fund"), N/I
NUMERIC INVESTORS Growth & Value Fund ("Growth & Value Fund") and N/I NUMERIC
INVESTORS Larger Cap Value Fund ("Larger Cap Value Fund") (each a "Fund",
collectively the "Funds").
RBB has authorized capital of thirty billion shares of common stock of which
16.27 billion are currently classified into ninety-seven classes. Each class
represents an interest in one of twenty-six investment portfolios of RBB. The
classes have been grouped into fifteen separate "families", nine of which have
begun investment operations.
PORTFOLIO VALUATION -- The net asset value of each Fund is calculated as of the
close of regular trading on the NYSE 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.(REGISTRATION MARK) (the Funds'
"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.
38
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
FINANCIAL FUTURES TRANSACTIONS -- Each Fund may invest in financial futures
contracts for hedging purposes, including conversion of cash to equity. When
entering into a futures contract, each Fund makes a deposit of an initial margin
with its custodian in a segregated account in the name of the futures broker.
Subsequent payments to or from the broker, called variation margin, are made on
a daily basis as the price of the underlying security or index fluctuates,
making the long and short positions in the futures contracts more or less
valuable. When the contracts are closed, a gain or loss is realized equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Fund's basis in the contracts.
The risks related to the use of futures contracts include: (i) the correlation
between movements in the market price of a Fund's investments (held or intended
for purchase) being hedged and in the price of the futures contract may be
imperfect; (ii) possible lack of a liquid secondary market for closing out
futures positions; (iii) the need for additional portfolio management skills and
techniques; and (iv) losses due to unanticipated market movements. Successful
use of futures by the Funds is subject to Numeric's ability to predict correctly
movements in the direction of the market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss or gain to the investor. Thus, a purchase or sale of a futures
contract may result in losses or gains in excess of the amount invested in the
contract.
As of August 31, 1998, Micro Cap Fund held 45 Russell 2000 Growth Index futures
contracts expiring on September 17, 1998. The value of such contracts on August
31, 1998 was $7,571,250 resulting in an unrealized loss of $582,950. The Micro
Cap Fund has deposited $122,475 in a segregated account, as collateral for the
futures transactions. The cash collateral is included under the caption Cash in
the Statement of Assets and Liabilities.
The Growth and Growth & Value Funds had no futures transactions during the
fiscal year ended August 31, 1998.
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. At August 31, 1998, Micro Cap Fund and Growth Fund
reclassified net investment losses of $613,618 and $877,525, respectively, to
accumulated net realized gain from investments.
U.S. FEDERAL TAX STATUS -- No provision is made for U.S. federal income taxes as
it is each Fund's intention 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. For U.S. federal income tax purposes, realized
capital losses incurred after October 31, 1997, within the fiscal year
("post-October losses"), are deemed to arise on the first day of the following
fiscal year. The Funds did not incur any post-October losses except for the
Growth Fund, which incurred and elected to defer such losses of $1,827,023.
39
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Numeric 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 fiscal year ended August 31, 1998
(unless otherwise indicated), investment advisory fees, waivers and
reimbursements of expenses were as follows:
<TABLE>
<CAPTION>
GROSS NET EXPENSE
FUND ADVISORY FEES WAIVERS ADVISORY FEES REIMBURSEMENT
- ---- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Micro Cap Fund ........... $1,053,490 $ (140,740) $ 912,750 --
Growth Fund .............. 904,044 (121,746) 782,298 --
Growth & Value Fund ...... 812,098 (136,503) 675,595 --
Larger Cap Value Fund*.... 81,496 (46,328) 35,168 $ (30,869)
</TABLE>
- ----------
*Commenced operations on December 9, 1997.
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 Fund. 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% on the first $150 million
and 0.02% of each Fund's average daily net assets thereafter.
For the fiscal year ended August 31, 1998 (unless otherwise indicated), PFPC, at
their discretion, voluntarily agreed to waive a portion of their
co-administration fees for each Fund. During such period, PFPC's
co-administration fees and related waivers were as follows:
<TABLE>
<CAPTION>
PFPC GROSS PFPC PFPC NET
FUND CO-ADMINISTRATION FEES WAIVERS CO-ADMINISTRATION FEES
- ---- ---------------------- ------- ----------------------
<S> <C> <C> <C>
Micro Cap Fund ............. $175,582 $(14,047) $161,535
Growth Fund ................ 150,674 (12,054) 138,620
Growth & Value Fund ........ 135,701 (11,179) 124,522
Larger Cap Value Fund* ..... 54,233 (27,119) 27,114
</TABLE>
- --------
* Commenced operations on December 9, 1997.
40
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In addition, PFPC serves as each Fund's transfer and dividend disbursing agent.
PFPC, at its discretion, voluntarily agreed to waive a portion of their transfer
agency fees for each Fund. For the fiscal year ended August 31, 1998 (unless
otherwise indicated), transfer agency fees and waivers were as follows:
GROSS NET
TRANSFER AGENCY TRANSFER AGENCY
FUND FEES WAIVERS FEES
- ---- --------------- -------- ---------------
Micro Cap Fund.............. $76,078 -- $76,078
Growth Fund................. 69,463 $(13,500) 55,963
Growth & Value Fund......... 90,658 (7,822) 82,836
Larger Cap Value Fund*...... 30,594 (12,728) 17,866
- -----------
* Commenced operations on December 9, 1997.
Provident Distributors, Inc. ("PDI") provides certain administrative services to
each Fund. Prior to May 29, 1998 Counsellors Funds Services, Inc. ("CFS"), a
wholly owned subsidiary of Warburg Pincus Counsellors, Inc. provided these
services. As compensation for such administrative services, PDI is entitled to
receive a monthly fee equal to an annual rate of 0.15% of each Fund's average
daily net assets.
During the fiscal year ended August 31, 1998 (unless otherwise indicated), CFS
and PDI have, at their discretion, voluntarily agreed to waive a portion of
their administrative services fees for each Fund. For the fiscal year ended
August 31, 1998, administrative services fees and waivers were as follows:
GROSS
ADMINISTRATIVE NET ADMINISTRATIVE
FUND SERVICES FEES WAIVERS SERVICES FEES
- ---- -------------- --------- ------------------
Micro Cap Fund.................. $210,698 $(171,854) $38,844
Growth Fund..................... 180,809 (147,400) 33,409
Growth & Value Fund............. 162,420 (129,936) 32,484
Larger Cap Value Fund*.......... 16,299 (13,039) 3,260
- -----------
* Commenced operations on December 9, 1997.
These fees are computed daily and paid monthly.
3. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the costs of securities owned at August
31, 1998 were $122,277,565, $103,548,580, $140,618,553 and $31,450,299 for Micro
Cap Fund, Growth Fund, Growth & Value Fund and Larger Cap Value Fund,
respectively. Accordingly, the net unrealized depreciation of investments are as
follows:
GROSS GROSS
FUND APPRECIATION DEPRECIATION NET DEPRECIATION
- ---- ------------ ------------ ----------------
Micro Cap Fund................ $1,416,422 $(24,656,097) $(23,239,675)
Growth Fund................... 805,170 (25,965,505) (25,160,335)
Growth & Value Fund........... 657,843 (31,061,271) (30,403,428)
Larger Cap Value Fund......... 75,041 (6,514,783) (6,439,742)
41
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the fiscal year ended August 31, 1998 (unless otherwise indicated),
aggregate purchases and sales of investment securities (excluding short-term
investments) were as follows:
FUND PURCHASES SALES
- ---- ------------ ------------
Micro Cap Fund ..................... $519,350,245 $539,371,905
Growth Fund ........................ 378,866,275 382,629,716
Growth & Value Fund ................ 413,846,574 340,548,910
Larger Cap Value Fund* ............. 53,176,709 23,243,079
- ----------
* Commenced operations on December 9, 1997.
4. CAPITAL SHARE TRANSACTIONS
As of August 31, 1998 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:
MICRO CAP FUND
------------------------------------------------------------
FOR THE FOR THE
FISCAL YEAR ENDED FISCAL YEAR ENDED
AUGUST 31, 1998 AUGUST 31, 1997
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sales ......... 1,392,858 $ 25,611,592 7,698,447 $116,335,001
Repurchases ... (2,358,739) (41,957,147) (1,214,056) (18,368,326)
Reinvestments . 1,202,851 18,812,594 1,561 21,771
---------- ------------ ---------- ------------
Net increase .. 236,970 $ 2,467,039 6,485,952 $ 97,988,446
========== ============ ========== ============
GROWTH FUND
-----------------------------------------------------------
For the For the
Fiscal Year Ended Fiscal Year Ended
August 31, 1998 August 31, 1997
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sales .......... 1,479,501 $ 22,184,785 6,432,891 $ 85,903,977
Repurchases .... (2,118,359) (28,742,059) (1,468,234) (19,510,716)
Reinvestments .. 1,392,749 18,690,687 2,669 35,671
---------- ------------ ---------- ------------
Net increase ... 753,891 $ 12,133,413 4,967,326 $ 66,428,932
========== ============ ========== ============
42
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
GROWTH & VALUE FUND
------------------------------------------------------------
For the For the
Fiscal Year Ended Fiscal Year Ended
August 31, 1998 August 31, 1997
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
Sales ......... 6,593,529 $109,780,075 3,065,874 $44,012,804
Repurchases ... (2,051,495) (33,888,666) (339,841) (4,933,777)
Reinvestments . 685,614 10,483,035 3,427 45,813
---------- ------------ --------- -----------
Net increase .. 5,227,648 $ 86,374,444 2,729,460 $39,124,840
========== ============ ========= ===========
LARGER CAP VALUE FUND
-------------------------
For the Period
December 9, 1997* through
August 31, 1998
-------------------------
SHARES AMOUNT
--------- -----------
Sales ......... 2,499,708 $33,270,205
Repurchases ... (169,292) (2,252,882)
--------- -----------
Net increase .. 2,330,416 $31,017,323
========= ===========
- -----------
* 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 value of cash collateral and indemnification received at August
31, 1998, was as follows:
VALUE OF SECURITIES VALUE OF COLLATERAL
FUND ON LOAN AND INDEMNIFICATION
- ---- ------------------- -------------------
Micro Cap Fund ..................... $25,633,344 $29,298,595
Growth Fund ........................ 21,405,371 23,933,367
Growth & Value Fund ................ 17,211,400 19,072,529
Larger Cap Value Fund .............. 1,388,342 1,535,104
43
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
The cash collateral was reinvested in repurchase agreements which were in turn
collateralized by various U.S. Government Obligations.
During the fiscal year ended August 31, 1998, income from securities lending was
$74,995, $80,472 and $34,314 for Micro Cap Fund, Growth Fund and Growth & Value
Fund, respectively. During the period from December 9, 1997 (commencement of
operations) through August 31,1998, income from securities lending was $1,568
for Larger Cap Value Fund. Such income from securities lending is included under
the caption Interest in the Statement of Operations.
6. COLLATERAL FOR REPURCHASE AGREEMENTS
Listed below is the collateral associated with the repurchase agreements with
Bear, Stearns & Co. Inc., outstanding at August 31, 1998:
<TABLE>
<CAPTION>
MICRO CAP FUND
------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT ACCRUED TOTAL
ISSUER (000'S) MATURITY INTEREST RATE MARKET VALUE INTEREST VALUE
- ---- --------- -------- ------------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
United States Treasury Bill...... 440 11/27/98 -- $ 434,878 -- $ 434,878
United States Treasury Bill...... 9,000 11/19/98 -- 8,904,420 -- 8,904,420
United States Treasury Bill...... 1,700 11/05/98 -- 1,685,295 -- 1,685,295
---------- -----------
Total........................ $11,024,593 $11,024,593
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT ACCRUED TOTAL
ISSUER (000'S) MATURITY INTEREST RATE MARKET VALUE INTEREST VALUE
- ---- --------- -------- ------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States Treasury Bill...... 2,965 11/05/98 -- $2,939,353 -- $2,939,353
United States Treasury Bill...... 500 11/12/98 -- 495,125 -- 495,125
United States Treasury Notes..... 1,850 11/15/26 -- 403,541 -- 403,541
---------- ----------
Total........................ $3,838,019 $3,838,019
========== ==========
</TABLE>
<TABLE>
<CAPTION>
GROWTH & VALUE FUND
------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT ACCRUED TOTAL
ISSUER (000'S) MATURITY INTEREST RATE MARKET VALUE INTEREST VALUE
- ---- --------- -------- ------------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
United States Treasury Notes...... 4,350 11/15/99 5.875% $4,387,367 $75,696 $4,463,063
</TABLE>
<TABLE>
<CAPTION>
LARGER CAP VALUE FUND
------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT ACCRUED TOTAL
ISSUER (000'S) MATURITY INTEREST RATE MARKET VALUE INTEREST VALUE
- ---- --------- -------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
United States Treasury Notes..... 970 11/15/99 5.875% $978,332 $16,879 $995,211
</TABLE>
44
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE RBB FUND, INC.:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio of investments, of the N/I NUMERIC INVESTORS Micro Cap Fund, n/i
numeric investors Growth Fund, N/I NUMERIC INVESTORS Growth & Value Fund, and
N/I NUMERIC INVESTORS Larger Cap Value Fund of The RBB Fund, Inc. (the "Fund"),
and the related statements of operations and changes in net assets, and the
financial highlights present fairly, in all material respects, the financial
position of the N/I NUMERIC INVESTORS Micro Cap Fund, N/I NUMERIC INVESTORS
Growth Fund, N/I NUMERIC INVESTORS Growth & Value Fund, and N/I NUMERIC
INVESTORS Larger Cap Value Fund of The RBB Fund, Inc. at August 31, 1998, the
results of its operations for the year (or period) then ended, changes in its
net assets for each of the two years (or periods) in the period then ended, and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 2, 1998
45
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
MICRO CAP FUND
GROWTH FUND
GROWTH & VALUE FUND
LARGER CAP 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, 1998) 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, 1998, the following dividends and distributions per
share were paid by each of the Funds:
<TABLE>
<CAPTION>
ORDINARY INCOME (39.6%)
-----------------------------
NET INVESTMENT SHORT-TERM MID-TERM LONG-TERM
FUND INCOME GAINS GAINS (28%) GAINS (20%)
- ---- -------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
n/i Micro Cap Fund ............. -- $2.608 -- $0.039
n/i Growth Fund ................ -- 2.327 $0.105 0.060
n/i Growth &Value Fund ......... $0.058 2.610 -- --
n/i Larger Cap Value Fund ...... -- -- -- --
</TABLE>
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 1997. Because each
Fund's fiscal year is not the calendar year, another notification will be sent
with respect to calendar year 1998. The second notification, which will reflect
the amount, if any 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 1999.
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.
46
<PAGE>
(LOGO)
N/I NUMERIC INVESTORS
FAMILY OF FUNDS
One Memorial Drive
Cambridge, MA 02142
1-800-numeric [686-3742]
http://www.numeric.com
INVESTMENT ADVISER
Numeric Investors L.P.(REGISTRATION MARK)
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
Provident Distributors, Inc.
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428
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
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103
COUNSEL
Drinker Biddle & Reath LLP
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.
