<PAGE>
ANNUAL REPORT
*Not yet available for sale to investors
[LOGO]
Retirement System
Fund Inc.
Core Equity Fund
Emerging Growth Equity Fund
Intermediate-Term Fixed-Income Fund
Money Market Fund
Value Equity Fund*
International Equity Fund*
Actively Managed Fixed-Income Fund*
1996
Broker/Dealer
[LOGO]
RETIREMENT SYSTEM
Distributors Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------
<TABLE>
<S> <C>
President's Message...................................................... 1
Investment Review........................................................ 2
Financial Statements of Investment Funds................................. 10
Core Equity Fund..................................................... 10
Emerging Growth Equity Fund.......................................... 14
Intermediate-Term Fixed-Income Fund.................................. 19
Money Market Fund.................................................... 22
Notes to Financial Statements............................................ 25
Independent Auditor's Report............................................. 35
Officers, Consultants, Investment Managers and Custodians................ 36
Board of Directors....................................................... 37
</TABLE>
Note: Investors currently may purchase shares of the Core Equity Fund, the
Emerging Growth Equity Fund, the Intermediate-Term Fixed-Income Fund and the
Money Market Fund. Shares of the Value Equity Fund, the International Equity
Fund and the Actively Managed Fixed-Income Fund, as described in Retirement
System Fund Inc.'s Prospectus, are not yet available for sale to investors.
<PAGE>
PRESIDENT'S MESSAGE
To Our Shareholders:
While the proliferation of mutual funds makes it hard to stand
out from the crowd, nothing distinguishes a fund like
investment performance. We are understandably very proud of the
investment performances of the funds that make up Retirement
System Fund Inc., and invite you to review the specific details
of their performances in the Investment Review section of this
Annual Report, beginning on page two.
For example, for the fiscal year ended September 30, 1996,
both equity funds achieved double digit returns. They
outperformed their respective Lipper benchmarks, as well as
their market index benchmarks, by substantial margins. In fact,
for every time period covered in this Annual Report, the equity
funds outperformed their benchmarks.
On other fronts, the growth of assets under Fund management
has been another positive development during the past fiscal
year. Assets, representing the investments of non-qualified
pension plans, individuals and corporations, have increased by
more than 50%, to $23 million at September 30, 1996.
On behalf of the Board of Directors, I'd like to thank you
for choosing Retirement System Fund Inc. to help meet your
investment needs.
Sincerely,
[SIGNATURE]
William Dannecker
President and Director
November 15, 1996
1
<PAGE>
INVESTMENT REVIEW
CORE EQUITY FUND
The Core Equity Fund seeks capital appreciation over the long
term. The Fund invests in a broadly diversified group of
high-quality, medium-to-large companies which the manager,
Retirement System Investors Inc., believes to be reasonably
valued relative to their earnings growth potential.
MARKET ENVIRONMENT
Moderate economic growth, low inflation, benign interest rates,
heavy corporate stock repurchases and huge cash inflow by
mutual fund investors propelled the stock market in the fiscal
year ended September 30, 1996.
Corporate earnings and profit margin improvements benefited
from productivity gains from technological innovations,
downsizing of costs and the improved competitive position of
U.S. companies.
At the end of the reporting period, the market's valuation
at 16 times 1997 earnings estimates (i.e., price-to-earnings
ratio) was moderately above past averages, but within
historical ranges.
The Core Equity Fund's above-market performance (see below)
was positively influenced by the Fund's focus and concentration
in large growth companies, which performed well when compared
to smaller growth or value issues. The Fund's largest market
sector holdings in technology and capital goods enhanced its
performance. Also, performance benefited from the lower than
market weighting in the weak performing utilities, raw
materials and consumer cyclical groups.
The major portfolio changes during the past year involved
increasing weightings in financials and modestly in energy.
Technology holdings were reduced, but still remained relatively
large, at 28% of total assets. Moreover, utilities were reduced
to minimal levels.
The Fund's diversification and stock selections reflect the
portfolio manager's focus on such dominant investment themes as
growing globalization of demand for goods, technological
innovations, productivity, life style enhancements and
demographic factors.
PERFORMANCE RESULTS
The Core Equity Fund continued its strong performance in fiscal
year 1996. For the one-year period ended September 30, 1996,
the Fund posted a return of 22.21%, outpacing the 20.36% return
of the S&P 500 (AN UNMANAGED REPRESENTATIVE INDEX OF THE BROAD
EQUITY MARKET; ALL MARKET INDEX RESULTS THAT APPEAR IN THIS
REPORT REPRESENT GROSS RETURNS, SINCE EXPENSES ARE NOT
APPLICABLE) and the 17.24% return of the Lipper Growth & Income
Funds Average for the same period. This result placed the Core
Equity Fund in the top 11% of Lipper's Growth and Income Funds
grouping of mutual funds. (The Fund ranked 53rd out of 503
funds; rankings are based on total returns.)
2
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CORE EQUITY FUND VS S&P 500
<S> <C> <C>
5/31/91 10,000.00 10,000.00
9/30/91 10,275.32 10,057.75
9/30/92 11,109.10 11,169.99
9/30/93 13,263.17 12,622.89
9/30/94 14,253.45 13,086.98
9/30/95 19,276.11 16,975.80
9/30/96 23,556.65 20,431.69
Core Eq-
uity:
$23,557
S&P 500:
$20,432
GROWTH OF
$10,000
Core Equity S&P 500
1 year $12,221 $12,036
5 1/3 year $23,557 $20,432
CUMULA-
TIVE RE-
TURNS
1 year 22.21% 20.36%
5 1/3 year 135.57% 104.32%
AVERAGE
ANNUAL
RETURNS
1 year 22.21% 20.36%
5 1/3 year 17.43% 14.34%
</TABLE>
The Core Equity Fund also outperformed its Lipper benchmark
and the S&P 500 for all periods shown in this report. For the
five-year period ended September 30, 1996, the Core Fund
achieved an annual return of 18.05%, placing it among the top
3% of the Lipper Universe of Growth & Income Mutual Funds (5th
out of 204 funds), which reflected an average return of 13.79%
per year for the same period. For this period the Core also
outperformed the S&P 500 by 282 basis points per year, with an
annualized return of 18.05% versus 15.23% for the S&P 500. For
the period since inception (June 1, 1991 through September 30,
1996), the Core Fund provided a return of 17.43% per year,
versus 14.34% for the S&P 500 and 13.16% for its Lipper
benchmark for the same period--a top 2% ranking in the Lipper
Growth and Income Funds grouping (4th out of 200 funds). Past
performance is not a guarantee of future results.
CORE EQUITY FUND VS LIPPER GROWTH AND INCOME FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
------------------------
Since
1 Year 5 Years Inception
---------- ---------- ------------
<S> <C> <C> <C>
CORE EQUITY FUND(1) 22.21% 18.05% 17.43%(2)
Lipper Growth & Income Funds Avg.(3) 17.24 13.79 13.16
</TABLE>
1.All performance results shown are net of management fees and
all related expenses.
2.Covers the period from 6/1/91 through 9/30/96.
3.Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index and
are net of all expenses other than sales charges and
redemption fees.
- --------------------------------------------------------------------------------
3
<PAGE>
EMERGING GROWTH EQUITY FUND
The Emerging Growth Equity Fund, a fund that has above-average
volatility, seeks capital appreciation through investment in
quality emerging growth companies with superior growth and
financial characteristics and attractive stock market
valuations. Managed by The Putnam Advisory Company, Inc.
("Putnam"), the Fund acquires growth stocks of smaller
companies--those with market capitalizations generally between
$50 million and $750 million (at time of purchase). Companies
are evaluated according to a number of fundamental criteria
such as above-average earnings growth, above-average return on
equity, and low debt to total capitalization, in order to
identify super-achieving companies. These companies are then
screened using such valuation measures as price/earnings,
price/book and market capitalization/revenues, to determine
those stocks that are attractively priced. A rigorous buy, hold
and sell discipline is then applied.
MARKET ENVIRONMENT
For the one-year period ended September 30, 1996, economic
growth, as measured by the Gross Domestic Product ("GDP"),
started in a lackluster way at 0.5%, annualized for the fourth
quarter, 1995. During the next two quarters, however, the
economy gained momentum (GDP growing at 2.3%, annualized, and
4.7%, annualized, respectively), but reverted to slow growth
during the most recent quarter. The domestic equity markets
reflected respectable double digit returns as corporate
earnings growth continued to show solid gains and inflation
remained rather stable (3% level for this 12-month period).
This occurred even though interest rates encountered a high
level of volatility as the underlying strength of the economy
was in question for much of 1996. Corporate earnings have
benefited from productivity gains and from technological
innovations, downsizing of costs and the improved competitive
position of U.S. companies. In such an environment, investor
confidence remained very strong and this was a period in which
large capitalization growth stocks and cyclically oriented
issues, for the most part, turned in the best results for the
year.
Small capitalization companies (as represented by the
Russell 2000 Index, a representative index for this grouping)
produced a return of 13.13% for the one year ended September
30, 1996. (Most of the return was forthcoming during the nine
months ended June 30, 1996. The recent quarter return of 0.34%
was significantly influenced by the magnitude of the stock
market correction in July, when the Russell 2000 Index declined
8.73%, about double that of the broad equity market). Although
a respectable result for this index, its return was 723 basis
points under the 20.36% return of the S&P 500, the broad U.S.
equity market index. (For fiscal year 1995, the Russell 2000
Index returned 23.36%, but also trailed the S&P 500 return of
29.72%, by 636 basis points).
The Emerging Growth Equity Fund's results (see page five)
over the past fiscal year benefited from the manager's
diversified approach and the large number of holdings (173 at
September 30, 1996), as many of the stocks held, met or
exceeded earnings and growth expectations. In addition, the
consumer and business services sector was the most consistent
positive contributor to performance throughout the
4
<PAGE>
fiscal year. Within this broad-based sector, radio, outdoor
advertising, teleservices and temporary staffing were the
leaders. Technology holdings were gradually reduced throughout
the year, with many of the current holdings being information
technology consulting companies, which are higher confidence,
less volatile growth technology companies. At September 30,
1996, the top three sectors for Putnam were consumer cyclicals,
consumer staples and technology.
PERFORMANCE RESULTS
For the one-year period ended September 30, 1996, the Emerging
Growth Equity Fund posted an outstanding return of 42.07%,
exceeding the 13.13% return of the Russell 2000 Index by nearly
29 percentage points, and outperforming the 18.40% return of
the Lipper Small Company Growth Funds Average (a representative
benchmark) by more than 23 percentage points. This one-year
return placed this Fund among the top 5% of mutual funds in the
Lipper Small Company Growth Funds grouping (17th out of 349
funds; rankings are based on total return).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING GROWTH EQUITY FUND VS RUSSELL 2000 INDEX
<S> <C> <C>
5/31/91 10,000.00
9/30/91 10,518.96 10,190.19
9/30/92 11,970.97 11,100.99
9/30/93 16,526.29 14,781.18
9/30/94 18,491.34 15,175.64
9/30/95 25,740.83 18,723.90
9/30/96 36,571.09 21,182.85
Emerging Growth
Equity: $36,571
Russell 2000:
$21,183
GROWTH OF
$10,000
Emerging Growth Equity Russell 2000
1 year $14,207 $11,313
5 1/3 year $36,571 $21,183
CUMULATIVE
RETURNS
1 year 42.07% 13.13%
5 1/3 year 265.71% 111.83%
AVERAGE ANNUAL
RETURNS
1 year 42.07% 13.13%
5 1/3 year 27.52% 15.11%
</TABLE>
For the five-year period ended September 30, 1996, the
Fund's average return per year was 28.30%, well above the
17.08% return of its Lipper benchmark. This performance placed
the Fund in the top 3% (2nd out of 94 funds; rankings based on
total returns) of the Lipper Universe of Small Company Growth
Mutual Funds. For the period since inception (June 1, 1991
through September 30, 1996) the Emerging Growth Fund achieved
an annualized return of 27.52% versus the 17.10% return by the
Lipper Small Company Growth Funds Average, and the 15.11%
return of the Russell 2000 Index. For this period, the Fund
ranked in the top 4% of its Lipper grouping (3rd out of 88
funds). Past performance is not a guarantee of future results.
5
<PAGE>
EMERGING GROWTH EQUITY FUND VS LIPPER SMALL COMPANY GROWTH
FUNDS AVG.
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
------------------------
Since
1 Year 5 Years Inception
---------- ---------- ------------
<S> <C> <C> <C>
EMERGING GROWTH EQUITY FUND(1) 42.07% 28.30% 27.52%(2)
Lipper Small Company Growth Funds
Avg.(3) 18.40 17.08 17.10
</TABLE>
1.All performance results shown are net of management fees and
all related expenses.
2.Covers the period from 6/1/91 through 9/30/96.
3.Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index and
are net of all expenses other than sales charges and
redemption fees.
- --------------------------------------------------------------------------------
INTERMEDIATE-TERM FIXED-INCOME FUND
The Intermediate-Term Fixed-Income Fund, managed by Retirement
System Investors Inc., invests in high quality fixed-income
securities that mature within ten years or have expected
average lives of ten years or less. At least 65% of the
holdings in the Fund are in U.S. Government or agency issues.
MARKET ENVIRONMENT
The environment for fixed-income investors became less
favorable during the fiscal year ended September 30, 1996, and
interest rates in the intermediate and longer maturities rose
to end the year at higher levels. Last year's bond market rally
continued through the final quarter of 1995, but was reversed
early in 1996 when investors perceived that the economy was
regaining strength, and that Congress' plans to reduce
government spending and the budget deficit would be
unsuccessful. The 30-year Treasury ended the September fiscal
year at 6.9% versus 6.5% the year before; the ten-year Treasury
rose to 6.7% from 6.2%; the five year Treasury rose to 6.5%
from 6.0%; and the two year Treasury increased to 6.1% from
5.8%. Interest rates were volatile during the year and ranged
from lows in January of 5.95% for the 30-year Treasury and
5.52% for the ten-year Treasury to highs in July of 7.19% for
the Bond and 7.06% for the Note.
The performance of fixed-income investments varied
substantially with duration in fiscal 1996. Rising rates and a
steepening yield curve reduced prices and total return as
investors extended out on the curve. The yield spread between
the three-month Treasury bill and the 30-year bond widened to
176 basis points at the end of fiscal 1996, from 109 basis
points the year before. Short interest rates moved lower in the
last quarter of 1995 and early 1996, as the Federal Reserve cut
the Fed Funds Rate in several steps to 5.25%, where it has held
since January. Within fixed-income sectors, long duration
Governments and non-callable corporates underperformed
mortgages and other callable issues in fiscal 1996.
The Fund's average duration began the year at 2.8 years and
was progressively raised to 3.8 years by February, before
drifting back to 3.0 years at September 30,
6
<PAGE>
1996. This contrasted with a relatively steady duration of 3.0
years during the fiscal year for the Lehman Brothers
Government-Intermediate Bond Index. The Fund's performance was
adversely affected by its greater than average duration during
the rising interest rate environment in the first half of 1996.
The Fund maintained its emphasis on high-quality,
fixed-income investments in fiscal year 1996. At the end of the
year, 100% of holdings were in "AAA" securities consisting of
U.S. Treasury and Federal agency notes and agency mortgage
issues. All Fund holdings must have a quality rating of "A" or
better.
PERFORMANCE RESULTS
The Fund's return of 3.82% for the one-year period ended
September 30, 1996 trailed the return of the Lehman Brothers
Government-Intermediate Bond Index of 5.10% and the Lipper
Short-Intermediate (one to five years maturity) U.S. Government
Funds Average of 4.41% for the same period. Over the longer
period of five years ended September 30, 1996, the Fund posted
an annualized return of 6.40% versus the market benchmark's
return of 6.75% per year. For this period the Lipper benchmark
achieved an annualized return of 5.83%. For the period since
inception (June 1, 1991 through September 30, 1996), the Fund
outpaced its Lipper benchmark--the Lipper Short-Intermediate
(one to five years maturity) U.S. Government Funds Average--by
70 basis points per year with an annualized return of 7.08%,
compared to a return of 6.38% for the benchmark. This
performance placed the Fund in the top 12% of its Lipper
grouping (3rd out of 26 funds). (Rankings are based on total
returns.) Past performance is not a guarantee of future
results.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERMEDIATE-TERM FIXED- LEHMAN BROTHERS GOVERNMENT-
<S> <C> <C>
Income Fund vs Intermediate
5/31/91 10,000.00 10,000.00
9/30/91 10,563.21 10,483.38
9/30/92 12,026.79 11,789.56
9/30/93 13,046.05 12,691.20
9/30/94 12,655.71 12,500.75
9/30/95 13,875.52 13,826.79
9/30/96 14,405.01 14,532.25
Interme-
diate-
Term:
$14,405
Lehman
Brothers:
$14,532
GROWTH OF
$10,000
Intermediate-Term LB Govt't-Inter.
Fixed-Income Bond Index
1 year $10,382 $10,510
5 1/3 year $14,405 $14,532
CUMULA-
TIVE RE-
TURNS
1 year 3.82% 5.10%
5 1/3 year 44.05% 45.32%
AVERAGE
ANNUAL
RETURNS
1 year 3.82% 5.10%
5 1/3 year 7.08% 7.26%
</TABLE>
7
<PAGE>
INTERMEDIATE-TERM FIXED-INCOME FUND VS LIPPER
SHORT-INTERMEDIATE
(1 TO 5 YEARS MATURITY) U.S. GOVERNMENT FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
--------------------------
Since
1 Year 5 Years Inception
---------- ----------- -------------
<S> <C> <C> <C>
INTERMEDIATE-TERM FIXED-INCOME FUND(1) 3.82% 6.40% 7.08%(2)
Lipper Short-Intermediate (1 to 5 yrs.
maturity) U.S. Government Funds Avg.(3) 4.41 5.83 6.38
</TABLE>
1.All performance results shown are net of management fees and
all related expenses.
2.Covers the period from 6/1/91 through 9/30/96.
3.Lipper Analytical Services is an independent reporting
service that measures the performance of most U.S. mutual
funds. The performance results reflect an unmanaged index and
are net of all expenses other than sales charges and
redemption fees.
- --------------------------------------------------------------------------------
MONEY MARKET FUND
The objective of the Money Market Fund is to achieve high
current interest income while maintaining liquidity, stability
of principal and high-quality holdings. Average maturity of
portfolio holdings may not exceed 90 days. As a money market
fund, it strives to maintain a stable unit value of $1.00,
while the yield fluctuates with the market. This Fund is
managed by Retirement System Investors Inc.
MARKET ENVIRONMENT
The Fund continued to maintain a conservative posture in fiscal
1996 and was principally invested in discount Federal agency
notes of short maturities. Average maturity began the fiscal
year at 26 days, extended to 58 days in April, 1996, then
declined to 36 days at the end of September, 1996. The Fund's
benchmark, the Donoghue All-Taxable Money Funds Average, began
the fiscal year at 54 days and ended the fiscal year at 51
days.
PERFORMANCE RESULTS
For the one-year period ended September 30, 1996, the Money
Market Fund posted a return of 5.19%, comparing favorably to
the Lipper Retail Money Market Funds Average return of 4.89%
and the Donoghue All-Taxable Money Funds average of 5.05% for
the same period. The 90-Day U.S. Treasury Bill Index (an
unmanaged index which provides a representative proxy for
short-term money market instruments) returned 5.10% for this
period.
The Fund achieved a respectable five-year average return of
4.01%, outpacing the Lipper Retail Money Market Fund Average of
3.95% per annum and keeping in-line with the Donoghue Average
annual return of 4.05%. (The 90-Day U.S. Treasury Bill Index
returned 4.30% per year for the period.)
Since inception (April 1, 1991 through September 30, 1996),
the Fund achieved an annualized return of 4.13% versus 4.10%
per year for the Lipper Average and a
8
<PAGE>
4.19% annualized return for the Donoghue Average. For this
period, the market result, as measured by the 90-Day U.S.
Treasury Bill Index, was 4.42%. Past performance is not a
guarantee of future results.
MONEY MARKET FUND VS DONOGHUE ALL TAXABLE MONEY FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
--------------------------
Since
1 Year 5 Years Inception
---------- ----------- -------------
<S> <C> <C> <C>
MONEY MARKET FUND(1) 5.19% 4.01% 4.13%(2)
Donoghue All Taxable Money Fund Avg.(3) 5.05 4.05 4.19
Lipper Retail Money Market Funds
Average(4) 4.89 3.95 4.10
</TABLE>
1.All performance results shown are net of management fees and
all related expenses. Investment in the Money Market Fund is
neither insured nor guaranteed by the U.S. Government and
there is no assurance that the Fund will maintain a steady
net asset value of $1.00 per share.
2.Covers the period from 4/1/91 through 9/30/96.
3.Reported by the Donoghue Money Fund Reporting Service. The
performance results reflect an unmanaged index and are net,
since expenses are applicable.
4.Lipper Analytical Services is an independent reporting
service that measures performance of most U.S. mutual funds.
The performance results reflect an unmanaged index and are
net of all expenses other than sales charges and redemption
fees.
- --------------------------------------------------------------------------------
9
<PAGE>
FINANCIAL STATEMENTS OF INVESTMENT FUNDS
CORE EQUITY FUND
Statement of Investments September 30, 1996
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ----------
<C> <S> <C> <C>
COMMON STOCKS 87.8%
AEROSPACE AND DEFENSE 1.9%
1,900 Lockheed Martin Corp. $ 171,238
----------
AUTOMOBILES 0.5%
1,640 Chrysler Corporation 46,945
----------
BANKING 6.5%
2,300 Bankamerica Corp. 188,888
2,576 Chase Manhattan Corp. 206,402
2,000 Citicorp 181,250
----------
576,540
----------
BUILDING PRODUCTS 2.1%
3,000 Armstrong World Industries Inc. 187,125
----------
CHEMICALS 2.9%
2,900 E.I. Du Pont De Nemours & Company 255,925
----------
COMMERCIAL SERVICES 0.5%
1,300 Robert Half International* 47,938
----------
DRUG AND HEALTH CARE 6.4%
5,800 Johnson & Johnson 297,250
3,400 Pfizer Inc. 269,025
----------
566,275
----------
ELECTRONICS AND ELECTRICAL 18.3%
2,400 Cisco Systems Inc.* 148,800
3,000 Electronic Data Systems Corp. 184,125
4,400 Emerson Electric Company 396,550
4,600 General Electric Company 418,600
5,200 Hewlett Packard Corp. 253,500
2,300 Intel Corp. 219,363
----------
1,620,938
----------
ENERGY 5.4%
2,500 Dresser Industries Inc. 74,375
3,600 Exxon Corp. 299,700
200 Royal Dutch Petroleum Company 31,225
800 Texaco Inc. 73,600
----------
478,900
----------
ENGINEERING AND CONSTRUCTION 2.9%
4,200 Fluor Corp. 258,300
----------
FINANCIAL SERVICES 5.1%
7,900 Federal National Mortgage Association 275,513
1,100 Morgan (J.P.) & Company Inc. 97,763
2,200 Sunamerica, Inc. 75,900
----------
449,176
----------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Investments September
30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ----------
<C> <S> <C> <C>
FOOD AND SERVICES 1.2%
2,400 Dole Food Company $ 100,800
----------
HOUSEHOLD PRODUCTS 0.7%
1,500 Black & Decker Corp. 62,250
----------
INSURANCE 3.4%
3,900 Allstate Corp. 192,075
2,250 Travelers Group, Inc 110,531
----------
302,606
----------
MACHINERY AND ENGINEERING 2.1%
2,500 Deere & Company 105,000
400 Ingersoll-Rand Company 19,000
3,100 Cincinnati Milacron Inc. 58,512
----------
182,512
----------
MERCHANDISING 0.6%
1,200 Sears Roebuck & Company 53,700
----------
METALS AND MINING 1.4%
600 Phelps Dodge Corp. 38,474
1,200 Potash Corp. of Saskatchewan 87,750
----------
126,224
----------
OFFICE AND BUSINESS EQUIPMENT 3.6%
900 International Business Machines Corp. 112,050
3,900 Xerox Corp. 209,137
----------
321,187
----------
OTHER 5.6%
4,500 Allied Signal Inc. 296,437
2,200 Philip Morris Companies Inc. 197,450
----------
493,887
----------
SOFTWARE PRODUCTS 8.7%
400 3Com Corp.* 24,000
<CAPTION>
Shares Value
- --------- ----------
<C> <S> <C> <C>
3,000 Computer Associates International, Inc. $ 179,250
9,300 Informix Corp.* 259,237
6,000 Oracle Systems Corp.* 255,000
200 Parametric Technology Corp.* 9,875
800 Structural Dynamics Research* 19,100
300 Sun Microsystems Inc.* 18,600
100 U.S. Robotics Corp.* 6,463
----------
771,525
----------
TELECOMMUNICATIONS 8.0%
100 ADC Telecommunications* 6,375
3,100 American Telephone & Telegraph Corp. 117,025
4,300 DSC Communications Corp.* 108,037
2,005 Lucent Technologies Inc. 91,964
5,400 Tellabs Inc.* 380,700
----------
704,101
----------
Total Common Stocks (Cost $4,970,892) $7,778,092
----------
<CAPTION>
Principal
Amount
- ---------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT 3.8%
$340,000 Bear Stearns & Co. Dated 9/30/1996 5.60%
due 10/01/1996 collateralized by 915,000
United States Treasury Strips due
8/15/2010 (Value $347,984) 340,000
----------
Total Investments (Cost $5,310,892) 91.6% $8,118,092
Other Assets, Less Liabilities 8.4% 746,924
------ ----------
Net Assets 100.0% $8,865,016
------ ----------
------ ----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 11
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost $5,310,892)--Note
2 $8,118,092
Cash 823,038
Receivable for shares sold 17,082
Dividends and interest receivable 15,908
Other assets 5,922
----------
8,980,042
LIABILITIES:
Payable for investments purchased $ 71,536
Payable for shares redeemed 15,687
Accrued expenses and other 27,803 115,026
-------- ----------
NET ASSETS at value, applicable to 440,844 outstanding
shares--Note 5 $8,865,016
----------
----------
NET ASSET VALUE offering and redemption price per share
($8,865,016 divided by 440,844 shares) $ 20.11
----------
----------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 38,808
Dividends 114,807
--------
Total Income $ 153,615
Expenses:
Investment manager's fees--Note 3 41,833
Shareholder servicing fees and expenses--Note 3 41,833
Distribution fee--Note 3 13,944
Custodian fees and expenses 4,546
Legal and auditing fees 7,828
Directors' fees and expenses 8,218
Amortization of organizational costs 9,760
Printing and postage 7,624
Other 7,243
--------
Total expenses 142,829
Less expense reimbursement--Note 3 (75,067)
--------
Net expenses 67,762
----------
INVESTMENT INCOME--NET 85,853
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 364,855
Unrealized appreciation on investments 980,258
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,345,113
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,430,966
----------
----------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/96 9/30/95
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 85,853 $ 68,141
Net realized gain (loss) on investments 364,855 (18,467)
Unrealized appreciation on investments 980,258 1,388,101
---------- ----------
Increase in net assets resulting from operations 1,430,966 1,437,775
---------- ----------
DIVIDEND DISTRIBUTION--Note 2:
Investment income--net (86,059) (77,331)
Realized gain on investments 0 (37,144)
---------- ----------
(86,059) (114,475)
---------- ----------
CAPITAL TRANSACTIONS--Note 5:
Value of shares sold 2,533,992 912,546
Value of shares redeemed (757,380) (332,203)
Value of shares issued in reinvestment of dividend distribution 86,059 114,475
---------- ----------
Net increase in net assets resulting from capital transactions 1,862,671 694,818
---------- ----------
Net increase 3,207,578 2,018,118
NET ASSETS at beginning of year 5,657,438 3,639,320
---------- ----------
NET ASSETS at end of year $8,865,016 $5,657,438
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
EMERGING GROWTH EQUITY FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ----------
<C> <S> <C> <C>
COMMON STOCKS 94.9%
APPAREL AND TEXTILE 3.7%
2,990 St. John Knits Inc. $ 149,874
1,000 Tommy Hilfiger* 59,250
2,000 Vans, Inc.* 38,250
----------
247,374
----------
AUTOMOTIVE PRODUCTS 0.2%
750 Custom Chrome* 13,500
----------
BROADCASTING AND PUBLISHING 3.6%
700 American Radio Systems Corp.* 25,725
500 Chancellor Broadcasting Corp Class A* 20,750
100 Cox Radio Inc.* 2,200
2,200 Granite Broadcasting Corp.* 31,350
1,200 Heftel Broadcasting Corp--A* 51,750
1,000 SFX Broadcasting Inc.* 45,250
600 Sinclair Broadcast Group Inc.* 23,925
1,200 Young Broadcasting Corp. Cl. A* 39,300
----------
240,250
----------
BUILDING AND CONSTRUCTION 0.6%
1,100 Apogee Enterprises Inc. 38,225
----------
BUSINESS AND PUBLIC SERVICES 13.3%
1,490 Cambridge Technology Partners Inc.* 44,700
600 Carriage Services Inc.* 11,400
900 CCC Information Services Group* 18,675
1,000 Claremont Technology Group* 34,750
1,100 Computer Task Group Inc 34,238
2,820 Concord Efs, Inc.* 72,615
2,500 Correctional Services Corp.* 35,312
2,400 Cotelligent Group Inc.* 36,000
900 Equity Corporation International* 28,238
800 Interim Services Inc.* 34,200
1,060 Keane Inc.* 50,880
350 Labor Ready, Inc.* 5,993
900 Lamar Advertising Co.* 36,675
200 Learning Tree International, Inc.* 7,350
1,500 Outdoor Systems, Inc.* 69,750
2,100 Precision Response Corp.* 79,275
500 Registry, Inc.* 18,625
2,540 Robert Half International Inc.* 93,662
1,300 Strayer Education Inc.* 21,288
1,500 Sykes Enterprises, Inc.* 70,500
900 Universal Outdoor Holdings* 32,175
700 Vincam Group, Inc.* 26,775
400 Whitman-Hart Inc.* 18,900
----------
881,976
----------
<CAPTION>
Shares Value
- --------- ----------
<C> <S> <C> <C>
COMMERCIAL SERVICES 3.0%
1,088 Corestaff Inc.* $ 28,547
1,000 FYI Incorporated* 20,000
100 International Network Services* 3,512
700 National Techteam Inc.* 18,988
800 Physician Support Systems* 18,800
2,100 PMT Services Inc.* 42,000
1,500 Wackenhut Corp Class B 23,438
1,900 Wackenhut Corrections Corp.* 42,275
----------
197,560
----------
CONSUMER GOODS AND SERVICES 12.3%
1,550 Blyth Industries Inc.* 75,175
2,500 French Fragrances Inc.* 17,500
100 Gargoyles, Inc.* 2,075
2,750 Hollywood Entertainment Corp.* 56,030
1,800 Marks Bros Jewelers Inc.* 48,600
1,878 Nautica Enterprises Inc.* 60,566
800 North Face Inc.* 22,500
1,100 Pete's Brewing Company* 7,838
1,760 Sola International Inc.* 65,560
3,000 Rexall Sundown Inc.* 109,500
3,600 Signature Resorts Inc.* 86,400
1,800 Speedway Motorsports Inc.* 47,250
1,432 Stewart Enterprises Inc. 48,330
1,600 The Finish Line- Class A* 75,600
3,360 Wolverine World Wide 93,240
----------
816,164
----------
DATA PROCESSING 1.9%
800 Alternative Resources Corp.* 22,400
750 Business Objects SA Adr* 14,438
1,700 Data Processing Resources Cp* 34,850
800 HPR Inc.* 12,400
700 Vantive Corp.* 44,625
----------
128,713
----------
ELECTRONICS AND ELECTRICAL 5.8%
3,200 Advanced Lighting Techs* 63,200
1,129 Baldor Electric Company 22,015
2,000 C.P. Clare Corp. 18,500
3,500 Computer Products Inc.* 76,562
2,763 Del Global Technologies Corp.* 23,485
703 Credence Systems Corp.* 10,897
600 Eltron International Inc.* 19,200
700 Flextronics International Ltd.* 19,075
809 Harman International Industries Inc. 39,439
1,300 Sanmina Corp.* 52,325
2,250 Thermo Voltek Corp.* 30,938
800 Transwitch Corp.* 5,000
----------
380,636
----------
</TABLE>
See Notes to Financial Statements 14
<PAGE>
EMERGING GROWTH EQUITY FUND
(CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ----------
EMPLOYMENT AGENCY 0.9%
<C> <S> <C> <C>
1,230 On Assignment Inc.* $ 40,898
1,200 SOS Staffing Service* 13,500
300 Staffmark, Inc.* 4,125
----------
58,523
----------
ENTERTAINMENT 3.5%
700 Anchor Gaming* 42,875
2,300 Family Golf Centers, Inc.* 64,975
300 Penn National Gaming Inc.* 9,150
1,200 Penske Motorsports Inc.* 41,550
1,200 Regal Cinemas Inc.* 29,400
1,800 Sodak Gaming Inc.* 40,500
----------
228,450
----------
FOOD AND SERVICES 1.0%
1,025 Apple South Inc. 13,580
1,360 Landry's Seafood Restaurants* 33,320
1,100 Mortons Restaurant Group Inc.* 19,250
----------
66,150
----------
FURNITURE/HOME APPLIANCES 0.7%
2,150 Cort Business Services Corp.* 43,538
----------
INSURANCE 5.1%
1,075 Compdent Corp.* 40,580
835 CRA Managed Care Inc.* 44,672
700 First Commonwealth Inc.* 15,225
4,330 HCC Insurance Holdings Inc. 125,029
1,220 Reinsurance Group of America Inc. 53,528
2,000 Riscorp Inc Class A* 33,000
765 Sierra Health Services* 26,297
----------
338,331
----------
LODGING/MOTELS 2.6%
4,000 Prime Hospitality Corp.* 66,000
1,800 Servico, Inc.* 29,250
2,460 Studio Plus Hotels, Inc.* 38,745
1,700 Suburban Lodges Of America* 35,700
----------
169,695
----------
MACHINERY AND ENGINEERING 1.3%
1,200 Miller Industries Inc./Tenn* 47,400
1,700 Rental Service Corp.* 36,550
----------
83,950
----------
MEDICAL SERVICES AND DRUGS 13.9%
850 Access Health Inc.* 47,812
800 Alternative Living Services* 11,200
1,875 American Homepatient Inc.* 40,780
1,400 Amrion, Inc.* 29,925
<CAPTION>
Shares Value
- --------- ----------
<C> <S> <C> <C>
400 Arthrocare Corp.* $ 3,700
1,600 ARV Assisted Living Inc.* 23,200
1,100 Assisted Living Concepts, Inc.* 20,900
2,750 Dura Pharmaceuticals Inc.* 101,063
800 Emeritus Corp.* 12,600
1,200 Gelman Sciences, Inc.* 33,750
1,827 Genesis Health Ventures Inc.* 51,384
1,100 Idexx Laboratories Inc.* 49,775
1,450 Igen Inc.* 10,330
1,100 Impath, Inc.* 13,475
1,800 Iridex Corp.* 13,950
540 I-Stat Corp.* 9,855
805 Lincare Holdings Inc.* 31,798
675 Lunar Corp.* 21,600
1,600 Medicis Pharmaceutical Cl-A* 77,200
1,000 Memtec Ltd. 28,000
800 Minimed, Inc.* 19,600
1,250 National Surgery Centers Inc.* 33,438
1,500 NCS Healthcare Inc Class A* 47,063
1,000 Orthologic Corp.* 10,625
500 Pediatix Medical* 25,000
700 Renal Care Group Inc.* 25,550
1,600 Respironics, Inc.* 38,800
1,000 Sabratek Corp.* 15,750
1,500 Sterling House Corp.* 24,563
600 Target Therapeutics Inc.* 25,500
600 United Dental Care Inc.* 21,450
----------
919,636
----------
RETAIL TRADE 3.9%
900 99 Cents Only Stores* 12,600
1,500 Barnett Inc.* 34,500
0.5 Corporate Express Inc.* 19
1,900 Cost Plus Inc.* 43,225
1,400 Loehmann's, Inc.* 37,450
600 Party City Corp.* 11,100
600 Petco Animal Supplies, Inc.* 16,050
2,600 The Mens Wearhouse Inc.* 63,050
1,200 West Marine Inc.* 39,300
----------
257,294
----------
SOFTWARE PRODUCTS 8.4%
700 Analysts International Corp. 32,200
850 Bisys Group Inc.* 34,850
1,100 Black Box Corp.* 36,300
2,332 Computer Horizons Corp.* 66,462
900 Gensym Corp.* 19,575
570 Inso Corp.* 29,925
1,310 McAfee Associates Inc.* 90,390
1,125 Peak Technologies Group Inc.* 23,906
</TABLE>
See Notes to Financial Statements 15
<PAGE>
EMERGING GROWTH EQUITY FUND
(CONTINUED)
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ----------
SOFTWARE PRODUCTS--Continued
<C> <S> <C> <C>
425 Project Software & Development, Inc.* $ 17,850
1,400 Raptor Systems, Inc.* 23,800
1,100 Renaissance Solutions Inc.* 45,375
1,500 SPSS, Inc.* 40,500
2,800 Technology Solutions Company* 97,300
----------
558,433
----------
TELECOMMUNICATIONS 7.6%
900 Bet Holdings* 25,875
1,500 Cai Wireless Systems Inc.* 10,875
1,100 Centennial Cellular Corp.--Cl A* 14,575
400 CMG Information Services Inc.* 5,700
2,000 Coherent Communic. Systems Corp.* 37,000
740 Commnet Cellular Inc.* 21,368
1,500 Evergreen Media Corp.* 46,877
1,575 EZ Communications Inc.--Cl A* 69,300
1,075 Heartland Wireless Communications Inc.* 26,875
900 Intermedia Communications Inc.* 26,325
3,000 Midcom Communication Inc.* 40,500
1,300 P-Com Inc.* 32,175
800 RMH Teleservices Inc.* 11,800
1,506 Saga Communications Inc.--Cl A* 33,697
1,300 Spectralink, Corp.* 8,450
<CAPTION>
Shares Value
- --------- ----------
<C> <S> <C> <C>
1,400 Teltrend, Inc.* $ 58,800
2,087 Transaction Network Services* 29,740
----------
499,932
----------
TOYS 0.8%
1,800 Galoob (Lewis) Toys Inc.* 52,650
----------
TRANSPORTATION 0.8%
1,425 Expeditors International of Wash Inc. 50,230
----------
Total Common Stocks (Cost $4,456,847) $6,271,210
----------
<CAPTION>
Principal
Amount
- ---------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 3.9%
$242,494 Bear Stearns & Co. Dated 9/30/1996 5.60%
due 10/01/1996 collateralized by 655,000
United States Treasury Strips due
8/15/2010 (Value $249,103) 242,494
----------
Total Investments (Cost $4,699,341) 98.8% $6,513,704
Other Assets, Less Liabilities 1.2% 95,190
------ ----------
Net Assets 100.0% $6,608,894
------ ----------
------ ----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 16
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost $4,699,341)--Note
2 $6,513,704
Cash 115,260
Receivable for investments sold 39,143
Receivable for shares sold 15,395
Dividends and interest receivable 3,072
Other assets 13,956
----------
6,700,530
LIABILITIES:
Payable for investments purchased $ 59,900
Accrued expenses and other 31,736 91,636
-------- ----------
NET ASSETS at value, applicable to 263,504 outstanding
shares--Note 5 $6,608,894
----------
----------
NET ASSET VALUE offering and redemption price per share
($6,608,894 divided by 263,504 shares) $ 25.08
----------
----------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 19,772
Dividends 3,307
--------
Total Income $ 23,079
Expenses:
Investment manager's fees--Note 3 39,330
Shareholder servicing fees and expenses--Note 3 24,122
Distribution fee--Note 3 8,041
Custodian fees and expenses 37,623
Legal and auditing fees 7,838
Directors' fees and expenses 8,220
Amortization of organizational costs 9,749
Printing and postage 7,624
Other 6,523
--------
Total expenses 149,070
Less expense reimbursement--Note 3 (64,413)
--------
Net expenses 84,657
----------
INVESTMENT (LOSS)--NET (61,578)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 697,630
Unrealized appreciation on investments 926,887
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,624,517
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,562,939
----------
----------
</TABLE>
See Notes to Financial Statements
17
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/96 9/30/95
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net $ (61,578) $ (29,893)
Net realized gain on investments 697,630 272,274
Unrealized appreciation on investments 926,887 547,848
---------- ----------
Increase in net assets resulting from operations 1,562,939 790,229
---------- ----------
DIVIDEND DISTRIBUTION--Note 2:
Investment income--net -- --
Realized gain on investments (252,458) (45,582)
---------- ----------
(252,458) (45,582)
---------- ----------
CAPITAL TRANSACTIONS--Note 5:
Value of shares sold 2,748,861 527,430
Value of shares redeemed (651,909) (191,700)
Value of shares issued in reinvestment of dividend distribution 250,995 45,582
---------- ----------
Net increase in net assets resulting from capital transactions 2,347,947 381,312
---------- ----------
Net increase 3,658,428 1,125,959
NET ASSETS at beginning of year 2,950,466 1,824,507
---------- ----------
NET ASSETS at end of year $6,608,894 $2,950,466
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements
18
<PAGE>
INTERMEDIATE-TERM FIXED-INCOME FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ---------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS 86.6%
$ 250,000 Federal Home Loan Mortgage Corp.
CMO 1489G
5.85% Due 10/15/2006 $ 240,640
250,000 Federal National Mortgage Assoc
CMO G93-8Pg
6.50% Due 7/25/2018 242,382
390,000 Federal National Mortgage Association
Medium Term Note
7.46% Due 9/30/1999 395,787
250,000 Federal National Mortgage Association
CMO G93-3G
6.00% Due 6/25/2018 237,805
250,000 Federal National Mortgage Association
Medium Term Note
6.25% Due 1/14/2004 238,582
500,000 Federal National Mortgage Association
CMO 1994-10M
6.50% Due 6/25/2023 475,109
450,000 Federal National Mortgage Association
CMO 93-167H
6.35% Due 1/25/2022 426,006
292,960 Federal National Mortgage Association
CMO 93-154K
6.00% Due 8/25/2008 271,621
250,000 Federal National Mortgage Assoc. CMO-1993-54E
6.25% Due 6/25/2019 239,627
223,091 Federal National Mortgage Assoc.
CMO 1992-9G
7.00% Due 7/25/2005 224,208
195,097 Federal National Mortgage Assoc. P#050987
6.5% Due 2/1/2009 190,615
<CAPTION>
Principal
Amount Value
- --------- ---------
<C> <S> <C> <C>
$ 600,000 Federal Home Loan Mortgage Corp.
CMO 1611I
6.00% Due 2/15/2023 $ 555,809
648,043 Federal Home Loan Mortgage Corp.
CMO 1680E
6.50% Due 2/15/2024 614,046
380,000 United States Treasury Note
8.875% Due 5/15/2000 410,281
175,000 United States Treasury Note
8.875% Due 11/15/1997 180,578
100,000 United States Treasury Note Stripped Coupon
0.00% Due 02/15/1998 92,245
65,000 United States Treasury Note Stripped Principal
0.00% Due 2/15/1998 59,943
---------
Total United States Government and Agency Obligations (Cost
$5,200,216) $5,095,284
---------
SHORT TERM INVESTMENTS 13.0%
UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS
$ 550,000 Farmer Mac Discount Note
5.20% Due 10/04/96 549,762
170,000 Federal Home Loan Mortgage Corp. Discount Note
5.22% Due 10/21/96 169,507
REPURCHASE AGREEMENT
47,022 Bear Stearns & Co. Dated 9/30/1996
5.60% due 10/01/1996 collateralized by 130,000 United States Strips due
8/15/2010 (Value $49,440) 47,022
---------
Total Short Term Obligations (Cost $766,291) $ 766,291
---------
Total Investments (Cost $5,966,507) $5,861,575
Other Assets, Less Liabilities 0.4 % 23,015
--- ---------
Net Assets 100.0 % $5,884,590
--- ---------
--- ---------
</TABLE>
See Notes to Financial Statements 19
<PAGE>
INTERMEDIATE-TERM FIXED-INCOME FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost $5,966,507)--Note
2 $5,861,575
Receivable for shares sold 2,917
Interest receivable 45,269
Other assets 9,404
----------
5,919,165
LIABILITIES:
Payable for shares redeemed $ 10,347
Accrued expenses and other 24,228 34,575
-------- ----------
NET ASSETS at value, applicable to 561,002 outstanding
shares--Note 5 $5,884,590
----------
----------
NET ASSET VALUE offering and redemption price per share
($5,884,590 divided by 561,002 shares) $ 10.49
----------
----------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $403,284
--------
Total Income $ 403,284
Expenses:
Investment manager's fees--Note 3 22,308
Shareholder servicing fees and expenses--Note 3 33,463
Distribution fee--Note 3 11,154
Custodian fees and expenses 3,035
Legal and auditing fees 7,838
Directors' fees and expenses 8,220
Amortization of organizational costs 9,767
Printing and postage 7,624
Registration fees 5,390
Other 1,540
--------
Total expenses 110,339
Less expense reimbursement--Note 3 (56,361)
--------
Net expenses 53,978
----------
INVESTMENT INCOME--NET 349,306
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain on investments 2,356
Unrealized (depreciation) on investments (143,605)
--------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS (141,249)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 208,057
----------
----------
</TABLE>
See Notes to Financial Statements
20
<PAGE>
INTERMEDIATE-TERM FIXED-INCOME FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/96 9/30/95
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 349,306 $ 260,487
Net realized gain (loss) on investments 2,356 (273)
Unrealized appreciation (depreciation) on investments (143,605) 185,270
---------- ----------
Increase in net assets resulting from operations 208,057 445,484
---------- ----------
DIVIDEND DISTRIBUTION--Note 2:
Investment income--net (375,199) (246,044)
Realized gain on investments 0 (19,238)
---------- ----------
(375,199) (265,282)
---------- ----------
CAPITAL TRANSACTIONS--Note 5:
Value of shares sold 1,400,572 1,578,988
Value of shares redeemed (881,027) (258,804)
Value of shares issued in reinvestment of dividend distribution 396,452 263,537
---------- ----------
Net increase in net assets resulting from capital transactions 915,997 1,583,721
---------- ----------
Net increase 748,855 1,763,923
NET ASSETS at beginning of year 5,135,735 3,371,812
---------- ----------
NET ASSETS at end of year $5,884,590 $5,135,735
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements
21
<PAGE>
MONEY MARKET FUND
Statement of Investments September 30, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ----------
<C> <S> <C> <C>
CORPORATE NOTE 3.4%
$ 50,000 Merck & Company
6.00% Due 1/15/1997 $ 50,116
----------
Total Corporate Note (Cost $50,116) $ 50,116
----------
UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS 96.3%
35,000 Federal Home Loan Bank
4.40% Due 1/21/1997 34,863
100,000 Federal Home Loan Bank
4.75% Due 1/13/1997 100,000
150,000 Federal Home Loan Bank
4.57% Due 12/30/1996 149,559
50,000 Federal Home Loan Mortgage Corp.
4.625% Due 11/15/1996 50,000
150,000 Federal Home Loan Mortgage Corp. Discount Note
5.22% Due 10/16/1996 149,674
525,000 Federal Home Loan Mortgage Corp. Discount Note
5.24% Due 10/3/1996 524,846
400,000 Federal National Mortgage Association Medium
Term Note
4.50% Due 11/1/1996 399,540
----------
Total United States Government and Agency
Obligations (Cost $1,407,017) $1,408,482
----------
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT .9%
$13,747 Bear Stearns & Co. Inc. Dated 9/30/1996 5.60%
Due 10/01/1996 collateralized by 40,000 United
States Treasury Strips
Due 8/15/2010 (Value $15,212) 13,747
----------
Total Investments (Cost $1,472,345) $1,472,345
Liabilities, net of other assets -0.6% (9,084)
------ ----------
Net Assets 100.0% $1,463,261
------ ----------
------ ----------
</TABLE>
See Notes to Financial Statements 22
<PAGE>
MONEY MARKET FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost $1,472,345)--Note
2 $1,472,345
Receivable for shares sold 4,548
Interest receivable 12,373
Other assets 8,220
----------
1,497,486
LIABILITIES:
Payable for shares redeemed $ 9,777
Dividends payable 5,502
Accrued expenses and other 18,946 34,225
------- ----------
NET ASSETS at value, applicable to 1,463,276 outstanding
shares--Note 5 $1,463,261
----------
----------
NET ASSET VALUE offering and redemption price per share
($1,463,261 divided by 1,463,276 shares) $ 1.00
----------
----------
</TABLE>
Statement of Operations Year Ended September 30, 1996
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 72,152
--------
Total Income $72,152
Expenses:
Investment manager's fees--Note 3 3,245
Shareholder servicing fees and expenses--Note 3 7,788
Distribution fee--Note 3 2,596
Custodian fees and expenses 1,608
Legal and auditing fees 7,838
Directors' fees and expenses 8,220
Amortization of organizational costs 8,211
Printing and postage 7,624
Registration fees 5,391
Other 1,125
--------
Total expenses 53,646
Less expense reimbursement--Note 3 (47,155)
--------
Net expenses 6,491
-------
INVESTMENT INCOME--NET 65,661
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS --
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $65,661
-------
-------
</TABLE>
See Notes to Financial Statements
23
<PAGE>
MONEY MARKET FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/96 9/30/95
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 65,661 $ 59,394
---------- ----------
Increase in net assets resulting from operations 65,661 59,394
---------- ----------
DIVIDEND DISTRIBUTION--Note 2:
Investment income--net (65,661) (59,394)
---------- ----------
CAPITAL TRANSACTIONS--Note 5:
Value of shares sold 560,439 160,847
Value of shares redeemed (369,464) (119,753)
Value of shares issued in reinvestment of dividend distribution 64,916 53,877
---------- ----------
Net increase in net assets resulting from capital transactions 255,891 94,971
---------- ----------
Net increase 255,891 94,971
---------- ----------
NET ASSETS at beginning of year 1,207,370 1,112,399
---------- ----------
NET ASSETS at end of year $1,463,261 $1,207,370
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1--GENERAL
Retirement System Fund Inc. ("Fund") is a no-load, open-end
diversified management investment company, registered under the
Investment Company Act of 1940, as amended, designed to provide
professional investment management and diversification of risk
to investors by offering shares in separate investment funds
("Investment Funds"), each with a different investment
objective. Currently investors may purchase shares of Money
Market Fund, Emerging Growth Equity Fund, Intermediate-Term
Fixed-Income Fund and Core Equity Fund. In the future, the Fund
expects to offer shares of Value Equity Fund, International
Equity Fund and Actively Managed Fixed-Income Fund.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting
policies followed by the Investment Funds in the preparation of
the financial statements.
(A) SECURITIES VALUATION: Except for debt securities with
remaining maturities of 60 days or less, investments for
which market prices are available are valued as follows:
(1)each listed security is valued at its closing price
obtained from the respective exchange on which the
security is listed, or, if there were no sales on that
day, at its last reported closing or bid price.
(2)each unlisted security quoted on the NASDAQ is valued at
the last current bid price obtained from the NASDAQ.
(3)United States Government and agency obligations and
certain other debt obligations are valued based upon bid
quotations from various market makers for identical or
similar obligations.
(4)mortgage-backed securities and asset-backed securities
are valued with a cash flow model based on both the
pre-payment assumptions (Public Securities Association
median) and the price-yield spreads over comparable
United States Treasury Securities.
(5)short-term money market instruments (such as
certificates of deposit, bankers' acceptances and
commercial paper) are valued by bid quotations or by
reference to bid quotations of available yields for
similar instruments of issuers with similar credit
rating.
Debt securities with remaining maturities of 60 days or
less are valued on the basis of amortized cost. In the absence
of an ascertainable market value, investments are valued at
their fair value as determined by the officers of Investors
using methods and procedures reviewed and approved by the
Fund's Directors.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized
gain and loss from securities transactions are recorded on
a specific cost basis. Dividend income is recognized on the
ex-dividend date or when the dividend information is known;
25
<PAGE>
interest income, including, where applicable, amortization
of discount and premium on investments and zero coupon
bonds, is recognized on an accrual basis.
The Investment Funds may enter into repurchase
agreements with financial institutions, deemed to be
creditworthy by the Investment Funds' Manager, subject to
the sellers' agreement to repurchase and the Funds'
agreement to resell such securities at a mutually agreed
upon price. Securities purchased subject to repurchase
agreements are deposited with the Investment Funds'
custodian and, pursuant to the terms of the repurchase
agreement, must have an aggregate market value greater than
or equal to the repurchase price plus accrued interest at
all times. If the value of the underlying securities falls
below the value of the repurchase price plus accrued
interest, the Investment Funds will require the seller to
deposit additional collateral by the next business day. If
the request for additional collateral is not met, or the
seller defaults on its repurchase obligation, the
Investment Funds maintain the right to sell the underlying
securities at market value and may claim any resulting loss
against the seller.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends and capital gain
distributions to shareholders are recorded on the
ex-dividend date. However, the Money Market Fund declares
dividends daily and automatically reinvests such dividends
in additional Fund shares at net asset value, unless the
shareholder elects otherwise. Dividends are declared from
the total of net investment income and net realized gain on
investments.
(D) FEDERAL INCOME TAXES: Each Investment Fund is treated as a
separate entity for Federal Income tax purposes and is not
combined with other Investment Funds. Each of the
Investment Funds intends to comply with the provisions of
the Internal Revenue Code applicable to "regulated
investment companies" and to distribute all of its taxable
income to its shareholders. Therefore, no provision has
been made for Federal income taxes for these Investment
Funds.
(E) ACCOUNTING ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the
date of the financial statements and the reported amounts
of increase and decrease in net assets from operations
during the period. Actual results could differ from those
estimates.
(F) OTHER: Costs incurred in connection with the organization
of the Investment Funds have been deferred and are being
amortized on a straight-line basis over five years from the
date of commencement of operations of each portfolio.
Expenses directly attributed to each Investment Fund are
charged to that Investment Fund's operations; expenses
which are applicable to all Investment Funds are allocated
among them.
26
<PAGE>
The Investment Funds may enter into financial futures
contracts which require initial margin deposits of cash or
U.S. Government securities equal to approximately 10% of
the value of the contract. During the period the financial
futures are open, changes in the value of the contracts are
recognized by "marking to market" on a daily basis to
reflect the market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments
are made or received to reflect daily unrealized gains or
losses. The Investment Fund is exposed to market risk as a
result of movements in securities, values and interest
rates.
NOTE 3--INVESTMENT MANAGERS' FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Retirement System Investors Inc. ("Investors") is the
investment advisor for each Investment Fund. Investors has
engaged Putnam Advisory Company, Inc. ("Putnam"), an
independent investment manager, as subadviser for the Emerging
Growth Equity Fund, to make and effect decisions on buying and
selling portfolio securities. Investors is also investment
manager to the remaining investment funds and, in the case of
all Investment Funds, exercises general oversight with respect
to portfolio management and reports to the Board of Directors
with respect thereto. For their services, the investment
managers are entitled to receive an annual fee, calculated
daily and paid monthly, (calculated and paid quarterly in the
case of Putnam), based upon a percentage of the average net
assets of the respective Investment Funds. The specific
percentages for the Investment Funds are set forth in the
following table.
<TABLE>
<CAPTION>
INVESTMENT FUND ANNUAL FEE
- ----------------------------------------------------- -------------
<S> <C> <C>
Core Equity Fund First $50 million 0.60
Next $150 million 0.50
Over $200 million 0.40
Emerging Growth Equity Fund First $25 million 1.00
Over $25 million 0.75
Intermediate-Term Fixed-Income Fund First $50 million 0.40
Next $100 million 0.30
Over $150 million 0.20
Money Market Fund First $50 million 0.25
Over $50 million 0.20
</TABLE>
In addition, Investors is entitled to receive an annual fee
based upon a percentage of average net assets of the respective
Investment Funds (or portion thereof) for which it does not act
as investment manager, which fee shall be an amount equal to
the sum of (i) .20% of total net assets of the applicable
Investment Funds, and (ii) the fee to which the investment
manager of the applicable Investment Funds is entitled,
calculated in the manner described above with respect to the
investment manager's fees for each such Investment Fund.
Investors, in turn, remits such portion of its fee to the
investment manager of such Investment Fund.
27
<PAGE>
With respect to the Investment Funds for which Investors does
not act as investment manager, Investors has agreed to waive
payment of the portion of the investment advisory fees in an
amount equal to .20% of the total assets of the Investment
Fund's operations, and intends to waive payment of such amount
going forward if necessary to maintain a competitive expense
ratio or to assure that the Investment Fund's expense ratios
comply with regulations in various states where Fund shares are
qualified for sale.
Pursuant to a Distribution Agreement ("Plan") each
Investment Fund pays Retirement System Distributors Inc.
("Distributor") an affiliate of Investors, a monthly fee
determined as follows. The maximum amount payable under the
Plan is equal to .25% of the average daily net assets of an
Investment Fund but the Board of Directors currently limits
such expenditures to .20% of average daily net assets. The Plan
does not provide for any charges to an Investment Fund for
excess amounts expended by the Distributor and, if the Plan is
terminated, the obligation of the Investment Fund to make
payments to the Distributor will cease and the Investment Fund
will not be required to make any payments thereafter. If the
Distributor's costs in connection with its distribution
services to an Investment Fund are less than .20% of net
assets, the Distributor may nevertheless retain the difference.
If the Distributor's costs exceed .20% of net assets, the
Distributor will assume the difference and will not be
reimbursed therefore.
Retirement System Consultants Inc. ("Service Company"), an
affiliate of Investors, has entered into a Service Agreement
with the Fund to provide each Investment Fund with the general
administrative and related services necessary to carry on the
affairs of the Investment Funds, including transfer agent and
registrar services.
For its services, the Service Company is entitled to
receive a fee, calculated daily and paid monthly, based upon
the percentage of the average daily net assets of the
respective Investment Funds. The fee arrangement applicable for
each of the investment funds is as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS FEE
- --------------------------------- ---------
<S> <C>
First $25 million .60%
Next $25 million .50%
Next $25 million .40%
Next $25 million .30%
Over $100 million .20%
</TABLE>
For the year ended September 30, 1996 Investors and its
affiliates waived fees and reimbursed expenses of the Core
Equity Fund, Emerging Growth Equity Fund, Intermediate-Term
Fixed-Income Fund, and Money Market Fund amounting to $75,067,
$64,413, $56,361 and $47,155, respectively.
Each Director who is not an officer of the Investment Funds
or a Trustee of Investors Retirement Trust receives an annual
fee of $7,000. Each Director receives a
28
<PAGE>
fee of $800 per meeting attended, except that such fee is $400
for a telephonic meeting. A Director and several officers of
the Fund are also officers of Investors and its affiliates.
NOTE 4--SECURITIES TRANSACTIONS
The following summarizes the securities transactions, other
than short term securities, by the various Investment Funds for
the year ended September 30, 1996:
<TABLE>
<CAPTION>
INVESTMENT FUND PURCHASES SALES
- -------------------------------------------------------- ------------- -------------
<S> <C> <C>
Core Equity Fund $ 2,492,436 $ 1,131,243
Emerging Growth Equity Fund 5,096,457 3,196,429
Intermediate-Term Fixed-Income Fund 2,463,021 2,009,529
</TABLE>
The cost basis of investments for tax purposes is
substantially the same as the cost basis for book purposes. Net
unrealized appreciation consisting of gross unrealized
appreciation and gross unrealized (depreciation) at September
30, 1996 for each of the Investment Funds was as follows:
<TABLE>
<CAPTION>
NET UNREALIZED GROSS GROSS
APPRECIATION UNREALIZED UNREALIZED
INVESTMENT FUND (DEPRECIATION) APPRECIATION DEPRECIATION
- -------------------------------------- --------------- ------------- -------------
<S> <C> <C> <C>
Core Equity Fund $ 2,807,200 $ 2,820,647 $ (13,447)
Emerging Growth Equity Fund 1,814,363 1,965,046 (150,683)
Intermediate-Term Fixed-Income Fund (104,932) 19,395 (124,327)
</TABLE>
The following summarizes the value of securities that were
on loan to brokers and the value of securities held as
collateral for these loans at September 30, 1996:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
INVESTMENT FUND LOANED COLLATERAL
- -------------------------------------------------------- ------------- -------------
<S> <C> <C>
Core Equity Fund $ 2,702 $ 3,803
Emerging Growth Equity Fund 1,044,806 1,089,588
</TABLE>
NOTE 5--CAPITAL TRANSACTIONS
The Investment Funds were organized under the laws of the
state of Maryland in November 1990. The Investment Fund is
authorized to issue two billion shares of capital stock, par
value $.001 per share. The Board of Directors of the Investment
Funds is authorized to establish multiple series of shares of
capital stock, each evidencing interest in a separate
Investment Fund.
29
<PAGE>
Transactions in the shares of capital stock of each
Investment Fund for the year ended September 30, 1996 and the
year ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
Core Equity Emerging Growth
Fund Equity Fund
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Fund Shares Sold 138,929 67,933 125,953 34,324
Dividends Reinvested 5,104 9,247 13,991 3,282
Fund Shares Redeemed (42,161) (24,411) (31,299) (12,944)
--------- --------- --------- ---------
Net Increase 101,872 52,769 108,645 24,662
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
Intermediate-Term
Fixed-Income Fund
--------------------
1996 1995
--------- ---------
<S> <C> <C> <C> <C>
Fund Shares Sold 131,098 152,183
Dividends Reinvested 37,381 25,145
Fund Shares Redeemed (82,620) (24,467)
--------- ---------
Net Increase 85,859 152,861
--------- ---------
--------- ---------
</TABLE>
Net Assets at September 30, 1996 are as follows:
<TABLE>
<CAPTION>
Core Emerging
Equity Growth
Fund Equity Fund
---------- --------------
<S> <C> <C>
Paid-in Capital $5,675,248 $ 4,187,065
Accumulated undistributed investment
income gain (loss)--net 44,834 (61,578)
Undistributed realized gain 337,734 669,044
Unrealized appreciation 2,807,200 1,814,363
---------- --------------
$8,865,016 $ 6,608,894
---------- --------------
---------- --------------
</TABLE>
<TABLE>
<CAPTION>
Intermediate-Term
Fixed-Income Money Market
Fund Fund
--------------- ------------
<S> <C> <C>
Paid-in Capital $ 5,961,225 $1,434,573
Accumulated undistributed
investment income--net 26,214 28,688
Undistributed realized gain 2,083 0
Unrealized depreciation (104,932) 0
--------------- ------------
$ 5,884,590 $1,463,261
--------------- ------------
--------------- ------------
</TABLE>
30
<PAGE>
NOTE 6--FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CORE EQUITY FUND
-----------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 16.69 $ 12.72 $ 12.08 $ 10.98 $ 10.45
------- ------- ------- ------- -------
Income from investment operations:
Investment income--net 0.21 0.13 0.15 0.18 0.23
Net realized and unrealized gain on
investments 3.45 4.22 0.74 1.84 0.60
------- ------- ------- ------- -------
Total from Investment Operations 3.66 4.35 0.89 2.02 0.83
------- ------- ------- ------- -------
Distributions:
Distributions from capital gains -- (0.22) (0.11) (0.64) (0.08)
Distributions from investment income (0.24) (0.16) (0.14) (0.28) (0.22)
------- ------- ------- ------- -------
Total Distributions (0.24) (0.38) (0.25) (0.92) (0.30)
------- ------- ------- ------- -------
Net increase 3.42 3.97 0.64 1.10 0.53
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 20.11 $ 16.69 $ 12.72 $ 12.08 $ 10.98
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return* 22.21% 35.24% 7.47% 19.39% 8.11%
Ratios/Supplemental Data:
Ratios to average net assets:
Expenses 0.97% 0.90% 0.90% 0.90% 0.90%
Investment income--net 1.23% 1.52% 1.17% 1.31% 1.86%
Decrease reflected in above expense
ratio due to expense waivers and
reimbursement 1.08% 1.30% 1.33% 2.43% 2.46%
Portfolio turnover rate 18.08% 25.49% 9.64% 21.79% 61.27%
Average commission rate paid (per
share)** $ .05 -- -- -- --
Net Assets at End of Year ($1,000's) $ 8,865 $ 5,657 $ 3,639 $ 3,094 $ 1,049
</TABLE>
* The total return calculation reflects dividend
reinvestment.
** Required by regulations issued in 1995.
31
<PAGE>
<TABLE>
<CAPTION>
EMERGING GROWTH
EQUITY FUND
-----------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 19.05 $ 14.01 $ 14.74 $ 11.83 $ 10.54
------- ------- ------- ------- -------
Income from investment operations:
Investment (loss)--net (0.17) (0.12) (0.04) (0.13) (0.17)
Net realized and unrealized gain on
investments 7.62 5.49 1.58 4.36 1.49
------- ------- ------- ------- -------
Total from Investment Operations 7.45 5.37 1.54 4.23 1.32
------- ------- ------- ------- -------
Distributions:
Distributions from capital gains (1.42) (0.33) (2.27) (1.21) (0.01)
Distributions from investment income -- -- -- (0.11) --
Return of capital -- -- -- -- (0.02)
------- ------- ------- ------- -------
Total Distributions (1.42) (0.33) (2.27) (1.32) (0.03)
------- ------- ------- ------- -------
Net Increase (Decrease) 6.03 5.04 (0.73) 2.91 1.29
------- ------- ------- ------- -------
Net Asset Value, End of Year $25.08 $19.05 $14.01 $14.74 $11.83
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return* 42.07% 39.20% 11.89% 38.05% 13.80%
Ratios/Supplemental Data:
Ratios to average net assets
Expenses 1.96% 1.85% 1.85% 1.85% 1.86%
Investment income (loss)--net (1.43)% (1.33)% (1.37)% (1.34)% (1.10)%
Decrease reflected in above expense
ratio due to expense waivers and
reimbursement 1.49% 3.30% 4.11% 6.41% 7.90%
Portfolio turnover rate 77.94% 84.05% 72.59% 144.49% 138.46%
Average commission rate paid (per
share)** $ .01 -- -- -- --
Net Assets at End of Year ($1,000's) $ 6,609 $ 2,950 $ 1,825 $ 1,352 $684
</TABLE>
* The total return calculation reflects dividend
reinvestment.
** Required by regulations issued in 1995.
32
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM
FIXED-INCOME FUND
-----------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout
the year)
Net Asset Value, Beginning of Year $ 10.81 $ 10.46 $ 11.43 $ 11.00 $ 10.46
------- ------- ------- ------- -------
Income from investment operations:
Investment income--net 0.66 0.59 0.52 0.54 0.80
Net realized and unrealized gain (loss)
on investments (0.26) 0.38 (0.85) 0.36 0.73
------- ------- ------- ------- -------
Total from Investment Operations 0.40 0.97 (0.33) 0.90 1.53
------- ------- ------- ------- -------
Distributions:
Distributions from capital gains -- (0.05) (0.08) 0.00 (0.15)
Distributions from investment income (0.72) (0.57) (0.56) (0.47) (0.84)
------- ------- ------- ------- -------
Total Distributions (0.72) (0.62) (0.64) (0.47) (0.99)
------- ------- ------- ------- -------
Net Increase (decrease) (0.32) 0.35 (0.97) 0.43 0.54
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 10.49 $ 10.81 $ 10.46 $ 11.43 $ 11.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return* 3.82% 9.64% (2.99)% 8.47% 13.86%
Ratios/Supplemental Data:
Ratios to average net assets
Expenses 0.97% 0.90% 0.90% 0.90% 0.90%
Investment income--net 6.27% 5.71% 5.76% 4.90% 5.59%
Decrease reflected in above expense
ratio due to expense waivers and
reimbursement 1.00% 1.09% 1.66% 3.33% 5.56%
Portfolio turnover rate 39.69% 8.50% 8.68% 27.62% 8.66%
Net Assets at End of Year ($1,000's) $ 5,885 $ 5,136 $ 3,372 $ 2,159 $881
</TABLE>
* The total return calculation reflects dividend
reinvestment.
33
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
-----------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout
the year)
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- -------
Income from investment operations:
Investment income--net 0.05 0.05 0.03 0.03 0.04
Total from Investment Operations 0.05 0.05 0.03 0.03 0.04
------- ------- ------- ------- -------
Distributions:
Distributions from investment income (0.05) (0.05) (0.03) (0.03) (0.04)
------- ------- ------- ------- -------
Total Distributions (0.05) (0.05) (0.03) (0.03) (0.04)
------- ------- ------- ------- -------
Net Increase (decrease) 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- -------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return* 5.19% 5.20% 3.27%+ 2.77% 3.73%
Ratios/Supplemental Data:
Ratios to average net assets
Expenses 0.50% 0.50% 0.42% 0.25% 0.44%
Investment income--net 5.06% 5.15% 3.18% 2.94% 3.68%
Decrease reflected in above expense
ratio due to expense waivers and
reimbursement 3.64% 3.72% 3.47% 4.39% 5.19%
Net Assets at End of Year ($1,000's) $1,463 $1,207 $1,112 $1,466 $664
</TABLE>
* The total return calculation reflects dividend
reinvestment.
+ Had an affiliate of the advisor not contributed capital to
the fund to reimburse a realized loss, the total return
would have been 3.22%.
34
<PAGE>
INDEPENDENT AUDITOR'S REPORT
---------------------------------------------------------------
To the Shareholders and Board of Directors
Retirement System Fund Inc.
We have audited the statements of assets and liabilities,
including the statements of investments, of the Core Equity
Fund, Emerging Growth Equity Fund, Intermediate-Term
Fixed-Income Fund and Money Market Fund (the "Investment
Funds") of the Retirement System Fund Inc. as of September 30,
1996, and the related statements of operations for the year
then ended, statements of changes in net assets for each of the
two years in the period then ended and the financial highlights
for each of the five years in the period then ended. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1996, by
correspondence with the custodians and brokers. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Investment Funds of
Retirement System Fund Inc. at September 30, 1996, the results
of their operations, the changes in their net assets and the
financial highlights for the periods indicated, in conformity
with generally accepted accounting principles.
[SIGNATURE]
New York, New York
November 15, 1996
35
<PAGE>
OFFICERS
---------------------------------------------------------------
William Dannecker, President
James P. Coughlin, C.F.A., Executive Vice President and Chief
Investment Officer
Stephen P. Pollak, Esq., Executive Vice President, Counsel and
Secretary
John F. Meuser, Senior Vice President and Treasurer
Veronica A. Fisher, First Vice President and Assistant
Treasurer
Herbert Kuhl, Jr., C.F.A., First Vice President
Chris R. Kaufman, Second Vice President
Deborah A. Modzelewski, Second Vice President
Heidi Viceconte, Second Vice President
INVESTMENT MANAGERS
---------------------------------------------------------------
The Putnam Advisory Company, Inc.
Retirement System Investors Inc.
CUSTODIAN
---------------------------------------------------------------
Custodial Trust Company
DISTRIBUTOR
---------------------------------------------------------------
Retirement System Distributors Inc.
CONSULTANT
---------------------------------------------------------------
Retirement System Consultants Inc.
TRANSFER AGENT
---------------------------------------------------------------
Retirement System Consultants Inc.
INDEPENDENT AUDITORS
---------------------------------------------------------------
McGladrey & Pullen, LLP
COUNSEL
---------------------------------------------------------------
Morgan, Lewis & Bockius, LLP
36
<PAGE>
BOARD OF DIRECTORS
---------------------------------------------------------------
Edward J. Brown
Retired President and Chief Operating Officer
Apple Bank for Savings and Apple Bancorp, Inc., NY
Candace Cox
President and Chief Investment Officer
NYNEX Asset Management Co., NY
William Dannecker
President and Chief Executive Officer
Retirement System Group Inc., NY
Eugene C. Ecker
Pension and Group Insurance Consultant
Joseph P. Gemmell
Chairman of the Board, President and Chief Executive Officer
Bankers Savings, NJ
Covington Hardee
Retired Chairman
The Lincoln Savings Bank, FSB, NY
Raymond L. Willis
Private Investments
37
<PAGE>
FOR MORE COMPLETE INFORMATION ABOUT RETIREMENT SYSTEM FUND INC., INCLUDING
CHARGES AND EXPENSES, CALL 1-800-772-3615 FOR A PROSPECTUS OR WRITE TO
RETIREMENT SYSTEM DISTRIBUTORS INC., CUSTOMER SERVICE, P.O. BOX 2064, GRAND
CENTRAL STATION, NEW YORK, NY 10163-2064. READ THE PROSPECTUS CAREFULLY BEFORE
YOU INVEST OR SEND MONEY. RETIREMENT SYSTEM FUND IS DISTRIBUTED EXCLUSIVELY BY
RETIREMENT SYSTEM DISTRIBUTORS INC. TOTAL RETURNS ARE BASED ON HISTORICAL
RESULTS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. FUTURE PERFORMANCE
AND UNIT ASSET VALUE WILL FLUCTUATE SO THAT UNITS, IF REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. THIS MATERIAL MUST BE PRECEDED OR
ACCOMPANIED BY A PROSPECTUS.
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ANNUAL REPORT
*Not yet available for sale to investors
[LOGO]
Retirement System
Fund Inc.
Core Equity Fund
Emerging Growth Equity Fund
Intermediate-Term Fixed-Income Fund
Money Market Fund
Value Equity Fund*
International Equity Fund*
Actively Managed Fixed-Income Fund*
1996
Broker/Dealer
[LOGO]
RETIREMENT SYSTEM
Distributors Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
