<PAGE>
SEMI-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*
1997
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................................. 6
Core Equity Fund..................................................... 6
Emerging Growth Equity Fund.......................................... 10
Intermediate-Term Fixed-Income Fund.................................. 15
Money Market Fund.................................................... 18
Notes to Financial Statements............................................ 21
Officers, Consultants, Investment Managers,
Custodians, Distributor, Transfer Agent................................ 32
Board of Directors....................................................... 33
</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.
This Semi-Annual Report is unaudited.
<PAGE>
PRESIDENT'S MESSAGE
To Our Shareholders:
During the six-month period ended March 31, 1997, the trend
that has been prevalent during the past few years--moderate
economic growth, fluctuating interest rates, favorable
inflation rates, heavy corporate stock repurchases and massive
cash inflows by mutual fund investors--continued unabated.
Equity markets showed ongoing strength, with strong returns
in the first quarter of the fiscal year, followed by more
volatile returns in the second quarter. The S&P 500, a
representative index of the U.S. broad equity market, rose
11.24% for the entire period (8.42% and 2.61%, respectively,
for the two consecutive quarters). Second quarter volatility
was also apparent in the Russell 2000, a small cap index, which
ended the six-month period down 0.24%, and down 5.17% for the
three months ended March 31, 1997. Fixed-income markets,
affected by the continuing strong economic growth and concerns
about higher inflation and the resulting upward movement in
interest rates, experienced negative returns in the second
quarter of the fiscal year, but still finished the six months
ended March 31, 1997 with positive results.
During the six-month period, two funds--the
Intermediate-Term Fixed-Income Fund and the Money Market
Fund--outperformed their respective Lipper benchmarks. However,
over the longer term, the funds were more uniformly successful,
with all the investment funds outperforming their respective
Lipper benchmarks for the five-year period ended March 31,
1997.
During the fiscal year-to-date, assets under Fund
management have grown substantially, increasing by $8 million,
to $30.8 million at March 31, 1997.
On behalf of the Board of Directors, I'd like to thank our
shareholders for choosing Retirement System Fund Inc. to help
meet your investment goals. I'd also like to thank the members
of the Board for their valuable counsel and assistance.
Sincerely,
[SIG]
William Dannecker
President and Director
1
<PAGE>
INVESTMENT REVIEW
EQUITY FUNDS
For the first six months of fiscal year 1997, the domestic
equity market indices (principally for large cap stocks),
showed substantial strength in the fourth quarter 1996 and
modest strength for the first quarter 1997. For the full
period, the Dow Jones Industrial Average (DJIA) reflected the
highest gains at 13.17%. During this period, cyclical stocks
were generally in favor and the DJIA benefited accordingly,
since this index contains a number of cyclical stocks. The S&P
500, a representative index of the U.S. broad equity market,
rose 11.24% for the period (8.42% and 2.61%, respectively, for
the last two quarters).
Large cap growth stocks, as measured by the Russell 1000
Growth Index, were more sensitive to investor sentiment, which
became more bearish in the first quarter, and returned 6.61%
(6.04% of the return coming in the fourth quarter 1996). The
Russell 2000, a small capitalization index, was one of the
worst performing indices at -0.24% for the last six months, and
down 5.17% for trailing three months ended March 31, 1997. (For
the six-month period, the Russell 2000 Growth Index, however,
was down 10.25%, and reflected a -10.49% result for the most
recent quarter.)
Value oriented stocks (traditionally, stocks selling at low
p/e's, low price/book ratios and/or high dividend yields)
performed well over the past six months. The representative
index for this investment discipline, the Russell 1000 Value
Index, returned 12.79% (9.98% for the fourth quarter 1996 and
2.56% for the first quarter 1997).
Moderate economic growth, low inflation rates, favorable
interest rates, heavy corporate stock repurchases and
substantial cash inflow by mutual fund investors have propelled
the stock market over the past few years. Thus far in fiscal
year 1997, this trend has continued (as was the case also for
the first half year of fiscal year 1996). Corporate earnings
have benefited from productivity gains from technological
innovations, downsizing of costs, and the improved competitive
position of U.S. companies, in spite of a rising dollar.
Economic growth (Gross Domestic Product, or "GDP") was
strong, growing at an annualized rate of 3.8% for the fourth
quarter 1996. The momentum continued for the first quarter of
1997.
Assuming a 2% to 3% GDP pace, on average, the key to future
earnings growth will be the interaction of productivity gains
and product price increases versus higher wage and raw material
costs. The extent of recovery in foreign economies will also
play a major role. Looking forward, meaningful stock market
gains would seem to depend upon no substantial increases in
interest rates and the continuation of earnings growth
momentum. Also, ongoing share repurchases should continue to
help stock prices. Conversely, market volatility risk could
increase if higher interest rates accompanied by profit
pressures develop, particularly if strong cash flow trends into
equity mutual funds moderate significantly. Subsequent to March
31, 1997, interest rates have continued to fluctuate and the
equity markets have been very volatile as a result, with the
small capitalization company indices being the most severely
impacted to date.
2
<PAGE>
CORE EQUITY FUND
The Core Equity Fund posted an 3.91% return for the six months
ended March 31, 1997, compared to a return of 8.63% for the
Lipper Growth and Income Funds Average, its performance
comparison benchmark. For the one-year period ended March 31,
1997, the Fund returned 17.07% versus the 15.47% return of the
Lipper benchmark. For the three-year period ended March 31,
1997, the Fund returned 21.90% per year, outpacing the 17.89%
annualized return of its benchmark, and ranked in the top 5% of
the Lipper Growth & Income Fund grouping (15th out of 341
funds). Since inception (June 1, 1991 to March 31, 1997), this
Fund achieved an annualized return of 16.59%, and ranked in the
top 6% of the Lipper Growth and Income Funds' grouping (11th
out of 195 funds).
EMERGING GROWTH EQUITY FUND
For the six-month period ended March 31, 1997, the Emerging
Growth Equity Fund reflected a return of -17.12%, while its
benchmark, the Lipper Small Company Growth Funds Average,
returned -4.60%. For the one-year period ended March 31, 1997,
the Fund returned -0.59%, as compared to the 4.67% return of
its Lipper benchmark. For the three-year period ended March 31,
1997, the Fund's annualized return of 20.98% outperformed by
more than seven percentage points the 13.63% annualized return
of its benchmark. This return placed the Fund in the top 7%
(15th out of 227 funds) of its Lipper grouping. Since inception
(June 1, 1991 to March 31, 1997) the Fund achieved a 20.94%
annualized return, outpacing the 14.61% annualized return for
its Lipper benchmark by a considerable margin. This return
placed the Fund in the top 4% of the Lipper Small Company
Growth Funds' grouping (3rd out of 83 funds).
FIXED-INCOME FUNDS
In the fourth quarter of 1996, inflation remained under
control, as the Consumer Price Index (CPI) was up 0.5% for the
period. It was a period when interest rates throughout the
yield curve were declining most of the time and a period during
which the Federal Reserve (late in the quarter) was becoming
more sensitive to underlying inflationary concerns as a result
of the robust economy. For the longer-term portion of the yield
curve, fixed-income total returns (interest plus price
changes), as measured by the Lehman Brothers Aggregate Bond
Index, rose 3.00% for the quarter. For the short- to-
intermediate-term securities (represented by the Lehman
Brothers Government-Intermediate Bond Index), the total
quarterly return was up 2.31%; and cash equivalent-type
investments (the 90-Day Treasury Bills) increased 1.22% for
this period.
The first quarter of 1997 (like the first quarter of 1996)
reflected a turn in events--intermediate and longer-term
interest rates rose substantially with the 5-year Treasury
increasing to 6.75% at quarter end from 6.21% at December 31,
1996 and the 30-year Treasury up to 7.09% at March 31, 1997
from 6.64% at December 31, 1996. On March 25, 1997, the Federal
Reserve (FED) Committee did increase the Federal Funds Rate by
25 basis points to 5.50%, but kept the Discount Rate unchanged
at 5.00% (this was the first action taken by the FED in 14
months).
3
<PAGE>
Moreover, the outlook remains bright for continued strong
economic growth, thereby strengthening inflationary concerns
and further increases in interest rates. As a result of the
conditions that prevailed during this quarter, the bond markets
reflected negative returns (the same situation that also
prevailed for the first quarter of 1996). However, the Lehman
Brothers Government-Intermediate Bond Index (a proxy for the
short- to-intermediate securities) finished the six-month
period ended March 31, 1997 up 2.29%. The 90-Day U.S. Treasury
Bills returned 2.48% for this six-month period.
INTERMEDIATE-TERM FIXED-INCOME FUND
The Intermediate-Term Fixed-Income Fund returned 2.53% for the
fiscal year-to-date ended March 31, 1997, and compared
favorably to its benchmark, the Lipper Short-Intermediate (1 to
5 year maturity) U.S. Government Funds grouping, which returned
2.25%. For the one year ended March 31, 1997, this Fund
achieved a 4.91% return, compared to a 4.38% return for the
Lipper benchmark. With an annualized return of 6.91% since
inception (June 1, 1991 to March 31, 1997), this Fund
outperformed the Lipper benchmark's performance of 6.21% per
year for the same period, and ranked in the top 12% of its
Lipper grouping (3rd out of 26 funds).
The Intermediate-Term Fixed-Income Fund emphasizes quality
of holding, with 98% in U.S. Treasury and U.S. Government and
Agency issues, and 2% in Repurchase Agreements collateralized
with U.S. Treasury securities. At March 31, 1997, the Fund
reflected an average maturity of 2.4 years and an average
duration of 2.2 years, versus 3.7 years and 3.0 years,
respectively, at September 30, 1996.
MONEY MARKET FUND
For the six-month period ended March 31, 1997, the Money Market
Fund posted a return of 2.45%, comparing favorably to the
Lipper Retail Money Market Funds Average return of 2.35% and
the Donoghue All-Taxable Money Funds Average return of 2.44%
for the same period. For the one-year period ended March 31,
1997 the Fund produced a return of 5.02% and compared favorably
to both representative benchmarks for this period. The Fund
achieved a respectable five-year average return of 4.91%,
outpacing the Lipper Retail Money Market Fund Average of 4.01%
per annum and equaling the Donoghue Average annual return of
4.91%.
Since inception (April 1, 1991 through March 31, 1997), the
Fund achieved an annualized return of 4.20% versus 4.17% per
year for the Lipper Average and a 4.25% annualized return for
the Donoghue Average.
The Money Market Fund emphasizes quality holdings, with 96%
in U.S. Government Agency issues and 4% in Repurchase
Agreements collateralized with U.S. Treasury securities. On
March 31, 1997, the average maturity of all portfolio holdings
was 19 days versus 36 days, six months ago (September 30,
1996).
4
<PAGE>
EQUITY FUNDS
NET INVESTMENT PERFORMANCE(1)
FOR PERIODS ENDED MARCH 31, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
------------------------------------
Since
6 Months 1 Year 3 Years 5 Years Inception(2)
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
CORE EQUITY FUND 3.91% 17.07% 21.90% 17.75% 16.59%
Lipper Growth & Income Funds
Average(3) 8.63 15.47 17.89 14.21 13.66
EMERGING GROWTH EQUITY FUND -17.12 -0.59 20.98 19.95 20.94
Lipper Small Company Growth
Funds Average(3) -4.60 4.67 13.63 13.34 14.61
</TABLE>
1. All performance results shown are net of management fees
and all related expenses, unless otherwise footnoted.
2. Covers the period from 6/1/91 through 3/31/97.
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.
---------------------------------------------------------------
FIXED-INCOME FUNDS
NET INVESTMENT PERFORMANCE(1)
FOR PERIODS ENDED MARCH 31, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
------------------------------------
Since
6 Months 1 Year 3 Years 5 Years Inception
------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
INTERMEDIATE-TERM FIXED-INCOME
FUND 2.53% 4.91% 4.96% 6.28% 6.91%
Lipper Short-Intermediate
(1 to 5 year maturity)
U.S. Government Funds Average 2.25 4.38 5.11 5.56 6.21(2)
MONEY MARKET FUND(3) 2.45 5.02 4.91 4.11 4.20(4)
Donoghue All Taxable Money Fund
Average(5) 2.44 4.92 4.91 4.10 4.25(4)
Lipper Retail Money Market
Funds Average(6) 2.35 4.76 4.81 4.01 4.17(4)
</TABLE>
1. All performance results shown are net of management fees
and all related expenses, unless otherwise footnoted.
2. Covers the period from 6/1/91 through 3/31/97.
3. Investment in the Money Market Fund is neither insured or
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.
4. Covers the period from 4/1/91 through 3/31/97.
5. Reported by the Donoghue Money Fund Reporting Service. The
performance results reflect an unmanaged index and are net,
since expenses are applicable.
6. 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.
---------------------------------------------------------------
5
<PAGE>
FINANCIAL STATEMENTS OF INVESTMENT FUNDS
CORE EQUITY FUND
Statement of Investments
March 31, 1997 (Unaudited)
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- -----------
<C> <S> <C> <C>
COMMON STOCKS 90.9%
AEROSPACE 4.4%
1,000 Boeing Corp. $ 98,624
4,800 Lockheed Martin Corp. 403,200
-----------
501,824
-----------
AUTOMOBILES 0.6%
1,640 Chrysler Corporation 49,200
500 Snap-On Tools Inc. 19,375
-----------
68,575
-----------
BANKING 6.4%
2,600 BankAmerica Corp. 261,950
2,576 Chase Manhattan Corp. 241,177
2,000 Citicorp 216,500
-----------
719,627
-----------
BUILDING PRODUCTS 1.7%
3,000 Armstrong World Industries
Inc. 194,250
-----------
CHEMICALS 2.7%
2,900 E.I. Du Pont De Nemours &
Company 307,400
-----------
COMPUTER SYSTEMS 2.5%
2,100 International Business
Machines Corp. 288,488
-----------
DRUG AND HEALTH CARE 2.7%
5,800 Johnson & Johnson 306,675
-----------
ELECTRONICS AND ELECTRICAL 14.9%
2,400 Cisco Systems Inc.* 115,500
1,600 EMC Corp. 56,800
8,800 Emerson Electric Company 396,000
4,600 General Electric Company 456,550
5,200 Hewlett Packard Corp. 276,900
2,600 Intel Corp. 361,400
500 Seagate Technology Inc. 22,438
-----------
1,685,588
-----------
ENERGY 7.7%
4,100 Dresser Industries Inc. 124,025
4,100 Exxon Corp. 441,775
600 Royal Dutch Petroleum Company 105,000
1,800 Texaco Inc. 197,100
-----------
867,900
-----------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Investments
March 31, 1997 (Unaudited)
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- -----------
<C> <S> <C> <C>
ENGINEERING AND CONSTRUCTION 1.9%
4,200 Fluor Corp. $ 220,500
-----------
FINANCIAL SERVICES 8.9%
7,900 Federal National Mortgage
Association 285,388
1,100 Morgan (J.P.) & Company Inc. 108,075
5,900 Sunamerica, Inc. 221,988
6,400 Sunamerica, Inc. Pfd 252,800
3,000 Travelers Group, Inc. 143,625
-----------
1,011,876
-----------
FOOD AND SERVICES 3.1%
9,400 Dole Food Company 354,850
-----------
INSURANCE 3.3%
5,300 Allstate Corp. 314,687
400 General Re Corp 63,200
-----------
377,887
-----------
MACHINERY AND ENGINEERING 3.3%
6,300 Cincinnati Milacron Inc. 118,125
5,500 Deere & Company 239,250
400 Ingersoll-Rand Company 17,450
-----------
374,825
-----------
METALS AND MINING 3.4%
1,000 Aluminum Company of America 68,000
4,100 Potash Corp. of Saskatchewan 311,600
-----------
379,600
-----------
MISCELLANEOUS 2.2%
2,200 Philip Morris Companies Inc. 251,075
-----------
MULTI INDUSTRY 2.8%
4,500 Allied Signal Inc. 320,625
-----------
OFFICE AND BUSINESS EQUIPMENT 2.1%
4,100 Xerox Corp. 233,188
-----------
PHARMACEUTICALS 2.9%
200 Amgen 11,175
400 Lilly & Co. 32,900
3,400 Pfizer Inc. 286,025
-----------
330,100
-----------
<CAPTION>
SHARES VALUE
- --------- -----------
<C> <S> <C> <C>
RETAIL 1.0%
1,700 Federated Department Stores $ 55,888
1,200 Sears Roebuck & Company 60,300
-----------
116,188
-----------
SOFTWARE 7.8%
200 BMC Software, Inc. 9,200
9,100 Computer Associates
International, Inc. 353,763
3,000 Electronic Data Systems Corp. 121,125
9,600 Informix Corp.* 144,000
6,000 Oracle Systems Corp.* 231,000
200 Parametric Technology Corp.* 9,000
1,000 Structural Dynamics Research* 20,500
-----------
888,588
-----------
TELECOMMUNICATIONS 4.6%
3,100 American Telephone & Telegraph
Corp. 107,725
2,004 Lucent Technologies, Inc. 105,710
8,400 Tellabs Inc.* 302,400
-----------
515,835
-----------
Total Common and Preferred Stocks (Cost $7,401,519) $10,315,464
-----------
<CAPTION>
PRINCIPAL
AMOUNT
- ---------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 4.4%
$475,000 Bear Stearns & Co. Inc. Dated
3/31/1997 6.28% due 4/1/1997
collateralized by $3,060,000
United States Treasury
Strips due 11/15/2022 (Value
$484,826) 475,000
-----------
Total Investments (Cost $7,876,519) 95.3% $10,790,464
-----------
</TABLE>
<TABLE>
<CAPTION>
# OF EXPIRATION DATE/
CONTRACTS STRIKE PRICE
- --------- ----------------
<C> <S> <C> <C>
WRITTEN COVERED CALL OPTIONS
10 General Electric Co. June 1997 / 110
(Premiums Received $5,095) (1,625)
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Other Assets, Less Liabilities 4.7% 537,189
----- -----------
Net Assets 100.0% $11,326,028
----- -----------
----- -----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 7
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$7,876,519)--Note 2 $10,790,464
Cash 426,540
Receivable for investments sold 35,219
Receivable for shares sold 152,705
Dividends and interest receivable 16,335
Other assets 14,252
-----------
11,435,515
LIABILITIES:
Options written (premiums received $5,095) $ 1,625
Payable for investments purchased 77,652
Accrued expenses and other 30,210 109,487
------- -----------
NET ASSETS at value, applicable to 565,820
outstanding shares--Note 5 $11,326,028
-----------
-----------
NET ASSET VALUE offering and redemption price
per share
($11,326,028 divided by 565,820 shares) $ 20.02
-----------
-----------
</TABLE>
Statement of Operations Six Months Ended March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 24,699
Dividends 75,464
--------
Total Income $100,163
Expenses:
Investment manager's fees--Note 3 31,636
Shareholder servicing fees and
expenses--Note 3 31,636
Distribution fee--Note 3 10,545
Custodian fees and expenses 3,732
Legal and auditing fees 4,773
Directors' fees and expenses 6,531
Printing and postage 5,807
Registration fees 7,656
Other 1,367
--------
Total expenses 103,683
Less expense reimbursement--Note 3 (54,616)
--------
Net expenses 49,067
--------
INVESTMENT INCOME--NET 51,096
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS--Note 4:
Net realized gain on investments 127,215
Unrealized appreciation on investments 110,215
--------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 237,430
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $288,526
--------
--------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
3/31/97 YEAR ENDED
(UNAUDITED) 9/30/96
----------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 51,096 $ 85,853
Net realized gain on investments 127,215 364,855
Unrealized appreciation on investments 110,215 980,258
----------- ----------
Increase in net assets resulting from operations 288,526 1,430,966
----------- ----------
DIVIDEND DISTRIBUTION--Note 2:
Investment income--net (93,023) (86,059)
Realized gain on investments (338,161) 0
----------- ----------
(431,184) (86,059)
----------- ----------
CAPITAL TRANSACTIONS--Note 5:
Value of shares sold 2,627,049 2,533,992
Value of shares redeemed (454,052) (757,380)
Value of shares issued in reinvestment of dividend distribution 430,673 86,059
----------- ----------
Net increase in net assets resulting from capital transactions 2,603,670 1,862,671
----------- ----------
Net increase 2,461,012 3,207,578
NET ASSETS at beginning of period 8,865,016 5,657,438
----------- ----------
NET ASSETS at end of period $11,326,028 $8,865,016
----------- ----------
----------- ----------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
EMERGING GROWTH EQUITY FUND
Statement of Investments
March 31, 1997 (Unaudited)
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- -----------
<C> <S> <C> <C>
COMMON STOCKS 84.7%
APPAREL AND TEXTILE 2.9%
2,100 Gadzooks Inc.* $ 66,150
5,890 St. John Knits Inc. 254,743
-----------
320,893
-----------
BROADCASTING AND
PUBLISHING 2.4%
3,600 Granite Broadcasting
Corp.* 34,650
2,700 Heftel Broadcasting Corp.
Class A* 124,200
1,500 SFX Broadcasting Inc.* 42,375
600 Sinclair Broadcast Group
Inc.* 15,600
2,100 Young Broadcasting Corp.
Class A* 50,138
-----------
266,963
-----------
BUSINESS AND PUBLIC
SERVICES 10.4%
2,100 Acres Gaming, Inc.* 9,713
100 Ameritrade Holding Corp.
Class A* 1,563
1,400 Carriage Services, Inc.* 26,600
1,300 CCC Information Services
Group* 15,275
2,000 Claremont Technology
Group* 47,000
2,000 Computer Task Group Inc. 71,000
4,320 Concord EFS, Inc.* 81,000
4,700 Cotelligent Group Inc.* 42,300
1,700 Delta Financial Corp.* 30,813
4,950 Equity Corporation
International* 103,950
4,420 Keane Inc.* 145,308
2,200 Lamar Advertising Co.* 43,450
800 Learning Tree
International, Inc.* 22,200
1,100 Metzler Group, Inc.* 23,788
1,400 Outdoor Systems, Inc.* 40,600
1,600 PJ America Inc.* 22,800
3,600 Precision Response Corp.* 85,050
3,000 Raptor Systems, Inc.* 38,625
4,050 Splash Technologies
Holdings* 99,225
2,900 Strayer Education Inc.* 56,550
1,600 Sykes Enterprises, Inc.* 50,600
1,000 The Registry, Inc.* 35,000
1,800 Universal Outdoor
Holdings* 52,200
-----------
1,144,610
-----------
COMMERCIAL SERVICES 5.7%
3,250 Brightpoint Inc.* 52,813
1,687 Corestaff Inc.* 32,686
3,900 Fine Host Corp.* 91,163
2,100 FYI Inc.* 42,788
2,800 Judge Group, Inc.* 9,975
2,850 Lason Holdings Inc.* 56,288
2,700 National Techteam Inc.* 41,850
3,400 NCO Group, Inc.* 73,100
<CAPTION>
SHARES VALUE
- --------- -----------
<C> <S> <C> <C>
4,200 PMT Services Inc.* $ 45,675
4,200 Promedco Management Co.* 37,800
2,340 Robert Half International
Inc.* 81,608
3,000 Superior Services Inc.* 66,750
-----------
632,496
-----------
CONSUMER GOODS AND
SERVICES 11.6%
2,550 Blyth Industries Inc.* 92,119
3,000 Cuno Inc.* 46,125
5,100 Finish Line (the) Class
A* 112,200
5,100 French Fragrances, Inc.* 38,250
400 General Cigar Holding,
Inc.* 8,900
4,400 Marks Bros. Jewelers
Inc.* 51,700
2,000 Metris Companies, Inc.* 49,500
3,078 Nautica Enterprises Inc.* 76,950
5,000 Rexall Sundown, Inc.* 128,125
4,500 Signature Resorts Inc.* 105,750
3,432 Stewart Enterprises Inc. 124,410
5,100 Team Rental Group Inc.* 104,550
5,600 The North Face, Inc.* 92,400
1,600 Watsco, Inc.* 40,800
5,660 Wolverine World Wide 206,590
-----------
1,278,369
-----------
DATA PROCESSING 0.3%
1,800 Data Processing
Resources* 33,300
-----------
ELECTRONICS AND
ELECTRICAL 13.4%
2,300 Act Manufacturing Inc. 47,150
4,300 Actel Corp.* 93,525
6,200 Advanced Lighting Techs* 136,400
1,100 Benchmarq
Microelectronics* 13,338
4,700 C.P. Clare Corp.* 47,000
1,500 CFM Technologies Inc.* 43,875
7,200 Computer Products Inc.* 105,300
4,703 Credence Systems Corp.* 91,120
5,454 Del Global Technologies
Corp.* 44,995
1,800 Electromagnetic Sciences,
Inc.* 33,300
4,600 Elexsys International
Inc.* 55,200
1,200 Enterprise Systems* 27,000
2,700 Flextronics International
Ltd.* 52,987
1,000 Helix Technology Corp. 32,750
3,900 Integrated Circuit
Systems* 55,575
1,900 Jabil Circuit Inc.* 85,500
2,900 JPM Company* 47,125
1,500 Micrel, Inc.* 43,500
2,400 Micro Linear Corp.* 29,700
900 Photronics, Inc.* 26,437
2,250 Sanmina Corp.* 100,405
</TABLE>
See Notes to Financial Statements 10
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Investments
March 31, 1997 (Unaudited)
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- -----------
ELECTRONICS AND
ELECTRICAL--CONTINUED
<C> <S> <C> <C>
3,600 SDL Inc.* $ 60,300
3,100 Sierra Semiconductor
Corp.* 49,988
2,250 Thermo Voltek Corp. 20,812
2,800 Ultrak, Inc.* 49,000
3,700 Ultratech Stepper Inc.* 80,937
-----------
1,473,219
-----------
EMPLOYMENT AGENCY 0.6%
2,530 On Assignment Inc.* 63,250
-----------
ENTERTAINMENT 1.8%
1,400 Family Golf Centers,
Inc.* 26,775
4,700 Penn National Gaming
Inc.* 74,025
2,500 Penske Motorsports Inc.* 70,000
1,200 Regal Cinemas Inc.* 32,400
-----------
203,200
-----------
FOOD AND SERVICES 0.7%
2,100 Mortons Restaurant Group
Inc.* 35,438
2,250 Rainforest Cafe, Inc.* 44,437
-----------
79,875
-----------
FURNITURE/HOME APPLIANCES 0.9%
4,250 Cort Business Services
Corp.* 96,687
-----------
INSURANCE 3.1%
2,075 Compdent Corp.* 58,100
1,885 CRA Managed Care, Inc.* 69,745
4,830 HCC Insurance Holdings
Inc. 118,335
2,020 Reinsurance Group of
America, Inc. 97,970
-----------
344,150
-----------
LODGING/MOTELS 1.5%
7,800 Prime Hospitality Corp.* 121,875
2,760 Studio Plus Hotels, Inc.* 47,610
-----------
169,485
-----------
MACHINERY AND ENGINEERING 2.5%
1,800 Memtec Ltd. 45,675
7,700 Miller Industries Inc.* 92,400
2,700 Remec, Inc.* 54,675
3,300 Rental Service Corp.* 60,225
700 Veeco Instruments Inc.* 20,562
-----------
273,537
-----------
MEDICAL SERVICES AND
DRUGS 10.0%
4,975 American Homepatient
Inc.* 109,450
2,400 Amrion, Inc.* 39,300
4,700 Cytyc Corp.* 88,125
4,250 Dura Pharmaceuticals
Inc.* 151,405
<CAPTION>
SHARES VALUE
- --------- -----------
<C> <S> <C> <C>
1,400 Idexx Laboratories Inc.* $ 19,600
2,750 Igen Inc.* 14,437
2,200 Impath, Inc.* 38,500
975 Lunar Corp.* 32,662
4,950 Medicis Pharmaceutical
Class A* 146,025
2,200 Minimed, Inc.* 56,650
2,550 National Surgery Centers
Inc.* 73,312
2,000 NCS Healthcare Inc. Class
A* 44,250
1,000 Pediatix Medical* 32,500
1,500 Pharmaceutical Product
Development* 29,250
2,050 Premier Research
Worldwide* 32,800
1,300 Renal Care Group Inc.* 41,275
2,100 Sabratek Corp.* 40,950
3,200 Sangstat Medical Corp.* 86,800
1,000 United Dental Care Inc.* 27,000
-----------
1,104,291
-----------
RETAIL 4.2%
1,000 99 Cents Only Stores* 20,125
2,900 Barnett, Inc.* 57,275
1 Corporate Express Inc. 8
2,400 Cost Plus Inc. 36,600
3,300 Loehmann's, Inc.* 57,750
1,600 Mazel Stores Inc.* 32,000
1,200 Petco Animal Supplies,
Inc.* 27,600
5,200 The Men's Wearhouse Inc.* 143,000
2,800 West Marine Inc.* 89,600
-----------
463,958
-----------
SOFTWARE 8.2%
2,600 Analysts International
Corp. 56,550
1,000 Arbor Software Corp.* 25,000
4,000 Black Box Corp.* 107,500
1,900 BTG, Inc.* 33,250
2,832 Computer Horizons Corp.* 87,791
4,500 Computer Learning
Centers* 147,375
665 McAfee Associates Inc.* 29,343
3,600 Oak Technology Inc.* 36,450
600 PRI Automation, Inc.* 28,200
925 Project Software &
Development, Inc.* 29,022
1,400 Red Brick Systems, Inc.* 19,075
2,100 Renaissance Solutions
Inc.* 52,500
3,000 SPSS, Inc.* 73,500
3,000 Summit Design, Inc.* 22,125
5,700 Technology Solutions
Company* 154,613
-----------
902,294
-----------
TELECOMMUNICATIONS 3.2%
1,550 Anadigics, Inc.* 41,850
3,300 Evergreen Media Corp.* 96,113
1,800 Intermedia Communications
Inc.* 29,475
</TABLE>
See Notes to Financial Statements 11
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Investments
March 31, 1997 (Unaudited)
- ----------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- -----------
TELECOMMUNICATIONS--CONTINUED
<C> <S> <C> <C>
1,300 Level One Communications* $ 34,775
6,000 Midcom Communication
Inc.* 47,250
2,200 Natural Microsystems
Corp.* 43,725
3,006 Saga Communications Inc.
Class A* 62,375
-----------
355,563
-----------
TRANSPORTATION 1.3%
5,750 Expeditors International
of Washington, Inc. 138,000
-----------
Total Common Stocks (Cost $9,516,832) $ 9,344,140
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- -----------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 4.1%
$450,000 Bear Stearns & Co. Inc.
Dated 3/31/1997 6.28%
due 4/1/1997
Collateralized by
$2,900,000 United
States Treasury Strips
due 11/15/2022 (Value
$459,476) $ 450,000
-----------
Total Investments (Cost $9,966,832) 88.8% $ 9,794,140
Other Assets, Less Liabilities 11.2% 1,235,736
------ -----------
Net Assets 100.0% $11,029,876
------ -----------
------ -----------
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 12
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities at value (Cost $9,966,832)--Note
2 $ 9,794,140
Cash 1,096,847
Receivable for shares sold 161,996
Dividends and interest receivable 7,201
Other assets 9,535
-----------
11,069,719
LIABILITIES:
Accrued expenses and other 39,843
-----------
NET ASSETS at value, applicable to 581,128 outstanding
shares--Note 5 $11,029,876
-----------
-----------
NET ASSET VALUE offering and redemption price per share
($11,029,876 divided by 581,128 shares) $ 18.98
-----------
-----------
</TABLE>
Statement of Operations Six Months Ended March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 29,656
Dividends 2,618
-----------
Total Income $ 32,274
Expenses:
Investment manager's fees--Note 3 45,119
Shareholder servicing fees and
expenses--Note 3 28,813
Distribution fee--Note 3 9,604
Custodian fees and expenses 29,798
Legal and auditing fees 4,770
Directors' fees and expenses 6,531
Printing and postage 5,900
Registration fees 7,614
Other 904
-----------
Total expenses 139,053
Less expense reimbursement--Note 3 (48,816)
-----------
Net expenses 90,237
-----------
INVESTMENT (LOSS)--NET (57,963)
REALIZED GAIN AND UNREALIZED (LOSS) ON
INVESTMENTS--Note 4:
Net realized gain on investments 100,173
Unrealized (depreciation) on investments (1,987,056)
-----------
NET REALIZED GAIN AND UNREALIZED (LOSS) ON
INVESTMENTS (1,886,883)
-----------
NET (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $(1,944,846)
-----------
-----------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
3/31/97 YEAR ENDED
(UNAUDITED) 9/30/96
----------- ----------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net $ (57,963) $ (61,578)
Net realized gain on investments 100,173 697,630
Unrealized appreciation (depreciation) on investments (1,987,056) 926,887
----------- ----------
Increase (decrease) in net assets resulting from operations (1,944,846) 1,562,939
----------- ----------
DIVIDEND DISTRIBUTION--Note 2:
Realized gain on investments (656,536) (252,458)
----------- ----------
CAPITAL TRANSACTIONS--Note 5:
Value of shares sold 8,490,605 2,748,861
Value of shares redeemed (2,114,067) (651,909)
Value of shares issued in reinvestment of dividend distribution 645,826 250,995
----------- ----------
Net increase in net assets resulting from capital transactions 7,022,364 2,347,947
----------- ----------
Net increase 4,420,982 3,658,428
NET ASSETS at beginning of period 6,608,894 2,950,466
----------- ----------
NET ASSETS at end of period $11,029,876 $6,608,894
----------- ----------
----------- ----------
</TABLE>
See Notes to Financial Statements
14
<PAGE>
INTERMEDIATE-TERM FIXED-INCOME FUND
Statement of Investments
March 31, 1997 (Unaudited)
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- ----------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS 97.3%
$ 500,000 Federal Home Loan Bank
7.27% Due 4/15/2003 $ 495,381
200,000 Federal Home Loan Bank
Structured Note
6.50% Due 4/14/2004 200,073
300,000 Federal Home Loan Bank
Structured Note
6.00% Due 4/12/2001 301,391
200,000 Federal Home Loan Bank
Structured Note
6.10% Due 6/13/2001 199,719
200,000 Federal Home Loan Bank
Structured Note
5.20% Due 10/20/2000 192,840
640,465 Federal Home Loan Mortgage Corp.
Remic 1680e
6.50% Due 2/15/2024 606,433
250,000 Federal Home Loan Mortgage Corp.
CMO 1489g
5.85% Due 10/15/2006 240,285
350,000 Federal Home Loan Mortgage Corp
7.61% Due 9/1/2004 347,129
500,000 Federal National Mortgage Association
CMO 1994-10m
6.50% Due 6/25/2023 465,272
450,000 Federal National Mortgage Association
Remic Fnr1993-167 Paci(11)
6.35% Due 1/25/2022 424,143
292,960 Federal National Mortgage Association
Remic Fnr93-154k
6.00% Due 8/25/2008 272,470
200,000 Federal National Mortgage Association
Medium Term Note
7.78% Due 5/22/2006 199,760
190,000 Federal National Mortgage Association
Medium Term Note
6.28% Due 2/3/2004 180,380
200,000 Federal National Mortgage Association
Medium Term Note
7.27% Due 6/6/2001 200,396
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- ----------
<C> <S> <C> <C>
$ 250,000 Federal National Mortgage Association
Medium Term Note
6.25% Due 1/14/2004 $ 238,439
125,000 Federal National Mortgage Association
Pri Strip, Structured Note
0.00% Due 8/10/2004 105,644
390,000 Federal National Mortgage Association
Medium Term Note
7.46% Due 9/30/1999 393,375
250,000 Federal National Mortgage Association
CMO G93-8pg
6.50% Due 7/25/2018 242,305
250,000 Federal National Mortgage Association
CMO-1993-54e
6.25% Due 6/25/2019 239,413
174,983 Federal National Mortgage Association
Remic
7.00% Due 7/25/2005 175,167
183,063 Federal National Mortgage Association Pool
#050987
6.50% Due 2/1/2009 177,579
380,000 United States Treasury Notes
8.875% Due 5/15/2000 403,988
100,000 United States Treasury Zero Coupons
0.00% Due 2/15/1998 94,947
65,000 United States Treasury Zero Coupons
0.00% Due 2/15/1998 61,678
----------
Total United States Government and
Agency Obligations (Cost $6,585,387) $6,458,207
----------
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 2.1%
$ 142,557 Bear Stearns & Co. Inc. dated 3/31/1997
6.28% due 4/1/1997 collateralized by
$920,000 United States Treasury Strips
due 11/15/2022
(Value $145,765) 142,557
----------
Total Investments (Cost $6,727,944) 99.4% $6,600,764
Other Assets, Less Liabilities 0.6% 40,999
------ ----------
Net Assets 100.0% $6,641,763
------ ----------
------ ----------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
INTERMEDIATE-TERM FIXED-INCOME FUND (CONTINUED)
Statement of Assets and Liabilities March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost $6,727,944)--Note
2 $6,600,764
Receivable for shares sold 3,612
Dividends and interest receivable 86,060
Other assets 12,035
----------
6,702,471
LIABILITIES:
Dividends payable $ 38,274
Accrued expenses and other 22,434 60,708
---------- ----------
NET ASSETS at value, applicable to 638,248 outstanding
shares--Note 5 $6,641,763
----------
----------
NET ASSET VALUE offering and redemption price per share
($6,641,763 divided by 638,248 shares) $ 10.41
----------
----------
</TABLE>
Statement of Operations Six Months Ended March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 218,319
----------
Total Income $ 218,319
Expenses:
Investment manager's fees--Note 3 12,841
Shareholder servicing fees and
expenses--Note 3 19,262
Distribution fee--Note 3 6,421
Custodian fees and expenses 1,718
Legal and auditing fees 4,770
Directors' fees and expenses 6,531
Printing and postage 5,900
Registration fees 7,614
Other 840
----------
Total expenses 65,897
Less expense reimbursement--Note 3 (33,977)
----------
Net expenses 31,920
----------
INVESTMENT INCOME--NET 186,399
REALIZED AND UNREALIZED (LOSS) ON
INVESTMENTS--Note 4:
Net realized (loss) on investments (13,750)
Unrealized (depreciation) on investments (22,249)
----------
NET REALIZED AND UNREALIZED (LOSS) ON
INVESTMENTS (35,999)
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 150,400
----------
----------
</TABLE>
See Notes to Financial Statements
16
<PAGE>
INTERMEDIATE-TERM FIXED-INCOME FUND (CONTINUED)
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
3/31/97 YEAR ENDED
(UNAUDITED) 9/30/96
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 186,399 $ 349,306
Net realized gain (loss) on investments (13,750) 2,356
Unrealized (depreciation) on investments (22,249) (143,605)
---------- ----------
Increase in net assets resulting from operations 150,400 208,057
---------- ----------
DIVIDEND DISTRIBUTION--Note 2:
Investment income--net (208,032) (375,199)
Realized gain on investments (2,962) 0
---------- ----------
(210,994) (375,199)
---------- ----------
CAPITAL TRANSACTIONS--Note 5:
Value of shares sold 888,568 1,400,572
Value of shares redeemed (239,884) (881,027)
Value of shares issued in reinvestment of dividend distribution 169,083 396,452
---------- ----------
Net increase in net assets resulting from capital transactions 817,767 915,997
---------- ----------
Net increase 757,173 748,855
NET ASSETS at beginning of period 5,884,590 5,135,735
---------- ----------
NET ASSETS at end of period $6,641,763 $5,884,590
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements
17
<PAGE>
MONEY MARKET FUND
Statement of Investments
March 31, 1997 (Unaudited)
- ----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- ----------
<C> <S> <C> <C>
UNITED STATES GOVERNMENT
AND AGENCY OBLIGATIONS 97.7%
$ 440,000 Federal National Mortgage
Association Discount Note
5.19% Due 4/9/1997 $ 439,493
250,000 Federal Farm Credit Bank
5.41% Due 6/6/1997 247,520
200,000 Federal Home Loan Bank
5.45% Due 5/30/1997 199,905
500,000 Federal Home Loan Mortgage
Corporation Discount Note
5.22% Due 4/4/1997 499,782
440,000 Federal National Mortgage
Association Discount Note
6.50% Due 4/1/1997 440,000
----------
Total Bonds and Notes
(Cost $1,826,700) $1,826,700
----------
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 3.9%
$ 72,173 Bear Stearns & Co. Inc. dated
3/31/1997 6.28% due 4/1/1997
collateralized by $464,700
United States Treasury Strips
due 11/15/2022 (Value $72,627) 72,173
----------
Total Investments (Cost $1,898,873) 101.6% $1,898,873
Liabilities, net of other assets -1.6% (30,588)
------ ----------
Net Assets 100.0% $1,868,285
------ ----------
------ ----------
</TABLE>
See Notes to Financial Statements 18
<PAGE>
MONEY MARKET FUND (CONTINUED)
Statement of Assets and Liabilities March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost
$1,898,873)--Note 2 $1,898,873
Dividends and interest receivable 5,446
Other assets 10,513
----------
1,914,832
LIABILITIES:
Payable for shares redeemed $22,050
Dividends payable 7,430
Accrued expenses and other 17,067 46,547
------- ----------
NET ASSETS at value, applicable to 1,868,300
outstanding shares--Note 5 $1,868,285
----------
----------
NET ASSET VALUE offering and redemption price per share
($1,868,285 divided by 1,868,300 shares) $ 1.00
----------
----------
</TABLE>
Statement of Operations Six Months Ended March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 44,756
---------
Total Income $ 44,756
Expenses:
Investment manager's fees--Note 3 2,083
Shareholder servicing fees and expenses--Note 3 4,999
Distribution fee--Note 3 1,666
Custodian fees and expenses 903
Legal and auditing fees 4,768
Directors' fees and expenses 6,531
Printing and postage 5,978
Registration fees 7,656
Other 434
---------
Total expenses 35,018
Less expense reimbursement--Note 3 (30,853)
---------
Net expenses 4,165
---------
INVESTMENT INCOME--NET 40,591
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS --
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,591
---------
---------
</TABLE>
See Notes to Financial Statements
19
<PAGE>
MONEY MARKET FUND (CONTINUED)
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
3/31/97 YEAR ENDED
(UNAUDITED) 9/30/96
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 40,591 $ 65,661
----------- -----------
Increase in net assets resulting from operations 40,591 65,661
----------- -----------
DIVIDEND DISTRIBUTION--Note 2:
Investment income--net (48,247) (65,661)
----------- -----------
CAPITAL TRANSACTIONS--Note 5:
Value of shares sold 632,275 560,439
Value of shares redeemed (265,798) (369,464)
Value of shares issued in reinvestment of dividend
distribution 46,203 64,916
----------- -----------
Net increase in net assets resulting from capital
transactions 412,680 255,891
Net increase 405,024 255,891
----------- -----------
NET ASSETS at beginning of period 1,463,261 1,207,370
----------- -----------
NET ASSETS at end of period $1,868,285 $1,463,261
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
20
<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;
interest income, including, where applicable, amortization
of discount and premium on investments and zero coupon
bonds, is recognized on an accrual basis.
21
<PAGE>
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.
The Investment Funds may write call options on equity
securities. Premiums received for call options written are
recorded as a liability and "marked to market" daily to
reflect the current value of the option written. If the
written option is exercised prior to expiration, the
premium received is treated as a realized gain. If the
written option is exercised, the premium received is added
to the sale proceeds of the underlying security.
(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: 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.
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
22
<PAGE>
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. Effective April 1,
1997, the Emerging Growth Equity Fund has engaged Pilgrim
Baxter & Associates, Ltd. ("Pilgrim"), an independent
investment manager, to make and effect decisions on buying and
selling portfolio securities. Prior to April 1, 1997, the
Putnam Advisory Company, Inc. was the investment manager for
the Emerging Growth Equity Fund. Investors acts as 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 Pilgrim), 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 all asset levels 0.65
(effective 4/1/97)
First $25 million 1.00
Over $25 million 0.75
(until 3/31/97)
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. With respect to the
Investment Funds for which Investors does not act as investment
manager, Investors has agreed to waive payment of
23
<PAGE>
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 period ended March 31, 1997 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 $54,616,
$48,816, $33,977 and $30,853, 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 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.
24
<PAGE>
NOTE 4--SECURITIES TRANSACTIONS
The following summarizes the securities transactions, other
than short term securities, by the various Investment Funds for
the period ended March 31, 1997:
<TABLE>
<CAPTION>
INVESTMENT FUND PURCHASES SALES
- -------------------------------------------------------- ------------- -------------
<S> <C> <C>
Core Equity Fund $ 2,325,426 $ 699,569
Emerging Growth Equity Fund 8,003,995 3,051,332
Intermediate-Term Fixed-Income Fund 2,689,444 1,050,816
</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 March 31,
1997 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 $ 2,917,415 $ 3,067,860 $ (150,445)
Emerging Growth Equity Fund (172,692) 884,200 (1,056,892)
Intermediate-Term Fixed-Income Fund (127,180) 13,455 (140,635)
</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 March 31, 1997:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
INVESTMENT FUND LOANED COLLATERAL
- -------------------------------------------------------- ------------- -------------
<S> <C> <C>
Core Equity Fund $ 3,231 $ 3,961
Emerging Growth Equity Fund 2,377,169 3,425,716
</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.
25
<PAGE>
Transactions in the shares of capital stock of each
Investment Fund for the period ended March 31, 1997 and the
year ended September 30, 1996 were as follows:
<TABLE>
<CAPTION>
CORE EQUITY EMERGING GROWTH
FUND EQUITY FUND
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Fund Shares Sold 130,480 138,929 390,868 125,953
Dividends Reinvested 20,982 5,104 30,325 13,991
Fund Shares Redeemed (26,486) (42,161) (103,569) (31,299)
--------- --------- --------- ---------
Net Increase 124,976 101,872 317,624 108,645
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
INTERMEDIATE-TERM
FIXED-INCOME FUND
--------------------
1997 1996
--------- ---------
<S> <C> <C> <C> <C>
Fund Shares Sold 85,304 131,098
Dividends Reinvested 16,002 37,381
Fund Shares Redeemed (24,060) (82,620)
--------- ---------
Net Increase 77,246 85,859
--------- ---------
--------- ---------
</TABLE>
Net Assets at March 31, 1997 are as follows:
<TABLE>
<CAPTION>
EMERGING
CORE EQUITY GROWTH
FUND EQUITY FUND
----------- --------------
<S> <C> <C>
Paid-in Capital $ 8,279,429 $ 11,217,906
Undistributed investment
income gain--net 340,130 549,503
Accumulated realized (loss) (210,946) (564,841)
Unrealized appreciation
(depreciation) 2,917,415 (172,692)
----------- --------------
$11,326,028 $ 11,029,876
----------- --------------
----------- --------------
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM MONEY MARKET
FIXED-INCOME FUND FUND
----------------- ------------
<S> <C> <C>
Paid-in Capital $6,778,991 $1,839,596
Undistributed investment
income--net 6,664 28,689
Accumulated realized gain (loss) (16,712) 0
Unrealized depreciation (127,180) 0
----------------- ------------
$6,641,763 $1,868,285
----------------- ------------
----------------- ------------
</TABLE>
26
<PAGE>
NOTE 6--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Investment Funds activity during the year in writing
equity call options had off-balance sheet risk of accounting
loss. These financial instruments involve market risk in excess
of the amount recognized in the Statement of Assets and
Liabilities. A written equity call option obligates the
Investment Funds to deliver the underlying security upon
exercise by the holder of the option. The Investment Funds
cover options written by owning the underlying security.
A summary of the Investment Funds option transactions
written for the year follows:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS PREMIUMS
CONTRACTS RECEIVED
------------- -----------
<S> <C> <C>
Contracts outstanding at September 30, 1996 -- --
Options written 10 $ 5,095
Options exercised -- --
Options expired -- --
Contracts outstanding at March 31, 1997 10 $ 5,095
</TABLE>
27
<PAGE>
NOTE 7--FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CORE EQUITY FUND
--------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
3/31/97 9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net Asset Value, Beginning of Period $20.11 $16.69 $12.72 $12.08 $10.98 $10.45
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Investment income--net 0.115 0.21 0.13 0.15 0.18 0.23
Net realized and unrealized gain on
investments 0.500 3.45 4.22 0.74 1.84 0.60
--------- --------- --------- --------- --------- ---------
Total from Investment Operations 0.615 3.66 4.35 0.89 2.02 0.83
--------- --------- --------- --------- --------- ---------
Distributions:
Distributions from capital gains (0.705) -- (0.22) (0.11) (0.64) (0.08)
Distributions from investment income -- (0.24) (0.16) (0.14) (0.28) (0.22)
--------- --------- --------- --------- --------- ---------
Total Distributions (0.705) (0.24) (0.38) (0.25) (0.92) (0.30)
--------- --------- --------- --------- --------- ---------
Net increase (0.090) 3.42 3.97 0.64 1.10 0.53
--------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period $20.02 $20.11 $16.69 $12.72 $12.08 $10.98
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN* 3.91% 22.21% 35.24% 7.47% 19.39% 8.11%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 1.00%+ 0.97% 0.90% 0.90% 0.90% 0.90%
Investment income--net 0.96%+ 1.23% 1.52% 1.17% 1.31% 1.86%
Decrease reflected in above expense
ratio due to expense waivers and
reimbursement 1.04%+ 1.08% 1.30% 1.33% 2.43% 2.46%
Portfolio turnover rate 7.37% 18.08% 25.49% 9.64% 21.79% 61.27%
Average commission rate paid
(per share) $ 0.04 $ 0.05 -- -- -- --
Net Assets at End of Period ($1,000's) $11,326 $8,865 $5,657 $3,639 $3,094 $1,049
</TABLE>
* The total return calculation reflects dividend reinvestment
and is not annualized for periods less than one year.
+Annualized.
28
<PAGE>
<TABLE>
<CAPTION>
EMERGING GROWTH
EQUITY FUND
-----------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
3/31/97 9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net Asset Value, Beginning of Period $25.08 $19.05 $14.01 $14.74 $11.83 $10.54
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Investment (loss)--net (0.13) (0.17) (0.12) (0.04) (0.13) (0.17)
Net realized and unrealized gain on
investments (3.91) 7.62 5.49 1.58 4.36 1.61
--------- --------- --------- --------- --------- ---------
Total from Investment Operations (4.04) 7.45 5.37 1.54 4.23 1.44
--------- --------- --------- --------- --------- ---------
Distributions:
Distributions from capital gains (2.06) (1.42) (0.33) (2.27) (1.21) (0.13)
Distributions from investment income -- -- -- -- (0.11) --
Return of capital -- -- -- -- -- (0.02)
--------- --------- --------- --------- --------- ---------
Total Distributions (2.06) (1.42) (0.33) (2.27) (1.32) (0.15)
--------- --------- --------- --------- --------- ---------
Net Increase (Decrease) (6.10) 6.03 5.04 (0.73) 2.91 1.29
--------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period $18.98 $25.08 $19.05 $14.01 $14.74 $11.83
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN* (17.12)% 42.07% 39.20% 11.89% 38.05% 13.80%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 2.00%+ 1.96% 1.85% 1.85% 1.85% 1.86%
Investment (loss)--net (1.28)%+ (1.43)% (1.33)% (1.37)% (1.34)% (1.10)%
Decrease reflected in above expense
ratio due to expense waivers and
reimbursement 1.08%+ 1.49% 3.30% 4.11% 6.41% 7.90%
Portfolio turnover rate 38.23% 77.94% 84.05% 72.59% 144.49% 138.46%
Average commission rate paid (per share) $ 0.01 $ 0.01 -- -- -- --
Net Assets at End of Period ($1,000's) $11,030 $6,609 $2,950 $1,825 $1,352 $684
</TABLE>
* The total return calculation reflects dividend reinvestment
and is not annualized for periods less than one year.
+Annualized.
29
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM
FIXED-INCOME FUND
-------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
3/31/97 9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net Asset Value, Beginning of Period $ 10.49 $ 10.81 $ 10.46 $ 11.43 $ 11.00 $ 10.46
------- ------- ------- ------- ------- ---------
Income from investment operations:
Investment income--net 0.310 0.66 0.59 0.52 0.54 0.80
Net realized and unrealized gain (loss)
on investments (0.050) (0.26) 0.38 (0.85) 0.36 0.73
------- ------- ------- ------- ------- ---------
Total from Investment Operations 0.260 0.40 0.97 (0.33) 0.90 1.53
------- ------- ------- ------- ------- ---------
Distributions:
Distributions from capital gains (0.005) -- (0.05) (0.08) 0.00 (0.15)
Distributions from investment income (0.340) (0.72) (0.57) (0.56) (0.47) (0.84)
------- ------- ------- ------- ------- ---------
Total Distributions (0.345) (0.72) (0.62) (0.64) (0.47) (0.99)
------- ------- ------- ------- ------- ---------
Net Increase (decrease) (0.085) (0.32) 0.35 (0.97) 0.43 0.54
------- ------- ------- ------- ------- ---------
Net Asset Value, End of Period $ 10.41 $ 10.49 $ 10.81 $ 10.46 $ 11.43 $ 11.00
------- ------- ------- ------- ------- ---------
------- ------- ------- ------- ------- ---------
TOTAL RETURN* 2.53% 3.82% 9.64% (2.99)% 8.47% 13.86%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets
Expenses 1.00%+ 0.97% 0.90% 0.90% 0.90% 0.90%
Investment income--net 5.82%+ 6.27% 5.71% 5.76% 4.90% 5.59%
Decrease reflected in above expense
ratio due to expense waivers and
reimbursement 1.06%+ 1.00% 1.09% 1.66% 3.33% 5.56%
Portfolio turnover rate 18.36% 39.69% 8.50% 8.68% 27.62% 8.66%
Net Assets at End of Period ($1,000's) $ 6,642 $ 5,885 $ 5,136 $ 3,372 $ 2,159 $ 881
</TABLE>
* The total return calculation reflects dividend reinvestment
and is not annualized for periods less than one year.
+Annualized.
30
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
-------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
3/31/97 9/30/96 9/30/95 9/30/94 9/30/93 9/30/92
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- ---------
Income from investment operations:
Investment income--net 0.02 0.05 0.05 0.03 0.03 0.04
Total from Investment Operations 0.02 0.05 0.05 0.03 0.03 0.04
------- ------- ------- ------- ------- ---------
Distributions:
Distributions from investment income (0.02) (0.05) (0.05) (0.03) (0.03) (0.04)
------- ------- ------- ------- ------- ---------
Total Distributions (0.02) (0.05) (0.05) (0.03) (0.03) (0.04)
------- ------- ------- ------- ------- ---------
Net Increase (decrease) 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ---------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- ---------
------- ------- ------- ------- ------- ---------
TOTAL RETURN* 4.90%++ 5.19% 5.20% 3.27%+ 2.77% 3.73%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets
Expenses 0.50%++ 0.50% 0.50% 0.42% 0.25% 0.44%
Investment income--net 4.86%++ 5.06% 5.15% 3.18% 2.94% 3.68%
Decrease reflected in above expense
ratio due to expense waivers and
reimbursement 3.70%++ 3.64% 3.72% 3.47% 4.39% 5.19%
Net Assets at End of Period ($1,000's) $1,868 $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%.
++Annualized.
31
<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
---------------------------------------------------------------
Pilgrim Baxter & Associates, Ltd.
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
32
<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
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
33
<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.
<PAGE>
SEMI-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*
1997
BROKER/DEALER
[LOGO]
RETIREMENT SYSTEM
Distributors Inc.
P.O. Box 2064
Grand Central Station
New York, NY 10163-2064
