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Previous: PUTNAM INVESTMENT FUNDS, 485BPOS, 1999-11-26 |
Next: OPPENHEIMER INTERNATIONAL BOND FUND, N-30D, 1999-11-26 |
<PAGE>
1999
ANNUAL REPORT
[LOGO]
RSI RETIREMENT TRUST
CORE EQUITY FUND
VALUE EQUITY FUND
EMERGING GROWTH EQUITY FUND
INTERNATIONAL EQUITY FUND
ACTIVELY MANAGED BOND FUND
INTERMEDIATE-TERM BOND FUND
SHORT-TERM INVESTMENT FUND
BROKER/DEALER
[LOGO]
RETIREMENT SYSTEM
Distributors Inc.
317 Madison Avenue
New York, NY 10017-5397
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------
<TABLE>
<S> <C>
President's Message.............................. 1
Investment Review................................ 2
Combined Financial Statements.................... 22
Financial Statements of Investment Funds......... 24
Core Equity Fund............................. 24
Value Equity Fund............................ 28
Emerging Growth Equity Fund.................. 32
International Equity Fund.................... 37
Actively Managed Bond Fund................... 43
Intermediate-Term Bond Fund.................. 49
Short-Term Investment Fund................... 55
Notes to Financial Statements.................... 60
Independent Auditor's Report..................... 78
Change in Independent Accountants................ 79
Annual Meeting Results........................... 80
Officers, Consultants, Investment Managers and
Custodians..................................... 81
Board of Trustees................................ 82
</TABLE>
[LOGO]
is a registered trademark of Retirement System Group Inc.
<PAGE>
PRESIDENT'S MESSAGE
To Our Unitholders:
During fiscal year 1999, the conditions that have predominated
over the past several years -- moderate to strong economic
growth, low inflation rates, favorable interest rates and
substantial investment in mutual funds -- continued, resulting
in another solid year for the stock market in general and RSI
Retirement Trust funds in particular.
In fact, the three domestic equity funds posted superior
net returns, significantly outperforming their respective
Lipper benchmarks for the one-year period ended September 30,
1999. The top performing fund for the period -- the Emerging
Growth Equity Fund -- posted a 47.47% return, besting its
Lipper benchmark by more than 20 percentage points. The Core
Equity Fund returned 33.86%, outperforming its Lipper benchmark
by more than 13 percentage points, and the Value Equity Fund
achieved a return of 27.97%, exceeding its benchmark's return
by more than seven percentage points. During this same period,
the S&P 500, which reflects the performance of the broad equity
market, returned 27.68%. On the fixed-income side of the Trust,
the two bond funds also outperformed their benchmarks, though
their returns were modest. For the longer time period of five
years, the funds also turned in solid performances, with five
of the seven funds exceeding their Lipper benchmarks.
During the first quarter of 1999, the Board of Trustees
changed managers on two funds that were not performing up to
our expectations. On February 8, 1999, Retirement System
Investors Inc. was appointed to manage a portion of the
Emerging Growth Equity Fund's assets, with the remainder of the
assets given to the existing fund manager, HLM Management
Company, Inc. Effective March 1, 1999, the Board named the Bank
of Ireland Asset Management (U.S.) Limited as manager of the
International Equity Fund. We expect these changes will have
positive results on the future investment performances of both
funds.
On behalf of the Board of Trustees, I would like to thank
our unitholders for choosing RSI Retirement Trust to help meet
your retirement savings objectives. Please feel free to call me
at 212-503-0101 if you would like to discuss any part of this
Annual Report.
Sincerely,
/s/ William Dannecker
William Dannecker
President and Trustee
November 11, 1999
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
During fiscal year 1999, growth stocks outperformed value
stocks, with technology stocks dramatically outperforming all
other sectors of the stock market, as technology earnings
outpaced the typical stock and the market proved willing to pay
expanding multiples for those earnings. For the calendar
quarter ended June 30, value stocks, especially economically
sensitive cyclical stocks, outperformed large cap growth stocks
as investors acknowledged the likely benefits to those
companies of recovering emerging markets, though investor
interest in this prospect did not sustain itself.
The technology sector of the S&P 500 returned 80.5% during
the fiscal year. Other strong performing sectors were: consumer
cyclicals, up 34.6%; capital goods, up 36.9%; and
communications services, up 32.7%. The worst performing sectors
were utilities, down 5.0%; healthcare, up 1.8%; transportation,
up 2.7%; and consumer staples, up 4.2%. Performance and
valuation metrics of the S&P 500 itself were in large part
dominated by large cap, high price/earnings ratio, stocks.
The Federal Reserve Board, as expected, increased
short-term interest rates twice, reversing two of the three
easings which accompanied the emerging markets financial crisis
of 1998. Interest rates all along the yield curve shifted
higher as well, partly due to the Fed action and partly because
fixed income investors have become more concerned that
inflation may accelerate as the economy continues to expand.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN CORE EQUITY S&P 500
CORE EQUITY FUND VS S&P 500
FOR 10-YEAR PERIOD ENDED 9/30/99
<S> <C> <C>
RETURN 15.94% 16.82%
RISK 12.69% 13.10%
THIS CHART COMPARES THE HISTORICAL AVERAGE ANNUAL
TOTAL RETURN AND THE RISK (AS MEASURED BY THE
STANDARD DEVIATION) OF THE CORE EQUITY FUND AND
THE STANDARD & POOR'S 500 INDEX FOR THE TEN-YEAR
PERIOD ENDED 9/30/99. THE S&P 500 INDEX IS AN
UNMANAGED INDEX OF COMMON STOCKS WIDELY USED
AS A MEASURE OF THE BROAD EQUITY MARKET AND IS A
REPRESENTATIVE MARKET INDEX FOR THIS FUND.
STANDARD DEVIATION IS A STATISTICAL MEASURE OF
VOLATILITY OFTEN USED AS A MEASURE OF RISK.
IN GENERAL, THE GREATER THE STANDARD DEVIATION,
THE GREATER THE TENDENCY TO VARY FROM THE AVERAGE
ANNUAL TOTAL RETURN. BY COMPARING THE MAGNITUDE OF
THE STANDARD DEVIATIONS, THE RELATIVE VOLATILITY OF
EACH INVESTMENT CAN BE DETERMINED. A LOWER
STANDARD DEVIATION REFLECTS LOWER VOLATILITY.
</TABLE>
Generally, during the fiscal year, economies around the
world improved as measured by GDP, interest rates and
inflation. Emerging economies, whose troubles in places as
diverse as Thailand, Brazil and Russia had helped precipitate
the financial crisis of confidence so worrisome in late 1998,
seemed to regain their equilibrium and again look like they
might grow at a greater rate than the more mature economies of
Europe, the
2
<PAGE>
United States and Japan. Towards the end of the fiscal year,
partly due to the recovery of these economies, and partly due
to the OPEC cartel, commodity prices stopped falling, and in
the case of energy, rebounded significantly.
Technological change seems pervasive in the United States
and world economies, with changes in the communications
infrastructure and the internet beginning to change the way we
communicate and the way companies conduct business. This may be
showing up in greater labor productivity, and may be one of the
reasons why such a full-employment economy hasn't been
inflationary. Other likely factors producing the benign
economic backdrop of fiscal 1999 were a strong dollar and low
commodity prices. Towards the end of the fiscal year, the
Japanese yen strengthened considerably versus the dollar, with
full consequences yet to be determined, though this will
probably make it more difficult for Japan to continue its long,
slow climb out of recession.
During fiscal year 1999, the Core Fund maintained exposure
to such high growth areas of the economy as technology and
healthcare, but acknowledging market conditions, continued its
efforts, begun last year, to lower the volatility of returns.
It did this by increasing the proportion of lower P/E stocks
which were "cheaper" on traditional valuation measures such as
price/earnings ratios, yield and price to book ratios compared
to the larger growth stocks, and which appear more defensive in
nature.
Relative to the S&P 500, the Core Fund's outperformance was
helped by its large exposure to technology, favorable stock
selection in financials, and an overweighting in capital goods
producers. The Fund's modest weighting in consumer staples
outperformed its S&P 500 sector. The Fund's stock selection and
weighting in healthcare had a negative effect on performance,
as did the Fund's more moderate exposure to consumer cyclicals
stocks. The Fund had moderate or no exposure to the
underperforming S&P 500 sectors of transportation and
utilities.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CORE EQUITY FUND VS S&P 500
<S> <C> <C>
89 $10,000.00 $10,000.00
90 $9,558.82 $9,068.78
91 $11,429.29 $11,903.00
92 $12,424.40 $13,219.30
93 $14,241.19 $14,938.76
94 $14,687.14 $15,487.99
95 $19,286.93 $20,086.62
96 $23,358.20 $24,177.02
97 $31,426.42 $33,969.60
98 $32,789.02 $37,064.07
99 $43,892.11 $47,322.96
Core Equity: $43,892
S&P 500: $47,323
GROWTH OF $10,000
CORE EQUITY S&P 500
1 year $13,386 $12,768
3 year $18,791 $19,574
5 year $29,885 $30,555
10 year $43,892 $47,323
CUMULATIVE RETURNS
1 year 33.86% 27.68%
3 year 87.91% 95.74%
5 year 198.85% 205.55%
10 year 338.92% 373.23%
AVERAGE ANNUAL RETURNS
1 year 33.86% 27.68%
3 year 23.40% 25.09%
5 year 24.48% 25.03%
10 year 15.94% 16.82%
</TABLE>
PERFORMANCE RESULTS
The Core Equity Fund returned
33.86% for the one-year period
ended September 30,
3
<PAGE>
1999, outperforming the S&P 500 by over six percentage points,
33.86% vs. 27.68% for the same period. The S&P 500 is an
unmanaged representative index of the broad equity market. (All
market index results that appear in this report are gross,
since expenses are not applicable.) For the three, five and ten
years ended September 30, 1999, the Core Fund produced average
annual returns of 23.40%, 24.48% and 15.94%, respectively,
while the S&P 500 posted average annual returns of 25.09%,
25.03% and 16.82% for these same three periods.
It should be noted that the Core Equity Fund's annualized
return for the ten years ended September 30, 1999, was achieved
while taking less risk (as measured by standard deviation) than
the S&P 500 (see chart on page 2).
The Core Equity Fund returned 33.86% for the one-year
period ended September 30, 1999, significantly outperforming
the 20.61% of its Lipper benchmark, the Lipper Growth & Income
Funds Average, for the same period. For this period, Core
ranked in the top 7% of its Lipper grouping (59th out of 859
funds). For the trailing three, five and ten years ended
September 30, 1999, the Fund achieved annualized returns of
23.40%, 24.48% and 15.94%, respectively, and outperformed the
Lipper benchmark's annualized returns of 17.03%, 18.76% and
13.27% for the same three periods. For all these periods, Core
was a strong first quartile performer in the Lipper Growth &
Income Funds grouping and ranked in the top 5% for the
five-year period and in the top 11% for the three- and ten-year
periods. Past performance is not a guarantee of future results.
CORE EQUITY FUND VS LIPPER GROWTH AND INCOME FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
----------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
CORE EQUITY FUND(1) 33.86% 23.40% 24.48% 15.94%
Lipper Growth & Income Funds Avg.(2) 20.61 17.03 18.76 13.27
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Inc. is an independent reporting service that
measures the performance of most U.S. mutual funds. The
performance results reflect an unmanaged index and are net
of all expenses other than sales charges and redemption
fees.
---------------------------------------------------------------
VALUE EQUITY FUND
The Value Equity Fund seeks income and capital appreciation by
investing in a diversified portfolio of stocks with a below
average price-to-earnings (P/E) ratio and above-average growth
prospects. The portfolio typically has a dividend yield that is
higher than the market itself. The aim of the portfolio
manager, Retirement System Investors Inc., is to produce
above-market returns by choosing stocks whose current prices do
not adequately reflect their ability to grow earnings and
dividends over time. (Retirement System Investors Inc. became
the manager of this Fund effective April 1, 1995.)
4
<PAGE>
MARKET ENVIRONMENT
During fiscal year 1999, value stocks did not keep pace with
growth stocks, as the market continued to afford growth stocks
extremely high valuations, i.e., to pay high prices by
historical standards for each dollar of expected future
earnings. Technology stocks, in particular, dramatically
outperformed all other sectors of the stock market, as company
earnings outpaced the typical stock and the market proved
willing to pay expanding multiples for those earnings. This
left many more traditional value sectors of the market at
relative valuations which were lower, i.e., cheaper on a
relative basis, than historical norms. For one quarter, the
calendar quarter ended June 30, value stocks, especially
economically sensitive cyclical stocks, outperformed as
investors acknowledged the likely benefits to those companies
of recovering emerging markets, though broad investor interest
in this prospect appeared short lived.
The Russell 1000 Value Index ("The Russell Index"), a
representative market index for this Fund, returned 18.7% for
fiscal year 1999. The strongest performing sectors of the
Russell Index for the period were technology, returning 37.4%;
communications services, up 28.1%; capital goods, up 19.5%; and
basic materials, up 15.0%. The sectors which most significantly
underperformed the overall Index were utilities, down 8.3%;
healthcare, down 6.8%; and transportation, up 1.3%.
The Federal Reserve Board, as expected, increased
short-term interest rates twice, reversing two of the three
easings, which accompanied the emerging markets financial
crisis of 1998. Interest rates all along the yield curve
shifted higher as well, partly due to the Fed action and partly
because fixed income investors have become more concerned that
inflation may accelerate as the economy continues to expand.
Generally, during the fiscal year, economies around the
world improved as measured by GDP, interest rates and
inflation. Emerging economies, whose troubles in places as
diverse as Thailand, Brazil and Russia had
helped precipitate the financial crisis of confidence so
worrisome in late 1998, seemed to regain their equilibrium and
again look like they might grow at a greater rate than the more
mature economies of Europe, the United States and Japan.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN VALUE EQUITY RUSSELL 1000 VALUE
VALUE EQUITY FUND VS
RUSSELL 1000 VALUE INDEX
FOR 10-YEAR PERIOD ENDED 9/30/99
<S> <C> <C>
RETURN 13.14% 14.96%
RISK 15.82% 12.97%
THIS CHART COMPARES THE HISTORICAL AVERAGE
ANNUAL TOTAL RETURN AND THE RISK (AS MEASURED
BY THE STANDARD DEVIATION) OF THE VALUE EQUITY
FUND AND THE RUSSELL 1000 VALUE INDEX FOR
THE TEN-YEAR PERIOD ENDED 9/30/99. THE RUSSELL
1000 VALUE INDEX IS A REPRESENTATIVE MARKET
INDEX FOR THIS FUND. SEE THE CORE EQUITY FUND
CHART (P. 2) FOR A DEFINITION OF STANDARD DEVIATION.
</TABLE>
5
<PAGE>
Towards the end of the fiscal year, partly due to the recovery
of these economies, and partly due to the OPEC cartel,
commodity prices stopped falling, and in the case of energy,
rebounded significantly.
Technological change seems pervasive in the American and
world economies, with changes in the communications
infrastructure and the internet beginning to change the way we
communicate and the way companies conduct business. This is as
true for old line businesses as well as the very newest. This
change may be showing up in greater labor productivity, and may
be one of the reasons why such a full-employment economy hasn't
been inflationary. Other likely factors in producing the benign
economic backdrop of fiscal 1999 were a strong dollar and low
commodity prices. Towards the end of the fiscal year, the
Japanese yen strengthened considerably versus the dollar, with
full consequences yet to be determined, though this will
probably make it more difficult for Japan to continue its long,
slow climb out of recession.
During fiscal year 1999, the Value Fund moderately
increased its purchase of stocks that were likely to benefit as
the world economy recovered. For instance, the Fund increased
its exposure to energy and paper producers. Additionally, the
Fund scaled back its exposure to stocks, which had been bought
at below market price/ earnings multiples, but which had become
more high priced on conventional valuation metrics. Most
typically, these were technology and pharmaceutical stocks
which were bought at attractive prices but which had come to
carry higher valuations than the Fund felt was justified given
its value orientation. The Fund has identified and begun
purchasing other technology and pharmaceutical stocks currently
less highly priced on traditional valuation metrics, such as
price earnings ratios, yield and price to book but which
appear, in the manager's judgment, to have excellent business
prospects.
Relative to the Russell Index, the Fund's stock selection
and weighting in technology each helped the Fund's
outperformance. The Fund's communications services investments
also contributed to outperformance of the Index, as did
transportation, capital goods and basic materials. Relative to
the Index, the Fund's investments in consumer cyclicals and
consumer staples underperformed.
6
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE EQUITY FUND VS RUSSELL 1000 VALUE INDEX
<S> <C> <C>
89 $10,000.00 $10,000.00
90 $7,587.18 $8,473.32
91 $10,256.30 $10,925.00
92 $10,953.42 $12,279.13
93 $12,643.71 $15,394.92
94 $12,915.87 $15,289.48
95 $15,580.22 $19,522.95
96 $18,941.69 $23,027.15
97 $27,388.33 $32,767.40
98 $26,867.88 $33,944.56
99 $34,383.44 $40,300.66
Value Equity: $34,383
Russell 1000: $40,301
GROWTH OF $10,000
VALUE EQUITY RUSSELL 1000
1 year $12,797 $11,872
3 year $18,152 $17,501
5 year $26,621 $26,358
10 year $34,383 $40,301
CUMULATIVE RETURNS
1 year 27.97% 18.72%
3 year 81.52% 75.01%
5 year 166.21% 163.58%
10 year 243.83% 303.01%
AVERAGE ANNUAL RETURNS
1 year 27.97% 18.72%
3 year 21.99% 20.51%
5 year 21.63% 21.39%
10 year 13.14% 14.96%
</TABLE>
PERFORMANCE RESULTS
For the one-year period ended September 30, 1999, the Value
Equity Fund returned 27.97% and significantly exceeded the
18.72% return of the Russell 1000 Value Index, an unmanaged
representative index reflecting the performance of
approximately 750 stocks with a less-than-average growth
orientation. For the three-, five-and ten-year periods ended
September 30, 1999, the Fund produced annual returns of 21.99%,
21.63% and 13.14% and outperformed the annualized returns of
the Russell 1000 Value Index for the three- and five-year
periods. The Index returned 20.51%, 21.39% and 14.96%,
respectively, for these three periods. [Retirement Systems
Investors Inc. has been the manager of the Fund since April 1,
1995. During the period it returned 22.88% per annum, while the
Russell 1000 Value Index reflected an annualized return of
21.99% for the same period.] The Fund's risk profile, as
measured by standard deviation of return, versus the market,
the Russell 1000 Value Index, is reflected in the chart on
page 2.
For the one-year period ended September 30, 1999, the
Fund's return of 27.97% compared quite favorably to the 20.61%
return of the Lipper Growth & Income Funds Average, a
representative performance benchmark. For the recent three and
five years ended September 30, 1999, the Value Equity Fund
reflected annualized returns of 21.99% and 21.63% and outpaced
the Lipper benchmark returns of 17.03% and 18.76% per annum for
those periods. These returns ranked the Fund in the top 18%
(92nd out of 537 funds) and top 23% (78th out of 347 funds) of
its Lipper benchmark grouping, respectively. For the recent
ten-year period, the Fund returned 13.14% per year versus the
13.27% annualized return for the Lipper benchmark. [Retirement
System Investors Inc. the manager of this Fund since April 1,
1995, or 4 1/2 years ended September 30, 1999, reflected an
annualized return of 22.88% and exceeded the 19.18% annualized
return for the Lipper Growth & Income Funds Average by 370
basis points per year. Value ranked in the top 17% of it Lipper
benchmark grouping, 65th out of 403 funds.] Past performance is
not a guarantee of future results.
7
<PAGE>
VALUE EQUITY FUND VS LIPPER GROWTH AND INCOME FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
----------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
VALUE EQUITY FUND(1) 27.97% 21.99% 21.63% 13.14%
Lipper Growth & Income Funds Avg.(2) 20.61 17.03 18.76 13.27
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Inc. is an independent reporting service that
measures the performance of most U.S. mutual funds. The
performance results reflect an unmanaged index and are net
of all expenses other than sales charges and redemption
fees.
---------------------------------------------------------------
EMERGING GROWTH EQUITY FUND
The Emerging Growth Equity Fund seeks capital appreciation
through investment in securities of rapidly growing, good
quality, emerging companies, those in the $75 million to $1
billion capitalization range at time of purchase.
MARKET ENVIRONMENT
Economic growth, as measured by the Gross Domestic Product
("GDP"), was quite strong for the fourth quarter, 1998 at 5.9%,
annualized, and growth moderated to 3.7%, annualized for the
first quarter, 1999 and then dropped off substantially in the
second quarter to 1.9%, annualized. For the final quarter of
fiscal year 1999, the GDP "advance number" is 4.8%, annualized.
It was a year with substantial intra and inter month
volatility. Fiscal year 1999 started off in a most depressing
way. For the first eight days of October, all the major
domestic equity indices were hammered, with small cap stocks,
as measured by the Russell 2000 Growth Index, hit the hardest
at -18.5%, more than triple the decline of the S&P 500 Index,
which was down 5.7% for this period. Subsequent to
October 8th, a dramatic turnaround followed with small, mid and
large cap growth stocks leading the way. The NASDAQ OTC
Composite Index rose 54.5%, the Russell 2000 Growth Index was
up 51.6% and the Russell 1000 Growth Index returned 39.0% for
the remainder of this quarter.
Large cap growth stocks continued to outperform value
stocks in the first quarter of 1999, and the Russell 1000
Growth Index rose 6.36%, followed closely by the S&P 500 Index,
up 4.96%. A shift in investor sentiment took place in the
second quarter, 1999 and small cap value and growth stocks
performed quite well, with the Russell 2000 Value Index
(inclusive of small cap value stocks) returning 16.6% and the
Russell 2000 Growth Index (inclusive of small cap growth
stocks) rising 14.8%. Large cap growth stocks were totally
out-of-favor for this quarter and mid to large cap value stocks
were also strong beneficiaries of the swing in sentiment
(Russell 1000 Value Index was up 11.3% for this quarter). For
the final quarter of fiscal year 1999, all the major equity
indices were down, but growth stocks outperformed value
8
<PAGE>
stocks by roughly 6 percentage points for mid to large cap
growth vs. mid to large cap value stocks and close to 3
percentage points for small cap growth vs. small cap value
stocks.
On the strength of double-digit results for the Russell
2000 Growth Index for the first and third quarters of fiscal
year 1999, this index returned 32.64% for the recent 12-month
period (a major turnaround from the -24.83% for fiscal year
1998). Large cap growth stocks (Russell 1000 Growth Index) were
the most favored stock grouping for the year with the Index up
34.85%. In contrast to growth stocks, value stocks, especially
small cap value stocks, were appreciably out-of-favor with the
Russell 2000 Value Index, returning only 5.8% for the year,
while the Russell 1000 Value Index did respectably, at 18.72%,
but trailed the broad equity measure (the S&P 500 Index) by 9%
(18.7% vs. 27.7%).
Two investment managers manage the Emerging Growth Equity
Fund. HLM Management Company, Inc. ("HLM"), under sub-advisory
agreement with Retirement System Investors Inc., since
April 1, 1997 and Retirement System Investors Inc.
("Investors") since February 8, 1999. Friess Associates, Inc.
("Friess") was removed as a sub-advisor, effective with the
start of business on February 8. At that time, Investors was
given $10 million of assets to manage and the remainder of the
Friess assets were given to HLM to manage. As of September 30,
1999, HLM was managing $62.3 million of fund assets (81.7%) and
Investors was managing $13.9 million of fund assets (18.3%).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
EMERGING GROWTH EQUITY FUND VS
RUSSELL 2000 GROWTH INDEX
FOR 10-YEAR PERIOD ENDED 9/30/99
<S> <C> <C>
EMERGING GROWTH RUSSELL 2000 GROWTH
RETURN 15.47% 9.89%
RISK 25.05% 22.01%
THIS CHART COMPARES THE HISTORICAL AVERAGE
ANNUAL TOTAL RETURN AND THE RISK (AS MEASURED
BY THE STANDARD DEVIATION) OF THE EMERGING GROWTH EQUITY
FUND AND THE RUSSELL 2000 GROWTH INDEX FOR
THE TEN-YEAR PERIOD ENDED 9/30/99. THE RUSSELL
2000 GROWTH INDEX IS A REPRESENTATIVE MARKET
INDEX FOR THIS FUND. SEE THE CORE EQUITY FUND
CHART (P. 2) FOR A DEFINITION OF STANDARD DEVIATION.
</TABLE>
Investors is a small market capitalization manager
investing in emerging growth companies and is the more
aggressive of the two managers of the Fund. For the period that
Investors managed assets (February 8, 1999 through
September 30, 1999), it reflected a gross return of 41.07%,
much higher than the Russell 2000 Growth Index, a
representative index for the Emerging Growth Equity Fund, which
returned 6.48%. For this period, HLM, the Fund's other
portfolio manager, reflected a gross return of 20.40%. At the
total Fund level, the gross and net returns were 23.69% and
22.09%, respectively for this time period. (At the time of the
manager change, this Fund reflected a net return of 20.78% and
trailed the Russell 2000 Growth Index, which returned 24.57%
for the period October 1, 1998 to the start of business on
February 8, 1999.)
During February 1999, Investors' portion of the assets
(which carried forward 18 stocks from Friess) were repositioned
with increased emphasis on the fastest
9
<PAGE>
growing segments of the economy. Industry and company selection
played a key role in achieving the superior performance results
realized. Specifically, the Fund increased exposure to
communication semiconductors and Internet infrastructure
companies, resulting in significant gains for the Fund.
Weakness for the Fund came from the healthcare sector.
Healthcare companies remained plagued by Medicare uncertainty
and decreased sales and earnings growth rates. Exposure to this
group now stands at 9.6%, down from 22.5% as of February 8,
1999. This is largely due to reduced exposure to the sector and
stock price declines. Going forward, the Fund is positioning to
benefit from emerging industries such as e-commerce services,
application hosting, and the continued recovery of the
semiconductor industry.
Investors identifies companies through intensive research
working with company managements, analysts and industry
contacts. At September 30, 1999, the portion of the Fund's
portfolio managed by Investors held 50 stocks.
HLM invests in small capitalization stocks and is a more
conservative emerging growth company manager than Investors. It
invests in high-quality emerging companies that are
entrepreneurially managed, rapidly growing and have the
potential to become profitable industry leaders. At time of
purchase, the companies will normally fall within a market
value range of $100-$700 million. (At September 30, 1999, the
average market cap was $779 million for HLM and $1.1 billion
for Investors.) Two key disciplines include harvesting
positions that grow to 5% of the portfolio and redeploying the
cash into new investments, and giving stocks that are not
contributing to overall performance a very short leash before
they are sold. Adhering to these two disciplines resulted in a
portfolio with very few negative surprises for major holdings,
while limiting the effect of any one stock's influence on the
portfolio. As a result, HLM's gross return for fiscal year 1999
was 49.87%, exceeding the Russell 2000 Growth Index by over 17
percentage points.
HLM started the year with 18% of the portfolio in
technology, 26% in healthcare and 28% in consumer discretionary
stocks; these sectors are the largest sectors in the Russell
2000 Growth Index and typically account for HLM's largest
exposure. During the year, the technology position grew
significantly, reaching 37% of the portfolio in June and ending
September at 35%, as the manager invested in companies that are
building out the infrastructure of the internet, communications
chips, storage-area network related equipment and internet
enabling software, specifically, internet bank processing
software. HLM's technology exposure was the clear performance
driver in the year. Healthcare declined as a percentage of
total portfolio to 7% at fiscal year end, as the pricing
environment continued to be difficult. Consumer discretionary
stocks declined slightly to 25% of total portfolio assets, but
was a negative contributor to performance.
At present, HLM continues to find many good ideas in
technology, as the growth of the Internet demands more and
faster communications, connections and software. The complexion
of HLM's technology holdings is likely to change, but the
portfolio exposure is not likely to increase from current
levels. Also, energy exposure is rising and the manager
continues to look for a turn in the healthcare environment, but
currently remains cautious about this sector.
10
<PAGE>
On September 30, 1999, the HLM portfolio held 43 stocks, of
which only two overlapped with the Investors' holdings (HLM
held 46 stocks at September 30, 1998). Traditionally, HLM holds
between 40 and 60 stocks. It continues to look for stocks to
add which have strong and improving fundamentals and to
increase the holding in the portfolio in order to reduce the
cash level to 5% or less or total portfolio assets from the 10%
position at the September quarter-end.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING GROWTH EQUITY FUND VS RUSSELL 2000 GROWTH INDEX
<S> <C> <C>
89 $10,000.00 $10,000.00
90 $7,794.10 $7,376.44
91 $12,151.92 $11,121.85
92 $12,630.92 $11,097.42
93 $18,493.41 $14,336.16
94 $18,722.50 $14,461.73
95 $27,375.66 $18,536.66
96 $34,919.85 $20,873.85
97 $43,974.66 $25,748.80
98 $28,580.67 $19,354.62
99 $42,147.37 $25,672.78
Emerging Growth: $42,147
Russell 2000 Growth: $25,673
GROWTH OF $10,000
EMERGING GROWTH EQUITY RUSSELL 2000 GROWTH
1 year $14,747 $13,264
3 year $12,070 $12,299
5 year $22,512 $17,752
10 year $42,147 $25,673
CUMULATIVE RETURNS
1 year 47.47% 32.64%
3 year 20.70% 22.99%
5 year 125.12% 77.52%
10 year 321.47% 156.73%
AVERAGE ANNUAL RETURNS
1 year 47.47% 32.64%
3 year 6.47% 7.14%
5 year 17.62% 12.16%
10 year 15.47% 9.89%
</TABLE>
PERFORMANCE RESULTS
The Emerging Growth Equity Fund -- the best performing Trust
investment fund for fiscal year 1999 -- was up 47.47% and
significantly exceeded the 32.64% return of the Russell 2000
Growth Index, a representative index that reflects the
performance of the small company growth securities component of
the Russell 2000 Index. (The latter index was up 19.07%.) For
the three-year period ended September 30, 1999, the Fund's net
return, at 6.47%, annualized, trailed the index return (7.14%
per annum), but for the five- and ten-year periods, the Fund
outperformed the Russell 2000 Growth Index, achieving an
average annual return of 17.62% and 15.47% per year,
respectively, compared to the 12.16% and 9.89% return per year
for the Index. The Fund's risk profile (as measured by standard
deviation) verses the market (the Russell 2000 Growth Index) is
reflected in the chart on page 2).
For the one-year period ended September 30, 1999, the
Emerging Growth Equity Fund (the highest performing Trust
investment fund) produced a return of 47.47%, compared to the
Lipper Small Cap Funds Average return of 26.93%. The three-year
annualized return of 6.47% trailed its Lipper benchmark, which
returned 8.83% per year; however, for the longer periods (five
and ten years), the annualized returns exceeded the Lipper
Small Cap Funds Average (the Fund's representative performance
benchmark) with annualized returns of 17.62% and 15.47% versus
annualized returns of 13.91% and 13.04%, respectively, for the
Lipper benchmark. For these two periods, the Fund ranked in the
top 23% (58th out of 258 funds) and top 18% (12th out of 70
funds), respectively, of the Lipper Small Cap Funds grouping.
Past performance is not a guarantee of future performance.
11
<PAGE>
EMERGING GROWTH EQUITY FUNDS VS LIPPER SMALL COMPANY GROWTH
FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
----------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
EMERGING GROWTH EQUITY FUND(1) 47.47% 6.47% 17.62% 15.47%
Lipper Small Cap. Funds Avg.(2) 26.93 8.83 13.91 13.04
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Inc. is an independent reporting service that
measures the performance of most U.S. mutual funds. The
performance results reflect an unmanaged index and are net
of all expenses other than sales charges and redemption
fees.
---------------------------------------------------------------
INTERNATIONAL EQUITY FUND
The International Equity Fund seeks capital appreciation by
investing in common stocks in well established companies that
are headquartered in foreign countries, in order to take
advantage of opportunities outside the U.S. capital markets.
Holdings are concentrated in the larger markets abroad, and
some investments are also made in emerging markets. The
portfolio manager, Bank of Ireland Asset Management (U.S.)
Limited ("BIAM"), first identifies economic and business themes
that it believes will provide a favorable framework for
selecting stocks. Then it selects companies best positioned to
take advantage of the opportunities presented by such themes
with a focus on: companies whose current prices are undervalued
relative to their long-term prospective earnings growth rate;
their historic valuation levels and that of their competitors;
and companies of substantial size and liquidity, strong balance
sheets, proven management and diversified earnings streams.
(BIAM replaced Morgan Grenfell Investment Services Limited,
effective March 1, 1999 and manages under a sub-advisory
agreement with Retirement System Investors Inc.)
MARKET ENVIRONMENT
The first quarter of fiscal year 1999 was explosive, with the
MSCI EAFE Index returning 20.65%, or approximately two-thirds
of its total return for fiscal year 1999 (30.94%). It was a
period in which the foreign markets in general recovered
strongly as interest rates fell and Japan, the second largest
equity market (after the U.S.), returned 26.9% in U.S. dollar
terms, which was primarily due to the rise in value of the yen
vis-a-vis the U.S. dollar and other major currencies.
Subsequently, in addition to increased signs of life in the
previously moribund Japanese economy, a soft landing of the
U.K. economy was forthcoming (helped by monetary easing). In
addition, there are signs of sustainable recovery in the
EUROZONE due to a continuation of simulative monetary policy, a
competitive currency and a global recovery. However, many of
the individual European markets did experience lackluster
returns in 1999 on the back of some very hefty returns for
1998, leading up to the advent of the European Monetary Union,
which took effect January 1, 1999. The easing of U.S. interest
rates in the fourth quarter of 1998, coupled with signs of
recovery in Japan, has helped increase demand in the battered
Pacific Rim emerging economies.
12
<PAGE>
The BIAM portfolio is driven by major themes and two that
have performed well in the last two quarters of fiscal year
1999 are Growth in Telecommunications and Technology
Innovation. The stocks that have performed well in the first
theme are the telecom companies domiciled in Europe and the
U.K., where growth rates for mobile phones have consistently
been underestimated and the prospects for data transmission via
fixed and mobile lines is compelling. This element of the
market (telecom companies) is also seeing significant merger
activities and joint ventures arising in an attempt to become
more geographically diversified. The Technology Innovation
theme is comprised of mostly Japanese stocks that manufacture
technical equipment, such as copiers, electronic components and
precision instruments.
For the first five months of the year, the Fund, while
managed by the former portfolio manager, Morgen Grenfell,
reflected a net return of 15.01% (the manager had a gross
return of 15.95%) and trailed the MSCI EAFE Index, which
returned 17.43%. For the remaining seven months of fiscal year
1999, with BIAM as manager, the Fund's net return was 6.90%
versus the market return of 11.51%. (BIAM's gross return for
this period was 8.18%.) The shortfall of Fund performance
vis-a-vis the MSCI EAFE Index was due in part to the Japanese
yen hedges in place throughout the year with the expectation
that the yen would weaken against the dollar, but the inverse
situation took place and the yen remains very strong vis-a-vis
the dollar. In addition, some shortfall in performance was
experienced as a result of the underweighting in Japan
vis-a-vis its weighting in the MSCE EAFE Index throughout the
year; and, at the time, BIAM was re-structuring the portfolio
inherited from Morgan Grenfell during March.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
INTERNATIONAL EQUITY FUND VS
MSCI EAFE
FOR 10-YEAR PERIOD ENDED 9/30/99
<S> <C> <C>
INTERNATIONAL MSCI
EQUITY EAFE
RETURN 6.49% 5.81%
RISK 13.79% 16.57%
THIS CHART COMPARES THE HISTORICAL AVERAGE
ANNUAL TOTAL RETURN AND THE RISK (AS MEASURED BY
THE STANDARD DEVIATION) OF THE INTERNATIONAL
EQUITY FUND AND THE EAFE FOR THE TEN-YEAR
PERIOD ENDED 9/30/99. THE EAFE IS A
REPRESENTATIVE MARKET INDEX FOR THIS FUND.
SEE THE CORE EQUITY FUND CHART (P. 2)
FOR A DEFINITION OF STANDARD DEVIATION.
</TABLE>
It should be noted that the MSCI EAFE Index for fiscal year
1999 outperformed the broad U.S. equity market (the S&P 500
Index) by over 3 percentage points (30.94% vs. 27.68%) after
significantly trailing the S&P 500 Index for the previous four
fiscal years with returns of 5.80% in 1995, 8.61% in 1996,
12.18% in 1997 and -8.35% in 1998 versus the S&P 500, which
returned 29.72%, 20.36%, 40.50%, and 9.11%, respectively, for
these periods.
13
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND VS MSCI
EAFE
<S> <C> <C>
89 $10,000.00 $10,000.00
90 $8,495.13 $7,239.11
91 $9,820.92 $8,824.60
92 $9,488.63 $8,196.75
93 $11,532.70 $10,357.05
94 $12,781.29 $11,372.74
95 $13,509.64 $12,034.49
96 $15,188.17 $13,072.84
97 $17,148.36 $14,664.94
98 $15,251.94 $13,439.76
99 $18,752.77 $17,598.12
International Equity: $18,753
MSCI EAFE: $17,598
GROWTH OF $10,000
INTERNATIONAL EQUITY MSCI EAFE
1 year $12,295 $13,094
3 year $12,347 $13,462
5 year $14,672 $15,474
10 year $18,753 $17,598
CUMULATIVE RETURNS
1 year 22.95% 30.94%
3 year 23.47% 34.62%
5 year 46.72% 54.74%
10 year 87.53% 75.98%
AVERAGE ANNUAL RETURNS
1 year 22.95% 30.94%
3 year 7.28% 10.42%
5 year 7.97% 9.12%
10 year 6.49% 5.81%
</TABLE>
PERFORMANCE RESULTS
For the one-year period ended September 30, 1999, the
International Equity Fund returned 22.95% and trailed the MSCE
EAFE Index, which returned 30.94% for the period. For the
recent three- and five-year periods, the Fund reflected
annualized returns of 7.28% and 7.97%, underperforming the EAFE
Index, which returned 10.42% and 9.12% per annum for both these
periods. For the ten years ended September 30, 1999 however,
the International Equity Fund produced a return of 6.49%,
annualized, and compared favorably to the MSCI EAFE Index per
year return of 5.81%. During this period, the Fund had a much
lower risk exposure as measured by standard deviation, than the
MSCI EAFE Index (see chart on page 2).
The International Equity Fund's return of 22.95% for the
one-year period ended September 30, 1999 underperformed the
29.80% return of the Lipper International Funds Average, the
Fund's performance benchmark. For the trailing three-, five-
and ten-year periods ended September 30, 1999, the Fund
returned 7.28%, 7.97% and 6.49 per annum, respectively, versus
an annualized return of 11.15%, 9.12% and 8.54%, respectively,
for the Lipper benchmark. Past performance is not a guarantee
of future results.
INTERNATIONAL EQUITY FUND VS LIPPER INTERNATIONAL FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
----------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND(1) 22.95% 7.28% 7.97% 6.49%
Lipper International Funds
Avg.(2) 29.80 11.15 9.12 8.54
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Inc. 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.
---------------------------------------------------------------
14
<PAGE>
ACTIVELY MANAGED BOND FUND
The Actively Managed Bond Fund invests in high-quality,
fixed-income securities (bonds and other debt securities) with
maturities of up to 30 years. The Fund has been managed by
Retirement System Investors Inc. since August 2, 1993. Its
performance index is the Lehman Brothers Aggregate Bond Index.
MARKET ENVIRONMENT
Bond markets turned negative and interest rates rose during the
fiscal year ended September 30, 1999. The Federal Reserve
adopted a bias towards tighter monetary policy in May, and on
June 30 it raised the Fed Funds rate 25 basis points to 5.0%.
On August 24, Funds were raised another 25 basis points to
5.25% and the discount rate increased to 4.75% from 4.5%. At
the most recent meeting on October 5, 1999, the Fed left rates
unchanged but again adopted a bias toward a firmer policy.
The worldwide developments that propelled the Fed to reduce
Funds rates in three steps of 25 basis points each (to 4.75%
from 5.5%) in the fall of 1998 have been slowly reversing in
1999. World economies are recovering to various degrees,
financial markets are functioning more normally and commodity
and other prices have stopped deflating and in some instances,
particularly energy, are considerably higher. The U.S. economy
has not slowed as anticipated, and continued strong growth has
raised concerns of a demand supply imbalance in some markets.
The Fed has particularly commented on its concerns about:
persistent strength in domestic demand; tight labor markets, as
evidenced by a decreasing pool of workers willing to take jobs,
with the potential for costs to increase significantly in
excess of productivity; the weaker dollar and rising import
prices; and the trend in commodity prices. Manufacturing and
exports have also gradually recovered from last year's lows. In
view of the overall trends, further tightening by the Fed
would not be surprising.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN ACTIVELY MANAGED LEHMAN BROS.
ACTIVELY MANAGED BOND FUND VS
LEHMAN BROTHERS AGGREGATE BOND INDEX
FOR 10-YEAR PERIOD ENDED 9/30/99
<S> <C> <C>
RETURN 7.79% 8.10%
RISK 5.33% 4.50%
THIS CHART COMPARES THE HISTORICAL AVERAGE
ANNUAL TOTAL RETURN AND THE RISK (AS MEASURED
BY THE STANDARD DEVIATION) OF THE ACTIVELY
MANAGED BOND FUND AND THE LEHMAN BROS.
AGGREGATE BOND INDEX FOR THE TEN-YEAR PERIOD
ENDED 9/30/99. LEHMAN BROS. IS A REPRESENTATIVE
MARKET INDEX FOR THIS FUND. SEE THE CORE EQUITY
FUND CHART (P. 2) FOR A DEFINITION OF
STANDARD DEVIATION
</TABLE>
Interest rates trended higher throughout the September 30,
1999 fiscal year. The 30-year Treasury ended fiscal 1999 at
6.05% versus 4.97% the year before; the ten-year Treasury rose
to 5.88% from 4.41%; the five-year increased to 5.75% from
4.21%; and the two-year Treasury was 5.60% versus 4.26%.
The yield curve steepened as the outlook for bonds turned
negative during the September 30, 1999 fiscal year. Yield
spreads widened sharply between callable agencies, mortgages
and Treasuries in the September quarter, as investors reduced
15
<PAGE>
buying ahead of anticipated rate increases and stressed
liquidity ahead of possible Y2K problems. Investment objectives
during the year primarily consisted of buying Federal agency
bonds and mortgages and corporates to obtain higher yields,
although purchases were reduced as higher rates became more
likely. The rise in rates and wider yield spreads to Treasuries
caused spread products (corporates, mortgages and other
callables) to underperform. This will reverse when spreads
return to historical norms.
The Actively Managed Bond Fund began fiscal 1999 with a
duration of 6.5 years, which had declined to 6.0 years at
September 30, 1999. The Lehman Brothers Aggregate Bond Index
had a modified duration of 5.0 years at the end of fiscal 1999.
At September 30, 1999, yield-to-maturity of the Fund was 7.70%
versus 6.75% for the Lehman Brothers Aggregate Bond Index.
The Fund maintained high quality, with 12% in U.S.
Treasuries, 25% in Federal Agency notes and bonds, 3% in
Federal agency mortgage pass thrus, 55% in agency and AAA rated
collateralized mortgage obligations and 5% in corporates as of
fiscal year end. (The quality of holdings is restricted to "A"
or better, and at least 65% of holdings must be in U.S.
Government or agency issues.)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ACTIVELY MANAGED BOND FUND VS LEHMAN BROTHERS AGGREGATE BOND INDEX
<S> <C> <C>
89 $10,000.00 $10,000.00
90 $10,488.17 $10,755.22
91 $12,365.12 $12,474.47
92 $13,974.75 $14,040.96
93 $15,601.44 $15,443.10
94 $14,822.22 $14,944.91
95 $16,824.30 $17,043.37
96 $17,512.51 $17,879.27
97 $19,275.71 $19,612.99
98 $21,459.80 $21,869.81
99 $21,164.04 $21,788.15
Actively Managed: $21,164
Lehman Bros. Index: $21,788
GROWTH OF $10,000
ACTIVELY MANAGED BOND FUND LB AGG. BOND INDEX
1 year $9,862 $9,963
3 year $12,085 $12,186
5 year $14,279 $14,579
10 year $21,164 $21,788
CUMULATIVE RETURNS
1 year -1.38% -0.37%
3 year 20.85% 21.86%
5 year 42.79% 45.79%
10 year 111.64% 117.88%
AVERAGE ANNUAL RETURNS
1 year -1.38% -0.37%
3 year 6.52% 6.81%
5 year 7.38% 7.83%
10 year 7.79% 8.10%
</TABLE>
PERFORMANCE RESULTS
The Actively Managed Bond Fund posted a return of -1.38% for
the one-year period ended September 30, 1999 and trailed the
Lehman Brothers Aggregate Bond Index, a representative market
index, which returned -0.37%. For the recent three-and
five-year periods, the Fund's annualized returns were 6.52% and
7.38% compared to the market index returns of 6.81% and 7.83%
per annum. Over the longer term, ten years ended September 30,
1999, the Fund had a return of 7.79% per year compared to the
8.10% annualized return of the Lehman Brothers Aggregate Bond
Index. During this ten-year period, the Fund's risk profile, as
measured by standard deviation, exceeded that of the market
index (see chart on page 2).
16
<PAGE>
The Actively Managed Bond Fund outperformed its Lipper
benchmark, the U.S. Government Bond Funds Average, for the
one-year period ended September 30, 1999, with a return
of -1.38%, compared to the -2.66% of the benchmark. Over the
longer term (three, five and ten years ended September 30,
1999), the Fund showed very strong results compared to its
Lipper benchmark with annualized returns of 6.52%, 7.38% and
7.79%, respectively. For all three periods, the Lipper
benchmark reflected returns of 5.75%, 6.70% and 7.07% per
annum. For these periods, the Fund achieved a top 14% ranking
(21st out of 154 funds), a top 17% ranking (18th out of 112
funds) and a top 19% ranking (9th out of 49 funds),
respectively, in the Lipper U.S. Government Funds grouping.
Past performance is not a guarantee of future results.
ACTIVELY MANAGED BOND FUND VS LIPPER U.S. GOVERNMENT BOND FUNDS
AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
----------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
ACTIVELY MANAGED BOND FUND(1) -1.38% 6.52% 7.38% 7.79%
Lipper U.S. Government Bond Funds
Avg.(2) -2.66 5.75 6.70 7.07
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Inc. is an independent reporting service that
measures the performance of most U.S. mutual funds. The
performance results reflect an unmanaged index and are net
of all expenses other than sales charges and redemption
fees.
---------------------------------------------------------------
INTERMEDIATE-TERM BOND FUND
The Intermediate-Term Bond Fund invests in high-quality,
fixed-income securities that mature within ten years or have
expected average lives of ten years or less. It is managed by
Retirement System Investors Inc. Its performance index is the
Lehman Brothers Government-Intermediate Bond Index.
MARKET ENVIRONMENT
The unfavorable environment for fixed-income investors (see
Actively Managed Bond Fund) also had a dampening impact for the
Intermediate-Term Bond Fund in 1999. As noted under the
Actively Managed Bond Fund, the worldwide developments that
propelled the Fed to reduce the Funds rate in three steps of 25
basis points each (to 4.75% from 5.50%) in the fall of 1998
have been slowly reversing in 1999. World economies are
recovering to various degrees, financial markets are
functioning more normally and commodity and other prices have
stopped deflating and in some instances, particularly energy,
are considerably higher. The U.S. economy has not slowed as
anticipated, and continued strong growth has raised concerns of
a demand supply imbalance in some markets. The Fed has
particularly commented on its concerns about: persistent
strength in domestic demand; tight labor markets as evidenced
by a decreasing pool of workers willing to take jobs, the
potential for costs to increase significantly in excess of
productivity; the weaker dollar, rising import prices, and the
trend in commodity prices.
17
<PAGE>
The yield curve steepened as the outlook for bonds turned
negative in fiscal 1999. Yield spreads widened sharply between
callable agencies, mortgages and Treasuries as investors
reduced buying ahead of anticipated rate increases. Conversely,
should the spreads narrow to more normal levels, it will permit
the Intermediate-Term Bond Fund to outperform its index more
favorably. The Intermediate-Term Bond Fund is also yield
oriented, with a yield to maturity of 7.07% at September 30,
1999, versus 5.93% for the Lehman Brothers Government-
Intermediate Bond Index. The duration of the Fund was reduced
to 3.3 years at the end of the fiscal year from 3.8 years at
the beginning of fiscal 1999. The Lehman Brothers
Government-Intermediate Bond Index had a modified duration of
3.2 years at the end of fiscal 1999.
The Intermediate-Term Bond Fund maintained an emphasis on
high-quality, fixed-income investments during the one-year
period covered by this report. At the end of the year, 98% of
the holdings were in "AAA" securities, including 6% in U.S.
Treasuries, 8% in agency mortgage pass thrus, 59% in agency and
AAA rated collateralized mortgage obligations, and 25% in
Federal agency notes and bonds. (The quality of holdings is
restricted to "A" or better, and at least 65% of holdings must
be U.S. Government or agency issues.)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN
INTERMEDIATE-TERM BOND FUND VS
LEHMAN BROTHERS GOVERNMENT-
INTERMEDIATE BOND INDEX
FOR 10-YEAR PERIOD ENDED 9/30/99
<S> <C> <C>
INTERMEDIATE-TERM LEHMAN BROS.
RETURN 6.98% 7.47%
RISK 3.58% 3.67%
THIS CHART COMPARES THE HISTORICAL AVERAGE
ANNUAL TOTAL RETURN AND THE RISK (AS MEASURED
BY THE STANDARD DEVIATION) OF THE INTERMEDIATE-TERM
BOND FUND AND THE LEHMAN BROS. GOVERNMENT-
INTERMEDIATE BOND INDEX FOR THE TEN-YEAR PERIOD
ENDED 9/30/99. LEHMAN BROS. IS A REPRESENTATIVE
MARKET INDEX FOR THIS FUND. SEE THE CORE EQUITY
FUND CHART (P. 2) FOR A DEFINITION OF
STANDARD DEVIATION.
</TABLE>
18
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERMEDIATE-TERM LEHMAN BROTHERS GOVERNMENT-
BOND FUND VS INTERMEDIATE BOND INDEX
<S> <C> <C>
1989 $10,000.00 $10,000.00
1990 $10,857.68 $10,857.81
1991 $12,347.06 $12,333.97
1992 $13,756.85 $13,871.39
1993 $14,751.66 $14,932.24
1994 $14,439.01 $14,708.17
1995 $15,917.02 $16,267.74
1996 $16,656.02 $17,098.59
1997 $17,935.36 $18,438.73
1998 $19,384.97 $20,394.69
1999 $19,635.10 $20,555.23
Intermediate-Term Bond: $19,635
Lehman Brothers Index: $20,555
GROWTH OF $10,000
INTERMEDIATE-TERM BOND FUND LB GOV'T-INTER. BOND INDEX
1 year $10,129 $10,079
3 year $11,789 $12,022
5 year $13,599 $13,975
10 year $19,635 $20,555
CUMULATIVE RETURNS
1 year 1.29% 0.79%
3 year 17.89% 20.22%
5 year 35.99% 39.75%
10 year 96.35% 105.55%
AVERAGE ANNUAL RETURNS
1 year 1.29% 0.79%
3 year 5.64% 6.33%
5 year 6.34% 6.92%
10 year 6.98% 7.47%
</TABLE>
PERFORMANCE RESULTS
The Intermediate-Term Bond Fund posted a return of 1.29% for
the one-year period ended September 30, 1999, which compared
quite favorably to the 0.79% return for the Lehman Brothers
Government-Intermediate Bond Index, a representative market
index. For the three and five years ended September 30, 1999,
the Fund reflected annualized returns of 5.64% and 6.34%
compared to 6.33% and 6.92% per annum for the market index. For
the ten-year period ended September 30, 1999, the
Intermediate-Term Bond Fund achieved an annualized return of
6.98%, while the market index returned 7.47% per year. Both the
Fund and market index had similar risk profiles, as measured by
standard deviation, during this period (see chart on page 2).
For the one-year period ended September 30, 1999, the Fund
had a return of 1.29% versus 0.69% for the Lipper
Short-Intermediate (one to five years maturity) U.S. Government
Funds Average, the Fund's performance benchmark. For the recent
three-, five-, and ten-year periods, the Fund experienced
annualized returns of 5.64%, 6.34% and 6.98%, respectively,
outperforming the Lipper benchmark for all three periods by 34,
40 and 21 basis points, per year, respectively. Past
performance is not a guarantee of future results.
INTERMEDIATE-TERM BOND FUND VS LIPPER SHORT-INT. U.S. GOV'T.
FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
----------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
INTERMEDIATE-TERM BOND
FUND(1) 1.29% 5.64% 6.34% 6.98%
Lipper Short-Intermediate (1
to 5 years maturity) U.S.
Gov't. Funds Avg.(2) 0.69 5.30 5.94 6.77
</TABLE>
1. All performance results shown are net of management fees
and all related investment expenses.
2. Lipper Inc. 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.
---------------------------------------------------------------
19
<PAGE>
SHORT-TERM INVESTMENT FUND
The Short-Term Investment Fund, managed by Retirement System
Investors, Inc., invests in high-quality, cash equivalent-type
securities maturing in one year or less, and U.S. Government
instruments with maturities of up to two years. The portfolio's
maximum average maturity is one year.
MARKET ENVIRONMENT
Short-term interest rates rose throughout most of fiscal 1999
as investors anticipated tighter monetary policy by the Federal
Reserve. The Fed, as expected, raised Fed Funds 25 basis points
to 5.0% on June 30, 1999 and another 25 basis points to 5.25%
on August 24, 1999. It also raised the discount rate 25 basis
points at the same time to 4.75%. During the 52-week period
beginning September 30, 1998, the 90-day Treasury bill moved
from 4.35% to 4.85% at September 30, 1999. During the same
period, the two-year Treasury moved from 4.26% to 5.60%.
During the one year ended September 30, 1999, the
Short-Term Investment Fund's average maturity lengthened to 280
days at September 30, 1999. This represents a gradual increase
of 116 days from its 12-month low of 164 days at September 30,
1998. Short intersector yield spreads (e.g., one-month
commercial paper versus two-year Treasury notes) narrowed
considerably after beginning fiscal year 1999 at negative 98
basis points (5.24% for commercial paper vs. 4.26% for the
two-year Treasury Notes), jumping to its 52-week high of 85
basis points at June 11, 1999, and ending fiscal year 1999 at
31 basis points. All other short intersector spreads narrowed
as the short portion of the curve steepened as compared to its
inverted position one year earlier.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURING RISK AND RETURN SHORT-TERM INVESTMENT SALOMON BROS. T-BILLS
SHORT-TERM INVESTMENT FUND VS
SALOMON BROS. 6-MONTH U.S. TREASURY BILLS
FOR 10-YEAR PERIOD ENDED 9/30/99
<S> <C> <C>
RETURN 4.79% 5.35%
RISK 0.80% 0.68%
THIS CHART COMPARES THE HISTORICAL AVERAGE ANNUAL
TOTAL RETURN AND THE RISK (AS MEASURED BY THE
STANDARD DEVIATION) OF THE SHORT-TERM INVESTMENT
FUND AND THE SALOMON BROS. 6-MONTH U.S. TREASURY BILLS
FOR THE TEN-YEAR PERIOD ENDED 9/30/99. T-BILLS ARE A
REPRESENTATIVE MARKET INDEX FOR THIS FUND. SEE THE
CORE EQUITY FUND CHART (P. 2) FOR A DEFINITION OF
STANDARD DEVIATION.
</TABLE>
Investment changes during the fiscal year included an
increase in the manager's weightings of mortgages, callable
agencies and high quality, short maturity corporate issues,
while maintaining a commitment to quality. At September 30,
1999, 87.1% of holdings were rated "AA" or better by two or
more of the nationally recognized rating agencies.
20
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SHORT-TERM SALOMON BROS. 6-MONTH
INVESTMENT FUND VS. U.S. TREASURY BILLS
<S> <C> <C>
1989 $10,000.00 $10,000.00
1990 $10,833.78 $10,824.62
1991 $11,526.76 $11,559.87
1992 $11,959.01 $12,081.17
1993 $12,233.46 $12,479.61
1994 $12,597.10 $12,955.57
1995 $13,248.91 $13,719.83
1996 $13,889.09 $14,468.70
1997 $14,568.32 $15,251.97
1998 $15,307.71 $16,071.77
1999 $15,973.25 $16,839.72
Short-Term: $15,973
Salomon Bros. T-Bills: $16,840
GROWTH OF $10,000
SHORT-TERM INVESTMENT SALOMON BROS. T-BILLS
1 year $10,435 $10,478
3 year $11,501 $11,639
5 year $12,680 $12,998
10 year $15,973 $16,840
CUMULATIVE RETURNS
1 year 4.35% 4.78%
3 year 15.01% 16.39%
5 year 26.80% 29.98%
10 year 59.73% 68.40%
AVERAGE ANNUAL RETURNS
1 year 4.35% 4.78%
3 year 4.77% 5.19%
5 year 4.86% 5.38%
10 year 4.79% 5.35%
</TABLE>
PERFORMANCE RESULTS
For the one year period ended September 30, 1999, the
Short-Term Investment Fund returned 4.35% versus 4.41% for the
Lipper Money Market Funds Average, an unmanaged index of money
funds that reflects performance after fees and expenses are
taken out. Salomon Brothers 6-Month U.S. Treasury Bills (an
unmanaged index, which provides a representative proxy for the
short-term fixed-income securities market) returned 4.78% for
this period. For the recent three-year period, the Fund's
annualized return of 4.77% was the same as its Lipper benchmark
return, but trailed the Salomon Brothers 6-Month U.S. Treasury
Bills, which returned 5.19% per annum over the three years
ended September 30, 1999.
For the five-year period ended September 30, 1999 the Fund
returned 4.86% annually, compared to the 4.95% annualized
return of its Lipper benchmark, and the 5.38% return per year
for the Salomon Brothers index. The Fund's 4.79% annualized
return for the ten-year period ended September 30, 1999,
trailed the 4.88% per year return of the Lipper benchmark and
the 5.35% annualized return of the Salomon Brothers 6-Month
U.S. Treasury Bills for the same period. Both the Fund and the
Salomon Brothers 6-Month Treasury Bills had extremely low risk
profiles, as measured by standard deviation, during this period
(see chart on page 2). Past performance is not a guarantee of
future results.
SHORT-TERM INVESTMENT FUND VS LIPPER RETAIL MONEY FUNDS AVERAGE
FOR PERIODS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized
----------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT FUND(1) 4.35% 4.77% 4.86% 4.79%
Lipper Money Market Funds Average(2) 4.41 4.77 4.95 4.88
</TABLE>
1. All performance results shown are net of management fees
and all related expenses.
2. Lipper Inc. 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.
---------------------------------------------------------------
21
<PAGE>
COMBINED FINANCIAL STATEMENTS
RSI RETIREMENT TRUST
Combined Statement of Assets and Liabilities September 30,
1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (cost
$503,514,764)--Note 2(A) $653,977,493
Cash 2,203,581
Receivable for investments sold 3,255,252
Receivable for units sold 1,382,135
Dividends and interest receivable 2,250,212
Collateral for securities loaned, at fair value--Note
4 3,426,748
Other assets 138,010
------------
666,633,431
LIABILITIES:
Payable for investments purchased $3,136,107
Payable upon return of securities loaned--Note 4 3,426,748
Payable for units redeemed 407,930
Payable for investment managers 274,596
Net loss on forward foreign currency contracts 143,989
Accrued expenses 545,909 7,935,279
---------- ------------
NET ASSETS--Note 5 $658,698,152
============
</TABLE>
Combined Statement of Operations Year Ended September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 4,592,559
Interest 18,411,460
-----------
Total Income $ 23,004,019
Expenses:
Investment manager's fees--Note 3(A) 3,209,238
Shareholder servicing fees and expenses--Note 3(B) 2,826,987
Custodian fees and expenses 270,421
Legal and auditing fees 177,562
Consultant fees 89,593
Trustees' fees and expenses--Note 3(C) 232,214
Printing and Postage 71,316
Insurance 81,198
Other 238,656
-----------
Total Expenses 7,197,185
Less fees paid indirectly--Note 4 (49,395)
Less expense reimbursement--Note 3(A) (126,180)
-----------
Net Expenses 7,021,610
------------
INVESTMENT INCOME--NET 15,982,409
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS--Note 4:
Realized gain (loss) on:
Investments 54,539,234
Options written 111,269
Foreign currency transactions (738,580)
-----------
53,911,923
-----------
Unrealized appreciation on investments:
Investments 36,196,266
Options written 7,687
Foreign currency translations of other assets and
liabilities 5,101
-----------
36,209,054
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 90,120,977
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $106,103,386
============
</TABLE>
See Notes to Financial Statements
22
<PAGE>
RSI RETIREMENT TRUST (CONTINUED)
Combined Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 15,982,409 $ 15,336,152
Net realized gain 53,911,923 52,428,272
Net unrealized appreciation (depreciation) 36,209,054 (72,680,619)
------------- -------------
Net increase (decrease) in net assets resulting
from operations 106,103,386 (4,916,195)
------------- -------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 190,767,775 150,412,586
Value of units redeemed (222,297,742) (203,447,714)
------------- -------------
Net (decrease) in net assets resulting from
capital transactions (31,529,967) (53,035,128)
------------- -------------
Net increase (decrease) 74,573,419 (57,951,323)
NET ASSETS at beginning of year 584,124,733 642,076,056
------------- -------------
NET ASSETS at end of year $ 658,698,152 $ 584,124,733
============= =============
</TABLE>
See Notes to Financial Statements
23
<PAGE>
FINANCIAL STATEMENTS OF INVESTMENT FUNDS
CORE EQUITY FUND
Statement of Investments September 30, 1999
--------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
COMMON STOCKS 99.3%
AEROSPACE & DEFENSE 4.6%
135,189 Allied Signal, Inc. $ 8,102,891
------------
BANKING 8.1%
48,683 Bank of America Corp. 2,711,035
65,576 Chase Manhattan Corp. 4,942,791
136,283 Citigroup, Inc. 5,996,452
16,000 Washington Mutual, Inc. 468,000
------------
14,118,278
------------
BROADCASTING & PUBLISHING 0.1%
2,000 Time Warner, Inc. 121,500
------------
BUILDING PRODUCTS 3.6%
91,500 Armstrong World
Industries, Inc. 4,111,781
39,000 Southdown, Inc. 2,086,500
------------
6,198,281
------------
CHEMICALS 2.8%
79,600 E.I. Du Pont De Nemours &
Co. 4,845,650
------------
COMPUTER SOFTWARE &
PERIPHERALS 3.4%
44,000 BMC Software, Inc.* 3,146,000
41,875 Computer Associates
International, Inc. 2,564,844
12,100 Sterling Commerce, Inc.* 224,606
------------
5,935,450
------------
COMPUTER SYSTEMS 14.8%
204,200 EMC Corp.* 14,587,537
32,200 Hewlett-Packard Corp. 2,962,400
67,000 International Business
Machines Corp. 8,132,125
------------
25,682,062
------------
DRUG, HEALTH CARE &
PHARMACEUTICALS 12.7%
2,500 Elan Corp. Plc* 83,906
93,900 Johnson & Johnson 8,627,062
90,571 Merck & Co., Inc. 5,870,133
212,400 Pfizer, Inc. 7,633,125
------------
22,214,226
------------
ELECTRONICS & ELECTRICAL 14.3%
112,800 Cisco Systems, Inc.* 7,726,799
115,800 Emerson Electric & Co. 7,317,113
131,800 Intel Corp. 9,794,387
------------
24,838,299
------------
ENERGY 12.6%
41,729 BP Amoco Plc - Spons ADR 4,624,095
82,905 Halliburton Co. 3,399,105
114,081 Royal Dutch Petroleum Co. 6,737,909
113,800 Texaco, Inc. 7,183,625
------------
21,944,734
------------
</TABLE>
See Notes to Financial Statements 24
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1999
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------ -----
<C> <S> <C> <C>
FINANCIAL SERVICES 2.3%
65,210 Fannie Mae $ 4,087,852
------------
INSURANCE 3.8%
77,151 American International
Group, Inc. 6,707,315
------------
MACHINERY & ENGINEERING 2.8%
89,926 Ingersoll-Rand Co. 4,940,310
------------
METALS & MINING 0.0%
612 Alcoa, Inc. 37,982
------------
OFFICE & BUSINESS
EQUIPMENT 3.9%
163,327 Xerox Corp. 6,849,526
------------
RETAIL 0.2%
5,200 Tiffany & Co. 311,675
------------
TELECOMMUNICATIONS 6.5%
175,364 Lucent
Technologies, Inc. 11,376,740
------------
TELECOMMUNICATIONS
EQUIPMENT 2.8%
84,600 Tellabs, Inc.* 4,816,913
------------
Total Common Stocks (Cost $48,195,969) $173,129,684
------------
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 0.4%
$659,267 Bear Stearns &
Co., Inc., Dated
9/30/99, 5.32%, Due
10/1/99, Collateralized
by $1,855,000 United
States Treasury Strips
Due 5/15/15 (Value
$673,606) $ 659,267
------------
Total Short Term Investments--Repurchase
Agreement (Cost $659,267) $ 659,267
------------
<CAPTION>
# of
Contracts
- ---------
INDEX OPTIONS 0.0%
<C> <S> <C> <C>
5 S&P 500 Put Option Dec 99/1350 $ 42,500
------------
Total Index Options (Premiums Received $26,525) $ 42,500
------------
Total Investments (Cost $48,881,761) 99.7% $173,831,451
Other assets in excess of liabilities 0.3% 541,620
----- ------------
Total Net Assets 100.0% $174,373,071
===== ============
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 25
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (cost
$48,881,761)--Note 2(A) $173,831,451
Receivable for investments sold 515,645
Receivable for units sold 227,860
Dividends and interest receivable 66,872
Other assets 28,096
------------
174,669,924
LIABILITIES:
Payable for units redeemed $ 123,686
Payable for investment managers 78,292
Accrued expenses 94,875 296,853
---------- ------------
NET ASSETS at value, applicable to 1,640,388
outstanding units of beneficial interest--Note 5 $174,373,071
============
NET ASSET VALUE offering and redemption price per unit
($174,373,071 divided by 1,640,388 units) $ 106.30
============
</TABLE>
Statement of Operations Year Ended September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 2,585,573
Interest 120,261
-----------
Total Income $ 2,705,834
Expenses:
Investment manager's fees--Note 3(A) 1,055,792
Shareholder servicing fees and expenses--Note 3(B) 733,294
Custodian fees and expenses 33,708
Legal and auditing fees 26,509
Consultant fees 12,799
Trustees' fees and expenses--Note 3(C) 29,054
Printing and Postage 10,188
Insurance 25,389
Other 27,570
-----------
Net Expenses 1,954,303
-----------
INVESTMENT INCOME--NET 751,531
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on:
Investments 28,128,496
Options written 115,848
-----------
28,244,344
-----------
Unrealized appreciation on:
Investments 20,311,871
Options written 15,975
-----------
20,327,846
-----------
NET REALIZED AND UNREALIZED GAIN 48,572,190
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $49,323,721
===========
</TABLE>
See Notes to Financial Statements
26
<PAGE>
CORE EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 751,531 $ 1,423,816
Net realized gain 28,244,344 39,334,232
Net unrealized appreciation (depreciation) 20,327,846 (31,400,154)
------------ ------------
Net increase in net assets resulting from
operations 49,323,721 9,357,894
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 32,286,369 22,854,166
Value of units redeemed (83,603,978) (68,118,523)
------------ ------------
Net (decrease) in net assets resulting from capital
transactions (51,317,609) (45,264,357)
------------ ------------
Net (decrease) (1,993,888) (35,906,463)
NET ASSETS at beginning of year 176,366,959 212,273,422
------------ ------------
NET ASSETS at end of year $174,373,071 $176,366,959
============ ============
</TABLE>
See Notes to Financial Statements
27
<PAGE>
VALUE EQUITY FUND
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
COMMON STOCKS 98.6%
AEROSPACE & DEFENSE 2.0%
15,811 Allied Signal, Inc. $ 947,672
23,600 Lockheed Martin Corp. 771,425
-----------
1,719,097
-----------
AUTOMOTIVE 2.0%
9,399 DaimlerChrysler AG 652,643
20,400 Ford Motor Co. 1,023,825
-----------
1,676,468
-----------
BANKING 9.7%
12,188 Bank of America Corp. 678,719
26,500 Bank One Corp. 922,531
24,800 Chase Manhattan Corp. 1,869,300
60,992 Citigroup, Inc. 2,683,648
31,800 Washington Mutual, Inc. 930,150
28,700 Wells Fargo Co. 1,137,238
-----------
8,221,586
-----------
BUILDING PRODUCTS 4.7%
45,200 Martin Marietta
Materials, Inc. 1,805,175
40,196 Southdown, Inc. 2,150,486
-----------
3,955,661
-----------
COMPUTER SOFTWARE &
PERIPHERALS 1.5%
12,500 BMC Software, Inc.* 893,750
23,000 Cadence Design
Systems, Inc.* 304,750
5,000 Sterling Commerce, Inc.* 92,813
-----------
1,291,313
-----------
COMPUTER SYSTEMS 1.0%
7,200 International Business
Machines Corp. 873,900
-----------
CONSUMER GOODS & SERVICES 0.6%
9,000 Kimberly Clark Corp. 472,500
-----------
CONTAINERS/PAPER/PLASTIC 0.8%
33,300 Smurfit-Stone Container
Corp.* 720,113
-----------
DRUG, HEALTH CARE &
PHARMACEUTICALS 8.5%
25,200 Alza Corp.* 1,078,875
49,000 Beverly Enterprises, Inc.* 208,250
10,000 Bristol Myers Squibb Co. 675,000
57,600 Elan Corp. Plc* 1,933,199
8,700 HCR Manor Care, Inc.* 150,619
8,000 Mckesson HBOC, Inc. 232,000
28,829 Merck & Co., Inc. 1,868,480
33,800 Tenet Healthcare Corp.* 593,613
15,700 Watson
Pharmaceutical, Inc.* 479,831
-----------
7,219,867
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
ELECTRONICS & ELECTRICAL 3.5%
6,900 Altera Corp.* $ 298,856
10,000 Dallas Semiconductor Corp. 534,375
12,400 Intel Corp. 921,475
35,600 Oak Industries, Inc.* 1,210,400
-----------
2,965,106
-----------
ENERGY 10.0%
13,625 BP Amoco Plc--Spons ADR 1,509,820
14,500 Conoco, Inc. 402,375
14,046 Conoco, Inc.--Class B 384,509
61,595 Halliburton Co. 2,525,396
2,700 Mobil Corp. 272,025
18,519 Royal Dutch Petroleum Co. 1,093,778
22,400 Texaco, Inc. 1,414,000
28,400 Transocean Offshore, Inc. 869,750
-----------
8,471,653
-----------
FINANCIAL SERVICES 3.2%
20,390 Fannie Mae 1,278,198
2,500 Goldman Sachs Group, Inc. 152,500
14,700 Morgan Stanley Dean
Witter & Co. 1,311,056
-----------
2,741,754
-----------
FOOD PRODUCTS & SERVICES 0.8%
17,600 Safeway, Inc.* 669,900
-----------
INSURANCE 3.0%
7,700 AFLAC, Inc. 322,438
19,300 Allstate Corp. 481,294
2,300 American General Corp. 145,331
13,500 American International
Group, Inc. 1,173,655
10,300 Hartford Financial Services
Group, Inc. 421,013
-----------
2,543,731
-----------
MACHINERY & ENGINEERING 3.3%
13,200 Honeywell, Inc. 1,469,325
15,174 Ingersoll-Rand Co. 833,622
7,500 Milacron, Inc. 133,125
24,300 Thermo Electron Corp.* 326,531
-----------
2,762,603
-----------
MACHINERY/GENERAL 0.1%
3,300 Maytag Corp. 109,931
-----------
MANUFACTURING/CAPITAL GOODS 0.5%
9,700 Zebra Technologies
Corp.--Class A* 440,744
-----------
MERCHANDISING 2.2%
40,550 Hasbro, Inc. 869,291
52,460 Mattel, Inc. 996,740
-----------
1,866,031
-----------
</TABLE>
See Notes to Financial Statements 28
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
METALS & MINING 3.4%
36,788 Alcoa, Inc. $ 2,283,155
13,500 Nucor Corp. 642,938
-----------
2,926,093
-----------
OFFICE & BUSINESS EQUIPMENT 4.8%
42,700 Lexmark International
Group, Inc.--Class A* 3,437,350
15,873 Xerox Corp. 665,674
-----------
4,103,024
-----------
OIL & GAS EXPLORATION,
PRODUCTION & SERVICES 3.9%
5,700 Atlantic Richfield Co. 505,163
18,600 Burlington Resources, Inc. 683,550
5,300 Diamond Offshore
Drilling, Inc. 176,888
27,600 EOG Resources, Inc. 586,500
14,800 Noble Drilling Corp.* 323,750
66,400 Union Pacific Resources
Group, Inc. 1,066,549
-----------
3,342,400
-----------
PAPER PRODUCTS 2.3%
8,400 International Paper Co. 403,725
44,000 Mead Corp. 1,512,500
-----------
1,916,225
-----------
REAL ESTATE INVESTMENT TRUST 2.4%
15,100 Boston Properties, Inc. 463,381
136,000 HRPT Properties Trust 1,581,000
-----------
2,044,381
-----------
RETAIL 2.3%
14,100 Federated Department Stores* 615,994
26,500 Kmart Corp.* 309,719
20,900 Kmart Financing
Corp.--Convertible
Preferred 995,362
-----------
1,921,075
-----------
TELECOMMUNICATIONS 10.6%
25,050 AT&T Corp. 1,089,675
9,600 Bell Atlantic Corp. 646,200
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
61,200 GTE Corp. $ 4,704,750
17,700 Nortel Networks Corp. 902,700
31,700 SBC Communications, Inc. 1,618,681
-----------
8,962,006
-----------
TELECOMMUNICATIONS EQUIPMENT 2.5%
49,700 ADC
Telecommunications, Inc.* 2,081,188
-----------
TRANSPORTATION & SHIPPING 2.8%
30,500 FDX Corp.* 1,181,875
68,250 Werner Enterprises, Inc. 1,202,906
-----------
2,384,781
-----------
UTILITIES 6.2%
3,600 Avista Corp.--Preferred 63,000
26,200 Duke Energy Corp. 1,444,274
20,400 MediaOne Group, Inc.* 1,393,575
36,400 Peoples Energy Corp. 1,280,825
1,000 Texas Utilities Co. 37,313
21,100 Texas Utilities
Co.--Preferred 1,040,494
-----------
5,259,481
-----------
Total Common Stocks (Cost $71,320,975) $83,662,612
-----------
<CAPTION>
Principal
Amount
- ------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 0.9%
$785,577 Bear Stearns & Co., Inc.,
Dated 9/30/99, 5.32%, Due
10/1/99, Collateralized by
$840,000 United States
Treasury Strips Due 8/15/00
(Value $801,940) $ 785,577
-----------
Total Short Term Investments--Repurchase Agreement
(Cost $785,577) $ 785,577
-----------
Total Investments (Cost $72,106,552) 99.5% $84,448,189
Other assets in excess of liabilities 0.5% 390,842
----- -----------
Total Net Assets 100.0% $84,839,031
===== ===========
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 29
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (cost
$72,106,552)--Note 2(A) $84,448,189
Receivable for investments sold 1,000,610
Receivable for units sold 145,524
Dividends and interest receivable 122,531
Other assets 17,875
-----------
85,734,729
LIABILITIES:
Payable for investments purchased $753,029
Payable for units redeemed 46,017
Payable for investment managers 27,309
Accrued expenses 69,343 895,698
-------- -----------
NET ASSETS at value, applicable to 1,178,206 outstanding
units of beneficial interest--Note 5 $84,839,031
===========
NET ASSET VALUE offering and redemption price per unit
($84,839,031 divided by 1,178,206 units) $ 72.01
===========
</TABLE>
Statement of Operations Year Ended September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 1,442,320
Interest 69,063
-----------
Total Income $ 1,511,383
Expenses:
Investment manager's fees--Note 3(A) 293,614
Shareholder servicing fees and expenses--Note 3(B) 379,918
Custodian fees and expenses 28,914
Legal and auditing fees 24,009
Consultant fees 12,799
Trustees' fees and expenses--Note 3(C) 29,054
Printing and Postage 10,188
Insurance 9,580
Other 29,082
-----------
Total Expenses 817,158
Less fees paid indirectly--Note 4 (27,395)
-----------
Net Expenses 789,763
-----------
INVESTMENT INCOME--NET 721,620
REALIZED AND UNREALIZED GAIN (LOSS)--Note 4:
Net realized gain (loss) on:
Investments 12,247,116
Options written (4,579)
-----------
12,242,537
-----------
Unrealized appreciation (depreciation) on:
Investments 12,758,086
Options written (8,288)
-----------
12,749,798
-----------
NET REALIZED AND UNREALIZED GAIN 24,992,335
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $25,713,955
===========
</TABLE>
See Notes to Financial Statements
30
<PAGE>
VALUE EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 721,620 $ 626,383
Net realized gain 12,242,537 11,453,123
Net unrealized appreciation (depreciation) 12,749,798 (14,028,220)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 25,713,955 (1,948,714)
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 23,902,497 20,642,979
Value of units redeemed (28,708,085) (15,152,673)
------------ ------------
Net increase (decrease) in net assets resulting from
capital transactions (4,805,588) 5,490,306
------------ ------------
Net increase 20,908,367 3,541,592
NET ASSETS at beginning of year 63,930,664 60,389,072
------------ ------------
NET ASSETS at end of year $ 84,839,031 $ 63,930,664
============ ============
</TABLE>
See Notes to Financial Statements
31
<PAGE>
EMERGING GROWTH EQUITY FUND
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
COMMON STOCKS 92.2%
AEROSPACE & DEFENSE 1.6%
33,600 HEICO Corp. $ 625,800
12,200 Mercury Computer Systems,
Inc.* 413,275
6,200 Moog, Inc.--Class A* 179,025
-----------
1,218,100
-----------
AIRLINES 0.1%
6,500 Frontier Airlines, Inc.* 61,750
-----------
BROADCASTING & PUBLISHING 2.8%
62,900 Citadel Communications
Corp.* 2,146,463
-----------
BUSINESS SERVICES 6.8%
8,700 Administaff, Inc.* 138,656
57,000 Asyst Technologies, Inc.* 1,880,999
12,300 Concentric Network Corp.* 249,844
14,500 Diamond Technology
Partners, Inc.* 649,781
5,700 ECsoft Group Plc, Spons
ADR* 78,375
2,500 Exodus Communications,
Inc.* 180,156
7,000 Forrester Research, Inc.* 273,438
3,500 Network Solutions,
Inc.--Class A* 321,125
46,200 Online Resources &
Commmunications Corp.* 635,250
2,600 Pomeroy Computer Resources,
Inc.* 27,950
6,000 Safeguard Scientifics,
Inc.* 408,000
4,700 Technology Solutions Co.* 66,094
5,300 U.S. Interactive, Inc.* 115,938
5,800 Verio, Inc.* 180,163
-----------
5,205,769
-----------
COMPUTER SERVICE SOFTWARE 22.6%
38,200 Ancor Communication, Inc.* 923,963
91,100 Ardent Software, Inc.* 2,419,843
2,300 Broadvision, Inc.* 305,900
4,000 Caere Corp.* 30,250
43,000 Cybex Computer Products
Corp.* 1,435,125
1,300 Digital River, Inc.* 28,194
33,100 Emulex Corp.* 2,834,187
1,000 Hyperion Solutions Corp.* 21,938
1,000 Open Market, Inc.* 13,125
22,100 Packeteer, Inc.* 754,163
21,600 Qlogic Corp.* 1,507,950
30,200 QRS Corp.* 1,932,799
4,900 Quest Software, Inc.* 227,850
78,700 Sanchez Computer
Associates, Inc.* 2,729,905
35,000 Security First Technologies
Corp.* 1,356,250
43,000 Silicon Storage Technology,
Inc.* 607,375
2,900 Silknet Software, Inc.* 133,763
-----------
17,262,580
-----------
</TABLE>
<TABLE>
COMPUTER SERVICES 0.4%
13,800 Netsolve, Inc.* $ 244,950
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
1,600 RSA Security, Inc.* 42,400
-----------
287,350
-----------
CONSUMER GOODS & SERVICES 11.8%
21,700 1-800 CONTACTS, Inc.* 618,450
47,500 F.Y.I., Inc.* 1,600,156
11,850 Fossil, Inc.* 321,431
72,800 Gerald Stevens, Inc.* 1,023,750
38,000 Jore Corp.* 453,625
34,200 P.F. Chang's China Bistro,
Inc.* 739,575
68,400 Quanta Services, Inc.* 2,004,974
68,600 Rare Hospitality
International, Inc.* 1,483,475
4,900 Sportsline USA, Inc.* 144,856
13,300 THQ, Inc.* 573,563
-----------
8,963,855
-----------
DATA PROCESSING &
REPRODUCTION 0.7%
31,100 InterCept Group, Inc.* 563,688
-----------
DRUG, HEALTH CARE &
PHARMACEUTICALS 2.3%
11,000 Barr Laboratories, Inc.* 349,250
18,800 Dura Pharmaceuticals, Inc.* 262,025
17,000 Ligand Pharmaceuticals,
Inc.* 130,688
8,900 Pharmaceutical Product
Development, Inc.* 120,150
29,500 Priority Healthcare
Corp.--Class B* 910,812
-----------
1,772,925
-----------
EDUCATIONAL SERVICES 0.8%
34,800 Scientific Learning Corp.* 578,550
-----------
ELECTRONICS & ELECTRICAL 20.2%
27,500 ACT Manufacturing, Inc.* 685,781
56,000 Advanced Digital
Information Corp.* 1,554,000
36,500 Applied Micro Circuits
Corp.* 2,078,219
72,000 Applied Science &
Technology, Inc.* 1,485,000
3,750 Dallas Semiconductor Corp. 200,391
500 Exar Corp.* 18,719
18,200 Galileo Technology Ltd.* 455,000
12,900 MMC Networks, Inc.* 402,319
25,400 Pegasus Systems, Inc.* 950,913
32,500 Power Integrations, Inc.* 2,232,343
75,400 Rayovac Corp.* 1,630,525
46,800 RF Micro Devices, Inc.* 2,132,324
5,900 TranSwitch Corp.* 336,300
21,425 Triquint Semiconductor,
Inc.* 1,223,903
-----------
15,385,737
-----------
</TABLE>
See Notes to Financial Statements 32
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
FINANCIAL SERVICES 5.0%
4,400 Eaton Vance Corp. $ 140,800
7,300 Internet Capital Group,
Inc.* 641,031
68,600 Profit Recovery Group
International, Inc.* 3,052,700
-----------
3,834,531
-----------
HOME BUILDING 0.1%
4,600 Toll Brothers, Inc.* 87,688
-----------
MANUFACTURING/CAPITAL GOODS 2.7%
2,100 Maverick Tube Corp.* 34,781
55,900 Pri Automation, Inc.* 2,015,894
-----------
2,050,675
-----------
MEDICAL EQUIPMENT &
SUPPLIES 1.0%
20,300 Cytyc Corp.* 784,088
-----------
MEDICAL SERVICES & DRUGS 0.1%
5,000 Twinlab Corp.* 44,375
-----------
MEDICAL/HOSPITAL SERVICES 5.2%
53,100 Accredo Health, Inc.* 1,666,013
16,100 Colorado Medtech, Inc.* 232,444
28,300 Quadramed Corp.* 208,713
32,750 Xomed Surgical Products,
Inc.* 1,862,655
-----------
3,969,825
-----------
TELECOMMUNICATIONS 6.5%
39,200 Aware, Inc.* 1,122,100
9,000 Cellstar Corp.* 66,938
13,600 Commscope, Inc.* 442,000
5,800 Oak Industries, Inc.* 197,200
</TABLE>
<TABLE>
TELECOMMUNICATIONS (CONTINUED)
9,200 Performance Technologies,
Inc.* $ 207,000
<CAPTION>
Shares Value
------ -----
<C> <S> <C> <C>
83,800 Pinnacle Holdings, Inc.* 2,178,800
39,400 TALK.com, Inc.* 507,275
14,100 Tekelec* 193,875
-----------
4,915,188
-----------
TELECOMMUNICATIONS
EQUIPMENT 0.9%
30,100 Three-Five Systems, Inc.* 665,963
-----------
TRANSPORTATION & SHIPPING 0.6%
31,650 Knight Transportation,
Inc.* 447,056
-----------
Total Common Stocks (Cost $53,682,803) $70,246,156
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
- ------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS
REPURCHASE AGREEMENT 10.3%
$7,869,592 Bear Stearns & Co., Inc.,
Dated 9/30/99, 5.32%, Due
10/1/99, Collateralized by
$19,572,000 United States
Treasury Strips Due
8/15/00--8/15/24
(Value $8,031,492) $ 7,869,592
-----------
Total Short Term Investments--Repurchase Agreement
(Cost $7,869,592) $ 7,869,592
-----------
Total Investments (Cost $61,552,395) 102.5% $78,115,748
Liabilities in excess of other assets (2.5)% (1,924,575)
----- -----------
Total Net Assets 100.0% $76,191,173
===== ===========
</TABLE>
*Denotes non-income producing security.
See Notes to Financial Statements 33
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (cost
$61,552,395)--Note 2(A) $78,115,748
Receivable for investments sold 234,067
Receivable for units sold 136,412
Dividends and interest receivable 33,508
Other assets 14,600
-----------
78,534,335
LIABILITIES:
Payable for investments purchased $2,149,991
Payable for units redeemed 46,554
Payable for investment managers 64,772
Accrued expenses 81,845 2,343,162
---------- -----------
NET ASSETS at value, applicable to 941,064 outstanding
units of beneficial interest--Note 5 $76,191,173
===========
NET ASSET VALUE offering and redemption price per unit
($76,191,173 divided by 941,064 units) $ 80.96
===========
</TABLE>
See Notes to Financial Statements
34
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Operations Year Ended September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 9,516
Interest 265,643
-----------
Total Income $ 275,159
Expenses:
Investment manager's fees--Note 3(A) 696,548
Shareholder servicing fees and expenses--Note 3(B) 350,904
Custodian fees and expenses 64,074
Legal and auditing fees 26,909
Consultant fees 12,799
Trustees' fees and expenses--Note 3(C) 57,890
Printing and Postage 10,188
Insurance 9,618
Other 33,991
-----------
Total Expenses 1,262,921
Less fees paid indirectly--Note 4 (17,000)
-----------
Net Expenses 1,245,921
-----------
INVESTMENT (LOSS)--NET (970,762)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 4:
Net realized gain on investments 8,306,803
Unrealized appreciation on investments 16,958,264
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 25,265,067
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $24,294,305
===========
</TABLE>
See Notes to Financial Statements
35
<PAGE>
EMERGING GROWTH EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net $ (970,762) $ (936,455)
Net realized gain (loss) 8,306,803 (4,262,493)
Net unrealized appreciation (depreciation) 16,958,264 (25,625,265)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 24,294,305 (30,824,213)
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 15,660,494 11,606,019
Value of units redeemed (19,050,135) (17,083,955)
------------ ------------
Net (decrease) in net assets resulting from capital
transactions (3,389,641) (5,477,936)
------------ ------------
Net increase (decrease) 20,904,664 (36,302,149)
NET ASSETS at beginning of year 55,286,509 91,588,658
------------ ------------
NET ASSETS at end of year $ 76,191,173 $ 55,286,509
============ ============
</TABLE>
See Notes to Financial Statements
36
<PAGE>
INTERNATIONAL EQUITY FUND
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------ -----
<C> <S> <C> <C>
COMMON AND PREFERRED STOCKS 96.5%
ADVERTISING 0.2%
12,332 WPP Group Plc $ 114,749
-----------
AUTO PARTS & SUPPLIES 0.6%
6,255 Michelin--Class B 295,238
-----------
AUTOMOBILES 1.9%
19,396 Bayerische Motoren Werke AG 548,637
9,000 Honda Motor Co., Ltd. 376,995
-----------
925,632
-----------
BANKING 13.7%
23,600 ABN Amro Holding NV 530,322
58,250 Banco Santander Central
Hispano SA 602,366
15,000 Bank of Tokyo-Mitsubishi Ltd. 230,339
32,922 Barclays Plc 966,730
58,150 DBS Group Holdings Ltd. 649,732
21,600 HSBC Holdings Plc 247,489
7,520 HypoVereinsbank 437,676
61,550 Lloyds TSB Group Plc 765,319
45,000 National Australia Bank Ltd. 658,756
25,325 National Westminster Bank Plc 590,582
17,000 Overseas-Chinese Banking
Corp., Ltd. 131,964
2,699 UBS AG 760,825
37,784 Westpac Banking Corp. 233,099
-----------
6,805,199
-----------
BROADCASTING & PUBLISHING 2.2%
13,650 Elsevier 140,283
86,925 News Corp. Ltd. 609,955
20,000 Singapore Press Holdings 315,207
-----------
1,065,445
-----------
CHEMICALS 1.5%
16,420 Hoechst AG 714,698
-----------
COMMERCIAL SERVICES 0.4%
6,365 Brambles Industries Ltd. 184,311
-----------
CONSUMER GOODS & SERVICES 5.1%
13,000 Fuji Photo Film Co., Ltd. 445,650
21,000 Kao Corp. 593,668
20,000 Shiseido Co., Ltd. 298,666
16,391 Vivendi 1,151,239
-----------
2,489,223
-----------
ELECTRONICS & ELECTRICAL 9.6%
3,450 Alcatel SA 475,443
40,000 Canon, Inc. 1,164,608
900 Keyence Corp. 240,905
700 Mabuchi Motor Co., Ltd. 91,121
</TABLE>
<TABLE>
ELECTRONICS & ELECTRICAL (CONTINUED)
<CAPTION>
Shares Value
- ------ -----
<C> <S> <C> <C>
9,000 Murata Mfg. Co. $ 904,450
2,000 Rohm Co., Ltd. 417,944
9,600 Sony Corp. 1,434,496
-----------
4,728,967
-----------
ENERGY 5.6%
60,104 ENI SpA 377,019
9,410 Royal Dutch Petroleum 546,174
121,419 Shell Transport & Trading Co.
Plc 907,841
7,430 Total Fina SA--Class B 933,718
-----------
2,764,752
-----------
ENGINEERING 5.4%
118,850 Invensys Plc 579,373
12,655 Mannesmann AG 2,035,363
9,400 TI Group Plc 68,735
-----------
2,683,471
-----------
ENTERTAINMENT 0.6%
13,780 Pearson Plc 295,707
-----------
FINANCIAL SERVICES 4.3%
1,000 Acom Co., Ltd. 131,206
7,230 Fortis (NL) 233,691
29,516 ING Groep NV 1,603,145
800 Takefuji Corp. 133,216
-----------
2,101,258
-----------
FOOD & SERVICES 5.9%
68,310 Cadbury Schweppes Plc 474,468
66,060 Diageo Plc 675,069
7,380 Kingfisher Plc 79,123
20,950 Koninklijke Ahold NV 689,426
534 Nestle SA 1,003,533
-----------
2,921,619
-----------
GAMING/HOTELS 0.5%
73,900 Hilton Group Plc 256,800
-----------
HEALTH 10.3%
19,690 AstraZeneca Plc 825,928
36,095 Glaxo Wellcome Plc 941,607
626 Novartis 928,625
80 Roche Holding AG 925,777
27,000 Takeda Chemical Industries 1,458,108
-----------
5,080,045
-----------
HEALTH CARE 0.2%
2,000 Hoya Corp. 120,969
-----------
</TABLE>
See Notes to Financial Statements 37
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------ -----
<C> <S> <C> <C>
INSURANCE 7.7%
59,650 Allied Zurich Plc $ 700,434
7,700 AXA SA 974,209
49,000 Old Mutual Plc * 104,504
69,790 Prudential Corp. Plc 1,072,365
463 Swiss Reinsurance Co. 924,101
-----------
3,775,613
-----------
LEISURE 1.6%
20,839 EMI Group Plc 152,380
76,580 Granada Group Plc 655,822
-----------
808,202
-----------
METALS FABRICATOR 1.3%
395 Alusuisse Lonza Group AG 454,865
6,400 Pohang Iron & Steel Co. ADR 200,400
-----------
655,265
-----------
MULTI-INDUSTRY 2.3%
58,350 British American Tobacco Plc 500,664
11,290 Veba AG 616,216
-----------
1,116,880
-----------
REAL ESTATE 0.4%
26,000 Cheung Kong Holdings Ltd. 216,734
-----------
TELECOMMUNICATIONS 12.9%
62,310 Cable & Wireless Plc 678,308
3,140 Ericsson LM--Class B 97,290
12,070 Koninklijke KPN NV 528,959
</TABLE>
<TABLE>
TELECOMMUNICATIONS (CONTINUED)
<CAPTION>
Shares Value
- ------ -----
<C> <S> <C> <C>
5,750 Korea Telecom Corp. ADR * $ 212,750
53 NTT Mobile Communications
Network, Inc. 1,045,330
4,510 Tele Danmark A/S 268,790
18,900 Telecom Corp of New Zealand
Ltd. 74,471
96,200 Telecom Italia SpA 836,008
30,428 Telefonica SA 487,054
85,800 Telstra Corp., Ltd. 444,714
70,273 Vodafone AirTouch Plc 1,664,235
-----------
6,337,909
-----------
TRANSPORTATION 0.5%
11,152 Railtrack Group Plc 234,721
-----------
UTILITIES 1.8%
9,100 Electricidade de Portugal SA 143,627
28,000 Hong Kong Electric Holdings 86,874
10,378 National Power Plc 80,924
11,915 TNT Post Group NV 303,275
13,468 Viag AG 256,027
-----------
870,727
-----------
Total Common and Preferred Stocks (Cost $43,941,116) 47,564,134
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments (Cost $43,941,116) 96.5% 47,564,134
Other assets in excess of liabilities 3.5% 1,723,792
----- -----------
Total Net Assets 100.0% $49,287,926
===== ===========
</TABLE>
* Denotes non-income producing security.
See Notes to Financial Statements 38
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Geographical Diversification September 30, 1999
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of Net Assets
---------------------
Country Total
- ------- -----
<S> <C>
United Kingdom 27.2%
Japan 18.4
Switzerland 10.1
Germany 9.4
Netherlands 9.3
France 5.3
Australia 4.3
Denmark 3.0
Italy 2.5
Singapore 2.2
Spain 2.2
Hong Kong 1.1
Korea 0.8
Portugal 0.3
Sweden 0.2
New Zealand 0.2
-----
Total Investments 96.5%
Other Assets Less Liabilities 3.5%
-----
Total 100.0%
=====
</TABLE>
See Notes to Financial Statements 39
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (cost
$43,941,116)--Note 2(A) $47,564,134
Cash 1,950,675
Receivable for investments sold 26,323
Receivable for units sold 76,258
Dividends and interest receivable 140,133
Collateral for securities loaned, at fair value--Note
4 1,005,948
Other assets 9,836
-----------
50,773,307
LIABILITIES:
Payable for investments purchased $ 199,323
Payable upon return of securities loaned--Note 4 1,005,948
Payable for units redeemed 20,301
Payable for investment managers 32,460
Net loss on forward foreign currency contracts 143,989
Accrued expenses 83,360 1,485,381
---------- -----------
NET ASSETS at value, applicable to 882,163 outstanding
units of beneficial interest--Note 5 $49,287,926
===========
NET ASSET VALUE offering and redemption price per unit
($49,287,926 divided by 882,163 units) $ 55.87
===========
</TABLE>
See Notes to Financial Statements
40
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Operations Year Ended September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 555,150
Interest 34,898
----------
Total Income $ 590,048
Expenses:
Investment manager's fees--Note 3(A) 303,770
Shareholder servicing fees and expenses--Note 3(B) 211,849
Custodian fees and expenses 93,464
Legal and auditing fees 26,909
Consultant fees 12,799
Trustees' fees and expenses--Note 3(C) 29,054
Printing and Postage 10,188
Insurance 4,916
Other 47,062
----------
Total Expenses 740,011
Less fees paid indirectly--Note 4 (5,000)
----------
Net Expenses 735,011
----------
INVESTMENT (LOSS)--NET (144,963)
REALIZED AND UNREALIZED GAIN (LOSS)--Note 4:
Net Realized gain (loss) on:
Investments 5,321,223
Foreign currency transactions (738,580)
----------
4,582,643
----------
Unrealized appreciation on investments:
Investments 3,017,484
Foreign currency translations of other assets and
liabilities 5,101
----------
3,022,585
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCIES 7,605,228
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,460,265
==========
</TABLE>
See Notes to Financial Statements
41
<PAGE>
INTERNATIONAL EQUITY FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net $ (144,963) $ (100,696)
Net realized gain 4,582,643 1,791,647
Net unrealized appreciation (depreciation) 3,022,585 (5,778,005)
------------ -----------
Net increase (decrease) in net assets resulting from
operations 7,460,265 (4,087,054)
------------ -----------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 18,155,816 9,648,430
Value of units redeemed (10,410,771) (6,755,055)
------------ -----------
Net increase in net assets resulting from capital
transactions 7,745,045 2,893,375
------------ -----------
Net increase (decrease) 15,205,310 (1,193,679)
NET ASSETS at beginning of year 34,082,616 35,276,295
------------ -----------
NET ASSETS at end of year $ 49,287,926 $34,082,616
============ ===========
</TABLE>
See Notes to Financial Statements
42
<PAGE>
ACTIVELY MANAGED BOND FUND
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
COMMERCIAL PAPER 0.1%
$ 200,000 Anheuser-Busch Co., Inc.,
5.50%, 10/1/99 $ 200,000
------------
Total Commercial Paper (Cost $200,000) $ 200,000
------------
CORPORATE BONDS 4.4%
$ 2,000,000 CNA Financial Corp., 6.75%,
11/15/2006 $ 1,913,684
1,802,000 Deutsche Bank Financial,
Medium Term Note, 0.00%,
7/18/2017 460,249
100,000 Financing Corp., 9.40%,
2/8/2018 126,410
2,000,000 J.C. Penny Co., Inc., 8.25%,
8/15/2022 1,975,299
657,000 Merrill Lynch & Co., Medium
Term Note, 0.00%,
2/25/2027 69,687
1,000,000 PMI Group, Inc., 6.75%,
11/15/2006 987,697
1,000,000 Public Service Electric &
Gas, 9.125%, 7/1/2005,
MBIA 1,102,299
320,000 Public Service Electric &
Gas, 6.375%, 5/1/2008 304,227
3,000,000 Transamerica Financial
Corp., 0.00%, 9/1/2012 1,121,274
1,000,000 TSY-Linked Call Strips,
0.00%, 11/15/2024 122,938
------------
Total Corporate Bonds (Cost $8,495,943) $ 8,183,764
------------
MORTGAGES 10.2%
$ 1,956,387 ABN Amro Mortgage Corp.,
Remic 98-5 A11, 8.82%,
1/25/2029 $ 1,860,577
1,948,673 Chase Mortgage Finance
Corp., Remic 94-G A13,
7.00%, 4/25/2025 1,809,947
1,033,333 Chase Mortgage Finance
Corp., Remic 98-S2 A12,
7.00%, 7/25/2028 810,247
1,000,000 First Union Residential
Trust, Remic 98-B 1A8,
6.75%, 8/25/2028 920,870
1,047,080 General Electric Capital
Mortgage Services, Remic
98-12 2A8, 6.75%,
6/25/2028 843,387
4,900,000 PNC Mortgage Securities
Corp., Remic 98-4 3A2,
6.75%, 5/25/2028 4,522,797
504,022 Prudential Home Mortgage
Securities, Inc., Remic
94-21 A8, 7.80%, 6/25/2024 496,100
2,000,000 Residential Accredit
Loans, Inc., Remic 97-QS8
A9, 7.375%, 8/25/2027 2,006,940
1,116,688 Residential Funding Mortgage
Securities I, Remic 93-S47
A15, 9.00%, 12/25/2023 951,517
500,000 Residential Funding Mortgage
Securities I, 7.25%,
8/15/2027 497,091
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
$ 2,000,000 Residential Funding Mortgage
Securities I, Remic 98-S13
A14, 6.75%, 6/25/2028 $ 1,804,300
2,411,000 Salomon Brothers Mortgage
Securities VII, Remic
98-NC3 A5, 6.93%,
8/25/2028 2,330,786
------------
Total Mortgages (Cost $20,211,951) $ 18,854,559
------------
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS 84.7%
$ 24,338 Collateralized Mortgage
Security Corp., Remic X1,
7.00%, 6/1/2006 $ 24,220
2,620,000 Federal Home Loan Bank,
6.55%, 3/20/2009 2,507,440
3,000,000 Federal Home Loan Bank,
8.00%, 8/26/2009 3,001,212
8,000,000 Federal Home Loan Bank,
0.00%, 6/25/2012 2,826,464
11,320,000 Federal Home Loan Bank,
0.00%, 7/2/2012 4,067,129
1,400,000 Federal Home Loan Bank,
6.76%, 1/29/2014 1,315,073
10,000,000 Federal Home Loan Bank,
0.00%, 6/26/2017 2,351,620
3,000,000 Federal Home Loan Bank,
0.00%, 7/7/2017 703,731
24,000,000 Federal Home Loan Bank,
0.00%, 7/14/2017 5,620,920
28,000,000 Federal Home Loan Bank,
0.00%, 7/25/2017 6,734,475
1,500,000 Federal Home Loan Bank,
0.00%, 7/28/2017 350,195
5,000,000 Federal Home Loan Bank,
0.00%, 7/28/2017 1,167,315
291,877 Federal Home Loan Mortgage
Corp., Pool #533624,
8.50%, 12/1/2007 303,395
2,850,879 Federal Home Loan Mortgage
Corp., Remic 1515S, 8.36%,
5/15/2008 2,678,034
1,000,000 Federal Home Loan Mortgage
Corp., 6.35%, 5/26/2008 951,967
935,000 Federal Home Loan Mortgage
Corp., Remic 2176LH,
7.50%, 12/15/2008 946,270
2,000,000 Federal Home Loan Mortgage
Corp., 6.50%, 3/5/2009 1,911,784
1,000,000 Federal Home Loan Mortgage
Corp., 7.00%, 5/27/2009 974,015
500,000 Federal Home Loan Mortgage
Corp., 7.625%, 9/9/2009 504,170
271,000 Federal Home Loan Mortgage
Corp., 6.20%, 9/17/2013 246,198
</TABLE>
See Notes to Financial Statements 43
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 1,500,000 Federal Home Loan Mortgage
Corp., 6.58%, 12/2/2013 $ 1,394,184
1,500,000 Federal Home Loan Mortgage
Corp., 7.01%, 3/12/2014 1,429,496
427,256 Federal Home Loan Mortgage
Corp., Pool #141001,
7.75%, 9/1/2016 434,370
42,659 Federal Home Loan Mortgage
Corp., Pool #297625,
8.50%, 6/1/2017 44,455
786,356 Federal Home Loan Mortgage
Corp., Remic 2120ZA,
6.00%, 1/15/2019 741,680
778,629 Federal Home Loan Mortgage
Corp., Remic 1290H, 7.50%,
6/15/2021 789,429
1,219,128 Federal Home Loan Mortgage
Corp., Remic 1175D, 8.00%,
11/15/2021 1,243,323
1,000,000 Federal Home Loan Mortgage
Corp., Remic 1430K, 7.00%,
12/15/2021 986,990
2,482,800 Federal Home Loan Mortgage
Corp., Remic 1591SH,
5.45%, 9/15/2022 1,869,655
15,000,000 Federal Home Loan Mortgage
Corp., 0.00%, 2/2/2023 2,287,500
954,832 Federal Home Loan Mortgage
Corp., Remic 1574V, 6.50%,
3/15/2023 913,697
538,262 Federal Home Loan Mortgage
Corp., Remic 15PZ, 7.00%,
7/25/2023 482,750
597,330 Federal Home Loan Mortgage
Corp., Remic 1790E, 8.00%,
11/15/2023 602,954
1,863,117 Federal Home Loan Mortgage
Corp., Remic 1663ZA,
7.00%, 1/15/2024 1,711,110
1,400,327 Federal Home Loan Mortgage
Corp., Remic 1671Z, 7.00%,
2/15/2024 1,261,105
2,956,510 Federal Home Loan Mortgage
Corp., Remic 29ZC, 8.00%,
4/25/2024 2,975,591
676,000 Federal Home Loan Mortgage
Corp., Remic 1814D, 6.50%,
2/15/2026 622,128
3,284,564 Federal Home Loan Mortgage
Corp., Remic 2089ZB,
7.00%, 8/15/2026 2,891,200
1,840,444 Federal Home Loan Mortgage
Corp., Remic 2123KE,
8.50%, 2/15/2027 1,970,328
5,000,000 Federal Home Loan Mortgage
Corp., Remic 2092DL,
8.50%, 9/15/2027 5,304,575
708,969 Federal Home Loan Mortgage
Corp., Remic 2036B, 7.00%,
3/15/2028 679,343
925,000 Federal Home Loan Mortgage
Corp., Remic 2064U, 7.00%,
6/15/2028 876,845
750,631 Federal Home Loan Mortgage
Corp., Remic 2101ZA,
6.00%, 11/15/2028 638,808
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 1,300,000 Federal National Mortgage
Assoc., Medium Term Note,
6.29%, 1/22/2008 $ 1,234,929
1,855,000 Federal National Mortgage
Assoc., Medium Term Note,
6.36%, 7/16/2008 1,758,564
200,000 Federal National Mortgage
Assoc., Medium Term Note,
6.69%, 2/2/2011 189,927
150,000 Federal National Mortgage
Assoc., Medium Term Note,
6.77%, 9/9/2013 140,916
286,460 Federal National Mortgage
Assoc., Pool #87277,
7.50%, 4/1/2018 291,476
5,000,000 Federal National Mortgage
Assoc., Medium Term Note,
0.00%, 7/13/2017 1,154,500
41,142 Federal National Mortgage
Assoc., Remic 91-169 M,
8.40%, 12/25/2021 43,326
420,000 Federal National Mortgage
Assoc., Remic 92-161H,
7.50%, 9/25/2022 420,997
552,348 Federal National Mortgage
Assoc., Remic 93-124M,
0.00%, 10/25/2022 338,918
356,000 Federal National Mortgage
Assoc., Remic G93-10J,
5.00%, 3/25/2023 300,253
3,820,118 Federal National Mortgage
Assoc., Remic 93-247C,
7.00%, 3/25/2023 3,757,614
2,222,162 Federal National Mortgage
Assoc., Remic 93-247Z,
7.00%, 3/25/2023 2,138,823
2,177,958 Federal National Mortgage
Assoc., Remic 94-69CA,
7.25%, 3/25/2023 2,162,199
500,000 Federal National Mortgage
Assoc., Remic G93-15H,
7.25%, 4/25/2023 491,065
675,075 Federal National Mortgage
Assoc., Remic 96-18PB,
0.00%, 5/25/2023 493,566
1,036,577 Federal National Mortgage
Assoc., Remic 93-100K,
0.00%, 6/25/2023 647,090
4,309,533 Federal National Mortgage
Assoc., Remic 94-36UA,
7.00%, 8/25/2023 4,198,201
597,071 Federal National Mortgage
Assoc., Pool #239024,
7.00%, 10/1/2023 590,838
3,049,934 Federal National Mortgage
Assoc., Remic 93-199Z,
7.00%, 10/25/2023 2,848,937
397,816 Federal National Mortgage
Assoc., Remic G95-4B,
8.00%, 11/25/2023 397,023
</TABLE>
See Notes to Financial Statements 44
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 711,054 Federal National Mortgage
Assoc., Remic 93-250DZ,
7.00%, 12/25/2023 $ 645,582
4,955,704 Federal National Mortgage
Assoc., Remic 93-255E,
7.10%, 12/25/2023 4,716,315
826,000 Federal National Mortgage
Assoc., Remic 94-97 H,
8.75%, 12/25/2023 859,811
800,422 Federal National Mortgage
Assoc., Pool #50966,
7.00%, 1/1/2024 792,066
7,111,292 Federal National Mortgage
Assoc., Remic G97-5ZB,
7.05%, 3/25/2024 6,417,352
708,000 Federal National Mortgage
Assoc., Remic 94-65LL,
7.375%, 4/25/2024 703,610
3,837,000 Federal National Mortgage
Assoc., Remic 94-61E,
7.50%, 4/25/2024 3,812,789
1,525,000 Federal National Mortgage
Assoc., Remic 98-49DC,
8.50%, 8/20/2025 1,568,154
385,000 Federal National Mortgage
Assoc., Remic G96-1PK,
7.50%, 6/17/2026 388,934
2,169,947 Federal National Mortgage
Assoc., Remic 97-27Z,
7.50%, 4/18/2027 2,144,625
337,350 Federal National Mortgage
Assoc., Remic 97-49B,
10.00%, 6/17/2027 369,062
900,000 Federal National Mortgage
Assoc., Remic 97-34YL,
7.00%, 6/18/2027 856,039
1,410,287 Federal National Mortgage
Assoc., Remic 98-45ZB,
7.00%, 8/18/2028 1,201,438
5,638,801 Federal National Mortgage
Assoc., Remic 98-62DC,
9.00%, 11/25/2028 6,035,243
12,527 Government National Mortgage
Assoc., Pool #1350, 6.50%,
3/15/2002 12,485
1,039 Government National Mortgage
Assoc., Pool #2919, 8.00%,
2/15/2004 1,072
23,553 Government National Mortgage
Assoc., Pool #5214, 8.00%,
7/15/2005 24,356
17,942 Government National Mortgage
Assoc., Pool #11192,
7.25%, 4/15/2006 18,204
159,894 Government National Mortgage
Assoc., Pool #10260,
8.00%, 6/15/2006 165,596
771 Government National Mortgage
Assoc., Pool #10855,
8.00%, 7/15/2006 799
3,201 Government National Mortgage
Assoc., Pool #026113,
9.00%, 8/15/2008 3,364
7,942 Government National Mortgage
Assoc., Pool #258110,
9.00%, 1/15/2009 8,350
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 11,251 Government National Mortgage
Assoc., Pool #35238,
9.50%, 9/15/2009 $ 12,073
11,335 Government National Mortgage
Assoc., Pool #158361,
9.50%, 6/15/2016 12,176
106,354 Government National Mortgage
Assoc., Pool #169957,
8.50%, 7/15/2016 111,100
6,631 Government National Mortgage
Assoc., Pool #157799,
9.00%, 7/15/2016 6,998
1,743 Government National Mortgage
Assoc., Pool #176069,
9.00%, 8/15/2016 1,840
23,565 Government National Mortgage
Assoc., Pool #177254,
9.00%, 9/15/2016 24,867
3,457 Government National Mortgage
Assoc., Pool #173806,
9.00%, 10/15/2016 3,649
282,600 Government National Mortgage
Assoc., Pool #152027,
8.00%, 10/20/2016 291,372
1,222 Government National Mortgage
Assoc., Pool #179930,
9.50%, 12/15/2016 1,314
167,990 Government National Mortgage
Assoc., Pool #000675,
8.00%, 12/20/2016 173,205
15,334 Government National Mortgage
Assoc., Pool #199032,
9.50%, 1/15/2017 16,468
244,072 Government National Mortgage
Assoc., Pool #196754,
8.50%, 2/15/2017 254,887
28,002 Government National Mortgage
Assoc., Pool #000710,
8.00%, 2/20/2017 28,869
90,236 Government National Mortgage
Assoc., Pool #193256,
8.00%, 3/15/2017 93,505
62,222 Government National Mortgage
Assoc., Pool #205624,
8.50%, 3/15/2017 64,979
9,203 Government National Mortgage
Assoc., Pool #209105,
8.00%, 3/20/2017 9,488
7,980 Government National Mortgage
Assoc., Pool #216159,
8.00%, 4/15/2017 8,270
100,266 Government National Mortgage
Assoc., Pool #213606,
8.00%, 4/15/2017 103,899
65,149 Government National Mortgage
Assoc., Pool #202887,
8.00%, 4/15/2017 67,510
27,477 Government National Mortgage
Assoc., Pool #211434,
9.50%, 4/15/2017 29,509
14,670 Government National Mortgage
Assoc., Backed Trust,
Remic 1A, 0.00%, 5/20/2017 13,661
202,189 Government National Mortgage
Assoc., Pool #218150,
8.00%, 6/15/2017 209,515
214,066 Government National Mortgage
Assoc., Pool #226673,
9.50%, 7/15/2017 29,892
</TABLE>
See Notes to Financial Statements 45
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 3,632 Government National Mortgage
Assoc., Pool #226855,
9.50%, 7/15/2017 $ 3,901
5,110 Government National Mortgage
Assoc., Pool #237572,
9.50%, 12/15/2017 5,488
18,178 Government National Mortgage
Assoc., Pool #226651,
9.50%, 6/15/2018 19,518
4,040 Government National Mortgage
Assoc., Pool #247493,
8.00%, 7/15/2018 4,181
1,652 Government National Mortgage
Assoc., Pool #266208,
9.50%, 8/15/2018 1,774
31,514 Government National Mortgage
Assoc., Pool #291195,
8.00%, 5/15/2020 32,468
38,146 Government National Mortgage
Assoc., Pool #290123,
8.00%, 6/15/2020 39,300
77,609 Government National Mortgage
Assoc., Pool #319342,
8.50%, 3/15/2022 80,838
134,684 Government National Mortgage
Assoc., Pool #346560,
8.00%, 4/15/2023 138,194
343,099 Government National Mortgage
Assoc., Pool #385850,
8.00%, 8/15/2024 351,430
1,729,719 Government National Mortgage
Assoc., Remic 99-22A,
7.00%, 3/20/2027 1,683,363
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 460,000 Government National Mortgage
Assoc., Remic 97-8PE,
7.50%, 5/16/2027 $ 464,576
1,000,000 Government National Mortgage
Assoc., Remic 97-18J,
7.00%, 11/20/2027 969,738
1,306,736 Government National Mortgage
Assoc., Remic 99-C, 7.00%,
2/16/2029 1,226,772
1,132,573 Government National Mortgage
Assoc., Pool #511918,
8.25%, 9/15/2029 1,173,040
6,020,000 U.S. Treasury Bonds, 9.25%,
2/15/2016 7,699,958
6,800,000 United States Treasury Zero
Coupon Strips, 0.00%,
2/15/2006 4,613,929
19,180,000 United States Treasury Zero
Coupon Strips, 0.00%,
2/15/2010 9,978,567
------------
Total United States Government and Agency
Obligations (Cost $160,050,664) $155,937,632
------------
Total Investments (Cost $188,958,558) 99.4% $183,175,955
Other assets in excess of liabilities 0.6% 1,021,446
----- ------------
Total Net Assets 100.0% $184,197,401
===== ============
</TABLE>
See Notes to Financial Statements 46
<PAGE>
ACTIVELY MANAGED BOND FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (cost
$188,958,558)--Note 2(A) $183,175,955
Cash 30,798
Receivable for units sold 175,274
Interest receivable 1,073,630
Collateral for securities loaned, at fair value--Note
4 688,400
Other assets 28,574
------------
185,172,631
LIABILITIES:
Payable upon return of securities loaned--Note 4 $ 688,400
Payable for units redeemed 137,803
Payable for investment managers 46,778
Accrued expenses 102,249 975,230
---------- ------------
NET ASSETS at value, applicable to 4,950,209
outstanding units of beneficial interest--Note 5 $184,197,401
============
NET ASSET VALUE offering and redemption price per unit
($184,197,401 divided by 4,950,209 units) $ 37.21
============
</TABLE>
Statement of Operations Year Ended September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 12,467,750
------------
Total Income $ 12,467,750
Expenses:
Investment manager's fees--Note 3(A) 558,829
Shareholder servicing fees and expenses--Note 3(B) 671,387
Custodian fees and expenses 25,682
Legal and auditing fees 26,908
Consultant fees 12,799
Trustees' fees and expenses--Note 3(C) 29,054
Printing and Postage 10,188
Insurance 20,430
Other 38,720
------------
Total Expenses 1,393,997
------------
INVESTMENT INCOME--NET 11,073,753
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS--Note 4:
Net realized gain on investments 524,140
Unrealized (depreciation) on investments (14,244,373)
------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS (13,720,233)
------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,646,480)
============
</TABLE>
See Notes to Financial Statements
47
<PAGE>
ACTIVELY MANAGED BOND FUND
(CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 11,073,753 $ 9,298,989
Net realized gain 524,140 3,247,694
Net unrealized appreciation (depreciation) (14,244,373) 3,846,747
------------ ------------
Net increase (decrease) in net assets resulting
from operations (2,646,480) 16,393,430
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 55,604,217 26,734,278
Value of units redeemed (31,115,385) (27,911,465)
------------ ------------
Net increase (decrease) in net assets resulting
from capital
transactions 24,488,832 (1,177,187)
------------ ------------
Net increase 21,842,352 15,216,243
NET ASSETS at beginning of year 162,355,049 147,138,806
------------ ------------
NET ASSETS at end of year $184,197,401 $162,355,049
============ ============
</TABLE>
See Notes to Financial Statements
48
<PAGE>
INTERMEDIATE-TERM BOND FUND
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
COMMERCIAL PAPER 0.3%
$ 200,000 Anheuser-Busch Co., Inc.,
5.50%, 10/1/99 $ 200,000
-----------
Total Commercial Paper (Cost $200,000) $ 200,000
-----------
CORPORATE BONDS 1.4%
$ 115,000 Cooper Industries, Inc.,
Medium Term Note, 5.88%,
2/20/2003 $ 112,249
755,000 Old Republic International
Corp., 7.00%, 6/15/2007 754,663
-----------
Total Corporate Bonds (Cost $909,028) $ 866,912
-----------
MORTGAGES 6.7%
$ 836,580 Bear Stearns Mortgage
Securities, Remic 1993-10
A9, 7.20%, 7/25/2024 $ 797,804
456,000 Capstead Securities Corp.,
Remic 1993-1E, 7.50%,
2/1/2023 443,797
149,314 CitiCorp Mortgage
Securities, Inc., Remic
1997-3 A4, 9.00%,
8/25/2027 150,409
174,191 CitiCorp Mortgage
Securities, Inc., Remic
1993-7 A3, 7.00%,
6/25/2023 171,678
398,330 Collateralized Mortgage
Obligation Trust, Remic
27A, 7.25%, 4/23/2017 400,496
300,000 GE Capital Mortgage
Services, Inc., Remic
1996-3 A4, 7.00%,
3/25/2026 293,823
330,000 GE Capital Mortgage
Services, Inc., Remic
1996-HE3 A4, 7.49%,
9/25/2026 332,812
500,000 GE Capital Mortgage
Services, Inc., Remic
1997-92 A5, 7.00%,
10/25/2027 496,960
847,794 GE Capital Mortgage
Services, Inc., Remic
1998-2 A12, 7.00%,
1/25/2028 839,680
7,408 John J Matterer, 8.50%,
1/1/2005 7,408
229,229 Prudential Home Mortgage
Securities, Remic 1992-50
A5, 7.625%, 2/25/2023 230,454
-----------
Total Mortgages (Cost $4,257,920) $ 4,165,321
-----------
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS 88.4%
$ 560,000 Federal Home Loan Bank,
5.13%, 9/15/2003 $ 537,080
1,000,000 Federal Home Loan Bank,
6.75%, 3/18/2009 965,077
<CAPTION>
Principal
Amount Value
- ------ -----
UNITED STATES GOVERNMENT AND AGENCY
<C> <S> <C> <C>
OBLIGATIONS (CONTINUED)
$ 2,174 Federal Home Loan Mortgage
Corp., Pool #212719,
7.50%, 8/1/2001 $ 2,196
3,033 Federal Home Loan Mortgage
Corp., Pool #200030,
9.00%, 3/1/2001 3,112
4,891 Federal Home Loan Mortgage
Corp., Pool #200035,
9.00%, 5/1/2001 5,017
10,890 Federal Home Loan Mortgage
Corp., Pool #200034,
8.50%, 5/1/2001 11,096
13,396 Federal Home Loan Mortgage
Corp., Pool #214040,
7.50%, 12/1/2001 13,535
17,348 Federal Home Loan Mortgage
Corp., Pool #320139,
8.00%, 9/1/2001 17,638
20,168 Federal Home Loan Mortgage
Corp., Pool #200040,
9.00%, 6/1/2001 20,690
21,985 Federal Home Loan Mortgage
Corp., Pool #200070,
7.50%, 4/1/2002 22,204
22,006 Federal Home Loan Mortgage
Corp., Pool #212242,
7.50%, 7/1/2001 22,236
29,687 Federal Home Loan Mortgage
Corp., Remic 157A, 8.75%,
7/15/2000 29,897
35,750 Federal Home Loan Mortgage
Corp., Pool #200071,
7.50%, 5/1/2002 36,105
38,671 Federal Home Loan Mortgage
Corp., Pool #213857,
7.50%, 11/1/2001 39,074
48,021 Federal Home Loan Mortgage
Corp., Remic 2062Z, 6.50%,
6/15/2028 47,909
58,723 Federal Home Loan Mortgage
Corp., Remic 1397D, 7.00%,
10/15/2021 59,108
73,751 Federal Home Loan Mortgage
Corp., Pool #290143,
8.50%, 8/1/2006 76,078
110,000 Federal Home Loan Mortgage
Corp., Remic 1311J, 7.50%,
9/15/2021 111,115
124,000 Federal Home Loan Mortgage
Corp., Remic 1847B, 7.50%,
7/15/2024 124,825
140,000 Federal Home Loan Mortgage
Corp., Remic 1692K, 7.20%,
9/15/2023 134,948
147,000 Federal Home Loan Mortgage
Corp., Remic 1753D, 8.50%,
9/15/2024 153,769
171,599 Federal Home Loan Mortgage
Corp., Pool #30900, 8.50%,
5/1/2006 176,700
200,000 Federal Home Loan Mortgage
Corp., Remic 1900N, 7.50%,
1/15/2024 201,909
225,000 Federal Home Loan Mortgage
Corp., Remic 1663C, 7.00%,
1/15/2024 219,853
225,262 Federal Home Loan Mortgage
Corp., Remic 1706LB,
7.00%, 6/15/2023 221,389
300,000 Federal Home Loan Mortgage
Corp., 7.625%, 9/9/2009 302,502
</TABLE>
See Notes to Financial Statements 49
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
UNITED STATES GOVERNMENT AND AGENCY
<C> <S> <C> <C>
OBLIGATIONS (CONTINUED)
$ 308,679 Federal Home Loan Mortgage
Corp., Remic 1169 D,
7.00%, 5/15/2021 $ 309,470
342,259 Federal Home Loan Mortgage
Corp., Remic 1316Z, 8.00%,
6/15/2022 353,008
346,581 Federal Home Loan Mortgage
Corp., Remic 1924A,
10.00%, 8/15/2025 367,468
355,665 Federal Home Loan Mortgage
Corp., Remic 1899ZG,
8.00%, 6/15/2018 360,975
367,000 Federal Home Loan Mortgage
Corp., Remic 1695EA,
7.00%, 12/15/2023 360,824
500,000 Federal Home Loan Mortgage
Corp., Remic 1770PH,
8.00%, 8/15/2023 511,078
538,346 Federal Home Loan Mortgage
Corp., Remic 1261J, 8.00%,
7/15/2021 552,673
646,000 Federal Home Loan Mortgage
Corp., Remic 1311K, 7.00%,
7/15/2022 633,506
941,742 Federal Home Loan Mortgage
Corp., Remic 2046PZ,
6.50%, 2/15/2028 866,967
952,393 Federal Home Loan Mortgage
Corp., Remic 1587Z, 6.50%,
10/15/2008 908,743
1,000,000 Federal Home Loan Mortgage
Corp., 6.22%, 6/24/2008 937,148
1,000,000 Federal Home Loan Mortgage
Corp., 6.35%, 5/26/2008 951,967
1,000,000 Federal Home Loan Mortgage
Corp., 6.41%, 1/20/2009 952,135
1,000,000 Federal Home Loan Mortgage
Corp., 6.54%, 8/26/2008 959,779
1,000,000 Federal Home Loan Mortgage
Corp., 7.00%, 5/27/2009 974,015
1,200,000 Federal Home Loan Mortgage
Corp., 5.50%, 2/10/2009 1,140,260
1,388,615 Federal Home Loan Mortgage
Corp., Remic 2137GT,
6.50%, 3/15/2029 1,341,194
1,500,000 Federal Home Loan Mortgage
Corp., 6.91%, 6/20/2005 1,487,763
1,500,000 Federal Home Loan Mortgage
Corp., Remic 2092DL,
8.50%, 9/15/2027 1,591,374
1,775 Federal National Mortgage
Assoc., Pool #29658,
8.50%, 7/1/2001 1,814
4,185 Federal National Mortgage
Assoc., Pool #47137,
8.00%, 5/1/2002 4,260
5,056 Federal National Mortgage
Assoc., Pool #26707,
9.00%, 5/1/2001 5,187
6,537 Federal National Mortgage
Assoc., Pool #7242, 8.50%,
7/1/2001 6,679
9,340 Federal National Mortgage
Assoc., Pool #26607,
9.00%, 5/1/2001 9,583
<CAPTION>
Principal
Amount Value
- ------ -----
UNITED STATES GOVERNMENT AND AGENCY
<C> <S> <C> <C>
OBLIGATIONS (CONTINUED)
$ 11,019 Federal National Mortgage
Assoc., Pool #29470,
9.00%, 7/1/2001 $ 11,305
22,173 Federal National Mortgage
Assoc., Pool #30409,
8.50%, 9/1/2001 22,656
34,640 Federal National Mortgage
Assoc., Remic 1993-244A,
0.00%, 11/25/2023 33,418
34,694 Federal National Mortgage
Assoc., Pool #48103,
8.00%, 5/1/2002 35,314
37,839 Federal National Mortgage
Assoc., Pool #28645,
9.00%, 6/1/2001 38,820
38,325 Federal National Mortgage
Assoc., Pool #46609,
8.00%, 5/1/2002 39,010
47,327 Federal National Mortgage
Assoc., Pool #46872,
8.00%, 5/1/2002 48,067
51,770 Federal National Mortgage
Assoc., Pool #28785,
9.00%, 6/1/2001 53,113
60,314 Federal National Mortgage
Assoc., Pool #47932,
8.00%, 5/1/2002 61,392
77,036 Federal National Mortgage
Assoc., Pool #355656,
7.00%, 8/1/2003 77,391
81,223 Federal National Mortgage
Assoc., Pool #47402,
8.00%, 5/1/2002 82,674
82,091 Federal National Mortgage
Assoc., Remic 1991-141PH,
7.50%, 4/25/2019 82,899
90,254 Federal National Mortgage
Assoc., Pool #50078,
8.50%, 6/1/2003 93,233
109,784 Federal National Mortgage
Assoc., Remic 1997-7U,
7.00%, 8/18/2022 109,711
159,144 Federal National Mortgage
Assoc., Pool #87277,
7.50%, 4/1/2018 161,931
192,000 Federal National Mortgage
Assoc., Remic 1993-4LA,
8.00%, 1/25/2023 198,270
210,000 Federal National Mortgage
Assoc., Remic G-41PT,
7.50%, 10/25/2021 209,282
230,000 Federal National Mortgage
Assoc., Remic G93-38H,
6.50%, 12/25/2023 223,064
261,202 Federal National Mortgage
Assoc., Remic 1990-132Z,
7.00%, 11/25/2020 258,347
276,000 Federal National Mortgage
Assoc., Remic 1993-4K,
7.50%, 11/25/2021 278,873
279,000 Federal National Mortgage
Assoc., Remic 1993-1G,
7.50%, 1/25/2022 282,475
</TABLE>
See Notes to Financial Statements 50
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
UNITED STATES GOVERNMENT AND AGENCY
<C> <S> <C> <C>
OBLIGATIONS (CONTINUED)
$ 302,380 Federal National Mortgage
Assoc., Remic 1994-20Z,
6.50%, 2/25/2009 $ 293,374
310,180 Federal National Mortgage
Assoc., Remic 1992-131H,
7.50%, 6/25/2021 312,218
312,109 Federal National Mortgage
Assoc., Pool #82407,
9.00%, 3/1/2004 324,638
320,000 Federal National Mortgage
Assoc., Medium Term Note,
6.50%, 3/19/2008 306,552
342,000 Federal National Mortgage
Assoc., Remic G93-40ZC,
6.50%, 12/25/2023 317,864
356,581 Federal National Mortgage
Assoc., Remic 1988-3D,
9.10%, 2/25/2002 360,318
385,000 Federal National Mortgage
Assoc., Medium Term Note,
6.87%, 10/02/2007 373,610
388,000 Federal National Mortgage
Assoc., Remic 1992-202J,
7.50%, 4/25/2020 391,121
400,000 Federal National Mortgage
Assoc., Medium Term Note,
7.43%, 6/13/2007 395,039
400,000 Federal National Mortgage
Assoc., Remic 1993-26K,
7.00%, 5/25/2021 395,232
449,935 Federal National Mortgage
Assoc., Remic 1994-32Z,
6.50%, 3/25/2009 430,736
450,000 Federal National Mortgage
Assoc., Medium Term Note,
6.90%, 8/21/2007 439,675
470,250 Federal National Mortgage
Assoc., Remic 1998-34AV,
6.50%, 6/18/2028 438,226
500,000 Federal National Mortgage
Assoc., Medium Term Note,
6.61%, 4/10/2008 480,167
500,000 Federal National Mortgage
Assoc., Medium Term Note,
7.65%, 10/06/2006 496,689
533,543 Federal National Mortgage
Assoc., Remic 1997-63A,
7.00%, 3/18/2026 531,286
592,216 Federal National Mortgage
Assoc., Remic G92-40ZC,
7.00%, 7/25/2022 588,888
<CAPTION>
Principal
Amount Value
- ------ -----
UNITED STATES GOVERNMENT AND AGENCY
<C> <S> <C> <C>
OBLIGATIONS (CONTINUED)
$ 645,000 Federal National Mortgage
Assoc., Remic 1993-54J,
6.75%, 10/25/2022 $ 619,517
700,000 Federal National Mortgage
Assoc., Remic 1993-89D,
7.00%, 6/25/2023 675,159
732,803 Federal National Mortgage
Assoc., Remic 1997-84B,
9.50%, 10/18/2022 763,163
867,173 Federal National Mortgage
Assoc., Remic 1992-174H,
7.25%, 9/25/2021 869,646
898,589 Federal National Mortgage
Assoc., Remic 1999-43,
7.50%, 12/25/2008 901,384
1,000,000 Federal National Mortgage
Assoc., Remic 1994-75N,
7.00%, 4/25/2024 979,530
1,000,000 Federal National Mortgage
Assoc., Remic 1992-138P,
7.50%, 8/25/2022 993,309
1,000,000 Federal National Mortgage
Assoc., Remic G93-32J,
6.75%, 5/25/2009 994,561
1,174,192 Federal National Mortgage
Assoc., Remic 1994-38J,
7.00%, 11/25/2012 1,166,455
1,500,000 Federal National Mortgage
Assoc., Medium Term Note,
6.44%, 1/7/2008 1,435,584
1,895,000 Federal National Mortgage
Assoc., Medium Term Note,
6.48%, 4/2/2008 1,813,435
2,049,030 Federal National Mortgage
Assoc., Remic 1993-188QZ,
6.00%, 10/28/2008 1,928,470
2,287,901 Federal National Mortgage
Assoc., Remic 1994-76KB,
0.00%, 4/25/2024 1,765,691
2,780,000 Federal National Mortgage
Assoc., Remic 1992-135J,
7.50%, 2/25/2021 2,807,310
13,354 Federal National Mortgage
Assoc. Strips, Remic 29-1,
0.00%, 3/1/2018 11,101
938 Government National Mortgage
Assoc., Pool #9335, 8.25%,
4/15/2006 979
7,746 Government National Mortgage
Assoc., Pool #8881, 8.25%,
3/15/2006 8,084
</TABLE>
See Notes to Financial Statements 51
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
UNITED STATES GOVERNMENT AND AGENCY
<C> <S> <C> <C>
OBLIGATIONS (CONTINUED)
$ 223,520 Government National Mortgage
Assoc., Pool #9257, 8.25%,
6/20/2025 $ 229,900
247,950 Government National Mortgage
Assoc., Pool #453323,
8.25%, 9/15/2027 256,867
315,282 Government National Mortgage
Assoc., Pool #427291,
8.25%, 12/15/2027 326,620
403,229 Government National Mortgage
Assoc., Pool #2326, 8.50%,
11/20/2026 416,511
445,306 Government National Mortgage
Assoc., Pool #453336,
8.25%, 9/15/2027 461,319
521,210 Government National Mortgage
Assoc., Pool #409781,
8.25%, 8/15/2025 540,282
1,456,546 Government National Mortgage
Assoc., Pool #440604,
8.25%, 6/15/2027 1,508,924
<CAPTION>
Principal
Amount Value
- ------ -----
UNITED STATES GOVERNMENT AND AGENCY
<C> <S> <C> <C>
OBLIGATIONS (CONTINUED)
$1,810,000 Government National Mortgage
Assoc., Remic 1997-16VB,
7.00%, 03/20/2007 $ 1,813,923
200,000 U.S. Treasury Note, 7.75%,
2/15/2001 205,625
4,000,000 U.S. Treasury Strips, 0.00%,
8/15/2002 3,393,277
-----------
Total United States Government and Agency
Obligations (Cost $56,388,466) $55,306,436
-----------
Total Investments (Cost $61,755,414) 96.8% $60,538,669
Other assets in excess of liabilities 3.2% 1,984,909
----- -----------
Total Net Assets 100.0% $62,523,578
===== ===========
</TABLE>
See Notes to Financial Statements 52
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (cost
$61,755,414)--Note 2(A) $60,538,669
Cash 32,372
Receivable for investments sold 1,478,607
Receivable for units sold 59,102
Dividends and interest receivable 542,185
Collateral for securities loaned, at fair value--Note
4 1,732,400
Other assets 16,175
-----------
64,399,510
LIABILITIES:
Payable for investments purchased $ 33,764
Payable upon return of securities loaned--Note 4 1,732,400
Payable for units redeemed 24,636
Payable for investment managers 19,571
Accrued expenses 65,561 1,875,932
----------- -----------
NET ASSETS at value, applicable to 1,810,158
outstanding units of beneficial interest--Note 5 $62,523,578
===========
NET ASSET VALUE offering and redemption price per unit
($62,523,578 divided by 1,810,158 units) $ 34.54
===========
</TABLE>
Statement of Operations Year Ended September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 3,976,721
------------
Total Income $ 3,976,721
Expenses:
Investment manager's fees--Note 3(A) 232,622
Shareholder servicing fees and expenses--Note 3(B) 318,496
Custodian fees and expenses 13,605
Legal and auditing fees 24,009
Consultant fees 12,799
Trustees' fees and expenses--Note 3(C) 29,054
Printing and Postage 10,188
Insurance 8,241
Other 35,801
------------
Total Expenses 684,815
------------
INVESTMENT INCOME--NET 3,291,906
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS--Note 4:
Net realized gain on investments 51,580
Unrealized (depreciation) on investments (2,550,969)
------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS (2,499,389)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 792,517
============
</TABLE>
See Notes to Financial Statements
53
<PAGE>
INTERMEDIATE-TERM BOND FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 3,291,906 $ 3,815,398
Net realized gain 51,580 864,694
Net unrealized appreciation (depreciation) (2,550,969) 282,393
------------ ------------
Net increase in net assets resulting from operations 792,517 4,962,485
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 16,296,336 7,479,124
Value of units redeemed (14,283,691) (21,111,961)
------------ ------------
Net increase (decrease) in net assets resulting from
capital transactions 2,012,645 (13,632,837)
------------ ------------
Net increase (decrease) 2,805,162 (8,670,352)
NET ASSETS at beginning of year 59,718,416 68,388,768
------------ ------------
NET ASSETS at end of year $ 62,523,578 $ 59,718,416
============ ============
</TABLE>
See Notes to Financial Statements
54
<PAGE>
SHORT-TERM INVESTMENT FUND
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
COMMERCIAL PAPER 6.2%
$1,000,000 Anheuser-Busch Co., Inc.,
5.50%, 10/1/99 $ 1,000,000
700,000 PepsiCo, Inc., 5.45%,
10/1/99 700,000
-----------
Total Commercial Paper (Cost $1,700,000) $ 1,700,000
-----------
CORPORATE BONDS 12.9%
$ 440,000 American Home Products
Corp., 7.70%, 2/15/2000 $ 442,880
230,000 Consolidated Edison, Inc.,
7.60%, 1/15/2000 231,116
1,000,000 General Electric Capital
Corp., Medium Term Note,
5.625%, 4/1/2000 1,000,013
1,000,000 Republic New York Corp.,
9.50%, 7/1/2000 1,026,321
565,000 Wal-Mart Stores, Inc.,
9.10%, 7/15/2000 578,634
250,000 Wells Fargo Co., Medium Term
Note, 7.125%, 4/1/2000 251,757
-----------
Total Corporate Bonds (Cost $3,527,025) $ 3,530,721
-----------
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS
77.3%
$ 475,000 Federal Home Loan Bank,
6.29%, 8/24/2001 $ 475,046
500,000 Federal Home Loan Bank,
5.29%, 10/27/2000 496,682
1,345,000 Federal Home Loan Bank,
6.10%, 10/12/2000 1,344,994
500,000 Federal Home Loan Bank,
5.21%, 10/20/2000 496,407
1,000,000 Federal Home Loan Bank,
5.655%, 6/23/2000 999,316
436,175 Federal Home Loan Mortgage
Corp., Gold Pool #L80033,
6.50%, 8/1/2000 437,191
100,033 Federal Home Loan Mortgage
Corp., Pool #M80156,
6.50%, 3/1/2000 100,266
95,135 Federal Home Loan Mortgage
Corp., Gold Pool #N92275,
6.50%, 11/1/1999 95,168
132,661 Federal Home Loan Mortgage
Corp., Gold Pool #M80157,
7.00%, 3/1/2000 133,504
259,832 Federal Home Loan Mortgage
Corp., Gold Pool #M80166,
6.00%, 4/1/2000 258,843
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 489,118 Federal Home Loan Mortgage
Corp., Gold Pool #M90463,
7.00%, 8/1/2001 $ 494,356
103,643 Federal Home Loan Mortgage
Corp., Pool #200047,
8.50%, 8/1/2001 105,608
1,000,000 Federal Home Loan Mortgage
Corp., 5.70%, 6/8/2001 992,930
189,868 Federal Home Loan Mortgage
Corp., Gold Pool #N92386,
6.50%, 12/1/1999 190,075
250,000 Federal Home Loan Mortgage
Corp., 5.48%, 2/26/2001 248,091
103,712 Federal Home Loan Mortgage
Corp., Gold Pool #L90155,
7.00%, 1/1/2000 103,955
86,875 Federal Home Loan Mortgage
Corp., Gold Pool #M80302,
6.00%, 12/1/2000 86,545
51,667 Federal Home Loan Mortgage
Corp., Gold Pool #L80044,
6.00%, 11/1/2000 51,472
310,740 Federal Home Loan Mortgage
Corp., Remic 1674 VA,
4.95%, 7/15/2000 309,380
597,993 Federal Home Loan Mortgage
Corp., Gold Pool #G40014,
6.50%, 10/1/2000 599,387
76,410 Federal Home Loan Mortgage
Corp., Gold Pool #G40009,
6.50%, 9/1/2000 76,589
156,167 Federal Home Loan Mortgage
Corp., Gold Pool #G40001,
7.00%, 8/1/2000 157,159
145,287 Federal Home Loan Mortgage
Corp., Gold Pool #L80011,
7.00%, 2/1/2000 146,210
87,065 Federal Home Loan Mortgage
Corp., Pool #L90152,
8.00%, 2/1/2000 88,726
191,761 Federal Home Loan Mortgage
Corp., Gold Pool #L73108,
8.00%, 2/1/2000 195,419
133,849 Federal Home Loan Mortgage
Corp., Gold Pool #G50337,
7.50%, 10/1/2000 134,362
126,526 Federal Home Loan Mortgage
Corp., Gold Pool #G50295,
6.50%, 9/1/2000 126,863
</TABLE>
See Notes to Financial Statements 55
<PAGE>
SHORT-TERM INVESTMENT FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 922,409 Federal Home Loan Mortgage
Corp., Gold Pool #G50223,
7.00%, 12/1/1999 $ 924,568
208,801 Federal Home Loan Mortgage
Corp., Gold Pool #G40056,
7.00%, 3/1/2000 210,128
161,526 Federal Home Loan Mortgage
Corp., Gold Pool #M90366,
7.50%, 10/1/1999 161,527
408,821 Federal Home Loan Mortgage
Corp., Gold Pool #L73383,
6.50%, 10/1/2000 409,908
317,859 Federal Home Loan Mortgage
Corp., Gold Pool #M90391,
8.00%, 3/1/2000 323,921
273,997 Federal Home Loan Mortgage
Corp., Remic 1156 IB,
7.00%, 9/15/2001 275,132
138,804 Federal Home Loan Mortgage
Corp., Gold Pool #N95881,
7.00%, 8/1/2001 139,839
255,249 Federal Home Loan Mortgage
Corp., Gold Pool #N99023,
7.50%, 1/1/2000 256,289
274,174 Federal Home Loan Mortgage
Corp., Gold Pool #G40285,
7.50%, 7/1/2001 277,739
133,761 Federal Home Loan Mortgage
Corp., Gold Pool #N99025,
7.50%, 1/1/2000 134,305
79,096 Federal Home Loan Mortgage
Corp., Gold Pool #L72886,
7.50%, 10/1/1999 79,096
42,060 Federal Home Loan Mortgage
Corp., Gold Pool #N93400,
6.50%, 4/1/2000 42,158
132,800 Federal Home Loan Mortgage
Corp., Gold Pool #N93948,
7.00%, 7/1/2000 133,643
187,108 Federal Home Loan Mortgage
Corp., Gold Pool #M90397,
7.50%, 4/1/2000 189,038
79,267 Federal National Mortgage
Assoc., Pool #124833,
7.50%, 5/1/2000 79,489
62,036 Federal National Mortgage
Assoc., Pool #124789,
7.50%, 4/1/2000 62,462
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 515,084 Federal National Mortgage
Assoc., Pool #124734,
6.50%, 3/1/2000 $ 514,925
97,155 Federal National Mortgage
Assoc., Pool #124909,
6.00%, 7/1/2000 96,877
51,313 Federal National Mortgage
Assoc., Pool #124643,
7.50%, 1/1/2000 51,456
33,936 Federal National Mortgage
Assoc., Pool #190808,
7.50%, 4/1/2000 34,031
1,150,000 Federal National Mortgage
Assoc., Medium Term Note,
5.65%, 6/1/2001 1,141,473
300,000 Federal National Mortgage
Assoc., Medium Term Note,
5.16%, 12/22/2000 297,139
500,000 Federal National Mortgage
Assoc., 6.63%, 6/5/2001 502,233
204,244 Federal National Mortgage
Assoc., Pool #50934,
6.50%, 11/1/2000 204,181
825,465 Federal National Mortgage
Assoc., Pool #50754,
6.50%, 6/1/2000 825,210
31,592 Federal National Mortgage
Assoc., Pool #50702,
7.50%, 1/1/2000 31,809
1,266,224 Federal National Mortgage
Assoc., Pool #50673,
7.00%, 12/1/99 1,267,022
133,172 Federal National Mortgage
Assoc., Remic 93-33 E,
6.25%, 5/25/2000 132,947
37,371 Federal National Mortgage
Assoc., Pool #190116,
6.50%, 11/1/2000 37,360
29,547 Federal National Mortgage
Assoc., Pool #190778,
6.00%, 5/1/2001 29,464
100,000 Federal National Mortgage
Assoc., Medium Term Note,
6.00%, 7/17/2001 99,639
176,112 Federal National Mortgage
Assoc., Pool #227596,
6.50%, 8/1/2000 176,058
155,388 Federal National Mortgage
Assoc., Pool #303581,
7.00%, 1/1/2000 155,486
365,892 Federal National Mortgage
Assoc., Pool #303072,
7.50%, 7/1/2000 366,910
108,518 Federal National Mortgage
Assoc., Pool #50652,
6.50%, 10/1/1999 108,518
110,092 Federal National Mortgage
Assoc., Pool #269915,
6.50%, 1/1/2001 110,059
55,462 Federal National Mortgage
Assoc., Pool #50646,
7.00%, 10/1/1999 55,463
</TABLE>
See Notes to Financial Statements 56
<PAGE>
SHORT-TERM INVESTMENT FUND (CONTINUED)
Statement of Investments September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 431,732 Federal National Mortgage
Assoc., Pool #266905,
6.50%, 1/1/2001 $ 430,744
106,801 Federal National Mortgage
Assoc., Pool #264971,
6.50%, 1/1/2001 106,557
132,310 Federal National Mortgage
Assoc., Pool #250131,
8.00%, 8/1/2001 134,129
437,258 Federal National Mortgage
Assoc., Pool #250065,
7.00%, 4/1/2001 440,581
962,259 Federal National Mortgage
Assoc., Pool #124673,
7.00%, 2/1/2000 967,773
<CAPTION>
Principal
Amount Value
- ------ -----
<C> <S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY
OBLIGATIONS (CONTINUED)
$ 110,488 Federal National Mortgage
Assoc., Pool #190781,
7.50%, 5/1/2000 $ 110,796
-----------
Total United States Government and Agency
Obligations (Cost $21,091,943) $21,072,626
-----------
Total Investments (Cost $26,318,968) 96.4% $26,303,347
Other assets in excess of liabilities 3.6% 982,625
----- -----------
Total Net Assets 100.0% $27,285,972
===== ===========
</TABLE>
See Notes to Financial Statements 57
<PAGE>
SHORT-TERM INVESTMENT FUND (CONTINUED)
Statement of Assets and Liabilities September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities at value (cost
$26,318,968)--Note 2(A) $26,303,347
Cash 189,736
Receivable for units sold 561,705
Dividends and interest receivable 271,353
Other assets 22,854
-----------
27,348,995
LIABILITIES:
Payable for units redeemed $ 8,933
Payable for investment managers 5,414
Accrued expenses 48,676 63,023
-------- -----------
NET ASSETS at value, applicable to 1,171,883 outstanding
units of beneficial interest--Note 5 $27,285,972
===========
NET ASSET VALUE offering and redemption price per unit
($27,285,972 divided by 1,171,883 units) $ 23.28
===========
</TABLE>
Statement of Operations Year Ended September 30, 1999
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $1,477,124
----------
Total Income $1,477,124
Expenses:
Investment manager's fees--Note 3(A) 68,063
Shareholder servicing fees and expenses--Note 3(B) 161,139
Custodian fees and expenses 10,974
Legal and auditing fees 22,309
Consultant fees 12,799
Trustees' fees and expenses--Note 3(C) 29,054
Printing and Postage 10,188
Insurance 3,024
Other 26,430
----------
Total Expenses 343,980
Less expense reimbursement--Note 3(A) (126,180)
----------
Net Expenses 217,800
----------
INVESTMENT INCOME--NET 1,259,324
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS--Note 4:
Net realized (loss) on investments (40,124)
Unrealized (depreciation) on investments (54,097)
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS (94,221)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,165,103
==========
</TABLE>
See Notes to Financial Statements
58
<PAGE>
SHORT-TERM INVESTMENT FUND (CONTINUED)
Statement of Changes in Net Assets
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net $ 1,259,324 $ 1,208,717
Net realized (loss) (40,124) (625)
Net unrealized appreciation (depreciation) (54,097) 21,885
------------ ------------
Net increase in net assets resulting from operations 1,165,103 1,229,977
------------ ------------
CAPITAL TRANSACTIONS--Note 5:
Value of units sold 28,862,046 51,447,590
Value of units redeemed (35,125,697) (47,314,082)
------------ ------------
Net increase (decrease) in net assets resulting from
capital transactions (6,263,651) 4,133,508
------------ ------------
Net increase (decrease) (5,098,548) 5,363,485
NET ASSETS at beginning of year 32,384,520 27,021,035
------------ ------------
NET ASSETS at end of year $ 27,285,972 $ 32,384,520
============ ============
</TABLE>
See Notes to Financial Statements
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1--GENERAL
Participation in RSI Retirement Trust ("RSI") is limited to
IRA's and trusts established by eligible employers, which
include banks, savings banks, credit unions, savings and loan
associations and other organizations determined by the Trustees
of RSI to have business interests in common with organizations
participating in RSI. Such trusts are exempt from taxation
under Section 501(a) of the Internal Revenue Code ("Code") and
have been established under pension or profit sharing plans
which are qualified under Section 401 of the Code
("Participating Plans").
In order to provide investment products to Participating
Plans, RSI operates, pursuant to an Agreement and Declaration
of Trust amended effective as of August 31, 1984 ("Trust
Agreement"), as a series fund currently issuing as of September
30, 1999 seven classes of units of beneficial interest: Core
Equity Fund, Emerging Growth Equity Fund, Value Equity Fund,
International Equity Fund, Actively Managed Bond Fund,
Intermediate-Term Bond Fund and Short-Term Investment Fund
("Investment Funds"). The Trust Agreement was amended in 1984
to provide for the continued operation of RSI as an open-end
management investment company under the Investment Company Act
of 1940 ("Act"). Retirement System Distributors Inc.
("Distributors") acts as the distributor of the Investment
Funds' units of beneficial interest. The Distributor is a
wholly owned subsidiary of Retirement System Group Inc.
("RSGroup-Registered Trademark-").
The financial statements of the Investment Funds are
presented on a combined and individual basis. The combined
financial statements should be read in conjunction with the
individual financial statements.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
(A) SECURITIES VALUATION: Except for debt securities with
remaining maturities of 60 days or less, investments for
which market prices are available are valued as follows:
(1)each listed equity security is valued at its closing
price obtained from the respective primary exchange on
which the security is listed, or, if there were no sales
on that day, at its last reported current closing price
or bid price;
(2)each unlisted equity 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)short-term money market instruments (such as
certificates of deposit, bankers' acceptances and
commercial paper) are most often valued by bid quotation
or by reference to bid quotations of available yields
for similar instruments of issuers with similar credit
ratings.
60
<PAGE>
Debt securities with remaining maturities of 60 days or
less are valued on the basis of amortized cost. In the absence
of an ascertainable market value, investments are valued at
their fair value as determined by the officers of RSI using
methods and procedures reviewed and approved by the RSI's
Trustees.
Investments and other assets and liabilities denominated in
foreign currencies are translated to United States dollars at
the prevailing rate of exchange. It is not practical to isolate
that portion of income arising from changes in the exchange
rates from the portion arising from changes in the market
prices of securities.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date plus one 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.
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) SECURITIES LOANS: The Investment Funds lend their
securities to other market participants and receive
compensation in the form of fees or they retain a portion
of interest on the investment of any cash received as
collateral. The Investment Funds also continue to receive
interest or dividends on the securities loaned. The loans
are secured by collateral at least equal, at all times, to
the fair value of the securities loaned plus accrued
interest. Gain or loss in the fair value of the securities
loaned that may occur during the term of the loan will be
for the account of the Investment Funds.
Collateral is recognized as an asset and the obligation to
return the collateral is recognized as a liability in all
cases where cash collateral is received. When other forms
of collateral are received the assets and liabilities are
generally not recognized as the counterparties have the
ability to reclaim the collateral on short notice from the
funds.
61
<PAGE>
(D) DIVIDENDS TO UNITHOLDERS: RSI does not normally declare
nor pay dividends on its net investment income or capital
gains.
(E) FEDERAL INCOME TAXES: RSI has received a determination
letter from the Internal Revenue Service stating that it is
exempt from taxation under Section 501(a) of the Internal
Revenue Code with respect to funds derived from
Participating Plans which are pension or profit sharing
trusts maintained in conformity with Section 401 of the
Code.
(F) 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 year. Actual results could differ from those
estimates.
(G) OTHER: RSI accounts separately for the assets, liabilities
and operations of each Investment Fund. Expenses directly
attributed to each Investment Fund are charged to that
Investment Fund's operations; expenses which are applicable
to all Investment Funds are allocated among them.
Administrative expenses incurred by RSI relating to the
administration of Plans of Participation are charged to
Full Participation Employers (as defined in the Trust
Agreement) and are not included in the operation of the
Investment Funds.
The Investment Funds may enter into financial futures
contracts which require initial margin deposits of cash or
U.S. Government securities equal to approximately 10% of
the value of the contract. During the period the financial
futures are open, changes in the value of the contracts are
recognized by "marking to market" on a daily basis to
reflect the market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments
are made or received to reflect daily unrealized gains or
losses. The Investment Fund is exposed to market risk as a
result of movements in securities, values and interest
rates.
(H) OPTIONS VALUATION: The Investment Funds may write call
options on equity securities. Premiums received for call
options written are recorded as a liability and "marked to
market" daily to reflect the current value of the option
written. If the written option is exercised prior to
expiration, the premium received is treated as a realized
gain. If the written option is exercised, the premium
received is added to the sale proceeds of the underlying
security.
62
<PAGE>
NOTE 3--INVESTMENT MANAGERS' FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
(A) Retirement System Investors Inc. ("Investors") is the
Investment Advisor for each Investment Fund. Investors has
retained sub-advisors to manage the International Equity
Fund and the Emerging Growth Equity Fund. Investors acts as
Investment Manager to the remaining Trust Investment Funds,
and in the case of all Investment Funds, exercises general
oversight with respect to the portfolio management,
including reporting of manager performance to the Trustees
and Investment Committee, compliance matters, sub-advisory
portfolio analysis, and presentations to unitholders.
Beginning February 8, 1999, Investors, Inc. assumed
portfolio management of a portion of the Emerging Growth
Equity Fund, replacing Friess Associates, Inc. HLM
Management Company, Inc. continues as sub-advisor to the
balance of the Emerging Growth Equity Fund.
Beginning March 1, 1999, Bank of Ireland Asset Management
(U.S.) Limited became the sub-advisor to the International
Equity Fund, replacing Morgan Grenfell Investment Services
Limited.
Fees incurred by Investors pursuant to the provisions of
its investment management contracts are payable monthly to
Investors and quarterly to all sub-advisors and are
computed based on the value of the net assets of each
Investment Fund determined on a monthly or quarterly basis
as appropriate at the rates listed in the following table.
The table of rates below are those as of September 30, 1999
as approved by the unitholders.
<TABLE>
<CAPTION>
INVESTMENT FUND INVESTMENT MANAGER FEE
--------------- ------------------ ---
<S> <C> <C>
Core Equity Fund Retirement System Investors Inc. .60% on first $50 million
.50% on next
$150 million,
and .40% over
$200 million
Value Equity Fund Retirement System Investors Inc. .60% on first
$10 million,
.50% on next $10 million,
.40% on next $20 million,
and .30% over $40 million
Emerging Growth Friess Associates, Inc, 1.00%
Equity Fund (Sub-adviser through 2/7/99)
Retirement System Investors, Inc. 1.00%
(Portfolio manager beginning 2/8/99)
HLM Management Company, Inc. 1.00% on first
(Sub-adviser) $25 million
.80% on next $25 million,
and .60% over $50 million
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT FUND INVESTMENT MANAGER FEE
--------------- ------------------ ---
<S> <C> <C>
International Morgan Grenfell Investment .60% on first
Equity Fund Services Limited (Sub-adviser $50 million,
through 2/28/99) and .50% over $50 million
Bank of Ireland Asset Management .75% on first
(U.S.) Limited $20 million,
(Sub-adviser beginning 3/1/99) .50% on next $30 million,
and .35% over $50 million
Actively Managed Retirement System Investors, Inc. .40% on first
Bond Fund $50 million,
.30% on next
$100 million,
and .20% over
$150 million
Intermediate-Term Retirement System Investors Inc. .40% on first
Bond Fund $50 million,
.30% on next
$100 million,
and .20% over
$150 million
Short-Term Retirement System Investors Inc. .25% on first
Investment Fund $50 million,
and .20% over $50 million
</TABLE>
RSI's investment management agreement with Investors
provides for RSI to receive a management fee of 0.20% per
annum of the average daily net assets of the Investment
Funds that employ a sub-advisor. For the year ended
September 30, 1999, Investors has voluntarily waived a
portion of its investment manager's fee from the Short-Term
Investment Fund amounting to $126,180, to limit the Fund's
annual expenses to 0.80% of average net assets.
(B) Shareholder servicing fees and expenses for the year ended
consist of fees paid to Retirement System Consultants Inc.,
(a subsidiary of RSGroup) under a contract for providing
administrative services for the Investment Funds. The fee
arrangement applicable for each of the Investment Funds is
as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS FEE
------------------ ---
<S> <C>
First $25 million .60%
Next $25 million .50%
Next $25 million .40%
Over $75 million .30%
</TABLE>
(C) Each Trustee who is not an officer of RSI receives an
annual fee of $9,500 and a fee of $950 per meeting
attended, except that such fee is $400 for a telephonic
meeting. Such Trustees also participate in a deferred
compensation plan which permits each Trustee to defer
payment of a portion of their fees. A Trustee and several
officers of RSI are also officers of RSGroup and its
subsidiaries.
64
<PAGE>
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, 1999:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
Core Equity Fund $ 17,582,116 $ 65,942,271
Value Equity Fund 68,403,061 73,060,155
Emerging Growth Equity Fund 133,472,871 140,882,916
International Equity Fund 49,659,100 44,305,567
Actively Managed Bond Fund 101,299,062 74,520,168
Intermediate-Term Bond Fund 31,196,148 29,131,318
</TABLE>
Net unrealized appreciation (depreciation) consisting of
gross unrealized appreciation and gross unrealized depreciation
at September 30, 1999 for each of the Investment Funds was as
follows:
<TABLE>
<CAPTION>
NET UNREALIZED GROSS GROSS
APPRECIATION UNREALIZED UNREALIZED
(DEPRECIATION) APPRECIATION DEPRECIATION
-------------- ------------ ------------
<S> <C> <C> <C>
Core Equity Fund $124,949,690 $125,566,570 $ (616,880)
Value Equity Fund 12,341,637 19,009,318 (6,667,681)
Emerging Growth Equity Fund 16,563,353 19,010,996 (2,447,643)
International Equity Fund 3,623,018 5,377,641 (1,754,623)
Actively Managed Bond Fund (5,782,603) 1,860,850 (7,643,453)
Intermediate-Term Bond Fund (1,216,745) 206,247 (1,422,992)
Short-Term Investment Fund (15,621) 31,566 (47,187)
</TABLE>
The following summarizes the market value of securities
that were on loan to brokers and the value of securities and
cash held as collateral for these loans at September 30, 1999:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
------ ----------
<S> <C> <C>
Core Equity Fund $ 584,258 $ 602,796
Value Equity Fund 5,656,538 5,854,317
Emerging Growth Equity Fund 12,498,649 12,785,763
International Equity Fund 957,093 1,005,948
Actively Managed Bond Fund 16,699,599 17,029,900
Intermediate Term Bond Fund 4,301,936 4,378,114
</TABLE>
These securities lending arrangements may result in
significant credit exposure in the event the counterparty to
the transaction was unable to fulfill its contractual
obligations. In accordance with industry practice, the
securities lending agreements are generally collaterized by
cash or securities with a market value in excess of the
Investment Funds obligation under the contract. The Investment
Funds attempt to
65
<PAGE>
minimize credit risk associated with these activities by
monitoring broker credit exposure and collateral values on a
daily basis and requiring additional collateral to be deposited
with or returned to the Investment Funds when deemed necessary.
In June 1996, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS 125"). SFAS 125 provides
accounting and reporting standards for transfers of financial
assets, including repurchase agreements and securities lending
arrangements, and establishes new requirements for pledged
collateral. RSI has adopted this pronouncement effective
January 1, 1998 and its adoption had no effect on the net
assets of the Investment Funds.
For the year ended September 30, 1999 the Emerging Growth
Equity Fund, Value Equity Fund, and the International Equity
Fund each had expenses paid through brokerage/service
arrangements which amounted to $17,000, $27,395 and $5,000,
respectively.
66
<PAGE>
NOTE 5--CAPITAL TRANSACTIONS
At September 30, 1999 there were an unlimited number of
units of beneficial interest authorized for each Investment
Fund.
Transactions in the units of beneficial interest of each
Investment Fund for the year ended September 30, 1999 were as
follows:
<TABLE>
<CAPTION>
CORE EQUITY VALUE EQUITY
FUND FUND
---- ----
UNITS AMOUNT UNITS AMOUNT
----- ------ ----- ------
<S> <C> <C> <C> <C>
Units sold 232,825 $ 32,286,369 322,785 $ 23,902,497
Units redeemed (813,497) (83,603,978) (280,637) (28,708,085)
-------- ------------ -------- ------------
Net increase
(decrease) (580,672) $(51,317,609) 42,148 $ (4,805,588)
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH INTERNATIONAL
EQUITY FUND EQUITY FUND
----------- -----------
UNITS AMOUNT UNITS AMOUNT
----- ------ ----- ------
<S> <C> <C> <C> <C>
Units sold 219,060 $ 15,660,494 328,739 $ 18,155,816
Units redeemed (285,013) (19,050,135) (196,704) (10,410,771)
-------- ------------ -------- ------------
Net increase
(decrease) (65,953) $ (3,389,641) 132,035 $ 7,745,045
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
ACTIVELY MANAGED INTERMEDIATE-TERM
BOND FUND BOND FUND
--------- ---------
UNITS AMOUNT UNITS AMOUNT
----- ------ ----- ------
<S> <C> <C> <C> <C>
Units sold 1,478,003 $ 55,604,217 475,910 $ 16,296,336
Units redeemed (830,998) (31,115,385) (417,042) (14,283,691)
--------- ------------ -------- ------------
Net increase (decrease) 647,005 $ 24,488,832 58,868 $ 2,012,645
========= ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENT FUND
---------------
UNITS AMOUNT
----- ------
<S> <C> <C>
Units sold 1,268,707 $ 28,862,046
Units redeemed (1,548,299) (35,125,697)
---------- ------------
Net increase
(decrease) (279,592) $ (6,263,651)
========== ============
</TABLE>
67
<PAGE>
Transactions in the units of beneficial interest of each
Investment Fund for the year ended September 30, 1998 were as
follows:
<TABLE>
<CAPTION>
CORE EQUITY VALUE EQUITY
FUND FUND
---- ----
UNITS AMOUNT UNITS AMOUNT
----- ------ ----- ------
<S> <C> <C> <C> <C>
Units sold 276,487 $ 22,854,166 334,572 $ 20,642,979
Units redeemed (844,421) (68,118,523) (251,265) (15,152,673)
-------- ------------ -------- ------------
Net increase
(decrease) (567,934) $(45,264,357) 83,307 $ 5,490,306
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
EMERGING GROWTH INTERNATIONAL
EQUITY FUND EQUITY FUND
----------- -----------
UNITS AMOUNT UNITS AMOUNT
----- ------ ----- ------
<S> <C> <C> <C> <C>
Units sold 153,746 $ 11,606,019 195,365 $ 9,648,430
Units redeemed (231,027) (17,083,955) (135,770) (6,755,055)
-------- ------------ -------- -----------
Net increase (decrease) (77,281) $ (5,477,936) 59,595 $ 2,893,375
======== ============ ======== ===========
</TABLE>
<TABLE>
<CAPTION>
ACTIVELY MANAGED INTERMEDIATE-TERM
BOND FUND BOND FUND
--------- ---------
UNITS AMOUNT UNITS AMOUNT
----- ------ ----- ------
<S> <C> <C> <C> <C>
Units sold 744,236 $ 26,734,278 227,648 $ 7,479,124
Units redeemed (782,105) (27,911,465) (643,793) (21,111,961)
-------- ------------ -------- ------------
Net increase (decrease) (37,869) $ (1,177,187) (416,145) $(13,632,837)
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENT FUND
---------------
UNITS AMOUNT
----- ------
<S> <C> <C>
Units sold 2,372,449 $ 51,447,590
Units redeemed (2,193,734) (47,314,082)
---------- ------------
Net increase
(decrease) 178,715 $ 4,133,508
========== ============
</TABLE>
68
<PAGE>
Net Assets at September 30, 1999 are comprised as follows:
<TABLE>
<CAPTION>
EMERGING
CORE EQUITY VALUE GROWTH INTERNATIONAL
FUND FUND EQUITY FUND EQUITY FUND
---- ---- ----------- -----------
<S> <C> <C> <C> <C>
Paid-in capital
(deficit) $(198,772,892) $(32,736,716) $(44,133,937) $ 5,538,745
Accumulated income
(loss) 49,420,614 20,055,199 (4,868,522) (1,906,580)
Accumulated realized
gain 198,775,659 85,178,911 108,630,279 42,169,438
Unrealized
appreciation 124,949,690 12,341,637 16,563,353 3,486,323
------------- ------------ ------------ -----------
$174,373,071 $84,839,031 $76,191,173 $49,287,926
============= ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
ACTIVELY
SHORT-TERM INTERMEDIATE-TERM MANAGED
INVESTMENT FUND BOND FUND BOND FUND
--------------- --------- ---------
<S> <C> <C> <C>
Paid-in capital
(deficit) $(17,325,461) $(82,324,461) $(24,715,077)
Accumulated income 43,337,892 129,913,956 176,950,266
Accumulated realized
gain 1,289,162 16,150,828 37,744,815
Unrealized
appreciation
(depreciation) (15,621) (1,216,745) (5,782,603)
------------ ------------ ------------
$ 27,285,972 $ 62,523,578 $184,197,401
============ ============ ============
</TABLE>
NOTE 6--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Investment Funds' activity during the year in writing
equity call options had off-balance sheet risk of accounting
loss. These financial instruments involve market risk in excess
of the amount recognized in the Statement of Assets and
Liabilities. A written equity call option obligates an
Investment Fund 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
CORE EQUITY FUND --------- --------
<S> <C> <C>
Contracts outstanding at September 30, 1998 3 $ 2,622
Options written 190 88,277
Options exercised 0 0
Options expired (193) (90,899)
---- --------
Contracts outstanding at September 30, 1999 0 $ 0
==== ========
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS PREMIUMS
CONTRACTS RECEIVED
VALUE EQUITY FUND --------- --------
<S> <C> <C>
Contracts outstanding at September 30, 1998 37 $ 12,463
Options written 73 29,228
Options exercised 0 0
Options expired (110) (41,691)
---- --------
Contracts outstanding at September 30, 1999 0 $ 0
==== ========
</TABLE>
69
<PAGE>
As of September 30, 1999, the International Equity Fund had
outstanding forward currency contracts as set forth below.
These contracts are reported in the financial statements at the
Fund's net loss of $(143,989) which is the difference between
the forward foreign exchange rates at the dates of entry into
the contracts and the forward rates at September 30, 1999.
<TABLE>
<CAPTION>
SETTLEMENT UNREALIZED
CONTRACTS TO BUY DATE GAIN (LOSS)
------------------------------ ---------- -----------
<S> <C> <C> <C>
38,886,000 Japanese Yen for U.S. $325,569 10/21/99 $ (41,191)
14,117,000 Japanese Yen for U.S. $129,443 10/21/99 (3,704)
47,520,000 Japanese Yen for U.S. $432,787 11/09/99 (16,982)
48,420,000 Japanese Yen for U.S. $426,458 11/18/99 (32,534)
13,263,000 Japanese Yen for U.S. $122,127 11/18/99 (3,598)
11,759,000 Japanese Yen for U.S. $108,378 11/24/99 (3,204)
40,924,000 Japanese Yen for U.S. $372,544 11/24/99 (15,786)
37,159,000 Japanese Yen for U.S. $338,116 11/30/99 (14,848)
90,537,000 Japanese Yen for U.S. $854,824 01/18/00 (12,142)
-----------
$ (143,989)
-----------
</TABLE>
70
<PAGE>
NOTE 7--FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CORE EQUITY FUND
-------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/96
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding
throughout
the year)
Net Asset Value, Beginning of
Year $ 79.41 $ 76.11 $ 56.57 $ 46.71 $ 35.57
-------- -------- -------- -------- --------
Income from Investment
Operations:
Investment income--net 0.37 0.58 0.60 0.72 0.74
Net realized and unrealized
gain
on investments 26.52 2.72 18.94 9.14 10.40
-------- -------- -------- -------- --------
Total from Investment
Operations 26.89 3.30 19.54 9.86 11.14
-------- -------- -------- -------- --------
Net Asset Value, End of the
Year $ 106.30 $ 79.41 $ 76.11 $ 56.57 $ 46.71
======== ======== ======== ======== ========
TOTAL RETURN 33.86% 4.34% 34.54% 21.11% 31.21%
RATIOS/SUPPLEMENTAL DATA:
Ratios to Average Net Assets
Expenses (0.97)% (0.94)% (0.90)% (0.92)% (0.98)%
Investment Income--net 0.37% 0.72% 0.92% 1.40% 1.86%
Portfolio Turnover Rate 8.89% 5.62% 5.68% 9.95% 7.91%
Net Assets at End of the Year
($1,000's) $174,373 $176,367 $212,273 $217,356 $189,942
</TABLE>
-----------------------------------------
* Using average units basis.
71
<PAGE>
<TABLE>
<CAPTION>
VALUE EQUITY FUND
----------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding
throughout
the year)
Net Asset Value, Beginning of
Year $ 56.27 $ 57.36 $ 39.67 $ 32.63 $ 27.05
------- ------- ------- ------- -------
Income from Investment
Operations:
Investment income--net 0.66 0.57 0.60 0.72 0.93
Net realized and unrealized
gain
(loss) on investments 15.08 (1.66) 17.09 6.32 4.65
------- ------- ------- ------- -------
Total from Investment
Operations 15.74 (1.09) 17.69 7.04 5.58
------- ------- ------- ------- -------
Net Asset Value, End of the
Year $ 72.01 $ 56.27 $ 57.36 $ 39.67 $ 32.63
======= ======= ======= ======= =======
TOTAL RETURN 27.97% (1.90)% 44.59% 21.58% 20.63%
RATIOS/SUPPLEMENTAL DATA:
Ratios to Average Net Assets
Expenses (1.02)% (1.11)% (1.20)% (1.20)% (1.32)%
Investment Income--net 0.94% 0.93% 1.26% 1.98% 3.24%
Portfolio Turnover Rate 90.14% 95.66% 99.25% 61.53% 67.06%
Net Assets at End of the Year
($1,000's) $84,839 $63,931 $60,389 $52,231 $43,824
</TABLE>
-----------------------------------------
* Using average units basis.
72
<PAGE>
<TABLE>
<CAPTION>
EMERGING GROWTH EQUITY FUND
----------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding
throughout
the year)
Net Asset Value, Beginning of
Year $ 54.90 $ 84.47 $ 67.07 $ 52.58 $ 35.96
------- ------- ------- ------- -------
Income from Investment
Operations:
Investment (loss)--net (1.05) (0.90) (0.95) (0.90) (0.67)
Net realized and unrealized
gain
(loss) on investments 27.11 (28.67) 18.35 15.39 17.29
------- ------- ------- ------- -------
Total from Investment
Operations 26.06 (29.57) 17.40 14.49 16.62
------- ------- ------- ------- -------
Net Asset Value, End of the
Year $ 80.96 $ 54.90 $ 84.47 $ 67.07 $ 52.58
======= ======= ======= ======= =======
TOTAL RETURN 47.47% (35.01)% 25.94% 27.56% 46.22%
RATIOS/SUPPLEMENTAL DATA:
Ratios to Average Net Assets
Expenses (1.99)% (1.94)% (1.98)% (1.91)% (2.12)%
Investment (loss)--net (1.55)% (1.22)% (1.39)% (1.54)% (1.61)%
Portfolio Turnover Rate 222.98% 204.41% 177.68% 150.40% 170.54%
Net Assets at End of the Year
($1,000's) $76,191 $55,287 $91,589 $92,136 $74,625
</TABLE>
-----------------------------------------
* Using average units basis.
73
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
----------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding
throughout
the year)
Net Asset Value, Beginning of
Year $ 45.44 $ 51.09 $ 45.25 $ 40.25 $ 38.08
------- ------- ------- ------- -------
Income from Investment
Operations:
Investment (loss)--net (0.21) (0.14) (0.14) (0.08) (0.02)
Net realized and unrealized
gain
(loss) on investments 10.64 (5.51) 5.98 5.08 2.19
------- ------- ------- ------- -------
Total from Investment
Operations 10.43 (5.65) 5.84 5.00 2.17
------- ------- ------- ------- -------
Net Asset Value, End of the
Year $ 55.87 $ 45.44 $ 51.09 $ 45.25 $ 40.25
======= ======= ======= ======= =======
TOTAL RETURN 22.95% (11.06)% 12.91% 12.42% 5.70%
RATIOS/SUPPLEMENTAL DATA:
Ratios to Average Net Assets
Expenses (1.97)% (1.94)% (1.96)% (1.93)% (1.90)%
Investment Income (Loss)--net (0.39)% (0.27)% (0.29)% (0.20)% (0.07)%
Portfolio Turnover Rate 120.42% 92.82% 61.87% 51.29% 51.40%
Net Assets at End of the Year
($1,000's) $49,288 $34,083 $35,276 $39,602 $31,143
</TABLE>
-----------------------------------------
* Using average units basis.
74
<PAGE>
<TABLE>
<CAPTION>
ACTIVELY MANAGED BOND FUND
-------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding
throughout
the year)
Net Asset Value, Beginning of
Year $ 37.73 $ 33.89 $ 30.79 $ 29.58 $ 26.06
-------- -------- -------- -------- --------
Income from Investment
Operations:
Investment income--net 2.32 2.19 2.04 1.80 1.64
Net realized and unrealized
gain
(loss) on investments (2.84) 1.65 1.06 (0.59) 1.88
-------- -------- -------- -------- --------
Total from Investment
Operations (0.52) 3.84 3.10 1.21 3.52
-------- -------- -------- -------- --------
Net Asset Value, End of the
Year $ 37.21 $ 37.73 $ 33.89 $ 30.79 $ 29.58
======== ======== ======== ======== ========
TOTAL RETURN (1.38)% 11.33% 10.07% 4.09% 13.51%
RATIOS/SUPPLEMENTAL DATA:
Ratios to Average Net Assets
Expenses (0.78)% (0.81)% (0.81)% (0.80)% (0.84)%
Investment Income--net 6.17% 6.16% 6.32% 5.94% 5.95%
Portfolio Turnover Rate 42.18% 71.12% 69.29% 17.14% 18.21%
Net Assets at End of the Year
($1,000's) $184,197 $162,355 $147,139 $150,304 $140,127
</TABLE>
-----------------------------------------
* Using average units basis.
75
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND FUND
-------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding
throughout
the year)
Net Asset Value, Beginning of
Year $ 34.10 $ 31.55 $ 29.30 $ 28.01 $ 25.40
-------- -------- -------- -------- --------
Income from Investment
Operations:
Investment income--net 1.85 1.93 1.78 1.74 1.66
Net realized and unrealized
gain
(loss) on investments (1.41) 0.62 0.47 (0.45) 0.95
-------- -------- -------- -------- --------
Total from Investment
Operations 0.44 2.55 2.25 1.29 2.61
-------- -------- -------- -------- --------
Net Asset Value, End of the
Year $ 34.54 $ 34.10 $ 31.55 $ 29.30 $ 28.01
======== ======== ======== ======== ========
TOTAL RETURN 1.29% 8.08% 7.68% 4.61% 10.28%
RATIOS/SUPPLEMENTAL DATA:
Ratios to Average Net Assets
Expenses (1.12)% (1.10)% (1.04)% (0.98)% (0.98)%
Investment Income--net 5.40% 5.92% 5.86% 6.06% 6.27%
Portfolio Turnover Rate 50.51% 107.30% 67.95% 13.20% 15.95%
Net Assets at End of the Year
($1,000's) $62,524 $59,718 $68,389 $74,754 $90,482
</TABLE>
-----------------------------------------
* Using average units basis.
76
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENT FUND
----------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER UNIT OPERATING PERFORMANCE:*
(for a unit outstanding
throughout
the year)
Net Asset Value, Beginning of
Year $ 22.31 $ 21.23 $ 20.24 $ 19.31 $ 18.36
------- ------- ------- ------- -------
Income from Investment
Operations:
Investment income--net 1.05 1.06 0.97 0.94 0.93
Net realized and unrealized
gain
(loss) on investments (0.08) 0.02 0.02 (0.01) 0.02
------- ------- ------- ------- -------
Total from Investment
Operations 0.97 1.08 0.99 0.93 0.95
------- ------- ------- ------- -------
Net Asset Value, End of the
Year $ 23.28 $ 22.31 $ 21.23 $ 20.24 $ 19.31
======= ======= ======= ======= =======
TOTAL RETURN 4.35% 5.09% 4.89% 4.82% 5.17%
RATIOS/SUPPLEMENTAL DATA:
Ratios to Average Net Assets
Expenses (0.80)% (0.80)% (0.80)% (0.80)% (0.80)%
Investment Income--net 4.63% 4.89% 4.67% 4.76% 4.94%
Decrease in above expense ratio
due to fee waiver 0.46% 0.50% 0.45% 0.39% 0.34%
Net Assets at End of the Year
($1,000's) $27,286 $32,385 $27,021 $25,668 $27,360
</TABLE>
-----------------------------------------
* Using average units basis.
77
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND UNITHOLDERS OF
RSI RETIREMENT TRUST
In our opinion, the accompanying combined and individual
statements of assets and liabilities, including the schedules
of investments, and the related statements of operations and of
changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the
Core Equity Fund, Value Equity Fund, Emerging Growth Equity
Fund, International Equity Fund, Actively Managed Bond Fund,
Intermediate-Term Bond Fund and Short-Term Investment Fund
series of RSI Retirement Trust, (hereafter referred to as the
"Funds") at September 30, 1999, the results of each of their
operations, the changes in each of their net assets, and the
financial highlights for the year then ended, in conformity
with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on
these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with
generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that
our audit, which included confirmation of securities at
September 30, 1999 by correspondence with the custodian and
brokers, provides a reasonable basis for the opinion expressed
above. The financial statements for the year ended
September 30, 1998, including the financial highlights for each
of the four years in the period then ended, were audited by
other independent accountants whose report dated October 30,
1998 expressed an unqualified opinion on those financial
statements.
PricewaterhouseCoopers LLP
New York, New York
October 29, 1999
78
<PAGE>
CHANGE IN INDEPENDENT ACCOUNTANTS
---------------------------------------------------------------
RSI RETIREMENT TRUST
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey)
resigned as independent auditors of the Trust pursuant to an
agreement by PricewaterhouseCoopers LLP (PwC) to acquire
McGladrey's investment company practice. The McGladrey partners
and professionals serving the Trust at the time of the
acquisition joined PwC. The reports of McGladrey on the
financial statements of the Funds during the past two fiscal
years contained no adverse opinion or disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit
scope or accounting principles. In connection with its audits
for the two most recent fiscal years and through August 13,
1999, there were no disagreements with McGladrey on any matter
of accounting principle or practices, financial statement
disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of McGladrey
would have caused it to make reference to the subject matter of
disagreement in connection with its report. On September 23,
1999, the Trust, with the approval of its Board of Trustees and
its Audit Committee, engaged PwC as its independent auditor.
79
<PAGE>
1999 ANNUAL MEETING
RESULTS
On April 26, 1999, at its Annual Meeting of Trust
Participants, the following items were considered. The results,
which are unaudited, follow:
1) Approval of portfolio management by Retirement System
Investors Inc. of a portion of the Emerging Growth Equity
Fund. (Voted on by Emerging Growth Fund unitholders only.)
<TABLE>
<CAPTION>
UNITS
<S> <C>
FOR 579,047.246
AGAINST 488.589
ABSTAIN 258.325
</TABLE>
2) Approval of a new investment sub-advisory agreement between
Retirement System Investors Inc. and Bank of Ireland
Management (U.S.) Limited. (Voted on by International
Equity Fund unitholders only.)
<TABLE>
<CAPTION>
UNITS
<S> <C>
FOR 427,877.809
AGAINST 64.408
ABSTAIN 0
</TABLE>
3) Approval of a new investment management agreement between
the Trust and Retirement System Investors Inc. for the
International Equity Fund. (Voted on by International
Equity Fund unitholders only.)
<TABLE>
<CAPTION>
UNITS
<S> <C>
FOR 427,877.809
AGAINST 64.408
ABSTAIN 0
</TABLE>
4) Approval of a new investment management agreement between
the Trust and Retirement System Investors Inc. for the
Value Equity Fund. (Voted on by Value Equity Fund
unitholders only.)
<TABLE>
<CAPTION>
UNITS
<S> <C>
FOR 719,764.471
AGAINST 2,376.853
ABSTAIN 91.273
</TABLE>
80
<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
Heidi Viceconte, First Vice President and Treasurer
John F. Meuser, Senior Vice President
Durando J. Saccente, Senior Vice President
Veronica A. Fisher, Vice President and Assistant Treasurer
Chris R. Kaufman, Vice President
Stephen A. Hughes, First Vice President
Herbert Kuhl, Jr., C.F.A., First Vice President
Deborah A. Modzelewski, First Vice President
Kenneth Berkson, Second Vice President
Michael Morgenroth, Second Vice President
Barbara L. Schenk, Second Vice President
CONSULTANTS
---------------------------------------------------------------
Actuarial--Retirement System Consultants Inc.
Administrative and Recordkeeping--Retirement System Consultants
Inc.
Investments--Hewitt Investment Group (a Division of Hewitt
Associates, LLC)
INVESTMENT MANAGERS
---------------------------------------------------------------
Bank of Ireland Asset Management (U.S.) Limited
HLM Management Company, Inc.
Retirement System Investors Inc.
CUSTODIANS
---------------------------------------------------------------
The Chase Manhattan Bank
Custodial Trust Company
DISTRIBUTOR
---------------------------------------------------------------
Retirement System Distributors Inc.
TRANSFER AGENT
---------------------------------------------------------------
Retirement System Consultants Inc.
INDEPENDENT AUDITORS
---------------------------------------------------------------
PricewaterhouseCoopers LLP
COUNSEL
---------------------------------------------------------------
Swidler Berlin Shereff Friedman, LLP
81
<PAGE>
BOARD OF TRUSTEES
---------------------------------------------------------------
Herbert G. Chorbajian
Vice Chairman
Charter One Financial, Inc.
Cleveland, OH
Candace Cox *
Managing Director
Emerald Capital Advisors, NY, NY
James P. Cronin
President, Treasurer and Chief Executive Officer
The Dime Savings Bank of Norwich, Norwich, CT
William Dannecker
President and Chief Executive Officer
Retirement System Group Inc., NY, NY
Ralph L. Hodgkins, Jr.
Retired Chief Executive Officer
Mid Maine Savings Bank, FSB, Auburn, ME
Maurice E. Kinkade
Director of Development
Maplebrook School, Amenia, NY
Willliam G. Lillis
Real Estate Consultant
William A. McKenna, Jr.
Chairman, President and Chief Executive Officer
Ridgewood Savings Bank, Ridgewood, NY
William L. Schrauth
President and Chief Executive Officer
The Savings Bank of Utica, NY
William E. Swan
President and Chief Executive Officer
Lockport Savings Bank, NY
Raymond L. Willis
Private Investments
* Resigned, effective November 4, 1999
82
<PAGE>
THE INFORMATION CONTAINED HEREIN SHALL NOT BE CONSTRUED TO BE OR CONSTITUTE AN
OFFER OR SOLICITATION OF AN OFFER TO BUY UNITS IN THE RSI RETIREMENT TRUST.
SALES OF UNITS IN THE TRUST MAY BE MADE ONLY IN THOSE STATES WHERE SUCH UNITS
ARE EXEMPT FROM REGISTRATION OR HAVE BEEN QUALIFIED FOR SALE. TOTAL RETURNS ARE
BASED ON HISTORICAL RESULTS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
FUTURE PERFORMANCE AND UNIT NET ASSET VALUE WILL FLUCTUATE SO THAT UNITS, IF
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS MATERIAL MUST
BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
<PAGE>
1999
ANNUAL REPORT
[LOGO]
RSI RETIREMENT TRUST
CORE EQUITY FUND
VALUE EQUITY FUND
EMERGING GROWTH EQUITY FUND
INTERNATIONAL EQUITY FUND
ACTIVELY MANAGED BOND FUND
INTERMEDIATE-TERM BOND FUND
SHORT-TERM INVESTMENT FUND
BROKER/DEALER
[LOGO]
RETIREMENT SYSTEM
Distributors Inc.
317 Madison Avenue
New York, NY 10017-5397
|
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