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<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Life Cycle Equity Fund(TM)
Life Cycle Bond Fund(TM)
Life Cycle Retirement Income Fund(TM)
Life Cycle Harvest Fund(TM)
Semi-Annual Report
January 31, 1997
Investment Advisor
- ------------------
Benson White & Company
656 East Swedesford Road
Wayne, Pennsylvania 19087
Administrator
- -------------
BISYS Fund Services, Inc.
3435 Stelzer Road
Suite 1000
Columbus, Ohio 43219
Distributor
- -----------
Life Cycle Mutual Funds Distributors, Inc.
125 W. 55 Street
New York, New York 10019
Custodian
- ---------
The Bank of New York
90 Washington Street
New York, New York 10286
Counsel
- -------
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Independent Accountants
- -----------------------
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
This report is for the information of the shareholders of Life Cycle Mutual
Funds, Inc. Its use in connection with any offering of the fund's Shares is
authorized only in case of a concurrent or prior delivery of the Fund's current
prospectus.
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Equity Fund(TM)
Portfolio of Investments - January 31, 1997
<TABLE>
<CAPTION>
Market
Value
Shares (Note 2)
- ----------------------- ------------------------
<S> <C> <C>
Common Stocks -87.6%
Banking - 4.8%
2,900 KeyCorp $ 151,888
3,100 National City Corp. 140,662
------------------------
292,550
------------------------
Chemicals - 4.6%
1,700 Dow Chemical Co. 131,113
2,700 Eastman Chemical Co. 147,487
------------------------
278,600
------------------------
Consumer Durables - Auto Related - 1.7%
3,100 Dana Corp. 101,138
------------------------
Consumer Services - 1.7%
2,300 International Flavors & Fragrance 102,063
------------------------
Diversified - 3.6%
2,800 National Service Industries, Inc. 107,450
2,800 Tenneco, Inc. 112,000
------------------------
219,450
------------------------
Financial Services - 5.0%
3,000 Corestates Financial Corp. 149,250
1,500 J.P. Morgan & Co., Inc. 154,500
------------------------
303,750
------------------------
Food Products & Papers - 2.1%
4,100 SUPERVALU, Inc. 126,588
------------------------
Food Products & Services - 2.3%
3,500 H.J. Heinz Co. 140,875
------------------------
Forest Products & Papers - 4.6%
3,300 Potlatch Corp. 140,250
3,000 Union Camp Corp. 142,125
------------------------
282,375
------------------------
Holding Cos., Diversified - 1.8%
3,300 Eastern Enterprises 108,488
------------------------
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Equity Fund(TM)
Portfolio of Investments (continued) - January 31, 1997
<TABLE>
<CAPTION>
Market
Value
Shares (Note 2)
- ----------------------- ------------------------
<S> <C> <C>
Insurance - 10.6%
2,500 American General Corp. $ 99,688
2,000 Lincoln National Corp. 107,250
1,300 Marsh & McLennan Co. 140,075
4,800 St. Paul Co. 300,000
------------------------
647,013
------------------------
Oil & Gas - 8.4%
1,700 Amoco Corp. 147,900
1,500 Exxon Corp. 155,438
800 Mobil Corp. 105,000
3,600 Oneok, Inc. 106,650
------------------------
514,988
------------------------
Paper Products - 1.9%
2,600 Weyerhaeuser Co. 118,300
------------------------
Pipelines - 0.2%
260 El Paso Natural Gas 14,008
------------------------
Restaurants - 1.7%
5,200 Luby's Cafeteria, Inc. 105,950
------------------------
Retail - 2.1%
2,800 J.C. Penny, Inc. 132,650
------------------------
Shipbuilding - 0.1%
560 Newport News Shipbuilding 8,960
------------------------
Telecommunications - 10.1%
4,000 Alltel 128,500
2,700 Ameritech Corp. 161,325
2,500 Bell Atlantic Corp. 168,125
2,900 SBC Communications, Inc. 159,138
------------------------
617,088
------------------------
Utilities - Electrical and General - 20.3%
4,400 Baltimore Gas and Electric Co. 121,000
3,600 Carolina Power and Light Co. 135,450
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Equity Fund(TM)
Portfolio of Investments (continued) - January 31, 1997
<TABLE>
<CAPTION>
Market
Value
Shares (Note 2)
- ----------------------- ------------------------
<S> <C> <C>
Utilities - Electrical and General (continued)
4,100 Consolidated Edison Co. of New York, Inc. $ 127,100
2,900 Duke Power Co., Inc. 135,938
2,900 Florida Power & Light, Inc. 128,325
3,800 General Public Utilities Corp. 127,300
3,400 Nicor, Inc. 122,825
4,100 Pacific Enterprises 123,513
4,200 Peco Energy Corp. 96,600
5,800 Southern Co. 126,870
------------------------
1,244,921
------------------------
Total Common Stocks (cost $5,099,087) 5,359,755
------------------------
Total Investments (cost $5,099,087) (a) $ 5,359,755
========================
<CAPTION>
Percentages indicated are based on net assets of $6,121,528.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<S> <C>
Unrealized appreciation $ 357,787
Unrealized depreciation (97,119)
========================
Net unrealized appreciation $ 260,668
========================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Bond Fund(TM)
Portfolio of Investments - January 31, 1997
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2)
- ----------------------- -------------------
<S> <C>
U.S Government Obligations - 68.7%
$40,000 U.S. Treasury Bills, 5.02%, 2/13/97 39,930
20,000 U.S. Treasury Notes, 4.75%, 10/31/98 19,632
20,000 U.S. Treasury Notes, 5.50%, 2/28/99 19,830
25,000 U.S. Treasury Notes, 6.00%, 8/15/99 24,981
25,000 U.S. Treasury Notes, 5.88%, 6/30/00 24,790
40,000 U.S. Treasury Notes, 5.50%, 12/31/00 39,024
30,000 U.S. Treasury Notes, 5.63%, 2/28/01 29,346
-------------------
Total U.S. Government Obligations (cost $198,531) 197,533
-------------------
Total Investments (cost $198,531) (a) 197,533
===================
<CAPTION>
Percentages indicated are based on net assets of $287,700.
(a) Represents cost for federal income tax purposes and differs from value by net unrealized depreciation
of securities as follows:
<S> <C>
Unrealized appreciation 235
Unrealized depreciation (1,233)
-------------------
Net unrealized depreciation (998)
===================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Retirement Income Fund(TM)
Portfolio of Investments - January 31, 1997
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2)
- ----------------------- ------------------------
U.S. Government Obligations - 77.8%
<S> <C>
$30,000 U.S. Treasury Bills, 5.02%, 2/13/97 $ 29,948
25,000 U.S. Treasury Notes, 5.13%, 11/30/98 24,671
25,000 U.S. Treasury Notes, 6.00%, 8/15/99 24,982
25,000 U.S. Treasury Notes, 6.00%, 10/15/99 25,009
25,000 U.S. Treasury Notes, 5.50%, 4/15/00 24,574
30,000 U.S. Treasury Notes, 5.75%, 10/31/00 29,561
40,000 U.S. Treasury Notes, 5.50%, 12/31/00 39,024
50,000 U.S. Treasury Notes, 5.63%, 2/28/01 48,910
------------------------
Total U.S. Government Obligations (cost $248,522) 246,679
------------------------
Total Investments (cost $248,522) (a) $ 246,679
========================
<CAPTION>
Percentages indicated are based on net assets of $316,876.
(a) Represents cost for federal income tax purposes and differs from value by net unrealized
depreciation of securities as follows:
<S> <C>
Unrealized appreciation $ 333
Unrealized depreciation (2,176)
------------------------
Net unrealized depreciation $ (1,843)
========================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Harvest Fund(TM)
Portfolio of Investments - January 31, 1997
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2)
- -------------------------- -----------------------------
<S> <C> <C> <C>
U.S. Government Obligations - 44.2%
$50,000 U.S. Treasury Bills, 5.02%, 2/13/97 49,913
100,000 U.S. Treasury Bills, 5.03%, 2/20/97 99,730
50,000 U.S. Treasury Bills, 4.76%, 3/20/97 49,680
-----------------------------
Total U.S. Government Obligations (cost $199,344) 199,323
-----------------------------
Total Investments (cost $199,344) (a) $ 199,323
=============================
<CAPTION>
Percentages indicated are based on net assets of $450,936.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<S> <C>
Unrealized appreciation $ -
Unrealized depreciation (21)
-----------------------------
Net unrealized depreciation $ (21)
=============================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Statements of Assets and Liabilities (unaudited)
January 31, 1997
<TABLE>
<CAPTION>
Equity Bond Retirement Harvest
Fund Fund Income Fund Fund
-------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at value ( cost
$5,099,087; $198,531; $248,522; and
$199,344 respectively) ................................... $5,359,755 $197,533 $246,679 $199,323
Cash ..................................................... 721,638 63,594 49,762 245,003
Dividends and interest recievable ........................ 21,589 2,678 3,797 873
Unamortized organization expenses ........................ 24,634 24,671 19,536 24,671
Receivable for capital shares sold ....................... 11,371 ------ ------ ------
Prepaid expenses and other assets ........................ 8,356 6,879 6,524 2,031
--------------- ------------ -------------- ------------
Total Assets 6,147,343 295,355 326,298 471,901
--------------- ------------ -------------- ------------
LIABILITIES:
Dividends payable ........................................ 9,805 698 809 1,002
Accrued expenses and other payables:
Investment advisory fees ................................. 3,849 183 202 287
Administration fees ...................................... 5,208 5,208 5,208 5,208
12b-1 fees ............................................... 3,849 183 202 287
Transfer agent .......................................... 1,447 343 121 95
Other ................................................... 1,657 1,040 2,880 14,086
--------------- ------------ --------------- -----------
Total Liabilities 25,815 7,655 9,422 20,965
--------------- ------------ --------------- -----------
NET ASSETS $6,121,528 $287,700 $316,876 $450,936
=============== ============ =============== ===========
NET ASSETS:
Capital Stock ............................................ $521 $29 $32 $45
Additional paid in capital .............................. 5,763,289 288,669 318,687 451,204
Accumulated undistributed net investment
income ............................................... 129 ------ ------ ------
Accumulated realized gains (losses) on
investments .......................................... 96,921 ------ ------ (292)
Net unrealized appreciation (depreciation)
from investments ..................................... 260,668 (998) (1,843) (21)
--------------- ------------ --------------- -----------
NET ASSETS $6,121,528 $287,700 $316,876 $450,936
=============== ============ =============== ===========
Shares of beneficial interest outstanding ................ 521,239 29,110 32,199 45,125
=============== ============ =============== ===========
Net Asset Value per share ................................ $11.74 $9.88 $9.84 $9.99
=============== ============ =============== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Statements of Operations (unaudited)
For the Period Ended January 31, 1997
<TABLE>
<CAPTION>
Equity Bond Retirement Harvest
Fund Fund Income Fund Fund
------------ ------------ -------------- ----------
<S> <C> <C> <C> <C>
INCOME:
Interest ............................................... $18,349 $6,208 $7,788 $12,975
Dividend ............................................... 72,701 ------ ------ ------
------------ ------------ ------------- -----------
Total Income 91,050 6,208 7,788 12,975
------------ ------------ ------------- -----------
EXPENSES:
Advisory (Note 3) ...................................... 16,648 975 1,173 2,088
Administrative services (Note 3) ....................... 31,250 31,250 31,250 31,250
Custodian .............................................. 6,809 3,434 3,491 3,803
Legal .................................................. 17,202 1,108 1,138 2,334
Fund accounting ........................................ 1,027 505 384 8
12b-1 distribution fees (Note 3) ....................... 16,657 974 1,174 2,086
Amortization of organization expenses .................. 3,389 3,389 2,683 3,389
Insurance ............................................. 1,976 1,976 1,976 1,976
Audit .................................................. 12,000 1,440 1,650 3,150
Registration ........................................... 4,300 3,850 3,850 3,940
Transfer agent fees (Note 3) ........................... 4,181 2,527 1,149 1,213
Trustees' fees and expenses ........................... 1,500 1,500 1,500 1,500
Miscellaneous .......................................... 1,447 892 598 1,304
------------- ------------ ------------- -----------
Total Expenses before waivers .................... 118,386 53,820 52,016 58,041
Less: Expenses waived or reimbursed by Advisor.... (75,644) (51,290) (48,968) (52,583)
------------- ------------ ------------- -----------
Net expenses ..................................... 42,742 2,530 3,048 5,458
------------- ------------ ------------- -----------
Net Investment Income .................................. 48,308 3,678 4,740 7,517
------------- ------------ ------------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains on investment transactions .......... 120,870 ------ ------ 8
Net change in unrealized appreciation (depreciation)
on investments .................................. 343,684 1,508 2,435 (21)
------------- ------------ ------------- -----------
Net realized and unrealized gains (losses) on
investments ..................................... 464,554 1,508 2,435 (13)
------------- ------------ ------------- -----------
Increase in net assets resulting from operations ....... $512,862 $5,186 $7,175 $7,504
============= ============ ============= ===========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Equity Bond
Fund Fund
---------------------------------- --------------------------------
Six Months October 2, Six Months October 4,
Ended 1995 (a) Ended 1995 (a)
January 31, through January 31, through
1997 July 31, 1997 July 31,
(unaudited) 1996 (unaudited) 1996
----------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income ................................. $48,308 $27,052 $3,678 $2,868
Net realized gains from
investment transactions ......................... 120,870 116,521 ------ ------
Net change in unrealized
appreciation (depreciation)
from investments ................................ 343,684 (83,016) 1,508 (2,506)
------------- ------------ ------------- ------------
Increase in net assets resulting from
operations ................................... 512,862 60,557 5,186 362
------------- ------------ ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................ (48,179) (27,052) (3,678) (2,868)
From net realized gains ............................... (140,470) ------ ------ ------
------------- ------------ ------------- ------------
Total distributions to shareholders ................... (188,649) (27,052) (3,678) (2,858)
------------- ------------ ------------- ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares ......................... 2,822,248 3,759,918 92,815 198,264
Net asset value of shares issued to
shareholders in reinvestment of
dividends ....................................... 154,372 17,037 2,942 2,868
Net asset value of shares redeemed .................... (130,525) (884,240) (31,584) (1,607)
------------- ------------ ------------- ------------
Net increase in net assets derived
from transactions in shares of
beneficial interest ............................. 2,846,095 2,892,715 64,173 199,525
------------- ------------ ------------- ------------
Total Increase in Net Assets ................................. 3,170,308 2,926,220 65,681 197,019
NET ASSETS:
Beginning of Year ..................................... 2,951,220 25,000 222,019 25,000
------------- ------------ ------------- ------------
End of Year ........................................... $6,121,528 $2,951,220 $287,700 $222,019
============= ============ ============= ============
</TABLE>
(a) Commencemet of operations
See accompanying notes to financial statements.
9
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Retirement Harvest
Income Fund Fund
--------------------------------- --------------------------------
Six Months October 4, Six Months October 4,
Ended 1995 (a) Ended 1995 (a)
January 31, through January 31, through
1997 July 31, 1997 July 31,
(unaudited) 1996 (unaudited) 1996
---------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income ............................. $4,740 $3,922 $7,517 $20,365
Net realized gains from
investment transactions ..................... ------ ------ 8 (300)
Net change in unrealized
appreciation (depreciation)
from investments ............................ 2,435 (4,278) (21) ------
---------------- -------------- --------------- -------------
Increase in net assets resulting from
operations .................................. 7,175 (356) 7,504 20,365
---------------- -------------- --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ........................ (4,740) (3,922) (7,517) (20,365)
---------------- -------------- --------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares ..................... 82,018 299,865 552,595 2,279,287
Net asset value of shares issued to
shareholders in reinvestment of
dividends ................................... 4,564 3,922 8,375 20,098
Net asset value of shares redeemed ................ (44,303) (52,347) (1,034,714) (1,399,392)
---------------- -------------- --------------- -------------
Net increase in net assets derived
from transactions in shares of
beneficial interest ......................... 42,279 251,440 (473,744) 899,993
---------------- -------------- --------------- -------------
Total Increase in Net Assets ............................. 44,714 247,162 (473,757) 899,693
NET ASSETS:
Beginning of Year ................................. 272,162 25,000 924,693 25,000
---------------- -------------- --------------- -------------
End of Year ....................................... $316,876 $272,162 $450,936 $924,693
================ ============== =============== =============
</TABLE>
(a) Commencement of Operations.
See accompanying notes to financial statements.
10
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Notes to Financial Statements
January 31, 1997
1. DESCRIPTION. Life Cycle Mutual Funds(TM), Inc. (The "Fund") was
organized on June 25, 1995, and is registered under the Investment Company Act
of 1940, as amended, as an open ended, management investment company and
currently consists of four separate investment portfolios (collectively the
"Portfolios"): the Life Cycle Equity Fund(TM) (the "Equity Fund"), the Life
Cycle Bond Fund(TM) (the "Bond Fund"), the Life Cycle Retirement Income Fund(TM)
(the "Retirement Income Fund"), and the Life Cycle Harvest Fund(TM) (the
"Harvest Fund"). The Portfolios are offered in connection with an age-based
asset allocation program (the "Life Cycle Program") which is designed to meet
the long-term retirement investment needs of individual investors. The Life
Cycle Program is intended to manage investors' retirement assets by making
disciplined age-based asset allocation decisions to achieve this overall
objective. The Equity Funds's investment objective is to maximize investors'
total return by investing in a portfolio of common stocks selected from the
Standard & Poor's 500 Index on the basis of such stocks' ability to provide
capital appreciation and generate dividend income. The Bond Fund's investment
objective is to maximize income consistent with the preservation of capital.
The Bond Fund intends to achieve its investment objective, with a low risk to
capital, by investing in a laddered portfolio of bonds issued and backed by the
full faith and credit of the U.S. Government and its agencies and
instrumentalities, mortgage-backed securities, and investment-grade debt
securities issued by corporations and banks. The Retirement Income Fund's
investment objective is to maximize income consistent with the preservation of
capital. The Retirement Income Fund intends to achieve its investment
objective, with moderate risk to capital, by investing in a laddered portfolios
of bonds issued and backed by the full faith and credit of the U.S. Government
and its agencies and instrumentalities, mortgage-backed securities, and
investment-grade debt securities issued by corporations and banks. The Harvest
Fund seeks to earn income consistent with the preservation of capital. The
Harvest Fund intends to achieve its investment objective by investing in a
laddered portfolio of short-term bonds issued and backed by the full faith and
credit of the U.S. Government and its agencies and instrumentalities, negotiable
CD's, repurchase agreements, and short-term corporate debt securities.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of
the significant accounting policies followed by the Fund:
A. Portfolio Valuation. The net asset value per share of the Portfolios
is calculated as of 4:00 P.M. (Eastern Time). Securities listed on an exchange
are valued at the last sales price prior to the time the valuation is made. If
there has been no sale since the immediately previous valuation, then current
bid price is used. Quotations are taken from the exchange where the security is
primarily traded. Over-the-counter securities are valued on the basis of the
closing bid price. Assets for which market quotations are not readily available
are valued in accordance with procedures established by the Fund's Board of
Directors, including use of an independent pricing service. Short-term
securities with maturities of 60 days or less are valued at amortized cost, if
their terms to maturity at purchase were 60 days or less, or by amortizing their
value on the 61st day prior to maturity, if their original term to maturity at
purchase exceeded 60 days.
B. Securities Transactions and Investment Income. Securities transactions
are recorded on
11
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Notes to Financial Statements (continued)
January 31, 1997
a trade date basis. Realized gains and losses from securities transactions are
recorded on the identified cost basis. Dividend income is recognized on the ex-
dividend date and interest income, including amortization of premium and
accretion of discount, is accrued daily.
C. Distributions to Shareholders. The Bond Fund, Retirement Income Fund,
and Harvest Fund declare dividends from net investment income daily and
distribute that income monthly. The Equity Fund declares and distributes net
investment income on a quarterly basis. Net realized capital gains will be
declared and distributed annually. Distributions are recorded on the ex-
dividend date.
D. Federal Income Tax. It is the policy of each of the Portfolios to
qualify as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended. By so qualifying, the Portfolios will not be
subject to Federal income taxes to the extend that they distribute all of their
taxable income for the fiscal year. The Portfolios also intend to meet the
distribution requirements to avoid the payment of an excise tax.
E. Organization Expenses. Costs incurred in connection with the
organization and initial registration of the Fund have been deferred and are
being amortized on a straight-line basis over sixty months beginning with each
Portfolio's commencement of operations. In the event any of the initial shares
of any of the Portfolios are redeemed, the appropriate Portfolio will be
reimbursed for any unamortized organization expenses in the same proportion as
the number of shares redeemed bears to the number of initial shares held at time
of redemption.
F. Determination of Net Asset Value and Calculation of Expenses. Expenses
directly attributable to a Portfolio are charged to that Portfolio. Other
expenses are allocated proportionately among each Portfolio within the Fund in
relation to the net assets of each Portfolio or on another reasonable basis.
G. Use of Estimates. Estimates and assumptions are required to be made
regarding assets, liabilities, and changes in net assets resulting from
operations when financial statements are prepared. Actual results could differ
from these amounts.
3. INVESTMENT ADVISORY, ADMINISTRATIVE AND OTHER TRANSACTIONS WITH
AFFILIATES. The Fund has entered into an investment advisory agreement (the
"Investment Advisory Agreement") with Benson White & Company (the "Advisor").
The Investment Advisory Agreement provides for the Advisor to supervise all
aspects of the Fund's operations and provide investment advice and portfolio
management services to the Fund. Subject to the supervision of the Fund's Board
of Directors, the Advisor makes each Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the portfolio investments. The Advisor is also responsible for the
management and implementation of the Life Cycle Program. Pursuant to the terms
of the Investment Advisory Agreement, the Advisor is paid a monthly advisory fee
equal to 0.75% of each Portfolio's average daily net assets per annum.
12
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Notes to Financial Statements (continued)
January 31, 1997
For the period ended January 31, 1997, the Advisor earned fees of $16,648, $975,
$1,173, $2,088, for the Equity, Bond, Retirement Income, and Harvest Funds,
respectively. For the period ended January 31, 1997, the Advisor voluntarily
waived fees of $16,648, $975, $1,173, $2,088, for the Equity, Bond, Retirement
Income, and Harvest Funds, respectively.
BISYS Fund Services ("BISYS") is responsible for providing the portfolios
with administrative, fund accounting, dividend and capital gains distribution
and transfer agency services. BISYS assumed these functions during the six month
period ended January 31, 1997, following the acquisition by the BISYS Group,
Inc. of the Mutual Funds Division of Furman Selz, LLC ("Furman Selz"), which
organization had previously provided these services to the portfolios.
BISYS provides the Fund with administrative, fund accounting, dividend
disbursing and transfer agency services pursuant to an administrative services
agreement (the "Administrative Services Agreement"). Pursuant to the
Administrative Services Agreement, BISYS receives a fee, payable monthly, equal
to 0.20% of the Fund's aggregate average net assets, subject to a minimum of
$250,000 per year, plus out of pocket expenses. For the period ended January
31, 1997, BISYS and Furman Selz earned, in the aggregate, $125,000 for services
provided to the Fund, consisting of $31,250 from each of the four individual
portfolios.
The fund entered into a distribution agreement (the "Distribution Agreement")
with Life Cycle Mutual Funds Distributors, Inc., an affiliate of Furman Selz.
Under the Distribution Agreement, Life Cycle Mutual Funds Distributors, Inc., as
agent for the Fund, agrees to use its best efforts as sole distributor of the
Funds' shares. Under the agreement, the distributor will receive an annual fee
of up to 0.75% of average daily net assets in return for financing certain
distribution and shareholder related activities related to the Funds' shares.
During the period ended January 31, 1997, the actual rates incurred by the Funds
were: 0.75% 0.74%, 0.75% and 0.75% for the Equity, Bond, Retirement Income and
Harvest Funds, respectively.
The Advisor has voluntarily agreed to cap the expense ratios at 1.95% for each
Portfolio. In order to maintain that expense ratio, the Advisor has agreed to
reimburse expenses as follows: Equity Fund - $58,996; Bond Fund - $50,315;
Retirement Income Fund - $47,795; Harvest Fund - $50,495.
4. SECURITIES TRANSACTIONS. Purchase and Sale Transactions. The
aggregate amount of purchases and sales of investment securities, other than
short-term securities, for the Equity Fund was $3,290,196 and $953,146,
respectively, for the period ended January 31, 1997.
13
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Notes to Financial Statements (continued)
January 31, 1997
5. CAPITAL SHARE TRANSACTIONS. The Fund is authorized to issue 20 billion shares
of beneficial interest with a par value of $0.001 each. Transactions in shares
of the Portfolios were as follows:
<TABLE>
<CAPTION>
Equity Fund Bond Fund
------------------------------------- ----------------------------------
Six Months October 2, Six Months October 4,
Ended 1995 (a) Ended 1995* (a)
January 31, through January 31, through
1997 July 31, 1997 July 31,
(unaudited) 1996 (unaudited) 1996
----------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
Beginning Balance ........................... 276,239 2,500 22,605 2,500
----------------- ---------------- --------------- -------------
Shares sold ................................. 241,023 351,123 9,412 19,977
Shares issued in reinvestment of dividends .. 13,138 1,598 298 291
Shares redeemed ............................. (9,161) (78,982) (3,205) (163)
----------------- ---------------- --------------- -------------
Net increase (decrease) in shares ........... 245,000 273,739 6,505 20,105
----------------- ---------------- --------------- --------------
Ending Balance .............................. 521,239 276,239 29,110 22,605
================= ================ =============== ==============
<CAPTION>
Retirement Income Fund Harvest Fund
------------------------------------- ---------------------------------
Six Months October 4, Six Months October 4,
Ended 1995 (a) Ended 1995 (a)
January 31, through January 31, through
1997 July 31, 1997 July 31,
(unaudited) 1996 (unaudited) 1996
----------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Beginning Balance ........................... 27,883 2,500 92,499 2,500
----------------- ---------------- --------------- --------------
Shares sold ................................. 8,351 30,286 55,312 227,927
Shares issued in reinvestment of dividends .. 470 397 800 2,010
Shares redeemed ............................. (4,505) (5,300) (103,486) (139,938)
----------------- ---------------- --------------- -------------
Net increase (decrease) in shares ........... 4,316 25,383 (47,374) 89,999
----------------- ---------------- --------------- -------------
Ending Balance .............................. 32,199 27,883 45,125 92,499
================= ================ =============== =============
</TABLE>
(a) Commencement of Operations.
14
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Financial Highlights
<TABLE>
<CAPTION>
Equity Find Bond Fund
----------------------------------- -------------------------------
Six Months October 2, Six Months October 4,
Ended 1995 (a)(d) Ended 1995 (a)(d)
January 31, through January 31, through
1997 July 31, 1997 July 31,
(unaudited) 1996 (unaudited) 1996
----------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $10.68 $10.00 $9.82 $10.00
----------------- -------------- ------------- -------------
Income from Investment Operations:
Net investment income ........................ 0.12 0.12 0.14 0.22
Net realized\unrealized gains (losses) on
investments ............................. 1.37 0.68 0.06 (0.18)
----------------- -------------- ------------- -------------
Total from Investment Operations ............. 1.49 0.80 0.20 0.04
----------------- -------------- ------------- -------------
Less Distributions:
Dividends from net investment income ......... (0.12) (0.12) (0.14) (0.22)
Distributions from net realized gains ........ (0.31) ----- ---- ----
----------------- -------------- ------------- -------------
Total Distributions .......................... (0.43) (0.12) (0.14) (0.22)
----------------- -------------- ------------- -------------
Net Asset Value, End of Period ................... $11.744 $10.680 $9.883 $9.820
================= ============== ============= =============
Total Return (excludes sales charge) ............. 13.94%(b) 8.05%(b) 2.05%(b) 0.39%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (in thousands) ..... $6,122 $2,951 $288 $222
Ratios of Net Investment Income to Average
Net Assets ............................. 2.18%(c) 1.82%(c) 2.83%(c) 2.51%(c)
Ratios of Expenses to Average Net Assets ..... 1.95%(c) 1.95%(c) 1.95%(c) 1.95%(c)
Ratios of Expenses to Average Net Assets* .... 5.34%(c) 9.70%(c) 41.39%(c) 76.34%(c)
Portfolio Turnover Rate .......................... 27.20% 132.00% ------ ------
Average Commission Rate .......................... $0.06 $0.03 ------ ------
</TABLE>
(*) During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(a) Commencement of Operations.
(b) Not annualized
(c) Annualized.
(d) Per share amounts based on the average number of shares outstanding during
the period from commencement of operations to to July 31, 1996.
See accompanying notes to financial statements.
15
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Financial Highlights
<TABLE>
<CAPTION>
Retirement Income Fund Harvest Fund
---------------------------------- ------------------------------
Six Months October 4, Six Months October 4,
Ended 1995 (a)(d) Ended 1995 (a)(d)
January 31, through January 31, through
1997 July 31, 1997 July 31,
(unaudited) 1996 (unaudited) 1996
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $9.76 $10.00 $10.00 $10.00
--------------- --------------- --------------- --------------
Income from Investment Operations:
Net investment income.................................. 0.15 0.24 0.14 0.20
Net realized\unrealized gains (losses) on investments.. 0.08 (0.24) (0.01) ------
--------------- --------------- --------------- --------------
Total from Investment Operations....................... 0.23 ------ 0.13 0.20
--------------- --------------- --------------- --------------
Less Distributions:
Dividends from net investment income................... (0.15) (0.24) (0.14) (0.20)
--------------- --------------- --------------- --------------
Net Asset Value, End of Period............................. $9.84 $9.76 $9.99 $10.00
=============== =============== =============== ==============
Total Return (excludes sales charge)....................... 2.36%(b) -0.02%(b) 1.26%(b) 2.05%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (in thousands)............... $317 $272 $451 $925
Ratios of Net Investment Income to Average Net Assets.. 3.03%(c) 2.83%(c) 2.70%(c) 2.44%(c)
Ratios of Expenses to Average Net Assets............... 1.95%(c) 1.95%(c) 1.95%(c) 1.95%(c)
Ratios of Expenses to Average Net Assets*.............. 33.27%(c) 60.32%(c) 20.85%(c) 12.38%(c)
</TABLE>
(*) During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Commencement of Operations.
(b) Not annualized
(c) Annualized.
(d) Per share amounts based on the average number of shares outstanding during
the period from commencement of operations to July 31, 1996.
See accompanying notes to financial statements.
16
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Board of Directors
Clay B. Mansfield* Frederik Fazer
Chairman Director
Timothy W. Cunningham* Thomas Flanigan
President Director
Robert Straniere
Director
* "Interested Person" as that term is defined in the Investment Company
Act of 1940.
- --------------------------------------------------------------------------------
Officers
Clay B. Mansfield James C. White
Chairman of the Board and Treasurer Vice President
Timothy W. Cunningham Curtis Barnes
President and Secretary Vice President
William H. Hastings, Jr. Sheryl Hirschfeld
Assistant Secretary Assistant Secretary
Michael Sakala Alaina V. Metz
Assistant Treasurer Assistant Secretary
Bruce Treff
Assistant Secretary
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