R
N
C
MUTUAL FUND
GROUP, INC
TABLE OF CONTENTS
RNC MONEY MARKET FUND
Shareholder Letter ............................................... 2
Investment Portfolio ............................................. 3
Statement of Assets and Liabilities .............................. 5
Statement of Operations .......................................... 6
Statement of Changes in Net Assets ............................... 7
Financial Highlights ............................................. 8
RNC EQUITY FUND
Shareholder Letter ............................................... 9
Investment Portfolio ............................................. 11
Statement of Assets and Liabilities .............................. 14
Statement of Operations .......................................... 15
Statement of Changes in Net Assets ............................... 16
Financial Highlights ............................................. 17
RNC MUTUAL FUND GROUP, INC ................................................
Notes to Financial Statements .................................... 18
Report to Independent Certified Public Accountants ............... 21
<PAGE>
RNC MONEY MARKET FUND
Dear Shareholder:
We are pleased to present the annual report on the operations of the RNC
Money Market Fund for the year ended September 30, 1997. Your Fund has continued
to exhibit a strong performance record. We sincerely appreciate the confidence
you have placed in your Fund's management and extend a special welcome to all
new shareholders.
The average dollar-weighted portfolio maturity of your Fund on September 30,
1997 was 61 days. Purchases continue to be high quality, highly liquid
investments which allow adjustment to the portfolio's maturity in the event of a
change in the interest rate forecast. Each issue is monitored to assure that it
meets our demanding standards of creditworthiness.
The Fund's portfolio diversification and maturity range will continue to be
adjusted based upon the interest rate forecast under fluctuating market
conditions.
We assure you of our continuing dedication to achieve superior investment
results, and look forward to continued service to you. If you have any questions
concerning your investment, please feel free to contact us.
Sincerely,
/s/ ERIC M. BANHAZL /s/ DANIEL J. GENTER
ERIC M. BANHAZL DANIEL J. GENTER
President President
RNC Money Market Fund RNC Capital Management Co.
2
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at September 30, 1997
- ------------------------------------------------------------------------------------------------------------------
Principle Amount COMMERCIAL PAPER: 50.5% Market Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$1,000,000 Allomon Funding Corp., 5.57%, 10/6/97................................... $ 999,226
2,000,000 APC Funding Corp., 5.55%, 10/2/97....................................... 1,999,692
1,000,000 Banca CRT Financial Corp., 5.82%, 10/1/97............................... 1,000,000
1,000,000 Bankers Trust New York Corp., 5.58%, 3/30/98............................ 972,100
2,000,000 Barton Capital Corp., 5.53%, 11/3/97.................................... 1,989,862
1,000,000 Cooperative Association of Tractor Dealers "B", 5.55%, 11/19/97......... 992,446
1,500,000 Korea Development Bank, 5.75%, 10/23/97................................. 1,494,729
1,327,000 KZH Holding Corp. (Crescent), 5.56%, 10/1/97............................ 1,327,000
2,000,000 Merrill Lynch & Co., 5.56%, 1/5/98...................................... 1,970,347
2,000,000 Omnibus Funding Corp., 5.55%, 10/10/97.................................. 1,997,225
1,800,000 Repeat Offering Securitisation Entity, Inc. Funding Co., 5.56%,
11/28/97............................................................. 1,783,876
2,000,000 Triple A-One Funding Corp., 5.55%, 10/9/97.............................. 1,997,533
2,000,000 Twin Towers Inc., 5.54%, 10/16/97....................................... 1,995,383
2,000,000 Woodstreet Funding Corp., 5.55%, 10/29/97............................... 1,991,367
-----------
22,510,786
-----------
FEDERAL AGENCY SECURITIES: 2.6%
- ------------------------------------------------------------------------------------------------------------------
1,170,000 Federal National Mortgage Association, 5.22%, 7/10/98................... 1,165,140
-----------
CORPORATE BONDS: 18.3%
- ------------------------------------------------------------------------------------------------------------------
500,000 Aristar Inc., 8.125%, 12/1/97........................................... 501,590
1,000,000 Carnival Cruise Lines, 5.75%, 3/15/98................................... 998,212
810,000 Caterpillar Financial Services Corp., 8.22%, 4/15/98.................... 818,788
815,000 Fleet Financial Group, 7.25%, 10/15/97.................................. 815,489
1,000,000 Ford Motor Credit Company, 8.90%, 2/12/98............................... 1,010,142
1,000,000 International Lease Finance Corp., 7.50%, 1/15/98....................... 1,004,600
500,000 Key Bank, N.A., 6.05%, 4/6/98........................................... 500,337
750,000 NationsBank Corp., 6.625%, 1/15/98...................................... 751,592
1,000,000 Paccar Financial Corp., 7.14%, 3/20/98.................................. 1,004,706
750,000 Temple-Inland, Inc., 9.00%, 4/20/98..................................... 762,144
-----------
8,167,600
-----------
See accompanying notes to financial statements.
3
</TABLE>
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at September 30, 1997, continued
- ------------------------------------------------------------------------------------------------------------------
FLOATING RATE NOTES: 9.1%*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$1,000,000 PNC Bank, N.A., 5.65%, 4/24/98.......................................... $ 999,831
1,070,000 Student Loan Marketing Association, 5.57%, 1/21/98...................... 1,070,117
2,000,000 Student Loan Marketing Association, 5.52%, 2/17/98...................... 2,000,000
-----------
4,069,948
-----------
CERTIFICATES OF DEPOSIT: 2.3%
- ------------------------------------------------------------------------------------------------------------------
1,000,000 Bankers Trust New York Corp., 6.00%, 7/7/98............................. 1,000,557
-----------
REPURCHASE AGREEMENT: 17.0%
- ------------------------------------------------------------------------------------------------------------------
7,576,000 Seattle Northwest Government Repurchase Agreement, 6.10%,
dated 9/30/97, due 10/1/97, collateralized by $7,732,450
Federal Home Loan Mortgage Corporation, 7.125%, due 7/21/99
(proceeds $7,577,284)................................................... 7,576,000
-----------
Total investment portfolio: 99.8%....................................... 44,490,031
Other assets less liabilities: 0.2%..................................... 79,602
-----------
Net assets: 100.00%..................................................... $44,569,633
===========
</TABLE>
*Interest rates will fluctuate. Rates shown are in effect on September 30, 1997.
See accompanying notes to financial statements.
4
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES - September 30, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment portfolio (cost of $44,490,031)............................................. $44,490,031
Cash................................................................................... 791
Interest receivable.................................................................... 212,476
Other assets........................................................................... 41,644
-----------
Total assets............................................................... 44,744,942
-----------
LIABILITIES:
Dividends payable...................................................................... 166,043
Investment advisory fees............................................................... 8,998
Other accrued expenses................................................................. 268
-----------
Total liabilities.......................................................... 175,309
-----------
NET ASSETS (equivalent to $1.00 per share based on 44,569,555 shares
of capital stock outstanding........................................................... $44,569,633
===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Year Ended September 30, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income interest........................................................................ $ 2,429,194
-----------
Expenses:
Advisory fees (Note 3)........................................................... 177,230
Shareholders' Rule 12b-1 Plan expense (Note 3)................................... 108,067
Administration fees (Note 3)..................................................... 42,360
Custodian fees................................................................... 25,118
Registration expense............................................................. 23,999
Professional fees................................................................ 23,868
Fund accounting expense.......................................................... 23,824
Audit fees....................................................................... 11,800
Transfer agent fees.............................................................. 9,690
Directors' fees.................................................................. 6,213
Insurance expense................................................................ 2,591
Printing & other expenses........................................................ 1,813
Miscellaneous expenses........................................................... 5,857
-----------
Total expenses............................................................. 462,430
Less: expenses waived (Note 3)............................................. (164,262)
-----------
Net expenses............................................................... 298,168
-----------
Net investment income ........................................................... 2,131,026
-----------
Net increase in net assets resulting from operations ............................ $ 2,131,026
===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
For the Year Ended September 30, 1997
-------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net increase in net assets resulting from operations................... $ 2,131,026 $ 1,551,704
----------- -----------
Distributions to shareholders from net investment income............... (2,131,026) (1,551,704)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold........................................ 168,807,286 127,532,902
Proceeds from shares reinvested.................................. 382,687 288,093
Cost of shares redeemed.......................................... (162,364,004) (121,143,373)
----------- -----------
Total increase from capital share transactions............. 6,825,969 6,677,622
----------- -----------
Total increase in net assets............................... 6,825,969 6,677,622
NET ASSETS:
Beginning of the period................................................ 37,743,664 31,066,042
----------- -----------
End of period.......................................................... $44,569,633 $37,743,664
=========== ===========
CHANGE IN SHARES:
Shares sold ........................................................... 168,807,208 127,532,902
Shares reinvested...................................................... 382,687 288,093
Shares redeemed........................................................ (162,364,004) (121,143,373)
----------- -----------
Net increase........................................................... 6,825,891 6,677,622
=========== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
- -----------------------------------------------------------------------------------------------------------------
For the Year Ended September 30,
--------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period......... $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Income from investment operations:
Net investment income.................... .049 .047 .051 .032 .026
Less distributions:
From net investment income............... (.049) (.047) (.051) (.032) (.026)
Net asset value at end of period............... $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total return................................... 5.01% 4.70% 5.10% 3.20% 2.65%
Ratios/supplemental data:
Net assets, end of period (000's).............. $44,570 $37,744 $31,066 $43,686 $29,527
Ratio of expenses to average net assets........ 0.70% 0.90% 0.80% 0.70% 0.70%
Ratio of net investment income to
average net assets....................... 4.90% 4.70% 5.00% 3.20% 2.60%
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
RNC EQUITY FUND
Dear Shareholders,
We are pleased to present the annual report on the operations of the RNC
Equity Fund for the year ended September 30, 1997. We sincerely appreciate the
confidence you have placed in your Fund's management and extend a special
welcome to all new shareholders.
Your Fund has continued to exhibit a strong performance record for the
Fund's first eleven months. We just ended our first fiscal year (September 30,
1997) virtually fully invested with a return of 23.8% since the inception date
of November 1, 1996. The fund has also appreciated a respectable 21.7% from
April 1 to September 30, 1997.
The equity market during the past fiscal year has enjoyed a substantial
rise. Basically, the underlying fundamentals of an expanding economy, rising
corporate profits, low inflation, declining interest rates and an ever watchful
but neutral Federal Reserve have all combined to stimulate higher equity prices.
However, as the calendar year has progressed, the equity market has become
increasingly volatile. So far, within the span of the past six months, the
market has undergone an almost 10% correction from highs achieved earlier in the
year. Following this correction, the market rotated away from large cap issues
towards smaller caps and technology issues while staging a dramatic surge to
significant new highs by mid-August. As it became increasingly apparent that the
Federal Reserve's intention was to only tighten once in what has been labeled an
"insurance hike," rising earnings and rising valuations fueled the market. Over
the next several months we expect the market to remain unusually volatile. We
still envision an expanding economy albeit at a somewhat slower rate but an
expansion that continues to be characterized by rising profits and low inflation
and even lower interest rates. Basically, more of the same as this year but with
higher volatility and a likely total return expectation which would compare with
historical market returns of low double-digits.
Throughout this difficult but still rewarding period, we have remained fully
invested while maintaining a focus on high quality, liquid, large cap,
fundamentally sound companies within broadly diversified industry groups. Our
turnover has been low, although, we have not hesitated to sell issues where
disappointment in the fundamentals was severe enough to invalidate the long term
investment thesis under which these stocks were initially purchased. Proceeds
from these sales have been used to upgrade the portfolio with the inclusion of
industry dominant companies with consistently rising earnings, selling at
reasonable valuations such a Carnival Cruise Lines, Halliburton and Tyco
International. Additional portfolio changes will continue to emphasize value,
risk control and diversification. Our value orientation is reinforced by a
portfolio P/E (price/earnings) that is consistently below the market and a yield
that is consistently greater than the market. This overall structure plus our
emphasis on industry leadership companies with consistently rising earnings will
continue to serve our shareholders well in both up and down markets. Our goal
remains as always above average long term appreciation consistent with
reasonable and acceptable stock market risk.
We assure you of our continuing dedication to achieve superior investment
results, and look forward to continued service to you. If you have any questions
concerning your investment, please feel free to contact us.
Sincerely,
/s/ ERIC M. BANHAZL /s/ DANIEL J. GENTER
ERIC M. BANHAZL DANIEL J. GENTER
President President
RNC Equity Fund RNC Capital Management Co.
9
<PAGE>
RNC EQUITY FUND
Comparison of the change in value of a $10,000 investment
in the RNC Equity Fund and the S&P 500 Index
Total Return
Ended Septembet 30, 1997
Inception (11/1/96).......23.75%
[GRAPH HERE]
1-NOV-96 31-DEC-96 31-MAR-97 30-JUN-97 30-SEP-97
-------- --------- --------- --------- ---------
RNC Equity Fund $10,000 $10,117 $10,223 $11,667 $12,375
S & P 500 Index $10,000 $10,564 $10,849 $12,741 $13,682
Past performance is not predictive of future performance.
The RNC Equity Fund commenced operations on November 1, 1996 and therefore the
portfolio return presented above covers only the eleven months of its existence.
10
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at September 30, 1997
- ------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 95.9% Market Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace: 3.1%
2,000 Boeing Company.......................................................... $ 108,875
-----------
Banking: 9.3%
2,200 Bank of New York Co..................................................... 105,600
1,000 Chase Manhattan Corp.................................................... 118,000
1,700 Norwest Corp............................................................ 104,125
-----------
327,725
-----------
Beverages: 3.1%
2,700 PepsiCo. Inc............................................................ 109,519
-----------
Capital Goods: 3.9%
2,000 General Electric Co..................................................... 136,125
-----------
Chemicals: 4.7%
700 Dow Chemical Company.................................................... 63,481
2,600 Monsanto Company........................................................ 101,400
---------
164,881
-----------
Computers & Peripherals: 7.5%
1,500 Hewlett-Packard Company................................................. 104,344
1,500 International Business Machines Corp.................................... 158,906
-----------
263,250
-----------
Computer Software & Services: 5.9%
1,500 Avnet Inc............................................................... 95,344
3,000 First Data Corp......................................................... 112,687
-----------
208,031
-----------
Consumer Products: 9.2%
1,800 Avon Products, Inc...................................................... 111,600
1,300 CPC International, Inc.................................................. 120,412
1,300 Procter & Gamble Company................................................ 89,781
-----------
321,793
-----------
Drugs: 8.9%
1,900 Johnson & Johnson Company............................................... 109,487
1,600 Pfizer, Inc............................................................. 96,100
2,100 Schering-Plough Corp.................................................... 108,150
-----------
313,737
-----------
</TABLE>
11
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at September 30, 1997, continued
- ------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Entertainment: 3.0%
1,300 The Walt Disney Company................................................. $ 104,813
-----------
Financial Services: 3.1%
1,600 Travelers, Inc.......................................................... 109,200
-----------
Insurance: 5.7%
1,100 Hartford Financial Services Group....................................... 94,669
1,400 Marsh & McLennan Companies.............................................. 107,275
-----------
201,944
-----------
Miscellaneous: 5.0%
2,300 ITT Industries, Inc..................................................... 76,331
1,200 Tyco International Ltd.................................................. 98,475
-----------
174,806
-----------
Oil Services: 3.5%
2,400 Halliburton Company..................................................... 124,800
-----------
Petroleum: 7.0%
1,500 Chevron Corp............................................................ 124,781
2,000 Texaco, Inc............................................................. 122,875
-----------
247,656
Raw Materials: 2.1%
1,200 PPG Industries.......................................................... 75,225
-----------
Recreational: 3.0%
2,300 Carnival Corp., Class A................................................. 106,375
-----------
Retailing: 4.6%
1,200 May Department Stores Company........................................... 65,400
1,700 Sears Roebuck & Company, Inc............................................ 96,794
-----------
162,194
Telecommunications Services: 3.3%
1,400 BellSouth Corp.......................................................... 64,750
1,100 GTE Corp................................................................ 49,913
-----------
114,663
-----------
Total Common Stocks (cost $2,930,063)................................... 3,375,612
-----------
</TABLE>
12
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at September 30, 1997, continued
- ------------------------------------------------------------------------------------------------------------------
Principal Amount REPURCHASE AGREEMENT: 3.8% Market Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$132,000 Star Bank Repurchase Agreement, 5.45%, dated 9/30/97, due 10/1/97,
collateralized by $138,375, GNMA, 6.5%, due 2/20/24, (proceeds
$132,019) (cost $132,000)............................................... $ 132,000
-----------
Total Investments: 99.7% (cost $3,062,063+)............................. 3,507,612
Other Assets less Liabilities: 0.3%..................................... 10,456
-----------
Total Net Assets: 100.0%................................................ $ 3,518,068
===========
+ Cost for Federal income tax purposes is $3,063,463.
Net unrealized appreciation consists of:
Gross unrealized appreciation........................................... $ 444,640
Gross unrealized depreciation........................................... (4,490)
-----------
Net unrealized appreciation....................................... $ 444,150
===========
</TABLE>
13
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES - September 30, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investment portfolio (cost of $3,062,063).............................................. $ 3,507,612
Cash................................................................................... 494
Receivables:
Securities sold.................................................................. 66,831
Dividends and interest........................................................... 4,113
Deferred organizational costs, net (Note 2)............................................ 32,000
Other assets........................................................................... 13,071
-----------
Total assets............................................................... 3,624,121
-----------
LIABILITIES:
Payable for fund shares redeemed....................................................... 35,705
Due to Advisor (Note 3)................................................................ 28,476
Accrued 12b-1 expenses (Note 3)........................................................ 1,865
Other accrued expenses................................................................. 40,007
-----------
Total liabilities.......................................................... 106,053
-----------
NET ASSETS ................................................................................. $ 3,518,068
===========
Net asset value, offering and redemption price per share
($3,518,068/236,864 shares outstanding; 500,000,000 shares
authorized with $0.01 par value)................................................. $14.85
======
SOURCES OF NET ASSETS:
Paid in capital........................................................................ $ 3,085,738
Accumulated net investment income...................................................... 5,645
Accumulated net realized loss on investments........................................... (18,864)
Net unrealized appreciation of investments............................................. 445,549
-----------
Net assets................................................................. $ 3,518,068
===========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Period November 1, 1996* through September 30, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income:
Dividends........................................................................ $ 28,276
interest......................................................................... 6,463
---------
Total investment income.................................................... 34,739
---------
Expenses:
Administration fees (Note 3)..................................................... 36,494
Professional fees................................................................ 30,443
Advisory fees (Note 3)........................................................... 17,621
Audit fees....................................................................... 12,774
Fund accounting expense.......................................................... 11,147
Transfer agent fees.............................................................. 8,758
Amortization of deferred organizational costs (Note 2-F)......................... 7,116
Custodian fees................................................................... 6,722
Directors' fees.................................................................. 6,071
Shareholders' Rule 12b-1 Plan expense (Note 3)................................... 4,400
Registration expense............................................................. 2,737
Printing fees.................................................................... 2,034
Insurance expense................................................................ 593
Miscellaneous expenses........................................................... 2,842
---------
Total expenses............................................................. 149,752
Less: expenses waived and reimbursed (Note 3).............................. (120,658)
---------
Net expenses............................................................... 29,094
---------
Net investment income ........................................................... 5,645
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments....................................................... (18,864)
Net change in unrealized appreciation of investments................................... 445,549
---------
Net realized and unrealized gain on investments.................................. 426,685
---------
Net increase in Net Assets Resulting from Operations ...................... $ 432,330
=========
*Commencement of operations.
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
September 30, 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income...................................................................... $ 5,645
Net realized loss on investments........................................................... (18,864)
Net change in unrealized appreciation of investments....................................... 445,549
-----------
Net increase in net assets resulting from operations................................. 432,330
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold............................................................ 3,240,812
Cost of shares redeemed.............................................................. (155,074)
-----------
Total increase from capital share transactions................................. 3,085,738
-----------
Total increase in net assets................................................... 3,518,068
-----------
NET ASSETS:
Beginning of the period.................................................................... 0
-----------
End of period (including undistributed net investment income of $5,645).................... $ 3,518,068
===========
CHANGE IN SHARES:
Shares sold ............................................................................... 248,230
Shares redeemed............................................................................ (11,366)
-----------
Net increase......................................................................... 236,864
===========
</TABLE>
*Commencement of operations.
See accompanying notes to financial statements.
16
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
- --------------------------------------------------------------------------------------------------------------
For the period
November 1, 1996* to
September 30, 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value at beginning of period............................................... $12.00
------
Income from investment operations:
Net investment income.......................................................... .02
Net realized and unrealized gain on investments................................ 2.83
------
Total from investment operations..................................................... 2.85
------
Net asset value at end of period..................................................... $14.85
======
Total return......................................................................... 23.75%
Ratios/supplemental data:
Net assets, end of period (000's omitted)............................................ $3,518
Ratio of expenses to average net assets:
Before expense reimbursement................................................... 8.50%
After expense reimbursement.................................................... 1.65%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement................................................... (6.53%)
After expense reimbursement.................................................... 0.32%
Portfolio turnover rate.............................................................. 38.00%
Average commission rate paid per share............................................... $0.2324
*Commencement of operations. All ratios for the period, except Total Return have been annualized.
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
RNC MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS September 30, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION
The RNC Mutual Fund Group, Inc. (the "Group"), is registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end management
investment company with two diversified funds: The RNC Equity Fund (the "Equity
Fund") and the RNC Money Market Fund (the "Money Fund"), formerly the RNC Liquid
Assets Fund, Inc. (collectively the "Funds"). The Equity Fund began operations
on November 1, 1996. The investment objective of the Equity Fund is to seek
above-average total return consistent with reasonable risk. The Fund seeks to
achieve its objective by investing primarily in equity securities. The Money
Fund's investment objective is high current income consistent with preservation
of capital and liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a
national securities exchange or included in the NASDAQ National
Market System are valued at the last reported sale price at the
close of regular trading on the last business day of the period;
securities traded on an exchange or NASDAQ for which there have
been no sales and other over-the-counter securities are valued at
the last reported bid price. Securities for which quotations are
not readily available are valued at their respective fair values
as determined in good faith by the Board of Directors. For the
Equity Fund short-term investments are stated at cost, which when
combined with accrued interest, approximates market value.
U.S. Government securities with less than 60 days remaining to
maturity when acquired by the Fund are valued on an amortized
cost basis. U.S. Government securities with more than 60 days
remaining to maturity are valued at the current market value
(using the mean between the bid and asked price) until the 60th
day prior to maturity, and are then valued at amortized cost
based upon the value on such date unless the Board determines
during such 60-day period that this amortized cost basis does not
represent fair value.
Short-term portfolio securities for the Money Fund are valued
using the amortized cost method, which approximates market value.
B. Federal Income Taxes. The Funds intend to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income
to its shareholders. Therefore, no federal income tax provision
is required. As of September 30, 1997, the Equity Fund had
realized capital losses of $17,464 to offset future net capital
gains through fiscal year ended 2005.
C. Security Transactions, Dividends and Distributions. As is common
in the industry, security transactions are accounted for on the
trade date. Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
18
<PAGE>
RNC MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
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D. Repurchase Agreements. Securities pledged as collateral for
repurchase agreements are held by the custodian bank until the
respective agreements mature. Provisions of the repurchase
agreements ensure that the market value of the collateral,
including accrued interest thereon, is sufficient in the event of
default by the counterparty. If the counterparty defaults and the
value of the collateral declines or if the counterparty enters an
insolvency proceeding, realization of collateral by the Funds may
be delayed or limited.
E. Expenses. Expenses that are related to one of the Funds are
charged directly to that Fund. Other operating expenses of the
Fund are allocated to the Funds on the basis of relative net
assets.
F. Deferred Organization Costs. The Equity Fund has incurred
expenses of $39,116 in connection with the organization. These
costs have been deferred and are being amortized on a
straight-line basis over a period of sixty months from the date
the Equity Fund commenced operations.
G. Use of 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 at the date of the
financial statements, as well as the reported amounts of income
and expenses during the reported period. Actual results could
differ from those estimates.
3. INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period ended September 30, 1997, RNC Capital Management Co. (the
"Advisor") provided the Funds with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space, facilities, and most of the personnel needed by the Funds. As
compensation for its services, the Advisor was entitled to a monthly fee at the
annual rate of 1.00% based upon the average daily net assets of the Equity Fund
and 0.41% based upon the average daily net assets for the Money Fund. For the
period November 1, 1996 to September 30, 1997, the Equity Fund incurred $17,621
in advisory fees and the Money Fund incurred $177,230 for the fiscal year ended
September 30, 1997. RNC voluntarily waived a portion of the Money Fund advisory
fee, which amounted to $56,195 or 0.13% of the Money Fund's average daily net
assets.
The Funds are responsible for their own operating expenses. The Advisor may
reduce its fees or make reimbursement to the Funds at any time in order to
reduce the Funds' expenses. Any such reductions made by the Advisor in its fees
or payments or reimbursement of expenses which are the Funds' obligation are
subject to reimbursement by the Funds provided the Funds are able to effect such
reimbursement and remain in compliance with applicable laws. During the period
ended September 30, 1997 the Advisor reimbursed the Equity Fund $120,658 in fees
and expenses.
Investment Company Administration Corporation (the "Administrator") acts as
the Funds' Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Funds; prepares reports and materials to be supplied to the directors;
monitors the activities of the Funds' custodian, transfer agent and accountants;
coordinates the preparation and payment of the
19
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RNC MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
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Funds expenses and reviews the Funds' expense accruals. For its services, the
Administrator receives a monthly fee at the following rate:
Under $40 million $40,000
$40 to $100 million 0.10% of average daily net assets
$100 to $200 million 0.05% of average daily net assets
Over $200 million 0.03% of average daily net assets
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor receives no fees for its services and is an affiliate of the
Administrator.
The Funds have adopted a Shareholder Rule 12b-1 Plan (the "Plan") in
accordance with Rule 12b-1 under the 1940 Act. The Plan provides that the Funds
will pay a fee to the Distributor at an annual rate of 0.25% of the average
daily net assets of the Funds. The Equity Fund incurred $4,400 in Plan expenses
for the period November 1, 1996 to September 30, 1997. Midvale Securities
Corporation ("MSC"), an affiliate of the Adviser, waived all fees totaling
$108,067 for the fiscal year ended September 30, 1997, in its capacity of
Shareholder Servicing Agent for the Money Fund.
Certain officers of the Fund are officers and/or directors of the
Administrator and Distributor.
4. PURCHASES AND SALES OF SECURITIES
Purchases and the proceeds from the sales of securities, other than
short-term investments, for the period ended September 30, 1997 were $3,621,246
and $672,319, respectively for the Equity Fund.
20
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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To the Board of Directors and Shareholders of
RNC Mutual Fund Group, Inc.
We have audited the accompanying statement of assets and liabilities of the RNC
Mutual Fund Group, Inc. composed of the RNC Money Market Fund and the RNC Equity
Fund, including the investment portfolio, as of September 30, 1997, and the
related statements of operations, the statement of changes in net assets, and
the financial highlights for each of the periods presented herein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
RNC Money Market Fund and the RNC Equity Fund as of September 30, 1997, and the
results of their operations, the changes in their net assets and the financial
highlights for each of the periods presented herein, in accordance with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 11, 1997
21
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ANNUAL
REPORT
ADVISER
RNC Capital Management Co.
11601 Wilshire Boulevard
25th Floor
Los Angeles, California 90025
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
TRANSFER AGENT
American Data Services, Inc.
150 Motor Parkway, Suite 109 R
Hauppuage, New York 11788 N
C
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th Floor
San Francisco, California 94104
MUTUAL FUND
AUDITORS GROUP, INC.
Tait, Weller & Baker
Eight Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103
