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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
<PAGE>
RNC MONEY MARKET FUND
Dear Shareholders,
We are pleased to provide you with the latest financial statistics for the
six months ending March 31, 1998.
The Fund continues to provide a competitive return consistent with its
peer group of First Tier Taxable Money Market Funds. In fact, as of March 31,
1998, the gross seven day yield before expenses for the Fund was 5.71%
(annualized) compared to an average yield of only 5.65% for the other high
quality money market funds as reported by IBC Financial Data, Inc. As of March
31, 1998, the seven day yield, net of expenses, was 4.84%.
We have maintained a neutral average maturity, targeting the 60-day area.
This strategy is the result of the extremely flat yield/maturity curve coupled
with the uncertainty over the future direction of interest rates.
We continue to stress quality as the major criteria involving investment
selection while avoiding issues (or credit supports) that are heavily exposed to
the Pacific Rim/Asia, to include Japanese financial institutions.
We believe that short-term interest rates will remain somewhat stable over
the near term as the Federal Reserve maintains its wait-and-see approach over
U.S. economic strength above potential and the possible effects of the Asian
crisis.
Please feel free to contact us should you have any questions regarding the
Fund in general or your account specifically.
Sincerely,
ERIC M. BANHAZL DANIEL J. GENTER
President President
RNC Money Market Fund RNC Capital Management LLC
2
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at March 31, 1998 (Unaudited)
- ---------------------------------------------------------------------------------------------------------
Principal Amount COMMERCIAL PAPER: 40.0% Market Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
$2,400,000 Cooperative Association of Tractor Dealers "A", 5.47%, 5/4/98...... $ 2,387,966
2,000,000 Coral Sea Funding Corp. (Letter of Credit issued by NationsBank),
5.59%, 4/1/98...................................................... 2,000,000
2,000,000 GE Capital Corp., 5.45%, 4/9/98.................................... 1,997,578
2,000,000 General Motors Acceptance Corp., 5.55%, 4/6/98..................... 1,998,458
2,000,000 Greenwich Asset Funding, Inc. (guaranteed by United Parcel Services
of America, Inc.), 5.55%, 4/1/98.................................. 2,000,000
1,670,000 ReliaStar Mortgage Corp. (guaranteed by ReliaStar Insurance Co.),
5.56%, 4/9/98...................................................... 1,667,937
2,000,000 Trident Capital Finance Inc. (Letter of Credit issued by Societe
Generale), 5.60%, 4/3/98........................................... 1,999,378
----------
14,051,317
----------
FEDERAL AGENCY SECURITIES: 3.3%
- ---------------------------------------------------------------------------------------------------------
1,170,000 Federal National Mortgage Association, 5.22%, 7/10/98.............. 1,168,276
----------
CORPORATE BONDS: 32.2%
- ---------------------------------------------------------------------------------------------------------
200,000 BellSouth Telecommunications, Inc., 5.25%, 6/8/98.................. 199,706
810,000 Caterpillar Financial Services Corp., 8.22%, 4/15/98............... 810,628
1,000,000 Dillard Department Stores, 8.75%, 6/15/98.......................... 1,006,336
650,000 Huntington Bancshares, Inc., 5.80%, 9/22/98........................ 650,254
150,000 International Bank For Reconstruction & Development,
9.26%, 11/18/98.................................................. 153,293
500,000 Key Bank, N.A., 6.05%, 4/6/98...................................... 500,009
2,000,000 Keystone Group, 9.75%, 9/1/98...................................... 2,099,571
500,000 Lehman Brothers Holding, Inc., 6.375%, 6/1/98...................... 500,471
200,000 Lehman Brothers Holding, Inc., 6.65%, 7/14/98...................... 200,539
810,000 Morgan Stanley Dean Witter & Co., 6.125%, 1/5/99................... 812,355
650,000 PepsiCo, Inc., 7.625%, 12/18/98.................................... 658,987
2,000,000 Salomon, Inc., 6.22%, 11/19/98..................................... 2,008,589
1,000,000 Sears Roebuck & Co., 5.86%, 1/22/99................................ 1,001,550
750,000 Temple-Inland, Inc., 9.00%, 4/20/98................................ 751,148
----------
11,353,436
----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at March 31, 1998 (Unaudited), continued
- ---------------------------------------------------------------------------------------------------------
Principal Amount FLOATING RATE NOTES: 2.8%* Market Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
$1,000,000 PNC Bank, N.A., 5.65%, 4/24/98..................................... $ 999,981
-----------
CERTIFICATES OF DEPOSIT: 2.8%
- ---------------------------------------------------------------------------------------------------------
1,000,000 Bankers Trust New York Corp., 6.00%, 7/7/98........................ 1,000,194
-----------
OVERNIGHT REPURCHASE AGREEMENT: 18.3%
- ---------------------------------------------------------------------------------------------------------
6,459,000 Seattle Northwest Government Repurchase Agreement, 6.00%,
dated 3/31/98, due 4/1/98, collateralized by $6,235,000 par
value Federal Assistance Corporation, 9.450%, due
11/21/2003 (collateral market value of $6,588,057)
(proceeds $6,460,062)
(cost $6,459,000).................................................. 6,459,000
-----------
Total investment portfolio: 99.4%.................................. 35,032,204
Other assets less liabilities: 0.6%................................ 206,061
-----------
Net assets: 100.00%................................................ $35,238,265
===========
</TABLE>
*Interest rates will fluctuate. Rates shown are in effect on March 31, 1998.
See accompanying notes to financial statements.
4
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES - March 31, 1998 (Unaudited)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investment portfolio (cost of $35,032,204)........................................ $35,032,204
Cash.............................................................................. 775
Interest receivable............................................................... 268,258
Other assets...................................................................... 83,390
-----------
Total assets.......................................................... 35,384,627
-----------
LIABILITIES:
Dividends payable................................................................. 126,995
Investment advisory fees.......................................................... 9,068
Other accrued expenses............................................................ 10,299
-----------
Total liabilities..................................................... 146,362
-----------
NET ASSETS (equivalent to $1.00 per share based on 35,240,076 shares
of capital stock outstanding...................................................... $35,238,265
===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended March 31, 1998 (Unaudited)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income interest................................................................... $ 1,222,394
-----------
Expenses:
Advisory fees (Note 3)...................................................... 70,977
Shareholders' Rule 12b-1 Plan expense (Note 3).............................. 41,429
Administration fees (Note 3)................................................ 24,067
Professional fees........................................................... 16,041
Registration expense........................................................ 11,966
Fund accounting expense..................................................... 11,479
Custodian fees.............................................................. 9,477
Audit fees.................................................................. 6,982
Transfer agent fees......................................................... 4,199
Directors' fees............................................................. 2,493
Printing & other fees....................................................... 1,632
Insurance fees.............................................................. 388
Miscellaneous fees.......................................................... 2,493
-----------
Total expenses........................................................ 203,623
Less: expenses waived (Note 3)........................................ (52,787)
-----------
Net expenses.......................................................... 150,836
-----------
Net investment income ...................................................... 1,071,558
-----------
Net increase in net assets resulting from operations ....................... $ 1,071,558
===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
For the Six Year Ended
Months Ended September
March 31, 1998# 30, 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net increase in net assets resulting from operations................... $ 1,071,558 $ 2,131,026
----------- -----------
Distributions to shareholders from net investment income............... (1,071,558) (2,131,026)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold........................................ 85,713,357 168,807,286
Proceeds from shares reinvested.................................. 251,852 382,687
Cost of shares redeemed.......................................... (95,296,577) (162,364,004)
----------- -----------
Total increase (decrease) from capital share transactions.. (9,331,368) 6,825,969
----------- -----------
Total increase (decrease) in net assets.................... (9,331,368) 6,825,969
NET ASSETS:
Beginning of the period................................................ 44,569,633 37,743,664
----------- -----------
End of period.......................................................... $35,238,265 $44,569,633
=========== ===========
CHANGE IN SHARES:
Shares sold ........................................................... 85,713,357 168,807,208
Shares reinvested...................................................... 251,852 382,687
Shares redeemed........................................................ (95,296,577) (162,364,004)
----------- -----------
Net increase (decrease)................................................ (9,331,368) 6,825,891
=========== ===========
</TABLE>
#Unaudited.
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 Six For the Year Ended September 30,
Months Ended --------------------------------
March 31, 1998# 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period...... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income................. .025 .049 .047 .051 .032 .026
Less distributions:
From net investment income............ (.025) (.049) (.047) (.051) (.032) (.026)
Net asset value at end of period............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ======
Total return................................ 2.50%++ 5.01% 4.70% 5.10% 3.20% 2.65%
Ratios/supplemental data:
Net assets, end of period (000's)........ $35,238 $44,570 $37,744 $31,066 $43,686 $29,527
Ratio of expenses to average net assets..... 0.71%+ 0.70% 0.90% 0.80% 0.70% 0.70%
Ratio of net investment income to
average net assets.................... 5.03%+ 4.90% 4.70% 5.00% 3.20% 2.60%
</TABLE>
#Unaudited.
+Annualized.
++Not annualized.
See accompanying notes to financial statements.
8
<PAGE>
RNC EQUITY FUND
Dear Shareholders,
As the President and CEO of RNC Capital Management LLC, the Advisor for
the RNC Equity Fund, I would like to thank you for your continued participation
in the Fund. The enclosed report contains a summary of the performance of the
Fund for the past six months along with investment total returns. In addition,
you will find financial statements disclosing the expenses of the Fund and the
Portfolio holdings as of March 31, 1998.
I am happy to convey to you that the Fund has enjoyed substantial
growth both due to market appreciation as well as the infusion of additional
assets by existing and new shareholders. The overall portfolio return has risen
substantially in conjunction with an equity market that has enthusiastically
discounted lower inflation, stable to declining interest rates and rising
corporate profits. As a result, the past six months have witnessed an increase
in Fund value of 16.4% for participants who have been shareholders from
September 30, 1997 through March 31, 1998. I am also very proud to announce that
USA Today, in its May 1, 1998 edition, positively mentioned the RNC Equity Fund.
During this period, the stock market has absorbed the economic impact
of the Asian financial crisis while continuing to advance to record highs. This
economic cycle is proving to be long lived and unique, in terms of its lack of
any discernable inflationary pressures despite eight uninterrupted years of
expansion. As a result, the stock market has risen to historically unprecedented
valuation levels as measured both by price/earnings ratios as well as other
generally accepted valuation measures. In our opinion, this advance is justified
on the basis of lower inflation, stable to lower interest rates and steadily
rising corporate profits. When these favorable underpinnings for equity
appreciation are combined with demographically inspired strong demand, it
becomes clear why setting records has become almost commonplace for the stock
market. Furthermore, the ten percent correction that occurred in the fourth
quarter of last year relieved, to some degree, the speculative excesses and
overconfidence on the part of investors that had been bubbling up from the lows
reached earlier in the year. However, just as an unforeseen outside event last
year was a catalyst for a correction, so too, either another such unanticipated
event similar to the Asian crisis or the fear of possible Federal Reserve Board
tightening against a background of an overly strong domestic economy may be
enough to presage another correction of similar magnitude. While we have
remained virtually fully invested over the past six months, and indeed have been
so since the Fund's inception, during any corrective process we would look to
adjust the portfolio by taking advantage of the volatility of the market and the
resulting pricing inefficiency of individual stocks. Proceeds to implement this
program would be realized by taking either partial or full gains in overextended
issues or through the sale of securities which have not met our expectations.
During the past six months we have undertaken very few changes in the
Fund. In point of fact, with the passage of time and as individual holdings have
become seasoned, RNC's long-term, conservative investing strategy has come more
into focus. As a result, the Fund has had very little turnover and remains very
tax efficient. In the past six months we have sold only three positions (Sears,
Baker Hughes and Monsanto) and reduced one position size on strength (Pfizer).
One new position was added to the portfolio during this period (Eli Lilly). The
remaining proceeds were used to increase position sizes in the most promising
issues. Currently, the top ten holdings in the Fund equal 37 percent of the
Fund's assets.
In brief, we remain optimistic about the stock market going forward
while being mindful of the strength in the market following the October decline
and its further upward acceleration over the past three months. Assuming only
modest P/E (price-earnings) expansion beyond the current historically high
level, the market
9
<PAGE>
RNC EQUITY FUND
should continue to have an upward bias due to strong demand for equities, lower
inflation, and moderate earnings growth. We are therefore staying fully invested
and focused on superior companies with excellent long-term growth potential.
Further, it is our intent to maintain a strict level of risk control in the Fund
through sector diversification and ownership of large capitalization stocks with
ample liquidity selling at reasonable valuations. Our objective, as always, is
to provide long-term capital appreciation consistent with reasonable stock
market risk.
Once again, thank you for your continued participation in the RNC
Equity Fund. We remain, as ever, dedicated to assisting you in achieving your
long-term investment objectives. If you have any questions regarding your
investment, please do not hesitate to contact us.
Sincerely,
ERIC M. BANHAZL DANIEL J. GENTER
President President
RNC Equity Fund RNC Capital Management LLC
10
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at March 31, 1998 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 99.4% Market Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace: 2.9%
3,000 Boeing Company.......................................................... $ 156,375
---------
Banking: 10.8%
3,000 Bank of New York Co..................................................... 188,4371
1,500 Chase Manhattan Corp.................................................... 202,313
4,800 Norwest Corp............................................................ 199,500
---------
590,250
---------
Beverages: 3.2%
4,100 PepsiCo. Inc............................................................ 175,019
---------
Capital Goods: 4.1%
2,600 General Electric Co..................................................... 224,087
---------
Chemicals: 3.2%
1,800 Dow Chemical Company.................................................... 175,050
---------
Computers & Peripherals: 5.5%
1,900 Hewlett-Packard Company................................................. 120,412
1,700 International Business Machines Corp.................................... 176,587
---------
296,999
---------
Computer Software & Services: 5.4%
2,200 Avnet Inc............................................................... 126,638
5,100 First Data Corp......................................................... 165,750
---------
292,388
---------
Consumer Products: 5.3%
2,300 Avon Products, Inc...................................................... 179,400
1,300 Procter & Gamble Company................................................ 109,688
---------
289,088
---------
Diversified Manufacters: 3.5%
3,500 Tyco International Ltd.................................................. 191,188
---------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at March 31, 1998 (Unaudited), continued
- ---------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Drugs: 13.0%
2,400 Johnson & Johnson Company............................................... $ 109,487
2,500 Lilly (Eli) & Co........................................................ 149,062
1,800 Pfizer, Inc............................................................. 179,438
2,500 Schering-Plough Corp.................................................... 204,219
-------
708,669
-------
Entertainment: 2.9%
1,500 The Walt Disney Company................................................. 160,125
-------
Financial Services: 3.3%
3,000 Travelers, Inc.......................................................... 180,000
-------
Food - Miscellaneous/Diversified: 3.2%
1,500 Bestfoods............................................................... 175,312
-------
Insurance: 7.1%
1,700 Hartford Financial Services Group....................................... 184,450
2,300 Marsh & McLennan Companies.............................................. 200,819
-------
385,269
-------
Miscellaneous: 2.0%
2,900 ITT Industries, Inc..................................................... 110,381
-------
Oil Services: 4.2%
4,600 Halliburton Company..................................................... 230,863
-------
Petroleum: 5.7%
2,000 Chevron Corp............................................................ 160,625
2,500 Texaco, Inc............................................................. 150,625
-------
311,250
-------
Raw Materials: 1.9%
1,500 PPG Industries.......................................................... 101,906
-------
Recreational: 3.8%
3,000 Carnival Corp., Class A................................................. 209,250
-------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO at March 31, 1998 (Unaudited), continued
- ---------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retailing: 1.9%
1,600 May Department Stores Company........................................... $ 101,600
-----------
Telecommunications Services: 6.5%
2,600 BellSouth Corp.......................................................... 175,662
3,000 GTE Corp................................................................ 179,625
-----------
355,287
-----------
Total Common Stocks (cost $4,256,598)................................... 5,420,356
-----------
Principal Amount REPURCHASE AGREEMENT: 5.2%
- ---------------------------------------------------------------------------------------------------------------------
$281,000 Star Bank Repurchase Agreement, 5.00%, dated 3/31/98, due 4/2/98,
collateralized by $291,056 GNMA, 6.5%, due 2/20/24, (proceeds
$281,077) (cost $281,000)............................................... 281,000
-----------
Total Investments: 104.6% (cost $4,537,598+)............................ 5,701,356
Liabilities in excess of Other Assets: (4.6)%........................... (248,118)
-----------
Total Net Assets: 100.0%................................................ $ 5,453,238
===========
+ Cost for Federal income tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation........................................... $ 1,194,159
Gross unrealized depreciation........................................... (30,401)
-----------
Net unrealized appreciation....................................... $ 1,163,758
===========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES - March 31, 1998 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investment portfolio (cost of $4,537,598).............................................. $ 5,701,356
Cash................................................................................... 455
Receivables for dividends and interest................................................. 5,897
Deferred organizational costs, net (Note 2)............................................ 29,335
Other assets........................................................................... 16,851
-----------
Total assets............................................................... 5,753,894
-----------
LIABILITIES:
Payable for fund securities purchased.................................................. 218,386
Due to advisor (Note 3)................................................................ 34,723
Accrued 12b-1 expenses (Note 5)........................................................ 2,907
Other accrued expenses................................................................. 44,640
-----------
Total liabilities.......................................................... 300,656
-----------
NET ASSETS ................................................................................. $ 5,453,238
===========
Net asset value, offering and redemption price per share
($5,453,238/315,445 shares outstanding; 500,000,000 shares
authorized with $0.01 par value)................................................. $ 17.29
===========
SOURCES OF NET ASSETS:
Paid in capital........................................................................ $ 4,289,928
Accumulated net investment income...................................................... 1,636
Accumulated net realized loss on investments........................................... (2,084)
Net unrealized appreciation of investments............................................. 1,163,758
-----------
Net assets................................................................. $ 5,453,238
===========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months Ended March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income
Dividends........................................................................ $ 33,111
Interest......................................................................... 3,814
---------
Total investment income.................................................... 36,925
---------
Expenses
Advisor fees (Note 3)............................................................ 21,290
Administration fees (Note 3)..................................................... 19,945
Professional fees................................................................ 14,984
Audit fees....................................................................... 6,982
Fund accounting expense.......................................................... 6,183
Shareholders' Rule 12b-1 Plan expense (Note 3)................................... 5,322
Transfer agent fees.............................................................. 4,787
Amortization of deferred organizational costs (Note 2-F)......................... 4,118
Custodian expense................................................................ 4,059
Directors fees................................................................... 2,837
Registration expense............................................................. 2,589
Printing expenses................................................................ 1,235
Insurance expense................................................................ 125
Miscellaneous expense............................................................ 1,921
---------
Total expenses............................................................. 96,377
Less, expenses waived and reimbursed....................................... (60,998)
---------
Net expenses............................................................... 35,379
---------
Net investment income ........................................................... 1,546
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments....................................................... 16,780
Net change in unrealized appreciation of investments for the period.................... 718,209
---------
Net realized and unrealized gain on investments.................................. 734,989
---------
Net increase in Net Assets Resulting from Operations ...................... $ 736,535
=========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
For the Six November 1, 1996*
Months Ended through
March 31, 1998# September 30, 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income...................................................... $ 1,546 $ 5,645
Net realized gain (loss) on investments.................................... 16,780 (18,864)
Net change in unrealized appreciation of investments....................... 718,209 445,549
----------- -----------
Net increase in net assets resulting from operations................. 736,535 432,330
----------- -----------
Distributions to shareholders from net investment income................... (5,555) 0
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold............................................ 1,432,790 3,240,812
Net asset value of shares issued on reinvestment of distributions.... 5,555 0
Cost of shares redeemed.............................................. (234,155) (155,074)
----------- -----------
Total increase from capital share transactions................. 1,204,190 3,085,738
----------- -----------
Total increase in net assets................................... 1,935,170 3,518,068
----------- -----------
NET ASSETS:
Beginning of the period.................................................... 3,518,068 0
----------- -----------
End of period (including undistributed
net investment income of $1,636)......................................... $ 5,453,238 $ 3,518,068
=========== ===========
CHANGE IN SHARES:
Shares sold ............................................................... 93,002 248,230
Shares issued on reinvestment of distributions............................. 361 0
Shares redeemed............................................................ (14,781) (11,366)
----------- -----------
Net increase......................................................... 78,581 236,864
=========== ===========
</TABLE>
*Commencement of operations.
#Unaudited.
See accompanying notes to financial statements.
16
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
- -------------------------------------------------------------------------------------------------------------------
For the Six For the period
Months Ended November 1, 1996* to
March 31, 1998# September 30, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period.............................. $14.85 $12.00
------ ------
Income from investment operations:
Net investment income......................................... .00 .02
Net realized and unrealized gain on investments............... 2.46 2.83
------ ------
Total from investment operations.................................... 2.46 2.85
------ ------
Less distributions:
From net investment income.................................... (.02) .00
------ ------
Net asset value at end of period.................................... $17.29 $14.85
====== ======
Total return........................................................ 16.58%++ 23.75%++
Ratios/supplemental data:
Net assets, end of period (000's omitted)........................... $5,453 $3,518
Ratio of expenses to average net assets:
Before expense reimbursement.................................. 4.48%+ 8.50%+
After expense reimbursement................................... 1.65%+ 1.65%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement.................................. (2.77%)+ (6.53%)+
After expense reimbursement................................... 0.07%+ 0.32%+
Portfolio turnover rate............................................. 9.00% 38.00%
Average commission rate paid per share.............................. $.1218 $.2324
</TABLE>
*Commencement of operations.
#Unaudited.
+Annualized.
++Not annualized.
See accompanying notes to financial statements.
17
<PAGE>
RNC MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 their taxable
income to their 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
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RNC MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited), 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 below the value of the
repurchase agreement 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 six months ended March 31, 1998, RNC Capital Management LLC (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
six months ended March 31, 1998, the Equity Fund incurred $21,290 in advisory
fees and the Money Fund incurred $70,977 for the six months ended March 31,
1998. RNC voluntarily waived a portion of the Money Fund advisory fee, which
amounted to $11,358 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 six
months ended March 31, 1998 the Advisor reimbursed the Equity Fund $60,998 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 (Unaudited), continued
- --------------------------------------------------------------------------------
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 $5,322 in Plan expenses
for the six months ended March 31, 1998. Midvale Securities LLC ("MSC"), an
affiliate of the Adviser, waived all fees totaling $41,429 for the six months
ended March 31, 1998, 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 six months ended March 31, 1998 were $1,701,061
and $391,307, respectively for the Equity Fund.
5. SUBSEQUENT EVENT
On March 31, 1998, Bank Austria America, the indirect holding company for
the Funds' Adviser, RNC Capital Management Co. ("RNC"), sold its interest in RNC
to a new limited liability company formed by the Adviser's chief executive
officer. On April 7, 1998, the Funds' shareholders approved a new Investment
Advisory Agreement between the Funds and RNC Capital Management LLC as part of
the acquisition of RNC.
20
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ADVISER
RNC Capital Management LLC
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
Hauppuage, New York 11788
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, California 94104
AUDITORS
Tait, Weller & Baker
Eight Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103
SEMI-ANNUAL
REPORT
[LOGO]
March 31, 1998
