ANNUAL
REPORT
[RNC LOGO]
September 30, 1999
<PAGE>
[RNC LOGO]
TABLE OF CONTENTS
RNC MONEY MARKET FUND
Shareholder Letter................................................ 2
Investment Portfolio.............................................. 3
Statement of Assets and Liabilities............................... 4
Statement of Operations........................................... 5
Statement of Changes in Net Assets................................ 6
Financial Highlights.............................................. 7
RNC EQUITY FUND
Shareholder Letter................................................ 8
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 annual report for the fiscal year
ending September 30, 1999.
The fund continues to exhibit favorable returns as measured by its peer
group of First Tier Taxable Money Market Funds. This top tier group of funds
only invests in the highest quality short term investments. As of September 30,
1999 the gross seven day yield for the Fund before expenses was 5.65%
(annualized) compared to an average yield of 5.41% for the other 310 funds, as
reported by IBC Financial Data, Inc. After expenses, the net seven day yield was
4.95% versus 4.65% for the same group of funds.
During the past six months, continued domestic economic strength, along
with the improved global situation, has prompted the Federal Reserve to raise
the Fed Funds Rate by 50 basis points. Essentially, this has almost reversed the
series of easings that occurred during the latter part of 1998 to address the
then prevailing liquidity problem. So far, the Federal Open Market Committee
("FOMC") has raised the targeted Fed Funds Rate in two steps, with an increase
of 25 basis points in June followed by another 25 basis points move in August.
In this environment we have maintained a shorter average maturity compared
with the Fund's peer group (42 days vs. 62 days) thus gaining a distinct yield
advantage as interest rates rose during the period. At the same time, we have
continued to focus on the quality and liquidity characteristics of each position
while being quite sensitive to associated risk.
Going forward, we believe the FOMC under Chairman Greenspan's able
leadership will maintain their tightening bias while focusing on the potential
effects of the tight labor market and its influence on possible inflationary
pressures to the domestic economy. We feel that SHORT TERM interest rates will
continue to be heavily influenced by investors' assessment of future Fed
actions. Therefore, we continue to emphasize a somewhat shorter maturity
structure at this time.
Thank you for expressing the confidence in our ability to provide a benefit
to you as a shareholder in this Fund. Please call us should you have any
questions regarding the Fund in general or your account specifically.
Sincerely,
/s/ Daniel J. Genter
Daniel J. Genter
President
RNC Mutual Fund Group, Inc.
RNC Capital Management LLC
2
<PAGE>
RNC MONEY MARKET FUND
INVESTMENT PORTFOLIO AT SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
Principal
Amount COMMERCIAL PAPER - 51.6% Value
- --------------------------------------------------------------------------------
$1,500,000 American Home Products Corp., 0.00%, 03/06/00........ $ 1,462,713
2,000,000 Amgen Inc., 0.00%, 10/14/99.......................... 1,996,172
2,000,000 Apreco Inc., 0.00%, 10/22/99......................... 1,993,770
1,800,000 ARCO British Ltd. 0.00%, 11/04/99.................... 1,790,990
1,700,000 Central Illinois Light Co., 0.00%, 10/19/99.......... 1,695,453
2,000,000 Cooperative Association of Tractor Dealers "A",
0.00%, 02/15/2000 ................................. 1,955,855
2,000,000 France Telecom, 0.00%, 11/10/99...................... 1,988,155
1,900,000 GE Capital Corp, 0.00%, 02/22/00..................... 1,856,680
1,280,000 Superior Funding Capital Corp., 0.00%, 10/01/99...... 1,280,000
1,900,000 Sydney Capital Corp., 0.00%, 10/27/99................ 1,892,645
1,900,000 Triple A-1 Funding, 0.00%, 10/08/1999................ 1,898,027
-----------
Total Commercial Paper ............................. 19,810,460
-----------
CORPORATE NOTES - 4.6%
- --------------------------------------------------------------------------------
1,800,000 Sunamerica Incorporated Senior Note, 6.20%, 10/31/99. 1,800,216
-----------
FEDERAL AGENCY SECURITIES - 25.5%
- --------------------------------------------------------------------------------
1,615,000 Federal Home Loan Bank Bonds, 5.53%, 02/03/00 ....... 1,613,822
500,000 Federal Home Loan Bank Notes, 7.65%, 10/28/99 ....... 500,818
3,000,000 Federal Home Loan Bank Floating Rates Notes,
5.56%, 02/25/00 ................................... 3,000,000
1,000,000 Federal Home Loan Mortgage Corp. Notes, 5.96%,
10/27/99 .......................................... 1,000,334
2,175,000 Federal Home Loan Mortgage Corp. Notes, 5.60%,
01/04/00........................................... 2,179,282
1,500,000 Federal National Mortgage Association Medium Term
Note, 5.97%, 10/28/99 ............................. 1,500,605
-----------
Total Federal Agency Securities..................... 9,794,861
-----------
OVERNIGHT REPURCHASE AGREEMENT - 22.8%
- --------------------------------------------------------------------------------
8,740,000 Seattle Northwest Securities Corporation Government
Repurchase Agreement, $8,740,000, 5.35%, dated
09/30/99, due 10/01/99, [collaterized by $9,305,000
par value Federal National Mortgage Association Notes
3.30% due 07/03/00 & 06/29/00, respectively
(collateral market value $8,921,169) (proceeds
$8,741,299) (cost $8,740,000)]....................... 8,740,000
-----------
Total Investment Portfolio - 104.5%.................. 40,145,321
Other Assets Less Liabilities - (4.5%)............... (1,734,832)
-----------
NET ASSETS - 100.0% ................................. $38,410,489
===========
See accompanying notes to financial statements.
3
<PAGE>
RNC MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES - SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investment portfolio (cost of $40,145,321) ................ $ 40,145,321
Receivable for interest income ............................ 262,522
Other assets .............................................. 12,574
------------
Total assets .......................................... 40,420,633
------------
LIABILITIES:
Payable for investments purchased ......................... 1,847,956
Dividends payable ......................................... 139,292
Investment advisory fees .................................. 17,183
Other liabilities ......................................... 5,713
------------
Total liabilities ..................................... 2,010,144
------------
NET ASSETS - (equivalent to $1.00 per share based on
38,419,830 shares of capital stock outstanding) .. $ 38,410,489
============
SOURCES OF NET ASSETS:
Paid-in capital ........................................... $ 38,419,830
Accumulated net realized loss on investments .............. (9,341)
------------
Net assets ............................................ $ 38,410,489
============
See accompanying notes to financial statements.
4
<PAGE>
RNC MONEY MARKET FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest Income ........................................... $ 1,854,475
-----------
Expenses:
Advisory fees (Note 3) .................................... 147,946
Shareholders' Rule 12b-1 Plan expense (Note 3) ............ 90,211
Professional fees ......................................... 44,245
Administration fees (Note 3) .............................. 40,000
Registration fees ......................................... 23,999
Fund accounting fees ...................................... 21,801
Custodian fees ............................................ 21,920
Audit fees ................................................ 14,001
Transfer agent fees ....................................... 11,300
Printing fees ............................................. 4,682
Directors' fees ........................................... 5,196
Insurance fees ............................................ 2,389
Miscellaneous fees ........................................ 27,678
-----------
Total expenses ........................................ 455,368
Less: expenses waived and reimbursed (Note 3) ......... (216,596)
-----------
Net expenses .......................................... 238,772
-----------
NET INVESTMENT INCOME ..................................... 1,615,703
-----------
REALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investment securities .......... (7,017)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ 1,608,686
===========
See accompanying notes to financial statements.
5
<PAGE>
RNC MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------
For the Year Ended For the Year Ended
September September
30, 1999 30, 1998
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
Net Investment Income .................... $ 1,615,703 $ 1,867,023
Net realized loss on investment securities (7,017) (2,403)
------------- -------------
Net Increase in net assets resulting
from operations .................... 1,608,686 1,864,620
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income .................... (1,615,703) (1,867,023)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................ 172,061,366 171,813,189
Proceeds from shares reinvested .......... 203,324 309,427
Cost of shares redeemed .................. (167,980,839) (182,556,191)
------------- -------------
Total Increase (decrease) from capital
share transactions ........................... 4,283,851 (10,433,575)
------------- -------------
Total Increase (decrease) in Net Assets ........ 4,276,834 (10,435,978)
NET ASSETS:
Beginning of year ........................ 34,133,655 44,569,633
------------- -------------
End of year .............................. $ 38,410,489 $ 34,133,655
============= =============
CHANGE IN SHARES:
Shares sold .................................... 172,061,366 171,813,189
Shares reinvested .............................. 203,324 309,427
Shares redeemed ................................ (167,980,839) (182,556,191)
------------- -------------
Net Increase (Decrease) .................. 4,283,851 (10,433,575)
============= =============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
RNC MUTUAL FUND GROUP, INC.
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended September 30,
-----------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value at beginning of year....... $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Income from investment operations:
Net investment income................. 0.044 0.049 0.049 0.047 0.051
------ ------ ------ ------ ------
Less distributions:
From net investment income............ (0.044) (0.049) (0.049) (0.047) (0.051)
------ ------ ------ ------ ------
Net Asset Value at end of year............. $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total Return............................... 4.52% 4.99% 5.01% 4.70% 5.10%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's).......... $38,410 $34,134 $44,570 $37,744 $31,066
Ratio of expenses to average net assets:
After expense waiver.................. 0.70% 0.76% 0.70% 0.90% 0.80%
Ratio of net investment income to
average net assets
(After expense waiver)................ 4.52% 4.92% 4.90% 4.70% 5.00%
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
RNC EQUITY FUND
Dear Shareholders,
As the President and CEO of RNC Capital Management LLC, which is the
advisor for the RNC Equity Fund, I would like to take this opportunity to
express my gratitude for your participation in the Fund. The following report
contains a summary of the performance of the Fund for the year ended September
30, 1999. Financial statements are also enclosed which detail Fund expenses for
the year ended September 30, 1999. Finally, you will also find a listing of the
Fund's holdings at September 30, 1999.
In contrast to the previous six months when the stock market enjoyed a
substantial and sustained progress, the past six months can be characterized as
a period of underachievement. The net advance in the S&P 500 for the six months
under review was +0.3%. This period encompasses two distinct investing
environments. The 2nd quarter ending 6/30/99 saw the S&P 500 achieve new highs
while rising a robust 7% as the market broadened out to include smaller cap
issues as well as classic value stocks. In contrast, the 3rd quarter suffered a
decline of over 6% primarily due to a rise in interest rates as the Federal
Reserve increased short-term rates twice once at quarter end and again at their
mid-August meeting. As the market reacted to higher interest rates a full
correction of over 11% ensued. Indeed, with over two-thirds of the issues listed
on the New York Stock Exchange having declined in excess of 20% from their highs
earlier in the year, a case can be made that during the past six months
investors have been mired in a "stealth" bear market. Throughout this six month
roller coaster ride, the RNC Equity Fund protected value through its large-cap
orientation as well as maintaining value characteristics of a below market P/E
and above market yield.
We are pleased to report that the NAV or Net Asset Value (the calculation
of price after deducting all expenses) declined just 1.73% for participants who
have been shareholders from March 31, 1999 to September 30, 1999. In sharp
contrast to the modest erosion in the value of the Equity Fund over the previous
six months, during the full twelve month period from September 30, 1998 to
September 30, 1999 the Fund recorded a substantial increase in NAV of 23.29%.
(For a more detailed review of the Equity Fund over the period 9/30/98-3/31/99
please refer to the previous semi-annual shareholder letter.) Despite the
Federal Reserve Board's attempt to slow the economy and dampen whatever
incipient inflation may yet develop in this the ninth year of economic
expansion, the economy remains strong. However, inflation measures are benign
when the core CPI (Consumer Price Index) and the GDP (Gross Domestic Product)
Deflator are examined. The core CPI has reached a thirty-four year low of 1.8%
and has decelerated since the beginning of the year. The GDP Deflator, a broad
measure of goods and services, rose 1% in the 3rd quarter and is up only 1.3%
year over year, again a very benign measurement.
The economic paradox of sustained, strong economic growth coupled with low
inflation is explainable by the boom in productivity during the decade of the
90's. The continued rise in productivity, which is output per man-hour according
to one definition, remains a key to rising standards of living, strong corporate
earnings, and the lack of inflation pressures. The 3rd quarter measurement of an
increase of 4.2% in productivity only reinforces the virtuous aspects of
increasing productivity. The high levels of capital spending prevalent
throughout the 90's has altered the productive capacity of U.S. industry from
the factory floor to the trading floor with no end in sight.
<PAGE>
RNC EQUITY FUND
Over the next six months we anticipate continued strength in the economy
albeit at a modestly slower rate. The Fed should complete this round of
tightening soon. The economy, particularly consumer spending in interest
sensitive sectors such as autos and housing, should begin to slow. However, we
continue to believe that a robust improvement in corporate earnings on the heels
of the 3rd quarter 20% increase in S&P 500 operating earnings, the best
quarterly increase in earnings in over three years. For the full year 2000, we
are looking for a 10% increase in S&P 500 earnings, which may have even further
upside potential driven by a global cyclical recovery and further strength in
the technology sector.
We have stayed the course by remaining fully invested throughout the
previous six-months of wide market gyrations. The sectors that we have found
attractive, have been and continue to be the Financial, Communication Services
and Technology Sectors which in the aggregate currently represent about 58% of
the Fund's assets. The Technology Sector has been and remains our largest single
sector commitment. The growth opportunities for selected large-cap Technology
stocks remains outstanding. Our approach, which is to avoid excessive valuations
while being opportunistic, has allowed us to participate in various leadership
Technology stocks at very favorable entry points. We are also attracted to the
longer term opportunities represented by the Communication Services Sector where
there is seemingly an insatiable demand for bandwidth, connectivity and
convergence all related to faster and more abundant voice, video, and data
transmission. The Financial Sector also continues to offer substantial absolute
and relative value. Currently, the forward twelve-month P/E (Price Earnings)
ratio for the entire sector is near the 1994 cyclical lows. Once the Federal
Reserve has finished raising short rates and long-term interest rates stabilize,
we believe this sector should once again outperform.
As the Equity Fund begins its fourth fiscal year, we are confident in our
ability to weather fluctuations inherent to the stock market. We remain focused
on improving and upgrading the portfolio during periods of little to no change
in the market. Finally, we remain firmly committed to realizing our stated goal
of achieving long term returns consistent with reasonable levels of risk
associated with equity investing.
If you have any questions pertaining to your investments in the Fund,
please contact us. Sincerely,
/s/ Daniel J. Genter
President
RNC Mutual Fund Group, Inc.
RNC Capital Management LLC
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
RNC EQUITY FUND S&P 500
--------------- -------
11/1/96 10000 10000
12/31/96 10117 10525
3/31/97 10233 10758
6/30/97 11667 12577
9/30/97 12375 13460
12/31/97 12917 13789
3/31/98 14427 15655
6/30/98 14670 16111
9/30/98 12707 14451
12/31/98 15591 17466
3/31/99 15942 18278
6/30/99 17029 19505
9/30/99 15666 18226
Past performance is not predictive of future performance.
The S&P 500 (dividends reinvested) is an unmanaged broad market-weighted stock
index that measures the performance of 500 large cap companies traded in the U.S
and is generally considered to be representative of the U.S stock market as a
whole.
Average Annual Total Returns
Periods Ended September 30, 1999
1 Year...................... 23.29%
Inception (11/1/96)......... 16.67%
10
<PAGE>
RNC EQUITY FUND
INVESTMENT PORTFOLIO AT SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 98.2% Market Value
- --------------------------------------------------------------------------------
AUTO: 2.1%
4,000 Ford Motor Company..................................... $ 200,750
-----------
BANKING: 8.2%
7,000 Bank of New York Company............................... 234,063
2,900 Chase Manhattan Corporation............................ 218,588
8,100 Wells Fargo Company.................................... 320,963
-----------
773,614
-----------
BEVERAGES: 1.0%
3,000 PepsiCo, Inc........................................... 90,750
-----------
CHEMICALS: 2.4%
2,000 The Dow Chemical Company............................... 227,250
-----------
COMPUTERS & PERIPHERALS: 9.7%
4,600 Hewlett-Packard Company................................ 423,200
4,000 International Business Machines Corp................... 485,500
-----------
908,700
-----------
COMPUTER SOFTWARE & SERVICES: 9.6%
8,100 First Data Corporation................................. 355,388
6,000 Microsoft Corporation*................................. 543,375
-----------
898,763
-----------
CONSUMER STAPLES: 2.1%
2,100 The Procter & Gamble Company........................... 196,875
-----------
DIVERSIFIED: 3.8%
3,000 General Electric Co.................................... 355,688
-----------
DIVERSIFIED MANUFACTURING: 7.6%
6,000 ITT Industries Inc..................................... 190,875
5,100 Tyco International, Ltd................................ 526,575
-----------
717,450
-----------
See accompanying notes to financial statements.
11
<PAGE>
RNC EQUITY FUND
INVESTMENT PORTFOLIO AT SEPTEMBER 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
DRUGS: 7.2%
3,000 Johnson & Johnson...................................... $ 275,625
6,900 Pfizer Inc............................................. 247,969
3,400 Schering-Plough Corporation............................ 148,325
-----------
671,919
-----------
ENTERTAINMENT: 2.2%
8,000 The Walt Disney Company................................ 207,000
-----------
FINANCIAL: 3.1%
6,700 Citigroup Inc.......................................... 294,800
-----------
INSURANCE: 5.8%
1,600 American International Group........................... 139,100
3,400 Hartford Financial Services Group, Inc................. 138,976
3,950 Marsh & McLennan Companies, Inc........................ 270,574
-----------
548,650
-----------
PETROLEUM: 5.5%
3,000 Chevron Corporation.................................... 266,250
5,000 Texaco Inc............................................. 252,500
-----------
518,750
-----------
RECREATIONAL: 2.3%
5,000 Carnival Cruise Line................................... 217,500
-----------
RETAILING STORES: 1.9%
5,000 May Department Stores Company.......................... 182,188
-----------
RETAILING-SPECIALTY: 2.9%
5,000 Avon Products Inc...................................... 124,062
3,000 Lowe's Co. Inc......................................... 146,250
-----------
270,312
-----------
TECHNOLOGY: 4.9%
10,000 Oracle Corp*........................................... 455,000
-----------
See accompanying notes to financial statements.
12
<PAGE>
RNC EQUITY FUND
INVESTMENT PORTFOLIO AT SEPTEMBER 30, 1999, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES: 10.2%
5,000 BellSouth Corporation.................................. $ 225,000
4,000 GTE Corporation........................................ 307,500
3,000 Lucent Technologies.................................... 194,624
3,200 MCI Worldcom Inc.*..................................... 230,000
-----------
957,124
-----------
UTILITIES: 5.7%
5,300 AT&T Corp.............................................. 230,550
5,000 PPG Industries......................................... 300,000
-----------
530,550
-----------
Total Investments: 98.2% (Cost $7,297,520**)........... 9,223,633
Other Assets Less Liabilities: 1.8%.................... 165,265
-----------
NET ASSETS: 100.0% .................................... $ 9,388,898
===========
** Cost for federal income tax purposes is $7,303,185
Net unrealized appreciation consists of:
Gross unrealized appreciation................ $ 2,182,163
Gross unrealized depreciation................ (261,717)
------------
Net unrealized appreciation............ $ 1,920,446
============
* Non-income producing security.
See accompanying notes to financial statements.
13
<PAGE>
RNC EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES - SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost $7,297,520) ..... $ 9,223,631
Cash .................................................. 138,162
Receivables:
Fund shares sold ................................. 2,150
Dividends and interest ........................... 8,544
Due from advisor (Note 2) ........................ 432
Deferred organizational costs, net (Note 2) ...... 17,202
Other assets .......................................... 21,594
-----------
Total assets ................................. 9,411,715
-----------
LIABILITIES:
Payable for fund shares redeemed .......................... 400
Accrued 12b-1 expenses (Note 3) ........................... 6,325
Other accrued expenses .................................... 16,092
-----------
Total liabilities ..................................... 22,817
-----------
NET ASSETS ..................................................... $ 9,388,898
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE ($9,388,898/501,375 shares outstanding;
500,000,000 shares, authorized with $0.01 par value) .... $ 18.73
===========
SOURCES OF NET ASSETS:
Paid-in capital ........................................... $ 7,524,854
Accumulated net realized loss on investments .............. (62,067)
Net unrealized appreciation of investments ................ 1,926,111
-----------
Net assets ............................................ $ 9,388,898
===========
See accompanying notes to financial statements.
14
<PAGE>
RNC EQUITY FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividend .............................................. $ 119,982
Interest .............................................. 6,688
-----------
Total investment income .......................... 126,670
-----------
Expenses
Advisor fees (Note 3) ................................. 87,937
Administration fees (Note 3) .......................... 40,000
Shareholders' Rule 12b-1 expense (Note 3) ............. 21,984
Professional fees ..................................... 20,739
Fund accounting expense ............................... 15,558
Audit fees ............................................ 14,001
Transfer agent fees ................................... 9,600
Amortization of deferred organizational expenses
(Note 2-f) .......................................... 8,428
Custodian expense ..................................... 7,677
Registration expense .................................. 6,001
Directors fees ........................................ 5,196
Printing expenses ..................................... 3,970
Insurance expense ..................................... 598
Miscellaneous expense ................................. 4,000
-----------
Total expenses ................................... 245,689
Less, expenses waived and reimbursed (Note 3) .... (100,594)
-----------
Net expenses ..................................... 145,095
-----------
Net investment loss .......................... (18,425)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments .......................... 19,549
Net change in unrealized appreciation of investments
for the period .......................................... 1,493,244
-----------
Net realized and unrealized gain on investments ....... 1,512,793
-----------
Net increase in Net Assets Resulting from Operations .. $ 1,494,368
===========
See accompanying notes to financial statements.
15
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------
For the Year For the Year
Ended Ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income (loss) ........................... $ (18,425) $ 1,696
Net realized gain (loss) on investments ................ 19,549 (62,752)
Net change in unrealized appreciation (depreciation)
of investments ...................................... 1,493,244 (12,682)
----------- -----------
Net increase (decrease) in net assets resulting
from operations ............................... 1,494,368 (73,738)
----------- -----------
DISTRIBUTIONS
Distributions to shareholders from net investment income (9,469) (12,776)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .............................. 3,061,026 3,860,678
Net asset value of shares issued on reinvestment
of distributions ..................................... 9,469 12,775
Cost of shares redeemed ................................ (1,729,332) (742,171)
----------- -----------
Net increase from capital share transactions ..... 1,341,163 3,131,282
----------- -----------
Total increase in net assets ............... 2,826,062 3,044,768
NET ASSETS:
Beginning of the year .................................. 6,562,836 3,518,068
----------- -----------
End of the year (including undistributed net investment
income of $0 and $9,504, respectively) .............. $ 9,388,898 $ 6,562,836
=========== ===========
CHANGE IN SHARES:
Shares sold ............................................ 160,612 237,937
Shares issued on reinvestment of distributions ......... 507 789
Shares redeemed ........................................ (91,154) (44,180)
----------- -----------
Net increase ..................................... 69,965 194,546
=========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
RNC EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------
For the Year For the Year For the period
Ended Ended November 1, 1996* to
September 30, 1999 September 30, 1998 September 30, 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net asset value at beginning of period............ $15.21 $14.85 $12.00
------ ------ ------
Income from investment operations:
Net investment income........................ (0.03) 0.01 0.02
Net realized and unrealized
gain on investments...................... 3.57 0.39 2.83
------ ------ ------
Total from investment operations.................. 3.54 0.40 2.85
------ ------ ------
Less distributions:
From net investment income................... (0.02) (0.04) 0.00
------ ------ ------
Net asset value at end of period.................. $18.73 $15.21 $14.85
====== ====== ======
Total Return .................................... 23.29% 2.68% 23.75%+
Ratios/Supplemental Data:
Net Assets, end of period (000 omitted)........... $9,389 $6,562 $3,518
Ratio of expenses to average net assets:
Before expense reimbursement................. 2.79% 3.57% 8.50%**
After expense reimbursement.................. 1.65% 1.64% 1.65%**
Ratio of net investment income to
average net assets:
Before expense reimbursement................. (1.35%) (1.90%) (6.53%)**
After expense reimbursement.................. (0.21%) 0.03% 0.32%**
Portfolio turnover rate........................... 46% 20% 38%
</TABLE>
* Commencement of Operations.
** Annualized.
+ Not Annualized.
See accompanying notes to financial statements.
17
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RNC MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
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 Nasdaq 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 Money 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, 1999, the Funds had realized capital losses to
offset future net capital gains as follows:
Expire Expire Expire
2005 2006 2007
---- ---- ----
Equity Fund $17,464 $21,433 $ 17,505
Money Market -- $ 2,324 $ 7,017
18
<PAGE>
RNC MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - continued
- --------------------------------------------------------------------------------
C. SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are
accounted for on trade date. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
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 into an insolvency proceeding, realization
of the 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 Funds are
allocated on the basis of relative net assets.
F. DEFERRED ORGANIZATION COSTS. The Equity Fund has incurred expenses of
$39,116 in connection with its 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 year ended September 30, 1999, 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
year ended September 30, 1999, the Equity Fund incurred $87,937 in advisory fees
and the Money Fund incurred $147,946. RNC voluntarily waived a portion of the
Money Fund's advisory fee amounting to $47,475 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 year
ended September 30, 1999 the Advisor reimbursed or waived expenses of the Equity
Fund in the amount of $100,594 and various parties waived expenses of $216,596
in the case of Money Market Fund.
Investment Company Administration, L.L.C. (the "Administrator") acts as the
Funds' Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
19
<PAGE>
RNC MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - continued
- --------------------------------------------------------------------------------
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 Funds expenses and reviews the
Funds' expense accruals. For its services, the Administrator receives a monthly
fee per Fund at the following annual 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 $21,984 in Plan expenses
for the year ended September 30, 1999. The Distributors waived all fees totaling
$90,211 reflected in the total amount waived or reimbursed for the year ended
September 30, 1999, in its capacity of Shareholder Servicing 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 year ended September 30, 1999 were $5,204,842
and $3,893,005 respectively for the Equity Fund.
20
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
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, 1999, 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, 1999, 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, 1999, 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
October 22, 1999
21
<PAGE>
ADVISER
RNC Capital Management LLC
11601 Wilshire Boulevard
25th Floor
Los Angeles, California 90025
CUSTODIAN
Firstar Institutional Custody Services
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
