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RNC Mutual Fund Group, Inc.
Semi-Annual Report
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For the Six Months Ended
March 31, 2000
<PAGE>
TABLE OF CONTENTS
RNC MONEY MARKET FUND
Shareholder Letter .................................................... 1
Investment Portfolio .................................................. 2
Statement of Assets and Liabilities ................................... 3
Statement of Operations ............................................... 4
Statement of Changes in Net Assets .................................... 5
Financial Highlights .................................................. 6
RNC EQUITY FUND
Shareholder Letter .................................................... 7
Investment Portfolio .................................................. 8
Statement of Assets and Liabilities ................................... 10
Statement of Operations ............................................... 11
Statement of Changes in Net Assets .................................... 12
Financial Highlights .................................................. 13
RNC MUTUAL FUND GROUP, INC.
Notes to Financial Statements ......................................... 14
<PAGE>
RNC MONEY MARKET FUND
Dear Shareholders,
We are pleased to provide you with the semi-annual report for the period ending
March 31, 2000.
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. The net seven day yield of 5.24%
as of March 31st places the Fund in a strong competitive position compared to
the other 310 funds, as reported by IBC Financial Data, Inc.
The spectacular growth of the domestic economy in the final quarter of 1999 has
carried itself over into the first quarter of 2000. This, coupled with the
potentially inflationary pressures of a tight labor market and the wealth effect
created by a healthy stock market, has prompted the Federal Reserve to raise the
Fed Funds Rate by an additional 75 basis points to 6.00%. So far, the Federal
Open Market Committee (the "FOMC") has raised the targeted Fed Funds Rate in
three steps, with an increase of 25 basis points in November, January and March.
Furthermore, the FOMC finally provided a new methodology of explaining their
intentions by changing from the often-misinterpreted "bias" approach. The new
statements focus on the balances of risk. At the last meeting on March 21st they
indicated that the risks were weighted towards conditions that may generate
heightened inflationary pressures. This was essentially the same position taken
at the meeting in February. As we look forward to the next scheduled meeting on
May 16th the same factors apply which would suggest that further tightening
moves may be in order until there is moderation in consumer demand and the tight
labor market eases to some degree.
In this environment we are maintaining a shorter average maturity compared with
the Fund's peer group (29 days vs. 51 days), thus putting ourselves in a
position to take advantage of higher rates as the Fed continues its efforts to
slow the economy. 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.
Thank you for your continued 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
1
<PAGE>
INVESTMENT PORTFOLIO AT MARCH 31, 2000 (UNAUDITED)
Principal
Amount Value
--------------------------------------------------------------------------------
COMMERCIAL PAPER: 50.0%
$2,000,000 AT&T Corp., 5.95%, 04/05/00 $ 1,998,682
-----------
2,000,000 Barton Capital Corp., 5.94%, 04/20/00 1,993,783
-----------
2,000,000 Cooperative Association of Tractor Dealers "A",
5.98%, 04/12/00 1,996,364
-----------
2,000,000 Delaware Funding Corp., 6.02%, 05/26/00 1,981,880
-----------
2,000,000 Enterprise Funding Corp., 6.05%, 05/08/00 1,987,667
-----------
2,000,000 John Hancock Capital Corp., 5.91%, 04/24/00 1,992,525
-----------
2,000,000 Quincy Capital Corp., 5.90%, 04/03/00 1,999,349
-----------
2,000,000 Sydney Capital Corp., 5.96%, 04/13/00 1,996,060
-----------
2,000,000 Trident Capital Corp., 5.94%, 04/07/00 1,998,047
-----------
1,800,000 Triple A-1 Funding Corp., 5.92%, 04/17/00 1,795,312
-----------
Total Commercial Paper 19,739,669
-----------
CORPORATE BONDS/NOTES: 8.7%
1,300,000 Associates Corp.
North America Senior Note, 6.38%, 08/15/00 1,299,311
-----------
1,000,000 Commercial Credit Corp. Note, 6.75%, 05/15/00 1,000,620
-----------
737,000 General Motor Acceptance Corp. Medium Term
Note, 5.80%, 02/23/01 731,343
-----------
381,000 Wheeling-Pitt Corp., 9.38%, 11/15/03 395,443
-----------
Total Corporate Bonds / Notes 3,426,717
-----------
FEDERAL AGENCY SECURITIES: 26.0%
1,000,000 Federal Home Loan Bank Bonds, 5.07%, 04/07/00 999,790
-----------
2,050,000 Federal Home Loan Bank Bonds, 5.50%, 04/14/00 2,049,550
-----------
2,000,000 Federal Home Loan Bank Bonds, 5.00%, 04/28/00 1,998,611
-----------
Principal
Amount Value
--------------------------------------------------------------------------------
$2,000,000 Federal National Mortgage Association Medium Term
Note, 9.05%, 04/10/00 $ 2,001,509
-----------
1,000,000 Federal National Mortgage Association Medium Term
Note, 6.97%, 05/02/00 1,000,760
-----------
2,100,000 Federal National Mortgage Association Discount Note,
0.00%, 05/11/00 2,086,420
-----------
152,000 Federal National Mortgage Association Discount Note,
0.00%, 05/15/00 150,828
-----------
Total Federal Agency Securities 10,287,468
-----------
OVERNIGHT REPURCHASE AGREEMENT: 18.2%
7,199,000 Seattle Northwest Securities Corporation Government
Repurchase Agreement $7,199,000, 6.20%, dated 03/31/00,
due 04/03/00, [collaterized by $7,460,000 par value
Federal National Mortgage Association Discount Note
0.00% due 06/29/00 (collateral market value
$7,342,980)] (proceeds $7,202,719) (cost $7,199,000) 7,199,000
-----------
TOTAL INVESTMENT
PORTFOLIO: 102.9%
(Cost $40,652,854) 40,652,854
-----------
Liabilities in excess
of Other Assets: (2.9%) (1,142,900)
-----------
NET ASSETS: 100.0% $39,509,954
===========
See accompanying Notes to Financial Statements.
2
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES AT MARCH 31, 2000 (UNAUDITED)
ASSETS
Investment portfolio, at value (cost of $40,652,854) .......... $40,652,854
Cash .......................................................... 2,083
Receivables:
Interest income ............................................. 358,707
Other assets .................................................. 9,553
-----------
Total assets .............................................. 41,023,197
-----------
LIABILITIES
Payables:
Investment securities purchased ............................. 1,299,311
Distribution to shareholders ................................ 190,574
Advisory fees ............................................... 13,472
Accrued expenses .............................................. 9,886
-----------
Total liabilities ......................................... 1,513,243
-----------
NET ASSETS (equivalent to $1.00 per share based on
39,519,564 shares of capital stock outstanding) ................. $39,509,954
===========
COMPONENTS OF NET ASSETS
Paid-in capital ............................................... $39,519,564
Accumulated net realized loss on investments .................. (9,610)
-----------
Net assets .................................................... $39,509,954
===========
See accompanying Notes to Financial Statements.
3
<PAGE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2000
INVESTMENT INCOME
Income
Interest ................................................... $ 1,209,489
Other ...................................................... 1,297
-----------
Total income ............................................. 1,210,786
-----------
Expenses
Advisory fees .............................................. 84,889
Distribution fees .......................................... 51,762
Administration fees ........................................ 15,708
Custody fees ............................................... 15,315
Legal fees ................................................. 8,612
Fund accounting fees ....................................... 8,466
Transfer agent fees ........................................ 5,581
Registration expense ....................................... 4,399
Audit fees ................................................. 2,754
Director fees .............................................. 2,631
Insurance expense .......................................... 1,408
Reports to shareholders .................................... 1,334
Miscellaneous .............................................. 11,076
-----------
Total expenses ........................................... 213,935
Less: fees waived and expense absorbed ................... (74,059)
-----------
Net expenses ............................................. 139,876
-----------
NET INVESTMENT INCOME ................................. 1,070,910
-----------
REALIZED LOSS ON INVESTMENTS:
Net realized loss on investments ......................... (269)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ........................................... $ 1,070,641
===========
See accompanying Notes to Financial Statements.
4
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
March 31, September 30,
2000# 1999
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income .............................. $ 1,070,910 $ 1,615,703
Net realized loss on investments ................... (269) (7,017)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ 1,070,641 1,608,686
------------- -------------
DISTRIBUTION TO SHAREHOLDERS FROM
Net investment income .............................. (1,070,910) (1,615,703)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .......................... 116,111,105 172,061,366
Proceeds from shares reinvested .................... 132,201 203,324
Cost of shares redeemed ............................ (115,143,572) (167,980,839)
------------- -------------
Total increase from capital share transactions.... 1,099,734 4,283,851
------------- -------------
TOTAL INCREASE IN NET ASSETS ..................... 1,099,465 4,276,834
NET ASSETS
Beginning of period ................................ 38,410,489 34,133,655
------------- -------------
END OF PERIOD ...................................... $ 39,509,954 $ 38,410,489
============= =============
CHANGE IN CAPITAL SHARES
Shares sold ........................................ 116,111,105 172,061,366
Shares reinvested .................................. 132,201 203,324
Shares redeemed .................................... (115,143,572) (167,980,839)
------------- -------------
Net increase ..................................... 1,099,734 4,283,851
============= =============
</TABLE>
# Unaudited.
See accompanying Notes to Financial Statements.
5
<PAGE>
FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year Ended September 30,
March 31, ----------------------------------------------------
2000# 1999 1998 1997 1996 1995
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.027 0.044 0.049 0.049 0.047 0.051
LESS DISTRIBUTIONS:
From net investment income ................... (0.027) (0.044) (0.049) (0.049) (0.047) (0.051)
------- ------- ------- ------- ------- -------
Net asset value, end of period ................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= =======
Total return ................................... 2.7%+ 4.52% 4.99% 5.01% 4.70% 5.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ............ $39,510 $38,410 $34,134 $44,570 $37,744 $31,066
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
After fees waived and expenses absorbed ...... 0.70% 0.66% 0.76% 0.70% 0.90% 0.80%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS:
After fees waived and expenses absorbed ...... 5.15% 4.48% 4.92% 4.90% 4.70% 5.00%
</TABLE>
# Unaudited.
* Annualized.
+ Not annualized.
See accompanying Notes to Financial Statements.
6
<PAGE>
RNC EQUITY FUND
Dear Shareholders,
This semi-annual report contains the following: a summary of the Fund's
performance for the six-months ended March 31, 2000, financial statements
including holdings of the Fund and all expenses incurred by the Fund as of March
31, 2000.
The past six months has borne witness to the staircase effect that the stock
market has so often resembled over the past few years. That is to say, a burst
of performance followed by a period of consolidation punctuated by a correction
of ten percent or more before once again resuming an upward course. We are
pleased to report that NAV or Net Asset Value (the calculation of price after
deducting all expenses) rose 14.04% during these previous six months in large
part following the same pattern as the S&P 500, a surge in the fourth quarter
and a relatively flat first quarter.
During this six-month period, the stock market was extremely narrow with
essentially only two sectors, technology and communication services,
outperforming. These two sectors now exceed 43% of the total market
capitalization of the S&P 500 with technology alone accounting for a record 33%
of the index. Whether referred to as bipolar or narrow, the market has certainly
been selective in rewarding investors. The tried and true concepts of
diversification and risk control have been overlooked in the quest for
performance without regard for the embedded volatility and risks associated with
many of the stocks leading this charge. However, investors were recently rudely
reminded that price momentum swings both ways as evidenced by a decline from,
early March to mid-April, of over 34% in the NASDAQ, a proxy for the technology
sector.
Our approach to both managing volatility as well as assessing the opportunities
in technology issues is to remain diversified. Our emphasis is on owning
companies with real earnings, positive cash flow, and growing market share, not
unseasoned companies valued on a multiple of revenues, long on promise but short
on cash. We also believe that the apparent dichotomy inherent in the concept of
New Economy and Old Economy can be resolved by both the imaginative and
pragmatic application of technology by old-line well-managed companies. It is
our ongoing task to sort out the winners from the losers, to concentrate our
investor's funds on those companies that we believe will adapt to the new
technologies and enhance profits while cutting costs and increasing market share
in their respective businesses across all sectors. In the end, it is both the
suppliers of technology as well as the users of that same technology that will
reward shareholders with rising market valuations.
The stock market throughout the past six-months has been struggling against a
headwind of higher short-term rates as the Fed has continued to tighten monetary
policy in the pursuit of maintaining price stability against the potential
inflationary pressures of an impressively strong economy. Price stability has
recently been brought to the forefront with a surge in the March CPI (Consumer
Price index) both nominal as well as core mostly due to higher energy prices.
Despite this recent surge, we expect core inflation to stay contained within a
range of 2-3% for the year as energy prices level off from the highs of early
January. In addition, we anticipate further Fed rate increases should inevitably
slow the economy towards a more acceptable non-inflationary growth potential of
approximately 4%. Meanwhile, we expect S&P 500 operating earnings to increase
over 11% fueling stock market returns we estimate to be around 12% for the full
year. However, we expect wide fluctuations in the averages will continue to
plague this long-lived but still vibrant bull market for stocks.
If you have any questions relating to your investments in the Fund, please
contact us.
Sincerely,
/s/ Daniel J. Genter
Daniel J. Genter
President
RNC Mutual Fund Group, Inc.
RNC Capital Management, LLC
7
<PAGE>
INVESTMENT PORTFOLIO AT MARCH 31, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS: 99.9%
Auto: 2.2%
5,000 Ford Motor Company $ 229,688
-----------
Banking: 6.0%
8,000 Bank of New York Company 332,500
3,400 Chase Manhattan Corporation 296,438
-----------
628,938
-----------
Beverages: 1.0%
3,000 PepsiCo, Inc. 103,688
-----------
Chemicals: 2.7%
2,500 The Dow Chemical Company 285,000
-----------
Computers & Peripherals: 15.8%
5,000 Dell Computer Corporation* 269,687
3,000 Hewlett-Packard Company 397,687
4,000 International Business Machines Corp. 472,000
4,000 Intel Corp. 527,750
-----------
1,667,124
-----------
Computer Software & Services: 8.6%
6,100 First Data Corporation 269,925
6,000 Microsoft Corporation* 637,500
-----------
907,425
-----------
Consumer Staples: 1.7%
3,100 The Procter & Gamble Company 174,375
-----------
Diversified: 4.4%
3,000 General Electric Co. 465,562
-----------
Diversified Manufacturing: 7.7%
4,000 Honeywell International Inc. 210,750
3,000 ITT Industries Inc. 93,188
10,200 Tyco International, Ltd. 508,725
-----------
812,663
-----------
Drugs: 6.5%
2,600 Johnson & Johnson $ 182,163
6,900 Pfizer Inc. 252,281
6,900 Schering-Plough Corporation 253,575
-----------
688,019
-----------
Entertainment: 2.7%
7,000 The Walt Disney Company 289,625
-----------
Financial: 2.8%
5,000 Citigroup Inc. 296,562
-----------
Insurance: 4.1%
3,950 Marsh & McLennan Companies, Inc. 435,734
-----------
Medical: 2.3 %
4,000 Amgen Inc.* 245,500
-----------
Petroleum: 4.7%
2,500 Chevron Corporation 231,094
5,000 Texaco Inc. 268,125
-----------
499,219
-----------
Recreational: 1.0%
4,000 Carnival Corporation 99,250
-----------
Retailing-Specialty: 2.2%
4,000 Lowe's Co. Inc. 233,500
-----------
Technology: 13.7%
6,000 Lucent Technologies 364,500
3,200 Motorola Inc. 455,600
8,000 Oracle Corp.* 624,500
-----------
1,444,600
-----------
Telecommunications Services: 9.8%
5,800 AT&T Corp. 326,250
4,500 BellSouth Corporation 211,500
3,000 GTE Corporation 213,000
6,400 MCI Worldcom Inc.* 290,000
-----------
1,040,750
-----------
8
<PAGE>
INVESTMENT PORTFOLIO AT MARCH 31, 2000 (UNAUDITED) - (CONTINUED)
Shares Value
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $7,716,204) $10,547,222
-----------
TOTAL INVESTMENTS: 99.9%
(Cost $7,716,204**) 10,547,222
Other Assets less Liabilities: 0.1% 13,630
-----------
NET ASSETS: 100.0% $10,560,852
===========
** Cost for federal income tax purposes is the same.
Net unrealized appreciation consists of:
Gross unrealized appreciation $ 3,051,594
Gross unrealized depreciation (220,576)
-----------
Net unrealized appreciation $ 2,831,018
===========
* Non-income producing security
See accompanying Notes to Financial Statements.
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES AT MARCH 31, 2000 (UNAUDITED)
ASSETS
Investments in securities, at value (cost $7,716,204) ........ $10,547,222
Receivables:
Fund shares sold ........................................... 107,430
Securities sold ............................................ 61,517
Dividends and interest ..................................... 5,479
Deferred organizational costs, net ........................... 12,976
Prepaid expenses ............................................. 21,455
-----------
Total assets ............................................. 10,756,079
-----------
LIABILITIES
Payables:
Due to custodian ........................................... 65,373
Fund shares redeemed ....................................... 60,400
Securities purchased ....................................... 35,830
Distribution fees .......................................... 6,337
Advisory fees .............................................. 2,698
Accrued expenses ............................................. 24,589
-----------
Total liabilities ........................................ 195,227
-----------
NET ASSETS ................................................... $10,560,852
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($10,560,852/494,475 shares outstanding; 500,000,000
shares, authorized with $0.01 par value) .................... $ 21.36
===========
COMPONENTS OF NET ASSETS
Paid-in capital .............................................. $ 7,378,387
Accumulated net investment loss ............................ (25,302)
Accumulated net realized gain on investments ............... 376,749
Net unrealized appreciation of investments ................. 2,831,018
-----------
Net assets ............................................... $10,560,852
===========
See accompanying Notes to Financial Statements.
10
<PAGE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2000
INVESTMENT INCOME
Income
Dividend .................................................... $ 56,815
Interest .................................................... 938
-----------
Total income .............................................. 57,753
-----------
Expenses
Advisory fees ............................................... 50,244
Administration fees ......................................... 20,000
Distribution fees ........................................... 12,561
Fund accounting fees ........................................ 8,297
Registration expense ........................................ 7,728
Audit fees .................................................. 7,210
Legal fees .................................................. 6,531
Transfer agent fees ......................................... 5,291
Custody fees ................................................ 4,442
Amortization of deferred organizational costs ............... 4,226
Director fees ............................................... 2,452
Reports to shareholders ..................................... 1,192
Insurance expense ........................................... 117
Miscellaneous ............................................... 1,299
-----------
Total expenses ............................................ 131,590
Less: fees waived and expenses absorbed ................... (48,535)
-----------
Net expenses .............................................. 83,055
-----------
NET INVESTMENT LOSS .................................... (25,302)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments ............................ 438,816
Net unrealized appreciation on investments .................. 904,907
-----------
Net realized and unrealized gain on investments ........... 1,343,723
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $ 1,318,421
===========
See accompanying Notes to Financial Statements.
11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
March 31, 2000# September 31, 1999
--------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss ................................... $ (25,302) $ (18,425)
Net realized gain on investments ...................... 438,816 19,549
Net unrealized appreciation on investments ............ 904,907 1,493,244
------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ...................................... 1,318,421 1,494,368
------------ -----------
DISTRIBUTION TO SHAREHOLDERS
From net investment income ........................... -- 9,469
------------ -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................ 918,971 3,061,026
Net asset value of shares issued on reinvestment
of distributions .................................... -- 9,469
Cost of shares redeemed .............................. (1,065,438) (1,729,332)
------------ -----------
Net increase (decrease) from capital share
transactions ........................................ (146,467) 1,341,163
------------ -----------
NET INCREASE IN NET ASSETS ....................... 1,171,954 2,826,062
NET ASSETS
Beginning of period ................................... 9,388,898 6,562,836
------------ -----------
END OF PERIOD (including accumulated net
investment loss of $25,302 and $0 respectively ....... $ 10,560,852 $ 9,388,898
============ ===========
CHANGE IN CAPITAL SHARES
Shares sold .......................................... 45,406 160,612
Shares issued on reinvestment of distributions ....... -- 507
Shares redeemed ...................................... (52,306) (91,154)
------------ -----------
Net increase (decrease) .......................... (6,900) 69,965
============ ===========
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE>
FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the period
Six Months Year Year November 1,
Ended Ended Ended 1996* to
March 31, September 30, September 30, September 30,
2000# 1999 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................. $ 18.73 $15.21 $14.85 $12.00
------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ........................ (0.05) (0.03) 0.01 0.02
Net realized and unrealized gain on investments ..... 2.68 3.57 0.39 2.83
------- ------ ------ ------
Total from investment operations ...................... 2.63 3.54 0.40 2.85
------- ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income .......................... 0.00 (0.02) (0.04) 0.00
------- ------ ------ ------
Net asset value, end of period ........................ $ 21.36 $18.73 $15.21 $14.85
======= ====== ====== ======
Total return .......................................... 14.04%+ 23.29% 2.68% 23.75%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) ............. $10,561 $9,389 $6,562 $3,518
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived and expenses absorbed ............ 2.62%** 2.79% 3.57% 8.50%**
After fees waived and expenses absorbed ............. 1.65%** 1.65% 1.64% 1.65%**
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS:
Before fees waived and expenses absorbed ............ (1.47%)** (1.35%) (1.90%) (6.53%)**
After fees waived and expenses absorbed ............. (0.50%)** (0.21%) 0.03% 0.32%**
Portfolio turnover rate ............................. 33%+ 46% 20% 38%+
</TABLE>
# Unaudited.
* Commencement of Operations.
** Annualized.
+ Not Annualized.
See accompanying Notes to Financial Statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 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.
NOTE 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 each day that the exchanges
are open for trading; 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. Commercial
paper is purchased at its discounted price and will mature at its
principal amounts, with the difference representing interest income
when received.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
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 Fund -- $ 2,324 $ 7,017
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 value of the collateral is at least 102% at all times to the total
amount of the repurchase obligation, including interest. 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.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the six months ended March 31, 2000, 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, 2000, the Equity Fund incurred $50,244 in advisory
fees and the Money Fund incurred $84,889.
The Funds are responsible for their own operating expenses. The Advisor has
agreed to limit the Funds total expenses to not more than 1.65% and 0.70% of the
average daily net assets for the Equity Fund and Money Fund, respectively. Any
fee withheld or voluntarily reduced and/or any Fund expense absorbed by the
Advisor voluntarily or pursuant to an agreed upon expense cap shall be
reimbursed by the Fund to the Advisor, if so requested by the Advisor, anytime
before the end of the third fiscal year following the year to which the fees
waived and expenses absorbed relate, provided the aggregate amount of the Fund's
current operating expenses for such fiscal year does not exceed the applicable
limitation on Fund expenses. Any such reimbursement is also contingent up Board
of Trustees review and approval prior to the time the reimbursement is
initiated. The Fund must pay its current ordinary operating expenses before the
Advisor is entitled to any reimbursement. For the six months ended March 31,
2000, the Advisor waived fees of $48,535 for the Equity Fund and waived fees of
$22,297 for the Money Fund. Effective April 2000, the Advisor has stopped
waiving fees and/ or absorbing expenses on the Money 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
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 at the following annual rate:
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
RNC Equity
----------
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
RNC Money Market
----------------
$25,000 to $32.5 million $25,000
$32.5 million thereafter 0.075% 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 Distribution 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 $12,561 in distribution fees for the six
months ended March 31, 2000. The Distributor waived all of its distribution fees
totaling $51,762 for the six months ended March 31, 2000, for the Money Fund.
Certain officers of the Fund are officers and/or directors of the
Administrator and Distributor.
NOTE 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, 2000 were $3,267,882
and $3,365,924 respectively for the Equity Fund.
17
<PAGE>
================================================================================
Adviser
RNC CAPITAL MANAGEMENT, LLC
11601 Wilshire Boulevard
25th Floor
Los Angeles, California 90025
(800) 576-8229
www.rnccapital.com
Custodian
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
425 Walnut Street
Cincinnati, Ohio 45202
Transfer Agent
ICA FUND SERVICES CORPORATION
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85108
Legal Counsel
PAUL, HASTINGS, JANOFSKY & WALKER, LLP 345 California
Street, 29th Floor San Francisco, California 94104
Auditors
TAIT, WELLER & BAKER
8 Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103
================================================================================
This report is intended for the shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
