President's Letter
Dear Shareholder:
The Walnut Street Funds, Inc. is pleased to present you with our 1996
semi-annual report. The Walnut Street Prime Reserve Fund asset balance for
the period ending June 30, 1996, was $150.4 million. The seven-day current
yield for the Prime Reserve Fund was 4.70% on June 30, 1996, with an average
maturity of 59 days.
The economic environment started out favorably for the equity markets for the
first half of the year, but the tide began to change towards the end of the
second quarter. Most stock market indices peaked in May and declined
thereafter.
The Federal Reserve's first move of the year was a quarter point lowering of
rates in January, after which, the economy began showing signs of
accelerating growth, raising concerns about inflation, and spawning rumors of
a possible interest rate hike by the Fed. The Federal Reserve managed to
avoid raising rates during the remaining months through June and at its July
2nd meeting. In the meantime, the 30-year Treasury bond yield rose nearly a
full point, from 5.95% to 6.89%. The rise in interest rates made it a
difficult six months for the bond market. When interest rates rise, bond
prices fall.
For investors seeking a refuge from the volatile movements of the stock and
bond market, money market funds provide an attractive alternative.
The Walnut Street Funds, Inc. and Conning Asset Management Company (formerly
General American Investment Management Company), the Fund's investment
adviser, remain committed to providing our shareholders with a high quality
money market fund, excellent service, and professional investment management.
Sincerely,
/s/ Richard A. Liddy
Richard A. Liddy
Chairman of the Board
The Walnut Street Funds, Inc.
Yields will fluctuate with market conditions. Past performance is no
guarantee of future returns. Investments in money market funds are not
insured or guaranteed by the U.S. Government and there is no assurance that
the Fund will be able to maintain a stable net asset value of $1.00 per
share. The investment adviser is currently waiving certain fees. Had fees not
been waived, the 7-day current yield would have been 4.64% and the total
return would have been lower. The voluntary waiver of fees may be modified or
terminated at any time, which would reduce the Fund's performance.
<PAGE>
Table of Contents
SCHEDULE OF INVESTMENTS Page 1
STATEMENT OF ASSETS AND LIABILITIES 4
STATEMENT OF OPERATIONS 4
STATEMENTS OF CHANGES IN NET ASSETS 5
FINANCIAL HIGHLIGHTS 6
NOTES TO FINANCIAL STATEMENTS 7
DIRECTORS AND OFFICERS 9
<PAGE>
WALNUT STREET PRIME RESERVE FUND
Schedule of Investments
June 30, 1996 (Unaudited)
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- --------- --------------
COMMERCIAL PAPER--87.54%
Automobiles--6.72%
$2,000,000 General Motors
Acceptance Corp, 5.42%,
12/16/96 $ 1,949,413
3,200,000 General Motors
Acceptance Corp, 5.42%,
12/16/96 3,119,061
2,800,000 General Motors
Acceptance Corp, 5.40%,
12/16/96 2,729,440
2,325,000 Mitsubishi Motors Credit, 5.45%,
8/5/96 (LOC: Mitsubishi Bank) 2,312,681
-----------
10,110,595
-----------
Banking & Finance--
79.82%
2,285,000 Alloman Funding Corp, 5.38%,
7/22/96 2,277,829
5,000,000 Anchor Capital Corp, 5.60%,
9/27/96 4,931,556
1,000,000 Anchor Funding Corp, 5.40%,
8/08/96 994,300
1,000,000 Astro Capital Corp, 5.52%,
9/05/96 989,880
1,500,000 Astro Capital Corp, 5.50%,
9/10/96 1,483,729
4,500,000 Astro Capital Corp, 5.62%,
10/31/96 4,414,295
2,324,000 Banca CRT Financial, 5.30%,
8/26/96 2,304,840
1,853,000 Banca CRT Financial, 5.30%,
9/03/96 1,835,541
3,000,000 Banca CRT Financial, 5.08%,
9/04/96 2,972,483
1,000,000 Banca CRT Financial, 5.35%,
11/15/96 979,640
2,500,000 Broadway Capital, 5.40%,
7/12/96 2,495,875
250,000 Creative Capital, 5.47%,
7/18/96 249,354
1,500,000 Creative Capital, 5.40%,
8/02/96 1,492,800
1,075,000 Creative Capital, 5.37%,
8/27/96 1,065,860
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- --------- --------------
$1,028,000 Creative Capital, 5.52%,
9/20/96 $ 1,015,232
2,000,000 Dealers Capital, 5.00%,
7/25/96 1,993,333
3,500,000 Diamond Asset Funding, 5.38%,
7/12/96 3,494,246
1,000,000 Diamond Asset Funding, 5.25%,
7/15/96 997,958
2,000,000 Diamond Asset Funding, 5.40%,
8/15/96 1,986,500
1,150,000 Diamond Asset Funding, 5.45%,
8/15/96 1,142,166
2,050,000 Dynamic Funding, 5.43%,
7/01/96 2,050,000
1,000,000 Dynamic Funding, 5.52%,
7/16/96 997,700
3,751,000 Dynamic Funding, 5.45%,
7/31/96 3,733,964
100,000 Dynamic Funding, 5.51%,
9/10/96 98,913
2,000,000 Finova Capital Corp, 5.43%,
7/16/96 1,995,475
775,000 Finova Capital Corp, 5.42%,
7/24/96 772,316
1,700,000 Finova Capital Corp, 5.42%,
7/29/96 1,692,834
1,725,000 Finova Capital Corp, 5.53%,
8/30/96 1,709,101
125,000 Frontier Funding, 5.53%,
9/06/96 123,714
1,645,000 Industrial Funding, 5.40%,
7/16/96 1,641,299
3,875,000 Industrial Funding, 5.50%,
8/20/96 3,845,399
1,425,000 Jet Funding, 5.40%, 7/31/96 1,418,588
2,100,000 Lehman Brothers, 5.38%,
7/08/96 2,097,807
1,425,000 Lehman Brothers, 5.53%,
10/15/96 1,401,797
1,500,000 Lehman Brothers, 5.53%,
11/15/96 1,468,433
2,000,000 Lehman Brothers, 5.60%,
12/18/96 1,947,111
1,000,000 Oak Funding, 5.43%, 7/12/96 998,341
1,000,000 Oak Funding, 5.50%, 8/14/96 993,278
1,000,000 Orix America, 5.25%, 7/09/96
(LOC: Sanwa Bank) 998,833
750,000 Orix America, 5.57%, 9/27/96
(LOC: Norinchukin Bank) 739,788
See notes to financial statements.
1
<PAGE>
WALNUT STREET PRIME RESERVE FUND
Schedule of Investments (Continued)
June 30, 1996 (Unaudited)
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- --------- --------------
COMMERCIAL PAPER
(Continued)
Banking & Finance
(continued)
$3,000,000 Orix America, 5.40%, 9/27/96
(LOC: Norinchukin Bank) $ 2,960,400
1,400,000 Orix America, 5.52%, 10/15/96
(LOC: Norinchukin Bank) 1,377,245
600,000 Orix America, 5.52%, 10/15/96
(LOC: Norinchukin Bank) 590,248
1,500,000 Progress Funding, 5.43%,
7/15/96 1,496,833
1,900,000 Progress Funding, 5.50%,
8/28/96 1,883,164
1,850,000 Progress Funding, 5.40%,
9/09/96 1,830,575
1,150,000 Progress Funding, 5.43%,
9/09/96 1,137,858
625,000 Progress Funding, 5.55%,
10/30/96 613,341
450,000 Progress Funding, 5.70%,
12/19/96 437,816
1,325,000 Sanwa Business Credit Corp,
5.38%, 8/16/96 1,315,891
1,675,000 Sierra Funding, 5.00%,
7/15/96 1,671,743
1,176,000 Sierra Funding, 5.25%,
7/15/96 1,173,599
500,000 Sierra Funding, 5.50%,
7/15/96 498,931
1,000,000 Sierra Funding, 5.40%,
8/15/96 993,250
1,000,000 Stellar Capital Corp, 5.38%,
7/12/96 998,356
3,800,000 Stellar Capital Corp, 5.38%,
7/19/96 3,789,778
475,000 Stellar Capital Corp, 5.37%,
8/14/96 471,883
1,200,000 Stellar Capital Corp, 5.42%,
8/30/96 1,189,160
800,000 Stellar Capital Corp, 5.52%,
11/20/96 782,581
1,733,000 Strait Capital, 5.40%, 7/19/96 1,728,321
2,000,000 Strait Capital, 5.55%, 9/30/96 1,971,942
3,000,000 Strategic Asset Funding, 5.30%,
7/01/96 3,000,000
1,208,000 Strategic Asset Funding, 5.40%,
7/31/96 1,202,564
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- --------- -------------- v
$2,400,000 Strategic Asset Funding, 5.40%,
7/31/96 $ 2,389,200
800,000 Strategic Asset Funding, 5.40%,
7/31/96 796,400
2,369,000 Tri-Lateral Capital, 5.45%,
7/08/96 2,366,490
2,700,000 Tri-Lateral Capital, 5.45%,
7/08/96 2,697,139
1,500,000 Tri-Lateral Capital, 5.43%,
7/22/96 1,495,249
300,000 Tri-Lateral Capital, 5.40%,
8/07/96 297,435
700,000 Tri-Lateral Capital, 5.45%,
8/30/96 693,642
2,000,000 Working Capital Mgmt, 5.50%,
9/11/96 1,978,000
2,425,000 Working Capital Mgmt, 5.50%,
9/23/96 2,393,879
2,000,000 Yorkshire Building Society,
5.50%, 11/21/96 1,956,306
-----------
120,021,327
-----------
Energy--1.00%
1,500,000 KN Energy Inc, 5.45%,
7/03/96 1,499,546
-----------
Total Commercial Paper
(Cost $131,631,468) 131,631,468
-----------
FLOATING RATE NOTES
--7.31%
5,000,000 Federal Home Loan Mortgage
Corporation Floating Rate Note,
5.65%, payable quarterly, resets
quarterly, next coupon
9/30/96 (a) 4,998,050
1,000,000 Student Loan Marketing
Association Floating Rate Note,
5.46%, payable quarterly, resets
Tuesdays, next coupon
8/02/96 (a) 999,228
2,000,000 Student Loan Marketing
Association Floating Rate Note,
5.44%, payable quarterly, resets
Tuesdays, next coupon 8/22/96 (a) 2,000,000
See notes to financial statements.
2
<PAGE>
WALNUT STREET PRIME RESERVE FUND
Schedule of Investments (Continued)
June 30, 1996 (Unaudited)
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- --------- --------------
FLOATING RATE NOTES
(Continued)
$3,000,000 Student Loan Marketing
Association Floating Rate Note,
5.45%, payable quarterly, resets
Tuesdays, next coupon
9/20/96 (a) $ 3,000,000
------------
Total Floating Rate Notes (Cost
$10,997,278) 10,997,278
------------
TIME DEPOSITS--4.99%
2,000,000 Banco Espirito, 5.1875%,
7/01/96 2,000,000
1,500,000 Banco Espirito, 5.875%,
10/04/96 1,500,000
1,000,000 Banco Espirito, 5.875%,
10/26/96 1,000,000
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- --------- --------------
$1,000,000 Banco Espirito, 5.625%,
4/02/97 $ 1,000,000
1,000,000 Banco Espirito, 5.8125%,
4/09/97 1,000,000
1,000,000 Banco Espirito, 5.8125%,
5/15/97 1,000,000
------------
Total Time Deposits
(Cost $7,500,000) 7,500,000
------------
Total Investments-- (Cost
$150,128,746) (b)-- 99.84% 150,128,746
Cash, receivables, and other
assets less liabilities--.16% 239,952
------------
Net Assets--100% $150,368,698
============
LOC Letter of Credit
(a) The rate stated is the rate in effect on June 30, 1996.
(b) The cost stated also represents the aggregate cost for Federal income tax
purposes.
See notes to financial statements.
3
<PAGE>
Statememt of Assets
and
Liabilities
June 30, 1996 (Unaudited)
ASSETS:
Investments at value (Note 2A)
(Identified cost $150,128,746) $150,128,746
Cash 20,464
Interest receivable 284,317
Deferred organization costs and other
assets (Note 2E) 209,366
------------
Total Assets 150,642,893
------------
LIABILITIES:
Payables:
Advisory Fee (Note 3) 77,889
Distribution Fees (Note 3) 90,543
Accrued Expenses 105,763
------------
Total Liabilities 274,195
------------
NET ASSETS:
(applicable to 150,378,135 shares
issued and outstanding; 1 billion
shares of $.001 par value
authorized) $150,368,698
============
Net asset value, offering price and
repurchase price per share
($150,368,698/150,378,135 shares) $ 1.00
============
SOURCES OF NET ASSETS:
Capital stock at par $ 150,378
Capital surplus 150,227,757
Accumulated net realized loss on
investments (9,437)
------------
NET ASSETS $150,368,698
============
Statement of Operations
For the six months ended
June 30, 1996 (Unaudited)
INVESTMENT INCOME:
Interest $ 4,566,933
------------
EXPENSES:
Advisory (Note 3) 203,122
Administration and accounting
(Note 3) 76,339
Custodian (Note 3) 14,333
Transfer agent 15,943
Audit 7,732
Cash management 7,224
Distribution (Note 3) 284,367
Directors (Note 4) 5,984
Reports to shareholders 15,833
Registration and filing 73,605
Organization 20,209
Legal 8,995
Other 3,740
------------
Total Expenses 737,426
Fees waived by adviser (46,841)
------------
Net Expenses 690,585
------------
Net Investment Income 3,876,348
Net realized gain on investments 1,130
------------
Net increase in net assets resulting
from operations $ 3,877,478
============
See notes to financial statements.
4
<PAGE>
Statements of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,876,348 $ 6,166,455
Net realized gain on investments 1,130 202
------------- -------------
Net increase in net assets resulting from operations 3,877,478 6,166,657
------------- -------------
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income (3,876,348) (6,166,455)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 90,568,520 193,059,843
Proceeds from shares issued on reinvestment of dividends 3,874,870 6,166,058
Cost of capital stock repurchased (100,992,146) (131,842,597)
------------- -------------
Increase (decrease) in net assets resulting from capital stock transactions (6,548,756) 67,383,304
------------- -------------
Increase (decrease) in Net Assets (6,547,626) 67,383,506
NET ASSETS:
Beginning of period 156,916,324 89,532,818
------------- -------------
End of period $ 150,368,698 $ 156,916,324
============= =============
CHANGE IN CAPITAL STOCK OUTSTANDING:
Shares sold 90,568,520 193,059,843
Shares issued on reinvestment of dividends 3,874,870 6,166,058
Shares repurchased (100,992,146) (131,842,597)
------------- -------------
Net increase (decrease) (6,548,756) 67,383,304
Shares outstanding, beginning of period 156,926,891 89,543,587
------------- -------------
Shares outstanding, end of period 150,378,135 156,926,891
============= =============
</TABLE>
See notes to financial statements.
5
<PAGE>
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
FOR THE
PERIOD JULY
FOR THE SIX FOR THE FOR THE 21, 1993*
MONTHS ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER DECEMBER DECEMBER 31,
1996 31, 1995 31, 1994 1993
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value at beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- ------- -------
Income from investment operations
Net investment income 0.024 0.053 0.036 0.011
-------- -------- ------- -------
Dividends to shareholders
Dividends from net investment income (0.024) (0.053) (0.036) (0.011)
-------- -------- ------- -------
Net asset value at end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======= =======
TOTAL RETURN: 4.81%** 5.40% 3.62% 2.46%**
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000's omitted) $150,369 $156,916 $89,533 $54,585
Ratio to average net assets of:
Expenses, net of waiver from adviser
(Note 3) 0.85%** 0.85% 0.85% 0.85%**
Expenses, prior to waiver from adviser
(Note 3) 0.91%** 0.93% 1.05% 1.07%**
Net investment income, net of waiver from adviser
(Note 3) 4.76%** 5.25% 3.64% 2.46%**
</TABLE>
* Commencement of investment operations.
** Annualized.
See notes to financial statements.
6
<PAGE>
Notes to Financial Statements (Unaudited)
1. ORGANIZATION AND BUSINESS
The Walnut Street Funds, Inc. (the "Company") was organized as a Maryland
Corporation on January 22, 1993 and is registered under the Investment
Company Act of 1940 as an open-end management investment company. The Company
currently consists of one series. The Walnut Street Prime Reserve Fund (the
"Fund") commenced investment operations on July 21, 1993.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) Security Valuations
Securities are valued at amortized cost which approximates market value. This
method values a security at its cost at the time of purchase and thereafter
assumes a constant rate of accretion or amortization to maturity of any
discount or premium.
(B) Federal Income Taxes
The Fund is treated as a separate entity for federal income tax purposes. The
Fund's policy is to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and distribute income to
shareholders within the allowable time limits. Therefore, no federal income
tax provision is required.
At December 31, 1995, the Portfolio had a capital loss carryover of
approximately $10,600 which is available to offset future net realized gains
on securities transactions. Such capital loss carryover will expire in fiscal
year 2002.
(C) Dividends to Shareholders
Net investment income is declared daily and paid monthly.
Income and capital gains distributions, if any, are determined in accordance
with income tax regulations which may differ from methods used to determine
the corresponding income and capital gains amounts in accordance with
generally accepted accounting principles.
(D) Security Transactions and Investment Income
Security transactions are recorded on the trade date and interest income is
accrued daily. Discounts and premiums on securities purchased are accreted
and amortized over the life of the respective securities.
(E) Organization Costs
Costs incurred in connection with organization and initial registration of
the Fund are being amortized over the period of benefit not to exceed 60
months from the date upon which the Fund commenced investment operations.
If any or all of the shares representing initial capital of the Fund are
redeemed by any holder thereof prior to the end of the amortization period,
the proceeds will be reduced by the unamortized organizational expense
balance in the same proportion as the number of such shares redeemed bears to
the number of initial shares outstanding immediately before the redemption.
(F) Financial Statements Preparation
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 and the reported amounts of revenues
7
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
and expenses for the period. Actual results could differ from those
estimates.
3. ADVISORY, ADMINISTRATION AND OTHER TRANSACTIONS WITH AFFILIATES
Conning Asset Management Company (formerly, General American Investment
Management Company) acts as the Fund's investment adviser (the "Adviser").
The Adviser manages the investments of the fund and is responsible for all
purchases and sales of the Fund's portfolio securities.
As compensation for its services and the related expenses borne by the
adviser, the Fund pays the Adviser a Management Fee, accrued daily and
payable monthly, that is equal, on an annual basis, to .25% of the Fund's
average daily net assets on the first $250,000,000 of the Fund's net assets,
.24% of the Fund's average daily net assets in excess of $250,000,000 up to
$500,000,000, .23% of the Fund's average daily net assets in excess of
$500,000,000 up to $750,000,000, .22% of the Fund's average daily net assets
in excess of $750,000,000 up to $1,000,000,000 and .21% of the Fund's average
daily net assets in excess of $1,000,000,000.
The Adviser has voluntarily agreed to assume/ waive expenses for the Fund to
the extent that expenses exceed .85% of the average daily net assets of the
Fund. For the six months ended June 30, 1996, the Adviser waived $46,841.
The Bank of New York acts as the Fund's administrator (the "Administrator")
and will assist in supervising the operations of the Fund. The Bank of New
York also serves as the Fund's custodian and fund accounting agent.
The Administrator has agreed to provide facilities, equipment and personnel
to carry out administrative services for the Fund, including, among other
things, monitoring the custodian, fund accounting, and administrative
services.
The Administrator's fee is accrued daily and is payable monthly at the rate
of .10% of the Fund's average net assets up to $100,000,000, .07% of the next
$400,000,000 of average net assets, and .03% of average net assets in excess
of $500,000,000, with a minimum fee of $6,000 per month.
The exclusive distributor of the Fund's shares is Walnut Street Securities,
Inc. (the "Distributor"), a registered broker dealer that is a wholly-owned
subsidiary of the Adviser.
The Fund has adopted a distribution plan ("12b-1 Plan") pursuant to which the
Distributor may be reimbursed for expenses incurred during the year in
connection with the distribution of Fund shares. The aggregate annual amount
payable by the Fund as provided in the 12b-1 Plan may not exceed .35% of the
Fund's average daily net assets.
4. DIRECTORS' FEES
Unaffiliated directors are paid $500 for each board meeting attended, plus
reimbursement for travel and out-of-pocket expenses.
8
<PAGE>
DIRECTORS AND OFFICERS
RENE C. LORIO, PRESIDENT
RICHARD A. LIDDY, DIRECTOR
THEODORE M. ARMSTRONG, DIRECTOR
HARRY E. RICH, DIRECTOR
ALAN C. HENDERSON, DIRECTOR
E. THOMAS HUGHES, TREASURER
DON P. WULLER, ASSISTANT TREASURER
MATTHEW P. MCCAULEY, SECRETARY
INVESTMENT ADVISER
CONNING ASSET MANAGEMENT COMPANY
ADMINISTRATOR
THE BANK OF NEW YORK
DISTRIBUTOR
WALNUT STREET SECURITIES, INC.
TRANSFER AGENT
BISYS FUND SERVICES, INC.
CUSTODIAN
THE BANK OF NEW YORK
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
LEGAL COUNSEL
HUSCH & EPPENBERGER
9
<PAGE>
This report is not authorized for distribution to prospective investors
unless accompanied by a current prospectus for the Walnut Street Prime
Reserve Fund. Please read the prospectus carefully before sending money.
THE WALNUT STREET FUNDS
PRIME RESERVE
MONEY MARKET FUND
[WALNUT STREET FUNDS
PRIME RESERVE LOGO]
Semi-Annual Report
June 30, 1996
(Unaudited)
Adviser
Conning Asset
Management Company
Distributor
Walnut Street Securities, Inc.
