<PAGE>
PRESIDENT'S LETTER
Dear Shareholder:
The Walnut Street Funds, Inc. is pleased to present you with our 1997
semi-annual report. The Walnut Street Prime Reserve Fund asset balance for the
period ending June 30, 1997 was $161.6 million. The seven-day current yield for
the Prime Reserve Fund was 5.01% on June 30, 1997, with an average maturity of
45 days.
After accelerating in the first quarter, the economy resumed to a moderate
growth pace in the second quarter. Inflation remained under control, making it
difficult for the Fed to raise rates. Robust corporate earnings helped send most
domestic equity indices to record highs. After the recent rise, overvaluation in
U.S. stocks continues to be a concern.
After raising interest rates once in the first quarter, the Federal Reserve
chose not to do so at their next meeting on May 20th. The Fed felt that the
expansion of economic activity had slowed significantly from the first quarter's
pace. As the second quarter progressed, it turned out that the Fed was correct
in its assessment of the economy. After starting the quarter at 7.10%, the
30-year Treasury bond declined to 6.78% by the quarter's end.
Rising commodity prices and continued labor market rightness will rest the Fed's
ability to restrain from raising interest rates in the coming months. At the
FOMC meeting in July rates were left unchanged. The next meeting is in August,
and at this time the bond market is betting that the Fed will not take any
action. As we approach the next meeting bond prices are expected to fluctuate
amongst the uncertainty of an interest rate hike.
Given concerns about an over priced stock market and a potential increase in
bond market volatility, money market funds provide an attractive investment
alternative and refuge.
The Walnut Street Funds, Inc. and Conning Asset 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,
[SIGNATURE]
Richard J. Miller
President & CEO
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 4.99% 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>
WALNUT STREET PRIME RESERVE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- ---------- -------------
<C> <S> <C>
COMMERCIAL PAPER-- 89.5%
AUTOMOBILES--1.1%
$1,800,000 Cooperative Association of
Tractor Dealers, 6.50%,
7/01/97....................... $ 1,800,000
-------------
BANKING & FINANCE--88.4%
2,600,000 AGA Capital, 5.70%, 7/07/97... 2,597,530
2,200,000 Anchor Funding, 6.40%,
7/01/97....................... 2,200,000
1,775,000 Anchor Funding, 5.65%,
7/16/97....................... 1,770,821
500,000 Anchor Funding, 5.70%,
9/03/97....................... 494,933
3,000,000 Anchor Funding, 5.68%,
9/12/97....................... 2,965,447
1,000,000 Astro Capital Corp, 5.75%,
7/31/97....................... 995,208
1,000,000 Astro Capital Corp, 5.77%,
7/31/97....................... 995,192
2,000,000 Astro Capital Corp, 5.72%,
10/31/97...................... 1,961,231
4,000,000 Atlas Funding Corp, 5.72%,
7/22/97....................... 3,986,654
1,550,000 Atlas Funding Corp, 5.75%,
7/22/97....................... 1,544,801
3,000,000 Banca CRT Financial, 5.75%,
10/01/97...................... 2,955,917
2,000,000 Banca CRT Financial, 5.80%,
10/01/97...................... 1,970,356
4,000,000 Banner Receivables, 5.72%,
7/17/97....................... 3,989,831
4,000,000 Banner Receivables, 5.67%,
9/15/97....................... 3,952,120
3,000,000 BTM Capital Corp, 5.72%,
7/15/97....................... 2,993,327
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- ---------- -------------
<C> <S> <C>
$1,400,000 BTM Capital Corp, 5.73%,
7/15/97....................... $ 1,396,880
1,750,000 BTM Capital Corp, 5.71%,
7/25/97....................... 1,743,338
600,000 BTM Capital Corp, 5.75%,
8/01/97....................... 597,029
1,200,000 BTM Capital Corp, 5.80%,
8/07/97....................... 1,192,847
1,426,000 Broadway Capital Corp, 5.75%,
7/18/97....................... 1,422,128
1,743,000 Broadway Capital Corp, 5.73%,
7/31/97....................... 1,734,677
700,000 Broadway Capital Corp, 5.65%,
9/15/97....................... 691,651
1,776,000 Creative Capital Corp, 5.75%,
7/18/97....................... 1,771,178
750,000 Creative Capital Corp, 5.50%,
7/29/97....................... 746,792
1,682,000 Creative Capital Corp, 5.48%,
7/31/97....................... 1,674,319
1,350,000 Creative Capital Corp, 5.58%,
9/05/97....................... 1,336,189
2,316,000 Creative Capital Corp, 5.70%,
12/09/97...................... 2,256,961
1,125,000 Dynamic Funding Corp, 6.50%,
7/01/97....................... 1,125,000
1,000,000 Dynamic Funding Corp, 5.75%,
7/10/97....................... 998,562
1,000,000 Dynamic Funding Corp, 5.78%,
7/10/97....................... 998,555
500,000 Dynamic Funding Corp, 5.80%,
7/17/97....................... 498,711
3,150,000 Dynamic Funding Corp, 5.71%,
9/10/97....................... 3,114,527
1,000,000 Dynamic Funding Corp, 5.72%,
9/10/97....................... 988,719
220,000 Finova Capital Corp, 5.45%,
7/14/97....................... 219,567
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
1
<PAGE>
WALNUT STREET PRIME RESERVE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- ---------- -------------
<S> <C>
</TABLE>
COMMERCIAL PAPER (CONTINUED)
BANKING & FINANCE (CONTINUED)
<TABLE>
<C> <S> <C>
$4,000,000 Frontier Funding Corp, 6.30%,
7/01/97....................... $ 4,000,000
970,000 Gotham Funding Corp, 5.70%,
7/03/97....................... 969,693
1,000,000 Gotham Funding Corp, 5.75%,
7/03/97....................... 999,680
1,200,000 Gotham Funding Corp, 5.42%,
7/21/97....................... 1,196,387
2,275,000 Gotham Funding Corp, 5.78%,
7/24/97....................... 2,266,599
975,000 Gotham Funding, 5.75%,
8/15/97....................... 967,992
110,000 Hitachi America Limited,
5.60%, 8/27/97................ 109,025
425,000 Industrial Funding, 5.75%,
7/01/97....................... 425,000
2,252,000 Industrial Funding, 5.75%,
7/02/97....................... 2,251,640
3,050,000 Industrial Funding, 5.73%,
7/18/97....................... 3,041,748
2,200,000 Industrial Funding, 5.80%,
7/29/97....................... 2,190,076
1,500,000 Industrial Funding, 5.82%,
7/29/97....................... 1,493,210
2,000,000 Jet Funding, 5.73%, 7/22/97... 1,993,315
3,966,000 Jet Funding, 5.88%, 9/02/97... 3,925,242
272,000 Merrill Lynch & Company,
5.66%, 8/15/97................ 270,076
2,725,000 Mitsui & Company, 5.75%,
8/15/97....................... 2,705,414
800,000 Orix America, 5.80%, 7/08/97
(LOC: Sanwa Bank)............. 799,098
2,200,000 Orix America, 5.63%, 9/15/97
(LOC: Norinchukin Bank)....... 2,173,852
2,600,000 Orix America, 5.69%, 9/17/97
(LOC: Norinchukin Bank)....... 2,567,946
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- ---------- -------------
<C> <S> <C>
$2,000,000 Orix America, 5.73%, 11/21/97
(LOC: Sanwa Bank)............. $ 1,954,478
1,400,000 Progress Funding, 5.75%,
7/09/97....................... 1,398,211
2,775,000 Progress Funding, 5.80%,
7/16/97....................... 2,768,294
500,000 Progress Funding, 5.84%,
7/31/97....................... 497,567
2,000,000 Progress Funding, 5.81%,
9/08/97....................... 1,977,728
575,000 Progress Funding, 5.75%,
9/09/97....................... 568,571
3,000,000 Strait Capital Corp, 5.73%,
7/22/97....................... 2,989,972
1,000,000 Strait Capital Corp, 5.68%,
9/19/97....................... 987,378
825,000 Strategic Asset Funding,
5.75%, 7/01/97................ 825,000
3,000,000 Strategic Asset Funding,
5.72%, 7/31/97................ 2,985,700
1,000,000 Strategic Asset Funding,
5.85%, 8/29/97................ 990,413
1,000,000 Sumitomo Bank Capital Markets,
5.80%, 7/14/97................ 997,906
2,000,000 Sumitomo Bank Capital Markets,
5.45%, 7/18/97................ 1,994,853
2,000,000 Sumitomo Bank Capital Markets,
5.45%, 7/25/97................ 1,992,733
2,000,000 Sumitomo Bank Capital Markets,
5.80%, 8/29/97................ 1,980,989
1,000,000 Sumitomo Bank Capital Markets,
5.72%, 10/03/97............... 985,064
3,225,000 Toshiba International Finance,
5.77%, 8/08/97................ 3,205,358
1,200,000 Toshiba International Finance,
5.75%, 8/18/97................ 1,190,800
2,525,000 Tri-Lateral Capital, 5.75%,
7/17/97....................... 2,518,547
700,000 Tri-Lateral Capital, 5.80%,
8/12/97....................... 695,263
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
WALNUT STREET PRIME RESERVE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- ---------- -------------
<C> <C>
</TABLE>
COMMERCIAL PAPER (CONTINUED)
BANKING & FINANCE (CONTINUED)
<TABLE>
<C> <S> <C>
$ 400,000 Tri-Lateral Capital, 5.80%,
8/18/97....................... $ 396,907
3,100,000 Tri-Lateral Capital, 5.72%,
9/02/97....................... 3,068,969
1,000,000 Tri-Lateral Capital, 5.72%,
9/11/97....................... 988,560
3,200,000 Wood Street Funding Corp,
6.30%, 7/01/97................ 3,200,000
3,850,000 Working Capital Management
Company, 5.65%, 7/08/97....... 3,845,770
2,394,000 Working Capital Management
Company, 5.77%, 7/09/97....... 2,390,930
1,200,000 Working Capital Management
Company, 5.70%, 9/22/97....... 1,184,230
-------------
142,807,182
-------------
TOTAL COMMERCIAL PAPER
(Cost $144,607,182)........... 144,607,182
-------------
FLOATING RATE NOTES-- 6.5%
5,000,000 Federal Home Loan Mortgage
Corporation Floating Rate
Note, 5.90%, payable
quarterly, resets daily, next
coupon 12/30/97 (a)........... 4,999,026
2,500,000 Lehman Brothers Holding
Incorporated Floating Rate
Note, 5.94%, payable monthly,
resets monthly, next coupon
7/22/97 (a)................... 2,501,087
2,000,000 Student Loan Marketing
Association Floating Rate
Note, 5.27%, payable
quarterly, resets Tuesdays,
next coupon 8/22/97 (a)....... 2,000,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
- ---------- -------------
<C> <S> <C>
$1,000,000 Student Loan Marketing
Association Floating Rate
Note, 5.29%, payable
quarterly, resets Tuesdays,
next coupon 8/02/97 (a)....... $ 999,478
-------------
TOTAL FLOATING RATE NOTES
(Cost $10,499,591)............ 10,499,591
-------------
TIME DEPOSITS--4.3%
2,000,000 Banco Espirito Santo, 6.1875%,
7/31/97....................... 2,000,000
1,000,000 Banco Espirito Santo, 5.8125%,
1/05/98....................... 1,000,000
1,000,000 Banco Espirito Santo, 5.8125%,
1/07/98....................... 1,000,000
2,000,000 Banco Espirito Santo, 6.0625%,
6/12/98....................... 2,000,000
1,000,000 Banco Espirito Santo,
6.00%, 6/22/98................ 1,000,000
-------------
TOTAL TIME DEPOSITS
(Cost $7,000,000)............. 7,000,000
-------------
TOTAL INVESTMENTS--(Cost
$162,106,773) (b)--100.3%..... 162,106,773
Other assets less
liabilities-- (0.3%).......... (489,210)
-------------
NET ASSETS--100%.............. $ 161,617,563
-------------
</TABLE>
LOC LETTER OF CREDIT
(A) THE RATE STATED IS THE RATE IN EFFECT ON JUNE 30, 1997.
(B) THE COST STATED ALSO REPRESENTS THE AGGREGATE COST FOR FEDERAL INCOME TAX
PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
<S> <C>
STATEMENT OF ASSETS
AND STATEMENT OF OPERATIONS
LIABILITIES FOR THE SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
(UNAUDITED) (UNAUDITED)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Note 2A)
(Identified cost
$162,106,773)............... $162,106,773
Cash.......................... 76,163
Receivables:
Investments sold.............. 16,180,000
Interest receivable........... 280,391
Capital stock sold............ 5,332
Deferred organization costs
and other assets (Note
2E)......................... 177,934
----------
TOTAL ASSETS............... 178,826,593
----------
LIABILITIES:
Payables:
Dividends payable........... 669,744
Investments purchased....... 16,237,894
Capital stock repurchased... 1,250
Advisory Fee (Note 3)....... 105,195
Distribution Fees (Note
3)........................ 96,505
Accrued Expenses.............. 98,442
----------
TOTAL LIABILITIES.............. 17,209,030
----------
NET ASSETS:
(applicable to 161,626,464
shares issued and
outstanding; 1 billion
shares of $.001 par value
authorized)................. $161,617,563
----------
Net asset value, offering
price and repurchase price
per share
($161,617,563/161,626,464)... $ 1.00
----------
SOURCES OF NET ASSETS:
Capital stock at par.......... 161,627
Capital surplus............... 161,464,837
Accumulated net realized loss
on investments.............. (8,901)
----------
NET ASSETS:..................... $161,617,563
----------
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................ $4,999,203
---------
EXPENSES:
Advisory (Note 3)............... 218,910
Administration and accounting
(Note 3)...................... 80,635
Custodian....................... 12,663
Transfer Agent.................. 15,259
Audit........................... 7,410
Cash management................. 7,140
Distribution (Note 3)........... 306,474
Directors (Note 4).............. 4,795
Reports to shareholders......... 22,850
Registration and filing......... 49,087
Organization.................... 20,098
Legal........................... 11,040
Other........................... 589
---------
TOTAL EXPENSES................. 756,950
Fees waived by adviser............ (14,207)
---------
NET EXPENSES................... 742,743
---------
NET INVESTMENT INCOME.......... 4,256,460
Net realized gain on
investments...................... 45
---------
Net increase in net assets
resulting from operations........ $4,256,505
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED DECEMBER
JUNE 30, 1997 31, 1996
------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income.......................................................... $ 4,256,460 $ 7,744,486
Net realized gain on investments............................................... 45 1,621
------------- ----------------
Net increase in net assets resulting from operations......................... 4,256,505 7,746,107
------------- ----------------
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income........................................... (4,256,460) (7,744,486)
------------- ----------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold............................................... 95,092,907 174,323,154
Proceeds from shares issued on reinvestment of dividends....................... 3,586,584 7,743,223
Cost of capital stock repurchased.............................................. (107,117,114) (168,929,181)
------------- ----------------
Increase (decrease) in net assets resulting from capital stock
transactions............................................................... (8,437,623) 13,137,196
------------- ----------------
INCREASE (DECREASE) IN NET ASSETS.......................................... (8,437,578) 13,138,817
NET ASSETS:
Beginning of period............................................................ 170,055,141 156,916,324
------------- ----------------
End of period.................................................................. $ 161,617,563 $ 170,055,141
------------- ----------------
CHANGE IN CAPITAL STOCK OUTSTANDING:
Shares sold.................................................................... 95,092,907 174,323,154
Shares issued on reinvestment of dividends..................................... 3,586,584 7,743,223
Shares repurchased............................................................. (107,117,114) (168,929,181)
------------- ----------------
Net increase (decrease)...................................................... (8,437,623) 13,137,196
Shares outstanding, beginning of period........................................ 170,064,087 156,926,891
------------- ----------------
Shares outstanding, end of period.............................................. 161,626,464 170,064,087
------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX FOR THE FOR THE FOR THE PERIOD JULY
MONTHS YEAR ENDED YEAR ENDED YEAR ENDED 21,* THROUGH
ENDED JUNE DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
30, 1997 1996 1995 1994 1993
----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value at beginning of period.......... $1.000 $1.000 $1.000 $1.000 $1.000
----------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENTS OPERATIONS
Net investment income........................... 0.024 0.048 0.053 0.036 0.011
----------- ------------- ------------- ------------- -------------
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income............ (0.024) (0.048) (0.053) (0.036) (0.011)
----------- ------------- ------------- ------------- -------------
Net asset value at end of period................ $1.000 $1.000 $1.000 $1.000 $1.000
----------- ------------- ------------- ------------- -------------
TOTAL RETURN:................................... 4.90%** 4.88% 5.40% 3.62% 2.46%**
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000's omitted)..... $161,618 $170,055 $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% 0.85%**
Expenses, prior to waiver from adviser
(Note 3).................................... 0.87%** 0.92% 0.93% 1.05% 1.07%**
Net investment income, net of waiver from
adviser
(Note 3)....................................... 4.86%** 4.78% 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, 1996, the Portfolio had a capital loss carryover of
approximately $8,900 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 the organization and initial registration of
the Fund are being amortized over the period 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 and expenses for the
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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, 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 waive fees to the extent that total
expenses exceed .85% of the average daily net assets of the Fund. For the six
months ended June 30, 1997, the Adviser waived $14,207 of advisory fees.
The Bank of New York acts as the Fund's administrator (the "Administrator") and
assists in supervising the operations of the Fund. The Bank of New York also
serves as the Fund's custodian and 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 daily net assets up to $100,000,000, .07% of the next
$400,000,000 of average daily net assets, and .03% of average daily 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 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
RICHARD J. MILLER, PRESIDENT AND CHIEF EXECUTIVE OFFICER
RICHARD A. LIDDY, CHAIRMAN
THEODORE M. ARMSTRONG, DIRECTOR
HARRY E. RICH, DIRECTOR
ALAN C. HENDERSON, DIRECTOR
E. THOMAS HUGHES, TREASURER
DON P. WULLER, ASSISTANT TREASURER
KENT P. ZIMMERMAN, 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, OHIO, INC.
CUSTODIAN
THE BANK OF NEW YORK
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
LEGAL COUNSEL
HUSCH & EPPENBERGER
9
<PAGE>
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- ------- TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
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
</TABLE>
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
[LOGO]
Semi-Annual Report
June 30, 1997
(Unaudited)
ADVISER
Conning Asset
Management Company
DISTRIBUTOR
Walnut Street Securities, Inc.
