President's Letter
Dear Shareholder:
Walnut Street Funds is pleased to present you with our 1996 annual report. The
Walnut Street Prime Reserve Fund won IBC Financial Data's Money Fund ReportTM
Top-Performing Portfolio Manager Award for 1996, for the All Taxable money
market fund category. This award is based on gross yield for the 12 months ended
December 31, 1996. The Walnut Street Prime Reserve Fund was the highest in its
class.
The Prime Reserve Fund experienced growth in assets of more than 8.0% during
1996, reaching an asset balance of $170.1 million on December 31, 1996. The
seven-day current yield for the Prime Reserve Fund was 4.82% on December 31,
1996, with an average maturity of 46 days. The portfolio remained invested in
Tier 1 commercial paper (97.0%) and high-grade short term bonds (3.0%).
The Federal Reserve took action on short term rates only once during the year.
At the end of January, 1996 the Federal Funds rate was lowered from 5.50% to
5.25%. Despite widespread expectation of monetary tightening throughout much of
the year, especially during mid-summer, the Fed made no additional changes.
Their inaction proved correct as economic growth slowed to more sustainable
levels and inflation fears diminished.
Looking forward, we believe that the Federal Reserve still appears to be in a
wait-and-see mode. If the next set of reports begin to show strengthening
economic indicators, the current Fed strategy may change. Short-term rates are
reflecting a slight tightening in monetary policy at this time, but there
continues to be conflicting signals in the economy.
If the Fed reacts by raising interest rates, bond prices will suffer and equity
markets could decline. Money market funds will be available to provide a safe
haven for concerned investors.
Walnut Street Funds, Inc. and Conning Asset Management (formerly General
American Investment Management Company), the Fund's investment adviser,
remain committed to providing our shareholders with a 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 Fund is
currently waiving certain fees. Had fees not been waived, the 7-day current
yield would have been 4.75% 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 (Continued)
December 31, 1996
Principal Value
Amount (Note 2A)
========== =========
Commercial Paper
--92.3% Automobiles--1.2%
$1,000,000 Cooperative Assoc. of
Tractor Dealers, 6.55%,
1/06/97 ........................ $ 999,090
1,000,000 Cooperative Assoc. of
Tractor Dealers, 5.70%,
2/04/97 ........................ 994,617
-----------
1,993,707
-----------
Banking & Finance--
91.1%
1,250,000 AGA Capital, 5.65%, 2/11/97 .... 1,241,957
2,000,000 Alloman Funding Corp,
5.70%, 2/11/97 ................. 1,987,017
1,300,000 Anchor Funding, 5.47%,
1/02/97 ........................ 1,299,802
550,000 Anchor Funding, 5.48%,
1/17/97 ........................ 548,680
2,625,000 Anchor Funding, 5.48%,
2/11/97 ........................ 2,608,617
1,000,000 Anchor Funding, 5.70%,
2/11/97 ........................ 993,508
2,000,000 Anchor Funding, 5.55%,
3/13/97 ........................ 1,978,108
1,000,000 Astro Capital Corp, 5.40%,
2/05/97 ........................ 994,750
2,000,000 Astro Capital Corp, 5.40%,
3/31/97 ........................ 1,973,300
500,000 Atlas Funding Corp, 5.45%,
1/31/97 ........................ 497,729
2,575,000 Banca CRT Financial, 5.40%,
3/31/97 ........................ 2,540,624
1,300,000 Banca CRT Financial, 5.35%,
4/11/97 ........................ 1,280,681
1,050,000 Banca CRT Financial, 5.35%,
4/25/97 ........................ 1,032,211
1,400,000 Banca CRT Financial, 5.40%,
4/25/97 ........................ 1,376,060
1,506,000 Banner Receivables, 5.65%,
3/07/97 ........................ 1,490,637
5,000,000 Banner Receivables, 5.55%,
3/21/97 ........................ 4,939,104
850,000 Bluegrass Funding, 5.43%,
2/05/97 (LOC: Bank of
Tokyo-Mitsubishi) .............. 845,513
2,000,000 Broadway Capital Corp,
5.42%, 2/10/97 ................. 1,988,111
<PAGE>
Principal Value
Amount (Note 2A)
========== =========
$1,000,000 BTM Capital Corp, 5.37%,
2/07/97 ........................ $ 994,481
1,900,000 BTM Capital Corp, 5.37%,
2/07/97 ........................ 1,889,514
500,000 BTM Capital Corp, 5.48%,
2/28/97 ........................ 495,586
3,000,000 Countrywide Home, 6.50%,
1/09/97 ........................ 2,995,667
2,150,000 Creative Capital, 5.38%,
1/21/97 ........................ 2,143,574
634,000 Creative Capital, 6.25%,
1/24/97 ........................ 631,468
2,000,000 Creative Capital, 5.40%,
2/03/97 ........................ 1,990,100
1,000,000 Creative Capital, 5.50%,
2/10/97 ........................ 993,889
1,500,000 Creative Capital, 5.60%,
3/10/97 ........................ 1,484,133
2,600,000 Dealers Capital Access
Trust, 5.45%, 1/17/97 .......... 2,593,702
1,050,000 Dynamic Funding, 5.57%,
1/08/97 ........................ 1,048,863
300,000 Dynamic Funding, 5.50%,
1/08/97 ........................ 299,679
1,160,000 Dynamic Funding, 5.60%,
1/31/97 ........................ 1,154,587
2,000,000 Dynamic Funding, 5.65%,
1/31/97 ........................ 1,990,583
1,000,000 Dynamic Funding, 6.07%,
1/03/97 ........................ 999,663
496,000 Dynamic Funding, 7.00%,
1/07/97 ........................ 495,421
900,000 Dynamic Funding, 5.60%,
3/12/97 ........................ 890,200
1,500,000 Dynamic Funding, 5.50%,
5/02/97 ........................ 1,472,271
2,000,000 Embarcado Center Venture
(Three), 5.62%, 1/15/97 ........ 1,995,629
1,150,000 Finova Capital Corp, 5.40%,
1/29/97 ........................ 1,145,170
350,000 Finova Capital Corp, 6.10%,
1/31/97 ........................ 348,221
2,000,000 Finova Capital Corp, 5.60%,
2/10/97 ........................ 1,987,556
1,275,000 Finova Capital Corp, 5.42%,
2/26/97 ........................ 1,264,250
1,960,000 Frontier Corporation,
5.37%, 1/17/97 ................. 1,955,322
3,650,000 Frontier Funding Corp,
5.47%, 3/06/97 ................. 3,614,506
4,675,000 Goldman Sachs Group, 8.25%,
1/02/97 ........................ 4,673,929
1,500,000 Gotham Funding, 5.70%,
1/15/97 ........................ 1,496,675
1,000,000 Gotham Funding, 5.40%,
2/03/97 ........................ 995,050
See notes to financial statements.
- -----------------------------------------------------------
1
<PAGE>
Walnut Street Prime Reserve Fund
Schedule of Investments (Continued)
December 31, 1996
Principal Value
Amount (Note 2A)
========== =========
Commercial Paper
(Continued)
Banking & Finance
(continued)
$3,000,000 Gotham Funding, 5.40%,
2/04/97 ........................ $2,984,700
1,500,000 Gotham Funding, 5.40%,
2/12/97 ........................ 1,490,550
5,000,000 Industrial Funding, 5.70%,
1/15/97 ........................ 4,988,917
1,000,000 Industrial Funding, 5.70%,
1/31/97 ........................ 995,250
2,531,000 Iris Partners, 5.80%,
1/29/97 (LOC: Sumitomo
Bank) .......................... 2,519,582
1,850,000 Iris Partners, 5.45%,
1/30/97 (LOC: Sumitomo
Bank) .......................... 1,841,878
850,000 Iris Partners, 5.52%,
2/07/97 (LOC: Sumitomo Bank) ... 845,178
1,450,000 Iris Partners, 5.45%,
3/03/97 (LOC: Sumitomo Bank) ... 1,436,610
2,000,000 Jet Funding, 5.41%, 1/31/97 .... 1,990,983
3,000,000 Jet Funding, 5.55%, 1/31/97 .... 2,986,125
1,568,000 Jet Funding, 5.50%, 2/28/97 .... 1,554,106
3,000,000 Oak Funding, 5.41%, 1/24/97 .... 2,989,631
1,000,000 Oak Funding, 5.58%, 2/20/97 .... 992,250
1,000,000 Orix America, 5.55%,
3/17/97 (LOC: Sanwa Bank) ...... 988,438
550,000 Orix America, 5.50%, 3/18/97
(LOC: Norinchukin Bank) ........ 543,614
2,500,000 Orix America, 5.58%, 3/18/97
(LOC: Norinchukin Bank) ........ 2,470,550
1,700,000 Orix America, 5.60%, 3/18/97
LOC: Norinchukin Bank) ......... 1,679,902
2,575,000 Orix America, 5.45%, 3/25/97
(LOC: Industrial Bank of Japan) 2,542,644
3,314,000 Pacific Dunlop Asia, 5.50%,
2/03/97 ........................ 3,297,292
1,000,000 Progress Funding, 5.75%,
1/13/97 ........................ 998,083
1,000,000 Progress Funding, 6.50%,
1/13/97 ........................ 997,833
1,100,000 Progress Funding, 5.55%,
1/15/97 ........................ 1,097,626
750,000 Progress Funding, 5.50%,
1/31/97 ........................ 746,563
1,000,000 Progress Funding, 5.43%,
2/03/97 ........................ 995,022
<PAGE>
Principal Value
Amount (Note 2A)
========== =========
$1,850,000 Progress Funding, 5.53%,
2/03/97 ........................ $1,840,758
1,675,000 Sanwa Business Credit Corp,
5.36%, 2/12/97 ................. 1,664,526
1,000,000 Shimizu International
Finance, 5.48%, 3/14/97
(LOC: Dai Ichi Kangyo) ......... 989,040
2,000,000 Strait Capital Corp, 5.52%,
2.28/97 ........................ 1,982,213
2,000,000 Strait Capital Corp, 5.60%,
3/05/97 ........................ 1,980,400
2,000,000 Strait Capital Corp, 5.60%,
4/15/97 ........................ 1,967,644
2,000,000 Strategic Asset Funding,
5.47%, 2/10/97 ................. 1,987,844
1,800,000 Strategic Asset Funding,
5.42%, 2/28/97 ................. 1,784,282
1,500,000 Strategic Asset Funding,
5.55%, 3/14/97 ................. 1,483,350
700,000 Toshiba International
Finance, 5.50%, 1/30/97 ........ 696,899
2,500,000 Toshiba International
Finance, 5.37%, 2/13/97 ........ 2,483,964
1,200,000 Toshiba International
Finance, 5.40%, 2/14/97 ........ 1,192,080
1,000,000 Tri-Lateral Capital,
5.43%, 1/08/97 ................. 998,944
1,000,000 Tri-Lateral Capital,
5.45%, 1/15/97 ................. 997,881
2,500,000 Tri-Lateral Capital,
5.40%, 2/03/97 ................. 2,487,625
1,000,000 Tri-Lateral Capital,
5.42%, 2/24/97 ................. 991,870
1,500,000 Tri-Lateral Capital,
5.50%, 3/05/97 ................. 1,485,562
1,000,000 Wood Street Funding Corp,
5.75%, 1/28/97 ................. 995,687
3,000,000 Wood Street Funding Corp,
5.41%, 2/24/97 ................. 2,975,655
1,000,000 Wood Street Funding Corp,
5.65%, 2/24/97 ................. 991,525
2,050,000 Working Capital Management
Company, 5.45%, 1/22/97 ........ 2,043,483
1,800,000 Working Capital Management
Company, 5.50%, 2/21/97 ........ 1,785,975
1,500,000 Working Capital Management
Company, 5.50%, 2/24/97 ........ 1,487,625
-----------
154,924,257
-----------
Total Commercial Paper
(Cost $156,917,964) ........... 156,917,964
===========
See notes to financial statements.
- -----------------------------------------------------------
2
<PAGE>
Walnut Street Prime Reserve Fund
Schedule of Investments (Continued)
December 31, 1996
Principal Value
Amount (Note 2A)
========== =========
Floating Rate Notes
--4.7%
$5,000,000 Federal Home Loan Mortgage
Corporation Floating Rate
Note, 5.65%, payable
quarterly, resets daily,
next coupon 3/30/97 (a) ........ $4,998,542
2,000,000 Student Loan Marketing
Association Floating Rate
Note, 5.42%, payable
quarterly, resets
Tuesdays, next coupon
2/22/97 (a) .................... 2,000,000
1,000,000 Student Loan Marketing
Association Floating Rate
Note, 5.44%, payable
quarterly, resets
Tuesdays, next coupon
2/02/97 (a) .................... 999,354
-----------
Total Floating Rate Notes
(Cost $7,997,896) .............. 7,997,896
-----------
Time Deposits--2.9%
1,000,000 Banco Espirito Santo,
5.625%, 4/02/97 ................ 1,000,000
1,000,000 Banco Espirito Santo,
5.8125%, 4/09/97 ............... 1,000,000
$1,000,000 Banco Espirito, 5.8125%,
5/15/97 ........................ $1,000,000
2,000,000 Banco Espirito, 6.1875%,
7/31/97 ........................ 2,000,000
------------
Total Time Deposits
(Cost $5,000,000) .............. 5,000,000
------------
Total Investments--
(Cost $169,915,860) (b)--
99.9% .......................... 169,915,860
Cash, receivables, and other
assets less liabilities--0.1% .. 139,281
------------
Net Assets--100% ............... $170,055,141
------------
LOC Letter of Credit
(a) The rate stated is the rate in effect on December 31, 1996.
(b) The cost stated also represents the aggregate cost for Federal income tax
purposes.
See notes to financial statements.
- --------------------------------------------------------------------------------
3
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets Statements of Operations
and
Liabilities For the year ended
December 31, 1996 December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets: Investment Income:
Investments at value (Note 2A) Interest ............................... $9,123,213
(Identified cost $169,915,860) ....... $ 169,915,860 ----------
Cash ................................... 70,542 Expenses:
Capital Stock Sold ..................... 450 Advisory (Note 3) ...................... 405,517
Interest receivable .................... 197,914 Administration and accounting
Deferred organization costs and other (Note 3) ............................. 152,691
assets (Note 2E) ..................... 159,305 Custodian (Note 3) ..................... 28,609
------------- Transfer agent ......................... 31,342
Total Assets ........................... 170,344,071 Audit .................................. 15,364
------------- Cash management ........................ 14,483
Liabilities: Distribution (Note 3) .................. 567,719
Payables: Directors (Note 4) ..................... 11,080
Advisory Fee (Note 3) ................ 65,409 Reports to shareholders ................ 31,141
Distribution Fees (Note 3) ........... 93,461 Registration and filing ................ 170,429
Accrued Expenses ....................... 130,060 Organization ........................... 40,641
------------- Legal .................................. 18,837
Total Liabilities ...................... 288,930 Other .................................. 5,315
------------- ----------
Net Assets: Total Expenses ....................... 1,493,168
(applicable to 170,064,087 shares Fees waived by adviser ................. (114,441)
issued and outstanding; 1 billion ----------
shares of $.001 par value Net Expenses ......................... 1,378,727
authorized) .......................... $ 170,055,141 ----------
============= Net Investment Income ................ 7,744,486
Net asset value, offering price and Net realized gain on investments ....... 1,621
repurchase price per share ----------
($170,055,141/170,064,087 shares) .... $ 1.00 Net increase in net assets resulting
============= from operations ...................... $7,746,107
Sources of Net Assets: ==========
Capital stock at par ................... $ 170,064
Capital surplus ........................ 169,894,023
Accumulated net realized loss on
investments .......................... (8,946)
-------------
Net Assets ............................... $ 170,055,141
=============
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
4
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
year year
ended ended
December 31, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 7,744,486 $ 6,166,455
Net realized gain on investments .................................... 1,621 202
------------- -------------
Net increase in net assets resulting from operations .............. 7,746,107 6,166,657
------------- -------------
Dividends to Shareholders:
Dividends from net investment income ................................ (7,744,486) (6,166,455)
------------- -------------
Capital Stock Transactions:
Proceeds from capital stock sold .................................... 174,323,154 193,059,843
Proceeds from shares issued on reinvestment of dividends ............ 7,743,223 6,166,058
Cost of capital stock repurchased ................................... (168,929,181) (131,842,597)
------------- -------------
Increase in net assets resulting from capital stock transactions .. 13,137,196 67,383,304
------------- -------------
Increase in Net Assets .......................................... 13,138,817 67,383,506
Net Assets:
Beginning of year ................................................... 156,916,324 89,532,818
------------- -------------
End of year ......................................................... $ 170,055,141 $ 156,916,324
============= =============
Change in Capital Stock Outstanding:
Shares sold ......................................................... 174,323,154 193,059,843
Shares issued on reinvestment of dividends .......................... 7,743,223 6,166,058
Shares repurchased .................................................. (168,929,181) (131,842,597)
------------- -------------
Net increase ...................................................... 13,137,196 67,383,304
Shares outstanding, beginning of year ............................... 156,926,891 89,543,587
------------- -------------
Shares outstanding, end of year ..................................... 170,064,087 156,926,891
============= =============
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
5
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
For the
Period
For the For the For the July 21,
year year year 1993*
ended ended ended through
December 31, December 31, December 31, December 31,
1996 1995 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 ................................ 0.048 0.053 0.036 0.011
-------- -------- ------- -------
Dividends to shareholders
Dividends from net investment income ................. (0.048) (0.053) (0.036) (0.011)
-------- -------- ------- -------
Net asset value at end of period ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======= =======
Total Return: ........................................ 4.88% 5.40% 3.62% 2.46%**
Ratios/Supplemental Data:
Net assets at end of period (000's omitted) .......... $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%**
Expenses, prior to waiver from adviser
(Note 3) ......................................... 0.92% 0.93% 1.05% 1.07%**
Net investment income, net of waiver from adviser
(Note 3) ......................................... 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
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
7
<PAGE>
Notes to Financial Statements (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, 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 year
ended December 31, 1996, the Adviser waived $114,441 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>
Independent Auditors' Report
To the Shareholders and Board of Directors of
Walnut Street Prime Reserve Fund:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Walnut Street Prime Reserve Fund
as of December 31, 1996, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the three-year period then ended and for the period from July 21, 1993
(commencement of investment operations) through December 31, 1993. 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
December 31, 1996, 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 presents fairly, in all material respects, the financial position of the
Walnut Street Prime Reserve Fund as of December 31, 1996, the results of its
operations, the changes in its net assets and its financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
KPMG Peat Marwick llp
New York, New York
February 7, 1997
9
<PAGE>
Directors and Officers
Richard A. Liddy, Chairman and Director
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
10
<PAGE>
Table of Contents
Schedule of Investments ............. Page 1
Statement of Assets
and Liabilities ..................... 4
Statement of Operations ............. 4
Statements of Changesin Net Assets .. 5
Financial Highlights ................ 6
Notes to Financial Statements ....... 7
Independent Auditors' Report ........ 9
Directors and Officers .............. 10
This report is not authorized for distribution to prospectus 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
LOGO
Annual Report
December 31, 1996
Adviser
Conning Asset
Management Company
Distributor
Walnut Street Securities, Inc.
