[Graphic]
TAX-FREE INSTRUMENTS TRUST
14TH ANNUAL REPORT
MARCH 31, 1997
ESTABLISHED 1981
PRESIDENT'S MESSAGE
[Graphic]
Dear Shareholder:
Tax-Free Instruments Trust was established in 1981, and I am pleased to
present the 14th Annual Report to Shareholders.
This report covers the twelve-month reporting period from April 1, 1996,
through March 31, 1997. It begins with a discussion with the fund's
portfolio manager, Jeff A. Kozemchak, Vice President, Federated Management,
and follows with a complete list of the fund's municipal money market
holdings and its financial statements. In addition, financial highlights
tables are included for Investment Shares and Institutional Service Shares.
In Tax-Free Instruments Trust, your ready cash is at work pursuing daily
income free from federal regular income tax.* And, you have the comfort of
knowing that the fund is managed to keep the value of your investment at a
stable $1.00 per share.** You also have daily access to your invested cash.
On March 31, 1997, the fund's portfolio was invested among more than 260
money market securities issued by municipalities across the United States.
Dividends paid to shareholders during the reporting period totaled $0.03 per
Investment Share and $0.03 per Institutional Service Share. Net assets stood
at $1.7 billion on March 31, 1997.
Thank you for your participation in the daily, tax-free earning power of
Tax-Free Instruments Trust. We'll continue to keep you up to date on your
investment, and, as always, we welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
May 15, 1997
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** Although money market funds seek to maintain a stable net asset value of
$1.00, there is no assurance that they will be able to do so. An investment
in this fund is neither insured nor guaranteed by the U.S. government.
INVESTMENT REVIEW
[Graphic]
Jeff A. Kozemchak, CFA
Vice President
Federated Management
[Graphic]
JEFF, WHAT IS YOUR ANALYSIS OF THE INTEREST RATE ENVIRONMENT DURING THE
FUND'S TWELVE-MONTH REPORTING PERIOD ENDED MARCH 31, 1997?
Although it did not occur until near the very end, the reporting period for
the fund brought about the first change in monetary policy in over a year.
On March 25, 1997, the Federal Reserve Board (the "Fed") voted to raise the
federal funds target interest rate from 5.25% to 5.5%, in the face of
stronger-than-expected demand. The move was viewed as being pre-emptive
against the threat of future inflationary pressures possibly brought about
by tight labor market conditions. Until that point, movements in interest
rates reflected shifting market sentiment about the need for the Fed to move
to a more restrictive policy. The second quarter of 1996 was characterized
by much stronger-than-expected growth, fueled by consumer spending and
housing. Signs of slower growth began to emerge in the third quarter,
temporarily allaying the market's fears about inflation. However, growth
picked up once again during the fourth quarter of 1996 and into 1997. With
inflation still appearing to be benign, the market tolerated the pace of
growth over this period; however, Fed Chairman Alan Greenspan's
Congressional testimony in late February 1997 marked a turning point for the
short-term government market -- indeed the bond and equity markets as well
- -- as his relatively hawkish statements revealed fears at the Fed that the
transitory factors that had been keeping inflation under control in the face
of fairly robust growth may be coming to an end. The ensuing weeks brought
continued evidence of persistent strength, and ended in the Fed's action at
the Federal Open Market Committee in late March 1997.
For most of the reporting period, movements in short-term interest rates
bounced back and forth as sentiment regarding the need for a more
restrictive policy swayed back and forth. The yield on the six-month U.S.
Treasury bill, for example, rose from 5% to 5.5% from the beginning of April
1996 through early June 1996 as conviction that the next change in monetary
policy might be a tightening grew. The next few months were characterized by
significant market volatility and debate over the sustainability of the
economy, and interest rate movements reflected the uncertainty -- the yield
on the six-month U.S. Treasury bill rose to 5.60% in early July 1996, fell
to 5.30% by early August 1996, rose to 5.60% by early September 1996, and,
finally, fell to 5.25% by the end of September 1996. Interest rates then
traded within a range over the fourth quarter and into early 1997 -- with
the six-month U.S. Treasury bill yield moving between 5.2% to 5.4% -- as the
continued friendly inflation picture provided some comfort to market
participants. Finally, interest rates began to rise in late February 1997,
and by the time the Fed tightened in late March 1997, had built in much of
the expectations regarding the move. The six-month U.S. Treasury bill yield
rose steadily from 5.2% to close to 5.6% by the end of the reporting period.
[Graphic]
WHAT WERE YOUR STRATEGIES FOR TAX-FREE INSTRUMENTS TRUST DURING THE
REPORTING PERIOD?
The fund's average maturity at the beginning of the reporting period was
approximately 57 days. As the signs of strength in the economy became more
apparent, we lowered the average maturity target range of the fund from
between 55 and 60 days to between 40 and 45 days. In June and July 1996, two
factors combined to present the fund with an attractive buying opportunity.
First, the upward surge in interest rates. Second, the start of the annual
municipal note borrowing season. By early July 1996, we allowed the purchase
of one-year, fixed-rate notes to extend the maturity to between 55 and 60
days. As expectation of an imminent Fed tightening grew in the first quarter
of 1997, we allowed the average maturity of the portfolio to roll inward
from 55 days to a target range of 45 to 50 days in anticipation of higher
interest rates in the future.
Once an average maturity range was targeted, the portfolio maximized
performance through ongoing, relative value analysis. Relative value
analysis included the comparison of the richness or cheapness of municipal
securities to one another, as well as municipal to taxable instruments, such
as U.S. Treasury securities. The fund's portfolio remained barbelled in
structure, which combined a significant portion in seven-day variable rate
demand notes and short maturity commercial paper with purchases of
longer-term, six- to twelve-month fixed rate notes. This portfolio structure
has continued to provide a competitive yield over time.
[Graphic]
HOW HAS THE FUND PERFORMED?
Naturally, the fund's average yield has remained relatively stable since the
Fed did not change their federal funds interest rate target until the very
end of the reporting period. The seven-day net yield* for the fund's
Institutional Service Shares on March 31, 1997, was 3.05% compared to 3.03%
one year ago.** The latest yield was the equivalent of a 5.05% taxable yield
for investors in the highest federal tax bracket. Over the one-year period
ended March 31, 1997, the tax-exempt total return was 3.08%, which is
equivalent to a pre-tax return of 5.10% for those same investors.**
For the Investment Shares, the seven-day net yield* on March 31, 1997, was
2.90% compared to 2.88% one year ago.** The latest yield was equivalent to a
4.80% pre-tax yield. The tax-exempt total return over the reporting period
was 2.92%, which is comparable to a taxable return of 4.83% for those
investors in the highest federal tax bracket.**
[Graphic]
LOOKING THROUGH 1997, WHAT IS YOUR OUTLOOK FOR SHORT-TERM INTEREST RATES?
Although current expectations are that the Fed will find cause to tighten
monetary policy further in 1997 -- perhaps as soon as the second quarter --
it is also anticipated that the overall tightening cycle will not be long in
terms of magnitude or duration. In our opinion, the pre-emptive move by the
Fed should help to preclude the need for more aggressive action down the
road by preventing the buildup of inflationary pressures. We would look to
see moderately higher, short-term interest rates throughout the course of
the year, but not to the extent evidenced in the last tightening cycle in
1994. As such, we will likely continue in our modestly defensive stance for
the portfolio until market conditions indicate otherwise.
* The seven-day net yield is calculated daily, based on the income dividends
for the seven days ending on the date of calculation and then compounded and
annualized.
** Performance quoted represents past performance and is not indicative of
future returns. Yield will vary.
TAX-FREE INSTRUMENTS TRUST
PORTFOLIO OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- 99.8%
ALABAMA -- 2.8%
$ 3,650,000 Arab, AL IDB, (Series 1989) Weekly VRDNs (SCI Manufacturing, Inc.)/
(Bank of Tokyo-Mitsubishi Ltd. LOC) $ 3,650,000
3,500,000 Birmingham, AL Medical Clinic Board, Medical Clinic Revenue Bonds
(Series 1996) Weekly VRDNs (St. Martin's In The Pines)/(First Alabama
Bank, Birmingham LOC) 3,500,000
3,000,000 Decatur, AL IDB, Revenue Refunding Bonds (Series 1993) Weekly
VRDNs (Allied-Signal, Inc.) 3,000,000
2,000,000 Decatur, AL IDB, Solid Waste Disposal Revenue Bonds (Series 1996)
Weekly VRDNs (Trico Steel Company, L.L.C. Project)/(Chase
Manhattan Bank N.A., New York LOC) 2,000,000
6,000,000 Homewood, AL IDA Weekly VRDNs (Mountain Brook Inn
(Homewood AL))/(SouthTrust Bank of Alabama, Birmingham LOC) 6,000,000
1,000,000 (a)Madison, AL IDA, (Series A) Weekly VRDNs (Executive Inn)/
(Amsouth Bank N.A., Birmingham LOC) 1,000,000
15,400,000 Mobile, AL Port City Medical Clinic Board, Revenue Bonds (Series
1992-A), 3.55% CP (Mobile, AL Infirmiary Association)/(Rabobank
Nederland, Utrecht LOC), Mandatory Tender 5/14/1997 15,400,000
4,000,000 Montgomery, AL BMC Special Care Facilities Finance Authority,
(Series 94A) Weekly VRDNs (Baptist Medical Center, AL)/(Amsouth
Bank N.A., Birmingham LOC) 4,000,000
4,500,000 Stevenson, AL IDB, Industrial Revenue Bonds (Series 1996-A) Weekly
VRDNs (Unitog Co.)/(UMB Bank, N.A. LOC) 4,500,000
5,425,000 Vincent, AL IDB Weekly VRDNs (Headquarters Partnership Project)/
(National Australia Bank, Ltd., Melbourne LOC) 5,425,000
Total 48,475,000
ARIZONA -- 1.0%
349,200 Gilbert, AZ IDA Weekly VRDNs (Foxworth-Galbraith Lumber Co.)/
(Bank One, Arizona N.A. LOC) 349,200
9,725,000 Maricopa County, AZ, HFA (Series 1984) Weekly VRDNs (Gannett
Co., Inc.) 9,725,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
ARIZONA -- CONTINUED
$ 1,473,000 Maricopa County, AZ, IDA Weekly VRDNs (Chaparral City Water
Services)/(Bank One, Arizona N.A. LOC) $ 1,473,000
1,565,000 Pima County, AZ IDA Weekly VRDNs (A & P Investments)/(Bank One,
Arizona N.A. LOC) 1,565,000
5,203,000 Pima County, AZ IDA Weekly VRDNs (BJR Investments, Inc.)/(Bank
One, Arizona N.A. LOC) 5,203,000
Total 18,315,200
ARKANSAS -- 0.4%
5,300,000 Pine Bluff, AR, (Series 1985) Weekly VRDNs (Camden Wire Project)/
(Chase Manhattan Bank N.A., New York LOC) 5,300,000
2,500,000 Pocahontas, AR, IDRB (Series 1995) Weekly VRDNs (MacLean ESNA
L.P. Project)/(Northern Trust Co., Chicago, IL LOC) 2,500,000
Total 7,800,000
CALIFORNIA -- 6.3%
1,900,000 Barstow Unified School District, CA, 4.25% TRANs, 6/30/1997 1,901,940
9,325,000 (a)California HFA, CDC Municipal Products, Inc. Class A Certificates
(Series 1996A) Weekly VRDNs (CDC Municipal Products, Inc. LIQ) 9,325,000
13,850,000 (a)California Public Capital Improvements Financing Authority, Trust
Receipts (Series 1996 FR-3) Weekly VRDNs (MBIA INS)/(Bank of
New York, New York LIQ) 13,850,000
20,000,000 California School Cash Reserve Program Authority, (Series A), 4.75%
TRANs (MBIA INS), 7/2/1997 20,043,675
5,000,000 California School Cash Reserve Program Authority, (Series B), 4.50%
TRANs (MBIA INS), 12/19/1997 5,031,171
7,000,000 California State, (Series A), 4.50% RANs, 6/30/1997 7,008,797
18,800,000 California State, GO Tax Exempt Notes, 3.05% CP (Bayerische
Landesbank Girozentrale, Credit Suisse, Zurich, Landesbank
Hessen-Thueringen, Frankfurt, Morgan Guaranty Trust Co., New York
and Westdeutsche Landesbank Girozentrale LIQs), Mandatory Tender
4/11/1997 18,800,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
CALIFORNIA -- CONTINUED
$ 21,000,000 California Statewide Communities Development Authority, (1996
Series A), 4.75% TRANs (FSA INS), 6/30/1997 $ 21,038,892
13,200,000 Orange County, CA Local Transportation Authority, Sales Tax Revenue
Notes, 3.30% CP (Industrial Bank of Japan Ltd., Tokyo LOC),
Mandatory Tender 4/7/1997 13,200,000
Total 110,199,475
COLORADO -- 1.2%
3,000,000 (a)Colorado Municipal Securities Trust, Series 1996A Weekly VRDNs
(Arapahoe County, CO School District)/(Norwest Bank Minnesota,
Minneapolis LIQ) 3,000,000
4,000,000 Colorado Springs, CO Utility System, IDRB's (Series 1996) Weekly
VRDNs (Micro Metals, Inc.)/(Colorado National Bank, Denver LOC) 4,000,000
4,000,000 Denver (City & County), CO, (Series 1991-B) Weekly VRDNs (Denver,
CO City & County Airport Authority)/(Sanwa Bank Ltd, Osaka LOC) 4,000,000
4,845,000 Mesa County, CO, IDR (Series 1996) Weekly VRDNs (3D Systems
Corp.)/(Norwest Bank Minnesota, Minneapolis LOC) 4,845,000
5,365,000 (a)Thornton, CO, Multifamily Housing Refunding Revenue Bonds (1989
Series A) Weekly VRDNs (Quail Ridge Project)/(General Electric
Capital Corp. LOC) 5,365,000
Total 21,210,000
CONNECTICUT -- 2.6%
4,000,000 (a)Clipper Connecticut Tax Exempt Trust, (Series 1994-1) Weekly VRDNs
(State Street Bank and Trust Co. LIQ) 4,000,000
7,000,000 Connecticut Development Authority, (Series A) Weekly VRDNs (Exeter
Energy)/(Sanwa Bank Ltd, Osaka LOC) 7,000,000
14,000,000 Connecticut Development Authority, PCR (Series 1993A) Weekly
VRDNs (Connecticut Light & Power Co.)/(Deutsche Bank, AG LOC) 14,000,000
5,300,000 Connecticut Development Health Care Facilities Weekly VRDNs
(Independence Living)/(Chase Manhattan Bank N.A., New York LOC) 5,300,000
3,600,000 Connecticut Development Health Care Facilities Weekly VRDNs
(Independence Living)/(Credit Local de France LOC) 3,600,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
CONNECTICUT -- CONTINUED
$ 11,200,000 Connecticut State Special Tax Obligation Transportation Infrastructure
Authority Weekly VRDNs (Connecticut State)/(Commerzbank AG,
Frankfurt LOC) $ 11,200,000
Total 45,100,000
DISTRICT OF COLUMBIA -- 1.5%
12,000,000 District of Columbia Housing Finance Agency, (Series 1996B), 3.75%
TOBs (Trinity Funding Company INV), Mandatory Tender 12/1/1997 12,000,000
6,000,000 District of Columbia Housing Finance Agency, (Series 1996C), 3.90%
TOBs (Trinity Funding Company INV), Mandatory Tender 12/1/1997 6,000,000
7,740,000 District of Columbia, (Series A) Weekly VRDNs (American
University)/(National Westminster Bank, PLC, London LOC) 7,740,000
Total 25,740,000
FLORIDA -- 2.6%
5,500,000 Dade County, FL Water & Sewer System Weekly VRDNs (FGIC INS)/
(Commerzbank AG, Frankfurt LIQ) 5,500,000
9,730,000 Eustis Health Facilities Authority, FL, Health Facilities Revenue Bonds,
(Series 1992) Weekly VRDNs (Florida Hospital/Waterman, Inc.
Project)/(SunTrust Bank, Central Florida LOC) 9,730,000
5,700,000 Jacksonville, FL Electric Authority, Electric System T-E CP Notes
(Series D-1), 3.50% CP, Mandatory Tender 5/9/1997 5,698,587
7,340,000 Jacksonville, FL HFDC Daily VRDNs (River Garden Project)/(Banque
Paribas, Paris LOC) 7,340,000
8,400,000 Orange County, FL, Health Facilities Authority, Revenue Bonds (Series
1992) Weekly VRDNs (Adventist Health System)/(Banque Paribas,
Paris and SunTrust Bank, Central Florida LOCs) 8,400,000
8,350,000 Putnam County, FL Development Authority, PCR Bonds (Series 1984H)
Weekly VRDNs (Seminole Electric Cooperative, Inc (FL))/(National
Rural Utilities Cooperative Finance Corp. LOC) 8,350,000
Total 45,018,587
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
GEORGIA -- 5.7%
$ 6,200,000 Atlanta, GA, Urban Residential Finance Authority, Multifamily Rental
Housing Revenue Refunding Bonds (Series 1988A), 3.90% TOBs (West
Paces Club Towers Project)/(Sanwa Bank Ltd, Osaka LOC), Optional
Tender 5/1/1997 $ 6,200,000
2,550,000 Clayton County, GA Housing Authority, Revenue Refunding Bonds
(Series 1992) Weekly VRDNs (Oxford Townhomes Project)/(Amsouth
Bank N.A., Birmingham LOC) 2,550,000
5,765,000 Columbus, GA IDA Industrial & Port Development Commission,
(Series 1992) Weekly VRDNs (Maine Street Village Partnership)/
(Columbus Bank and Trust Co., GA LOC) 5,765,000
7,000,000 Coweta County, GA Residential Care Facilities for the Elderly, First
Lien Revenue Bonds (Series 1996B) Weekly VRDNs (Wesley Woods of
Newman-Peachtree City, Inc. Project)/(Banque Paribas, Paris LOC) 7,000,000
5,000,000 Crisp County, GA Development Authority, Solid Waste Disposal
Revenue Bonds (Series A), 3.90% TOBs (International Paper Co.)/
(International Paper Co. GTD), Optional Tender 3/1/1998 5,000,000
4,950,000 Douglas County, GA School District, 4.00% TANs, 12/31/1997 4,960,758
7,500,000 Floyd County, GA, 3.80% TANs, 12/31/1997 7,505,408
1,600,000 Municipal Electric Authority of Georgia, (Series 1985A), 3.20% CP
(Bayerische Landesbank Girozentrale, Credit Suisse, Zurich and
Morgan Guaranty Trust Co., New York LOCs), Mandatory Tender
4/1/1997 1,600,000
10,200,000 Municipal Electric Authority of Georgia, (Series 1985A), 3.20% CP
(Bayerische Landesbank Girozentrale, Credit Suisse, Zurich and
Morgan Guaranty Trust Co., New York LOCs), Mandatory Tender
4/1/1997 10,200,000
3,000,000 Municipal Electric Authority of Georgia, (Series 1985A), 3.25% CP
(Bayerische Landesbank Girozentrale, Credit Suisse, Zurich and
Morgan Guaranty Trust Co., New York LOCs), Mandatory Tender
4/8/1997 2,999,650
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
GEORGIA -- CONTINUED
$ 6,400,000 Municipal Electric Authority of Georgia, (Series 1987A), 3.35% CP
(Bayerische Landesbank Girozentrale, Credit Suisse, Zurich and
Morgan Guaranty Trust Co., New York LOCs), Mandatory Tender
5/21/1997 $ 6,400,000
32,250,000 Municipal Electric Authority of Georgia, (Series 1994D), 3.40% CP
(ABN AMRO Bank N.V., Amsterdam LOC), Mandatory Tender
4/11/1997 32,250,000
2,300,000 Rockdale County, GA Development Authority, (Series 1995) Weekly
VRDNs (Great Southern Wood Preserving Co.)/(SunTrust Bank,
Central Florida LOC) 2,300,000
5,550,000 Savannah, GA EDA, (Series 1995A) Weekly VRDNs (Home Depot, Inc.) 5,550,000
Total 100,280,816
ILLINOIS -- 6.3%
1,400,000 Champaign, IL, IDRB Weekly VRDNs (Christie Clinic)/(National City
Bank, Indiana LOC) 1,400,000
11,200,000 Chicago O'Hare International Airport, Special Facility Revenue Bonds
(Series 1983B) Daily VRDNs (American Airlines Project)/(Royal Bank
of Canada, Montreal LOC) 11,200,000
1,033,000 Illinois Development Finance Authority, IDR Weekly VRDNs
(Newlywed Food)/(Mellon Bank N.A., Pittsburgh LOC) 1,033,000
2,300,000 Illinois Development Finance Authority, EDRB (Series 1995) Weekly
VRDNs (Evapco, Inc. Project)/(Nationsbank, N.A., Charlotte LOC) 2,300,000
3,600,000 Illinois Development Finance Authority, IDRB (Series 1995) Weekly
VRDNs (Dickson Weatherproof Nail Co. Project)/(Lasalle National
Bank, Chicago LOC) 3,600,000
10,100,000 Illinois Development Finance Authority, PCR Daily VRDNs (Diamond
Star Motors Corp.)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 10,100,000
20,000,000 Illinois Development Finance Authority, PCR, (Series 1996B) Weekly
VRDNs (Commonwealth Edison Co.)/(AMBAC INS)/(Bank of
New York, New York LIQ) 20,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
ILLINOIS -- CONTINUED
$ 7,500,000 Illinois Educational Facilities Authority, 3.60% CP (Field Museum of
Natural History)/(Northern Trust Co., Chicago, IL LOC), Mandatory
Tender 5/15/1997 $ 7,500,000
40,000,000 Illinois Health Facilities Authority, Revenue Bonds (Series 1985B)
Weekly VRDNs (OSF Health Care Systems)/(Bank of America Illinois
and Rabobank Nederland, Utrecht LIQs) 40,000,000
2,055,000 Martinsville, IL, IDRB (Series 1995) Weekly VRDNs (PAP-R Products
Company Project)/(Bank One, Chicago LOC) 2,055,000
4,000,000 Mendota, IL, IDRB (Series 1995) Weekly VRDNs (Minnesota Diversified
Products, Inc. Project)/(Norwest Bank Minnesota, Minneapolis LOC) 4,000,000
1,800,000 Naperville, IL, Economic Development Revenue Refunding Bonds
(Series 1994) Weekly VRDNs (Independence Village Associates, Ltd
Project)/(First Bank N.A., Minneapolis LOC) 1,800,000
2,500,000 Oakbrook Terrace, IL, IDR (Series 1993) Weekly VRDNs (La Quinta
Inns, Inc.)/(Nationsbank of Texas, N.A. LOC) 2,500,000
3,000,000 Peoria, IL, (Series 1996) IDR Weekly VRDNs (J.T. Fennell Company, Inc.
Project)/(Bank One, Chicago LOC) 3,000,000
Total 110,488,000
INDIANA -- 1.0%
2,200,000 Bluffton, IN, Economic Development Refunding Revenue Bonds Weekly
VRDNs (Blount, Inc.)/(Morgan Guaranty Trust Co., New York LOC) 2,200,000
3,165,000 Hamilton County, IN, EDRB (Series 1995) Weekly VRDNs (Fabcon
L.L.C. Project)/(Norwest Bank Minnesota, Minneapolis LOC) 3,165,000
2,400,000 Kendallville, IN, IDRB (Series 1995) Weekly VRDNs (Rivnut Real
Estate, Ltd. Project)/(National City, Northeast LOC) 2,400,000
7,000,000 Richmond, IN EDA Weekly VRDNs (Gannett Co., Inc.) 7,000,000
2,130,000 Winamac, IN, (Series 1997) EDRB Weekly VRDNs (Pulaski Health
Foundation, Inc.)/(KeyBank, N.A. LOC) 2,130,000
Total 16,895,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
IOWA -- 0.3%
$ 4,950,000 Iowa Finance Authority, (Series 1996) Weekly VRDNs (Wittern Realty,
Inc. Project)/(Norwest Bank Minnesota, Minneapolis LOC) $ 4,950,000
KANSAS -- 0.8%
6,200,000 Burlington, KS, PCR, 3.45% CP (Kansas City Power and Light Co.)/
(Societe Generale, Paris LOC), Mandatory Tender 4/16/1997 6,200,000
6,000,000 Kansas Development Finance Authority, Multifamily Housing Revenue
Bonds (Series 1995) Weekly VRDNs (First Kansas State Partnership,
L.P.)/(Boatmen's National Bank of St. Louis LOC) 6,000,000
1,900,000 Olathe, KS, Industrial Revenue Bonds (Series 1995) Weekly VRDNs
(Garmin International, Inc. Project)/(Boatmen's National Bank of
St. Louis LOC) 1,900,000
Total 14,100,000
KENTUCKY -- 4.2%
1,800,000 Boone County, KY, (Series 1996) Weekly VRDNs (Western States
Envelope Company)/(Bank One, Milwaukee, WI N.A. LOC) 1,800,000
5,740,000 Henderson County, KY, Solid Waste Disposal (Series 1996) Weekly
VRDNs (Audubon Metals LLC Project)/(Harris Trust & Savings
Bank, Chicago LOC) 5,740,000
1,955,000 Jefferson County, KY, Industrial Building Revenue Bonds (Series 1995)
Weekly VRDNs (Derby Industries, Inc. Project)/(Liberty National Bank,
Louisville, Kentucky LOC) 1,955,000
12,000,000 Kentucky Interlocal School Transportation Association, (Series A),
4.05% TRANs, 6/30/1997 12,000,000
17,200,000 Kentucky Pollution Abatement & Water Resource Finance Authority
Daily VRDNs (Toyota Motor Credit Corp.) 17,200,000
34,000,000 Owensboro, KY, (Series 1996) Weekly VRDNs (Owensboro Mercy
Health System, Inc. Project)/(Bank of America Illinois LOC) 34,000,000
1,800,000 Owensboro, KY, Limited Obligation Revenue Bonds, 3.60% TOBs (Dart
Polymers)/(NBD Bank, Michigan LOC), Optional Tender 6/1/1997 1,800,000
Total 74,495,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
LOUISIANA -- 1.4%
$ 19,500,000 Louisiana HFA, Single Family Mortgage Revenue Bonds (Series
1997A-3), 3.75% TOBs (Trinity Funding Company INV), Mandatory
Tender 3/1/1998 $ 19,500,000
5,000,000 St. James Parish, LA, Pollution Control Revenue Weekly VRDNs
(Occidental Petroleum Corp.)/(Wachovia Bank of Georgia N.A.,
Atlanta LOC) 5,000,000
Total 24,500,000
MAINE -- 0.1%
1,750,000 Gardiner, ME IDB Weekly VRDNs (Associated Grocers)/(Westpac
Banking Corp. Ltd. LOC) 1,750,000
MARYLAND -- 1.3%
1,000,000 Maryland Health & Higher Educational Facilities Authority, (Series
1992A) Weekly VRDNs (Carroll County, MD General Hospital)/
(Nationsbank, N.A., Charlotte LOC) 1,000,000
3,500,000 Maryland State Community Development Administration, (1987
Series 4), 3.75% TOBs (First National Bank of Chicago LIQ), Optional
Tender 4/1/1997 3,500,000
10,220,000 Maryland State Department of Transportation, 3.625% Bonds, 6/15/1997 10,197,005
1,805,000 Maryland State IDFA, (Series 1991) Weekly VRDNs (Maryland
Academy of Sciences Facility)/(Nationsbank, N.A., Charlotte LOC) 1,805,000
6,000,000 Montgomery County, MD Housing Opportunities Commission,
(1996 Series A), 3.70% TOBs, Mandatory Tender 11/13/1997 6,000,000
Total 22,502,005
MASSACHUSETTS -- 2.9%
3,050,000 Commonwealth of Massachusetts Daily VRDNs (National Westminster
Bank, PLC, London LOC) 3,050,000
5,000,000 Gardner, MA, 4.15% BANs, 11/7/1997 5,008,200
2,699,323 Gloucester, MA, 3.85% BANs, 8/8/1997 2,700,517
4,200,000 Massachusetts HEFA, (Series A) Weekly VRDNs (Brigham & Women's
Hospital)/(Sanwa Bank Ltd, Osaka LOC) 4,200,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
MASSACHUSETTS -- CONTINUED
$ 3,200,000 Massachusetts HEFA, (Series E) Daily VRDNs (Capital Asset
Program)/(First National Bank of Chicago LOC) $ 3,200,000
3,000,000 Massachusetts HEFA, (Series G) Weekly VRDNs (Massachusetts
Institute of Technology) 3,000,000
7,350,000 Massachusetts IFA Weekly VRDNs (Kendall Square Entity)/(State
Street Bank and Trust Co. LOC) 7,350,000
3,000,000 Massachusetts IFA, (Series 1992B), 3.55% CP (New England Power
Co.), Mandatory Tender 5/29/1997 3,000,000
3,800,000 Massachusetts IFA, IDRB (Series 1995) Weekly VRDNs (Dunsirn
Industries, Inc. Project)/(Bank One, Milwaukee, WI N.A. LOC) 3,800,000
4,200,000 Massachusetts Water Resources Authority, (Series 1994), 3.50% CP
(Morgan Guaranty Trust Co., New York LOC), Mandatory Tender 7/16/1997 4,200,000
7,000,000 Southborough, MA, 4.00% BANs, 2/6/1998 7,017,225
5,000,000 Springfield, MA, 4.10% BANs (Fleet National Bank, Providence, R.I.
LOC), 11/21/1997 5,012,348
Total 51,538,290
MICHIGAN -- 2.0%
4,209,000 Battle Creek, MI Economic Development Corporation, Limited
Obligation Economic Development Revenue Refunding Bonds (Series
1992) Weekly VRDNs (Michigan Carton & Paperboard Company)/
(American National Bank, Chicago LOC) 4,209,000
850,000 Dearborn, MI Economic Development Corp., (Series 1990) Weekly
VRDNs (Exhibit Productions, Inc. Project)/(First of America Bank -
Illinois LOC) 850,000
1,200,000 Garden City, MI School District, State Aid Notes, 4.30% RANs (NBD
Bank, Michigan LOC), 4/15/1997 1,200,222
600,000 Michigan Higher Education Student Loan Authority, Refunding
Revenue Bonds (Series X11-B) Weekly VRDNs (AMBAC INS)/
(Kredietbank N.V., Brussels LIQ) 600,000
2,300,000 (a)Michigan State Hospital Finance Authority, (Series A) Weekly VRDNs
(OSF Health Care Systems) 2,300,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
MICHIGAN -- CONTINUED
$ 15,000,000 Michigan State, 4.50% TRANs, 9/30/1997 $ 15,075,016
900,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series
1991) Weekly VRDNs (Martin Luther Memorial Home, Inc.)/(National
Australia Bank, Ltd., Melbourne LOC) 900,000
5,005,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series
1995) Weekly VRDNs (Wayne Disposal-Oakland, Inc. Project)/
(Comerica Bank, Detroit, MI LOC) 5,005,000
3,000,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series
1995) Weekly VRDNs (Wellness Plan Project)/(NBD Bank,
Michigan LOC) 3,000,000
1,750,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds, Series
1995 Weekly VRDNs (Welch Properties Project)/(Old Kent Bank &
Trust Co., Grand Rapids LOC) 1,750,000
Total 34,889,238
MINNESOTA -- 1.9%
9,600,000 Brooklyn Park, MN EDA, (Series 1997), 5.015% TOBs (Brooks Landing
and Brooks Gardens)/(Bayerische Landesbank Girozentrale INV),
Mandatory Tender 3/1/1998 9,600,000
1,345,000 Byron, MN IDB Weekly VRDNs (Schmidt Printing)/(Norwest Bank
Minnesota, Minneapolis LOC) 1,345,000
15,500,000 Minneapolis CDA, Refunding Revenue Bonds Weekly VRDNs
(Riverplace Project (The Pinnacle Apartments))/(Sumitomo Bank
Ltd., Osaka LOC) 15,500,000
7,000,000 Rochester, MN Health Care Facility Authority Weekly VRDNs (Mayo
Foundation) 7,000,000
Total 33,445,000
MISSISSIPPI -- 0.2%
4,000,000 Warren County, MS IDA Weekly VRDNs (Vesper Corp.)/(PNC Bank,
N.A. LOC) 4,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
MISSOURI -- 0.6%
$ 4,670,000 Missouri Development Finance Board, (Series 1995) Weekly VRDNs
(Wilson Trailer Sales, Inc. Project)/(Norwest Bank Minnesota,
Minneapolis LOC) $ 4,670,000
6,366,000 Missouri State Environmental Improvement & Energy Authority, 3.65%
CP (Kansas City Power and Light Co.), Mandatory Tender 11/5/1997 6,366,000
Total 11,036,000
NEBRASKA -- 0.3%
1,820,000 Douglas County, NE, IDR Weekly VRDNs (Majors Plastics, Inc.)/
(Norwest Bank Minnesota, Minneapolis LOC) 1,820,000
1,160,000 (a)Douglas County, NE, Industrial Development Revenue Refunding
Bonds (Series 1994) Weekly VRDNs (Omaha Fixture Manufacturing
Project)/(NBD Bank, Michigan LOC) 1,160,000
2,145,000 Douglas County, NE, Subordinated IDRB (Series 1995) Weekly VRDNs
(Aksarben Foods, Inc. Project)/(Norwest Bank Minnesota,
Minneapolis LOC) 2,145,000
Total 5,125,000
NEVADA -- 1.7%
7,600,000 Clark County, NV, IDRB (Series 1995C) Weekly VRDNs (Nevada
Power Co.)/(Barclays Bank PLC, London LOC) 7,600,000
19,000,000 Nevada Housing Division, Multi-Unit Housing Revenue Refunding
Bonds (1991 Series A) Weekly VRDNs (Park Vista Apartments
Project)/(Sumitomo Bank Ltd., Osaka LOC) 19,000,000
2,500,000 Sparks, NV, Industrial Development Revenue Bonds (Series 1996)
Weekly VRDNs (The Antioch Publishing Co. Project)/(National City
Bank, Dayton, OH LOC) 2,500,000
Total 29,100,000
NEW HAMPSHIRE -- 1.5%
9,000,000 New Hampshire Business Finance Authority, PCR Bonds (Series A),
3.55% CP (New England Power Co.), Mandatory Tender 6/11/1997 9,000,000
7,100,000 New Hampshire Business Finance Authority, PCR Bonds (Series A),
3.60% CP (New England Power Co.), Mandatory Tender 5/8/1997 7,100,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
NEW HAMPSHIRE -- CONTINUED
$ 10,000,000 New Hampshire Business Finance Authority, PCR Bonds (Series A),
3.70% CP (New England Power Co.), Mandatory Tender 5/12/1997 $ 10,000,000
Total 26,100,000
NEW JERSEY -- 4.9%
3,042,500 Atlantic Highlands, NJ, 4.125% BANs, 1/28/1998 3,051,587
3,399,864 Haddonfield, NJ, 3.94% BANs, 6/6/1997 3,400,263
2,531,000 Hamilton Township, NJ, 4.125% BANs, 1/30/1998 2,538,610
6,000,000 Hammonton, NJ, 4.00% BANs, 11/26/1997 6,011,346
3,969,000 Highland Park, NJ, 4.125% BANs, 2/6/1998 3,982,836
8,628,681 New Brunswick, NJ, 3.875% BANs, 12/23/1997 8,639,245
7,500,000 New Jersey EDA Weekly VRDNs (Center-For-Aging -- Applewood
Estates)/(Banque Paribas, Paris LOC) 7,500,000
255,267 (a)New Jersey EDA Weekly VRDNs (H.L. Bhasin)/(Ford Motor Credit
Corp. LIQ)/(Chase Manhattan Bank N.A., New York LOC) 255,267
4,500,000 New Jersey EDA Weekly VRDNs (YM-YWHA of Bergen County, NJ)/
(Bank of New York, New York LOC) 4,500,000
10,900,000 New Jersey EDA, (Series 1995) Weekly VRDNs (Hillcrest Health
Service System, Inc.)/(Industrial Bank of Japan Ltd., Tokyo LOC) 10,900,000
12,000,000 New Jersey State, (Series 1997A), 3.55% CP (Union Bank of
Switzerland, Zurich LIQ), Mandatory Tender 5/27/1997 12,000,000
2,947,500 Sparta Township, NJ, 4.125% BANs, 6/13/1997 2,949,060
4,442,000 Trenton, NJ, 4.00% BANs, 12/18/1997 4,449,390
6,600,000 Trenton, NJ, 4.00% BANs, 12/18/1997 6,614,536
9,754,100 West Milford Township, NJ, (Series 1997 A), 4.00% BANs, 1/23/1998 9,777,038
Total 86,569,178
NEW MEXICO -- 1.2%
6,395,000 Albuquerque, NM, IDR (Series 1996) Weekly VRDNs (Rose's Southwest
Papers, Inc. Project)/(Norwest Bank Minnesota, Minneapolis LOC) 6,395,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
NEW MEXICO -- CONTINUED
$ 2,000,000 Albuquerque, NM, IDR (Series 1996A) Weekly VRDNs (El Encanto, Inc.
Project)/(Norwest Bank Minnesota, Minneapolis LOC) $ 2,000,000
3,300,000 Albuquerque, NM, Refunding Revenue Bonds (Series 1992) Weekly
VRDNs (Charter Hospital of Albuquerque, Inc.)/(Bankers Trust Co.,
New York LOC) 3,300,000
3,200,000 Farmington, NM, PCR Bonds (1994 Series C) Daily VRDNs (Arizona
Public Service Corp.)/(Union Bank of Switzerland, Zurich LOC) 3,200,000
6,300,000 Las Cruces, NM, IDRB (Series 1994A) Weekly VRDNs (F & A Dairy
Products, Inc. Project)/(Norwest Bank Minnesota, Minneapolis LOC) 6,300,000
Total 21,195,000
NEW YORK -- 6.1%
10,000,000 Clyde-Savannah Central School District, NY, 4.625% BANs, 6/27/1997 10,012,596
3,000,000 New York City, NY Housing Development Corp., (Series A) Weekly
VRDNs (East 96th Street Project)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 3,000,000
10,000,000 (a)New York City, NY Municipal Water Finance Authority, Trust Receipts
(Series 1997) Weekly VRDNs (MBIA INS)/(Bank of New York,
New York LIQ) 10,000,000
4,500,000 New York City, NY Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds (Series 1995 A) Daily VRDNs (FGIC
INS)/(FGIC Securities Purchase, Inc. LIQ) 4,500,000
3,800,000 New York City, NY Daily VRDNs (Morgan Guaranty Trust Co., New
York LOC) 3,800,000
3,000,000 New York City, NY Housing Special Obligations Daily VRDNs
(Morgan Guaranty Trust Co., New York LOC) 3,000,000
17,000,000 New York City, NY, (Series B), 4.50% RANs (Bank of Nova Scotia,
Toronto, Canadian Imperial Bank of Commerce, Toronto and
Commerzbank AG, Frankfurt LOCs), 6/30/1997 17,028,564
7,900,000 New York City, NY, GO Bonds (Series 1995 F and G) Weekly VRDNs
(Morgan Guaranty Trust Co., New York LOC) 7,900,000
9,000,000 New York City, NY, UT GO Fiscal 1994 (Series H-3), 3.60% CP
(FSA INS)/(State Street Bank and Trust Co. LIQ), Mandatory Tender
6/19/1997 9,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
NEW YORK -- CONTINUED
$ 5,500,000 New York State HFA Weekly VRDNs (Special Surgery Hospital)/
(Chase Manhattan Bank N.A., New York LOC) $ 5,500,000
200,000 New York State Local Government Assistance Corp., (Series D)
Weekly VRDNs (Societe Generale, Paris LOC) 200,000
400,000 New York State Local Government Assistance Corp., (Series E)
Weekly VRDNs (Canadian Imperial Bank of Commerce,
Toronto LOC) 400,000
6,000,000 New York State, (Series A), 4.50% Bonds, 7/15/1997 6,010,513
4,000,000 South Country Central School District, NY, 4.50% TANs,
6/25/1997 4,004,024
15,000,000 (a)VRDC/IVRC Trust, (Series 1992A) Weekly VRDNs (New York
City Municipal Water Finance Authority)/(MBIA INS)/(Hong
Kong & Shanghai Banking Corp. LIQ) 15,000,000
8,000,000 (a)VRDC/IVRC Trust, (Series 1993G) Weekly VRDNs (St. Lukes
Roosevelt Hospital Center)/(FHA INS)/(Hong Kong & Shanghai
Banking Corp. LIQ) 8,000,000
Total 107,355,697
NORTH CAROLINA -- 4.2%
1,000,000 Alamance County, NC Industrial Facilities & Pollution Control
Financing Authority, (Series A) Weekly VRDNs (Culp, Inc.)/(Wachovia
Bank of NC, NA, Winston-Salem LOC) 1,000,000
2,800,000 Catawba County, NC Industrial Facilities & Pollution Control
Financing Authority, (Series 1994) Weekly VRDNs (Ethan Allen Inc
Project)/(Bankers Trust Co., New York LOC) 2,800,000
1,000,000 Cleveland County, NC Industrial Facilities and Pollution Control
Financing Authority Weekly VRDNs (PPG Industries, Inc.) 1,000,000
825,000 Guilford County, NC Industrial Facilities & PCFA, (Series 1989) Weekly
VRDNs (Culp, Inc.)/(Wachovia Bank of NC, N.A., Winston-Salem LOC) 825,000
2,000,000 Lee County, NC Industrial Facility & PCFA, (Series 1989) Weekly
VRDNs (Avondale Mills, Inc.)/(SunTrust Bank, Atlanta LOC) 2,000,000
17,400,000 (a)Martin County, NC IFA, (Series 1993) Weekly VRDNs
(Weyerhaeuser Co.) 17,400,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
NORTH CAROLINA -- CONTINUED
$ 3,680,000 Mecklenberg County, NC Industrial Facility & PCFA, (Series 1988)
Weekly VRDNs (Florida Steel Corp.)/(Bankers Trust Co.,
New York LOC) $ 3,680,000
710,000 (a)NCNB Pooled Tax-Exempt Trust, (Series 1990A) Weekly VRDNs
(NCNB Tax Exempt Trust 1990a)/(Nationsbank, N.A., Charlotte LOC) 710,000
3,095,000 (a)NCNB Pooled Tax-Exempt Trust, (Series 1990B) Weekly VRDNs
(NCNB Tax-Exempt Trust 1990b)/(Nationsbank, N.A., Charlotte LOC) 3,095,000
2,250,000 New Hanover County, NC, GO School Bonds, (Series 1995) Weekly
VRDNs (Wachovia Bank of NC, N.A., Winston-Salem LIQ) 2,250,000
2,250,000 New Hanover County, NC, GO School Bonds, (Series 1995) Weekly
VRDNs (Wachovia Bank of NC, N.A., Winston-Salem LIQ) 2,250,000
10,000,000 North Carolina Educational Facilities Finance Agency, (Series 1990)
Weekly VRDNs (Bowman Gray School of Medicine)/(Wachovia Bank
of NC, NA, Winston-Salem LOC) 10,000,000
2,000,000 North Carolina Medical Care Commission Hospital, (Series 1996)
Weekly VRDNs (Adult Communities Total Services, Inc)/(Lasalle
National Bank, Chicago LOC) 2,000,000
3,300,000 North Carolina Medical Care Commission Hospital, (Series 1996)
Weekly VRDNs (North Carolina Baptist) 3,300,000
9,300,000 North Carolina Medical Care Commission Hospital, Revenue Bonds
(Series 1992B) Weekly VRDNs (North Carolina Baptist) 9,300,000
7,300,000 North Carolina Medical Care Commission Hospital, Revenue Bonds
(Series 1993) Weekly VRDNs (Moses H. Cone Memorial) 7,300,000
2,100,000 North Carolina Medical Care Commission Hospital, Revenue Bonds
(Series 1994) Weekly VRDNs (Hugh Chatam Memorial/Rutherford
Hospitals)/(First Union National Bank, Charlotte, NC LOC) 2,100,000
2,000,000 Rutherford County, NC, Industrial Facilities Pollution Control
Financing Authority Weekly VRDNs (Spring-Ford Knitting Co.)/
(Branch Banking & Trust Co, Wilson LOC) 2,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
NORTH CAROLINA -- CONTINUED
$ 1,350,000 University of North Carolina, (Series 1989) Weekly VRDNs (University
of North Carolina at Chapel Hill General Alumni Association)/(Credit
Suisse, Zurich LOC) $ 1,350,000
Total 74,360,000
NORTH DAKOTA -- 0.2%
3,275,000 (a)Fargo, ND, IDRB (Series 1994) Weekly VRDNs (Pan-O-Gold Baking Co.
Project)/(Norwest Bank Minnesota, Minneapolis LOC) 3,275,000
OHIO -- 1.6%
11,000,000 Clermont County, OH, Adjustable Rate Hospital Facilities Revenue
Bonds (Series 1996) Weekly VRDNs (Mercy Health Systems)/(Credit
Suisse, Zurich LIQ) 11,000,000
300,000 Cuyahoga County, OH IDA Weekly VRDNs (Health Hill)/(Union Bank
of Switzerland, Zurich LOC) 300,000
450,000 Oakwood Village, OH IDA Weekly VRDNs (Oak Leaf Industries)/
(First Union National Bank, Charlotte, NC LOC) 450,000
16,000,000 Ohio HFA, (Series 1997 A-1), 3.55% TOBs, Mandatory Tender 9/1/1997 16,000,000
Total 27,750,000
OKLAHOMA -- 1.1%
8,000,000 Broken Arrow, OK EDA Weekly VRDNs (Blue Bell Creameries)/
(Banque Nationale de Paris LOC) 8,000,000
2,295,000 Claremore, OK IDA Weekly VRDNs (Baldor Electric Co.)/(Wachovia
Bank of Georgia N.A., Atlanta LOC) 2,295,000
2,080,000 Oklahoma County, OK Finance Authority, (Series 1996) Weekly VRDNs
(Avalon Project)/(Bank One, Texas N.A. LOC) 2,080,000
6,100,000 Tulsa, OK International Airport, Variable Rate Certificates (Series 1997
B-1) Weekly VRDNs (MBIA INS)/(Bank of America NT and SA,
San Francisco LIQ) 6,100,000
Total 18,475,000
PENNSYLVANIA -- 2.6%
1,200,000 Berks County, PA IDA Weekly VRDNs (Lutheran Home at Topton
Project)/(Corestates Bank N.A., Philadelphia, PA LOC) 1,200,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
PENNSYLVANIA -- CONTINUED
$ 7,000,000 Cumberland County, PA Municipal Authority, Variable Rate Revenue
Bonds (Series 1996 B), 4.25% TOBs (Dickinson College)/(Mellon Bank
N.A., Pittsburgh LOC), Optional Tender 10/31/1997 $ 7,026,496
11,000,000 (a)Delaware County, PA IDA, Refunding Revenue Bonds (Series 1993G),
3.625% TOBs (Delaware County Resource Recovery (PA))/(General
Electric Capital Corp. LOC), Optional Tender 12/1/1997 11,000,000
2,900,000 Erie County, PA Hospital Authority Weekly VRDNs (St. Mary's
Hospital Erie, PA)/(PNC Bank, N.A. LOC) 2,900,000
7,000,000 (a)Erie County, PA Hospital Authority Weekly VRDNs (St. Vincent
Health System)/(Mellon Bank N.A., Pittsburgh LOC) 7,000,000
1,600,000 Erie County, PA IDA, Multi Mode Revenue Refunding Bonds Weekly
VRDNs (Corry Manor, Inc.)/(PNC Bank, N.A. LOC) 1,600,000
2,000,000 Montgomery County, PA IDA Weekly VRDNs (Plymouth Woods)/
(PNC Bank, N.A. LOC) 2,000,000
3,500,000 Montgomery County, PA IDA, (Series 1984) Weekly VRDNs (Seton
Co.)/(First Union National Bank, Charlotte, NC LOC) 3,500,000
6,675,000 Montgomery County, PA IDA, Commercial Development Revenue
Bonds (Series 1992) Weekly VRDNs (Hickory Pointe Project)/(First
Union National Bank, North LOC) 6,675,000
1,100,000 Pennsylvania EDFA, (1995 Series E) Weekly VRDNs (Home Nursing
Agency Affiliates Project)/(PNC Bank, N.A. LOC) 1,100,000
2,000,000 (a)Pennsylvania EDFA, (Series 1996 E) Weekly VRDNs (Adelphoi, Inc.)/
(PNC Bank, N.A. LOC) 2,000,000
Total 46,001,496
SOUTH CAROLINA -- 1.2%
2,660,000 Berkeley, SC IDRB, (Series 1989) Weekly VRDNs (W.W. Williams
Company Project)/(Bank One, Columbus, N.A. LOC) 2,660,000
6,000,000 Georgetown County, SC, Pollution Control Facilities Adjustable Rate
Bonds (Series A), 4.00% TOBs (International Paper Co.), Optional
Tender 9/1/1997 6,000,000
5,075,000 Greenville County, SC Hospital Authority, (Series 1989) Weekly VRDNs
(Charter Hospital St. Louis)/(Bankers Trust Co., New York LOC) 5,075,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
SOUTH CAROLINA -- CONTINUED
$ 2,400,000 South Carolina Education Facilities Authority, Educational Facilities
Revenue Bonds (Series 1993) Weekly VRDNs (Presbyterian
College Project) $ 2,400,000
5,255,000 South Carolina Job Development Authority, Hospital Facilities
Revenue Bonds, (Series 1994) Weekly VRDNs (Rolling Green Village
Project)/(Branch Banking & Trust Co, Wilson LOC) 5,255,000
Total 21,390,000
SOUTH DAKOTA -- 2.5%
610,000 Mitchell, SD, IDR Weekly VRDNs (Holiday Inn)/(First Bank N.A.,
Minneapolis LOC) 610,000
1,105,000 Rapid City, SD Weekly VRDNs (Gillette Dairy Black Hills, Inc.)/(Bank
of Tokyo-Mitsubishi Ltd. LOC) 1,105,000
15,555,000 South Dakota Housing Development Authority, (Series 1996E), 3.75%
TOBs, Mandatory Tender 11/13/1997 15,555,000
14,395,000 (a)South Dakota Housing Development Authority, CDC Municipal
Products, Inc. Class A Certificates (Series 1996C) Weekly VRDNs
(CDC Municipal Products, Inc. LIQ) 14,395,000
10,090,000 (a)South Dakota Housing Development Authority, PT-85 (1988 Series A)
Weekly VRDNs (Rabobank Nederland, Utrecht LIQ) 10,090,000
1,380,000 Watertown, SD, (Series 1991) Weekly VRDNs (Tescom Corp.)/
(Norwest Bank Minnesota, Minneapolis LOC) 1,380,000
Total 43,135,000
TENNESSEE -- 0.7%
6,500,000 Chattanooga-Hamilton County, TN Hospital Authority Daily VRDNs
(Erlanger Medical Center)/(Morgan Guaranty Trust Co., New York LIQ) 6,500,000
3,500,000 Tennessee Housing Development Agency, Homeownership Program
Bonds (Issue 1996-3), 3.85% TOBs, Optional Tender 5/29/1997 3,500,000
2,250,000 Washington County, TN IDB, Revenue Refunding Bonds (Series 1996)
Weekly VRDNs (Springbrook Properties Project)/(SunTrust Bank,
Nashville LOC) 2,250,000
Total 12,250,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
TEXAS -- 10.2%
$ 900,000 Corpus Christi, TX IDC Weekly VRDNs (Grainger (W.W.), Inc.) $ 900,000
3,200,000 Gulf Coast, TX IDA, Marine Terminal Revenue Bonds (Series 1993)
Daily VRDNs (Amoco Corp.) 3,200,000
1,500,000 Gulf Coast, TX Waste Disposal Authority Daily VRDNs (Amoco Corp.) 1,500,000
2,250,000 Harris County, TX Cultural Education Facilities Finance Corp. Weekly
VRDNs (Houston Museum of Natural Sciences)/(Bank One, Texas
N.A. LOC) 2,250,000
4,100,000 Harris County, TX HFDC, (Series 1994) Daily VRDNs (Methodist
Hospital, Harris County, TX) 4,100,000
10,000,000 Harris County, TX HFDC, (Series C) Daily VRDNs (St. Luke's
Episcopal Hospital) 10,000,000
25,800,000 Harris County, TX HFDC, Hospital Revenue Bonds (Series 1997) Daily
VRDNs (Methodist Hospital, Harris County, TX) 25,800,000
14,200,000 Harris County, TX HFDC, Hospital Revenue Bonds (Series 1997B)
Weekly VRDNs (Memorial Hospital System)/(MBIA INS)/(Societe
Generale, Paris LIQ) 14,200,000
955,000 Harris County, TX IDC Weekly VRDNs (Grainger (W.W.), Inc.) 955,000
14,900,000 Harris County, TX School Health Care, 3.75% CP (Sisters of Charity of
The Incarnate Word)/(Toronto-Dominion Bank LIQ), Mandatory
Tender 6/30/1997 14,900,000
2,210,000 Liberty County, TX IDA Weekly VRDNs (Insteel Industries, Inc.)/(First
Union National Bank, Charlotte, NC LOC) 2,210,000
3,000,000 Lubbock, TX IDC Daily VRDNs (McLane Co., Inc.)/(Nationsbank,
N.A., Charlotte LOC) 3,000,000
6,000,000 Matagorda County, TX Navigation District Number One, Revenue
Refunding Bonds (Series 1997) Daily VRDNs (Houston Light &
Power Co.)/(AMBAC INS)/(Union Bank of Switzerland, Zurich LIQ) 6,000,000
1,680,000 North Richland Hills, TX IDC Weekly VRDNs (Tecnol, Inc.)/
(Nationsbank, N.A., Charlotte LOC) 1,680,000
6,000,000 Tarrant County, TX IDC Weekly VRDNs (Holden Business Forms)/
(Norwest Bank Minnesota, Minneapolis LOC) 6,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
TEXAS -- CONTINUED
$ 33,425,000 Texas Small Business Industrial Development Corp., (Series 1986)
Weekly VRDNs (Texas Public Facilities Capital Access Program)/
(Credit Suisse, Zurich and National Westminster Bank, PLC, London
LOCs) $ 33,425,000
31,050,000 Texas State, 4.75% TRANs, 8/29/1997 31,150,805
9,200,000 Tyler, TX Health Facilities Development Corp., (Series 1993C), 3.45%
CP (East Texas Medical Center)/(Banque Paribas, Paris LOC),
Mandatory Tender 5/21/1997 9,200,000
9,145,000 (a)Tyler, TX Health Facilities Development Corp., Hospital Revenue
Bonds (Series 1994) Weekly VRDNs (East Texas Medical Center)/
(Nationsbank of Texas, N.A. LOC) 9,145,000
Total 179,615,805
UTAH -- 0.4%
7,400,000 Salt Lake County, UT, Multi-Family Housing Revenue Refunding
Bonds (Series 1992) Weekly VRDNs (Santa Fe Apartments)/(First
Security Bank of Utah, NA LOC) 7,400,000
VIRGINIA -- 9.2%
15,300,000 Alexandria, VA Redevelopment and Housing Authority Weekly
VRDNs (Crystal City Apartments)/(Safeco Insurance Co. of America
INS)/(Barclays Bank PLC, London LIQ) 15,300,000
6,525,000 Alexandria, VA Redevelopment and Housing Authority, (Series 1996A)
Weekly VRDNs (Glebe Park Apartments Project)/(Kredietbank N.V.,
Brussels LOC) 6,525,000
9,250,000 Carroll County, VA IDA, IDRB (Series 1995) Weekly VRDNs (Kentucky
Derby Hosiery Co, Inc. Project)/(Bank One, Kentucky LOC) 9,250,000
1,000,000 Chesapeake, VA IDA, IDRB (Series 1988) Weekly VRDNs (Sumitomo
Machinery Corp. of America Corp.)/(Sumitomo Bank Ltd., Osaka LOC) 1,000,000
14,100,000 Chesterfield County, VA IDA, 3.60% CP (Virginia Electric Power Co.),
Mandatory Tender 4/11/1997 14,100,000
13,000,000 Fairfax County, VA EDA, (Series 1995) Weekly VRDNs (American
Society of Civil Engineers Foundation, Inc. Project)/(Mellon Bank N.A.,
Pittsburgh LOC) 13,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
VIRGINIA -- CONTINUED
$ 1,230,000 Fairfax County, VA EDA, Facilities Revenue Refunding Bonds (Series
1993) Weekly VRDNs (Future Homemakers of America)/(Nationsbank,
N.A., Charlotte LOC) $ 1,230,000
1,900,000 Fairfax County, VA IDA Weekly VRDNs (Inova Health System)/
(Credit Suisse, Zurich LIQ) 1,900,000
2,500,000 Fauquier County, VA IDA, Refunding Revenue Bonds Weekly VRDNs
(Warrenton Development Co.)/(Nationsbank, N.A., Charlotte LOC) 2,500,000
2,000,000 Front Royal & Warren County, VA IDA, IDRB (Series 1995) Weekly
VRDNs (Pen-Tab Industries, Inc. Project)/(Bank of America
Illinois LOC) 2,000,000
3,350,000 Hampton, VA Redevelopment & Housing Authority, (Series 1984)
Weekly VRDNs (Nationsbank, N.A., Charlotte LOC) 3,350,000
6,400,000 Henrico County, VA IDA, (Series 1994) Daily VRDNs (Virginia United
Methodist Homes, Inc.)/(Nationsbank, N.A., Charlotte LOC) 6,400,000
23,400,000 James City County, VA IDA, (Series 1997) Weekly VRDNs (Riverside
Health System-Patriots Colony) 23,400,000
5,590,000 King George County, VA IDA, (Series 1996) Weekly VRDNs (Garnet of
Virginia, Inc. Project)/(Morgan Guaranty Trust Co., New York LOC) 5,590,000
3,000,000 Newport News, VA Redevelopment & Multifamily Housing Authority,
(Series 1990) Weekly VRDNs (Fredericksburg-Oxford)/(Bankers
Trust Co., New York LOC) 3,000,000
6,500,000 Richmond, VA Redevelopment & Housing Authority Weekly VRDNs
(Richmond, VA Red Tobacco Row)/(Bayerische Landesbank
Girozentrale LOC) 6,500,000
11,350,000 Richmond, VA Redevelopment & Housing Authority, (Series 1989)
Weekly VRDNs (Belmont Apartment)/(First Union National Bank,
Charlotte, NC LOC) 11,350,000
9,000,000 Richmond, VA Redevelopment & Housing Authority, (Series B-1)
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische
Landesbank Girozentrale LOC) 9,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
VIRGINIA -- CONTINUED
$ 3,500,000 Richmond, VA Redevelopment & Housing Authority, (Series B-9)
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische
Landesbank Girozentrale LOC) $ 3,500,000
4,520,000 Suffolk, VA Redevelopment & Housing Authority Weekly VRDNs
(Terry/Peterson Development Corp.)/(Nationsbank, N.A.,
Charlotte LOC) 4,520,000
3,105,000 Suffolk, VA Redevelopment & Housing Authority, (Series 1994) Weekly
VRDNs (Terry/Peterson Associates II Project)/(Nationsbank, N.A.,
Charlotte LOC) 3,105,000
6,900,000 Virginia Peninsula Port Authority Daily VRDNs (Kinyo Virginia, Inc.)/
(Industrial Bank of Japan Ltd., Tokyo LOC) 6,900,000
2,000,000 Virginia Peninsula Port Authority, Facility Revenue Refunding Bonds
(Series 1992), 3.50% CP (CSX Corp.)/(Bank of Nova Scotia, Toronto
LOC), Mandatory Tender 4/1/1997 2,000,000
1,500,000 Virginia State Housing Development Authority, (Series 1987A) Weekly
VRDNs (AHC Service Center)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 1,500,000
4,000,000 Williamsburg, VA IDA, (Series 1988) Weekly VRDNs (Colonial
Williamsburg Foundation Museum)/(Nationsbank, N.A., Charlotte LOC) 4,000,000
Total 160,920,000
WASHINGTON -- 0.4%
7,500,000 Port of Moses Lake, WA Public Corp., Industrial Revenue Bonds
(Series 1997) Weekly VRDNs (National Frozen Foods Corp. Project)/
(Bank of America NT and SA, San Francisco LOC) 7,500,000
WEST VIRGINIA -- 0.8%
2,875,000 Berkeley County, WV County Commission, Industrial Development
Bonds (Series 1994) Weekly VRDNs (Brentwood Industries, Inc.
Project)/(Corestates Bank N.A., Philadelphia, PA LOC) 2,875,000
11,500,000 Marshall County, WV, PCR (Series 1992) Weekly VRDNs (PPG
Industries, Inc.) 11,500,000
Total 14,375,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS -- CONTINUED
WISCONSIN -- 0.9%
$ 2,000,000 Green Bay, WI IDA, IDRB (Series 1985) Weekly VRDNs (St. Mary's
Holdings, Inc.)/(Mellon Bank N.A., Pittsburgh LOC) $ 2,000,000
940,000 Spooner, WI, Commercial Development (Series 1994) Weekly VRDNs
(Nash Finch Co.)/(First Bank N.A., Minneapolis LOC) 940,000
10,000,000 Wisconsin HEFA Weekly VRDNs (St. Luke's Medical Center)/
(Sumitomo Bank Ltd., Osaka LOC) 10,000,000
3,080,000 (a)Wisconsin Housing & Economic Development Authority, (Series B),
4.05% TOBs (FSA INS)/(Corestates Bank N.A., Philadelphia, PA LIQ),
Optional Tender 6/1/1997 3,080,000
Total 16,020,000
WYOMING -- 0.6%
1,830,000 Sweetwater County, WY IDA Weekly VRDNs (FMC Gold Co.)/
(Wachovia Bank of NC, N.A., Winston-Salem LOC) 1,830,000
8,500,000 Sweetwater County, WY IDA, PCR Refunding Bonds (Series 1990A)
Weekly VRDNs (Pacificorp)/(Credit Suisse, Zurich LOC) 8,500,000
Total 10,330,000
OTHER -- 0.4%
6,331,062 (a)LaSalle National Bank Leasetops Trust, Series 1995A Leasetops
Certificates Weekly VRDNs (Lasalle National Bank, Chicago LIQ)/
(Lasalle National Bank, Chicago LOC) 6,331,062
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $1,751,300,849
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 23% of the
Portfolio as calculated based upon total portfolio market value.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At March 31, 1997, these securities amounted
to $160,776,329 which represents 9.2% of net assets.
(b) Cost for federal tax purposes $1,751,354,092.
Note: The categories of investments are shown as a percentage of net assets
($1,754,864,199) at March 31, 1997.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
BANs -- Bond Anticipation Notes
CDA -- Community Development Administration
CP -- Commercial Paper
EDA -- Economic Development Authority
EDFA -- Economic Development Financing Authority
EDRB -- Economic Development Revenue Bonds
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FSA -- Financial Security Assurance
GO -- General Obligation
GTD -- Guaranty
HEFA -- Health and Education Facilities Authority
HFA -- Housing Finance Authority
HFDC -- Health Facility Development Corporation
IDA -- Industrial Development Authority
IDB -- Industrial Development Bond
IDC -- Industrial Development Corporation
IDR -- Industrial Development Revenue
IDRB -- Industrial Development Revenue Bond
IDFA -- Industrial Development Finance Authority
IFA -- Industrial Finance Authority
INS -- Insured
INV -- Investment Agreement
LIQ -- Liquidity Agreement
LOC(s) -- Letter(s) of Credit
MBIA -- Municipal Bond Investors Assurance
PCR -- Pollution Control Revenue
PCFA -- Pollution Control Finance Authority
PLC -- Public Limited Company
RANs -- Revenue Anticipation Notes
SA -- Support Agreement
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TRANs -- Tax and Revenue Anticipation Notes
UT -- Unlimited Tax
VRDNs -- Variable Rate Demand Notes
The Trust may only invest in securities rated in one of the two highest
short-term rating categories by nationally recognized statistical rating
organizations ("NRSROs") or unrated securities of comparable quality. An
NRSRO's two highest rating categories are determined without regard for
sub-categories and gradations. For example, securities rated SP-1+, SP-1 or
SP-2 by Standard & Poor's Corporation, MIG-1 or MIG-2 by Moody's Investors
Service, Inc., or FIN-1+, FIN-1 and FIN-2 by Fitch Investors Service, Inc.
are all considered rated in one of the two highest short-term rating
categories.
Securities rated in the highest short-term rating category (and unrated
securities of comparable quality) are identified as First Tier securities.
Securities rated in the second highest short-term rating category (and
unrated securities of comparable quality) are identified as Second Tier
securities. The Trust follows applicable regulations in determining whether
a security is rated and whether a security rated by multiple NRSRO's in
different rating categories should be identified as a First or Second Tier
security. At March 31, 1997, tier rating percentages were as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
TIER RATING PERCENTAGES BASED ON
TOTAL MARKET VALUE
<S> <C>
FIRST TIER SECOND TIER
98.0% 2.0%
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TAX-FREE INSTRUMENTS TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value
(tax cost $1,751,354,092) $1,751,300,849
Cash 3,768,073
Income receivable 11,079,927
Receivable for shares sold 9,896,658
Total assets 1,776,045,507
LIABILITIES:
Payable for investments purchased $ 5,008,200
Payable for shares redeemed 14,086,644
Income distribution payable 1,710,265
Accrued expenses 376,199
Total liabilities 21,181,308
NET ASSETS for 1,755,308,693 shares outstanding $1,754,864,199
NET ASSETS CONSIST OF:
Paid in capital $1,755,308,693
Undistributed net investment income 5,242
Accumulated net realized loss on investments (449,736)
Total Net Assets $1,754,864,199
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
Investment Shares $1,506,918,391 / 1,507,192,636 shares outstanding $1.00
Institutional Service Shares $247,945,808 / 248,116,057 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TAX-FREE INSTRUMENTS TRUST
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $63,110,583
EXPENSES:
Investment advisory fee $ 8,802,596
Administrative personnel and services fee 1,330,311
Custodian fees 202,869
Transfer and dividend disbursing agent fees and expenses 402,565
Directors'/Trustees' fees 23,343
Auditing fees 15,688
Legal fees 9,486
Portfolio accounting fees 151,216
Shareholder services fee -- Investment Shares 3,631,223
Shareholder services fee -- Institutional Service Shares 770,075
Share registration costs 116,836
Printing and postage 164,516
Insurance premiums 17,056
Taxes 39,667
Miscellaneous 15,037
Total expenses 15,692,484
Waivers --
Waiver of investment advisory fee $ (1,432,278)
Waiver of shareholder services fee -- Investment Shares (1,452,489)
Waiver of shareholder services fee -- Institutional Service Shares (770,075)
Total waivers (3,654,842)
Net expenses 12,037,642
Net investment income 51,072,941
Net realized gain on investments 228,552
Change in net assets resulting from operations $51,301,493
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TAX-FREE INSTRUMENTS TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 51,072,941 $ 57,127,738
Net realized gain (loss) on investments ($228,552 net gain and
$932,829 net loss, respectively, as computed for federal income
tax purposes) 228,552 32,047
Change in net assets resulting from operations 51,301,493 57,159,785
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Investment Shares (41,768,570) (44,999,576)
Institutional Service Shares (9,304,371) (11,850,355)
Change in net assets resulting from distributions to shareholders (51,072,941) (56,849,931)
SHARE TRANSACTIONS --
Proceeds from sale of shares 4,986,838,234 5,662,886,235
Net asset value of shares issued to shareholders in payment of
distributions declared 42,372,256 45,012,727
Cost of shares redeemed (5,044,423,524) (5,575,079,915)
Change in net assets resulting from share transactions (15,213,034) 132,819,047
Change in net assets (14,984,482) 133,128,901
NET ASSETS:
Beginning of period 1,769,848,681 1,636,719,780
End of period (including undistributed net investment income of
$5,242 and $277,807, respectively) $ 1,754,864,199 $ 1,769,848,681
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TAX-FREE INSTRUMENTS TRUST
FINANCIAL HIGHLIGHTS -- INVESTMENT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment 0.03 0.03 0.03 0.02 0.02 0.04 0.05 0.06 0.05 0.04
income
LESS DISTRIBUTIONS
Distributions
from net
investment (0.03) (0.03) (0.03) (0.02) (0.02) (0.04) (0.05) (0.06) (0.05) (0.04)
income
NET ASSET VALUE,
END
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.92% 3.32% 2.70% 2.01 2.42% 3.84% 5.40% 5.88% 5.28% 4.29%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.71% 0.71% 0.70% 0.61% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55%
Net investment 2.88% 3.27% 2.66% 2.00% 2.38% 3.73% 5.25% 5.73% 5.14% 4.19%
income
Expense waiver/
reimbursement(b) 0.18% 0.24% 0.17% 0.14% 0.10% 0.11% 0.12% 0.11% 0.08% 0.06%
SUPPLEMENTAL DATA
Net assets, end
of period
(000 omitted) $1,506,918 $1,465,333 $1,277,894 $1,327,506 $1,619,531 $1,440,970 $1,214,045 $1,142,022 $1,313,391 $1,552,460
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
TAX-FREE INSTRUMENTS TRUST
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.03) (0.03) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 3.08% 3.47% 2.85% 0.92%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.56% 0.56% 0.55% 0.55%*
Net investment income 3.02% 3.43% 2.82% 1.99%*
Expense waiver/reimbursement(c) 0.33% 0.40% 0.17% 0.14%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $247,946 $304,516 $358,826 $390,453
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 15, 1993 (date of
initial public investment) to March 31, 1994.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
TAX-FREE INSTRUMENTS TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
1. ORGANIZATION
Tax-Free Instruments Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust offers two classes of shares: Investment
Shares and Institutional Service Shares. The investment objective of the
Trust is current income which is exempt from federal income tax including
the alternative minimum tax consistent with stability of principal.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- The Trust's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act. Investments in other open-end regulated investment companies are valued
at net asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing book/tax
treatments of partnerships. The following reclassifications have been made
to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME LOSS
<S> <C>
$(272,565) $272,565
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES -- It is the Trust's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. At March 31, 1997, the Trust, for
federal tax purposes, had a capital loss carryforward of $450,119, which
will reduce the Trust's taxable income arising from future net realized gain
on investments, if any, to the extent permitted by the Code, and thus will
reduce the amount of the distributions to shareholders which would otherwise
be necessary to relieve the Trust of any liability for federal tax. Pursuant
to the Code, such capital loss carryforward will expire in 2004 ($450,119).
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. Many restricted securities may be resold in
the secondary market in transactions exempt from registration. In some
cases, the restricted securities may be resold without registration upon
exercise of a demand feature. Such restricted securities may be determined
to be liquid under criteria established by the Board of Trustees (the
"Trustees"). The Trust will not incur any registration costs upon such
resales. Restricted securities are valued at amortized cost in accordance
with Rule 2a-7 under the Act. Additional information on each restricted
security held at March 31, 1997 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Madison, AL IDA, (Series A) 5/1/96 $ 1,000,000
California Housing Finance Authority 8/1/96 9,325,000
California Public Capital Improvements Financing
Authority 9/1/96 - 3/1/97 13,850,000
Colorado Municipal Securities Trust, Series 1996A 12/1/96 3,000,000
Thornton, CO, Multifamily Housing Refunding
Revenue Bonds 9/15/95 - 10/16/95 5,365,000
Clipper Connecticut Tax Exempt Trust 1/2/97 4,000,000
Michigan State Hospital Finance Authority, (Series A) 6/1/89 2,300,000
Douglas County, NE, Industrial Development Revenue
Refunding Bonds (Series 1994) 11/22/94 1,160,000
New Jersey Economic Development Authority 10/1/92 255,267
New York City, NY Municipal Water Finance Authority 2/28/97 10,000,000
VRDC/IVRC Trust, (Series 1992A) 6/16/95 - 12/16/96 15,000,000
VRDC/IVRC Trust, (Series 1993G) 8/16/96 - 2/16/97 8,000,000
Martin County, NC Industrial Finance Authority,
(Series 1993) 12/2/96 - 3/3/97 17,400,000
NCNB Pooled Tax-Exempt Trust, (Series 1990A) 6/15/95 710,000
NCNB Pooled Tax-Exempt Trust, (Series 1990B) 12/4/90 3,095,000
Fargo, ND, Industrial Development Revenue Bond,
(Series 1994) 6/1/95 3,275,000
Delaware County, PA Industrial Development
Authority, Refunding Revenue Bonds (Series 1993G) 12/1/96 11,000,000
Erie County, PA Hospital Authority 12/2/96 7,000,000
Pennsylvania Economic Development Financing
Authority, (Series 1996E) 11/1/96 - 3/3/97 2,000,000
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
South Dakota Housing Development Authority,
CDC Municipal Products, Inc. 7/11/96 14,395,000
South Dakota Housing Development Authority, PT-85
(1988 Series A) 7/2/96 10,090,000
Tyler, TX Health Facilities Development Corp.,
Hospital Revenue Bonds (Series 1994) 11/10/94 9,145,000
Wisconsin Housing & Economic Development
Authority, (Series B) 3/1/97 3,080,000
LaSalle National Bank Leasetops Trust 10/11/95 6,331,062
</TABLE>
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 amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value) for
each class of shares. Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996
INVESTMENT SHARES SHARES SHARES
<S> <C> <C>
Shares sold 4,067,609,898 4,705,771,360
Shares issued to shareholders in payment of distributions declared 40,667,650 43,656,277
Shares redeemed (4,066,883,584) (4,562,229,196)
Net change resulting from Investment Share transactions 41,393,964 187,198,441
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES SHARES SHARES
Shares sold 919,228,336 957,114,875
Shares issued to shareholders in payment of distributions declared 1,704,606 1,356,450
Shares redeemed (977,539,940) (1,012,850,719)
Net change resulting from Institutional Service Share transactions (56,606,998) (54,379,394)
Net change resulting from share transactions (15,213,034) 132,819,047
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Management, the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.50% of the Trust's average daily net assets. The
Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Trust will pay
FSS up to 0.25% of average daily net assets of the Trust for the period. The
fee paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver at any
time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Trust. The fee paid to FSSC
is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Trust's accounting records
for which it receives a fee. The fee is based on the level of the Trust's
average daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS -- During the period ended March 31, 1997, the Trust
engaged in purchase and sale transactions with funds that have a common
investment adviser (or affiliated investment advisers), common
Directors/Trustees, and/or common Officers. These purchase and sale
transactions were made at current market value pursuant to Rule 17a-7 under
the Act amounting to $2,957,474,000 and $3,150,801,500, respectively.
GENERAL -- Certain of the Officers and Trustees of the Trust are Officers
and Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
TAX-FREE INSTRUMENTS TRUST:
We have audited the accompanying statement of assets and liabilities of
Tax-Free Instruments Trust (a Massachusetts business trust), including the
schedule of portfolio investments, as of March 31, 1997, and the related
statement of operations for the year then ended, and the statement of
changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust'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 March 31, 1997, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Tax-Free Instruments Trust as of March 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
the periods presented, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
April 24, 1997
Trustees
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
Officers
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
S. Elliott Cohan
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including
possible loss of principal. Although money market funds seek to maintain a
stable net asset value of $1.00 per share, there is no assurance that they
will be able to do so.
This report is authorized for distribution to prospective investors only
when preceded or accompanied by the trust's prospectuses which contain facts
concerning its objective and policies, management fees, expenses and other
information.
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Federated Investors
Federated Securities Corp., Distributor
Cusip 876924101
Cusip 876924200
8042604 (5/97)
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