<PAGE> 1
CARNEGIE CAPITAL
MANAGEMENT COMPANY
THE CARNEGIE FUNDS GROUP
1228 Euclid Avenue, Cleveland, Ohio 44115
Phone: (216) 781-4440
call toll free (800) 321-2322
--------------------------------------------------------------------------------
CARNEGIE
Liquid Capital Income Trust
is a money market fund with dividends compounded
daily. Withdraw cash at any time without penalty.
CARNEGIE
Government Securities Trust
is a money market fund investing in securities issued
or guaranteed by the U.S. Government, its agencies
or instrumentalities and repurchase agreements.
CARNEGIE
Tax Free Income Trust
provides income free from federal income taxation--
while offering all the advantages of
a money market fund.
CARNEGIE
Tax Exempt Income Trust
Ohio General Municipal Fund
provides a high level of current income
exempt from federal income tax.
This report was prepared for shareholders of the Trust. It is not
authorized for distribution to others unless it is accompanied or
preceded by a current combined prospectus. For more complete
information on other Carnegie funds, including sales charges and
expenses, see the appropriate sections of the combined prospectus,
which may be obtained from your broker. Read the prospectus
carefully before you invest or send money.
(LOGO)EFG
CARNEGIE CAPITAL MANAGEMENT COMPANY
CARNEGIE
FUNDS GROUP
-- Liquid Capital Income Trust
-- Carnegie Government
Securities Trust
-- Carnegie Tax Free Income
Trust
-- Carnegie Tax Exempt Income
Trust -- Ohio General Municipal Fund
-------------------------------------------------------------------
Annual Reports
July 31, 1995
-------------------------------------------------------------------
CARNEGIE CAPITAL MANAGEMENT COMPANY
(LOGO)EFG
1100 The Halle Building
1228 Euclid Avenue
Cleveland, Ohio 44115-1831
<PAGE> 2
ANNUAL MESSAGE FROM THE PRESIDENT: August 18, 1995
Dear Fellow Shareholders:
So far, 1995 has experienced stronger corporate earnings than was expected
less than eight months ago, and continued restraint on the inflationary front.
Consumer spending has been remarkably tempered. The Federal Reserve Board may
begin a policy of "easing credit" or lowering interest rates. Long-term bond
markets have reversed since 1994 to produce very positive returns in 1995. Due
to the Federal Reserve policy of lowering rates, it is likely that the Federal
Open Market Committee will lower rates again in the next quarter. This will
have a positive effect in the money market arena because it will further
economic growth.
We believe the Federal Reserve's policy of "easing" will continue for the next
six to twelve months due to economic conditions as well as political
considerations. With the Presidential election in 15 months, we will see many
cross-currents regarding interest rates from an economic and political
perspective.
We believe that our high quality standards remain very important to our
shareholders. We will continue to respect and adhere to those standards
enumerated in our investment philosophy. We are pleased that you have chosen
to remain with the Carnegie Funds Group, and to invest in our philosophy of
quality investments. Thank you for your continued support as shareholders of
the Carnegie Funds.
Sincerely,
/s/George R. Mateyo
George R. Mateyo
President
INDEPENDENT AUDITORS' REPORT
KPMG Peat Marwick LLP
To the Board of Trustees and Shareholders
Liquid Capital Income Trust, Carnegie Government Securities Trust,
Carnegie Tax Free Income Trust and Carnegie Tax Exempt Income Trust
We have audited the accompanying statements of net assets of Liquid Capital
Income Trust, Carnegie Government Securities Trust, Carnegie Tax Free Income
Trust and Carnegie Tax Exempt Income Trust (comprising the Ohio General
Municipal Fund), as of July 31, 1995, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trusts' 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 July 31, 1995, 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 the financial highlights referred
to above present fairly, in all material respects, the financial position of
Liquid Capital Income Trust, Carnegie Government Securities Trust, Carnegie
Tax Free Income Trust and Carnegie Tax Exempt Income Trust, as of July 31,
1995, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
August 18, 1995
Cleveland, Ohio /s/KPMG Peat Marwick LLP
1
<PAGE> 3
LIQUID CAPITAL INCOME TRUST -- FINANCIAL HIGHLIGHTS
Data for each share outstanding throughout the period
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.047 0.026 0.024 0.042 0.065
------------ ------------ ------------ -------------- --------------
Total from Investment
Operations..................... 0.047 0.026 0.024 0.042 0.065
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income......................... (0.047) (0.026) (0.024) (0.042) (0.065)
------------ ------------ ------------ -------------- --------------
Total Distributions.............. (0.047) (0.026) (0.024) (0.042) (0.065)
Net Asset Value, End of Period.... $1.00 $1.00 $1.00 $1.00 $1.00
============ ============ ============ ============== ==============
RATIOS/SUPPLEMENTAL INFORMATION
Expenses as a percentage of
average daily net assets(1).... 0.87% 0.88% 0.83% 0.77% 0.70%
Net investment income as a
percentage of average daily net
assets(1)...................... 4.72% 2.62% 2.43% 4.25% 6.48%
Net Assets at end of period....... $247,385,884 $289,950,268 $335,030,422 $431,773,459 $1,503,924,041
============ ============ ============ ============== ==============
<FN>
(1) The percentages should not be construed as representative of the yield or
expenses related to further investments in the Trust.
</TABLE>
CARNEGIE GOVERNMENT SECURITIES TRUST -- FINANCIAL HIGHLIGHTS
Data for each share outstanding throughout the period
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... 0.044 0.024 0.022 0.040 0.061
----------- ----------- ----------- ------------ ------------
Total from Investment Operations.... 0.044 0.024 0.022 0.040 0.061
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income............................ (0.044) (0.024) (0.022) (0.040) (0.061)
----------- ----------- ----------- ------------ ------------
Total Distributions................. (0.044) (0.024) (0.022) (0.040) (0.061)
Net Asset Value, End of Period....... $1.00 $1.00 $1.00 $1.00 $1.00
=========== =========== =========== ============ ============
RATIOS/SUPPLEMENTAL INFORMATION
Expenses as a percentage of average
daily net assets(1)............... 1.06% 0.98% 0.87% 0.79% 0.71%
Net investment income as a
percentage of average daily net
assets(1)......................... 4.38% 2.37% 2.25% 4.05% 6.12%
Net Assets at end of period.......... $14,424,876 $18,078,719 $25,364,240 $34,687,846 $126,090,338
=========== =========== =========== ============ ============
<FN>
(1) The percentages should not be construed as representative of the yield or
expenses related to further investments in the Trust.
</TABLE>
2
<PAGE> 4
CARNEGIE TAX FREE INCOME TRUST -- FINANCIAL HIGHLIGHTS
Data for each share outstanding throughout the period
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.029 0.018 0.019 0.036 0.046
----------- ----------- ----------- ------------ ------------
Total from Investment Operations....... 0.029 0.018 0.019 0.036 0.046
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income............................... (0.029) (0.018) (0.019) (0.036) (0.046)
----------- ----------- ----------- ------------ ------------
Total Distributions.................... (0.029) (0.018) (0.019) (0.036) (0.046)
Net Asset Value, End of Period.......... $1.00 $1.00 $1.00 $1.00 $1.00
=========== =========== =========== ============ ============
RATIOS/SUPPLEMENTAL INFORMATION
Expenses as a percentage of average
daily net assets(1).................. 0.82% 0.77% 0.76% 0.69% 0.64%
Net investment income as a percentage
of average daily net assets(1)....... 2.86% 1.77% 1.88% 3.58% 4.61%
Net Assets at end of period............. $27,615,905 $31,640,760 $40,646,525 $56,180,652 $250,951,045
=========== =========== =========== ============ ============
<FN>
(1) The percentages should not be construed as representative of the yield or
expenses related to further investments in the Trust.
</TABLE>
CARNEGIE TAX EXEMPT INCOME TRUST -- OHIO GENERAL MUNICIPAL FUND
FINANCIAL HIGHLIGHTS -- Data for each share outstanding throughout the period
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $9.50 $9.87 $9.79 $9.26 $9.18
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2)............... 0.556 0.549 0.559 0.571 0.576
Net realized and unrealized
gains/(losses) on securities......... (0.040) (0.370) 0.080 0.530 0.080
------------- ----------- ----------- ----------- -----------
Total from investment operations....... 0.516 0.179 0.639 1.101 0.656
LESS DISTRIBUTIONS:
Distributions from net investment
income............................... (0.556) (0.549) (0.559) (0.571) (0.576)
------------- ----------- ----------- ----------- -----------
Total distributions.................... (0.556) (0.549) (0.559) (0.571) (0.576)
Net Asset Value, End of Period.......... $9.46 $9.50 $9.87 $9.79 $9.26
============= =========== =========== =========== ===========
ANNUAL TOTAL RETURN..................... 5.50% 1.82% 6.77% 12.32% 7.45%
============= =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL INFORMATION
Net assets at end of period............ $11,448,521 $12,574,835 $18,669,199 $28,011,143 $30,908,900
Expenses as a percentage of average
daily net assets(1)(2)............... 0.97% 0.93% 0.81% 0.76% 0.76%
Net investment income as a percentage
of average daily net assets(1)....... 5.95% 5.68% 5.81% 6.10% 6.32%
Portfolio Turnover rate................ 8.77% 10.04% 4.98% 11.40% 19.45%
<FN>
(1) The percentages should not be construed as representative of the yield or
expenses related to further investments in the Fund.
(2) During the periods indicated, the Fund did not make payments or made partial
payments under their Distribution Expenses Plan and CCMC waived management
fees. Net investment income for the Ohio General Municipal Fund would have
been $.528, $.520, $.530, $.543, $.545 and $.544 for the years ended July
31, 1995, 1994, 1993, 1992 and 1991, respectively; had such Distribution
Expense Plan payments been made and had such fees not been waived. Expenses
as a percentage of average net assets would have been 1.27%, 1.23%, 1.11%,
1.06% and 1.11% for the same periods, respectively.
</TABLE>
3
<PAGE> 5
LIQUID CAPITAL INCOME TRUST
STATEMENT OF NET ASSETS
JULY 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MATURITY DATE VALUE
AMOUNT (1995) (NOTE A)
------------ --------------- --------------
<S> <C> <C> <C>
BANKERS ACCEPTANCES -- 8.1%
$ 10,000,000 Republic National Bank of New York, 5.70%.................................. 8/7 $ 9,990,500
10,000,000 Wachovia Bank, Georgia, 5.70%.............................................. 8/11 9,984,167
-------------
TOTAL BANKERS ACCEPTANCES (Cost $19,974,667)............................... 19,974,667
-------------
CERTIFICATES OF DEPOSIT -- .1%
143,636 Mellon Bank, 6.60%......................................................... 1/2/96 143,636
-------------
TOTAL CERTIFICATES OF DEPOSIT (Cost $143,636).............................. 143,636
-------------
COMMERCIAL PAPER+ -- 41.8%
10,000,000 ABS Commercial Paper Inc., 5.80%........................................... 8/23 9,964,556
10,000,000 American Telephone and Telegraph Company, 5.68%............................ 8/30 9,954,244
10,000,000 Dean Witter Discover and Company, 5.95%.................................... 8/9 9,986,778
10,000,000 Industrial Funding Corp., 5.78%............................................ 8/3 9,996,789
10,000,000 International Lease Finance Corp., 5.69%................................... 8/4 9,995,258
10,000,000 J.C. Penney Funding Corp., 5.70%........................................... 8/15 9,977,833
10,000,000 National City Corp., 5.81%................................................. 8/22 9,966,108
6,200,000 Oak Funding Corp., 5.80%................................................... 8/29 6,172,031
10,000,000 PHH Corp., 5.81-5.95%...................................................... 8/4-1/22/96 10,003,365
10,000,000 Phillip Morris Companies, 5.92%............................................ 8/3 9,996,711
7,500,000 Receivables Purchase Corp., 5.80%.......................................... 8/15 7,483,084
-------------
TOTAL COMMERCIAL PAPER (Cost $103,496,757)................................. 103,496,757
-------------
LETTERS OF CREDIT -- 7.0%
10,000,000 AES Barbers Point Inc., 5.60%.............................................. 10/6 9,897,334
7,503,000 First National Bank of Chicago, Commonwealth Fuel, 5.93%................... 8/14 7,486,933
-------------
TOTAL LETTERS OF CREDIT (Cost $17,384,267)................................. 17,384,267
-------------
TAXABLE MUNICIPALS -- 8.0%
9,580,000 Metropolitan Washington D.C. Airport Authority, 5.78%...................... 8/22 9,603,084
10,000,000 New York City General Obligation Bonds, 6.24%.............................. 8/22 10,119,690
-------------
TOTAL TAXABLE MUNICIPALS (Cost $19,722,774)................................ 19,722,774
-------------
U.S. GOVERNMENT INTEREST BEARING AND AGENCIES -- 22.2%
5,000,000 Federal Agricultural Mortgage Association Discount Notes, 5.65%............ 8/15 4,989,014
35,000,000 Federal Farm Credit Bank, 5.80-5.98-6.02%.................................. 8/1-10/2 35,000,000
10,000,000 Federal National Mortgage Association Discount Notes, 5.65%................ 8/14 9,979,597
5,000,000 Federal National Mortgage Association, 5.91%............................... 2/16/96 5,000,000
-------------
TOTAL U.S. GOVERNMENT INTEREST BEARING AND AGENCIES (Cost $54,968,611)..... 54,968,611
-------------
REPURCHASE AGREEMENTS 12.6%
23,475,000 Merrill Lynch Government Securities, Inc., 5.75%; Collateralized by
$23,475,000 United States Treasury Bonds, 10.75% due 8/15/2005 (repurchase
proceeds $31,154,975)...................................................... 8/1 31,150,000
-------------
TOTAL INVESTMENTS -- 99.8% (COST $246,840,712)............................. 246,840,712
OTHER ASSETS LESS LIABILITIES -- .2%....................................... 545,172
-------------
NET ASSETS -- 100.0% -- equivalent to $1.00 per share for 247,385,884
outstanding Capital Shares in the Trust, $.10 par value (unlimited number
of shares authorized) -- NOTE E............................................ $ 247,385,884
=============
<FN>
+ At July 31, 1995, investments in commercial paper are diversified among
several industries with no significant concentration. At the time of purchase,
all commercial paper investments are rated A-1 by S&P or P-1 by Moody's Rating
Services.
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 6
LIQUID CAPITAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<S> <C> <C>
INTEREST INCOME............................................. $14,980,348
EXPENSES -- NOTE B
Management fees........................................... $1,341,942
Custodian and transfer agent fees......................... 698,280
Printing.................................................. 85,495
Insurance expense......................................... 43,115
Postage................................................... 38,390
Registration and filing fees.............................. 34,760
Professional fees......................................... 25,710
Trustees' fees............................................ 24,000
Investment Company Institute fees......................... 18,086
Miscellaneous............................................. 14,427 2,324,205
---------- -----------
INVESTMENT INCOME -- NET.................................... $12,656,143
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net................................ $ 12,656,143 $ 8,135,537
Distributions to shareholders from net
investment income....................................... (12,656,143) (8,135,537)
Capital share transactions -- net......................... (42,564,384) (45,080,154)
------------ ------------
Total decrease in net assets....................... (42,564,384) (45,080,154)
NET ASSETS
Beginning of year......................................... 289,950,268 335,030,422
------------ ------------
End of year............................................... $247,385,884 $289,950,268
============ ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 7
CARNEGIE GOVERNMENT SECURITIES TRUST
STATEMENT OF NET ASSETS
JULY 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT DATES (1995) (NOTE A)
---------- ------------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 81.3%
$2,000,000 Federal Agricultural Mortgage Association,
5.82%......................................... 8/4 $ 1,999,030
3,000,000 Federal Agricultural Mortgage Association,
5.65%......................................... 8/15 2,993,408
2,000,000 Federal Home Loan Mortgage Corp., 5.63%......... 8/17 1,994,996
3,000,000 Federal National Mortgage Association, 5.65%.... 8/14 2,993,879
1,750,000 Federal National Mortgage Association, 5.70%.... 8/22 1,744,181
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $11,725,494)............................ 11,725,494
-----------
REPURCHASE AGREEMENTS -- 18.4%
2,000,000 Merrill Lynch Government Securities, Inc.,
5.75%; Collateralized by $2,000,000 United
States Treasury Bonds, 10.75% due 8/15/2005
(repurchase proceeds $2,650,423).............. 8/1 2,650,000
-----------
TOTAL INVESTMENTS -- 99.7%
(Cost $14,375,494)............................ 14,375,494
OTHER ASSETS LESS LIABILITIES -- .3%............ 49,382
-----------
NET ASSETS -- 100.0% -- equivalent to $1.00 per
share for 14,424,876 outstanding Capital
Shares in the Trust, $.10 par value (unlimited
number of shares authorized) -- NOTE E........ $14,424,876
============
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 8
CARNEGIE GOVERNMENT SECURITIES TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<S> <C> <C>
INTEREST INCOME............................................. $852,317
EXPENSES -- NOTE B
Management fees........................................... $ 78,300
Custodian and transfer agent fees......................... 29,522
Registration and filing fees.............................. 17,947
Professional fees......................................... 14,638
Trustees' fees............................................ 8,000
Printing.................................................. 5,065
Insurance expense......................................... 3,007
Postage................................................... 1,335
Investment Company Institute fees......................... 1,285
Miscellaneous............................................. 6,680 165,779
-------- --------
INVESTMENT INCOME -- NET.................................... $686,538
========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net................................ $ 686,538 $ 515,300
Distributions to shareholders from net
investment income....................................... (686,538) (515,300)
Capital share transactions -- net......................... (3,653,843) (7,285,521)
----------- -----------
Total decrease in net assets....................... (3,653,843) (7,285,521)
NET ASSETS
Beginning of year......................................... 18,078,719 25,364,240
----------- -----------
End of year............................................... $14,424,876 $18,078,719
=========== ===========
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 9
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF NET ASSETS+
JULY 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
---------- -------- ----------------
<S> <C> <C> <C>
MUNICIPAL SECURITIES -- 99.2%
ALABAMA -- 9.4%
$ 200,000 Alabama Special Care Facility Variable Rate Demand Revenue Bonds 3.75%,
8/7/95................................................................. AAA $ 200,000
1,390,000 Birmingham Baptist Medical Center Variable Rate Demand Revenue Bonds
3.90%, 8/7/95.......................................................... A1 1,390,000
1,000,000 North Alabama Pollution Control Variable Rate Demand Revenue Bonds
3.90%, 8/7/95.......................................................... Aa3 1,000,000
ARIZONA -- 1.8%
500,000 Pima County Arizona Variable Rate Demand Industrial Development Revenue
Bonds 3.10%, 8/7/95.................................................... NR 500,000
CALIFORNIA -- 3.7%
1,000,000 California Schools Cash Reserve Revenue Notes 4.75%, 7/3/96............ MIG-1 1,009,580
FLORIDA -- 2.8%
765,000 Florida Housing Floating Rate Demand Revenue Bonds 3.85%, 8/7/95....... AA 765,000
GEORGIA -- 3.3%
900,000 Burke County Pollution Control Variable Rate Demand Revenue Bonds
3.85%, 8/1/95.......................................................... A+ 900,000
HAWAII -- 3.6%
1,000,000 Hawaii Housing Finance Variable Rate Demand Revenue Bonds 3.90%,
8/7/95................................................................. A1 1,000,000
ILLINOIS -- 9.3%
1,175,000 Chicago Illinois Adjustable Tender General Obligation Bonds 4.60%,
11/1/95................................................................ MIG-1 1,175,000
400,000 Cook County Township High School General Obligation Bonds 4.60%,
12/1/95................................................................ A1 401,476
1,000,000 Illinois Housing Development Authority Variable Rate Demand Revenue
Bonds 3.80%, 8/7/95.................................................... AA+ 1,000,000
KENTUCKY -- 4.7%
1,300,000 Appalachian Regional Health Care Development Finance Authority Variable
Rate Demand Revenue Bonds 3.05%, 8/7/95................................ Aa2 1,300,000
LOUISIANA -- 2.9%
800,000 Louisiana State Recovery District Sales Tax Variable Rate Demand
Revenue Bonds 3.90%, 8/1/95............................................ AAA 800,000
MASSACHUSETTS -- .7%
200,000 Massachusetts State Variable Rate Demand Revenue Bonds 3.80%, 8/1/95... AA- 200,000
MICHIGAN -- 4.7%
1,300,000 Michigan State Hospital Finance Authority Variable Rate Demand Revenue
Bonds 3.80%, 8/7/95.................................................... A1 1,300,000
NEW YORK -- 3.3%
900,000 New York State Medical Care Facilities Variable Rate Demand Revenue
Bonds 3.60%, 8/7/95.................................................... Aa3 900,000
OHIO -- 10.5%
1,000,000 Muskingum County Bethesda Hospital Variable Rate Demand Revenue Bonds
3.05%, 9/1/95.......................................................... Aa3 1,000,000
200,000 Muskingum County Variable Rate Demand Industrial Development Revenue
Bonds 4.10%, 8/7/95.................................................... Aa3 200,000
700,000 Ohio State Air Quality Development Authority Variable Rate Demand
Revenue Bonds 3.80%, 8/1/95............................................ AAA 700,000
1,000,000 Ohio State Environmental Improvement Variable Rate Demand Revenue Bonds
4.10%, 9/1/95.......................................................... A1 1,000,000
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 10
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF NET ASSETS+ -- CONTINUED
JULY 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
---------- -------- ----------------
<S> <C> <C> <C>
OREGON -- 3.6%
$ 400,000 Port of Portland Pollution Control Variable Rate Demand Revenue Bonds
3.90%, 8/1/95.......................................................... Aa3 $ 400,000
600,000 Umatilla County Hospital Facilities Variable Rate Demand Revenue Bonds
3.90%, 8/1/95.......................................................... AA 600,000
PENNSYLVANIA -- 6.2%
700,000 Delaware County Variable Rate Industrial Development Revenue Bonds
3.80%, 8/1/95.......................................................... AAA 700,000
1,000,000 Pennsylvania State University Project Revenue Notes 5.50%, 12/21/95.... MIG-1 1,003,790
SOUTH CAROLINA -- 3.6%
1,000,000 York County Pollution Control Tax Free Commercial Paper 3.00%,
8/14/95................................................................ AA- 1,000,000
TENNESSEE -- 1.4%
400,000 Sullivan County Variable Rate Industrial Development Revenue Bonds
3.90%, 8/1/95.......................................................... AAA 400,000
TEXAS -- 9.6%
1,300,000 Dallas Texas Waterworks and Sewer Systems Revenue Bonds 8.5%,
10/1/95................................................................ AA 1,325,398
1,300,000 University of Texas Revenue Bonds 7.70%, 8/15/95....................... AA+ 1,321,709
VIRGINIA -- 7.2%
700,000 Peninsula Ports Variable Rate Demand Revenue Bonds 3.80%, 8/1/95....... Aa2 700,000
1,300,000 Fairfax County Variable Rate Demand Industrial Development Revenue
Bonds 3.90%, 8/7/95.................................................... AA- 1,300,000
WISCONSIN -- 6.9%
900,000 Racine University School District Tax and Revenue Anticipation Notes
4.75%, 8/23/95......................................................... Sp1+ 901,989
1,000,000 Wisconsin Health Facilities Variable Rate Demand Revenue Bonds 3.75%,
8/7/95................................................................. AAA 1,000,000
----------------
TOTAL INVESTMENTS -- 99.2% (Cost $27,393,942).......................... 27,393,942
OTHER ASSETS LESS LIABILITIES -- .8%................................... 221,963
----------------
NET ASSETS -- 100% -- equivalent to $1.00 per share for 27,615,905
outstanding Capital Shares in the Trust, $.10 par value (unlimited
number of shares authorized) -- Note E................................. $ 27,615,905
=================
<FN>
+ Floating Rate Demand Notes (F.R.D.N.) and Floating Rate Participation
Certificates (F.R.P.C.) are instruments whose interest rates vary with changes
in a designated base rate (such as the prime interest rate). Variable Rate
Demand Notes (V.R.D.N.) are instruments whose interest rates change on a
specified date (such as coupon date or interest payment date). These
instruments are payable on demand and are secured by letters of credit or
other credit support agreements from major banks.
* All ratings are stated as of July 31, 1995 by Moody's Investor Services, Inc.
or Standard and Poor's. The unrated municipal obligations are considered by
the Trust's investment adviser, Carnegie Capital Management Company, to have
characteristics and quality comparable to the rated municipal obligations
purchased by the Fund, and are in accordance with policies established by the
Board of Trustees.
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 11
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<S> <C> <C>
INTEREST INCOME.................................................. $1,042,786
EXPENSES -- NOTE B
Management fees................................................ $ 141,600
Custodian and transfer fees.................................... 27,446
Registration and filing fees................................... 19,005
Professional fees.............................................. 14,543
Trustees' fees................................................. 8,000
Printing....................................................... 6,029
Insurance Expense.............................................. 5,606
Investment Company Institute fees.............................. 2,225
Postage........................................................ 1,443
Miscellaneous.................................................. 6,509 232,406
---------- ----------
INVESTMENT INCOME -- NET......................................... $ 810,380
==========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net..................................... $ 810,380 $ 641,826
Distributions to shareholders from net
investment income............................................ (810,380) (641,826)
Capital share transactions -- net.............................. (4,024,855) (9,005,765)
------------ ------------
Total decrease in net assets............................ (4,024,855) (9,005,765)
NET ASSETS
Beginning of year.............................................. 31,640,760 40,646,525
------------ ------------
End of year.................................................... $ 27,615,905 $ 31,640,760
============ ============
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 12
CARNEGIE TAX EXEMPT INCOME TRUST
OHIO GENERAL MUNICIPAL FUND
STATEMENT OF NET ASSETS -- JULY 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
--------- ---------- -----------
<S> <C> <C> <C>
MUNICIPAL BONDS -- 93.5%
$ 750,000 Columbus Citation Housing Corp. Rev. Bonds 7.63%, 1/1/2022............................... AA 787,438
250,000 Cuyahoga Cnty. General Obligation Bonds 7.40%, 10/1/2009................................. NR 277,853
450,000 Cuyahoga Cnty. Hosp.-Metro Health Sys. Rev. Bonds 6.90%, 2/15/2007....................... AAA 477,079
250,000 Cuyahoga Cnty. Jail Fac. General Obligation Bonds 7.00%, 10/1/2013....................... NR 285,654
750,000 Cuyahoga Cnty. Meridia Hlth. Care Sys. Rev. Bonds 7.00%, 8/15/2006....................... A 809,087
500,000 Dublin Ohio City Schl Dist. General Obligation Bonds 6.20%, 12/1/2019.................... AAA 511,677
800,000 Franklin Cnty. Hosp. Rev. Refunding & Improvement Riverside 7.60%, 5/15/2020............. AAA 917,129
600,000 Franklin Cnty. Riverside Hosp. Rev. Bonds 7.25%, 5/15/2020............................... AAA 646,546
800,000 Hamilton Cnty. General Obligation Bonds 5.10%, 12/1/2013 - 12/1/2014..................... AA 732,009
850,000 Hamilton Cnty. Bethesda Hosp. Rev. Bonds 7.00%, 1/1/2009................................. A 879,654
450,000 Mahoning Cnty. Sanitary Sewer Sys. Rev. Bonds 7.50%, 2/1/2009............................ AAA 493,559
500,000 Montgomery Cnty. Hosp. Rev. Bonds 9.38%, 12/1/2005....................................... A+ 519,170
500,000 Ohio Air Quality Dev. Auth. Rev. Dayton Pwr. & Light Co. Proj. Bonds 9.50%, 12/1/2015.... AA- 520,495
675,000 Ohio Air Quality Dev. Auth. Rev. PC Cincinnati Gas & Electric Bonds 10.13%, 12/1/2015.... BAA 703,845
175,000 Ohio Building Auth., Lausche Office Bldg., Rev. Bonds 10.13%, 10/1/2006.................. AAA 219,008
500,000 Ohio Capital Corp. Housing Rev. Bonds 7.60%, 11/1/2023................................... AAA 535,000
485,000 Ohio Housing Finance Agency Rev. Bonds 7.05% - 7.40%, 9/1/2015 - 9/1/2016................ AAA 499,522
120,000 Ohio State Higher Ed. Oberlin College Rev. Bonds 7.10%, 10/1/2012........................ NR 134,449
250,000 Parma Community Hospital Rev. Bonds 7.13%, 11/15/2013.................................... AAA 267,437
500,000 University of Toledo General Receipts Revenue Bonds 5.90%, 6/1/2020...................... AAA 489,747
-----------
TOTAL MUNICIPAL BONDS -- (COST $10,252,073).............................................. 10,706,358
-----------
SHORT-TERM TAX EXEMPT INVESTMENTS -- 4.9%
$ 250,000 Clermont Cnty. Hosp. Fac. Mercy Hlth. Care Sys. Rev. Bonds 9.75%, 9/1/1995............... AAA $ 256,212
200,000 Grapevine Texas Ind. Dev. Corp. Variable Rate Demand Revenue Bonds, 3.90%, 8/1/95........ Aa1 200,000
100,000 Kansas City Ind. Dev. Auth Hospital Variable Rate Demand Revenue Bonds, 3.95%, 8/1/95.... Aaa 100,000
-----------
TOTAL SHORT-TERM TAX EXEMPT INVESTMENTS (COST $556,576).................................. 556,212
-----------
TOTAL INVESTMENTS -- 98.4% (COST $10,808,649)............................................ 11,262,570
OTHER ASSETS LESS LIABILITIES -- 1.6%.................................................... 185,951
-----------
NET ASSETS -- 100%....................................................................... $11,448,521
===========
NET ASSET VALUE PER SHARE................................................................ $ 9.46
===========
SHARES OUTSTANDING (unlimited number of shares authorized; $.10 par value) --
NOTE C................................................................................... 1,210,593
===========
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus 4.71% of net amount invested or
4.5% of the offering price).............................................................. $ 9.91
===========
NET ASSETS, AS OF JULY 31, 1995, ARE COMPRISED OF THE FOLLOWING:
Aggregate paid in capital................................................................ $11,653,894
Accumulated undistributed net realized losses............................................ (659,294)
Unrealized appreciation of investments -- net............................................ 453,921
-----------
$11,448,521
<FN> ===========
* All ratings are stated as of July 31, 1995 by Moody's Investor Services, Inc. or Standard and Poor's. The unrated municipal
obligations are considered by the Trust's investment adviser, Carnegie Capital Management Company, to have characteristics and
quality comparable to the rated municipal obligations purchased by the Fund, and are in accordance with policies established by
the Board of Trustees.
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 13
CARNEGIE TAX EXEMPT INCOME TRUST
OHIO GENERAL MUNICIPAL FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<S> <C>
INTEREST INCOME............................................................................................ $ 788,748
------------
EXPENSES -- NOTE B
Management fees............................................................................................ 58,187
Trustee fees............................................................................................... 8,000
Professional fees.......................................................................................... 6,703
Transfer agent fees........................................................................................ 6,690
Insurance expense.......................................................................................... 3,381
Custodian fees............................................................................................. 2,742
Shareholder reporting...................................................................................... 2,498
Miscellaneous expenses..................................................................................... 22,291
------------
Total expenses......................................................................................... 110,492
------------
NET INVESTMENT INCOME...................................................................................... 678,256
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET
Realized gain on investments............................................................................... 47,871
Change in unrealized appreciation of investments........................................................... (127,808)
------------
Net loss on investments.................................................................................... (79,937)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS................................................................. $ 598,319
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS
Net investment income........................................................ 678,256 $ 895,163
Realized gain on investments -- net.......................................... 47,871 440,643
Change in unrealized appreciation of investments -- net...................... (127,808) (981,987)
----------- -----------
Net increase in net assets from operations................................... 598,319 353,819
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME -- NOTE A........... (678,256) (895,163)
CAPITAL SHARE TRANSACTIONS -- NOTE C
Shares sold.................................................................. 702,342 935,527
Shares issued on reinvestment of distributions............................... 456,507 614,433
----------- -----------
1,158,849 1,549,960
Shares redeemed.............................................................. (2,205,226) (7,102,980)
----------- -----------
Net decrease from capital shares transactions................................ (1,046,377) (5,553,020)
----------- -----------
Total decrease in net assets........................................ (1,126,314) (6,094,364)
NET ASSETS
Beginning of year............................................................ 12,574,835 18,669,199
----------- -----------
End of year.................................................................. $11,448,521 $12,574,835
=========== ===========
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 14
CARNEGIE FUNDS GROUP (THE "TRUSTS")
NOTES TO FINANCIAL STATEMENTS
NOTE A -- ACCOUNTING POLICIES
Liquid Capital Income Trust (LCI), Carnegie Government Securities Trust
(CGST) and Carnegie Tax Free Income Trust (CTF) (the "Money Funds") are money
market funds. The Trusts are open-end, diversified management investment
companies registered under the Investment Company Act of 1940, as amended.
Carnegie Tax-Exempt Income Trust is a business trust organized under the
laws of the State of Ohio pursuant to a Declaration of Trust dated September 19,
1985 and is registered under the Investment Company Act of 1940, as amended, as
a non-diversified, open-end management investment company. The Trust offers
shares of beneficial interest in the Ohio General Municipal Fund ("Ohio
General"). Ohio General is managed in accordance with the investment objectives
and policies of the Fund.
The following is a summary of significant accounting policies followed by
the Trusts. The policies are in conformity with generally accepted accounting
principles.
Security valuations -- Investment securities for LCI, CGST and CTF are
valued using the amortized cost method whereby a security is valued at cost
adjusted for the amortization of any premiums or discounts over the period until
maturity. The cost of portfolio securities is substantially the same for
financial reporting and federal income tax purposes.
The value of municipal obligations held by Ohio General are furnished by
pricing services approved by the Trust's Board of Trustees using methods based
on market transactions for comparable securities and other factors which are
generally recognized by institutional traders. Short-term portfolio securities
are valued using the amortized cost method whereby a security is valued at cost
adjusted for the amortization of any premiums or discounts over the period until
maturity.
Security transactions and related investment income -- Security transactions
are accounted for on the trade date (date order to buy or sell is executed).
Interest income is determined on the basis of accrued interest and discount
earned (including original issue and market discount) and premium amortized.
Realized gains and losses, if any, on sales of securities are calculated on the
identified cost basis.
Repurchase Agreements -- For LCI and CGST, all repurchase agreements are
collateralized by United States Government Securities and such collateral is in
the possession of the Trusts' custodian. Each Trust evaluates collateral daily.
The market value of collateral is noted in the Statement of Net Assets. Unless
otherwise noted, the purchase date for all repurchase agreements was July 31,
1995.
Federal income taxes -- The Trusts have elected to fulfill the applicable
requirements of the Internal Revenue Code relating to regulated investment
companies by distributing all income to shareholders and, accordingly, no
provision for federal income taxes is required.
Distributions paid by Ohio General from net investment income on tax-exempt
municipal obligations are not includable by shareholders as gross income for
federal income tax purposes because Ohio General has fulfilled certain
requirements of the Internal Revenue Code applicable to regulated investment
companies which will enable Ohio General to pay exempt-interest distributions.
For the year ended July 31, 1995, Ohio General has capital loss carryovers for
federal income tax purposes of $659,294. These are scheduled to expire on July
31, 1996, 1997, 1998 and 1999 in the amounts of $92,434, $442,979, $2,240, and
$121,641, respectively.
Securities purchased on a when-issued basis -- Delivery and payment for
securities which have been purchased on a when-issued or delayed delivery basis
can take place a month or more after the date of the transaction. The securities
so purchased are subject to market fluctuation during this period. The Trusts
instruct the custodian to segregate assets in a separate account with a market
value equal to the amount of its purchase commitment. At July 31, 1995, there
were no when-issued securities.
Capital share transactions and distributions to shareholders -- The Money
Funds' shares are sold in continuous public offerings and are redeemed at their
respective net asset values. LCI and CGST declare and pay dividends each
business day to distribute their net investment income and realized net
short-term capital gains, if any. CTF declares a dividend each business day and
pays the dividend monthly. For LCI and CGST, all such dividends are
automatically reinvested in additional shares of the applicable Trust at their
respective net asset values. For CTF, the shareholders may elect a cash
distribution of dividends or elect automatic reinvestment in additional shares
of the Trust at its net asset value.
Ohio General shares are sold in a continuous public offering and are
redeemed at the net asset value. The Fund declares distributions each business
day and pays the distributions monthly. Shareholders may elect to reinvest such
distributions at the net asset value on the payment date or receive the
distributions in cash.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE B -- MANAGEMENT FEE AND DISTRIBUTION FEE
Pursuant to the investment advisory contract (the "Advisory Contract") in
effect between the Trusts and Carnegie Capital Management Company ("CCMC"), CCMC
is responsible for the management of the investments for the Trusts, and the
overall management of the business affairs, subject to the general supervision
and control of the Board of Trustees.
CCMC performs and bears the cost of research, statistical analysis and
continuous supervision of the investment portfolios of the Trusts and furnishes
office facilities and certain clerical and administrative services. In addition,
CCMC, together with Carnegie Fund Distributors, Inc. ("CFD"), the Fund's
principal underwriter and a wholly-owned subsidiary of CCMC, bears promotional
expenses, including costs of printing and distributing prospectuses utilized for
promotional purposes, other than those waived under the Distribution Expense
Plan described below.
LCI compensates CCMC with a management fee at an annual rate of .50% of
LCI's average daily net assets up to $700 million, .45% of the next $500
million, .40% of the next $800 million and .35% of the average daily net assets
exceeding $2.0 billion. For the year ended July 31, 1995, LCI had $99,658
payable to CCMC for management fees, and for the year then ended CCMC earned
management fees of $1,341,942.
CGST compensates CCMC with a management fee at an annual rate of .50% of
CGST's average daily net assets up to $100 million, .40% of the next $200
million and .35% of average daily net assets in excess of $300 million. For the
year ended July 31, 1995, CGST had $5,619 payable to CCMC for management fees,
and for the year then ended CCMC earned management fees of $78,300.
CTF compensates CCMC with a management fee at an annual rate of .50% of
CTF's average daily net assets. For the year ended July 31, 1995, CTF had
$11,329 payable to CCMC for management fees, and for the year then ended CCMC
earned management fees of $141,600.
Ohio General compensates CCMC with a management fee at an annual rate of
.50% of Ohio General's average daily net assets. For the year ended July 31,
1995, Ohio General had $4,849 payable to CCMC for management fees, and for the
year then ended CCMC earned management fees of $58,187.
In addition, in the event that the aggregate operating expenses of the Money
Funds and Ohio General (excluding certain expenses and, where permitted by
applicable state securities regulations, expenses incurred as part of the
Distribution Expense Plan described below) exceed any expense limitations
imposed by applicable state securities regulations, CCMC will reimburse 100% of
such excess expenses. There were no excess expenses for the year ended July 31,
1995.
The Trustees have adopted a Distribution Expense Plan pursuant to Rule 12b-1
under the 1940 Act with respect to Ohio General. Pursuant to the Distribution
Expense Plan, Ohio General will pay to CFD quarterly a Distribution Fee at the
annual rate of .30 of 1% of the average daily net assets. If actual Distribution
Expenses incurred for the year are less than the yearly Distribution Fee, as
calculated above, the Ohio General will pay an amount equal to such Distribution
Expenses. CFD is required to use .20 of 1% of such fee to make continuing
payments to authorized securities dealers for their continuing distribution and
promotional assistance in connection with the sale of the shares of Ohio
General. The remaining portion of the Distribution Fee must be utilized by CFD
for expenses incurred which are primarily intended to result in the sale of
shares including, but not limited to, paying for the preparation, printing and
distribution of sales literature and other promotional materials to existing and
prospective investors and by directly or indirectly purchasing radio,
television, newspaper and other media advertising and conducting sales seminars,
sales contests, and other incentives. Distribution fees in the amount of $34,223
for the year ended July 31, 1995 were waived for the Ohio General Municipal
Fund.
For the year ended July 31, 1995, CFD received sales charges paid by the
purchasers of Ohio General's shares of $791. Such sales charges are not expenses
of Ohio General and hence are not reflected in the accompanying Statements of
Operations. CCMC, CFD and the Trusts have certain officers in common.
LCI compensates independent trustees with a quarterly fee of $1,500. CGST,
CTF and Ohio General each compensate trustees with a quarterly fee of $500.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE C -- CAPITAL SHARES
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
---------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
LCI
Shares sold................................................... 581,045,745 654,219,318
Shares issued on reinvestment of distributions................ 12,656,143 8,135,537
-------------- --------------
593,701,888 662,354,855
Shares redeemed............................................... (636,266,272) (707,435,009)
-------------- --------------
Net decrease in capital shares................................ (42,564,384) (45,080,154)
=============== ===============
CGST
Shares sold................................................... 64,575,987 38,486,440
Shares issued on reinvestment of distributions................ 686,538 515,300
-------------- --------------
65,262,525 39,001,740
Shares redeemed............................................... (68,916,368) (46,287,261)
-------------- --------------
Net decrease in capital shares................................ (3,653,843) (7,285,521)
=============== ===============
CTF
Shares sold................................................... 73,012,254 71,904,296
Shares issued on reinvestment of distributions................ 810,380 641,826
-------------- --------------
73,822,634 72,546,122
Shares redeemed............................................... (77,847,489) (81,551,887)
-------------- --------------
Net decrease in capital shares................................ (4,024,855) (9,005,765)
=============== ===============
Ohio General
Shares sold................................................... 74,725 95,238
Shares issued on reinvestment of distributions from net
investment income........................................... 48,762 62,760
-------------- --------------
123,487 157,998
Shares redeemed................................................. (235,935) (725,894)
-------------- --------------
Net decrease in capital shares.................................. (112,448) (567,896)
=============== ===============
</TABLE>
NOTE D -- PURCHASES AND SALES OF INVESTMENT SECURITIES -- OHIO GENERAL MUNICIPAL
FUND
Purchases of investment securities and value of securities maturing or sold
excluding short-term securities during the year ended July 31, 1995 amounted to
$989,465 and $2,191,667, respectively.
For Federal income tax purposes, the identified cost of securities owned on
July 31, 1995 was $10,808,649. Aggregate unrealized appreciation on the cost
basis of investments was $515,131 and aggregate unrealized depreciation was
$61,210. Net realized appreciation at July 31, 1995 was $453,921.
NOTE E -- NET ASSETS
Net Assets, as of July 31, 1995, are comprised of the following:
<TABLE>
<CAPTION>
LCI CGST CTF
------------ ----------- -----------
<S> <C> <C> <C>
Capital shares, at par.......................................... $ 24,738,588 $ 1,442,488 $ 2,761,591
Capital shares in excess of par................................. 222,647,296 12,982,388 24,854,314
------------ ----------- -----------
Net Assets.............................................. $247,385,884 $14,424,876 $27,615,905
============= ============ ============
</TABLE>
15
