<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 Carnegie funds, including sales charges and expenses,
see the appropriate sections of the combined prospectus, which may
be obtained from Carnegie or your broker. Read the prospectus
carefully before you invest or send money.
(LOGO)
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
- -------------------------------------------------------------------
Semi-Annual Report
January 31, 1997
- -------------------------------------------------------------------
CARNEGIE CAPITAL MANAGEMENT COMPANY
1100 The Halle Building
1228 Euclid Avenue
Cleveland, Ohio 44115-1831
(LOGO)
<PAGE> 2
SEMI-ANNUAL MESSAGE FROM THE PRESIDENT:
MONEY MARKET SEMI-ANNUAL REPORT 1997
Dear Fellow Shareholders:
Much of the investment attention has shifted to the equity side of the
mutual fund industry, with the spectacular returns of both 1995 and 1996. The
entire industry has seen a dramatic rise in assets under management because of
the positive "press" and aforementioned returns. Money market funds have also
seen added dollars, partly due to greater public awareness overall, and also
because of the continued competitive returns they provide with prudent,
short-term, quality investments.
We at Carnegie Capital continue to believe that the purpose for which
your Funds were created still is more than relevant in today's volatile market
environment. In fact, it may be more so now than ever before, with almost 80%
of all monies in equity mutual funds having been there less than five years!
Money market mutual funds have always provided investors a competitive return
with safety -- the price per share on Liquid Capital Income Trust, as well as
Carnegie Government Securities Trust, and Carnegie Tax-Free Income Trust has
never varied from $1.00 per share.
We thank you for your continued confidence in The Carnegie Funds Group,
and do hope you will call or write with any comments or suggestions.
Sincerely,
/s/ George R. Mateyo
George R. Mateyo
President
1
<PAGE> 3
LIQUID CAPITAL INCOME TRUST -- FINANCIAL HIGHLIGHTS
Data for each share outstanding throughout the period
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JULY 31,
JANUARY 31, ---------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<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............ 0.023 0.047 0.047 0.026 0.024
------------ ------------ ------------ ------------ ------------
Total from Investment
Operations..................... 0.023 0.047 0.047 0.026 0.024
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income......................... (0.023) (0.047) (0.047) (0.026) (0.024)
------------ ------------ ------------ ------------ ------------
Total Distributions.............. (0.023) (0.047) (0.047) (0.026) (0.024)
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).... .96%(2) 0.90% 0.87% 0.88% 0.83%
Net investment income as a
percentage of average daily net
assets(1)...................... 4.52%(2) 4.69% 4.72% 2.62% 2.43%
Net Assets at end of period....... $192,969,362 $205,508,605 $247,385,884 $289,950,268 $335,030,422
============ ============ ============ ============ ============
<CAPTION>
1992
------------
<S> <C>
Net asset value, beginning of
period........................... $1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.042
------------
Total from Investment
Operations..................... 0.042
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income......................... (0.042)
------------
Total Distributions.............. (0.042)
Net Asset Value, End of Period $1.00
============
RATIOS/SUPPLEMENTAL INFORMATION
Expenses as a percentage of
average daily net assets(1).... 0.77%
Net investment income as a
percentage of average daily net
assets(1)...................... 4.25%
Net Assets at end of period....... $431,773,459
============
</TABLE>
(1) The percentages should not be construed as representative of the yield or
expenses related to further investments in the Trust.
(2) Annualized basis.
CARNEGIE GOVERNMENT SECURITIES TRUST -- FINANCIAL HIGHLIGHTS
Data for each share outstanding throughout the period
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JULY 31,
JANUARY 31, ---------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... 0.021 0.045 0.044 0.024 0.022 0.040
----------- ----------- ----------- ----------- ----------- -----------
Total from Investment Operations.... 0.021 0.045 0.044 0.024 0.022 0.040
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income............................ (0.021) (0.045) (0.044) (0.024) (0.022) (0.040)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions................. (0.021) (0.045) (0.044) (0.024) (0.022) (0.040)
Net Asset Value, End of Period....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=========== =========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL INFORMATION
Expenses as a percentage of average
daily net assets(1)............... 1.14%(2) 1.03% 1.06% 0.98% 0.87% 0.79%
Net investment income as a
percentage of average daily net
assets(1)......................... 4.28%(2) 4.50% 4.38% 2.37% 2.25% 4.05%
Net Assets at end of period.......... $12,500,723 $12,737,746 $14,424,876 $18,078,719 $25,364,240 $34,687,846
=========== =========== =========== =========== =========== ===========
</TABLE>
(1) The percentages should not be construed as representative of the yield or
expenses related to further investments in the Trust.
(2) Annualized basis.
2
<PAGE> 4
CARNEGIE TAX FREE INCOME TRUST -- FINANCIAL HIGHLIGHTS
Data for each share outstanding throughout the period
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JULY 31,
JANUARY 31, -----------------------------------------------------------
1997 1996 1995 1994 1993
------------- ----------- ----------- ----------- -----------
<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..................... 0.014 0.029 0.029 0.018 0.019
------------- ----------- ----------- ----------- -----------
Total from Investment Operations.......... 0.014 0.029 0.029 0.018 0.019
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income.................................. (0.014) (0.029) (0.029) (0.018) (0.019)
------------- ----------- ----------- ----------- -----------
Total Distributions....................... (0.014) (0.029) (0.029) (0.018) (0.019)
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%(2) 0.80% 0.82% 0.77% 0.76%
Net investment income as a percentage of
average daily net assets(1)............. 2.76%(2) 2.92% 2.86% 1.77% 1.88%
Net Assets at end of period................ $22,846,635 $25,266,098 $27,615,905 $31,640,760 $40,646,525
============ ========== ========== ========== ==========
<CAPTION>
1992
------------
<S> <C>
Net asset value, beginning of period....... $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.036
------------
Total from Investment Operations.......... 0.036
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income.................................. (0.036)
------------
Total Distributions....................... (0.036)
Net Asset Value, End of Period............. $1.00
===========
RATIOS/SUPPLEMENTAL INFORMATION
Expenses as a percentage of average daily
net assets(1)........................... 0.69%
Net investment income as a percentage of
average daily net assets(1)............. 3.58%
Net Assets at end of period................ $56,180,652
===========
</TABLE>
(1) The percentages should not be construed as representative of the yield or
expenses related to further investments in the Trust.
(2) Annualized basis.
CARNEGIE TAX EXEMPT INCOME TRUST -- OHIO GENERAL MUNICIPAL FUND
FINANCIAL HIGHLIGHTS -- Data for each share outstanding throughout the period
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JULY 31,
JANUARY 31, -----------------------------------------------------------
1997 1996 1995 1994 1993
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $9.41 $9.46 $9.50 $9.87 $9.79
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2).................. 0.244 0.514 0.556 0.549 0.559
Net realized and unrealized gains/(losses)
on securities........................... 0.070....... (0.050) (0.040) (0.370) 0.080
------------- ----------- ----------- ----------- -----------
Total from investment operations.......... 0.314....... 0.464 0.516 0.179 0.639
LESS DISTRIBUTIONS:
Distributions from net investment
income.................................. (0.244) (0.514) (0.556) (0.549) (0.559)
------------- ----------- ----------- ----------- -----------
Total distributions....................... (0.244) (0.514) (0.556) (0.549) (0.559)
Net Asset Value, End of Period............. $9.48 $9.41 $9.46 $9.50 $9.87
============ ========== ========== ========== ==========
ANNUAL TOTAL RETURN........................ 2.50% 4.98% 5.50% 1.82% 6.77%
============ ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL INFORMATION
Net assets at end of period............... $10,723,185 $11,655,988 $11,448,521 $12,574,835 $18,669,199
Expenses as a percentage of average daily
net assets(1)(2)........................ 0.91%(3) 0.88% 0.97% 0.93% 0.81%
Net investment income as a percentage of
average daily net assets(1)............. 5.15%(3) 5.41% 5.95% 5.68% 5.81%
Portfolio Turnover rate................... 0% 23.45% 8.77% 10.04% 4.98%
<CAPTION>
1992
-----------
<S> <C>
Net asset value, beginning of period....... $9.26
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2).................. 0.571
Net realized and unrealized gains/(losses)
on securities........................... 0.530
-----------
Total from investment operations.......... 1.101
LESS DISTRIBUTIONS:
Distributions from net investment
income.................................. (0.571)
-----------
Total distributions....................... (0.571)
Net Asset Value, End of Period............. $9.79
==========
ANNUAL TOTAL RETURN........................ 12.32%
==========
RATIOS/SUPPLEMENTAL INFORMATION
Net assets at end of period............... $28,011,143
Expenses as a percentage of average daily
net assets(1)(2)........................ 0.76%
Net investment income as a percentage of
average daily net assets(1)............. 6.10%
Portfolio Turnover rate................... 11.40%
</TABLE>
(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 $.232 for the six months ended January 31, 1997, $.483, $528, $.520,
$.530, and $.543 for the years ended July 31, 1996, 1995, 1994, 1993 and
1992, 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 1.21% for the six months ended January 31, 1997,
1.18%, 1.27%, 1.23%, 1.11%, and 1.06% for the same periods, respectively.
(3) Annualized basis.
3
<PAGE> 5
LIQUID CAPITAL INCOME TRUST
STATEMENT OF NET ASSETS
JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY DATES VALUE
AMOUNT (1997) (NOTE A)
- ------------ --------------- --------------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 4.9%
$ 9,500,000 First Deposit National Bank, 5.50%........................................ 5/9 $ 9,500,000
------------
TOTAL CERTIFICATES OF DEPOSIT (Cost $9,500,000)........................... 9,500,000
------------
COMMERCIAL PAPER+ -- 36.4%
10,000,000 Dean Witter Company, 5.32%................................................ 2/14 9,983,744
9,500,000 Ford Motor Credit Company, 5.25%.......................................... 2/6 9,495,844
6,200,000 Harley-Davidson Dealer Funding Corp., 5.35................................ 3/14 6,164,066
3,900,000 Industrial Funding Corp., 5.45%........................................... 4/15 3,858,080
5,500,000 Industrial Funding Corp., 5.43%........................................... 4/25 5,432,804
5,270,000 Metropolitan Washington Airport Authority, 5.48%.......................... 2/25 5,317,843
1,755,000 Metropolitan Washington Airport Authority, 5.48%.......................... 2/25 1,770,932
9,000,000 National City Corp., 5.38%................................................ 2/3 9,000,000
9,500,000 Philip Morris Companies, 5.27%............................................ 2/24 9,470,795
9,900,000 Republic National Bank of New York, 5.30%................................. 4/10 9,803,805
------------
TOTAL COMMERCIAL PAPER (Cost $70,297,913)................................. 70,297,913
------------
LETTERS OF CREDIT -- 10.0%
10,000,000 AES Barbers Point Inc., 5.32%............................................. 2/14 9,983,745
9,500,000 First National Bank of Chicago, Commonwealth Fuel, 5.34%.................. 4/25 9,385,858
------------
TOTAL LETTERS OF CREDIT (Cost $19,369,603)................................ 19,369,603
------------
U.S. GOVERNMENT INTEREST BEARING AND AGENCIES -- 25.9%
10,000,000 Federal Home Loan Mortgage Corp., 5.22%................................... 2/13 9,985,500
10,000,000 Federal Home Loan Mortgage Corp., 5.22%................................... 2/17 9,976,800
15,000,000 Federal National Mortgage Association, 5.23%.............................. 2/14 14,976,029
15,000,000 Federal National Mortgage Association, 5.23%.............................. 2/18 14,967,312
------------
TOTAL U.S. GOVERNMENT INTEREST BEARING AND AGENCIES
(Cost $49,905,641)........................................................ 49,905,641
------------
REPURCHASE AGREEMENTS -- 22.7%
45,130,000 Merrill Lynch Government Securities, Inc., 5.45%; Collateralized by
$45,130,000 Federal National Mortgage Association, 5.45% due 4/10/97
(repurchase proceeds $43,819,892)......................................... 2/3 43,800,000
------------
TOTAL INVESTMENTS -- 99.9% (Cost $192,873,157)............................ 192,873,157
OTHER ASSETS LESS LIABILITIES -- .1%...................................... 96,205
------------
NET ASSETS -- 100.0% -- equivalent to $1.00 per share for 192,969,362
outstanding Capital Shares in the Trust, $.10 par value (unlimited number
of shares authorized) -- NOTE E........................................... $ 192,969,362
============
</TABLE>
+ At January 31, 1997, 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.
See Notes to Financial Statements.
4
<PAGE> 6
LIQUID CAPITAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C>
INTEREST INCOME............................................. $ 5,471,931
EXPENSES -- NOTE B
Management fees........................................... $ 509,230
Custodian and transfer agent fees......................... 285,224
Printing.................................................. 50,406
Postage................................................... 46,500
Registration and filing fees.............................. 18,600
Trustees' fees............................................ 12,000
Professional fees......................................... 11,346
Insurance expense......................................... 9,852
Miscellaneous............................................. 11,250 954,408
---------- -----------
INVESTMENT INCOME -- NET.................................... $ 4,517,523
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, JULY 31,
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net................................ $ 4,517,523 $ 10,711,291
Distributions to shareholders from net
investment income....................................... (4,517,523) (10,711,291)
Capital share transactions -- net......................... (12,539,243) (41,877,279)
------------ ------------
Total decrease in net assets....................... (12,539,243) (41,877,279)
NET ASSETS
Beginning of period....................................... 205,508,605 247,385,884
------------ ------------
End of period............................................. $192,969,362 $205,508,605
============ ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 7
CARNEGIE GOVERNMENT SECURITIES TRUST
STATEMENT OF NET ASSETS
JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT DATES (1997) (NOTE A)
- ---------- ------------ -----------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES -- 79.8%
$2,000,000 Federal Home Loan Mortgage Corp., 5.22%............... 2/13 1,997,100
4,000,000 Federal Home Loan Mortgage Corp., 5.22%............... 2/19 3,990,720
1,000,000 Federal National Mortgage Association, 5.22%.......... 2/21 997,390
3,000,000 Federal National Mortgage Association, 5.23%.......... 2/18 2,993,462
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $9,978,672)................................... 9,978,672
-----------
REPURCHASE AGREEMENTS -- 20.3%
2,610,000 Merrill Lynch Government Securities, Inc., 5.70%;
Collateralized by $2,610,000 Federal National Mort-
gage Association, 5.45% due 2/3/1997
(repurchase proceeds $2,531,149).................... 2/3 2,530,000
-----------
TOTAL INVESTMENTS -- 100.1%
(Cost $12,508,672).................................. 12,508,672
OTHER ASSETS LESS LIABILITIES -- (.1%)................ (7,949)
-----------
NET ASSETS -- 100.0% -- equivalent to $1.00 per share
for 12,500,723 outstanding Capital Shares in the
Trust, $.10 par value (unlimited number of shares
authorized) -- NOTE E............................... $12,500,723
============
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 8
CARNEGIE GOVERNMENT SECURITIES TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C>
INTEREST INCOME............................................. $324,225
EXPENSES -- NOTE B
Management fees........................................... $ 30,482
Custodian and transfer agent fees......................... 14,238
Registration and filing fees.............................. 7,825
Professional fees......................................... 4,785
Trustees' fees............................................ 4,000
Printing.................................................. 3,776
Postage................................................... 1,344
Insurance expense......................................... 701
Miscellaneous............................................. 1,242 68,393
-------- --------
INVESTMENT INCOME -- NET.................................... $255,832
========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, JULY 31,
1997 1996
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net................................ $ 255,832 $ 637,972
Distributions to shareholders from net
investment income....................................... (255,832) (637,972)
Capital share transactions -- net......................... (237,023) (1,687,130)
----------- -----------
Total decrease in net assets....................... (237,023) (1,687,130)
NET ASSETS
Beginning of period....................................... 12,737,746 14,424,876
----------- -----------
End of period............................................. $12,500,723 $12,737,746
=========== ===========
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 9
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF NET ASSETS+
JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
- ---------- -------- ----------------
<S> <C> <C> <C>
MUNICIPAL SECURITIES -- 99.4%
ALABAMA -- 6.1%
$ 200,000 Alabama Special Care Facility Variable Rate Demand Revenue Bonds 3.50%,
2/7/97................................................................. Aaa $ 200,000
1,200,000 Birmingham Baptist Medical Center Variable Rate Demand Revenue Bonds
3.55%, 2/7/97.......................................................... Aa3 1,200,000
ARIZONA -- 6.6%
1,000,000 Arizona Health Facilities Authority Variable Rate Demand Revenue Bonds
3.55%, 2/7/97.......................................................... Aaa 1,000,000
500,000 Pima County Variable Rate Demand Industrial Development Revenue Bonds
3.50%, 2/7/97.......................................................... NR 500,000
CALIFORNIA -- 3.9%
900,000 Los Angeles Regional Airports Variable Rate Demand Revenue Bonds 3.65%,
2/7/97................................................................. Aa2 900,000
DELAWARE -- 1.8%
400,000 Wilmington Hospital Franciscan Health System Variable Rate Demand
Revenue Bonds 3.65%, 2/3/97............................................ Aa2 400,000
HAWAII -- 4.4%
1,000,000.. Hawaii Housing Finance Variable Rate Demand Revenue Bonds 3.60%,
2/7/97................................................................. A1 1,000,000
ILLINOIS -- 12.7%
900,000 Illinois Health Facilities SSM Health Care Variable Rate Demand Revenue
Bonds 3.50%, 2/7/97.................................................... Aaa 900,000
1,000,000 Illinois Health Facilities Swedish Covenant Variable Rate Demand
Revenue Bonds 3.50%, 2/7/97............................................ Aaa 1,000,000
1,000,000 Saint Charles Industrial Development Pier 1 Imports Variable Rate
Demand Revenue Bonds 3.55%, 2/7/97..................................... AA 1,000,000
KENTUCKY -- 4.8%
1,100,000 Appalachian Regional Health Care Development Finance Authority Variable
Rate Demand Revenue Bonds 3.50%, 2/7/97................................ Aa2 1,100,000
LOUISIANA -- 4.4%
1,000,000 Delhi Louisiana Industrial Development Variable Rate Demand Revenue
Bonds 3.55%, 2/7/97.................................................... A1 1,000,000
MARYLAND -- 4.4%
1,000,000 Montgomery County Housing Oppnty. Variable Rate Demand Revenue Bonds
3.55%, 2/7/97.......................................................... Aa 1,000,000
MASSACHUSETTS -- 8.8%
100,000 Massachusetts State Updates Variable Rate Demand Revenue Bonds 3.50%,
2/7/97................................................................. Aa2 100,000
1,000,000 Massachusetts State Health & Educational Facility Authority Variable
Rate Demand Revenue Bonds 3.50%, 2/7/97................................ Aa3 1,000,000
900,000 Massachusetts State Industrial Finance Agency Variable Rate Demand
Revenue Bonds 3.35%, 2/7/97............................................ Aaa 900,000
MICHIGAN -- 4.4%
1,000,000 Michigan State Hospital Finance Authority Variable Rate Demand Revenue
Bonds 3.60%, 2/7/97.................................................... A1 1,000,000
NEW YORK -- 3.9%
900,000 New York State Medical Care Facilities Variable Rate Demand Revenue
Bonds 3.45%, 2/7/97.................................................... Aa3 900,000
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 10
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF NET ASSETS+ -- CONTINUED
JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
- ---------- -------- ----------------
<S> <C> <C> <C>
OHIO -- 13.1%
$ 200,000 Muskingum County Variable Rate Demand Industrial Development Revenue
Bonds 3.95%, 3/1/97.................................................... Aa2 $ 200,000
1,000,000 Ohio State Environmental Improvement Variable Rate Demand Revenue Bonds
3.85%, 3/1/97.......................................................... A1 1,000,000
1,000,000 Franklin County Bond Anticipation Notes 3.90%, 8/1/97.................. MIG-1 1,000,840
800,000 Hamilton County Health System Variable Note Demand Revenue Bonds 3.75%,
2/3/97................................................................. A1 800,000
OREGON -- 3.9%
400,000 Port of Portland Pollution Control Variable Rate Demand Revenue Bonds
3.65%, 2/3/97.......................................................... Aa3 400,000
500,000 Umatilla County Hospital Facilities Variable Rate Demand Revenue Bonds
3.65%, 2/3/97.......................................................... Aa2 500,000
TENNESSEE -- 3.5%
800,000 Metropolitan Nashville Airport Authority Variable Rate Demand Revenue
Bonds 3.65%, 2/3/97.................................................... AA 800,000
TEXAS -- 7.4%
500,000 Bexar County Housing Finance Variable Rate Demand Revenue Bonds
3.65%,2/7/97........................................................... AA+ 500,000
700,000 Lone Star Texas Airport Variable Rate Demand Revenue Bonds 3.65%,
2/3/97................................................................. VMIG-1 700,000
500,000 Lower Neches Valley Authority Variable Rate Demand Revenue Bonds 3.50%,
2/7/97................................................................. Aa2 500,000
VIRGINIA -- 1.8%
400,000 Fairfax County Industrial Development Authority Variable Rate Demand
Revenue Bonds 3.55%, 2/7/97............................................ Aa 400,000
WISCONSIN -- 3.5%
800,000 Wisconsin Health Facilities Variable Rate Demand Revenue Bonds 3.50%,
2/7/97................................................................. Aaa 800,000
----------------
TOTAL INVESTMENTS -- 99.4% (Cost $22,700,840).......................... 22,700,840
OTHER ASSETS LESS LIABILITIES -- .6%................................... 145,795
----------------
NET ASSETS -- 100% -- equivalent to $1.00 per share for 22,846,635
outstanding Capital Shares in the Trust, $.10 par value (unlimited
number of shares authorized) -- Note E................................. $ 22,846,635
=================
</TABLE>
+ 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 January 31, 1997 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.
See Notes to Financial Statements.
9
<PAGE> 11
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C>
INTEREST INCOME.................................................. $ 429,061
EXPENSES -- NOTE B
Management fees................................................ $ 61,076
Custodian and transfer fees.................................... 10,535
Registration and filing fees................................... 7,350
Professional fees.............................................. 5,580
Trustees' fees................................................. 4,000
Printing....................................................... 2,790
Insurance Expense.............................................. 1,334
Postage........................................................ 1,488
Miscellaneous.................................................. 4,370 98,523
---------- ----------
INVESTMENT INCOME -- NET......................................... $ 330,538
==========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, JULY 31,
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net..................................... $ 330,538 $ 718,521
Distributions to shareholders from net
investment income............................................ (330,538) (718,521)
Capital share transactions -- net.............................. (2,419,493) (2,349,807)
------------ ------------
Total decrease in net assets............................ (2,419,463) (2,349,807)
NET ASSETS
Beginning of period............................................ 25,266,098 27,615,905
------------ ------------
End of period.................................................. $ 22,846,635 $ 25,266,098
============ ============
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 12
CARNEGIE TAX EXEMPT INCOME TRUST
OHIO GENERAL MUNICIPAL FUND
STATEMENT OF NET ASSETS -- JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
- --------- ---------- -----------
<S> <C> <C> <C>
MUNICIPAL BONDS -- 93.4%
$ 750,000 Columbus Citation Housing Corp. Revenue Bonds 7.63%, 1/1/2022............................ AA $ 885,894
250,000 Cuyahoga Cnty. Hosp.-Metro Health Sys. Revenue Bonds 6.90%, 2/15/2007.................... AAA 259,649
500,000 Cuyahoga Cnty. Meridia Hlth. Care Sys. Revenue Bonds 7.00%, 8/15/2006.................... A 538,194
500,000 Dublin Ohio City Schl Dist. General Obligation Bonds 6.20%, 12/1/2019.................... AAA 519,731
800,000 Franklin Cnty. Hosp. Revenue Refunding & Improvement Riverside 7.60%, 5/15/2020.......... AAA 892,428
600,000 Franklin Cnty. Riverside Hosp. Revenue Bonds 7.25%, 5/15/2020............................ AAA 662,954
800,000 Hamilton Cnty. General Obligation Bonds 5.10%, 12/1/2013 - 12/1/2014..................... AA 766,605
850,000 Hamilton Cnty. Bethesda Hosp. Revenue Bonds 7.00%, 1/1/2009.............................. A 870,204
450,000 Mahoning Cnty. Sanitary Sewer Sys. Revenue Bonds 7.50%, 2/1/2009......................... AAA 486,909
500,000 Mahoning Cnty. Western Reserve Care Sys. Revenue Bonds 5.38%, 10/15/2015................. AAA 485,600
500,000 Ohio Capital Corp. Housing Revenue Bonds 7.60%, 11/1/2023................................ AAA 530,051
436,000 Ohio Housing Finance Agency Revenue Bonds 7.05% - 7.40%, 9/1/2015 - 9/1/2016............. AAA 452,973
120,000 Ohio State Higher Ed. Oberlin College Revenue Bonds 7.10%, 10/1/2012..................... NR 131,087
500,000 Ohio State Water Dev. Auth. Ref. & Impt. Revenue Bonds 5.50%, 12/1/2018.................. AAA 491,231
250,000 Parma Community Hospital Revenue Bonds 7.13%, 11/15/2013................................. AAA 264,442
500,000 Richland Cnty. General Obligation Bonds 5.40%, 12/1/2015................................. AAA 491,839
150,000 Rural Lorain Water Auth. Ref. & Impt. Revenue Bonds 5.45%, 10/1/2018..................... AAA 146,632
500,000 Stark Cnty. General Obligation Bonds 5.70%, 11/15/2017................................... AAA 504,422
145,000 University Heights B General Obligation Bonds 6.20%, 12/1/2014........................... A 151,741
500,000 Washington Water Sys. Revenue Bonds 5.38%, 12/1/2019..................................... AAA 483,367
-----------
TOTAL MUNICIPAL BONDS -- (COST $9,615,775)............................................... 10,015,953
-----------
SHORT-TERM TAX EXEMPT INVESTMENTS -- 4.7%
300,000 Lone Star Texas Airport Variable Rate Demand Revenue Bonds, 3.65%, 12/01/2014............ A 300,000
200,000 Columbia Alabama Ind'l. Dev. Auth. Variable Rate Demand Revenue Bonds, 3.65%,
10/01/2022............................................................................... NR 200,000
-----------
TOTAL SHORT-TERM TAX EXEMPT INVESTMENTS (COST $500,000).................................. 500,000
-----------
TOTAL INVESTMENTS -- 98.1% (COST $10,115,775)............................................ 10,515,953
OTHER ASSETS LESS LIABILITIES -- 1.9%.................................................... 207,232
-----------
NET ASSETS -- 100%....................................................................... $10,723,185
===========
NET ASSET VALUE PER SHARE................................................................ $ 9.48
===========
SHARES OUTSTANDING (unlimited number of shares authorized; $.10 par value) --
NOTE C................................................................................... 1,130,866
===========
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus 4.71% of net amount invested or
4.5% of the offering price).............................................................. $ 9.93
===========
NET ASSETS, AS OF JANUARY 31, 1997, ARE COMPRISED OF THE FOLLOWING:
Aggregate paid in capital................................................................ $10,926,252
Accumulated undistributed net realized losses............................................ (603,245)
Unrealized appreciation of investments -- net............................................ 400,178
-----------
$10,723,185
===========
* All ratings are stated as of January 31, 1997 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 SIX MONTHS ENDED JANUARY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INTEREST INCOME............................................................................................ $ 327,312
------------
EXPENSES -- NOTE B
Management fees............................................................................................ 27,255
Trustee fees............................................................................................... 4,600
Shareholder reporting...................................................................................... 2,760
Transfer agent fees........................................................................................ 2,632
Professional fees.......................................................................................... 2,392
Custodian fees............................................................................................. 1,258
Insurance expense.......................................................................................... 672
Miscellaneous expenses..................................................................................... 7,360
------------
Total expenses......................................................................................... 48,929
------------
NET INVESTMENT INCOME...................................................................................... 278,383
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET
Realized gain on investments............................................................................... 42,791
Change in unrealized appreciation of investments........................................................... 43,151
------------
Net gain on investments.................................................................................... 85,942
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS................................................................. $ 364,325
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 1997 JULY 31, 1996
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS
Net investment income...................................................... $ 278,383 $ 636,768
Realized gain/(loss) on investments -- net................................. 42,791 13,258
Change in unrealized appreciation of investments -- net.................... 43,151 (96,894)
---------------- -------------
Net increase in net assets from operations................................. 364,325 553,132
---------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME -- NOTE A......... (278,383) (636,768)
CAPITAL SHARE TRANSACTIONS -- NOTE C
Shares sold................................................................ 477,157 2,185,962
Shares issued on reinvestment of distributions............................. 184,869 428,112
---------------- -------------
662,026 2,614,074
Shares redeemed............................................................ (1,680,771) (2,322,971)
---------------- -------------
Net increase/(decrease) from capital shares transactions................... (1,018,745) 291,103
---------------- -------------
Total increase/(decrease) in net assets........................... (932,803) 207,467
NET ASSETS
Beginning of period........................................................ 11,655,988 11,448,521
---------------- -------------
End of period.............................................................. $ 10,723,185 $ 11,655,988
============ ===========
</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 January 31,
1997.
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, 1996, Ohio General had capital loss carryovers for
federal income tax purposes of $387,830. If unused, such amount will expire on
July 31, 1999.
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 January 31, 1997, 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 six months ended January 31, 1997, LCI had
$85,776 payable to CCMC for management fees, and for the six months then ended
CCMC earned management fees of $509,230.
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
six months ended January 31, 1997, CGST had $5,185 payable to CCMC for
management fees, and for the six months then ended CCMC earned management fees
of $30,482.
CTF compensates CCMC with a management fee at an annual rate of .50% of
CTF's average daily net assets. For the six months ended January 31, 1997, CTF
had $10,132 payable to CCMC for management fees, and for the six months then
ended CCMC earned management fees of $61,076.
Ohio General compensates CCMC with a management fee at an annual rate of
.50% of Ohio General's average daily net assets. For the six months ended
January 31, 1997, Ohio General had $4,435 payable to CCMC for management fees,
and for the six months then ended CCMC earned management fees of $27,255.
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 six months ended
January 31, 1997.
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 $32,410
for the six months ended January 31, 1997 were waived for the Ohio General
Municipal Fund.
For the six months ended January 31, 1997, CFD received sales charges paid
by the purchasers of Ohio General's shares of $3,827. 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 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>
SIX MONTHS
ENDED
JANUARY 31, YEAR ENDED
1997 JULY 31, 1996
-------------- --------------
<S> <C> <C>
LCI
Shares sold................................................... 199,233,207 523,164,749
Shares issued on reinvestment of distributions................ 4,517,523 10,711,291
-------------- --------------
203,750,730 533,876,040
Shares redeemed............................................... (216,289,973) (575,753,319)
-------------- --------------
Net decrease in capital shares................................ (12,539,243) (41,877,279)
=============== ===============
CGST
Shares sold................................................... 9,259,926 46,242,801
Shares issued on reinvestment of distributions................ 255,832 637,972
-------------- --------------
9,515,758 46,880,773
Shares redeemed............................................... (9,752,781) (48,567,903)
-------------- --------------
Net decrease in capital shares................................ (237,023) (1,687,130)
=============== ===============
CTF
Shares sold................................................... 19,032,287 53,251,073
Shares issued on reinvestment of distributions................ 330,538 718,521
-------------- --------------
19,362,825 53,969,594
Shares redeemed............................................... (21,782,288) (56,319,401)
-------------- --------------
Net decrease in capital shares................................ (2,419,463) (2,349,807)
=============== ===============
Ohio General
Shares sold................................................... 50,411 226,209
Shares issued on reinvestment of distributions from net
investment income........................................... 19,508 47,504
-------------- --------------
69,919 273,713
Shares redeemed................................................. (177,504) (245,855)
-------------- --------------
Net increase/(decrease) in capital shares....................... (107,585) 27,858
=============== ===============
</TABLE>
NOTE D -- PURCHASES AND SALES OF INVESTMENT SECURITIES -- OHIO GENERAL MUNICIPAL
FUND
The value of securities sold during the six months period ended January 31,
1997 amounted to $1,067,750. Excluding short-term securities, there were no
purchases of investment securities during the same period.
For Federal income tax purposes, the identified cost of securities owned on
January 31, 1997 was $10,115,775. Aggregate unrealized appreciation on the cost
basis of investments was $477,368 and aggregate unrealized depreciation was
$77,190. Net realized appreciation at January 31, 1997 was $400,178.
NOTE E -- NET ASSETS
Net Assets, as of January 31, 1997, are comprised of the following:
<TABLE>
<CAPTION>
LCI CGST CTF
------------ ----------- -----------
<S> <C> <C> <C>
Capital shares, at par.......................................... $ 22,198,968 $ 1,273,775 $ 2,284,664
Capital shares in excess of par................................. 199,790,715 11,463,971 20,561,971
------------ ----------- -----------
Net Assets.............................................. $221,989,683 $12,737,746 $22,846,635
============= ============ ============
</TABLE>
15
