<PAGE> 1
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, ------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<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 0.024 0.045 0.047 0.047 0.026 0.024
------------ ------------ ------------ ------------ ------------ ------------
Total from Investment Operations 0.024 0.045 0.047 0.047 0.026 0.024
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income (0.024) (0.045) (0.047) (0.047) (0.026) (0.024)
------------ ------------ ------------ ------------ ------------ ------------
Total Distributions (0.024) (0.045) (0.047) (0.047) (0.026) (0.024)
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) 0.85%(2) 0.94% 0.90% 0.87% 0.88% 0.83%
Net investment income as a percentage
of average daily net assets(1) 4.79%(2) 4.48% 4.69% 4.72% 2.62% 2.43%
Net Assets at end of period $175,742,559 $185,185,738 $205,508,605 $247,385,884 $289,950,268 $335,030,422
============ ============ ============ ============ ============ ============
</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, -------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<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 0.023 0.042 0.045 0.044 0.024 0.022
----------- ----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.023 0.042 0.045 0.044 0.024 0.022
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income (0.023) (0.042) (0.045) (0.044) (0.024) (0.022)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions (0.023) (0.042) (0.045) (0.044) (0.024) (0.022)
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) 0.98%(2) 1.11% 1.03% 1.06% 0.98% 0.87%
Net investment income as a percentage
of average daily net assets(1) 4.65%(2) 4.25% 4.50% 4.38% 2.37% 2.25%
Net Assets at end of period $15,837,607 $12,440,409 $12,737,746 $14,424,876 $18,078,719 $25,364,240
=========== =========== =========== =========== =========== ===========
</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.
SEMI-ANNUAL MESSAGE FROM THE PRESIDENT:
Dear Fellow Shareholders:
If investing really is the "Art of Anticipation" both art and anticipation
were the winners for the six months ending January 31, 1998.
With the exception of the crisis in Asia, and the turmoil in both the
Middle East and the White House, the investment landscape remains benevolent.
Our economy continues its expansionary trends, although in moderation, with
both inflation and interest rates apparently heading lower.
Carnegie Capital Management Co. continues to hold fast to the policy of
investing in quality. Now, in our opinion, is not the time to "stretch" for
yield.
Thank you for your continued support of the Carnegie Funds Group. Please
call or write with any comments or suggestions.
Sincerely,
/s/ George R. Mateyo
George R. Mateyo
President
1
<PAGE> 2
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, --------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- ----------- ----------- ----------- ----------- ------------
<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 0.014 0.027 0.029 0.029 0.018 0.019
------------ ----------- ----------- ----------- ----------- ------------
Total from Investment Operations 0.014 0.027 0.029 0.029 0.018 0.019
LESS DISTRIBUTIONS:
Distributions from Net Investment
Income (0.014) (0.027) (0.029) (0.029) (0.018) (0.019)
------------ ----------- ----------- ----------- ----------- ------------
Total Distributions (0.014) (0.027) (0.029) (0.029) (0.018) (0.019)
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) 0.89%(2) 0.84% 0.80% 0.82% 0.77% 0.76%
Net investment income as a
percentage of average daily net
assets(1) 2.87%(2) 2.74% 2.92% 2.86% 1.77% 1.88%
Net Assets at end of period $21,780,058 $20,188,763 $25,266,098 $27,615,905 $31,640,760 $40,646,525
============ =========== =========== =========== =========== ============
</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, -------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.66 $9.41 $9.46 $9.50 $9.87 $9.79
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.240 0.484 0.514 0.556 0.549 0.559
Net realized and unrealized
gains/(losses) on securities 0.047....... 0.250...... (0.050) (0.040) (0.370) 0.080
------------ ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.287 0.734...... 0.464 0.516 0.179 0.639
LESS DISTRIBUTIONS:
Distributions from net investment
income (0.240) (0.484) (0.514) (0.556) (0.549) (0.559)
------------ ----------- ----------- ----------- ----------- -----------
Total distributions (0.240) (0.484) (0.514) (0.556) (0.549) (0.559)
Net Asset Value, End of Period $9.71 $9.66 $9.41 $9.46 $9.50 $9.87
============ =========== =========== =========== =========== ===========
ANNUAL TOTAL RETURN 6.10% 9.41% 4.98% 5.50% 1.82% 6.77%
============ =========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL INFORMATION
Net assets at end of period $9,418,349 $10,283,205 $11,655,988 $11,448,521 $12,574,835 $18,669,199
Expenses as a percentage of average
daily net assets(1)(2) 0.99%(3) 0.95% 0.88% 0.97% 0.93% 0.81%
Net investment income as a
percentage of average daily net
assets(1) 5.00%(3) 5.12% 5.41% 5.95% 5.68% 5.81%
Portfolio Turnover rate 0% 3.88% 23.45% 8.77% 10.04% 4.98%
</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 $.211 for the six months ended January 31, 1998, $.455, $.483, $528,
$.520 and $.530, for the years ended July 31, 1997, 1996, 1995, 1994 and
1993, 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 .795% for the six months ended January 31, 1998,
1.25%, 1.18%, 1.27%, 1.23% and 1.11%, for the same periods, respectively.
(3) Annualized basis.
2
<PAGE> 3
LIQUID CAPITAL INCOME TRUST
STATEMENT OF NET ASSETS
JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY DATES VALUE
AMOUNT (1998) (NOTE A)
--------- -------------- --------
<C> <S> <C> <C>
COMMERCIAL PAPER+ -- 5.1%
$ 5,000,000 Abbott Laboratories Corp., 5.43%............................ 2/12 $ 4,992,458
5,000,000 American Express Company, 5.43%............................. 3/2 4,978,883
5,000,000 American Telephone and Telegraph Company, 5.44%............. 2/9 4,994,711
5,000,000 BankAmerica Corp., 5.50% 2/4 4,998,472
5,000,000 Bank One Corp., 5.48%....................................... 2/27 4,980,972
8,000,000 Cargill Inc., 5.74%......................................... 2/6 7,994,898
5,000,000 Coca-Cola Company, 5.41%.................................... 3/5 4,976,707
5,000,000 Ford Motor Credit Company, 5.44%............................ 2/19 4,987,156
7,000,000 General Electric Company, 5.41%............................. 3/2 6,970,545
5,000,000 International Lease Finance Corp., 5,41%.................... 3/23 4,963,182
5,000,000 Lucent Technologies Inc., 5.46%............................. 2/23 4,984,075
5,000,000 Merrill Lynch & Company, 5.46%.............................. 3/13 4,970,425
5,000,000 National City Corp., 5.47%.................................. 2/24 4,983,286
5,000,000 Northern Illinois Gas Company, 5.45%........................ 2/12 4,992,431
5,000,000 Pitney Bowes Credit Corp., 5.53%............................ 2/5 4,997,696
5,000,000 Transamerica Finance Corp., 5.45%........................... 3/2 4,978,806
5,000,000 Walt Disney Company, 5.40%.................................. 3/3 4,978,250
-------------
TOTAL COMMERCIAL PAPER (Cost $89,722,953)................... 89,722,953
-------------
U.S. GOVERNMENT INTEREST BEARING AND AGENCIES -- 35.7%
6,000,000 Federal Agricultural Mortgage Association, 5.39%............ 2/20 5,983,830
7,000,000 Federal Farm Credit Bank, 5.62%............................. 4/1 7,033,876
5,000,000 Federal Home Loan Bank, 5.43%............................... 2/25 4,982,654
19,000,000 Federal Home Loan Mortgage Corp., 5.35-5.41%................ 2/12-3/17 18,927,874
26,000,000 Federal National Mortgage Association, 5.32-5.39%........... 2/10-4/13 25,880,758
-------------
TOTAL U.S. GOVERNMENT INTEREST BEARING AND AGENCIES
(Cost $62,808,992).......................................... 62,808,992
-------------
REPURCHASE AGREEMENTS -- 13.2%
23,243,000 Merrill Lynch Government Securities, Inc. 5.50%;
Collateralized by $23,245,000 Federal Home Loan Bank, 5.91%
due 11/05/99 (repurchase proceeds $23,253,653).............. 2/2 23,243,000
-------------
TOTAL INVESTMENTS -- 100% (Cost $175,774,946)............... 175,774,946
OTHER ASSETS LESS LIABILITIES............................... (32,387)
-------------
NET ASSETS -- 100.0% -- equivalent to $1.00 per share for
175,742,559 outstanding Capital Shares in the Trust, $.10
par value (unlimited number of shares authorized) -- NOTE
E........................................................... $ 175,742,559
=============
</TABLE>
+ At January 31, 1998, 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.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C>
INTEREST INCOME............................................. $ 7,354,408
EXPENSES -- NOTE B
Management fees............................................ $ 660,742
Custodian and transfer agent fees.......................... 273,288
Registration and filing fees............................... 52,065
Printing................................................... 45,262
Postage.................................................... 23,750
Professional fees.......................................... 22,706
Trustees' fees............................................. 12,000
Insurance expense.......................................... 8,695
Miscellaneous.............................................. 6,179 1,104,687
------------ ------------
INVESTMENT INCOME -- NET.................................... $ 6,249,721
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1998 JULY 31, 1997
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net................................. $ 6,249,721 $ 8,808,056
Distributions to shareholders from net investment income... (6,249,721) (8,808,056)
Capital share transactions -- net.......................... (9,443,179) (20,322,867)
------------ ------------
Total decrease in net assets.......................... (9,443,179) (20,322,867)
NET ASSETS
Beginning of period........................................ 185,185,738 205,508,605
------------ ------------
End of period.............................................. $175,742,559 $185,185,738
============ ============
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 4
CARNEGIE GOVERNMENT SECURITIES TRUST
STATEMENT OF NET ASSETS
JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT DATES (1998) (NOTE A)
- --------- ------------ --------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 91.1%
$2,000,000 Federal Farm Credit Bank, 5.33-5.39%............................. 2/20-4/2 $ 1,988,570
1,000,000 Federal Home Loan Bank, 5.43%.................................... 2/25 996,531
9,000,000 Federal Home Loan Mortgage Corp., 5.28-5.41%..................... 2/12-3/20 8,959,586
2,500,000 Federal National Mortgage Association, 5.35-5.39%................ 2/10-2/26 2,493,452
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $14,438,139)............................................. 14,438,139
-----------
REPURCHASE AGREEMENTS -- 8.9%
1,404,000 Merrill Lynch Government Securities, Inc., 5.91%; Collateralized
by $1,405,000.00 Federal Home Loan Mortgage Corp., 5.50% due
11/05/99
(repurchase proceeds $1,404,644)............................... 2/2 1,404,000
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost $15,842,139)............................................. 15,842,139
OTHER ASSETS LESS LIABILITIES.................................... (4,532)
-----------
NET ASSETS -- 100.0% -- equivalent to $1.00 per share for
15,837,607 outstanding Capital Shares in the Trust, $.10 par
value (unlimited number of shares authorized) -- NOTE E........ $15,837,607
===========
</TABLE>
CARNEGIE GOVERNMENT SECURITIES TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C>
INTEREST INCOME............................................................... $395,126
EXPENSES -- NOTE B
Management fees............................................................. $35,598
Custodian and transfer agent fees........................................... 12,974
Professional fees........................................................... 4,671
Registration and filing fees................................................ 4,625
Trustees' fees.............................................................. 4,000
Printing.................................................................... 3,187
Postage..................................................................... 1,546
Insurance expense........................................................... 740
Miscellaneous............................................................... 1,473 68,814
-------- --------
INVESTMENT INCOME -- NET...................................................... $326,312
========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1998 JULY 31, 1997
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net................................ $ 326,312 $ 523,418
Distributions to shareholders from net
investment income....................................... (326,312) (523,418)
Capital share transactions -- net......................... 3,397,198 (297,337)
----------- -------------
Total increase (decrease) in net assets............. 3,397,198 (297,337)
NET ASSETS
Beginning of period....................................... 12,440,409 12,737,746
----------- -------------
End of period............................................. $15,837,607 $ 12,440,409
=========== =============
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF NET ASSETS+
JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
- --------- ------- --------
<C> <S> <C> <C>
MUNICIPAL SECURITIES -- 99.3%
ALABAMA -- 8.7%
$ 200,000 Alabama Special Care Facility Variable Rate Demand Revenue
Bonds 3.55%, 2/4/98......................................... Aaa $ 200,000
1,000,000 Birmingham Baptist Medical Center Variable Rate Demand
Revenue Bonds 4.5%, 2/4/98.................................. Aa3 1,000,000
700,000 Columbia Industrial Development Brd. Pollution Control
Variable Rate Demand Revenue Bonds 3.70%, 2/2/98............ A2 700,000
ARIZONA -- 6.9%
1,000,000 Arizona Health Facilities Authority Variable Rate Demand
Revenue Bonds 3.55%, 2/4/98................................. Aaa 1,000,000
500,000 Pima County Variable Rate Demand Industrial Development
Revenue Bonds 3.55%, 2/4/98................................. NR 500,000
DELAWARE -- 3.7%
500,000 Delaware State Economic Development Authority Demand Revenue
Bonds 3.60%, 2/4/98......................................... A2 500,000
300,000 Wilmington Hospital Franciscan Health System Variable Rate
Demand Revenue Bonds 3.70%, 2/2/98.......................... AAA 300,000
GEORGIA -- 1.4%
300,000 Burke County Pollution Control Variable Rate Demand Revenue
Bonds 3.70%, 2/2/98......................................... A1 300,000
HAWAII -- 4.6%
1,000,000.. Hawaii Housing Finance Variable Rate Demand Revenue Bonds
4.00%, 2/4/98............................................... A2 1,000,000
ILLINOIS -- 12.4%
900,000 Illinois Health Facilities SSM Health Care Variable Rate
Demand Revenue Bonds 3.60%, 2/4/98.......................... Aaa 900,000
800,000 Illinois Health Facilities Swedish Covenant Variable Rate
Demand Revenue Bonds 3.60%, 2/4/98.......................... Aaa 800,000
1,000,000 Saint Charles Industrial Development Pier 1 Imports Variable
Rate Demand Revenue Bonds 3.60%, 2/4/98..................... AA 1,000,000
LOUISIANA -- 4.6%
1,000,000 Delhi Louisiana Industrial Development Variable Rate Demand
Revenue Bonds 3.60%, 2/4/98................................. A1 1,000,000
MARYLAND -- 4.6%
1,000,000 Montgomery County Housing Opportunity Variable Rate Demand
Revenue Bonds 3.60%, 2/4/98................................. Aa2 1,000,000
MICHIGAN -- 3.7%
800,000 Michigan State Hospital Finance Authority Variable Rate
Demand Revenue Bonds 3.60%, 2/4/98.......................... A1 800,000
NEW YORK -- 6.4%
500,000 New York State Energy Research Variable Rate Demand Revenue
Bonds 3.60%, 2/2/98......................................... Aa1 500,000
900,000 New York State Medical Care Facilities Variable Rate Demand
Revenue Bonds 3.45%, 2/4/98................................. Aa2 900,000
OHIO -- 12.4%
400,000 Cuyahoga County Variable Rate Hospital Demand Revenue Bonds
4.05%, 2/2/98............................................... A1 400,000
500,000 Hamilton County Health System Variable Note Demand Revenue
Bonds 3.85%, 2/2/98......................................... A1 500,000
600,000 Hamilton County Health System Variable Rate Demand Revenue
Bonds 3.60%, 2/4/98......................................... Aa2 600,000
200,000 Muskingum County Variable Rate Demand Industrial Development
Revenue Bonds 3.90%, 2/4/98................................. Aa2 200,000
1,000,000 Ohio State Environmental Improvement Variable Rate Demand
Revenue Bonds 3.90%, 2/4/98................................. A1 1,000,000
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF NET ASSETS+ -- CONTINUED
JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
- --------- ------- --------
<C> <S> <C> <C>
OREGON -- 3.2%
$ 700,000 Port of Portland Pollution Control Variable Rate Demand
Revenue Bonds 3.70%, 2/2/98................................. Aa3 $ 700,000
PENNSYLVANIA -- 4.1%
700,000 Delaware County Variable Rate Industrial Development Demand
Revenue Bonds 3.65%, 2/2/98................................. Aaa 700,000
200,000 Franciscan Health System Variable Rate Demand Revenue Bonds
3.65%, 2/2/98............................................... AAA 200,000
SOUTH CAROLINA -- .5%
100,000 South Carolina Economic Development Authority Variable Rate
Demand Revenue Bonds 3.70%, 2/2/98.......................... Aa2 100,000
TEXAS -- 13.4%
500,000 Bexar County Housing Finance Variable Rate Demand Revenue
Bonds 3.75%, 2/4/98......................................... AA+ 500,000
500,000 Grapevine Texas Industrial Development Corporation Variable
Rate Demand Revenue Bonds 3.70%, 2/2/98..................... Aa1 500,000
1,000,000 Harris County Texas Flood Control General Obligation Bonds
5.0%, 10/1/98............................................... Aa2 1,026,490
400,000 Lone Star Texas Airport Variable Rate Demand Revenue Bonds
3.70%, 2/2/98............................................... VMIG1 400,000
500,000 Lower Neches Valley Authority Variable Rate Demand Revenue
Bonds 3.55%, 2/4/98......................................... Aa2 500,000
VIRGINIA -- 1.4%
400,000 Fairfax County Industrial Development Authority Variable
Rate Demand Revenue Bonds 3.50%, 2/4/98..................... Aa2 300,000
WASHINGTON -- 4.6%
1,000,000 Yakima County Washington Bond Application Notes 4.125%,
9/1/98 MIG1 1,002,420
WISCONSIN -- 2.7%
600,000 Wisconsin Health Facilities Variable Rate Demand Revenue
Bonds 3.55%, 2/4/98......................................... Aaa 600,000
-----------
TOTAL INVESTMENTS -- 99.3% (Cost $21,628,910)............... 21,628,910
OTHER ASSETS LESS LIABILITIES -- .7%........................ 151,148
-----------
NET ASSETS -- 100% -- equivalent to $1.00 per share for
21,780,058 outstanding Capital Shares in the Trust, $.10 par
value (unlimited number of shares authorized) -- Note E..... $21,780,058
===========
</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, 1998 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.
6
<PAGE> 7
CARNEGIE TAX FREE INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C>
INTEREST INCOME............................................. $388,623
EXPENSES -- NOTE B
Management fees........................................... $52,415
Custodian and transfer fees............................... 10,816
Registration and filing fees.............................. 9,250
Professional fees......................................... 6,165
Printing.................................................. 4,625
Trustees' fees............................................ 4,000
Postage................................................... 1,480
Insurance Expense......................................... 1,295
Miscellaneous............................................. 1,736 91,782
------- --------
INVESTMENT INCOME -- NET.................................... $296,841
========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, JULY 31,
1998 1997
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS -- NOTE E
Operations:
Investment income -- net................................ $ 296,841 $ 612,577
Distributions to shareholders from net
investment income....................................... (296,841) (612,577)
Capital share transactions -- net......................... 1,591,295 (5,077,335)
----------- -----------
Total increase/(decrease) in net assets............ 1,591,295 (5,077,335)
NET ASSETS
Beginning of period....................................... 20,188,763 25,266,098
----------- -----------
End of period............................................. $21,780,058 $20,188,763
=========== ===========
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 8
CARNEGIE TAX EXEMPT INCOME TRUST
OHIO GENERAL MUNICIPAL FUND
STATEMENT OF NET ASSETS -- JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT RATING* (NOTE A)
- --------- ------- -----------
<C> <S> <C> <C>
MUNICIPAL BONDS -- 96.7%
Columbus Citation Housing Corp. Revenue Bonds 7.63%,
$750,000 1/1/2022.................................................... AA $ 919,832
Cuyahoga Cnty. University Hosp. Revenue Refunding &
400,000 Improvement 5.63%, 1/15/2026................................ AAA 415,124
Cuyahoga Cnty. Meridia Hlth. Care Sys. Revenue Bonds 7.00%,
500,000 8/15/2006................................................... AAA 543,705
Dublin Ohio City Sch Dist. General Obligation Bonds 6.20%,
500,000 12/1/2019................................................... AAA 557,330
Franklin Cnty. Hosp. Revenue Refunding & Improvement
800,000 Riverside 7.60%, 5/15/2020.................................. AAA 660,266
Franklin Cnty. Riverside Hosp. Revenue Bonds 7.25%,
200,000 5/15/2020................................................... AAA 218,568
200,000 Hamilton Cnty. General Obligation Bonds 5.10%, 12/1/2013.... NR 203,606
Hamilton Cnty. Bethesda Hosp. Revenue Bonds 7.00%,
850,000 1/1/2009.................................................... A 885,711
Mahoning Cnty. Sanitary Sewer Sys. Revenue Bonds 7.50%,
450,000 2/1/2009.................................................... AAA 485,345
Mahoning Cnty. Western Reserve Care Sys. Revenue Bonds
500,000 5.38%, 10/15/2015........................................... AAA 531,238
500,000 Ohio Capital Corp. Housing Revenue Bonds 7.60%, 11/1/2023... AAA 525,492
Ohio Housing Finance Agency Revenue Bonds 7.05% -7.40%,
396,000 9/1/2015 - 9/1/2016......................................... AAA 417,883
Ohio State Higher Ed. Oberlin College Revenue Bonds 7.10%,
120,000 10/1/2012................................................... NR 128,836
Ohio State Water Dev. Auth. Ref. & Impt. Revenue Bonds
500,000 5.50%, 12/1/2018............................................ AAA 513,415
250,000 Parma Community Hospital Revenue Bonds 7.13%, 11/15/2013.... AAA 260,382
500,000 Richland Cnty. General Obligation Bonds 5.40%, 12/1/2015.... AAA 520,085
Rural Lorain Water Auth. Ref. & Impt. Revenue Bonds 5.45%,
150,000 10/1/2018................................................... AAA 154,053
500,000 Stark Cnty. General Obligation Bonds 5.70%, 11/15/2017...... AAA 521,988
University Heights B General Obligation Bonds 6.20%,
145,000 12/1/2014................................................... NR 157,533
500,000 Washington Water Sys. Revenue Bonds 5.38%, 12/1/2019........ AAA 508,539
-----------
TOTAL MUNICIPAL BONDS -- (COST $8,539,155).................. 9,108,930
-----------
SHORT-TERM TAX EXEMPT INVESTMENTS -- 1.1%
Delaware County Ind'l Dev. PA Airport Variable Rate Demand
100,000 Revenue Bonds 3.65%, 2/2/98................................. AAA 100,000
-----------
TOTAL SHORT-TERM TAX EXEMPT INVESTMENTS (COST $100,000)..... 100,000
-----------
TOTAL INVESTMENTS -- 97.8% (COST $8,639,155)................ 9,208,930
OTHER ASSETS LESS LIABILITIES -- 2.2%....................... 209,420
-----------
NET ASSETS -- 100%.......................................... $ 9,418,349
===========
NET ASSET VALUE PER SHARE................................... $ 9.71
===========
SHARES OUTSTANDING (unlimited number of shares authorized;
$.10 par value) -- NOTE C................................... 970,113
===========
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus 4.71%
of net amount invested or 4.5% of the offering price)....... $ 10.17
===========
NET ASSETS, AS OF JANUARY 31, 1998, ARE COMPRISED OF THE
FOLLOWING:
Aggregate paid in capital................................... $ 9,392,109
Accumulated undistributed net realized losses............... (543,535)
Unrealized appreciation of investments -- net............... 569,775
-----------
$ 9,418,349
===========
* All ratings are stated as of January 31, 1998 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.
8
<PAGE> 9
CARNEGIE TAX EXEMPT INCOME TRUST
OHIO GENERAL MUNICIPAL FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INTEREST INCOME............................................. $290,365
--------
EXPENSES -- NOTE B
Management fees............................................. 24,293
Trustee fees................................................ 4,000
Shareholder reporting....................................... 3,832
Professional fees........................................... 2,862
Transfer agent fees......................................... 2,571
Custodian fees.............................................. 1,192
Insurance expense........................................... 732
Miscellaneous expenses...................................... 8,536
--------
Total expenses.......................................... 48,018
--------
NET INVESTMENT INCOME....................................... 242,347
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS -- NET
Realized gain on investments................................ 36,493
Change in unrealized appreciation of investments............ 10,662
--------
Net gain on investments..................................... 47,155
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $289,502
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JANUARY 31, YEAR ENDED
1998 JULY 31, 1997
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS
Net investment income....................................... $ 242,347 $ 544,512
Realized gain on investments -- net......................... 36,493 66,008
Change in unrealized appreciation of investments -- net..... 10,662 202,087
----------- -----------
Net increase in net assets from operations.................. 289,502 812,607
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME --
NOTE A.................................................... (242,347) (544,512)
CAPITAL SHARE TRANSACTIONS -- NOTE C
Shares sold................................................. 528,297 631,315
Shares issued on reinvestment of distributions.............. 163,858 369,749
----------- -----------
692,155 1,001,064
Shares redeemed............................................. (1,604,166) (2,641,942)
----------- -----------
Net decrease from capital shares transactions............... (912,011) (1,640,878)
----------- -----------
Total decrease in net assets....................... (864,856) (1,372,783)
NET ASSETS
Beginning of period......................................... 10,283,205 11,655,988
----------- -----------
End of period............................................... $ 9,418,349 $10,283,205
=========== ===========
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 10
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 30,
1998.
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, 1997, Ohio General had capital loss carryovers for
federal income tax purposes of $321,822. 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, 1998, 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.
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, 1998, LCI had $76,420 payable to
CCMC for management fees, and for the six months then ended CCMC earned
management fees of $660,742.
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, 1998, CGST had $6,571 payable to CCMC for
management fees, and for the six months then ended CCMC earned management fees
of $35,598.
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, 1998, CTF had
$9,048 payable to CCMC for management fees, and for the six months then ended
CCMC earned management fees of $52,415.
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,
1998, Ohio General had $3,865 payable to CCMC for management fees, and for the
six months then ended CCMC earned management fees of $24,293.
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, 1998.
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
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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 $29,073 for the six months ended January 31,
1998 were waived for the Ohio General Municipal Fund.
For the six months ended January 31, 1998, CFD received sales charges paid by
the purchasers of Ohio General's shares of $665. 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.
NOTE C -- CAPITAL SHARES
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1998 JULY 31, 1997
---------------- --------------
<S> <C> <C>
LCI
Shares sold................................................ 488,363,261 386,866,751
Shares issued on reinvestment of distributions............. 6,249,721 8,808,056
-------------- --------------
494,612,982 395,674,807
Shares redeemed............................................ (504,056,161) (415,997,674)
-------------- --------------
Net decrease in capital shares............................. (9,443,179) (20,322,867)
============== ==============
CGST
Shares sold................................................ 9,344,332 15,408,580
Shares issued on reinvestment of distributions............. 326,312 523,418
-------------- --------------
9,670,644 15,931,998
Shares redeemed............................................ (6,273,446) (16,229,335)
-------------- --------------
Net increase/(decrease) in capital shares.................. 3,397,198 (297,337)
============== ==============
CTF
Shares sold................................................ 25,112,487 35,113,852
Shares issued on reinvestment of distributions............. 296,841 612,577
-------------- --------------
25,409,328 35,726,429
Shares redeemed............................................ (23,818,033) (40,803,764)
-------------- --------------
Net increase/(decrease) in capital shares.................. 1,591,295 (5,077,335)
============== ==============
Ohio General
Shares sold................................................ 55,062 66,452
Shares issued on reinvestment of distributions from net
investment income........................................ 17,007 39,040
-------------- --------------
Net decrease in capital shares.............................. 72,069 105,492
Shares redeemed............................................. (166,973) (278,926)
-------------- --------------
Net decrease in capital shares.............................. (94,904) (173,434)
============== ==============
</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,
1998 amounted to $1,024,050. 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, 1998 was $8,639,155. Aggregate unrealized appreciation on the cost
basis of investments was $569,775 and aggregate unrealized depreciation was
zero. Net realized appreciation at January 31, 1998 was $569,775.
NOTE E -- NET ASSETS
Net Assets, as of January 31, 1998, are comprised of the following:
<TABLE>
<CAPTION>
LCI CGST CTF
------------ ----------- -----------
<S> <C> <C> <C>
Capital shares, at par...................................... $ 17,574,256 $ 1,583,761 $ 2,178,006
Capital shares in excess of par............................. 158,168,303 14,253,846 19,602,052
------------ ----------- -----------
Net Assets........................................... $175,742,559 $15,837,607 $21,780,058
============ =========== ===========
</TABLE>
11
<PAGE> 12
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
FUNDS GROUP
- --------------------------------------------------------------------------------
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
-- 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, 1998
- ------------------------------------------------------------------
CARNEGIE CAPITAL MANAGEMENT COMPANY
1100 The Halle Building
1228 Euclid Avenue
Cleveland, Ohio 44115-1831
(LOGO)
