SEMI-ANNUAL REPORT
FEBRUARY 28, 1997
============
TOWER
MUTUAL FUNDS
============
TOWER CAPITAL APPRECIATION FUND
TOWER LOUISIANA MUNICIPAL INCOME FUND
TOWER TOTAL RETURN BOND FUND
TOWER U.S. GOVERNMENT INCOME FUND
TOWER CASH RESERVE FUND
TOWER U.S. TREASURY MONEY MARKET FUND
================================================================================
TABLE OF CONTENTS
================================================================================
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE......................................................... 1
- --------------------------------------------------------------------------------
INVESTMENT REVIEWS.......................................................... 2
- --------------------------------------------------------------------------------
PORTFOLIOS OF INVESTMENTS................................................... 8
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS......................................... 24
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES........................................ 26
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS.................................................... 28
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS......................................... 30
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS........................................................ 32
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS...................................... 34
- --------------------------------------------------------------------------------
- - SHARES OF THE TOWER MUTUAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF HIBERNIA
NATIONAL BANK OR ITS AFFILIATES, ARE NOT ENDORSED OR GUARANTEED BY HIBERNIA
NATIONAL BANK OR ITS AFFILIATES, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY.
- - INVESTMENT IN THE SHARES OF THE TOWER MUTUAL FUNDS INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
- - TOWER CASH RESERVE FUND AND TOWER U.S. TREASURY MONEY MARKET FUND ATTEMPT TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO
ASSURANCE THAT THESE FUNDS WILL BE ABLE TO DO SO.
- - PAST PERFORMANCE IS NO INDICATION OF FUTURE RESULTS.
- - THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN
PRECEDED OR ACCOMPANIED BY THE FUNDS' PROSPECTUS WHICH CONTAINS FACTS
CONCERNING THEIR OBJECTIVES AND POLICIES, MANAGEMENT FEES, EXPENSES AND OTHER
INFORMATION.
================================================================================
PRESIDENT'S MESSAGE
================================================================================
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for the Tower
Mutual Funds. The Report covers the activity of the Tower Mutual Funds over the
six-month period from September 1, 1996 through February 28, 1997. It includes
an interview with each fund's portfolio manager, as well as a complete list of
investments and financial statements for each fund.
Please note the following highlights for each fund over the six-month period:
- In a relatively favorable stock market environment during the reporting
period, TOWER CAPITAL APPRECIATION FUND produced strong total return
performance. For Class A Shares, the total return was 22.94%.*
Contributing to the total return were dividends of $0.09 per share and
capital gains of $1.99 per share, and a 10% increase in net asset value.
For Class B Shares, which had been in operation for only a four-month
period since November 30, 1996, the total return was 4.73%.* Contributing
to the total return were dividends of $0.03 per share and a 4% increase in
net asset value. At the end of the reporting period, net assets in the
fund stood at more than $205 million.
- Designed for tax-sensitive Louisiana residents, TOWER LOUISIANA MUNICIPAL
INCOME FUND paid double-tax-free dividends of $0.29 per share and capital
gains of $0.04 per share.** The fund's net asset value increased from
$10.94 on the first day of the period to $11.08 on the last day of the
period. The fund's total return was 4.33%.* At the end of the reporting
period, net assets stood at more than $66 million.
- The diversified portfolio of TOWER TOTAL RETURN BOND FUND paid dividends
of $0.31 per share, while its net asset value increased from $9.77 on the
first day of the period to $9.96 on the last day of the period. The fund
produced a total return of 5.17%.* At the end of the reporting period, net
assets stood at more than $65.7 million.
- TOWER U.S. GOVERNMENT INCOME FUND paid dividends of $0.33 per share, while
its net asset value increased by $0.11. As a result, the fund produced a
total return of 4.49%.* Net assets ended the reporting period at more than
$33.8 million.
- TOWER CASH RESERVE FUND, a portfolio of high quality money market
securities, paid dividends of $0.02 per share. At the end of the reporting
period, net assets stood at more than $164 million.
- TOWER U.S. TREASURY MONEY MARKET FUND, a portfolio of U.S. Treasury money
market securities, paid dividends of $0.02 per share. At the end of the
reporting period, net assets stood at more than $147.8 million.
Thank you for pursuing your financial goals through the Tower Mutual Funds. We
are committed to providing you with the highest level of service as we keep you
up-to-date on your investment progress.
Sincerely,
/s/ EDWARD C. GONZALES
- ----------------------
Edward C. Gonzales
President
April 15, 1997
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so an investor's shares, when redeemed, may
be worth more or less than their original cost. Total returns quoted above
are based on net asset value and do not reflect the maximum sales charges.
Total returns based on offering price for the six-month period are as
follows: Tower Capital Appreciation Fund-Class A Shares, 17.42%; Tower
Capital Appreciation Fund-Class B Shares (4-month period), (0.78%); Tower
Louisiana Municipal Income Fund, 1.18%; Tower Total Return Bond Fund, 2.04%;
and Tower U.S. Government Income Fund, 1.39%.
** Income may be subject to the federal alternative minimum tax.
===============================================================================
INVESTMENT REVIEWS
===============================================================================
===============================================================================
TOWER CAPITAL APPRECIATION FUND
===============================================================================
Q
What is your analysis of the stock market, which, despite periods of
volatility, continued to break records as the bull market marched on?
A
Strong corporate earnings continued to be the underpinning for a liquidity
driven bull market.
Q
How did Tower Capital Appreciation Fund perform over the six-month period
ended February 28, 1997?
A
Class A Shares of the fund produced a total return of 22.94%, based on net
asset value, versus 22.54% for the Standard & Poor's 500 Composite Stock
Index.* Class B Shares of the fund produced a total return of 4.73%, based
on net asset value for the period from November 30, 1996 (date of initial
public offering) to February 28, 1997.*
Q
What strategies accounted for such strong six-month performance?
A
We use our multi-factor quantitative equity selection model to select the
best stocks in each industry group on a continual basis. The fund's strong
performance over the reporting period came as a result of the selection
process that was based on this model.
Q
With the bull market at such an extended stage, what is your outlook for
the rest of 1997?
A
We look for continued volatility with a positive bias. The market should
remain in a trading range of approximately 6200-6850 on the Dow Jones
Industrial Average.
* Standard & Poor's 500 Composite Stock Index is an unmanaged composite index of
common stocks in industry, transportation, and financial and public utility
companies, that compares total returns of funds whose portfolios are invested
primarily in common stocks. Investments cannot be made in an index.
================================================================================
TOWER LOUISIANA MUNICIPAL INCOME FUND
================================================================================
Q
To what degree have Louisiana municipal bonds been impacted by the same
fears of inflation and rising interest rates that have had a negative
effect on the overall bond market?
A
While concerns over rising inflation have had a negative impact on
Louisiana municipal bond prices, tax-free prices have held up better than
taxable bond prices.
Q
During the reporting period, how did Tower Louisiana Municipal Income Fund
perform compared to the Louisiana municipal bond market in general?
A
The fund performed in line with the Louisiana municipal market returning
4.33% for the six-month period ended February 28, 1997, based on net asset
value.
Q
The fund has maintained a relatively consistent tax-free income stream.
What strategies do you use to accomplish this important objective for
shareholders?
A
We focus investments on higher yielding housing and hospital related bonds
and attempt to minimize turnover and transaction costs.
Q
What do you see ahead for the municipal bond market?
A
Municipal yields have risen to attractive long-term levels. We expect
tax-free bond prices to stabilize soon as the Federal Reserve Board (the
"Fed") moves to slow the economy.
================================================================================
TOWER TOTAL RETURN BOND FUND
================================================================================
Q
Thanks to market uncertainty, the bond market has remained relatively weak,
although prices have stabilized somewhat. What factors were responsible?
A
A surprisingly resilient U.S. economy continued to be driven by a confident
consumer. This has been led by relatively low unemployment and concern over
wage inflation.
Q
How did Tower Total Return Bond Fund perform over the reporting period in
terms of income and total return? How did the fund perform compared to the
overall bond market, as measured by the Salomon Brothers Broad
Investment-Grade Bond Index*?
A
The fund performed in line with the overall bond market returning 5.17%,
based on net asset value, versus 5.34% for the Salomon Brothers Broad
Investment Grade Bond Index.
Q
Were holdings focused on U.S. Treasury securities for most of the period?
Do you foresee any changes to portfolio composition?
A
The fund continued to hold a large position in U.S. Treasuries. Going
forward we plan to selectively add more high quality corporate and
mortgage-backed securities.
Q
What developments are you keeping an eye on with respect to the bond market
for the remainder of 1997?
A
The Fed's interest rate policy and the key economic indicators of inflation
are the important factors to watch in the coming months. Continued strength
in the domestic employment statistics and consumer spending will likely
require further Fed interest rate hikes.
* Salomon Brothers Broad Investment-Grade Bond Index is an unmanaged index
designed to provide the investment-grade bond manager with an all-inclusive
universe of institutionally traded U.S. Treasury, agency, mortgage and
corporate securities which can be used as a benchmark. Investments cannot be
made in an index.
================================================================================
TOWER U.S. GOVERNMENT INCOME FUND
================================================================================
Q
What are your comments on the uncertainty about the economy, and its
continued toll on the bond market?
A
From Main Street to Wall Street to the Washington Beltway, the fourth
quarter 1996 and preliminary 1st quarter 1997 economic numbers have been
surprisingly strong. While inflation has remained dormant, the pressure on
the Fed to continue to raise short-term interest rates and throttle the
U.S. economic engine has increased. This has led to an increase in bond
yields and most likely will continue to provide us with upward momentum on
interest rates.
Q
How did Tower U.S. Government Income Fund perform in this environment over
the six-month reporting period in terms of total return and yield?
A
The total return of the fund for the six-month period ended February 28,
1997 was 4.49%, based on net asset value. The net asset value price
appreciation alone accounted for a 1.12% gain. As of February 28, 1997, the
fund's 30-day SEC yield was 6.18%, based on offering price.
Q
Have mortgage-backed bonds continued to play a key role in the fund's
portfolio?
The mortgage-backed sector has been a strong relative performer as spreads
have narrowed and refinancings have remained generally low. Our portfolio
has and will continue to seek out mortgages where we find value. As of
February 28, 1997, the fund's assets, based on net asset value, were
allocated as follows: Mortgage-Backed Securities 40.0%; Treasuries 21.5%;
Agencies 37.4%; and Repurchase Agreements 0.6%.
Q
Do you foresee that economic conditions may have a positive influence on
bond prices during the remainder of 1997?
A
The biggest factor in determining fixed income returns for 1997 will be the
Fed policymakers and their measure of success in slowing down a stronger
than realized economy. Fed Chairman, Alan Greenspan has proven in the past
to be an independent thinker and if capital market, economic and
psychological factors turn heavily on his words and actions, the result
would be a volatile market with several different turns in 1997.
================================================================================
TOWER CASH RESERVE FUND
================================================================================
Q
Although the Fed continued to stay on the sidelines, short-term interest
rates swayed back and forth during the period. What factors contributed to
this?
A
Surprisingly strong economic growth gradually rallied support for a Fed
interest rate hike sooner rather than later. However, a relatively weak
retail sector and very benign inflation numbers served as a dampening
factor. Overall, the short-term market was indecisive and interest rates
ended up the period almost exactly where they started.
Q
How did the yield of the Tower Cash Reserve Fund respond to this
environment?
A
The 7-day net yield for the fund was 4.53% on September 1, 1996 and on
February 28, 1997.*
Q
What factors influenced the fund's portfolio mix and average maturity
during the period?
A
Our portfolio strategy was equally weighted among the following factors:
relative attractiveness of overnight repurchase agreements, availability of
prime commercial paper and our internal view of Fed action and timing. Near
the end of the reporting period we shortened average maturity as the chance
of a Fed tightening increased.
Q
Based on your outlook for interest rates for the rest of 1997, what is your
strategy going forward?
A
We intend to stay liquid and slightly shorter in average maturity in the
case that a single preemptive Fed tightening becomes the first of a series
of short-term interest rate hikes.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary.
================================================================================
TOWER U.S. TREASURY MONEY MARKET FUND
================================================================================
Q
Amid uncertainty about the directions of the economy, short-term interest
rates experienced their share of fluctuation during the period. Can you
comment?
A
The period saw great volatility as economic uncertainty and questions about
the Fed dominated the short-term landscape. At the period's conclusion,
however, short-term interest rates were approximately where they had been
six months prior.
Q
How did Tower U.S. Treasury Money Market Fund perform for shareholders in
terms of yield during the six-month reporting period?
A
The 7-day net yield for the fund was 4.82% on September 1, 1996 and 4.77%
on February 28, 1997.*
Q
Are you continuing to emphasize a combination of overnight repurchase
agreements and U.S. Treasury securities in the fund's portfolio? What are
the advantages of such a combination?
A
We believe our strategy of approximately a 50-50 mix of overnight
repurchase agreements and laddered U.S. Treasuries provides us with
superior liquidity and minimal re-investment risk. We will continue this
strategy and target average maturities in the 35-45 day range.
Q
What is your overall outlook for the economy and short-term interest rates
for the rest of 1997?
A
If the recent strong economic numbers do not subside, this could lead to a
Fed tightening and ultimately higher short-term rates. As a result, very
liquid and short-term investments may be investors best near-term fixed
income choice.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary.
================================================================================
PORTFOLIOS OF INVESTMENTS TOWER MUTUAL FUNDS
February 28, 1997 (unaudited)
================================================================================
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--98.4%
Aerospace & Defense--0.5%
16,150 Rockwell International
Corp. $ 1,045,713
------------
Automobile--1.0%
60,000 Chrysler Corp. 2,032,500
------------
Consumer Durables--0.6%
32,400 Brunswick Corp. 927,450
10,000 Hasbro, Inc. 427,500
------------
Total 1,354,950
------------
Consumer Non-
Durables--13.1%
65,500 Anheuser-Busch Cos., Inc. 2,914,750
26,200 Avon Products, Inc. 1,526,150
18,800 Campbell Soup Co. 1,694,350
28,700 Clorox Co. 3,429,650
83,200 Coca-Cola Co. 5,075,200
26,350 ConAgra, Inc. 1,396,550
21,400 Nike, Inc., Class B 1,538,125
31,900 Philip Morris Cos., Inc. 4,310,488
22,700 Procter & Gamble Co. 2,726,838
61,400 Sara Lee Corp. 2,379,250
------------
Total 26,991,351
------------
Consumer Services--3.5%
29,800 Disney (Walt) Co. 2,212,649
26,450 (a)HFS, Inc. 1,811,825
17,200 (a)King World Productions,
Inc. 638,550
55,500 New York Times Co., Class
A 2,469,750
------------
Total 7,132,774
------------
Electrical Equipment--1.1%
31,100 Honeywell, Inc. 2,211,987
------------
Electronic
Technology--10.8%
23,000 (a)Adaptec, Inc. 875,437
49,100 (a)Cisco Systems, Inc. 2,731,187
29,100 (a)Compaq Computer Corp. 2,306,175
38,000 (a)Dell Computer Corp. 2,702,750
40,100 (a)EMC Corp. Mass 1,443,600
30,200 Harris Corp. 2,227,250
27,400 Intel Corp. 3,887,375
- ------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>
18,250 Lockheed Martin Corp. $ 1,615,125
22,500 (a)Seagate Technology,
Inc. 1,063,125
33,500 (a)Sun Microsystems, Inc. 1,034,313
31,600 United Technologies Corp. 2,377,900
------------
Total 22,264,237
------------
Energy Minerals--6.9%
18,500 Amoco Corp. 1,563,250
7,200 Atlantic Richfield Co. 900,000
17,500 British Petroleum Co. PLC,
ADR 2,316,563
33,400 Exxon Corp. 3,335,825
21,700 Mobil Corp. 2,663,675
3,500 Royal Dutch Petroleum Co.,
ADR 605,500
18,800 Texaco, Inc. 1,858,850
24,200 Unocal Corp. 934,725
------------
Total 14,178,388
------------
Finance--15.6%
18,500 Allstate Corp. 1,172,437
30,800 BankAmerica Corp. 3,503,500
18,600 CIGNA Corp. 2,843,475
15,000 Chase Manhattan Corp. 1,501,875
16,800 Citicorp 1,961,400
43,300 Comerica, Inc. 2,603,412
38,600 First Chicago NBD Corp. 2,258,100
41,700 First Union Corp. 3,659,175
19,400 Merrill Lynch & Co., Inc. 1,862,400
62,400 NationsBank Corp. 3,736,200
13,800 PHH Corp. 660,675
66,500 SunAmerica, Inc. 3,050,688
61,900 Travelers Group, Inc. 3,319,388
------------
Total 32,132,725
------------
Health Services--1.5%
16,000 HBO & Co. 922,000
77,900 (a)Tenet Healthcare Corp. 2,113,038
------------
Total 3,035,038
------------
Health Technology--9.8%
36,500 Abbott Laboratories 2,053,125
36,000 Becton, Dickinson & Co. 1,773,000
32,600 Bristol-Myers Squibb Co. 4,254,300
44,800 Johnson & Johnson 2,581,600
37,700 Merck & Co., Inc. 3,468,400
- ------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
CAPITAL APPRECIATION FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS- Health
Technology-(cont'd)
33,100 Pfizer, Inc. $ 3,032,788
40,300 Schering Plough Corp. 3,087,988
------------
Total 20,251,201
------------
Industrial Services--0.9%
11,800 Fluor Corp. 715,375
10,600 Schlumberger Ltd. 1,066,625
------------
Total 1,782,000
------------
Non-Energy Minerals--1.0%
26,000 Nucor Corporation 1,251,250
12,400 Phelps Dodge Corp. 886,600
------------
Total 2,137,850
------------
Process Industries--4.1%
20,300 Air Products & Chemicals,
Inc. 1,504,737
40,100 Crown Cork & Seal Co.,
Inc. 2,225,550
26,650 Du Pont (E.I.) de Nemours
& Co. 2,858,212
38,100 Praxair, Inc. 1,852,613
------------
Total 8,441,112
------------
Producer
Manufacturing--6.1%
12,400 Allied-Signal, Inc. 895,900
15,300 Armstrong World
Industries, Inc. 1,053,787
17,400 Emerson Electric Co. 1,722,600
46,400 General Electric Co. 4,773,400
11,400 Harsco Corp. 410,400
39,600 Ingersoll-Rand Co. 1,881,000
21,500 Johnson Controls, Inc. 1,811,375
------------
Total 12,548,462
------------
Retail Trade--4.8%
41,500 American Stores Co. 1,857,125
27,600 Dayton-Hudson Corp. 1,159,200
72,000 Gap (The), Inc. 2,376,000
16,150 Home Depot, Inc. 880,175
30,300 Sears, Roebuck & Co. 1,643,775
44,800 TJX Cos., Inc. 1,870,400
------------
Total 9,786,675
------------
- ------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
<C> <S> <C>
Technology Services--5.1%
22,700 General Motors Corp. $ 1,313,762
33,750 Lucent Technologies, Inc. 1,818,281
56,100 (a)Microsoft Corp. 5,469,750
32,500 (a)Parametric Technology
Corp. 1,832,188
------------
Total 10,433,981
------------
Transportation--1.7%
30,000 CSX Corp. 1,383,750
9,500 Delta Air Lines, Inc. 764,750
4,900 Norfolk Southern Corp. 446,513
21,500 Tidewater, Inc. 924,500
------------
Total 3,519,513
------------
Utilities--10.3%
10,300 Ameritech Corp. 656,625
49,400 Bell Atlantic Corp. 3,414,775
61,300 BellSouth Corp. 2,873,437
38,750 Consolidated Edison Co. 1,196,406
75,600 GPU, Inc. 2,646,000
67,000 GTE Corp. 3,132,250
60,200 Pinnacle West Capital
Corp. 1,881,250
55,000 SBC Communications, Inc. 3,162,500
51,100 Williams Cos., Inc. (The) 2,235,624
------------
Total 21,198,867
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST
$141,606,086) 202,479,324
------------
(b)REPURCHASE
AGREEMENT--1.3%
$2,766,000 HSBC Securities, Inc.,
5.33%, dated 2/28/1997,
due 3/3/1997 (at
amortized cost) 2,766,000
------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$144,372,086) $205,245,324
============
- ------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
(c)LONG-TERM
MUNICIPALS--
98.5%
LOUISIANA--97.6%
$ 500,000 East Baton Rouge
Parish, LA, City
Sales & Use Tax
Revenue Bonds
(Series ST),
6.50% (AMBAC
INS)/ (United
States Treasury
PRF)/ (Original
Issue Yield:
6.80%), 2/1/2013 AAA $ 539,920
1,000,000 East Baton Rouge
Parish, LA, Re-
funding Revenue
Bonds, 5.40%
(FGIC INS)/
(Original Issue
Yield: 5.85%),
2/1/2018 AAA 974,640
1,250,000 East Baton Rouge
Parish, LA, Sales
& Use Tax Reve-
nue Bonds (Se-
ries ST), 5.90%
(FGIC INS),
2/1/2017 AAA 1,290,075
930,000 East Baton Rouge
Parish, LA, Sales
& Use Tax Reve-
nue Bonds (Se-
ries ST-A), 4.80%
(FGIC INS)/
(Original Issue
Yield: 5.15%),
2/1/2011 AAA 870,554
500,000 East Baton Rouge
Parish, LA, Sales
and Use Tax Rev-
enue Bonds (Se-
ries ST), 5.20%
(FSA INS)/(Orig-
inal Issue Yield:
5.65%), 2/1/2017 AAA 475,860
- ------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
$ 30,000 East Baton Rouge,
LA Mortgage Fi-
nance Authority,
Revenue Bonds
(Series C), 7.90%
(GNMA COL)/
(Original Issue
Yield: 7.90%),
2/1/2002 Aaa $ 31,344
190,000 East Baton Rouge,
LA Mortgage Fi-
nance Authority,
SFM Purchasing
Revenue Bonds
(Series B), 5.40%
(Federal National
Mortgage Associ-
ation COL),
10/1/2025 Aaa 178,936
1,680,000 East Baton Rouge,
LA Mortgage
Finance
Authority, SFM
Revenue Refunding
Bonds (Series B),
7.40% (GNMA COL),
8/1/2012 Aaa 1,774,147
745,000 East Baton Rouge,
LA Mortgage
Finance
Authority, SFM
Revenue Refunding
Bonds (Series C),
7.00%, 4/1/2032 Aaa 776,387
1,000,000 Ernest N Morial-
New Orleans, LA
Exhibit Hall
Authority,
Special Tax
Refunding Bonds
(Series C), 5.50%
(MBIA INS)/
(Original Issue
Yield: 5.58%),
7/15/2018 AAA 980,840
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM
MUNICIPALS-
(cont'd)
$1,000,000 Ernest N Morial-
New Orleans, LA
Exhibit Hall
Authority,
Special Tax
Refunding Bonds
(Series C), 5.60%
(MBIA INS)/
(Original Issue
Yield: 5.65%),
7/15/2025 AAA $ 974,290
1,000,000 Greater New
Orleans
Expressway
Commission, LA,
Revenue Refunding
Bonds, 6.00%
(Louisiana
Expressway)/
(MBIA INS)/
(Original Issue
Yield: 6.55%),
11/1/2016 AAA 1,029,930
1,000,000 Houma, LA,
Utilities Revenue
Refunding Bonds,
6.25% (FGIC INS)/
(Original Issue
Yield: 6.40%),
1/1/2012 AAA 1,061,500
1,000,000 Jefferson Parish
LA Hospital
Service District
No. 2, Hospital
Revenue Bonds,
5.50% (MBIA
Insurance
Corporation
INS)/(Original
Issue Yield:
5.924%), 7/1/2008 AAA 1,023,080
------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
$1,000,000 Jefferson Parish
LA Hospital
Service District
No. 2, Refunding
Revenue Bonds,
5.75% (MBIA
Insurance
Corporation
INS)/(Original
Issue Yield:
6.05%), 7/1/2016 AAA $ 991,280
2,000,000 Jefferson Parish,
LA Home Mortgage
Authority,
Refunding Revenue
Bond (Series A),
6.15% (Federal
National Mortgage
Association and
GNMA COLs),
6/1/2028 AAA 2,022,060
1,000,000 Jefferson Parish,
LA, Drain Sales
Tax Revenue Bond,
6.50% (AMBAC
INS)/ (Original
Issue Yield:
6.753%),
11/1/2011 AAA 1,079,240
140,000 Jefferson, LA
Housing
Development
Corp.,
Multifamily
Revenue Refunding
Bonds (Series A),
7.375% (Concordia
Project)/(Federal
National Mortgage
Association
COL)/(Original
Issue Yield:
7.544%), 8/1/2005 AAA 150,809
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM
MUNICIPALS-
(cont'd)
$ 115,000 Jefferson Parish,
LA, GO Refunding
Bonds, 7.70%
(FGIC INS),
9/1/2002 AAA $ 117,362
1,000,000 Lafayette Parish,
LA School Board,
Sales Tax Revenue
Bonds, 4.875%
(FGIC
INS)/(Original
Issue Yield:
5.15%), 4/1/2012 AAA 939,840
1,170,000 Lafayette, LA
Public Power
Authority,
Refunding Revenue
Bonds, 5.50%
(AMBAC INS),
11/1/2010 AAA 1,179,325
500,000 Lafayette, LA
Public Power
Authority,
Refunding Revenue
Bonds, 5.50%
(AMBAC INS),
11/1/2011 AAA 502,590
1,650,000 Louisiana HFA,
Multifamily
Housing Revenue
Refunding Bonds
(Series A), 6.10%
(Woodward Wright
Apartments
Project)/(GNMA
COL), 12/20/2018 Aaa 1,672,258
- ------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
$ 350,000 Louisiana HFA,
Multifamily
Housing Revenue
Refunding Bonds,
5.85% (Woodward
Wright Apartments
Project)/(GNMA
COL), 12/20/2008 Aaa $ 358,676
1,000,000 Louisiana HFA,
Multifamily
Housing Revenue
Refunding Bonds,
6.20% (Woodward
Wright Apartments
Project)/(GNMA
COL), 6/20/2028 Aaa 1,010,020
1,000,000 Louisiana HFA,
Revenue Bond,
7.10% (Villa
Maria Retirement
Center)/(GNMA
COL), 1/20/2035 AAA 1,057,500
585,000 Louisiana HFA, SFM
Revenue Bonds
(Series A-2),
6.55%, 12/1/2026 Aaa 600,789
500,000 Louisiana PFA,
Hospital Revenue
Bonds, 5.70%
(Woman's Hospital
Foundation)/
(FGIC INS)/
(Original Issue
Yield: 5.80%),
10/1/2008 AAA 520,275
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM
MUNICIPALS-
(cont'd)
$ 995,000 Louisiana PFA,
Hospital Revenue
Crossover
Refunding Bonds
(Series C), 6.30%
(Our Lady of Lake
Regional)/ (MBIA
INS)/ (Original
Issue Yield:
6.375%),
12/1/2016 AAA $ 1,055,018
500,000 Louisiana PFA,
Hospital Revenue
Refunding Bonds,
6.40% (Lafayette
General Medical
Center Project)/
(FSA INS)/
(Original Issue
Yield: 6.53%),
10/1/2012 AAA 536,140
2,045,000 Louisiana PFA,
Multifamily
Housing Revenue
Bonds (Series A),
7.50% (Federal
Home Loan
Mortgage Corp.
COL), 6/1/2021 AAA 2,198,375
500,000 Louisiana PFA,
Refunding Revenue
Bonds, 5.75%
(Alton Ochsner
Medical
Foundation)/
(MBIA INS)/
(Original Issue
Yield: 6.636%),
5/15/2011 AAA 508,380
750,000 Louisiana PFA,
Revenue Bond,
6.00% (General
Health, Inc.)/
(MBIA INS)/
(Original Issue
Yield: 6.15%),
11/1/2012 AAA 778,380
------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
$1,890,000 Louisiana PFA,
Revenue Refunding
Bonds (Series A),
6.75% (Bethany
Home
Project)/(FHA
LOC), 8/1/2025 AAA $ 1,967,377
350,000 Louisiana PFA,
Revenue Refunding
Bonds (Series B),
6.50% (Alton
Ochsner Medical
Foundation)/
(MBIA INS)/
(Original Issue
Yield: 6.743%),
5/15/2022 AAA 377,454
750,000 Louisiana PFA,
Revenue Refunding
Bonds, 7.70%
(Jefferson Parish
Eastbank)/(FGIC
INS)/(Original
Issue Yield:
7.747%), 8/1/2010 AAA 814,432
670,000 Louisiana PFA,
Student
Opportunity Loans
Revenue Bonds
(Series A), 6.80%
(FSA INS),
1/1/2006 AAA 717,858
670,000 Louisiana PFA,
Student
Opportunity Loans
Revenue Bonds
(Series A), 6.85%
(FSA COL),
1/1/2009 AAA 710,086
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM
MUNICIPALS-
(cont'd)
$ 500,000 Louisiana Stadium
and Expo
District, Hotel
Occupancy Tax and
Stadium Revenue
Refunding Bonds
(Series A), 6.00%
(FGIC INS),
7/1/2016 AAA $ 517,475
2,155,000 Louisiana Stadium
and Expo
District, Hotel
Occupancy Tax and
Revenue Refunding
Bonds (Series A),
6.00% (FGIC INS)/
(Original Issue
Yield: 6.10%),
7/1/2024 AAA 2,217,646
2,000,000 Louisiana Stadium
and Expo
District, Revenue
Bonds, 5.75%
(FGIC INS)/
(Original Issue
Yield: 5.85%),
7/1/2026 AAA 1,987,200
550,000 Louisiana State
Energy & Power
Authority,
Revenue Refunding
Bonds, 6.00%
(Rodemacher Unit
No. 2
Project)/(FGIC
INS)/(Original
Issue Yield:
6.962%), 1/1/2013 AAA 560,500
- ------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
$3,500,000 Louisiana State
University and
Agricultural and
Mechanical
College, Revenue
Bonds, 5.50%
(MBIA INS)/
(Original Issue
Yield: 5.80%),
7/1/2026 AAA $ 3,402,945
465,000 Louisiana State
University and
Agricultural and
Mechanical
College, Revenue
Bonds, 5.75%
(FGIC INS)/
(Original Issue
Yield: 6.043%),
7/1/2014 AAA 471,329
400,000 Louisiana State,
Gas and Fuel Tax
Revenue Bonds
(Series A), 7.25%
(FGIC INS)/
(Original Issue
Yield: 7.45%),
11/15/2004 AAA 434,912
750,000 Monroe, LA School
District, Special
School District,
GO UT Bonds,
5.35% (FGIC INS)/
(Original Issue
Yield: 5.75%),
3/1/2009 AAA 756,068
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM
MUNICIPALS-
(cont'd)
$ 525,000 Monroe-Brentwood,
LA Housing
Development
Corp.,
Multifamily
Housing Mortgage
Revenue Refunding
Bonds, 6.50%
(Federal National
Mortgage
Association COL),
2/1/2010 Aaa $ 539,543
1,020,000 Monroe-Brentwood,
LA Housing
Development
Corp.,
Multifamily
Housing Mortgage
Revenue Refunding
Bonds, 6.70%
(Federal National
Mortgage
Association COL),
8/1/2021 Aaa 1,042,573
1,500,000 New Orleans, LA
Audubon Park, GO
LT Bonds, 6.00%
(FGIC
INS)/(Original
Issue Yield:
6.25%), 10/1/2013 AAA 1,559,565
1,250,000 New Orleans, LA
Home Mortgage
Authority, SFM
Revenue Bonds
(Series A), 6.65%
(GNMA COL),
9/1/2008 Aaa 1,316,350
------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
$1,000,000 New Orleans, LA
Home Mortgage
Authority,
Special
Obligation
Revenue Bonds,
6.25% (United
States Treasury
COL)/(Original
Issue Yield:
6.517%),
1/15/2011 AAA $ 1,091,940
285,000 New Orleans, LA
Housing
Development
Corp.,
Multifamily
Housing Refunding
Revenue Bonds,
7.375% (Federal
National Mortgage
Association
COL)/(Original
Issue Yield:
7.544%), 8/1/2005 AAA 308,552
1,020,000 New Orleans, LA
Housing
Development
Corp.,
Multifamily
Housing Revenue
Bonds, 7.375%
(Southwood
Patio)/(Federal
National Mortgage
Association
COL)/(Original
Issue Yield:
7.544%), 8/1/2005 AAA 1,100,580
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM
MUNICIPALS-
(cont'd)
$ 1,900,000 New Orleans, LA,
GO Refunding
Bond, 6.20%
(AMBAC INS)/
(Original Issue
Yield: 6.30%),
10/1/2021 AAA $ 1,995,817
2,375,000 New Orleans, LA,
GO UT Capital
Appreciation
Bonds (AMBAC
INS)/(Original
Issue Yield:
7.10%), 9/1/2013 AAA 955,843
2,000,000 New Orleans, LA,
GO UT Capital
Appreciation
Revenue Bonds
(AMBAC INS)/
(Original Issue
Yield: 7.15%),
9/1/2016 AAA 669,780
980,000 New Orleans, LA,
GO UT Refunding
Bonds, 5.875%
(AMBAC
INS)/(Original
Issue Yield:
6.00%), 10/1/2011 AAA 1,019,651
500,000 Orleans Parish, LA
Law Enforcement
District, GO UT
Bonds, 7.10%
(AMBAC INS)/
(Original Issue
Yield: 7.25%),
5/1/2010 AAA 536,720
- ------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
$1,000,000 Orleans, LA Levee
District,
Refunding Revenue
Bonds (Series A),
5.95% (FSA INS)/
(Original Issue
Yield: 6.039%),
11/1/2014 AAA $ 1,040,510
300,000 Plaquemines Parish
LA, GO UT
Refunding Bonds,
6.50% (AMBAC
INS)/ (Original
Issue Yield:
6.65%), 8/1/2008 AAA 327,543
500,000 ST. Tammany
Parish, LA Wide
School District
No. 12, GO UT
Bonds, 5.375%
(FSA INS),
3/1/2013 AAA 496,815
500,000 Shreveport, LA,
Water & Sewer,
Revenue Bonds
(Series A), 5.95%
(FGIC LOC),
12/1/2014 AAA 518,785
1,485,000 St. Charles
Parish, LA
Consolidated
Waterworks and
Wastewater
District No. 1,
Utility Revenue
Refunding Bonds,
7.15% (MBIA
Insurance
Corporation INS),
7/1/2016 AAA 1,652,716
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM
MUNICIPALS-
(cont'd)
$1,000,000 St. Charles
Parish, LA Public
Improvement, UT
GO Refunding
Bonds (Series
ST-96), 5.25%
(Original Issue
Yield: 5.45%),
12/1/2009 AAA $ 1,001,950
500,000 St. Charles
Parish, LA,
Environmental
Improvement
Revenue Bonds,
5.95% (LA Power &
Light
Company)/(FSA
INS)/(Original
Issue Yield:
5.986%),
12/1/2023 AAA 502,825
1,000,000 St. Charles
Parish, LA, Solid
Waste Disposal
Revenue Bonds,
7.00% (LA Power &
Light Company)/
(AMBAC INS)/
(Original Issue
Yield: 7.04%),
12/1/2022 AAA 1,103,090
400,000 St. Tammany
Parish, LA
Hospital Service
District No. 2,
Hospital Revenue
Refunding Bonds,
6.125% (Connie
Lee INS)/
(Original Issue
Yield: 6.315%),
10/1/2011 AAA 420,852
- ------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
$1,000,000 St. Tammany
Parish, LA
Hospital Service
District No. 2,
Revenue Bonds,
6.25% (Connie Lee
LOC)/ (Original
Issue Yield:
6.40%), 10/1/2014 AAA $ 1,058,700
130,000 Terrebonne Parish
LA Hospital
Service District,
No. 1, Refunding
Revenue Bonds,
7.50% (Terrebonne
General Medical
Center)/(BIG
INS)/(Original
Issue Yield:
7.649%), 4/1/2008 AAA 136,858
170,000 Terrebonne Parish
LA Hospital
Service District
No. 1, Service
District ,
Hospital Revenue
Refunding Bonds,
7.40% (Terrebonne
General Medical
Center)/(BIG
INS)/(Original
Issue Yield:
7.50%), 4/1/2003 AAA 178,789
------------
Total 64,771,449
------------
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL CREDIT
AMOUNT RATING(d) VALUE
- ------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM
MUNICIPALS-
(cont'd)
PUERTO RICO--0.9%
$ 600,000 Puerto Rico
Municipal Finance
Agency, Revenue
Bonds (Series A),
6.00% (FSA INS)/
(Original Issue
Yield: 6.30%),
7/1/2014 AAA $ 628,554
------------
TOTAL LONG-TERM
MUNICIPALS
(IDENTIFIED COST
$62,781,051) 65,400,003
------------
MUTUAL FUND--0.1%
35,910 Dreyfus Tax Exempt
Cash Management
(at net asset
value) 35,910
------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$62,816,961) $ 65,435,913
============
- ------------------------------------------------------------------
</TABLE>
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS/ ASSET
BACKED SECURITIES--17.7%
Automotive--1.7%
$1,000,000 Ford Capital BV,
Debenture, 10.125%,
11/15/2000 $ 1,111,280
------------
Banking--2.3%
1,500,000 Swiss Bank Corp. New York,
Subordinated Note, 7.25%,
9/1/2006 1,513,253
------------
Consumer Durables--3.1%
2,000,000 Ford Motor Co., Note,
7.25%, 10/1/2008 2,016,000
------------
Finance--Retail-7.3%
750,000 American General Finance
Corp., Note, 8.00%,
2/15/2000 778,807
1,000,000 BankAmerica Corp.,
Subordinated Note, 7.50%,
10/15/2002 1,027,650
995,028 CIT Group Securitization
Corp. 1993-1, Class A2,
5.75%, 6/15/2018 976,302
1,000,000 Discover Card Trust
1993-A, Class A, 6.25%,
8/16/2000 1,002,550
1,000,000 Signet Credit Card Master
Trust 1993-1, Class A,
5.20%, 2/15/2002 986,920
------------
Total 4,772,229
------------
Utilities--3.3%
2,000,000 K N Energy, Inc.,
Debenture, 9.625%,
8/1/2021 2,202,020
------------
TOTAL CORPORATE
BONDS/ASSET-BACKED
SECURITIES (IDENTIFIED
COST $11,542,399) 11,614,782
------------
GOVERNMENT AGENCIES--27.1%
Federal Home Loan
Bank--0.9%
550,000 7.01%, 6/14/2006 558,101
------------
- ------------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
TOTAL RETURN BOND FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
<C> <S> <C>
GOVERNMENT
AGENCIES-(cont'd)
Federal Home Loan Mortgage
Corp. 30-Year Gold--1.6%
$1,000,000 Series 1024, 9.00%,
11/15/2005 $ 1,036,370
------------
Federal National Mortgage
Association Bond--6.0%
3,900,000 8.05%, 7/14/2004 3,931,044
------------
Federal National Mortgage
Association 30-Year
Seasoned--0.0%
10,633 Pool 1804, 11.00%,
4/1/2011 11,700
8,065 Pool 34138, 11.00%,
4/1/2010 9,048
12,391 Pool 76204, 11.00%,
6/1/2019 13,964
14,710 Pool 85131, 11.00%,
5/1/2017 16,576
------------
Total 51,288
------------
Government National
Mortgage Association
30-Year--18.6%
917,904 Pool 420153, 7.00%,
9/15/2010 920,483
514,327 Pool 302101, 7.00%,
6/15/2024 504,040
445,002 Pool 345031, 7.00%,
10/15/2023 436,101
472,127 Pool 345090, 7.00%,
11/15/2023 462,684
245,930 Pool 360772, 7.00%,
2/15/2024 241,319
595,887 Pool 382074, 7.00%,
9/15/2025 581,103
192,598 Pool 404653, 7.00%,
9/15/2025 187,820
498,587 Pool 408884, 7.00%,
9/15/2025 486,217
765,759 Pool 410108, 7.00%,
9/15/2025 746,761
306,600 Pool 410786, 7.00%,
9/15/2025 298,993
507,975 Pool 415865, 7.00%,
9/15/2025 495,372
1,268,186 Pool 418781, 7.00%,
9/15/2025 1,236,722
- ------------------------------------------------------------
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
$1,466,306 Pool 420157, 7.00%,
10/15/2025 $ 1,429,926
1,095,015 Pool 415427, 7.50%,
8/15/2025 1,094,873
178,507 Pool 168511, 8.00%,
7/15/2016 184,978
175,549 Pool 174673, 8.00%,
8/15/2016 181,967
71,089 Pool 177145, 8.00%,
1/15/2017 73,688
116,881 Pool 212660, 8.00%,
4/15/2017 121,154
158,278 Pool 212047, 8.00%,
5/15/2017 164,064
159,786 Pool 217533, 8.00%,
5/15/2017 165,578
211,255 Pool 216950, 8.00%,
6/15/2017 218,913
10,687 Pool 188080, 8.00%,
9/15/2018 11,044
233,891 Pool 302697, 8.00%,
4/15/2021 240,250
138,745 Pool 227430, 9.00%,
8/15/2019 148,154
101,952 Pool 279629, 9.00%,
10/15/2019 108,802
67,328 Pool 283261, 9.00%,
11/15/2019 71,894
168,199 Pool 287853, 9.00%,
4/15/2020 179,395
55,735 Pool 288967, 9.00%,
4/15/2020 59,480
112,066 Pool 289082, 9.00%,
4/15/2020 119,666
117,757 Pool 288994, 9.00%,
5/15/2020 125,595
77,756 Pool 291100, 9.00%,
5/15/2020 82,931
144,432 Pool 147875, 10.00%,
3/15/2016 159,147
93,270 Pool 253449, 10.00%,
10/15/2018 102,743
163,634 Pool 278300, 10.00%,
7/15/2019 180,202
90,211 Pool 279619, 10.00%,
9/15/2019 99,344
35,818 Pool 288052, 10.00%,
7/15/2020 39,434
- ------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
TOTAL RETURN BOND FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES-
Government National
Mortgage Association
30-Year-(cont'd)
$ 59,317 Pool 288570, 10.00%,
8/15/2020 $ 65,304
47,864 Pool 225725, 10.00%,
9/15/2020 52,695
103,303 Pool 292364, 10.00%,
9/15/2020 113,763
59,815 Pool 296315, 10.00%,
9/15/2020 65,853
------------
Total 12,258,452
------------
TOTAL GOVERNMENT AGENCIES
(IDENTIFIED COST
$17,893,592) 17,835,255
------------
TREASURY SECURITIES--53.9%
U.S. Treasury Bonds--42.7%
11,500,000 7.50%, 5/15/2002 12,058,440
2,000,000 7.50%, 11/15/2024 2,144,020
2,000,000 8.875%, 8/15/2017 2,428,000
3,800,000 11.25%, 2/15/2015 5,518,018
4,000,000 12.50%, 8/15/2014 5,900,720
------------
Total 28,049,198
------------
U.S. Treasury Notes--11.2%
200,000 5.125%, 4/30/1998 198,582
1,250,000 6.50%, 4/30/1997 1,252,738
750,000 7.00%, 7/15/2006 771,360
2,000,000 7.125%, 2/29/2000 2,049,140
3,000,000 7.875%, 11/15/1999 3,125,490
------------
Total 7,397,310
------------
TOTAL TREASURY SECURITIES
(IDENTIFIED COST
$35,338,098) 35,446,508
------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$64,774,089) $ 64,896,545
===========
- ------------------------------------------------------------
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
<C> <S> <C>
LONG-TERM OBLIGATIONS--
99.0%
Federal Home Loan Bank--1.0%
$ 350,000 7.01%, 6/14/2006 $ 355,156
-----------
(e)Federal Home Loan Bank
PC--2.8%
306,276 8.75%, 1/1/2011 319,149
364,488 8.75%, 2/1/2017 382,086
210,429 9.25%, 6/1/2002 216,742
40,052 9.50%, 10/1/2001 41,566
-----------
Total 959,543
-----------
(e)Federal Home Loan
Mortgage Corp.
Debentures--10.4%
2,000,000 6.50%, 6/8/2000 1,996,040
1,500,000 7.055%, 8/2/2001 1,513,170
-----------
Total 3,509,210
-----------
(e)Federal Home Loan Mort-
gage Corp. PC--19.5%
500,000 6.00, 10/15/2004 495,165
900,000 6.10%, 6/15/2016 890,964
1,500,000 7.00%, 11/15/2005 1,498,650
1,000,000 7.50%, 9/15/2021 975,840
1,558,000 7.50%, 9/15/2007 1,578,223
990,750 9.00%, 6/15/2020 1,015,786
142,321 9.50%, 1/15/2005 149,437
-----------
Total 6,604,065
-----------
Federal Home Loan Mortgage
Corp. 15-Year--1.2%
178,316 9.00%, 8/1/2001 184,724
137,428 9.50%, 12/1/2001 144,085
79,122 9.50%, 10/1/2004 82,954
-----------
Total 411,763
-----------
Federal Home Loan Mortgage
Corp. 30-Year--2.8%
2,153 9.00%, 9/1/2016 2,277
76,091 9.00%, 6/1/2016 80,870
12,800 9.00%, 5/1/2018 13,536
10,725 9.00%, 10/1/2016 11,399
90,729 9.00%, 1/1/2017 95,947
72,862 9.50%, 10/1/2019 78,054
59,191 10.00%, 8/1/2019 64,056
57,238 10.00%, 6/1/2020 61,942
6,660 10.00%, 6/1/2020 7,207
317,214 10.00%, 6/1/2018 343,286
- ------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
U.S. GOVERNMENT INCOME FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
<C> <S> <C>
LONG-TERM OBLIGATIONS-
Federal Home Loan Mortgage
Corp. 30-Year-(cont'd)
$ 132,619 10.00%, 5/1/2014 $ 143,519
40,292 10.00%, 4/1/2020 43,604
-----------
Total 945,697
-----------
(e)Federal National Mortgage
Association
Debentures--19.4%
1,000,000 7.60%, 4/14/2004 1,002,270
5,500,000 8.05%, 7/14/2004 5,543,780
-----------
Total 6,546,050
-----------
(e)Federal National Mortgage
Association REMIC--3.0%
1,000,000 7.50%, 3/25/2021 997,990
-----------
Federal National Mortgage
Association Medium Term
Notes--6.6%
500,000 7.00%, 4/20/2001 502,955
1,750,000 7.15%, 1/29/2007 1,743,486
-----------
Total 2,246,441
-----------
Federal National Mortgage
Association 15-Year--0.2%
70,624 10.75%, 1/1/2001 75,038
-----------
Federal National Mortgage
Association 30-Year--1.2%
256,858 8.50%, 2/1/2011 268,738
118,872 9.50%, 8/1/2020 128,555
-----------
Total 397,293
-----------
Government National Mortgage
Association POOL--1.7%
370,411 7.00%, 9/15/2010 371,452
94,355 7.00%, 11/15/2009 94,768
92,228 9.50%, 7/15/2020 99,981
-----------
Total 566,201
- ------------------------------------------------------------
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
Government National Mortgage
Association 30-Year--7.7%
$ 740,341 7.50%, 10/15/2022 $ 739,186
1,032,153 8.00%, 11/15/2022 1,052,807
417,496 9.00%, 2/15/2020 440,717
47,033 9.50%, 7/15/2020 50,854
222,352 9.50%, 6/15/2020 240,416
60,266 9.50%, 6/15/2020 65,162
-----------
Total 2,589,142
-----------
U.S. Treasury Bonds--11.7%
200,000 7.125%, 2/15/2023 204,704
700,000 7.25%, 8/15/2022 726,481
1,500,000 8.75%, 5/15/2020 1,813,200
1,000,000 10.75%, 2/15/2003 1,210,580
-----------
Total 3,954,965
-----------
U.S. Treasury Notes--9.8%
1,000,000 6.25%, 2/15/2003 991,660
32,000 6.375%, 7/15/1999 32,188
1,700,000 7.00%, 7/15/2006 1,748,416
500,000 7.50%, 2/15/2005 529,515
-----------
Total 3,301,779
-----------
TOTAL LONG-TERM OBLIGATIONS
(IDENTIFIED COST
$33,314,591) 33,460,333
-----------
(b)REPURCHASE
AGREEMENT--0.6%
189,000 HSBC Securities, Inc.,
5.33%, dated 2/28/1997, due
3/3/1997 (at amortized
cost) 189,000
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST
$33,503,591) $33,649,333
==========
- ------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
CASH RESERVE FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
<C> <S> <C>
(f)COMMERCIAL PAPER--
70.0%
Computer Services--1.2%
$ 2,000,000 Electronic Data Systems
Corp., 5.32%, 3/21/1997 $ 1,994,122
------------
Consumer Durables--3.1%
5,000,000 Toyota Motor Credit Corp.,
5.33%, 3/13/1997 4,991,233
------------
Consumer Non-Durables--
8.5%
5,000,000 Coca-Cola Co.,
5.33%-5.56%, 3/7/1997 4,995,566
4,000,000 Colgate-Palmolive Co.,
5.37%, 4/23/1997 3,968,789
5,000,000 Heinz (H.J.) Co.,
5.23%-5.25%,
3/17/1997-4/3/1997 4,980,941
------------
Total 13,945,296
------------
Consumer Services--3.0%
5,000,000 Disney (Walt) Co., 5.37%,
4/7/1997 4,972,712
------------
Finance--12.0%
5,000,000 American General Finance
Corp., 5.40%, 3/27/1997 4,980,717
5,000,000 Ford Motor Credit Corp.,
5.43%, 5/15/1997 4,944,479
5,000,000 Norwest Corp., 5.41%,
4/24/1997 4,960,025
5,000,000 Paccar Financial Corp.,
5.38%, 8/1/1997 4,888,225
------------
Total 19,773,446
------------
Finance--Commercial--
18.1%
5,000,000 CIT Group Holdings, Inc.,
5.39%, 5/16/1997 4,944,056
5,000,000 Deere (John) Capital
Corp., 5.36%, 5/7/1997 4,950,774
5,000,000 Falcon Asset
Securitization Corp.,
5.31%, 4/17/1997 4,965,599
5,000,000 General Electric Capital
Corp., 5.44%, 4/23/1997 4,960,544
5,000,000 Transamerica Finance
Corp., 5.37%, 4/9/1997 4,971,238
5,000,000 U.S.A.A. Capital Corp.,
5.38%, 4/16/1997 4,966,075
------------
Total 29,758,286
------------
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
Finance--Retail--6.0%
$ 5,000,000 Beta Finance, Inc., 5.38%,
6/23/1997 $ 4,916,400
5,000,000 Commercial Credit Co.,
5.32%, 3/6/1997 4,996,326
------------
Total 9,912,726
------------
Financial Services--3.0%
5,000,000 CIESCO, Inc., 5.38%,
4/17/1997 4,965,403
------------
Food & Beverage--3.0%
5,000,000 Cargill, Inc., 5.39%,
4/15/1997 4,966,750
------------
Health Technology--3.1%
5,000,000 Abbott Laboratories,
5.28%, 3/11/1997 4,992,708
------------
Process Industries--3.0%
5,000,000 Du Pont (E.I.) de Nemours
& Co., 5.38%, 5/6/1997 4,951,417
------------
Utilities--6.0%
5,000,000 BellSouth Telecommunica-
tions, Inc., 5.38%,
6/4/1997 4,930,069
5,000,000 South Carolina Electric
and Gas, 5.25%-5.33%,
3/14/1997-3/26/1997 4,978,887
------------
Total 9,908,956
------------
TOTAL COMMERCIAL PAPER 115,133,055
------------
(f)BANKERS ACCEPTANCE
--3.0%
Finance--3.0%
5,000,000 First Union Corp.,
5.37%-5.40%,
3/12/1997-5/15/1997 4,965,043
------------
GOVERNMENT AGENCIES --6.6%
Finance--6.6%
11,000,000 Federal National Mortgage
Association, 5.31%-5.48%,
3/24/1997-5/29/1997 10,906,952
------------
- ------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
CASH RESERVE FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
<C> <S> <C>
TIME DEPOSIT--12.2%
Finance--12.2%
$ 5,000,000 ABN AMRO Bank N.V.,
Amsterdam, 5.40%,
4/9/1997 $ 5,000,000
5,000,000 Bank of Tokyo-Mitsubishi
Ltd., 5.55%, 4/22/1997 5,000,000
5,000,000 Deutsche Bank, AG, 5.40%,
4/9/1997 5,000,000
5,000,000 Societe Generale, London,
5.38%, 3/12/1997 5,000,000
------------
TOTAL TIME DEPOSITS 20,000,000
------------
(b)REPURCHASE
AGREEMENT--8.4%
13,857,000 HSBC Securities, Inc.,
5.33%, dated 2/28/1997,
due 3/3/1997 13,857,000
------------
TOTAL INVESTMENTS (AT
AMORTIZED COST) $164,862,050
===========
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY MONEY MARKET FUND
- ------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY BILLS--54.3%
$81,000,000 3/6/1997-8/28/1997 $ 80,228,951
------------
U.S. TREASURY NOTES--1.4%
2,000,000 5.500%, 7/31/1997 2,002,623
------------
(b)REPURCHASE AGREE-
MENTS--46.1%
35,141,000 HSBC Securities, Inc.,
5.33%, dated 2/28/1997,
due 3/3/1997 35,141,000
33,000,000 State Street Bank and
Trust Co., 5.30%, dated
2/28/1997, due 3/3/1997 33,000,000
------------
TOTAL REPURCHASE
AGREEMENTS 68,141,000
------------
TOTAL INVESTMENTS (AT
AMORTIZED COST) $150,372,574
===========
- ------------------------------------------------------------
</TABLE>
(See Notes to Portfolios of Investments)
===============================================================================
NOTES TO PORTFOLIOS OF INVESTMENTS
===============================================================================
(a) Non-income producing security.
(b) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(c) At February 28, 1997, 12.0% of the total investments at market value were
subject to alternative minimum tax.
(d) Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings.
(e) Because of monthly principal payments, the average lives of the Federal Home
Loan Bank Participation Certificates, and Federal Home Loan Mortgage Corp.
Debentures and Participation Certificates, and Federal National Mortgage
Association Debentures and REMICs are less than the indicated periods.
(f) Rate shown represents yield to maturity.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
ADR -- American Depositary Receipt
AMBAC -- American Municipal Bond Assurance Corporation
BIG -- Bond Investors Guaranty
COL -- Collateralized
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
INS -- Insured
LOC -- Letter of Credit
LT -- Limited Tax
MBIA -- Municipal Bond Investors Assurance
PC -- Participation Certificate
PFA -- Public Facility Authority
PRF -- Pre-Refunded
REMIC -- Real Estate Mortgage Investment Conduit
SFM -- Single Family Mortgage
UT -- Unlimited Tax
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FOR FEDERAL TAX PURPOSES
- -----------------------------------------------------------------------------------------------------------------------
NET
UNREALIZED GROSS GROSS
COST OF APPRECIATION UNREALIZED UNREALIZED
TOWER MUTUAL FUNDS INVESTMENTS (DEPRECIATION) APPRECIATION DEPRECIATION TOTAL NET ASSETS*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation Fund $ 144,425,994 $ 60,819,330 $ 61,975,927 $1,156,597 $ 205,726,244
Louisiana Municipal Income Fund 62,816,961 2,618,952 2,661,734 42,782 66,373,412
Total Return Bond Fund 64,774,089 122,456 541,655 419,199 65,765,078
U.S. Government Income Fund 33,503,591 145,742 366,738 220,996 33,807,745
Cash Reserve Fund 164,862,050 -- -- -- 164,412,895
U.S. Treasury Money Market Fund 150,372,574 -- -- -- 147,857,147
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The categories of investments are shown as a percentage of net assets at
February 28, 1997.
(See Notes which are an integral part of the Financial Statements)
(This page intentionally left blank)
=========================================
STATEMENTS OF ASSETS AND LIABILITIES TOWER MUTUAL FUNDS
February 28, 1997 (unaudited)
=========================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL
APPRECIATION LOUISIANA MUNICIPAL
FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 2,766,000 $ --
Investments in securities 202,479,324 65,435,913
------------ ------------
Total investments in securities, at value 205,245,324 65,435,913
Cash -- 3,846
Income receivable 427,843 877,532
Receivable for shares sold 240,413 247,704
Deferred expenses -- --
------------ ------------
Total assets 205,913,580 66,564,995
------------ ------------
LIABILITIES:
Payable for investments purchased -- --
Payable for shares redeemed 59,174 12,151
Income distribution payable -- 153,754
Payable to Bank 82,325 --
Accrued expenses 45,837 25,678
------------ ------------
Total liabilities 187,336 191,583
------------ ------------
NET ASSETS CONSIST OF:
Paid in capital 135,194,144 63,594,155
Net unrealized appreciation of investments 60,873,238 2,618,952
Accumulated net realized gain (loss) on investments 9,618,115 92,456
Undistributed net investment income 40,747 67,849
------------ ------------
Total Net Assets $205,726,244 $ 66,373,412
------------ ------------
NET ASSETS: $204,499,107(1) $ 66,373,412
------------ ------------
$ 1,227,137(2) --
------------ ------------
SHARES OUTSTANDING 10,340,908(1) 5,988,048
62,112(2) --
------------ ------------
Total Shares Outstanding 10,403,020 5,988,048
============ ============
NET ASSET VALUE PER SHARE* $19.78(1) $11.08
------------ ------------
$19.76(2) --
------------ ------------
OFFERING PRICE PER SHARE* $20.71(1)*** $11.42**
------------ ------------
$19.76(2) --
------------ ------------
REDEMPTION PROCEEDS PER SHARE* $19.78(1) $11.08
------------ ------------
$18.67(2)**** --
------------ ------------
Investments, at identified costs $144,372,086 $ 62,816,961
============ ============
Investments, at tax costs $144,425,994 $ 62,816,961
============ ============
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents Class A Shares of Capital Appreciation Fund. The other Funds do
not have class designations.
(2) Represents Class B Shares of Capital Appreciation Fund. The other Funds do
not have class designations.
* See "What Shares Cost" in the Prospectus.
** Computation of Offering Price: 100/97 of net asset value.
*** Computation of Offering Price: 100/95.50 of net asset value.
**** Computation of Redemption Proceeds: 94.50/100 of net asset value.
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
TOTAL RETURN U.S. GOVERNMENT CASH RESERVE U.S. TREASURY
BOND FUND INCOME FUND FUND MONEY MARKET FUND
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ -- $ 189,000 $ 13,857,000 $ 68,141,000
64,896,545 33,460,333 151,005,050 82,231,574
-------------------- -------------------- -------------------- --------------------
64,896,545 33,649,333 164,862,050 150,372,574
-- 8,544 -- --
836,106 324,114 136,938 13,390
130,683 460 3,439 --
480 -- -- 443
-------------------- -------------------- -------------------- --------------------
65,863,814 33,982,451 165,002,427 150,386,407
-------------------- -------------------- -------------------- --------------------
-- -- -- 1,987,225
-- 37,336 -- --
70,295 130,909 555,676 528,706
885 -- 3,964 13,329
27,556 6,461 29,892 --
-------------------- -------------------- -------------------- --------------------
98,736 174,706 589,532 2,529,260
-------------------- -------------------- -------------------- --------------------
65,618,594 37,496,305 164,412,895 147,857,147
122,456 145,742 -- --
(47,492) (3,882,538) -- --
71,520 48,236 -- --
-------------------- -------------------- -------------------- --------------------
$ 65,765,078 $ 33,807,745 $164,412,895 $147,857,147
-------------------- -------------------- -------------------- --------------------
$ 65,765,078 $ 33,807,745 $164,412,895 $147,857,147
-------------------- -------------------- -------------------- --------------------
-- -- -- --
-------------------- -------------------- -------------------- --------------------
6,605,129 3,403,999 164,412,895 147,857,147
-- -- -- --
-------------------- -------------------- -------------------- --------------------
6,605,129 3,403,999 164,412,895 147,857,147
==================== ==================== ==================== ====================
$9.96 $9.93 $1.00 $1.00
-------------------- -------------------- -------------------- --------------------
-- -- -- --
-------------------- -------------------- -------------------- --------------------
$10.27** $10.24** $1.00 $1.00
-------------------- -------------------- -------------------- --------------------
-- -- -- --
-------------------- -------------------- -------------------- --------------------
$9.96 $9.93 $1.00 $1.00
-------------------- -------------------- -------------------- --------------------
-- -- -- --
-------------------- -------------------- -------------------- --------------------
$ 64,774,089 $ 33,503,591 $164,862,050 $150,372,574
==================== ==================== ==================== ====================
$ 64,774,089 $ 33,503,591 $164,862,050 $150,372,574
==================== ==================== ==================== ====================
--------------------------------------------------------------------------------------------
</TABLE>
=======================================
STATEMENTS OF OPERATIONS TOWER MUTUAL FUNDS
Six Months Ended February 28, 1997
(unaudited)
=======================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
CAPITAL LOUISIANA
APPRECIATION MUNICIPAL
FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $1,887,505 $ --
Interest 91,421 1,980,145
---------------- ----------------
Total income 1,978,926 1,980,145
---------------- ----------------
EXPENSES:
Investment advisory fee 712,589 148,287
Administrative personnel and services fee 121,231 42,050
Custodian fees 21,482 8,238
Transfer and dividend disbursing agent fees and expenses 21,100 16,932
Directors'/Trustees' fees 4,801 2,274
Auditing fees 8,528 6,369
Legal fees 2,803 2,256
Portfolio accounting fees 28,755 28,890
Distribution services fee 238,059(a) --
Shareholder services fee 265(b) --
Share registration costs 6,802 3,993
Printing and postage 3,085 3,493
Insurance premiums 2,505 1,998
Miscellaneous 1,700 648
---------------- ----------------
Total expenses 1,173,705 265,428
---------------- ----------------
Waivers--
Waiver of investment advisory fee -- (26,362)
---------------- ----------------
Net expenses 1,173,705 239,066
---------------- ----------------
Net investment income 805,221 1,741,079
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 10,307,025 637,436
Net change in unrealized appreciation on investments 27,687,979 445,089
---------------- ----------------
Net realized and unrealized gain (loss) on investments 37,995,004 1,082,525
---------------- ----------------
Change in net assets resulting from operations $38,800,225 $2,823,604
================= =================
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents distribution services fee of $237,264 and $795 for Class A
Shares and Class B Shares, respectively.
(b) Represents shareholder services fee for Class B Shares.
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
TOTAL
RETURN BOND U.S. GOVERNMENT CASH U.S. TREASURY
FUND INCOME FUND RESERVE FUND MONEY MARKET FUND
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ -- $ -- $ -- $ --
2,610,306 1,343,259 4,667,943 3,704,806
------------------- ------------------- ------------------- -------------------
2,610,306 1,343,259 4,667,943 3,704,806
------------------- ------------------- ------------------- -------------------
242,184 80,025 344,921 281,331
44,120 22,695 110,026 89,740
8,649 7,901 19,726 15,186
15,075 20,511 21,405 17,350
2,480 1,249 6,154 3,398
6,447 5,871 9,286 7,687
2,728 2,628 3,258 2,599
28,514 27,533 24,126 21,597
86,494 -- 215,576 --
-- -- -- --
5,650 5,086 6,335 6,780
3,252 2,701 3,620 2,579
1,835 1,984 3,024 2,405
3,173 1,736 1,991 3,058
------------------- ------------------- ------------------- -------------------
450,601 179,920 769,448 453,710
------------------- ------------------- ------------------- -------------------
-- (10,670) -- (154,732)
------------------- ------------------- ------------------- -------------------
450,601 169,250 769,448 298,978
------------------- ------------------- ------------------- -------------------
2,159,705 1,174,009 3,898,495 3,405,828
------------------- ------------------- ------------------- -------------------
771,819 (359,935) -- --
667,497 822,569 -- --
------------------- ------------------- ------------------- -------------------
1,439,316 462,634 -- --
------------------- ------------------- ------------------- -------------------
$ 3,599,021 $ 1,636,643 $ 3,898,495 $ 3,405,828
==================== ==================== ==================== ====================
-----------------------------------------------------------------------------------------
</TABLE>
=======================================
STATEMENTS OF CHANGES IN NET ASSETS TOWER MUTUAL FUNDS
=======================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL LOUISIANA MUNICIPAL
APPRECIATION FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
FEBRUARY 28, ENDED FEBRUARY 28, ENDED
1997 AUGUST 31, 1997 AUGUST 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 805,221 $ 1,732,246 $ 1,741,079 $ 3,562,511
Net realized gain (loss) on investments 10,307,025 21,484,071 637,436 328,333
Net change in unrealized appreciation
(depreciation) 27,687,979 2,454,787 445,089 (599,781)
------------- ------------ ------------- ------------
Change in net assets resulting from
operations 38,800,225 25,671,104 2,823,604 3,291,063
------------- ------------ ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (855,807)(1) (1,745,652) (1,748,747) (3,561,907)
Distributions from net realized gain on
investments (19,032,852)(2) (7,513,977) (220,394) --
------------- ------------ ------------- ------------
Change in net assets from distributions to
shareholders (19,888,659) (9,259,629) (1,969,141) (3,561,907)
------------- ------------ ------------- ------------
SHARE TRANSACTIONS:
Proceeds from sale of shares 37,673,960 33,055,554 3,003,316 7,858,208
Net asset value of shares issued to
shareholders in payment of distributions
declared 358,072 7,256,316 969,490 1,709,419
Cost of shares redeemed (20,865,080) (31,551,308) (4,170,523) (11,180,328)
------------- ------------ ------------- ------------
Change in net assets from share
transactions 17,166,952 8,760,562 (197,717) (1,612,701)
------------- ------------ ------------- ------------
Change in net assets 36,078,518 25,172,037 656,746 (1,883,545)
NET ASSETS:
Beginning of period 169,647,726 144,475,689 65,716,666 67,600,211
------------- ------------ ------------- ------------
End of period $ 205,726,244 $169,647,726 $66,373,412 $ 65,716,666
============= ============ ============ ============
Undistributed net investment income
included in net assets at end of period $ 40,747 $ 91,333 $ 67,849 $ 75,517
============= ============ ============ ============
Net gain (loss) as computed for federal tax
purposes $ 10,307,025 $ 21,433,652 $ 637,436 $ (229,807)
============= ============ ============ ============
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents income distributions of $855,681 and $126 for Class A Shares
and Class B Shares, respectively.
(2) Represents gain distributions for Class A Shares only.
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY
TOTAL RETURN U.S. GOVERNMENT MONEY MARKET
BOND FUND INCOME FUND CASH RESERVE FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, ENDED FEBRUARY 28, ENDED FEBRUARY 28, ENDED FEBRUARY 28,
1997 AUGUST 31, 1997 AUGUST 31, 1997 AUGUST 31, 1997
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,159,705 $ 3,989,944 $ 1,174,009 $ 2,711,671 $ 3,898,495 $ 9,132,497 $ 3,405,828
771,819 562,208 (359,935) (474,449) -- -- --
667,497 (2,533,917) 822,569 (734,318) -- -- --
------------ ------------ ------------ ------------ ------------- ------------- -------------
3,599,021 2,018,235 1,636,643 1,502,904 3,898,495 9,132,497 3,405,828
------------ ------------ ------------ ------------ ------------- ------------- -------------
(2,146,622) (4,074,428) (1,166,895) (2,789,759) (3,898,495) (9,132,497) (3,405,828)
-- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------- ------------- -------------
(2,146,622) (4,074,428) (1,166,895) (2,789,759) (3,898,495) (9,132,497) (3,405,828)
------------ ------------ ------------ ------------ ------------- ------------- -------------
5,558,475 15,497,407 743,592 4,723,431 237,860,810 432,905,070 185,237,489
1,719,348 3,455,297 335,079 911,699 751,926 1,471,325 1,424,745
(14,153,399) (15,162,898) (5,284,549) (9,397,530) (242,543,709) (457,274,889) (174,873,448)
------------ ------------ ------------ ------------ ------------- ------------- -------------
(6,875,576) 3,789,806 (4,205,878) (3,762,400) (3,930,973) (22,898,494) 11,788,786
------------ ------------ ------------ ------------ ------------- ------------- -------------
(5,423,177) 1,733,613 (3,736,130) (5,049,255) (3,930,973) (22,898,494) 11,788,786
71,188,255 69,454,642 37,543,875 42,593,130 168,343,868 191,242,362 136,068,361
------------ ------------ ------------ ------------ ------------- ------------- -------------
$65,765,078 $71,188,255 $33,807,745 $37,543,875 $ 164,412,895 $ 168,343,868 $ 147,857,147
============ ============ ============ ============ ============= ============= =============
$ 71,520 $ 58,437 $ 48,236 $ 41,122 -- -- --
============ ============ ============ ============ ============= ============= =============
$ 771,819 $ 264,963 $ (359,935) $(1,298,006) -- -- --
============ ============ ============ ============ ============= ============= =============
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR
ENDED
AUGUST 31,
1996
- --------------
<S><C>
$ 6,194,608
--
--
-------------
6,194,608
-------------
(6,194,608)
--
-------------
(6,194,608)
-------------
315,672,475
2,390,350
(298,483,536)
-------------
19,579,289
-------------
19,579,289
116,489,072
-------------
$ 136,068,361
=============
--
=============
--
=============
- --------------
</TABLE>
=========================================================
FINANCIAL HIGHLIGHTS
=========================================================
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED DISTRIBUTIONS FROM NET DISTRIBUTIONS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED IN EXCESS OF
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT GAIN ON NET INVESTMENT
AUGUST 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS INCOME
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND--CLASS A SHARES
1989(a) $ 10.17 0.33 2.68 3.01 (0.24) -- --
1990 $ 12.94 0.38 (0.76) (0.38) (0.39) (0.22) (0.02)(i)
1991 $ 11.93 0.33 2.45 2.78 (0.36) -- --
1992 $ 14.35 0.29 0.11 0.40 (0.27) (0.46) --
1993 $ 14.02 0.30 2.00 2.30 (0.30) (1.42) --
1994 $ 14.60 0.23 0.36 0.59 (0.25) (1.13) --
1995 $ 13.81 0.22 2.54 2.76 (0.21) (0.27) --
1996 $ 16.09 0.19 2.62 2.81 (0.19) (0.84) --
1997(b) $ 17.87 0.08 3.91 3.99 (0.09) (1.99) --
CAPITAL APPRECIATION FUND--CLASS B SHARES
1997(c) $ 18.90 0.03 0.86 0.89 (0.03) -- --
LOUISIANA MUNICIPAL INCOME FUND
1989(a) $ 10.00 0.43 0.14 0.57 (0.43) -- --
1990 $ 10.14 0.64 (0.16) 0.48 (0.64) -- --
1991 $ 9.98 0.64 0.48 1.12 (0.64) -- --
1992 $ 10.46 0.64 0.48 1.12 (0.64) (0.03) --
1993 $ 10.91 0.62 0.73 1.35 (0.62) (0.04) --
1994 $ 11.60 0.59 (0.68) (0.09) (0.59) (0.10) --
1995 $ 10.82 0.59 0.24 0.83 (0.58) (0.08) --
1996 $ 10.99 0.60 (0.05) 0.55 (0.60) -- --
1997(b) $ 10.94 0.29 0.18 0.47 (0.29) (0.04) --
TOTAL RETURN BOND FUND
1993(d) $ 10.00 0.56 0.48 1.04 (0.55) -- --
1994 $ 10.49 0.57 (0.83) (0.26) (0.57) (0.02) --
1995 $ 9.64 0.56 0.39 0.95 (0.54) -- --
1996 $ 10.05 0.56 (0.27) 0.29 (0.57) -- --
1997(b) $ 9.77 0.31 0.19 0.50 (0.31) -- --
U.S. GOVERNMENT INCOME FUND
1989(a) $ 10.17 0.69 0.03 0.72 (0.69) -- --
1990 $ 10.20 0.86 (0.11) 0.75 (0.86) (0.02) --
1991 $ 10.07 0.85 0.43 1.28 (0.85) (0.01) --
1992 $ 10.49 0.79 0.30 1.09 (0.79) (0.04) --
1993 $ 10.75 0.74 0.12 0.86 (0.74) (0.01) (0.01)(i)
1994 $ 10.85 0.69 (0.89) (0.20) (0.69) (0.04) --
1995 $ 9.92 0.71 0.20 0.91 (0.69) -- --
1996 $ 10.14 0.67 (0.30) 0.37 (0.69) -- --
1997(b) $ 9.82 0.33 0.11 0.44 (0.33) -- --
CASH RESERVE FUND
1989(a) $ 1.00 0.07 -- 0.07 (0.07) -- --
1990 $ 1.00 0.08 -- 0.08 (0.08) -- --
1991 $ 1.00 0.06 -- 0.06 (0.06) -- --
1992 $ 1.00 0.04 -- 0.04 (0.04) -- --
1993 $ 1.00 0.02 -- 0.02 (0.02) -- --
1994 $ 1.00 0.03 -- 0.03 (0.03) -- --
1995 $ 1.00 0.05 -- 0.05 (0.05) -- --
1996 $ 1.00 0.05 -- 0.05 (0.05) -- --
1997(b) $ 1.00 0.02 -- 0.02 (0.02) -- --
U.S. TREASURY MONEY MARKET
1993(e) $ 1.00 0.002 -- 0.002 (0.002) -- --
1994 $ 1.00 0.03 -- 0.03 (0.03) -- --
1995 $ 1.00 0.05 -- 0.05 (0.05) -- --
1996 $ 1.00 0.05 -- 0.05 (0.05) -- --
1997(b) $ 1.00 0.02 -- 0.02 (0.02) -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 14, 1988 (date of initial
public investment) to August 31, 1989.
(b) Six months ended February 28, 1997 (unaudited).
(c) Reflects operations for the period from November 30, 1996 (date of initial
public offering) to February 28, 1997.
(d) Reflects operations for the period from November 2, 1992 (date of initial
public investment) to August 31, 1993.
(e) Reflects operations for the period from July 19, 1993 (date of initial
public investment) to August 31, 1993.
(f) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(g) Computed on an annualized basis.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
--------------------------------------
NET ASSET NET NET ASSETS, PORTFOLIO
TOTAL VALUE, TOTAL INVESTMENT EXPENSE END OF PERIOD TURNOVER
DISTRIBUTIONS END OF PERIOD RETURN (F) EXPENSES INCOME WAIVER (H) (000 OMITTED) RATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(0.24) $ 12.94 32.29% 0.56%(g) 4.00%(g) 0.83%(g) $ 48,093 70%
(0.63) $ 11.93 (3.11%) 0.42% 3.06% 0.75% $ 60,448 123%
(0.36) $ 14.35 23.77% 0.74% 2.58% 0.29% $ 87,927 124%
(0.73) $ 14.02 2.93% 0.83% 1.99% 0.25% $ 73,653 163%
(1.72) $ 14.60 17.89% 0.85% 2.10% 0.18% $ 140,808 127%
(1.38) $ 13.81 4.27% 1.09% 1.67% -- $ 139,081 118%
(0.48) $ 16.09 20.71% 1.25% 1.46% -- $ 144,476 69%
(1.03) $ 17.87 18.03% 1.24% 1.08% -- $ 169,648 69%
(2.08) $ 19.78 22.94% 1.24%(g) 0.85%(g) -- $ 204,556 29%
(0.03) $ 19.76 4.73% 2.03%(g) 0.39%(g) -- $ 1,227 29%
(0.43) $ 10.14 5.82% 0.62%(g) 6.57%(g) 0.61%(g) $ 12,285 28%
(0.64) $ 9.98 4.89% 0.81% 6.35% 0.41% $ 31,380 32%
(0.64) $ 10.46 11.59% 0.74% 6.29% 0.20% $ 42,210 26%
(0.67) $ 10.91 11.02% 0.65% 6.04% 0.16% $ 57,547 19%
(0.66) $ 11.60 12.75% 0.66% 5.59% 0.14% $ 85,914 32%
(0.69) $ 10.82 (0.76%) 0.71% 5.24% 0.08% $ 79,698 33%
(0.66) $ 10.99 8.20% 0.77% 5.54% 0.08% $ 67,600 22%
(0.60) $ 10.94 5.04% 0.74% 5.37% 0.08% $ 65,717 17%
(0.33) $ 11.08 4.33% 0.73%(g) 5.30%(g) 0.08%(g) $ 66,373 16%
(0.55) $ 10.49 10.39% 0.77%(g) 6.56%(g) 0.22%(g) $ 63,608 78%
(0.59) $ 9.64 (2.46%) 1.21% 5.62% -- $ 72,088 96%
(0.54) $ 10.05 10.19% 1.30% 5.71% -- $ 69,455 91%
(0.57) $ 9.77 2.90% 1.29% 5.57% -- $ 71,188 38%
(0.31) $ 9.96 5.17% 1.30%(g) 6.24%(g) -- $ 65,765 43%
(0.69) $ 10.20 9.20% 0.59%(g) 8.64%(g) 0.52%(g) $ 15,753 42%
(0.88) $ 10.07 7.48% 0.69% 8.50% 0.45% $ 32,596 32%
(0.86) $ 10.49 13.27% 0.68% 8.30% 0.17% $ 48,482 20%
(0.83) $ 10.75 10.72% 0.69% 7.51% 0.11% $ 61,646 36%
(0.76) $ 10.85 8.11% 0.68% 7.03% 0.11% $ 86,597 61%
(0.73) $ 9.92 (1.67%) 0.74% 6.68% 0.06% $ 67,051 26%
(0.69) $ 10.14 9.60% 0.82% 7.02% 0.06% $ 42,593 5%
(0.69) $ 9.82 3.72% 0.87% 6.64% 0.06% $ 37,544 27%
(0.33) $ 9.93 4.49% 0.95%(g) 6.60%(g) 0.06%(g) $ 33,808 21%
(0.07) $ 1.00 6.86% 0.75%(g) 8.68%(g) -- $ 169,303 --
(0.08) $ 1.00 8.02% 0.77% 7.71% 0.01% $ 300,668 --
(0.06) $ 1.00 6.45% 0.80% 6.30% -- $ 249,822 --
(0.04) $ 1.00 3.75% 0.89% 3.79% 0.03% $ 162,038 --
(0.02) $ 1.00 2.49% 0.89% 2.48% -- $ 154,052 --
(0.03) $ 1.00 2.73% 0.91% 2.71% -- $ 183,922 --
(0.05) $ 1.00 4.97% 0.86% 4.87% -- $ 191,242 --
(0.05) $ 1.00 4.79% 0.87% 4.69% -- $ 168,344 --
(0.02) $ 1.00 2.27% 0.89%(g) 4.52%(g) -- $ 164,413 --
(0.002) $ 1.00 0.34% 0.50%(g) 2.80%(g) 0.32%(g) $ 33,995 --
(0.03) $ 1.00 2.85% 0.66% 2.85% 0.23% $ 45,022 --
(0.05) $ 1.00 5.15% 0.46% 5.15% 0.22% $ 116,489 --
(0.05) $ 1.00 5.08% 0.44% 4.95% 0.22% $ 136,068 --
(0.02) $ 1.00 2.43% 0.43%(g) 4.84%(g) 0.22%(g) $ 147,857 --
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE
COMMISSION
PAID (J)
<S> <C>
--
--
--
--
--
--
--
$ 0.0632
$ 0.0697
$ 0.0697
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
- -------------
</TABLE>
(h) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(i) These distributions in excess of net investment income were a result of
certain book and tax timing differences. These distributions do not
represent a return of capital for federal tax purposes.
(j) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.
(See Notes which are an integral part of the Financial Statements)
============================================
COMBINED NOTES TO FINANCIAL STATEMENTS TOWER MUTUAL FUNDS
February 28, 1997 (unaudited)
============================================
==================================
(1) ORGANIZATION
==================================
Tower Mutual Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of six portfolios (individually referred to as the
"Fund", or collectively as the "Funds") which are presented herein:
<TABLE>
- ------------------------------------------------------------------------------------------------
PORTFOLIO NAME DIVERSIFICATION INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Tower Capital Appreciation Fund diversified Provide growth of capital and
("Capital Appreciation Fund") income.
- ------------------------------------------------------------------------------------------------
Tower Louisiana Municipal Income non-diversified Provide current income which is
Fund generally exempt from federal
("Louisiana Municipal Income income tax and personal income
Fund") taxes imposed by the state of
Louisiana.
- ------------------------------------------------------------------------------------------------
Tower Total Return Bond Fund diversified Maximize total return.
("Total Return Bond Fund")
- ------------------------------------------------------------------------------------------------
Tower U.S. Government Income Fund diversified Provide current income.
("U.S. Government Income Fund")
- ------------------------------------------------------------------------------------------------
Tower Cash Fund diversified Current income consistent with
("Cash Reserve Fund") stability of principal.
- ------------------------------------------------------------------------------------------------
Tower U.S. Treasury Money Market diversified Current income consistent with
Fund stability of principal and
("U.S. Treasury Money Market liquidity.
Fund")
- ------------------------------------------------------------------------------------------------
</TABLE>
Effective November 30, 1996, Capital Appreciation Fund added Class B Shares
and designated the existing share class as Class A Shares.
The assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held.
===========================================
(2) SIGNIFICANT ACCOUNTING POLICIES
===========================================
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. U.S. government securities, listed
corporate bonds, and other fixed income and asset-backed securities are
generally valued at the mean of the latest bid and asked price as furnished
by an independent pricing service. Listed equity securities are valued at
the last sale price reported on a national securities exchange. Cash
Reserve and U.S. Treasury Money Market Funds' use of the amortized cost
method to value portfolio securities is in accordance with Rule 2a-7 under
the Act. For Capital Appreciation Fund, Louisiana Municipal Income Fund,
Total Return Bond Fund, and U.S. Government Income Fund, short-term
securities are valued at the prices provided by an independent pricing
service. However, short-term securities purchased with remaining maturities
of sixty days or less may be valued at amortized cost, which approximates
fair market value. Investments in other open-end regulated investment
companies are valued at net asset value.
REPURCHASE AGREEMENTS--It is the policy of the Funds to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Funds to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Funds' adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
At August 31, 1996, Louisiana Municipal Income Fund, Total Return Bond
Fund, and U.S. Government Income Fund, for federal tax purposes, had
capital loss carryforwards, as noted below, which will reduce the Funds'
taxable income arising from future net realized gain on investments, if
any, to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be necessary to
relieve the Funds of any liability for federal tax. Pursuant to the Code,
such capital loss carryforwards will expire as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
EXPIRATION YEAR
- -------------------------------------------------------------------------------------------------------------------
TOTAL TAX LOSS
FUND 2002 2003 2004 CARRYFORWARD
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louisiana Municipal Income Fund $ -- $ 86,087 $ 229,807 $ 315,894
Total Return Bond Fund -- 818,651 -- 818,651
U.S. Government Income Fund 97,781 1,657,595 1,298,006 3,053,382
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Additionally, the net capital loss, as noted below, is attributable to
security transactions incurred after October 31, 1995 are as arising on the
first day of the Funds' next taxable year (September 1, 1996).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
TOTAL TAX LOSS
FUND PUSHFORWARD
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
U.S. Government Income Fund $468,868
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by Total Return Bond Fund and U.S.
Treasury Money Market Fund with respect to registration of their shares in
their first fiscal year, excluding the initial expense of registering their
shares, have been deferred and are being amortized over a period not to
exceed five years from each Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
=============================================
(3) SHARES OF BENEFICIAL INTEREST
=============================================
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
February 28, 1997, Cash Reserve Fund and U.S. Treasury Money Market Funds'
capital paid-in aggregated $164,412,895, and $147,857,147, respectively.
Transactions in shares were as follows:
EQUITY AND INCOME FUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
- --------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES SHARES DOLLARS SHARES DOLLARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,903,855 $ 36,458,003 1,892,875 $ 33,055,554
Shares issued to shareholders in payment of distributions
declared 19,080 357,945 440,856 7,256,316
Shares redeemed (1,073,512) (20,864,023) (1,820,179)(31,551,308)
---------- ------------ ---------- -----------
Net change resulting from Class A Shares transactions 849,423 $ 15,951,925 513,552 $ 8,760,562
========= =========== ========= ==========
- -----------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED
FEBRUARY 28, 1997* AUGUST 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES SHARES DOLLARS SHARES DOLLARS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 62,157 $ 1,215,957 -- --
Shares issued to shareholders in payment of distributions
declared 6 127 -- --
Shares redeemed (51) (1,057) -- --
---------- ------------ ---------- ----------
Net change resulting from Class B Shares transactions 62,112 $ 1,215,027 -- --
- --------------------------------------------------------------- ========= =========== ========= ===========
Net change resulting from fund share transactions 911,535 $ 17,166,952 513,552 $ 8,760,562
========= =========== ========= ==========
</TABLE>
*For the period from November 30, 1996 (date of initial public offering) to
February 28, 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LOUISIANA MUNICIPAL U.S. GOVERNMENT
INCOME FUND TOTAL RETURN BOND FUND INCOME FUND
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS YEAR
ENDED YEAR ENDED YEAR ENDED ENDED
FEBRUARY ENDED FEBRUARY ENDED FEBRUARY AUGUST
28, AUGUST 31, 28, AUGUST 31, 28, 31,
1997 1996 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 270,945 709,049 552,585 1,539,679 74,559 465,362
Shares issued to
shareholders in payment of
distributions declared 87,603 154,787 171,544 344,081 33,584 90,519
Shares redeemed (376,290) (1,009,008) (1,405,550) (1,507,834) (527,705) (931,881)
----------- ---------- ----------- ---------- ----------- ---------
Net change resulting from
Share transactions (17,742) (145,172) (681,421) 375,926 (419,562) (376,000)
=========== ========== =========== ========== =========== =========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY
CASH RESERVE FUND MONEY MARKET FUND
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31,
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 237,860,810 432,905,070 185,237,489 315,672,475
Shares issued to shareholders in payment of
distributions declared 751,926 1,471,325 1,424,745 2,390,350
Shares redeemed (242,543,709) (457,274,889) (174,873,448) (298,483,536)
------------- ------------ ------------- ------------
Net change resulting from Share
transactions (3,930,973) (22,898,494) 11,788,786 19,579,289
============= ============ ============= ============
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
===============================================
(4) INVESTMENT ADVISORY FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
===============================================
INVESTMENT ADVISORY FEE--Hibernia National Bank, the Funds' investment adviser
(the "Adviser") receives for its services an annual investment advisory fee
based on a percentage of each Fund's average daily net assets (see below).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ANNUAL
FUND RATE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation Fund 0.75%
Louisiana Municipal Income Fund 0.45%
Total Return Bond Fund 0.70%
U.S. Government Income Fund 0.45%
Cash Reserve Fund 0.40%
U.S. Treasury Money Market Fund 0.40%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Adviser may voluntarily choose to waive any portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Funds with certain administrative personnel and services. The fee paid to FAS
is based on the level of average aggregate net assets of the Trust for the
period.
DISTRIBUTION SERVICES FEE--The Funds have adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Funds will reimburse Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Funds to finance activities intended
to result in the sale of each Fund's shares. The Plan provides that the Funds
may incur distribution expenses up to 0.25% of the average daily net assets of
the Fund's shares, annually, to reimburse FSC. During the six months ended
February 28, 1997, Louisiana Municipal Income Fund, U.S. Government Income
Fund and U.S. Treasury Money Market Fund did not incur distribution services
fees.
SHAREHOLDERS SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), Class B Shares of Capital
Appreciation Fund will pay FSS up to 0.25% of its daily average net assets for
the period. The fee paid to FSS is used to finance certain services for
shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the
Funds. The fee paid to FSSC is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Hibernia National Bank is the Funds' custodian for which it
receives a fee. The fee is based on the level of each Fund's average daily net
assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $13,075 and $17,585 for
Total Return Bond Fund and U.S. Treasury Money Market Fund, respectively, were
initially borne by FAS. The Funds have agreed to reimburse FAS for the
organizational expenses during the five year period following each Fund's
effective date.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
======================================
(5) INVESTMENT TRANSACTIONS
======================================
Purchases and sales of investments, excluding short-term securities, for the
six months ended February 28, 1997, were as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
FUND PURCHASES SALES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Fund $54,550,064 $54,943,187
Louisiana Municipal Income Fund $10,744,190 $11,310,616
Total Return Bond Fund $29,078,396 $31,998,608
U.S. Government Income Fund $ 7,537,446 $11,485,580
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</TABLE>
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(6) CONCENTRATION OF CREDIT RISK
======================================
Since Louisiana Municipal Income Fund invests a substantial portion of its
assets in issuers located in one state, it will be more susceptible to factors
adversely affecting issuers of that state than would be a comparable general
tax-exempt mutual fund. In order to reduce the credit risk associated with
such factors, at February 28, 1997, 71.0% of the securities in the portfolio
of investments were backed by letters of credit or bond insurance of various
financial institutions and financial guaranty assurance agencies. The value of
investments insured by or supported (backed) by a letter of credit from any
one institution or agency did not exceed 23.0% of total investments.
TOWER MUTUAL FUNDS
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
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<S> <C>
TRUSTEES OFFICERS
EDWARD C. GONZALES EDWARD C. GONZALES
President and Treasurer
ROBERT L. DIBENEDETTO, M.D. JEFFREY W. STERLING
Vice President and Assistant Treasurer
JAMES A. GAYLE, SR. PETER J. GERMAIN
Secretary
J. GORDON REISCHE GAIL CAGNEY
Assistant Secretary
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</TABLE>
891836108
891836206
891836306
891836504
891826405
891836603
Federated Securities Corp. is distributor of the fund. 007697(4/97)
