ANNUAL REPORT
AUGUST 31, 1997
============
TOWER
MUTUAL FUNDS
============
TOWER CAPITAL APPRECIATION FUND
CLASS A SHARES
CLASS B SHARES
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
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE......................................................... 1
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MANAGEMENT DISCUSSION & ANALYSIS............................................ 2
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PORTFOLIOS OF INVESTMENTS................................................... 13
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NOTES TO PORTFOLIOS OF INVESTMENTS.......................................... 32
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STATEMENTS OF ASSETS AND LIABILITIES........................................ 34
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STATEMENTS OF OPERATIONS.................................................... 36
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STATEMENTS OF CHANGES IN NET ASSETS......................................... 38
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FINANCIAL HIGHLIGHTS........................................................ 40
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COMBINED NOTES TO FINANCIAL STATEMENTS...................................... 42
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS........................... 48
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- - 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.
================================================================================
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for the Tower Mutual
Funds. The Report, which covers the 12-month fiscal year from September 1, 1996
through August 31, 1997, includes an interview with each fund's portfolio
manager, as well as a complete list of portfolio holdings and financial
statements for each fund.
Please note the following highlights for each fund over the 12-month period:
- TOWER CAPITAL APPRECIATION FUND performed extremely well as the stock
market continued to climb. The fund's Class A Shares achieved a total
return of 39.56%* through dividends of $0.16 per share, capital gains of
$1.99 per share, and a 25% increase in net asset value. The fund's Class B
Shares, which began operation on December 2, 1996, delivered a total
return of 18.40%* through distributions totaling $0.05 per share and an
18% increase in share price. The fund's net assets reached $288 million.
- TOWER LOUISIANA MUNICIPAL INCOME FUND paid double-tax-free dividends**
totaling $0.58 per share. Through these dividends and a 2% increase in the
fund's net asset value, the fund produced a total return of 8.31%.* Net
assets surpassed the $100 million mark.
- TOWER TOTAL RETURN BOND FUND paid a strong dividend stream totaling $0.61
per share from a diversified portfolio of government and high quality
corporate bonds. Share price increased 2%. As a result, the fund achieved
a positive total return of 8.71%.* Net assets amounted to more than $71
million.
- TOWER U.S. GOVERNMENT INCOME FUND paid dividends of $0.64 per share. This
income stream and a 1.6% increase in net asset value produced a total
return of 8.39%.* Net assets began the reporting period at $37 million and
ended the reporting period at $59 million.
- TOWER CASH RESERVE FUND paid dividends of $0.05 per share. At the end of
the reporting period, net assets totaled $150 million.
- TOWER U.S. TREASURY MONEY MARKET FUND paid dividends of $0.05 per share.
At the end of the reporting period, net assets reached $154 million.
Thank you for pursuing your financial goals through the Tower Mutual Funds. We
hope you were pleased with your fund's performance during the past fiscal year.
We will continue to provide 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
October 15, 1997
* Performance quoted represents past performance and is not indicative of
future results. 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 Funds' maximum sales charges. Total returns based on the
maximum sales charge for the 12-month period are as follows: Tower Capital
Appreciation Fund--Class A Shares, 33.30%; Tower Capital Appreciation Fund--
Class B Shares (from 12/2/96 through 8/31/97), 12.89%; Tower Louisiana
Municipal Income Fund, 5.05%; Tower Total Return Bond Fund, 5.47%; and Tower
U.S. Government Income Fund, 5.18%.
** Income may be subject to the federal alternative minimum tax.
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MANAGEMENT DISCUSSION & ANALYSIS
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TOWER CAPITAL APPRECIATION FUND
Q
The bull market continued its unprecedented march during the fund's fiscal
year, breaking the 8000 barrier--with some highly volatile days along the
way. What is your analysis of the market during the period?
A
We believe that the primary bull market remains intact, fueled by low
inflation and rising corporate profits.
Q
Tower Capital Appreciation Fund's performance was consistent with that of
the market. What was the total return, and how did it compare to the Lipper
Growth & Income Funds Average?*
A
The fund's total return for one-year period ended August 31, 1997, was
39.56%, based on net asset value,** outperforming the Lipper Growth &
Income Funds Average which returned 35.08% for the same period.
Q
As 1997 draws to a close, where do you see the market trading?
We believe the market will trade in a range of 7600-8300 as measured by the
Dow Jones Industrial Average.
* Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
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TOWER CAPITAL APPRECIATION FUND--CLASS A SHARES
GROWTH OF $10,000 INVESTED IN TOWER CAPITAL APPRECIATION FUND--CLASS A SHARES
The graph below illustrates the hypothetical investment of $10,000 in Tower
Capital Appreciation Fund--Class A Shares (the "Fund") from October 14, 1988
(start of performance) to August 31, 1997, compared to the Standard & Poor's 500
Composite Stock Index ("S&P 500").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX A
AVERAGE ANNUAL TOTAL RETURN** FOR THE
PERIOD ENDED AUGUST 31, 1997
1 Year................................................................. 33.30%
5 Year................................................................. 18.48%
Start of Performance (10/14/88)........................................ 16.26%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the original maximum sales charge of 4.50% ($10,000 investment minus $450
sales charge = $9,550), which was effective on October 14, 1988. For the
period from October 31, 1993 to August 31, 1996, the sales charge was reduced
to 3.00%. For the fiscal year ended August 31, 1997, the sales charge was
4.50%. The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects the current 4.50% sales charge.
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TOWER CAPITAL APPRECIATION FUND--CLASS B SHARES
GROWTH OF $10,000 INVESTED IN TOWER CAPITAL APPRECIATION FUND--CLASS B SHARES
The graph below illustrates the hypothetical investment of $10,000 in Tower
Capital Appreciation Fund--Class B Shares (the "Fund") from December 2, 1996
(start of performance) to August 31, 1997, compared to the Standard & Poor's 500
Composite Stock Index ("S&P 500").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX B
CUMULATIVE TOTAL RETURN** FOR THE
PERIOD ENDED AUGUST 31, 1997
Start of Performance (12/2/96)......................................... 12.89%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 5.50% contingent deferred sales charge on any
redemption less than one year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500 has
been adjusted to reflect reinvestment of dividends on securities in the
index.
** Total return quoted reflects all applicable contingent deferred sales
charges.
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TOWER LOUISIANA MUNICIPAL INCOME FUND
Q
What are your comments on the relatively favorable municipal bond market
environment during the fund's fiscal year ended August 31, 1997?
A
Low inflation, declining taxable yields and short supply combined to push
municipal bond prices higher during the fiscal year ended August 31, 1997.
Q
How did Tower Louisiana Municipal Income Fund perform during the one-year
period ended August 31, 1997?
A
The fund experienced a total return of 8.31%, based on net asset value.*
The net asset value of the fund rose $0.27 per share to $11.21.
Q
What sectors of the municipal market did you emphasize in the fund's
portfolio during the reporting period?
A
During the reporting period, the fund's holdings of hospital issues were
reduced while the holdings of general obligation and housing issues were
increased.
Q
New tax legislation left municipal bonds relatively unscathed, and
municipal bonds were among the better-performing fixed income investments
during the reporting period. As we leave 1997, do you foresee a continued
positive environment?
A
As one of the few remaining tax advantaged investments, the prospect for
municipal bonds seems to be very good. In addition, the improvement in the
federal budget deficit has lessened the need for Congress to tamper with
the tax-exempt status of municipal bonds.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
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- --------------------------------------------------------------
TOWER LOUISIANA MUNICIPAL INCOME FUND
GROWTH OF $10,000 INVESTED IN TOWER LOUISIANA MUNICIPAL INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in Tower
Louisiana Municipal Income Fund (the "Fund") from October 14, 1988 (start of
performance) to August 31, 1997, compared to the Lehman Brothers Ten-Year
Insured Index ("LTYII").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX C
AVERAGE ANNUAL TOTAL RETURN** FOR THE
PERIOD ENDED AUGUST 31, 1997
1 year................................................................. 5.05%
5 year................................................................. 5.96%
Start of Performance (10/14/88)........................................ 7.09%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
+ The LTYII is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the original maximum sales charge of 4.50% ($10,000 investment minus $450
sales charge = $9,550), which was effective on October 14, 1988. Effective
October 31, 1993, the maximum sales charge was reduced to 3.00%. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
LTYII has been adjusted to reflect reinvestment of dividends on securities in
the index.
** Total return quoted reflects the current 3.00% sales charge.
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TOWER TOTAL RETURN BOND FUND
Q
What is your overview of the bond market during the fund's fiscal year?
Benign inflation, moderate economic growth and reduced government spending
pushed the fixed income markets higher during the fiscal year ended August
31, 1997.
Q
How did Tower Total Return Bond Fund perform compared to its benchmark, the
Salomon Brothers Broad Investment-Grade Bond Index?*
A
The Salomon Brothers Broad Investment-Grade Bond Index returned 10.00% for
the one-year period ended August 31, 1997, and the shorter-term, more
conservative Tower Total Return Bond Fund returned 8.71% for the same
period, based on net-asset value.**
Q
How were the fund's assets allocated among Treasuries, mortgage-backed
securities and corporate bonds at the end of the reporting period?
A
As of August 31, 1997, the bulk of the portfolio, 46.8%, remained in
treasury securities. Agency backed mortgage securities comprised 18.7%. A
growing sector is corporate bonds which made up 24.7% of the portfolio.
Q
What is your outlook for rates for the balance of 1997 and beyond, and do
you anticipate making any portfolio adjustments in response?
A
We believe that interest rates will likely trade in a range of 6.25% to
6.75% for the remainder of the year with a long-term bias toward lower
levels.
* 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.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
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- --------------------------------------------------------------
TOWER TOTAL RETURN BOND FUND
GROWTH OF $10,000 INVESTED IN TOWER TOTAL RETURN BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in Tower
Total Return Bond Fund (the "Fund") from November 2, 1992 (start of performance)
to August 31, 1997, compared to the Salomon Brothers Broad Investment-Grade Bond
Index ("SBBIGBI").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX D
AVERAGE ANNUAL TOTAL RETURN** FOR THE
PERIOD ENDED AUGUST 31, 1997
1 Year................................................................. 5.47%
Start of Performance (11/2/92)......................................... 5.41%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
+ The SBBIGBI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the original maximum sales charge of 4.50% ($10,000 investment minus $450
sales charge = $9,550), which was effective on November 2, 1992. Effective
May 1, 1994, the maximum sales charge was reduced to 3.00%. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
SBBIGBI has been adjusted to reflect reinvestment of dividends on securities
in the index.
** Total return quoted reflects the current 3.00% sales charge.
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TOWER U.S. GOVERNMENT INCOME FUND
Q
What are your comments on the U.S. economic engine and inflation, and their
impact on the bond market during the reporting period?
A
The U.S. economic boom is over 6 years old and is showing scant signs of
retiring soon. While continuous and strong growth have typically been
harbingers of inflation, this current cycle has seen only benign price
pressures. The contradiction has led to volatile day-to-day bond market
reactions. Nonetheless, long-term bond yields have remained bound between
6.3% and 7.2% over the reporting period.
Q
How did Tower U.S. Government Income Fund perform in terms of income and
total return over the one-year period ended August 31, 1997?
A
The fund had simple price appreciation of 1.6% and a total return of 8.39%,
based on net asset value,* with dividends reinvested for the year ended
August 31, 1997.
Q
The mortgage-backed sector continues to offer attractive valuations versus
other high-grade, fixed-income assets. How were the fund's assets allocated
at the end of the reporting period among mortgage-backed securities,
Treasuries and agencies?
A
The fund's sector allocation was as follows: 23.6% Treasuries, 24.4% U.S.
Agencies, 40.8% Mortgage-Backed Securities, 10.3% Asset-Backed Securities
and .9% Cash.
Q
As the calendar year draws to a close, what is the potential for a rate
increase by the Federal Reserve Board (the "Fed")?
A
We believe that there is a possibility that the Fed will increase interest
rates by calendar year end 1997.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
- -------------------------------------------------------------
- --------------------------------------------------------------
TOWER U.S. GOVERNMENT INCOME FUND
GROWTH OF $10,000 INVESTED IN TOWER U.S. GOVERNMENT INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in Tower
U.S. Government Income Fund (the "Fund") from October 14, 1988 (start of
performance) to August 31, 1997, compared to the Salomon Brothers Medium Term
Broad Index ("SBMTBI").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX E
AVERAGE ANNUAL TOTAL RETURN** FOR THE
PERIOD ENDED AUGUST 31, 1997
1 Year................................................................. 5.18%
5 Year................................................................. 4.91%
Start of Performance (10/14/88)........................................ 7.33%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
+ The SBMTBI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the original maximum sales charge of 4.50% ($10,000 investment minus $450
sales charge = $9,550), which was effective on October 14, 1988. Effective
October 31, 1993, the maximum sales charge was reduced to 3.00%. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
SBMTBI has been adjusted to reflect reinvestment of dividends on securities
in the index.
** Total return quoted reflects the current 3.00% sales charge.
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TOWER CASH RESERVE FUND
Q
What is your review of the interest rate environment during the fund's
fiscal year ended August 31, 1997?
A
Short-term interest rates, as reflected by 3 month Treasury Bills, bounced
between 4.9% and 5.4%, a fairly narrow range, and ended the reporting
period right where they started.
Q
In this environment, how did Tower Cash Reserve Fund perform for
shareholders in terms of 7-day net yield at the beginning and end of the
one-year period ended August 31, 1997?
A
As of August 31, 1996, the 7-day net yield of the fund was 4.51%. The 7-day
net yield as of August 31, 1997 was 4.74%* Good security selection helped
our performance to achieve this slight increase.
Q
What was your strategy during the period in terms of average maturity and
portfolio mix?
The maturity moved between 30 and 40 days as rate opportunities presented
themselves and we primarily invested in high quality commercial paper.
Other investments included overnight repurchase agreements, Banker's
Acceptances, Eurodollar deposits and U.S. agency obligations.
Q
The Fed has been standing on the sidelines since March. Do you foresee any
action as 1997 draws to a close?
A
We believe the Fed will more than likely continue their policy of inaction
until real evidence of renewed inflation surfaces.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary.
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TOWER U.S. TREASURY MONEY MARKET FUND
Q
The period was marked by one rate increase by the Fed in March, with no
action since as the economy continued to hum along while inflation remained
benign. Can you comment?
A
We believe the Fed continues to be surprised at the good economic fortune
we have enjoyed without inflation. We believe they will be hesitant to "fix
something that ain't broke" and that they are also somewhat at a loss to
explain.
Q
As a result, where did the 7-day net yield of Tower U.S. Treasury Money
Market Fund stand at the beginning and end of the reporting period?
A
As of August 31, 1996, the 7-day net yield of the fund was 4.81%.* The
7-day net yield as of August 31, 1997 was 4.85% reflecting short-term rates
which ended the reporting period near where they began.
Q
What was your strategy during the reporting period in terms of average
maturity?
We maintained an average weighted maturity of 30 to 40 days throughout the
reporting period which was obtained by keeping about 50% of the assets in
overnight repurchase agreements and the remainder laddered in Treasury
obligations from 1 to 9 months.
Q
As 1997 draws to a close, what is your overall outlook for the economy and
short-term interest rates?
A
We believe the economy should continue to do well for the remainder of
1997, inflation should stay in check and the Fed will most likely stay on
the sideline as far as short-term interest rates are concerned.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary.
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PORTFOLIOS OF INVESTMENTS TOWER MUTUAL FUNDS
August 31, 1997
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
----------
<C> <S> <C>
SHARES VALUE
<CAPTION>
<C> <S> <C>
COMMON STOCKS--98.7%
Commercial Services--0.8%
35,000 Omnicom Group, Inc. $ 2,371,250
------------
Consumer Durables--1.3%
42,400 Brunswick Corp. 1,293,200
59,630 Ford Motor Co. 2,564,090
------------
Total 3,857,290
------------
Consumer Non-Durables--
12.1%
31,800 Avon Products, Inc. 2,037,187
34,800 Campbell Soup Co. 1,613,850
33,800 Clorox Co. 4,436,250
101,400 Coca-Cola Co. 5,811,487
35,575 ConAgra, Inc. 2,287,917
18,200 Kellogg Co. 814,450
112,155 PepsiCo, Inc. 4,037,580
114,000 Philip Morris Cos., Inc. 4,973,250
32,760 Procter & Gamble Co. 4,359,128
71,700 Sara Lee Corp. 2,885,925
19,000 V.F. Corp. 1,679,125
------------
Total 34,936,149
------------
Consumer Services--3.1%
37,100 Disney (Walt) Co. 2,849,744
37,850 Marriott Corp. 2,519,391
67,400 New York Times Co., Class
A 3,184,650
8,200 Time Warner, Inc. 422,300
------------
Total 8,976,085
------------
Electronic
Technology--12.1%
21,450 (a)3Com Corp. 1,071,159
56,550 (a)Applied Materials, Inc. 5,336,906
87,850 (a)Compaq Computer Corp. 5,754,175
53,600 (a)Dell Computer Corp. 4,398,550
37,200 Harris Corp. 3,241,050
32,900 Intel Corp. 3,030,913
29,500 International Business
Machines Corp. 2,975,813
43,500 (a)Sun Microsystems, Inc. 2,088,000
31,650 (a)Tellabs, Inc. 1,889,109
64,500 United Technologies Corp. 5,035,031
------------
Total 34,820,706
------------
<CAPTION>
----------
SHARES VALUE
<C> <S> <C>
Energy Minerals--7.9%
24,850 Amoco Corp. $ 2,349,878
23,200 Atlantic Richfield Co. 1,740,000
42,000 British Petroleum Co. PLC,
ADR 3,554,250
22,150 Chevron Corp. 1,715,241
78,400 Exxon Corp. 4,797,100
53,400 Mobil Corp. 3,884,850
38,700 Royal Dutch Petroleum Co.,
ADR 1,964,025
9,300 Texaco, Inc. 1,071,825
44,800 USX Corp. 1,458,800
------------
Total 22,535,969
------------
Finance--15.7%
23,800 Allstate Corp. 1,738,887
74,200 BankAmerica Corp. 4,883,287
27,260 Bankers Trust New York
Corp. 2,828,225
23,000 CIGNA Corp. 4,217,625
20,900 Citicorp 2,667,362
112,900 Equitable Cos., Inc. 4,911,150
51,900 First Chicago NBD Corp. 3,723,825
100,200 First Union Corp. 4,815,863
21,825 Fleet Financial Group,
Inc. 1,406,348
54,200 Merrill Lynch & Co., Inc. 3,333,300
28,900 NationsBank Corp. 1,715,938
27,200 Republic New York Corp. 2,912,100
31,000 State Street Corp. 1,546,125
69,800 Travelers Group, Inc. 4,432,300
------------
Total 45,132,335
------------
Health Services--1.3%
16,000 HBO & Co. 1,146,000
97,650 (a)Tenet Healthcare Corp. 2,660,963
------------
Total 3,806,963
------------
Health Technology--9.6%
46,400 Abbott Laboratories 2,781,100
46,400 Becton, Dickinson & Co. 2,224,300
78,500 Bristol-Myers Squibb Co. 5,966,000
55,200 Johnson & Johnson 3,129,150
43,800 Lilly (Eli) & Co. 4,582,575
46,000 Merck & Co., Inc. 4,223,375
98,200 Schering Plough Corp. 4,713,600
------------
Total 27,620,100
------------
</TABLE>
(See Notes to Portfolios of Investments)
CAPITAL APPRECIATION FUND (continued)
<TABLE>
<CAPTION>
---------- COMMON STOCKS- continued
SHARES Industrial Services--0.7% VALUE
<C> <S> <C>
27,300 Schlumberger Ltd. $ 2,079,919
------------
Non-Energy Minerals--1.7%
26,000 Nucor Corporation 1,473,875
22,500 Phelps Dodge Corp. 1,809,844
29,100 Weyerhaeuser Co. 1,680,525
------------
Total 4,964,244
------------
Process Industries--3.9%
26,525 Air Products & Chemicals,
Inc. 2,163,445
42,600 Corning, Inc. 2,252,475
63,200 Du Pont (E.I.) de Nemours
& Co. 3,938,150
50,100 Praxair, Inc. 2,677,219
------------
Total 11,031,289
------------
Producer
Manufacturing--7.1%
26,700 Allied-Signal, Inc. 2,204,419
68,900 Dana Corp. 3,173,706
35,200 Emerson Electric Co. 1,925,000
132,200 General Electric Co. 8,262,500
11,400 Harsco Corp. 513,713
50,600 Ingersoll-Rand Co. 3,042,325
17,200 Tyco International, Ltd. 1,349,125
------------
Total 20,470,788
------------
Retail Trade--5.6%
105,400 American Stores Co. 2,496,662
48,000 (a)Bed Bath & Beyond, Inc. 1,488,000
57,500 Dayton-Hudson Corp. 3,277,500
85,425 Home Depot, Inc. 4,030,992
45,100 Premark International,
Inc. 1,341,725
122,200 TJX Cos., Inc. 3,360,500
------------
Total 15,995,379
------------
Technology Services--5.8%
14,000 (a)Compuware Corp. 864,500
30,400 General Motors Corp. 1,907,600
44,700 Lucent Technologies, Inc. 3,481,013
64,400 (a)Microsoft Corp. 8,512,875
52,688 (a)Oracle Corp. 2,008,711
------------
Total 16,774,699
------------
<CAPTION>
----------
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
Transportation--1.8%
36,700 CSX Corp. $ 2,098,781
4,900 Norfolk Southern Corp. 480,200
28,300 Tidewater, Inc. 1,485,750
14,100 (a)UAL Corp. 1,074,244
------------
Total 5,138,975
------------
Utilities--8.2%
13,300 Ameritech Corp. 833,744
61,300 Bell Atlantic Corp. 4,436,587
72,200 BellSouth Corp. 3,176,800
141,400 GPU, Inc. 4,754,575
82,700 GTE Corp. 3,685,319
67,500 Pinnacle West Capital
Corp. 2,181,094
60,600 SBC Communications, Inc. 3,295,125
23,300 Williams Cos., Inc. (The) 1,084,906
------------
Total 23,448,150
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST
$188,584,953) 283,960,290
------------
(b)REPURCHASE
AGREEMENT--1.0%
$2,992,000 State Street Bank and
Trust Co., 5.50%, dated
8/29/ 1997, due 9/2/1997
(at amortized cost) 2,992,000
------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$191,576,953) $286,952,290
===========
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
----------
<C> <S> <C> <C>
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<CAPTION>
<C> <S> <C> <C>
(c) LONG-TERM
MUNICIPALS-- 98.4%
COLORADO--0.6%
$ 500,000 Colorado Health
Facilities
Authority, Revenue
Bonds, 7.125% (Rose
Medical Center
Project), 9/1/2008 AAA $ 548,005
100,000 Colorado Health
Facilities
Authority, Revenue
Refunding Bonds,
5.50% (Sisters of
Charity Health Care
System)/ (AMBAC
INS)/ (Original
Issue Yield: 5.60%),
5/15/2000 AAA 103,162
------------
Total 651,167
------------
FLORIDA--1.0%
345,000 Florida State Board
of Education
Administration, GO
UT Refunding Bonds,
6.10%, 6/1/2000 AA+ 352,407
655,000 Florida State Board
of Education
Administration, GO
UT Refunding Bonds,
6.10%, 6/1/2000 AAA 670,615
------------
Total 1,023,022
------------
LOUISIANA--95.4%
500,000 Alexandria, LA
Utilities Revenue,
Revenue Bonds, 5.25%
(FGIC INS)/
(Original Issue
Yield: 5.70%),
5/1/2010 AAA 505,505
500,000 Bossier City, LA,
Revenue Refunding
Bonds, 5.20% (FGIC
INS)/(Original Issue
Yield: 5.35%),
11/1/2014 AAA 496,150
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$ 200,000 Caddo Parish, LA, GO
UT, 7.20% (MBIA
INS)/ (United States
PRF)/(Original Issue
Yield: 7.45%),
2/1/1999 (@100) AAA $ 208,814
100,000 De Soto Parish, LA
Environmental
Improvement
Authority, PCR
Refunding Revenue
Bonds (Series A),
5.05% (International
Paper Co.),
12/1/2002 A- 103,369
250,000 East Ascension
Parish, LA Drainage
District No. 1,
Revenue Refunding
Bonds, 5.45% (FGIC
INS)/(Original Issue
Yield: 5.60%),
12/1/2009 AAA 257,973
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 536,655
1,500,000 East Baton Rouge
Parish, LA,
Refunding Revenue
Bonds, 5.40% (FGIC
INS)/(Original Issue
Yield: 5.85%),
2/1/2018 AAA 1,495,155
1,250,000 East Baton Rouge
Parish, LA, Sales &
Use Tax Revenue
Bonds (Series ST),
5.90% (FGIC INS),
2/1/2017 AAA 1,302,713
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
East Baton Rouge
Parish, LA, Sales &
---------- Use Tax Revenue
PRINCIPAL Bonds (Series ST-A),
AMOUNT 4.80% (FGIC INS)/
$ (Original Issue CREDIT
Yield: 5.15%), RATING(D) $ VALUE
930,000 2/1/2011 AAA 886,904
<C> <S> <C> <C>
500,000 East Baton Rouge
Parish, LA, Sales
and Use Tax Revenue
Bonds (Series ST),
5.20% (FSA INS)/
(Original Issue
Yield: 5.65%),
2/1/2017 AAA 483,950
25,000 East Baton Rouge, LA
Mortgage Finance
Authority, Revenue
Bonds (Series C),
7.90% (GNMA COL)/
(Original Issue
Yield: 7.90%),
2/1/2002 Aaa 26,016
225,000 East Baton Rouge, LA
Mortgage Finance
Authority, Revenue
Bonds, 7.625% (GNMA
Collateralized Home
Mortgage Program
COL), 8/1/2008 Aaa 236,151
300,000 East Baton Rouge, LA
Mortgage Finance
Authority, Revenue
Refunding Bonds,
4.80% (GNMA
Collateralized Home
Mortgage Program
COL), 10/1/2004 Aaa 300,291
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$ 550,000 East Baton Rouge, LA
Mortgage Finance
Authority, SFM
Purchasing Revenue
Bonds (Series B),
5.40% (FNMA COL),
10/1/2025 Aaa $ 535,249
1,680,000 East Baton Rouge, LA
Mortgage Finance
Authority, SFM
Revenue Refunding
Bonds (Series B),
7.40% (GNMA COL),
8/1/2012 Aaa 1,771,543
680,000 East Baton Rouge, LA
Mortgage Finance
Authority, SFM
Revenue Refunding
Bonds (Series C),
7.00%, 4/1/2032 Aaa 713,123
255,000 East Feliciana
Parish, LA School
Board, Sales & Use
Tax Revenue Bonds,
6.50% (MBIA INS),
10/1/2002 AAA 268,625
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 999,930
1,200,000 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 1,210,788
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
Greater New Orleans
Expressway
Commission, LA,
Revenue Refunding
---------- Bonds, 6.00%
PRINCIPAL (Louisiana
AMOUNT Expresssway)/ (MBIA
$ INS)/ (Original CREDIT
Issue Yield: 6.55%), RATING(D) $ VALUE
1,450,000 11/1/2016 AAA 1,522,123
<C> <S> <C> <C>
1,000,000 Houma, LA, Utilities
Revenue Refunding
Bonds, 6.25% (FGIC
INS)/(Original Issue
Yield: 6.40%),
1/1/2012 AAA 1,072,800
645,000 Houma, LA, Utility
Revenue Refunding
Bonds, 5.80% (FGIC
INS)/(Original Issue
Yield: 5.90%),
1/1/2003 AAA 683,416
300,000 Iberia Parish, LA Parishwide School District, GO UT Refunding
Bonds, 3.95% (MBIA INS),
4/1/1998 AAA 300,306
1,000,000 Jefferson Parish LA
Hospital Service
District No. 2,
Hospital Revenue
Bonds, 5.50% (MBIA
INS)/ (Original
Issue Yield:
5.924%), 7/1/2008 AAA 1,035,960
1,000,000 Jefferson Parish LA
Hospital Service
District No. 2,
Refunding Revenue
Bonds, 5.75% (MBIA
INS)/ (Original
Issue Yield: 6.05%),
7/1/2016 AAA 1,016,300
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$2,000,000 Jefferson Parish, LA
Home Mortgage
Authority, Refunding
Revenue Bond (Series
A), 6.15% (FNMA and
GNMA COLs), 6/1/2028 AAA $ 2,049,060
500,000 Jefferson Parish, LA
Home Mortgage
Authority, Revenue
Bonds, 5.85% (Fannie
Mae and GNMA LOCs),
12/1/2028 AAA 500,000
500,000 Jefferson Parish, LA
School Board,
Revenue Bonds, 5.00%
(AMBAC INS),
2/1/2008 AAA 501,995
1,000,000 Jefferson Parish, LA,
Drain Sales Tax
Revenue Bond, 6.50%
(AMBAC
INS)/(Original Issue
Yield: 6.753%),
11/1/2011 AAA 1,072,480
180,000 Jefferson, LA Housing
Development Corp.,
Multifamily Revenue
Refunding Bonds
(Series A), 7.375%
(Concordia
Project)/(FNMA
COL)/(Original Issue
Yield: 7.544%),
8/1/2005 AAA 193,865
115,000 Jefferson Parish, LA,
GO Refunding Bonds,
7.70% (FGIC INS),
9/1/2002 AAA 115,355
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 956,170
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
---------- LOUISIANA-CONTINUED
PRINCIPAL Lafayette, LA Public
AMOUNT Power Authority,
$ Refunding Revenue CREDIT
Bonds, 5.50% (AMBAC RATING(D) $ VALUE
500,000 INS), 11/1/2010 AAA 509,380
<C> <S> <C> <C>
500,000 Lafayette, LA Public
Power Authority,
Refunding Revenue
Bonds, 5.50% (AMBAC
INS), 11/1/2011 AAA 508,055
260,000 Lafayette, LA Public
Power Authority,
Refunding Revenue
Bonds, 5.50% (AMBAC
INS), 11/1/2012 AAA 263,505
50,000 Lafayette, LA Public
Power Authority,
Revenue Refunding
Bonds, 5.25% (AMBAC
INS)/ (Original
Issue Yield: 5.35%),
11/1/2009 AAA 50,659
150,000 Lafayette, LA Public
Power Authority,
Revenue Refunding
Bonds, 5.40% (AMBAC
INS)/ (Original
Issue Yield: 5.55%),
11/1/2008 AAA 153,558
150,000 Lafayette, LA Public
Power Authority,
Revenue Refunding
Bonds, 5.50% (AMBAC
INS)/ (Original
Issue Yield: 5.65%),
11/1/2009 AAA 153,609
250,000 Lafayette, LA, Public
Improvement Sales
Tax Revenue Bonds,
5.50% (FGIC INS)/
(Original Issue
Yield: 5.60%),
3/1/2009 AAA 257,113
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$1,650,000 Louisiana HFA,
Multifamily Housing
Revenue Refunding
Bonds (Series A),
6.10% (Woodward
Wright Apartments
Project)/(GNMA COL),
12/20/2018 Aaa $ 1,693,032
350,000 Louisiana HFA,
Multifamily Housing
Revenue Refunding
Bonds, 5.85%
(Woodward Wright
Apartments
Project)/(GNMA COL),
12/20/2008 Aaa 360,637
1,000,000 Louisiana HFA,
Multifamily Housing
Revenue Refunding
Bonds, 6.20%
(Woodward Wright
Apartments
Project)/(GNMA COL),
6/20/2028 Aaa 1,025,970
1,000,000 Louisiana HFA,
Revenue Bond, 7.10%
(Villa Maria
Retirement
Center)/(GNMA COL),
1/20/2035 AAA 1,063,480
575,000 Louisiana HFA, SFM
Revenue Bonds
(Series A-2), 6.55%,
12/1/2026 Aaa 602,790
145,000 Louisiana Health Care
Authority,
Certificate
Participation Bonds,
5.95% (Lallie Kemp
Regional Medical
Center)/(Societe
Generale, New York
INV)/(Original Issue
Yield: 6.00%),
12/1/1999 AAA 145,626
500,000 Louisiana PFA,
Hospital Revenue
Bonds, 5.70%
(Woman's Hospital
Foundation)/(FGIC
INS)/(Original Issue
Yield: 5.80%),
10/1/2008 AAA 526,410
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
Louisiana PFA,
Hospital Revenue
Crossover Refunding
Bonds (Series C),
---------- 6.30% (Our Lady of
PRINCIPAL Lake Regional)/
AMOUNT (MBIA INS)/
$ (Original Issue CREDIT
Yield: 6.375%), RATING(D) $ VALUE
995,000 12/1/2016 AAA 1,074,411
<C> <S> <C> <C>
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 544,995
2,045,000 Louisiana PFA,
Multifamily Housing
Revenue Bonds
(Series A), 7.50%
(Federal Home Loan
Mortgage Corp. COL),
6/1/2021 AAA 2,203,549
2,000,000 Louisiana PFA,
Refunding Revenue Bonds, 5.75% (Alton Ochsner Medical
Foundation)/ (MBIA INS)/ (Original Issue Yield:
6.636%), 5/15/2011 AAA 2,056,180
750,000 Louisiana PFA,
Revenue Bond, 6.00%
(General Health,
Inc.)/ (MBIA INS)/
(Original Issue
Yield: 6.15%),
11/1/2012 AAA 783,653
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$ 500,000 Louisiana PFA,
Revenue Bonds,
5.875% (Our Lady of
Lourdes Regional
Medical Center)/
(MBIA INS)/
(Original Issue
Yield: 5.95%),
2/1/2002 AAA $ 526,655
425,000 Louisiana PFA,
Revenue Bonds, 6.00%
(Our Lady of Lourdes
Regional Medical
Center)/ (MBIA INS)/
(Original Issue
Yield: 6.05%),
2/1/2003 AAA 452,621
1,890,000 Louisiana PFA,
Revenue Refunding
Bonds (Series A),
6.75% (Bethany Home
Project)/ (FHA LOC),
8/1/2025 AAA 1,977,242
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 381,941
50,000 Louisiana PFA,
Revenue Refunding
Bonds, 4.25%
(Jefferson Parish
Eastbank)/(FGIC
INS)/(Original Issue
Yield: 4.40%),
8/1/2000 AAA 49,999
1,000,000 Louisiana PFA,
Revenue Refunding
Bonds, 5.45% (AMBAC
INS)/ (Original
Issue Yield: 5.45%),
2/1/2013 Aaa 1,006,500
</TABLE>
(See Notes to Portfolios of Investments)
exit
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
Louisiana PFA,
Revenue Refunding
Bonds, 5.60%
---------- (Lafayette General
PRINCIPAL Medical Center
AMOUNT Project)/(FSA INS)/
$ (Original Issue CREDIT
Yield: 5.70%), RATING(D) $ VALUE
700,000 10/1/2000 AAA 725,823
<C> <S> <C> <C>
1,000,000 Louisiana PFA,
Revenue Refunding
Bonds, 6.20%
(Guaranteed Student
Loans GTD), 3/1/2001 Aaa 1,038,310
750,000 Louisiana PFA,
Revenue Refunding
Bonds, 7.70%
(Jefferson Parish
Eastbank)/(FGIC
INS)/(Original Issue
Yield: 7.747%),
8/1/2010 AAA 803,003
300,000 Louisiana PFA,
Special Insurance
Assessment Revenue
Refunding Bonds,
4.60% (FSA
LOC)/(Original Issue
Yield: 4.70%),
10/1/2002 AAA 301,746
500,000 Louisiana PFA,
Student Loan
Refunding Revenue
Bonds (Series A-2),
6.75% (Student Loans
GTD), 9/1/2006 AAA 527,615
670,000 Louisiana PFA,
Student Opportunity
Loans Revenue Bonds
(Series A), 6.80%
(FSA INS), 1/1/2006 AAA 711,868
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$ 670,000 Louisiana PFA,
Student Opportunity
Loans Revenue Bonds
(Series A), 6.85%
(FSA COL), 1/1/2009 AAA $ 711,011
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 526,570
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 2,255,531
3,500,000 Louisiana Stadium and
Expo District,
Revenue Bonds, 5.75%
(FGIC INS)/
(Original Issue
Yield: 5.85%),
7/1/2026 AAA 3,576,160
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 561,259
300,000 Louisiana State
Recovery District,
Revenue Refunding
Bonds, 5.50% (MBIA
INS)/ (Original
Issue Yield: 5.60%),
7/1/1998 AAA 304,182
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
Louisiana State
University and
Agricultural and
---------- Mechanical College,
PRINCIPAL Revenue Bonds, 5.50%
AMOUNT (MBIA INS)/
$ (Original Issue CREDIT
Yield: 5.80%), RATING(D) $ VALUE
5,000,000 7/1/2026 AAA 4,985,250
<C> <S> <C> <C>
1,565,000 Louisiana State
University and
Agricultural and
Mechanical College,
Revenue Bonds, 5.75%
(FGIC INS)/
(Original Issue
Yield: 6.043%),
7/1/2014 AAA 1,606,285
20,000 Louisiana State, GO
UT Bond (Series A),
6.25% (Original
Issue Yield: 6.50%),
8/1/1999 AAA 20,433
30,000 Louisiana State, GO
UT Bonds (Series A),
6.25% (Original
Issue Yield: 6.50%),
8/1/1999 AAA 31,211
220,000 Louisiana State, GO
UT Refunding Bonds,
5.375% (MBIA INS)/
(Original Issue
Yield: 5.50%),
8/1/2005 AAA 229,720
500,000 Louisiana State, GO
UT Refunding Bonds,
6.70% (MBIA INS)/
(Original Issue
Yield: 6.80%),
8/1/1998 AAA 511,115
25,000 Louisiana State, GO
UT, 4.60% (MBIA
INS)/(Original Issue
Yield: 4.70%),
8/1/1998 AAA 25,172
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$ 775,000 Louisiana State, GO
UT, 5.125% (FGIC
INS)/(Original Issue
Yield: 5.30%),
4/15/2009 AAA $ 781,378
250,000 Louisiana State, GO
UT, 6.30% (MBIA
INS)/(Original Issue
Yield: 6.35%),
5/1/2004 AAA 271,488
2,000,000 Louisiana State, Gas
& Fuels Tax Revenue
Bonds (Series A),
7.25% (Original
Issue Yield: 7.45%),
11/15/2004 A- 2,150,820
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 431,704
500,000 Mississippi River
Bridge Authority,
LA, Revenue Bonds,
6.00% (Original
Issue Yield: 6.05%),
11/1/1999 A- 518,990
250,000 Monroe, LA School
District, Special
School District, GO
UT Bonds, 5.35%
(FGIC INS)/
(Original Issue
Yield: 5.75%),
3/1/2009 AAA 255,105
525,000 Monroe-Brentwood, LA
Housing Development
Corp., Multifamily
Housing Mortgage
Revenue Refunding
Bonds, 6.50% (FNMA
COL), 2/1/2010 Aaa 541,217
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
Monroe-Brentwood, LA
---------- Housing Development
PRINCIPAL Corp., Multifamily
AMOUNT Housing Mortgage
$ Revenue Refunding CREDIT
Bonds, 6.70% (FNMA RATING(D) $ VALUE
1,020,000 COL), 8/1/2021 Aaa 1,044,919
<C> <S> <C> <C>
2,000,000 New Orleans, LA
Audubon Park, GO LT
Bonds, 6.00% (FGIC
INS)/ (Original
Issue Yield: 6.25%),
10/1/2013 AAA 2,096,380
1,250,000 New Orleans, LA Home
Mortgage Authority,
SFM Revenue Bonds
(Series A), 6.65%
(GNMA COL), 9/1/2008 Aaa 1,319,350
100,000 New Orleans, LA Home
Mortgage Authority,
Single Family
Mortgage Revenue
Bonds, 5.35% (FNMA
and GNMA COLs),
12/1/2020 Aaa 100,791
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 1,094,170
265,000 New Orleans, LA
Housing Development
Corp., Multifamily
Housing Refunding
Revenue Bonds,
7.375% (FNMA
COL)/(Original Issue
Yield: 7.544%),
8/1/2005 AAA 286,757
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$ 930,000 New Orleans, LA
Housing Develop-ment
Corp., Multifamily
Housing Revenue
Bonds, 7.375%
(Southwood Patio)/
(FNMA COL)/
(Original Issue
Yield: 7.544%),
8/1/2005 AAA $ 1,002,624
1,900,000 New Orleans, LA, GO
Refunding Bond,
6.20% (AMBAC INS)/
(Original Issue
Yield: 6.30%),
10/1/2021 AAA 2,047,041
4,750,000 New Orleans, LA, GO
UT Capital
Appreciation Bonds
(AMBAC INS)/
(Original Issue
Yield: 7.10%),
9/1/2013 AAA 2,018,180
2,000,000 New Orleans, LA, GO
UT Capital
Appreciation Revenue
Bonds (AMBAC INS)/
(Original Issue
Yield: 7.15%),
9/1/2016 AAA 709,220
825,000 New Orleans, LA, GO
UT Refunding Bonds,
5.20% (AMBAC INS)/
(Original Issue
Yield: 5.30%),
10/1/2004 AAA 849,593
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
---------- New Orleans, LA, GO
PRINCIPAL UT Refunding Bonds,
AMOUNT 5.875% (AMBAC INS)/
$ (Original Issue CREDIT
Yield: 6.00%), RATING(D) $ VALUE
980,000 10/1/2011 AAA 1,033,910
<C> <S> <C> <C>
6,000 New Orleans, LA, GO
UT Refunding Bonds,
7.30% (AMBAC INS)/
(Original Issue
Yield: 7.35%),
12/1/2001 AAA 6,686
2,000,000 New Orleans, LA, GO
UT, 7.70% (BIG and
FSA INSs), 10/1/1998 AAA 2,077,140
500,000 Orleans Parish, LA
Law Enforcement
District, GO UT
Bonds, 7.10% (AMBAC
INS)/ (Original
Issue Yield: 7.25%),
5/1/2010 AAA 533,385
750,000 Orleans Parish, LA
School Board,
Revenue Refunding
Bonds, 6.00% (MBIA
INS), 12/1/2006 AAA 819,488
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 1,053,610
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$1,500,000 Ouachita Parish, LA
West Ouachita Parish
School District,
Series A GO UT
Refunding Bonds,
6.20% (FSA INS),
3/1/2000 AAA $ 1,569,915
300,000 Plaquemines Parish
LA, GO UT Refunding
Bonds, 6.50% (AMBAC
INS)/(Original Issue
Yield: 6.65%),
8/1/2008 AAA 325,587
25,000 Regional
Transportation
Authority, Sales Tax
Revenue Bonds, 5.70%
(FGIC INS),
12/1/1997 AAA 25,119
1,000,000 Regional
Transportation
Authority, Sales Tax
Revenue Bonds, 6.50%
(FGIC INS)/
(Original Issue
Yield: 6.673%),
12/1/2008 AAA 1,090,290
750,000 Shreveport, LA, Water & Sewer, Revenue Bonds (Series A), 5.95%
(FGIC LOC),
12/1/2014 AAA 784,793
1,485,000 St. Charles Parish,
LA Consolidated
Waterworks and
Wastewater District
No. 1, Utility
Revenue Refunding
Bonds, 7.15% (MBIA
INS), 7/1/2016 AAA 1,643,346
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
St. Charles Parish,
LA Public
---------- Improvement, UT GO
PRINCIPAL Refunding Bonds
AMOUNT (Series ST-96),
$ 5.25% (Original CREDIT
Issue Yield: 5.45%), RATING(D) $ VALUE
1,000,000 12/1/2009 AAA 1,018,180
<C> <S> <C> <C>
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 509,075
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 1,103,630
350,000 St. Landry Parish, LA
Consolidated School
District No. 1, GO
UT Bonds, 6.10%
(MBIA INS)/
(Original Issue
Yield: 6.60%),
5/1/2008 AAA 364,766
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
$ 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 $ 425,463
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 1,076,670
500,000 St. Tammany Parish,
LA Wide School
District No. 12, GO
UT Bonds, 5.375%
(FSA INS), 3/1/2013 AAA 502,880
500,000 State Colleges &
Universities, LA,
Revenue Bonds, 5.65%
(University of
Southwestern, LA)/
(MBIA INS), 9/1/2026 AAA 508,284
25,000 Tangipahoa Parish, LA
Hospital Service
District No. 1,
Revenue Refunding
Bonds, 6.90% (AMBAC
INS)/ (United States
PRF), 2/1/1998
(@100) AAA 25,325
130,000 Terrebonne Parish LA
Hospital Service
District No.1, No.
1, Refunding Revenue
Bonds, 7.50%
(Terrebonne General
Medical Center)/
(BIG INS)/(Original
Issue Yield:
7.649%), 4/1/2008 AAA 135,030
</TABLE>
(See Notes to Portfolios of Investments)
LOUISIANA MUNICIPAL INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM MUNICIPALS-
continued
LOUISIANA-CONTINUED
Terrebonne Parish LA
Hospital Service
District No. 1,
Revenue Refunding
---------- Bonds, 7.50%
PRINCIPAL (Terrebonne General
AMOUNT Medical Center)/
$ (BIG LOC)/ (Original CREDIT
Issue Yield: RATING(D) $ VALUE
1,225,000 7.745%), 4/1/2015 AAA 1,272,407
<C> <S> <C> <C>
170,000 Terrebonne Parish LA
Hospital Service
District No. 1,
Service District No.
1, Hospital Revenue
Refunding Bonds,
7.40% (Terrebonne
General Medical
Center)/ (BIG
INS)/(Original Issue
Yield: 7.50%),
4/1/2003 AAA 176,480
------------
Total 96,783,754
------------
MISSISSIPPI--0.5%
470,000 Jones County, MS,
Revenue Bonds, 6.80%
(South Central
Regional Medical
Center)/ (MBIA INS),
8/1/1998 AAA 482,351
------------
PUERTO RICO--0.6%
600,000 Puerto Rico Municipal
Finance Agency,
Revenue Bonds
(Series A), 6.00%
(FSA INS)/ (Original
Issue Yield: 6.30%),
7/1/2014 AAA 633,185
------------
<CAPTION>
----------
PRINCIPAL CREDIT
AMOUNT RATING(D) VALUE
<C> <S> <C> <C>
TEXAS--0.3%
$ 10,000 Austin, TX, Electric
Waterworks & Sewer
System Revenue
Bonds, 6.60%,
10/1/2001 AAA $ 10,202
50,000 Gulf Coast, TX Water
Authority, Revenue
Refunding Bonds,
6.40% (AMBAC INS),
7/10/2003 AAA 53,924
100,000 Texas Municipal Power
Agency, Revenue
Refunding Bonds,
5.60% (MBIA INS)/
(Original Issue
Yield: 5.80%),
9/1/2001 AAA 104,624
100,000 Texas Municipal Power
Agency, Revenue
Refunding Bonds,
5.75% (MBIA INS)/
(Original Issue
Yield: 5.90%),
9/1/2002 AAA 105,960
------------
Total 274,710
------------
TOTAL LONG-TERM
MUNICIPALS
(IDENTIFIED COST
$95,146,334) 99,848,189
------------
MUTUAL FUND-- 0.7%
670,251 Dreyfus Tax Exempt
Cash Management (at
net asset value) 670,251
------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$95,816,585) $100,518,440
===========
</TABLE>
(See Notes to Portfolios of Investments)
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
-----------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
<CAPTION>
<C> <S> <C>
CORPORATE BONDS/ ASSET
BACKED SECURITIES--24.7%
Automotive--1.5%
$ 1,000,000 Ford Capital BV, Debenture,
10.125%, 11/15/2000 $ 1,103,570
-----------
Banking--2.1%
1,500,000 Swiss Bank Corp. New York,
Subordinated Note, 7.25%,
9/1/2006 1,534,812
-----------
Consumer Durables--2.9%
2,000,000 Ford Motor Co., Note,
7.25%, 10/1/2008 2,044,620
-----------
Finance-Insurance--2.8%
2,000,000 Old Republic International
Corp., Debenture, 7.00%,
6/15/2007 2,010,820
-----------
Finance-Retail--12.3%
1,250,000 American Express Co., Sr.
Unsubordinated, 6.75%,
6/23/2004 1,251,850
750,000 American General Finance
Corp., Note, 8.00%,
2/15/2000 776,880
1,000,000 BankAmerica Corp.,
Subordinated Note, 7.50%,
10/15/2002 1,035,740
683,981 CIT Group Securitization
Corp. 1993-1, Class A2,
5.75%, 6/15/2018 681,258
3,000,000 Dayton-Hudson Corp., Note,
7.50%, 7/15/2006 3,089,220
1,000,000 Discover Card Trust 1993-A,
Class A, 6.25%, 8/16/2000 1,002,060
1,000,000 Signet Credit Card Master
Trust 1993-1, Class A,
5.20%, 2/15/2002 994,340
-----------
Total 8,831,348
-----------
Utilities--3.1%
2,000,000 K N Energy, Inc.,
Debenture, 9.625%,
8/1/2021 2,236,320
-----------
TOTAL CORPORATE
BONDS/ASSET-BACKED
SECURITIES (IDENTIFIED
COST $17,566,664) 17,761,490
-----------
<CAPTION>
-----------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
GOVERNMENT AGENCIES-- 18.7%
Federal Home Loan Bank--
0.8%
$ 550,000 7.01%, 6/14/2006 $ 567,429
-----------
Federal Home Loan Mortgage
Corp. 30-Year Gold--1.4%
1,000,000 Series 1024, 9.00%,
11/15/2005 1,026,400
-----------
(e) Federal National
Mortgage Association
30-Year Seasoned--0.1%
9,980 Pool 1804, 11.00%, 4/1/2011 10,910
7,725 Pool 34138, 11.00%,
4/1/2010 8,541
4,639 Pool 76204, 11.00%,
6/1/2019 5,215
14,486 Pool 85131, 11.00%,
5/1/2017 16,287
-----------
Total 40,953
-----------
(e) Government National
Mortgage Association
15-Year--1.3%
886,363 Pool 420153, 7.00%,
9/15/2010 896,060
-----------
(e) Government National
Mortgage Association
30-Year--15.1%
424,757 Pool 345031, 7.00%,
10/15/2023 421,308
464,073 Pool 345090, 7.00%,
11/15/2023 460,305
234,063 Pool 360772, 7.00%,
2/15/2024 232,162
543,547 Pool 382074, 7.00%,
9/15/2025 537,775
170,685 Pool 404653, 7.00%,
9/15/2025 168,872
491,539 Pool 408884, 7.00%,
9/15/2025 486,319
735,183 Pool 410108, 7.00%,
9/15/2025 727,375
304,776 Pool 410786, 7.00%,
9/15/2025 301,539
477,725 Pool 415865, 7.00%,
9/15/2025 472,652
1,238,687 Pool 418781, 7.00%,
9/15/2025 1,225,532
</TABLE>
(See Notes to Portfolios of Investments)
TOTAL RETURN BOND FUND (continued)
<TABLE>
<CAPTION>
GOVERNMENT AGENCIES-
continued
----------- Government National
PRINCIPAL Mortgage Association 30-
AMOUNT Year-continued
$ Pool 420157, 7.00%, $ VALUE
1,420,342 10/15/2025 1,405,258
<C> <S> <C>
496,539 Pool 302101, 7.00%,
6/15/2024 492,195
1,040,589 Pool 415427, 7.50%,
8/15/2025 1,051,317
176,624 Pool 168511, 8.00%,
7/15/2016 184,406
162,809 Pool 174673, 8.00%,
8/15/2016 169,983
64,981 Pool 177145, 8.00%,
1/15/2017 67,844
111,333 Pool 212660, 8.00%,
4/15/2017 116,238
148,838 Pool 212047, 8.00%,
5/15/2017 155,396
140,546 Pool 217533, 8.00%,
5/15/2017 146,739
197,706 Pool 216950, 8.00%,
6/15/2017 206,356
10,078 Pool 188080, 8.00%,
9/15/2018 10,500
212,095 Pool 302697, 8.00%,
4/15/2021 219,649
128,074 Pool 227430, 9.00%,
8/15/2019 137,600
84,991 Pool 279629, 9.00%,
10/15/2019 91,312
66,482 Pool 283261, 9.00%,
11/15/2019 71,427
158,126 Pool 287853, 9.00%,
4/15/2020 169,788
32,570 Pool 288967, 9.00%,
4/15/2020 34,993
100,476 Pool 289082, 9.00%,
4/15/2020 107,950
116,951 Pool 288994, 9.00%,
5/15/2020 125,576
71,335 Pool 291100, 9.00%,
5/15/2020 76,641
143,132 Pool 147875, 10.00%,
3/15/2016 157,222
86,245 Pool 253449, 10.00%,
10/15/2018 94,707
<CAPTION>
-----------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
$ 162,648 Pool 278300, 10.00%,
7/15/2019 $ 178,557
89,659 Pool 279619, 10.00%,
9/15/2019 98,429
35,609 Pool 288052, 10.00%,
7/15/2020 39,092
59,017 Pool 288570, 10.00%,
8/15/2020 64,771
43,543 Pool 225725, 10.00%,
9/15/2020 47,802
99,830 Pool 292364, 10.00%,
9/15/2020 109,594
15,256 Pool 296315, 10.00%,
9/15/2020 16,743
-----------
Total 10,881,924
-----------
TOTAL GOVERNMENT AGENCIES
(IDENTIFIED COST
$13,379,406) 13,412,766
-----------
TREASURY SECURITIES--46.8%
U.S.Treasury Bonds--32.9%
11,500,000 7.50%, 5/15/2002 12,095,470
3,800,000 11.25%, 2/15/2015 5,606,558
4,000,000 12.50%, 8/15/2014 5,936,280
-----------
Total 23,638,308
-----------
U.S. Treasury Notes--13.9%
200,000 5.125%, 4/30/1998 199,425
500,000 7.00%, 7/15/2006 519,750
6,000,000 7.125%, 2/29/2000 6,148,980
3,000,000 7.875%, 11/15/1999 3,113,820
-----------
Total 9,981,975
-----------
TOTAL TREASURY SECURITIES
(IDENTIFIED COST
$33,414,953) 33,620,283
-----------
(b)REPURCHASE
AGREEMENT--8.7%
6,253,000 State Street Bank and Trust
Co., 5.50%, dated
8/29/1997, due 9/2/1997
(at amortized cost) 6,253,000
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST
$70,614,023) $71,047,539
==========
</TABLE>
(See Notes to Portfolios of Investments)
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
----------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
<CAPTION>
<C> <S> <C>
LONG-TERM OBLIGATIONS--
98.3%
Asset-Backed
Securities--10.2%
$1,250,000 American Express Credit
Account Master Trust,
Series 1996-1, 6.800%,
12/15/2003 $ 1,270,650
1,949,619 CIT Group Securitization
Corp., Series 1993-1,
5.750%, 6/15/2018 1,941,324
500,000 Discover Card Master Trust
I, Series 1993-2, 5.400%,
11/16/2001 497,460
11,606 GMAC Grantor Trust, Series
1993-B, 4.000%, 9/15/1998 11,586
41,283 Premier Auto Trust, Series
1993-5, 4.220%, 3/2/1999 41,200
1,400,000 Sears Credit Account Master
Trust, Series 1995-2,
8.100%, 6/15/2004 1,463,252
250,000 Sears Credit Account Master
Trust, Series 1995-4,
6.250%, 1/15/2003 251,315
600,000 WFS Financial Owner Trust,
Series 1997-A, 6.150%,
12/20/1999 601,843
-----------
Total 6,078,630
-----------
Federal Home Loan Bank
PC--2.7%
850,000 7.010%, 6/14/2006 876,937
205,000 7.555%, 2/27/2002 215,008
500,000 8.450%, 7/26/1999 521,985
-----------
Total 1,613,930
-----------
(e) Federal Home Loan Mort-
gage Corporation 15
Year--1.1%
73,126 8.750%, 1/1/2002 75,548
147,673 9.000%, 8/1/2001 154,503
179,333 9.250%, 6/1/2002 185,385
36,696 9.500%, 10/1/2001 38,186
68,511 9.500%, 10/1/2004 72,022
108,619 9.500%, 12/1/2001 114,186
-----------
Total 639,830
-----------
(e) Federal Home Loan Mort-
gage Corporation 30
Year--2.6%
293,641 8.750%, 1/1/2011 308,185
358,498 8.750%, 2/1/2017 378,721
68,276 9.000%, 6/1/2016 72,949
<CAPTION>
----------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
$ 1,922 9.000%, 9/1/2016 $ 2,045
9,310 9.000%, 10/1/2016 9,944
84,011 9.000%, 1/1/2017 89,288
12,647 9.000%, 5/1/2018 13,442
71,682 9.500%, 10/1/2019 76,632
130,567 10.000%, 5/1/2014 141,420
285,061 10.000%, 6/1/2018 308,756
47,643 10.000%, 8/1/2019 51,603
56,953 10.000%, 6/1/2020 61,687
6,589 10.000%, 6/1/2020 7,136
-----------
Total 1,521,808
-----------
(e)Federal Home Loan
Mortgage Corporation PC--
15.5%
500,000 6.000%, 10/15/2004 498,895
900,000 6.100%, 6/15/2016 896,004
3,074,000 7.000%, 11/15/2005 3,094,012
971,081 7.500%, 2/15/2003 994,611
1,558,000 7.500%, 9/15/2007 1,593,959
1,000,000 7.500%, 9/15/2021 999,690
809,339 9.000%, 6/15/2020 834,922
248,259 9.500%, 1/15/2005 259,458
-----------
Total 9,171,551
-----------
Federal Home Loan
Mortgage Corporation
Debentures--11.0%
1,000,000 6.320%, 7/14/2000 996,560
2,000,000 6.500%, 6/8/2000 2,003,480
2,000,000 6.665%, 7/23/2002 2,001,020
1,500,000 7.055%, 8/2/2001 1,518,255
-----------
Total 6,519,315
-----------
(e) Federal National
Mortgage Association
REMIC--5.2%
2,000,000 6.860%, 4/24/2000 2,014,620
982,933 7.500%, 3/25/2021 990,521
7,345 8.750%, 12/25/2004 7,338
93,516 9.400%, 7/25/2003 98,296
-----------
Total 3,110,775
-----------
(e) Federal National
Mortgage
Association 15 Year--0.1%
57,330 10.750%, 1/1/2001 61,182
-----------
</TABLE>
(See Notes to Portfolios of Investments)
U.S. GOVERNMENT INCOME FUND (continued)
<TABLE>
<CAPTION>
LONG-TERM OBLIGATIONS-
continued
---------- (e) Federal National
PRINCIPAL Mortgage
AMOUNT Association 30 Year--0.5% VALUE
<C> <S> <C>
$ 222,465 8.500%, 2/1/2011 $ 234,213
75,351 9.500%, 8/1/2020 81,065
-----------
Total 315,278
-----------
Federal National Mortgage
Association Medium Term
Notes--7.2%
500,000 7.000%, 4/20/2001 503,395
1,750,000 7.150%, 1/29/2007 1,763,258
1,000,000 7.280%, 5/23/2007 1,016,650
1,000,000 8.420%, 10/20/2004 1,003,840
-----------
Total 4,287,143
-----------
(e) Government National
Mortgage Association 30
Year--17.8%
687,589 7.500%, 10/15/2022 694,678
1,425,592 7.500%, 3/15/2026 1,440,290
1,974,698 8.000%, 1/15/2022 2,041,344
1,966,583 8.000%, 4/15/2022 2,032,955
2,034,040 8.000%, 8/15/2022 2,102,689
997,511 8.000%, 11/15/2022 1,025,561
570,106 8.500%, 2/20/2025 594,871
372,719 9.000%, 2/15/2020 395,779
176,898 9.500%, 6/15/2020 191,214
59,931 9.500%, 6/15/2020 64,781
-----------
Total 10,584,162
-----------
(e) Government National
Mortgage Association
POOL--1.0%
86,035 7.000%, 11/15/2009 87,273
362,152 7.000%, 9/15/2010 366,114
91,690 9.500%, 7/15/2020 99,455
46,661 9.500%, 7/15/2020 50,438
-----------
Total 603,280
-----------
<CAPTION>
----------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. Treasury Bonds--10.9%
$3,400,000 7.125%, 2/15/2023 $ 3,573,944
700,000 7.250%, 8/15/2022 745,829
300,000 8.500%, 2/15/2020 362,148
500,000 8.750%, 5/15/2020 618,495
1,000,000 10.750%, 2/15/2003 1,204,860
-----------
Total 6,505,276
-----------
U.S. Treasury Notes--12.5%
855,000 6.000%, 8/15/1999 855,539
32,000 6.375%, 7/15/1999 32,254
1,000,000 6.500%, 10/15/2006 1,006,480
2,000,000 6.500%, 5/15/2005 2,016,300
500,000 6.500%, 5/31/2002 505,485
500,000 6.750%, 4/30/2000 508,355
1,000,000 6.875%, 7/31/1999 1,016,330
1,000,000 7.000%, 7/15/2006 1,039,500
400,000 9.250%, 8/15/1998 412,792
-----------
Total 7,393,035
-----------
TOTAL LONG-TERM OBLIGATIONS
(IDENTIFIED COST
$57,728,936) 58,405,195
-----------
(b) REPURCHASE
AGREEMENT--0.9%
546,000 State Street Bank and Trust
Co., 5.500%, dated
8/29/1997, due 9/2/1997 (at
amortized cost) 546,000
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST
$58,274,936) $58,951,195
==========
</TABLE>
(See Notes to Portfolios of Investments)
CASH RESERVE FUND
<TABLE>
<CAPTION>
-----------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
<CAPTION>
<C> <S> <C>
(f)COMMERCIAL PAPER--
74.2%
Computer Services--3.3%
$ 5,000,000 Electronic Data Systems
Corp., 5.584%, 10/22/1997 $ 4,961,042
------------
Consumer Durables--3.3%
5,000,000 Toyota Motor Credit Corp.,
5.482%, 9/17/1997 4,987,867
------------
Consumer Non-Durables--
8.7%
3,181,000 Colgate-Palmolive Co.,
5.494%, 9/30/1997 3,167,009
5,000,000 Heinz (H.J.) Co.,
5.499%--5.502%,
9/26/1997--9/30/1997 4,980,399
5,000,000 PepsiCo, Inc., 5.538%,
9/29/1997 4,978,611
------------
Total 13,126,019
------------
Energy Minerals--3.3%
5,000,000 Atlantic Richfield Co.,
5.546%, 11/3/1997 4,952,138
------------
Finance--13.3%
5,000,000 American General Finance
Corp., 5.644%, 9/23/1997 4,983,011
5,000,000 Ford Motor Credit Corp.,
5.600%, 10/29/1997 4,955,614
5,000,000 Norwest Corp., 5.530%,
9/15/1997 4,989,344
5,000,000 PACCAR Financial Corp.,
5.505%, 9/3/1997 4,998,478
------------
Total 19,926,447
------------
Finance--Commercial--
16.5%
5,000,000 CIT Group Holdings, Inc.,
5.556%, 9/25/1997 4,981,667
5,000,000 Deere (John) Capital
Corp., 5.588%, 10/8/1997 4,971,685
5,000,000 Falcon Asset
Securitization Corp.,
5.546%, 9/18/1997 4,986,967
5,000,000 General Electric Capital
Corp., 5.553%, 9/16/1997 4,988,542
5,000,000 U.S.A.A. Capital Corp.,
5.558%, 11/12/1997 4,945,200
------------
Total 24,874,061
------------
<CAPTION>
-----------
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
Finance--Retail--6.6%
$ 5,000,000 Beta Finance, Inc.,
5.650%, 9/23/1997 $ 4,982,981
5,000,000 Commercial Credit Co.,
5.581%, 9/17/1997 4,987,733
------------
Total 9,970,714
------------
Food & Beverage--3.3%
5,000,000 Cargill, Inc., 5.558%,
11/14/1997 4,943,678
------------
Health Technology--3.3%
5,000,000 Abbott Laboratories,
5.507%, 9/16/1997 4,988,583
------------
Process Industries--3.3%
5,000,000 Du Pont (E.I.) de Nemours
& Co., 5.546%, 10/7/1997 4,972,650
------------
Retail Trade--3.3%
5,000,000 Toys 'R' Us, Inc., 5.515%,
10/10/1997 4,970,317
------------
Utilities--6.0%
5,000,000 AT&T Corp., 5.445%,
9/25/1997 4,981,933
4,000,000 BellSouth Telecommunica-
tions, Inc., 5.524%,
9/25/1997 3,985,333
------------
Total 8,967,266
------------
TOTAL COMMERCIAL PAPER 111,640,782
------------
(f)BANKERS
ACCEPTANCE--3.3%
Finance--3.3%
5,000,000 First Union Corp.,
5.647%--5.652%,
9/10/1997--9/24/1997 4,988,738
------------
GOVERNMENT AGENCIES-- 1.6%
Finance--1.6%
2,450,000 Federal Farm Credit Bank,
5.430%, 11/25/1997 2,418,589
------------
</TABLE>
(See Notes to Portfolios of Investments)
CASH RESERVE FUND (continued)
MARKET FUND
<TABLE>
<CAPTION>
----------- TIME DEPOSITS--10.0%
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
Finance--10.0%
$ 5,000,000 ABN AMRO Bank N.V.,
Amsterdam, 5.500%,
10/21/1997 $ 5,000,000
5,000,000 Bank of Tokyo-Mitsubishi
Ltd., 5.670%, 10/29/1997 5,000,000
5,000,000 Societe Generale, Paris,
5.600%, 12/4/1997 5,000,000
------------
TOTAL TIME DEPOSITS 15,000,000
------------
(b)REPURCHASE AGREE-
MENT--11.0%
16,488,000 State Street Bank and
Trust Co., 5.500%, dated
8/29/1997, due 9/2/1997 16,488,000
------------
TOTAL INVESTMENTS (AT
AMORTIZED COST) $150,536,109
===========
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY MONEY MARKET FUND
-----------
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
<CAPTION>
<C> <S> <C>
(g)U.S. TREASURY BILLS--
38.5%
$ 7,000,000 5.328-5.402%, 9/4/1997 $ 6,996,965
7,000,000 5.336-5.377%, 9/18/1997 6,982,717
2,000,000 5.218%, 10/2/1997 1,991,286
4,000,000 5.176-5.292%, 10/16/1997 3,974,600
2,000,000 5.238%, 10/30/1997 1,983,283
2,000,000 5.261%, 11/6/1997 1,981,263
18,000,000 5.135-5.308%, 11/13/1997 17,814,012
4,000,000 5.228-5.277%, 11/20/1997 3,954,733
6,000,000 5.178-5.198%, 11/28/1997 5,924,907
8,000,000 5.281-5.293%, 12/11/1997 7,885,309
------------
TOTAL U.S. TREASURY BILLS 59,489,075
------------
U.S. TREASURY NOTES--
16.2%
5,000,000 5.390-5.393%, 9/30/1997 5,000,248
5,000,000 5.247%, 9/30/1997 5,001,499
7,000,000 5.391-5.444%, 10/31/1997 7,002,029
4,000,000 5.455-5.531%, 11/30/1997 3,998,608
4,000,000 5.376-5.432%, 12/31/1997 3,997,658
------------
TOTAL U.S. TREASURY NOTES 25,000,042
------------
(b)REPURCHASE AGREE-
MENTS--45.3%
34,000,000 HSBC Securities, Inc.,
5.500%, dated 8/29/1997,
due 9/2/1997 34,000,000
36,034,000 State Street Bank and
Trust Co., 5.500%, dated
8/29/1997, due 9/2/1997 36,034,000
------------
TOTAL REPURCHASE
AGREEMENTS 70,034,000
------------
TOTAL INVESTMENTS (AT
AMORTIZED COST) $154,523,117
===========
</TABLE>
(See Notes to Portfolios of Investments)
=========================================================
NOTES TO PORTFOLIOS OF INVESTMENTS TOWER MUTUAL FUNDS
August 31, 1997
(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 August 31, 1997, 9.3% 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. Credit ratings are unaudited.
(e) Because of principal payments, the average lives of certain government
securities are less than the indicated periods.
(f) Rate shown represents yield to maturity.
(g) These issues show the rate of discount at the time of purchase.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
BIG -- Bond Investors Guaranty
COL -- Collateralized
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation
GTD -- Guaranty
HFA -- Housing Finance Authority
INS -- Insured
LOC -- Letter of Credit
LT -- Limited Tax
MBIA -- Municipal Bond Investors Assurance
PC -- Participation Certificate
PCR -- Pollution Control Revenue
PFA -- Public Facility Authority
PRF -- Pre-Refunded
REMIC -- Real Estate Mortgage Investment Conduit
SFM -- Single Family Mortgage
UT -- Unlimited Tax
<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 $ 191,630,861 $ 95,321,429 $ 96,574,320 $1,252,891 $ 287,674,526
Louisiana Municipal Income Fund 95,816,585 4,701,855 4,751,842 49,987 101,441,463
Total Return Bond Fund 70,614,023 433,516 607,515 173,999 71,866,819
U.S. Government Income Fund 58,323,092 628,103 811,328 183,225 59,437,873
Cash Reserve Fund 150,536,109 -- -- -- 150,377,368
U.S. Treasury Money Market Fund 154,523,117 -- -- -- 154,624,147
</TABLE>
* The categories of investments are shown as a percentage of net assets at
August 31, 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
August 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL
APPRECIATION LOUISIANA MUNICIPAL
FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 2,992,000 $ --
Investments in securities 283,960,290 100,518,440
-------------- --------------------
Total investments in securities, at value 286,952,290 100,518,440
Cash -- --
Income receivable 559,303 1,440,535
Receivable for investments sold -- 50,712
Receivable for shares sold 332,188 21,061
Deferred expenses -- --
-------------- --------------------
Total assets 287,843,781 102,030,748
-------------- --------------------
LIABILITIES:
Payable for shares redeemed 61,112 198,571
Income distribution payable -- 305,072
Payable to Bank 11,305 77,609
Accrued expenses 96,838 8,033
-------------- --------------------
Total liabilities 169,255 589,285
-------------- --------------------
NET ASSETS CONSIST OF:
Paid in capital 166,479,185 96,490,519
Net unrealized appreciation of investments 95,375,337 4,701,855
Accumulated net realized gain (loss) on investments 25,830,431 229,862
Undistributed net investment income (Distributions
in excess of net investment income) (10,427) 19,227
-------------- --------------------
Total Net Assets $287,674,526 $101,441,463
-------------- --------------------
NET ASSETS: $283,039,690(1) $101,441,463
-------------- --------------------
$ 4,634,836(2) --
-------------- --------------------
SHARES OUTSTANDING 12,648,630(1) 9,052,425
207,623(2) --
-------------- --------------------
Total Shares Outstanding 12,856,253 9,052,425
============== ===================
NET ASSET VALUE PER SHARE $22.38(1) $11.21
-------------- --------------------
$22.32(2) --
-------------- --------------------
OFFERING PRICE PER SHARE* $23.43(1)**** $11.56***
-------------- --------------------
$22.32(2) --
-------------- --------------------
REDEMPTION PROCEEDS PER SHARE** $22.38(1) $11.21
-------------- --------------------
$21.09(2)+ --
-------------- --------------------
Investments, at identified cost $191,576,953 $ 95,816,585
============== ===================
Investments, at tax cost $191,630,861 $ 95,816,585
============== ===================
- ---------------------------------------------------------------------------------------------------------------------
</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.
** See "Redeeming Shares" 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>
--------------------------------------------------------------------------------------------
$ 6,253,000 $ 546,000 $ 16,488,000 $ 70,034,000
64,794,539 58,405,195 134,048,109 84,489,117
-------------------- -------------------- -------------------- --------------------
71,047,539 58,951,195 150,536,109 154,523,117
-- -- 589,985 216
939,957 570,483 56,799 491,940
-- 216,626 -- --
2,120 59,194 5,212 8,153
-- -- -- 268
-------------------- -------------------- -------------------- --------------------
71,989,616 59,797,498 151,188,105 155,023,694
-------------------- -------------------- -------------------- --------------------
-- 72,183 294,439 29,673
89,367 254,108 478,548 366,501
3,478 19,827 -- --
29,952 13,507 37,750 3,373
-------------------- -------------------- -------------------- --------------------
122,797 359,625 810,737 399,547
-------------------- -------------------- -------------------- --------------------
71,366,086 62,683,937 150,377,368 154,624,147
433,516 676,259 -- --
65,503 (3,892,518) -- --
1,714 (29,805) -- --
-------------------- -------------------- -------------------- --------------------
$ 71,866,819 $ 59,437,873 $150,377,368 $154,624,147
-------------------- -------------------- -------------------- --------------------
$ 71,866,819 $ 59,437,873 $150,377,368 $154,624,147
-------------------- -------------------- -------------------- --------------------
-- -- -- --
-------------------- -------------------- -------------------- --------------------
7,190,338 5,958,120 150,377,368 154,624,147
-- -- -- --
-------------------- -------------------- -------------------- --------------------
7,190,338 5,958,120 150,377,368 154,624,147
==================== ==================== ==================== ====================
$9.99 $9.98 $1.00 $1.00
-------------------- -------------------- -------------------- --------------------
-- -- -- --
-------------------- -------------------- -------------------- --------------------
$10.30*** $10.29*** $1.00 $1.00
-------------------- -------------------- -------------------- --------------------
-- -- -- --
-------------------- -------------------- -------------------- --------------------
$9.99 $9.98 $1.00 $1.00
-------------------- -------------------- -------------------- --------------------
-- -- -- --
-------------------- -------------------- -------------------- --------------------
$ 70,614,023 $ 58,274,936 $150,536,109 $154,523,117
==================== ==================== ==================== ====================
$ 70,614,023 $ 58,323,092 $150,536,109 $154,523,117
==================== ==================== ==================== ====================
--------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------
- -----------------------------------------------------
STATEMENTS OF OPERATIONS TOWER MUTUAL FUNDS
Year Ended August 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CAPITAL LOUISIANA
APPRECIATION MUNICIPAL
FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 4,157,778 $ --
Interest 209,578 4,534,425
---------------- ----------------
Total income 4,367,356 4,534,425
---------------- ----------------
EXPENSES:
Investment advisory fee 1,674,455 346,773
Administrative personnel and services fee 277,600 95,787
Custodian fees 49,629 19,233
Transfer and dividend disbursing agent fees and expenses 48,499 35,332
Directors'/Trustees' fees 10,052 3,418
Auditing fees 19,068 12,952
Legal fees 5,850 5,200
Portfolio accounting fees 59,601 51,810
Distribution services fee 565,615(a) --
Shareholder services fee 3,732(b) --
Share registration costs 34,000 11,772
Printing and postage 12,774 7,045
Insurance premiums 5,050 3,286
Miscellaneous 8,882 1,307
---------------- ----------------
Total expenses 2,774,807 593,915
Waivers--
Waiver of investment advisory fee -- (61,649)
---------------- ----------------
Net expenses 2,774,807 532,266
---------------- ----------------
Net investment income 1,592,549 4,002,159
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 26,519,341 774,842
Net change in unrealized appreciation on investments 62,190,078 2,527,992
---------------- ----------------
Net realized and unrealized gain (loss) on investments 88,709,419 3,302,834
---------------- ----------------
Change in net assets resulting from operations $ 90,301,968 $7,304,993
================= ================
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents distribution services fee of $554,420 and $11,195 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>
----------------------------------------------------------------------------------------
$ -- $ -- $ -- $ --
5,091,457 3,040,193 9,338,985 7,954,368
------------------- ------------------- ------------------- -------------------
5,091,457 3,040,193 9,338,985 7,954,368
------------------- ------------------- ------------------- -------------------
488,596 190,313 682,458 598,805
87,209 52,512 213,586 186,989
17,450 17,000 39,123 31,798
32,401 40,751 39,621 38,818
4,001 2,519 12,410 8,005
13,001 11,643 17,566 15,502
4,501 5,300 6,570 6,342
52,274 50,013 47,310 44,534
174,499 -- 426,536 --
-- -- -- --
13,289 14,151 12,775 13,880
6,540 8,913 7,300 8,399
3,701 2,800 3,944 4,851
5,398 1,800 4,015 6,920
------------------- ------------------- ------------------- -------------------
902,860 397,715 1,513,214 964,843
-- (25,375) -- (214,099)
------------------- ------------------- ------------------- -------------------
902,860 372,340 1,513,214 750,744
------------------- ------------------- ------------------- -------------------
4,188,597 2,667,853 7,825,771 7,203,624
------------------- ------------------- ------------------- -------------------
884,814 (369,915) -- --
978,557 1,353,086 -- --
------------------- ------------------- ------------------- -------------------
1,863,371 983,171 -- --
------------------- ------------------- ------------------- -------------------
$ 6,051,968 $ 3,651,024 $ 7,825,771 $ 7,203,624
==================== ==================== ==================== ====================
----------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------
- -------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS TOWER MUTUAL FUNDS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL LOUISIANA MUNICIPAL
APPRECIATION FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,592,549 $ 1,732,246 $ 4,002,159 $ 3,562,511
Net realized gain (loss) on investments 26,519,341 21,484,071 774,842 328,333
Net change in unrealized appreciation/
depreciation 62,190,078 2,454,787 2,527,992 (599,781)
------------ ------------ ------------ ------------
Change in net assets resulting from
operations 90,301,968 25,671,104 7,304,993 3,291,063
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (1,694,309)(1) (1,745,652) (4,058,449) (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 (20,727,161) (9,259,629) (4,278,843) (3,561,907)
------------ ------------ ------------ ------------
SHARE TRANSACTIONS:
Proceeds from sale of shares 27,841,991 33,055,554 5,399,903 7,858,208
Proceeds from shares issued in connection
with the acquisition of the Common Trust
Funds 57,075,362 -- 36,590,980 --
Net asset value of shares issued to
shareholders in payment of distributions
declared 15,809,726 7,256,316 1,720,137 1,709,419
Cost of shares redeemed (52,275,086) (31,551,308) (11,012,373) (11,180,328)
------------ ------------ ------------ ------------
Change in net assets from share
transactions 48,451,993 8,760,562 32,698,647 (1,612,701)
------------ ------------ ------------ ------------
Change in net assets 118,026,800 25,172,037 35,724,797 (1,883,545)
NET ASSETS:
Beginning of period 169,647,726 144,475,689 65,716,666 67,600,211
------------ ------------ ------------ ------------
End of period $287,674,526 $169,647,726 $101,441,463 $ 65,716,666
============ ============ ============ ============
Undistributed net investment income
(Distributions in excess of net investment
income) included in net assets at end of
period $ (10,427) $ 91,333 $ 19,227 $ 75,517
============ ============ ============ ============
Net gain (loss) as computed for federal tax
purposes $ 26,519,341 $ 21,433,652 $ 774,842 $ (229,807)
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents income distributions of $1,691,843 and $2,466 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
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1997 1996 1997 1996 1997
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,188,597 $ 3,989,944 $ 2,667,853 $ 2,711,671 $ 7,825,771 $ 9,132,497 $ 7,203,624
884,814 562,208 (369,915) (474,449) -- -- --
978,557 (2,533,917) 1,353,086 (734,318) -- -- --
------------ ------------ ------------ ------------ ------------- ------------- -------------
6,051,968 2,018,235 3,651,024 1,502,904 7,825,771 9,132,497 7,203,624
------------ ------------ ------------ ------------ ------------- ------------- -------------
(4,245,320) (4,074,428) (2,738,780) (2,789,759) (7,825,771) (9,132,497) (7,203,624)
-- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------- ------------- -------------
(4,245,320) (4,074,428) (2,738,780) (2,789,759) (7,825,771) (9,132,497) (7,203,624)
------------ ------------ ------------ ------------ ------------- ------------- -------------
15,852,296 15,497,407 10,466,537 4,723,431 462,383,174 432,905,070 396,797,192
-- -- 21,368,846 -- -- -- --
3,287,237 3,455,297 623,990 911,699 1,743,290 1,471,325 3,258,924
(20,267,617) (15,162,898) (11,477,619) (9,397,530) (482,092,964) (457,274,889) (381,500,330)
------------ ------------ ------------ ------------ ------------- ------------- -------------
(1,128,084) 3,789,806 20,981,754 (3,762,400) (17,966,500) (22,898,494) 18,555,786
------------ ------------ ------------ ------------ ------------- ------------- -------------
678,564 1,733,613 21,893,998 (5,049,255) (17,966,500) (22,898,494) 18,555,786
71,188,255 69,454,642 37,543,875 42,593,130 168,343,868 191,242,362 136,068,361
------------ ------------ ------------ ------------ ------------- ------------- -------------
$71,866,819 $71,188,255 $59,437,873 $37,543,875 $ 150,377,368 $ 168,343,868 $ 154,624,147
============ ============ ============ ============ ============= ============= =============
$ 1,714 $ 58,437 $ (29,805) $ 41,122 -- -- --
============ ============ ============ ============ ============= ============= =============
$ 840,675 $ 264,963 $ (553,828) $(1,298,006) -- -- --
============ ============ ============ ============ ============= ============= =============
-------------
YEAR
ENDED
AUGUST 31,
1996
$ 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>
NET DISTRIBUTIONS
NET ASSET INVESTMENT NET REALIZED DISTRIBUTIONS FROM NET DISTRIBUTIONS
VALUE, INCOME AND UNREALIZED TOTAL FROM FROM NET REALIZED IN EXCESS OF
YEAR ENDED BEGINNING (OPERATING GAIN/(LOSS) ON INVESTMENT INVESTMENT GAIN ON NET INVESTMENT
AUGUST 31, OF PERIOD LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND--CLASS A SHARES
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 $ 17.87 0.15 6.51 6.66 (0.16) (1.99) --
CAPITAL APPRECIATION FUND--CLASS B SHARES
1997(a) $ 18.90 (0.01)(i) 3.48 3.47 -- -- (0.05)(g)
LOUISIANA MUNICIPAL INCOME FUND
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 $ 10.94 0.57 0.28 0.85 (0.58) -- --
TOTAL RETURN BOND FUND
1993(b) $ 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 $ 9.77 0.60 0.23 0.83 (0.61) -- --
U.S. GOVERNMENT INCOME FUND
1993 $ 10.75 0.74 0.12 0.86 (0.74) (0.01) (0.01)(g)
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 $ 9.82 0.62 0.18 0.80 (0.64) -- --
CASH RESERVE FUND
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 $ 1.00 0.05 -- 0.05 (0.05) -- --
U.S. TREASURY MONEY MARKET
1993(c) $ 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 $ 1.00 0.05 -- 0.05 (0.05) -- --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from December 2, 1996 (date of initial
public offering) to August 31, 1997.
(b) Reflects operations for the period from November 2, 1992 (date of initial
public investment) to August 31, 1993.
(c) Reflects operations for the period from July 19, 1993 (date of initial
public investment) to August 31, 1993.
(d) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(e) Computed on an annualized basis.
(f) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(g) 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.
(h) 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.
(i) Per share information presented is based on the monthly average number of
shares outstanding divided by the net operating loss due to large
fluctuations in the number of shares outstanding during the period.
(See Notes which are an integral part of the Financial Statements)
exit
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------
NET
INVESTMENT
NET ASSET INCOME NET ASSETS, PORTFOLIO
TOTAL VALUE, TOTAL (OPERATING EXPENSE END OF PERIOD TURNOVER
DISTRIBUTIONS END OF PERIOD RETURN (D) EXPENSES LOSS) WAIVER (F) (000 OMITTED) RATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(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%
(2.15) $ 22.38 39.56% 1.24% 0.72% -- $ 283,040 62%
(0.05) $ 22.32 18.40% 1.99%(e) (0.09%)(e) -- $ 4,635 62%
(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%
(0.58) $ 11.21 8.31% 0.69% 5.19% 0.08% $ 101,441 17%
(0.55) $ 10.49 10.39% 0.77%(e) 6.56%(e) 0.22%(e) $ 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%
(0.61) $ 9.99 8.71% 1.29% 6.00% -- $ 71,867 65%
(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%
(0.64) $ 9.98 8.39% 0.88% 6.31% 0.06% $ 59,438 72%
(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 --
(0.05) $ 1.00 4.70% 0.89% 4.59% -- $ 150,377 --
(0.002) $ 1.00 0.34% 0.50%(e) 2.80%(e) 0.32%(e) $ 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 --
(0.05) $ 1.00 4.92% 0.50% 4.81% 0.14% $ 154,624 --
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE
COMMISSION
PAID (H)
--
--
--
$ 0.0632
$ 0.0700
$ 0.0700
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
- -------------
</TABLE>
- --------------------------------------------------------------------
- --------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS TOWER MUTUAL FUNDS
August 31, 1997
- ------------------------------------------------------
- -----------------------------------------------------
(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>
<S> <C> <C>
----------------------------------------------------------------------------------------------
PORTFOLIO NAME DIVERSIFICATION INVESTMENT OBJECTIVE
----------------------------------------------------------------------------------------------
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 Reserve Fund diversified Provide current income consistent ("Cash
Reserve Fund") with stability of principal.
----------------------------------------------------------------------------------------------
Tower U.S. Treasury Money Market diversified Provide current income consistent
Fund with 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.
On May 12, 1997, three of the Tower Mutual Funds engaged in a tax-free common
trust fund conversion with three Hibernia National Bank Common Trust Funds.
The following is a summary of the transactions:
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
CAPITAL LOUISIANA MUNICIPAL U.S. GOVERNMENT
APPRECIATION FUND INCOME FUND INCOME FUND
-------------------------------------------------------------------------------------------------
Common Trust Fund Acquired Hibernia Personal Hibernia Personal Hibernia Personal
Stock Fund Tax Bond Fund
Exempt Bond Fund
-------------------------------------------------------------------------------------------------
Common Trust Fund Shares 932,721 3,612,185 1,962,801
Converted
-------------------------------------------------------------------------------------------------
Tower Fund Shares Issued 2,789,607 3,317,405 2,156,291
-------------------------------------------------------------------------------------------------
Common Trust Fund Assets $57,075,362 $36,590,980 $21,368,846
Acquired
-------------------------------------------------------------------------------------------------
Unrealized Appreciation* $18,492,828 $886,608 $132,392
-------------------------------------------------------------------------------------------------
Tower Fund Net Assets $270,386,000 $102,143,658 $54,858,937
Following Acquisition
-------------------------------------------------------------------------------------------------
</TABLE>
*Unrealized Appreciation is included in the Common Trust Fund Assets Acquired
above.
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 the amortized cost method
to value portfolio securities 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, 1997, U.S. Government Income Fund, for federal tax purposes,
had a capital loss carryforward, as noted below, which will reduce the
Fund's taxable income arising from future net realized gain on investments,
if any, to the extent permitted by the Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be
necessary to relieve the Fund of any liability for federal tax. Pursuant to
the Code, the capital loss carryforward will expire as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EXPIRATION YEAR
------------------------------------------------------------------------------------------------------------------
TOTAL TAX LOSS
FUND 2002 2003 2004 2005 CARRYFORWARD
<S> <C> <C> <C> <C> <C>
-------------------------------------------
U.S. Government Income Fund $97,781 $1,657,595 $1,298,006 $553,828 $3,607,210
------------------------------------------------------------------------------------------------------------------
</TABLE>
Additionally, the net capital loss, as noted below, is attributable to security
transactions incurred after October 31, 1996 are treated as arising on the
first day of the Funds' next taxable year (September 1, 1997).
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
TOTAL TAX LOSS
FUND PUSHFORWARD
-------------------------------------------------------------------------------------------------------------
<S> <C>
U.S. Government Income Fund $236,799
-------------------------------------------------------------------------------------------------------------
</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 U.S. Treasury Money Market Fund
with respect to registration of shares in the first fiscal year, excluding
the initial expense of registering the shares, have been deferred and are
being amortized over a period not to exceed five years from the 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).
Transactions in shares were as follows:
EQUITY AND INCOME FUNDS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
-----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996
CLASS A SHARES SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,060,360 $ 23,465,207 1,892,875 $ 33,055,554
Shares issued in connection with the acquisition of the
Common Trust Funds 2,789,607 57,075,362 -- --
Shares issued to shareholders in payment of distributions
declared 835,384 15,807,335 440,856 7,256,316
Shares redeemed (2,528,206) (52,191,192) (1,820,179) (31,551,308)
---------- ------------ ---------- ------------
Net change resulting from Class A Shares transactions 3,157,145 $ 44,156,712 513,552 $ 8,760,562
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
----------------------------------------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED
AUGUST 31, 1997* AUGUST 31, 1996
----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES SHARES DOLLARS SHARES DOLLARS
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 211,458 $ 4,376,784 -- --
Shares issued to shareholders in payment of distributions
declared 113 2,391 -- --
Shares redeemed (3,948) (83,894) -- --
---------- ------------ ---------- ------------
Net change resulting from Class B Shares transactions 207,623 $ 4,295,281 -- --
========= =========== ========= ===========
Net change resulting from fund share transactions 3,364,768 $ 48,451,993 513,552 $ 8,760,562
========= =========== ========= ===========
</TABLE>
*For the period from December 2, 1996 (date of initial public offering) to
August 31, 1997.
<TABLE>
------------------------------------------------------------------------------------------------------------------
<CAPTION>
LOUISIANA MUNICIPAL U.S. GOVERNMENT
TOTAL RETURN BOND FUND
INCOME FUND INCOME FUND
------------------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED YEAR YEAR YEAR YEAR ENDED
AUGUST ENDED ENDED ENDED ENDED AUGUST
31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 31,
1997 1996 1997 1996 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 566,626 709,049 1,596,634 1,539,679 1,066,484 465,362
Shares issued in connection with
the acquisition of the Common
Trust Funds 3,317,405 -- -- -- 2,156,291 --
Shares issued to shareholders in
payment of distributions
declared 155,298 154,787 329,947 344,081 62,787 90,519
Shares redeemed (992,694) (1,009,008) (2,022,793) (1,507,834) (1,151,003) (931,881)
--------- ---------- ---------- ---------- ---------- ---------
Net change resulting from
share transactions 3,046,635 (145,172) (96,212) 375,926 2,134,559 (376,000)
========== ========== ========== ========== ========== ==========
</TABLE>
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
U.S. TREASURY
CASH RESERVE FUND MONEY MARKET FUND
------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 462,383,174 432,905,070 396,797,192 315,672,475
Shares issued to shareholders in payment of
distributions declared 1,743,290 1,471,325 3,258,924 2,390,350
Shares redeemed (482,092,964) (457,274,889) (381,500,330) (298,483,536)
------------ ------------ ------------ ------------
Net change resulting from share transactions (17,966,500) (22,898,494) 18,555,786 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>
<S> <C>
--------------------------------------------------------------------------------------------------------------
ANNUAL
FUND RATE
--------------------------------------------------------------------------------------------------------------
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,
except for Class B Shares of the Capital Appreciation Fund, may incur
distribution expenses up to 0.25% of the average daily net assets of the
Funds, annually, to reimburse FSC. Class B Shares of the Capital Appreciation
Fund may incur distribution expenses up to 0.75% of the average daily net
assets of the Class B Shares, annually, to reimburse FSC. For the year ended
August 31, 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 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. For the year ended
August 31, 1997, the Funds listed below paid the following pursuant to this
agreement.
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------
AMOUNT REIMBURSED
EXPENSES OF TO FAS FOR THE
ORGANIZING YEAR ENDED
FUND THE FUNDS AUGUST 31, 1997
---------------------------------------------------------------------------------------------------------------
Total Return Bond Fund $13,075 $4,358
U.S. Treasury Money Market Fund $17,585 $4,983
</TABLE>
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
year ended August 31, 1997, were as follows:
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------
FUND PURCHASES SALES
---------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund $135,336,046 $142,438,505
Louisiana Municipal Income Fund $13,289,577 $18,050,790
Total Return Bond Fund $42,545,528 $45,991,693
U.S. Government Income Fund $30,964,499 $29,815,818
---------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------
- -----------------------------------------------------
(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 August 31, 1997, 74.98% 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 23.27% of total investments.
================================================================================
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of TOWER MUTUAL FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Tower Mutual Funds (comprising, respectively,
Tower Capital Appreciation Fund, Tower Louisiana Municipal Income Fund, Tower
Total Return Bond Fund, Tower U.S. Government Income Fund, Tower Cash Reserve
Fund and Tower U.S. Treasury Money Market Fund) as of August 31, 1997 and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for the periods presented therein. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian and brokers and, where
appropriate, the application of alternative auditing procedures for unsettled
security transactions. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios of the Tower Mutual Funds, as identified above, at
August 31, 1997, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and their financial highlights for the periods presented therein, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
October 13, 1997
TOWER MUTUAL FUNDS
------------------------------------------------
TRUSTEES AND OFFICERS
-----------------------------------
-----------------------------------
<TABLE>
<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
MUTUAL FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS, ARE NOT GUARANTEED
BY ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN MUTUAL
FUNDS INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED. ALTHOUGH MONEY MARKET FUNDS SEEK TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE IS NO ASSURANCE THAT
THEY WILL BE ABLE TO DO SO.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS
ONLY WHEN PRECEDED OR ACCOMPANIED BY THE FUNDS' PROSPECTUS WHICH
CONTAINS FACTS CONCERNING THEIR OBJECTIVES AND POLICIES, MANAGEMENT
FEES, EXPENSES AND OTHER INFORMATION.
</TABLE>
- --------------------------------------------------------------------------------
Federated Securities Corp. is distributor of the funds.
891836108
891836207
891836306
891836504
891836405
891836603
891836702
G01262-01(10/97)
Tower Mutual Funds Appendix
A. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in Tower Capital Appreciation Fund-Class A Shares
(the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a solid line. The Standard & Poor's 500
Composite Stock Index is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and the Standard & Poor's 500 Composite Stock
Index. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 10/14/88 through
8/31/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Standard & Poor's 500 Composite Stock
Index; the ending values are $38,115 and $42,748, respectively.
B. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in Tower Capital Appreciation Fund-Class B Shares
(the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a solid line. The Standard & Poor's 500
Composite Stock Index is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and the Standard & Poor's 500 Composite Stock
Index. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 12/2/96 through
8/31/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Standard & Poor's 500 Composite Stock
Index; the ending values are $11,289 and $12,048, respectively.
C. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in Tower Louisiana Municipal Income Fund (the
"Fund"). The corresponding components of the line graph are listed underneath.
The Fund is represented by a solid line. The Lehman Brothers Ten-Year Insured
Index is represented by a dotted line. The line graph is a visual representation
of a comparison of change in value of a hypothetical $10,000 purchase in the
Fund and the Lehman Brothers Ten-Year Insured Index. The "y" axis reflects the
cost of the investment. The "x" axis reflects computation periods from the
Fund's start of performance, 10/14/88 through 8/31/97. The right margin reflects
the ending value of the hypothetical investment in the Fund as compared to the
Lehman Brothers Ten-Year Insured Index; the ending values are $18,088 and
$20,433, respectively.
D. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in Tower Total Return Bond Fund (the "Fund"). The
corresponding components of the line graph are listed underneath. The Fund is
represented by a solid line. The Salomon Brothers Broad Investment Grade Bond
Index is represented by a dotted line. The line graph is a visual representation
of a comparison of change in value of a hypothetical $10,000 purchase in the
Fund and the Salomon Brothers Broad Investment Grade Bond Index. The "y" axis
reflects the cost of the investment. The "x" axis reflects computation periods
from the Fund's start of performance, 11/2/92 through 8/31/97. The right margin
reflects the ending value of the hypothetical investment in the Fund as compared
to the Salomon Brothers Broad Investment Grade Bond Index; the ending values are
$12,701 and $13,985, respectively.
E. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in Tower U.S. Government Income Fund (the "Fund").
The corresponding components of the line graph are listed underneath. The Fund
is represented by a solid line. The Salomon Brothers Medium Term Broad Index is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000 purchase in the Fund and
the Salomon Brothers Medium Term Broad Index. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods from the Fund's start
of performance, 10/14/88 through 8/31/97. The right margin reflects the ending
value of the hypothetical investment in the Fund as compared to the Salomon
Brothers Medium Term Broad Index; the ending values are $18,439 and $20,866,
respectively.
