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<PAGE> PAGE 4
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<PAGE> PAGE 6
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
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<PAGE> PAGE 15
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<PAGE> PAGE 16
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<PAGE> PAGE 18
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<PAGE> PAGE 22
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<PAGE> PAGE 23
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<PAGE> PAGE 27
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<PAGE> PAGE 28
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<PAGE> PAGE 29
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<PAGE> PAGE 32
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<PAGE> PAGE 33
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<PAGE> PAGE 34
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<PAGE> PAGE 35
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062 Q000800 0.0
062 R000800 0.0
066 A000800 Y
066 B000800 N
066 C000800 N
066 D000800 N
066 E000800 N
066 F000800 N
066 G000800 Y
067 000800 Y
068 A000800 N
068 B000800 N
069 000800 N
070 A010800 Y
070 A020800 Y
070 B010800 Y
070 B020800 N
070 C010800 Y
070 C020800 N
070 D010800 Y
070 D020800 N
070 E010800 N
070 E020800 N
070 F010800 Y
<PAGE> PAGE 40
070 F020800 N
070 G010800 Y
070 G020800 N
070 H010800 Y
070 H020800 N
070 I010800 Y
070 I020800 N
070 J010800 Y
070 J020800 N
070 K010800 Y
070 K020800 N
070 L010800 Y
070 L020800 Y
070 M010800 Y
070 M020800 N
070 N010800 Y
070 N020800 N
070 O010800 Y
070 O020800 N
070 P010800 Y
070 P020800 Y
070 Q010800 Y
070 Q020800 N
070 R010800 Y
070 R020800 N
071 A000800 4524
071 B000800 1417
071 C000800 2950
071 D000800 48
072 A000800 12
072 B000800 108
072 C000800 32
072 D000800 0
072 E000800 0
072 F000800 27
072 G000800 0
072 H000800 0
072 I000800 10
072 J000800 28
072 K000800 0
072 L000800 0
072 M000800 0
072 N000800 15
072 O000800 0
072 P000800 0
072 Q000800 0
072 R000800 26
072 S000800 47
072 T000800 0
072 U000800 0
072 V000800 0
<PAGE> PAGE 41
072 W000800 2
072 X000800 155
072 Y000800 114
072 Z000800 99
072AA000800 158
072BB000800 57
072CC010800 194
072CC020800 0
072DD010800 145
072DD020800 0
072EE000800 30
073 A010800 0.4127
073 A020800 0.0000
073 B000800 0.0936
073 C000800 0.0000
074 A000800 1
074 B000800 619
074 C000800 0
074 D000800 1483
074 E000800 0
074 F000800 1931
074 G000800 0
074 H000800 0
074 I000800 0
074 J000800 7
074 K000800 41
074 L000800 32
074 M000800 0
074 N000800 4114
074 O000800 51
074 P000800 3
074 Q000800 0
074 R010800 0
074 R020800 0
074 R030800 0
074 R040800 54
074 S000800 0
074 T000800 4006
074 U010800 375
074 U020800 0
074 V010800 10.69
074 V020800 0.00
074 W000800 0.0000
074 X000800 171
074 Y000800 0
075 A000800 0
075 B000800 3331
076 000800 0.00
008 A000901 CATERPILLAR INVESTMENT MANAGEMENT LTD.
008 B000901 A
008 C000901 801-34522
<PAGE> PAGE 42
008 D010901 PEORIA
008 D020901 IL
008 D030901 61629
008 D040901 5330
024 000900 N
028 A010900 5381
028 A020900 0
028 A030900 0
028 A040900 94
028 B010900 2696
028 B020900 0
028 B030900 0
028 B040900 553
028 C010900 1070
028 C020900 0
028 C030900 0
028 C040900 367
028 D010900 3620
028 D020900 0
028 D030900 0
028 D040900 221
028 E010900 5842
028 E020900 0
028 E030900 0
028 E040900 183
028 F010900 760
028 F020900 0
028 F030900 0
028 F040900 1446
028 G010900 19369
028 G020900 0
028 G030900 0
028 G040900 2864
028 H000900 0
045 000900 Y
046 000900 N
047 000900 Y
048 000900 0.750
048 A010900 0
048 A020900 0.000
048 B010900 0
048 B020900 0.000
048 C010900 0
048 C020900 0.000
048 D010900 0
048 D020900 0.000
048 E010900 0
048 E020900 0.000
048 F010900 0
048 F020900 0.000
048 G010900 0
<PAGE> PAGE 43
048 G020900 0.000
048 H010900 0
048 H020900 0.000
048 I010900 0
048 I020900 0.000
048 J010900 0
048 J020900 0.000
048 K010900 0
048 K020900 0.000
049 000900 N
050 000900 N
051 000900 N
052 000900 N
053 A000900 Y
053 B000900 Y
053 C000900 N
062 A000900 N
062 B000900 0.0
062 C000900 0.0
062 D000900 0.0
062 E000900 0.0
062 F000900 0.0
062 G000900 0.0
062 H000900 0.0
062 I000900 0.0
062 J000900 0.0
062 K000900 0.0
062 L000900 0.0
062 M000900 0.0
062 N000900 0.0
062 O000900 0.0
062 P000900 0.0
062 Q000900 0.0
062 R000900 0.0
066 A000900 Y
066 B000900 N
066 C000900 Y
066 D000900 N
066 E000900 N
066 F000900 N
066 G000900 N
067 000900 N
068 A000900 N
068 B000900 N
069 000900 N
070 A010900 Y
070 A020900 Y
070 B010900 Y
070 B020900 N
070 C010900 Y
070 C020900 N
<PAGE> PAGE 44
070 D010900 Y
070 D020900 N
070 E010900 N
070 E020900 N
070 F010900 Y
070 F020900 N
070 G010900 Y
070 G020900 N
070 H010900 Y
070 H020900 N
070 I010900 N
070 I020900 N
070 J010900 Y
070 J020900 N
070 K010900 Y
070 K020900 Y
070 L010900 Y
070 L020900 N
070 M010900 N
070 M020900 N
070 N010900 Y
070 N020900 N
070 O010900 Y
070 O020900 N
070 P010900 Y
070 P020900 N
070 Q010900 N
070 Q020900 N
070 R010900 Y
070 R020900 N
071 A000900 65791
071 B000900 23443
071 C000900 35680
071 D000900 66
072 A000900 8
072 B000900 65
072 C000900 316
072 D000900 0
072 E000900 0
072 F000900 94
072 G000900 0
072 H000900 0
072 I000900 8
072 J000900 36
072 K000900 0
072 L000900 0
072 M000900 1
072 N000900 13
072 O000900 0
072 P000900 0
072 Q000900 0
<PAGE> PAGE 45
072 R000900 32
072 S000900 19
072 T000900 0
072 U000900 0
072 V000900 0
072 W000900 3
072 X000900 206
072 Y000900 0
072 Z000900 175
072AA000900 2787
072BB000900 1915
072CC010900 2599
072CC020900 0
072DD010900 40
072DD020900 0
072EE000900 0
073 A010900 0.0156
073 A020900 0.0000
073 B000900 0.0000
073 C000900 0.0000
074 A000900 0
074 B000900 0
074 C000900 528
074 D000900 0
074 E000900 0
074 F000900 45217
074 G000900 0
074 H000900 0
074 I000900 0
074 J000900 0
074 K000900 0
074 L000900 33
074 M000900 0
074 N000900 45778
074 O000900 0
074 P000900 16
074 Q000900 0
074 R010900 0
074 R020900 0
074 R030900 0
074 R040900 69
074 S000900 0
074 T000900 45693
074 U010900 4062
074 U020900 0
074 V010900 11.25
074 V020900 0.00
074 W000900 0.0000
074 X000900 129
074 Y000900 0
075 A000900 0
<PAGE> PAGE 46
075 B000900 36727
076 000900 0.00
SIGNATURE FRED KAUFMAN
TITLE VICE PRES/TREASURER
PRICE WATERHOUSE LLP
160 Federal Street
Boston, MA 02110
August 20, 1996
To The Trustees of
The Preferred Group of Mutual Funds
In planning and performing our audits of the financial statements of Preferred
Growth Fund, Preferred Value Fund, Preferred International Fund, Preferred
Asset Allocation Fund, Preferred Fixed Income Fund, Preferred Short-Term
Government Securities Fund, Preferred Small Cap Fund, Preferred Balanced Fund
and Preferred Money Market Fund, constituting The Preferred Group of Mutual
Funds (the "Trust"), for the period ended June 30, 1996, we considered their
internal control structure, including procedures for safeguarding securities,
in order to determine our auditing procedures for the purposes of expressing
our opinion on the financial statements and to comply with the requirements of
Form N-SAR, and not to provide assurance on the internal control structure.
The management of the Trust is responsible for establishing and maintaining an
internal control structure. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and
related costs of internal control structure policies and procedures. Two of
the objectives of an internal control structure are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded against
loss from unauthorized use or disposition and that transactions are executed
in accordance with management's authorization and recorded properly to permit
preparation of financial statements in conformity with generally accepted
accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce
to a relatively low level the risk that errors or irregularities in amounts
that would be material in relation to the financial statements being audited
may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions. However, we noted no
matters involving the internal control structure, including procedures for
safeguarding securities, that we consider to be material weaknesses as defined
above as of June 30, 1996.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
PRICE WATERHOUSE LLP
THE PREFERRED GROUP OF MUTUAL FUNDS
RECORD OF SECURITIES PURCHASED
UNDER THE TRUST'S RULE 10F-3 PROCEDURES
1. Subadviser: CATERPILLAR INVESTMENT MANAGEMENT LTD.
2. Fund: PREFERRED SHORT-TERM GOVERNMENT SECURITIES FUND
3. Securities are: (Select one)
"Municipal securities" Part of an issue
as defined in Section registered under the
3(a)(29) of the Securities Act of
Securities Exchange 1933 which is being
Act of 1934 offered to the public
Yes No Yes X No
4. Issuer: STUDENT LOAN MARKETING ADMIN. ("SALLIE MAE")
5. Description of Security: ASSET BACKED TRUST
6. Date of Purchase: APRIL 20, 1996
7. Underwriter from whom
purchased: LEHMAN BROTHERS
8. Name of Affiliated Underwriter
managing or participating in
syndicate (attach list of all
members of syndicate): LEHMAN BROTHERS
SYNDICATE: GOLDMAN/LEHMAN/BEAR STERNS/FIRST BOSTON/J.P. MORGAN
9. Aggregate principal amount of purchase [this
amount, when added to purchases by other
investment companies for whom CIML and the
relevant Subadviser act as adviser, may not
exceed (A) the greater of 4% of (10) or
$500,000, or (B) 10% of (11)]: 2,000,000
<PAGE>
10. Aggregate principal amount of class of
securities being offered (i.e., existing
securities plus current offering, both of
which are same class of securities): $901,000,000
---------------------------
11. Aggregate principal amount of offering: $1,515,000,000
12. Purchase price, net of fees and
expenses [may not exceed (14)]: PAR
13. Date offering commenced: APRIL 20, 1996
14. Public offering price: PAR
15. Purchased prior to close of first full
business day after offering commenced: X YES NO
16. Commission, spread or profit: 0.225% $
----------
17. Have the following conditions been
satisfied? YES NO
a. The purchase price did not exceed
the offering price prior to the close
of the first full business day after
the first day of the offering (or, if
a rights offering, the securities were
purchased on the fourth day preceding
the day on which the offering terminated)? X
b. The underwriting was a firm commitment
underwriting? X
c. The commission, spread or profit was
reasonable and fair in relation to that
being received by others for
underwriting similar securities during
the same period? X
d. (FOR SECURITIES THAT ARE NOT
MUNICIPAL SECURITIES) The issuer has
been in continuous operation for not
less than three years, including the
operations of any predecessors? X
<PAGE>
e. (FOR MUNICIPAL SECURITIES ONLY) The
issue of securities has received an
investment grade rating from a
nationally recognized statistical rating
organization or, if the issuer or entity
supplying the revenues from which the
issue is to be paid shall have been in
existence less than three years
(including any predecessors), it has
received one of the three highest
ratings from at least one such rating
service?
f. The amount of such securities
purchased by all of the investment
companies advised by CIML and the
Subadviser(s) to the Fund purchasing
such securities did not exceed 10% of
the principal amount of the offering
AND did not exceed the greater of (i)
4% of the principal amount of the class
of securities being offered, or (ii)
$500,000? X
g. The purchase price was less than 3%
of the value of the total assets of the
Fund for which the securities were
purchased? X
h. No Affiliated Underwriter was a direct
or indirect participant in the sale? X
Submitted by: J. STEVEN ORR Date: JULY 12, 1996
------------------------------ -----------------
<PAGE>
THE PREFERRED GROUP OF MUTUAL FUNDS
RECORD OF SECURITIES PURCHASED
UNDER THE TRUST'S RULE 10F-3 PROCEDURES
1. Subadviser: JENNISON ASSOCIATES CAPITAL CORP.
2. Fund: PREFERRED BALANCE FUND
3. Securities are: (Select one)
"Municipal securities" Part of an issue
as defined in Section registered under the
3(a)(29) of the Securities Act of
Securities Exchange 1933 which is being
Act of 1934 offered to the public
Yes No Yes X No
4. Issuer: CompuServe Corporation
5. Description of Security: Common Stock
6. Date of Purchase: 04/18/96
7. Underwriter from whom
purchased: Goldman, Sachs & Co.
8. Name of Affiliated Underwriter
managing or participating in
syndicate (attach list of all
members of syndicate): Prudential Securities Incorporated
other members of the syndicate:* Please See Attached List
*Please note the underwriters used a "Severally" form of agreement.
9. Aggregate principal amount of purchase [this
amount, when added to purchases by other
investment companies for whom CIML and the
relevant Subadviser act as adviser, may not
exceed (A) the greater of 4% of (10) or
$500,000, or (B) 10% of (11)]: $30,000.00
<PAGE>
10. Aggregate principal amount of class of
securities being offered (i.e., existing
securities plus current offering, both of
which are same class of securities): $2,706,000,000.00
11. Aggregate principal amount of offering: $480,000,000
12. Purchase price, net of fees and
expenses [may not exceed (14)]: 30.00
13. Date offering commenced: 04/18/96
14. a. Public offering price: 30.00
b. Was it purchased prior to close of
first full business day after offering
commenced: Yes
15. Commission, spread or profit: 5.50% $1.65
--------
16. Have the following conditions been
satisfied? YES NO
a. The purchase price did not exceed the
offering price prior tot he close of the
first full business day after the first day
of the offering (or, if a rights offering,
the securities were purchased on the
fourth day preceding the day on which
the offering terminated)? X
b. The underwriting was a firm commitment
underwriting? X
c. The commission, spread or profit was
reasonable and fair in relation to that
being received by others for
underwriting similar securities during
the same period? X
d. (FOR SECURITIES THAT ARE NOT
MUNICIPAL SECURITIES) The issuer has
been in continuous operation for not
less than three years, including the
operations of any predecessors? X
<PAGE>
e. (FOR MUNICIPAL SECURITIES ONLY) The
issue of securities has received an
investment grade rating from a
nationally recognized statistical rating
organization or, if the issuer or entity
supplying the revenues from which the
issue is to be paid shall have been in
existence less than three years
(including any predecessors), it has
received one of the three highest
ratings from at least one such rating
service?
f. The amount of such securities
purchased by all of the investment
companies advised by CIML and the
Subadviser(s) to the Fund purchasing
such securities did not exceed 10% of
the principal amount of the offering
AND did not exceed the greater of (i)
4% of the principal amount of the class
of securities being offered, or (ii)
$500,000? X*
*With regard to the Preferred Balanced Fund only
g. The purchase price was less than 3%
of the value of the total assets of the
Fund for which the securities were
purchased? X
h. No Affiliated Underwriter was a direct
or indirect participant in the sale? X**
** Prudential Securities Incorporated, an affiliate of Jennison, did not
participate in the CompuServe Corporation sale to Jennison.
<PAGE>
UNDERWRITER
Goldman, Sachs, & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
George K. Baum & Company
Robert W. Baird & Co. Incorporated
Barrington Research Associates, Inc.
Bear, Stearns & Co. Inc.
William Blair & Company, L.L.C.
J. C. Bradford & Co.
Brean Murray, Foster Securities Inc.
Alex. Brown & Sons Incorporated
CS First Boston Corporation
Cowen & Company
Dean Witter Reynolds Inc.
A. G. Edwards & Sons, Inc.
EVEREN Securities, Inc.
Fahnestock & Co. Inc.
Furman Selz LLC
Gabelli & Company, Inc.
Edward D. Jones & Co., L.P.
WR Lazard, Laidlaw & Luther Inc.
Legg Mason Wood Walker Incorporated
McDonald & Company Securities, Inc.
Montgomery Securities
J. P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
The Ohio Company
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Brothers Inc.
Muriel Siebert & Co., Inc.
Stifel, Nicolaus & Company, Incorporated
Unterberg Harris
Utendahl Capital Partners, L.P.
Wasserstein Perella Securities, Inc.
Wessels, Arnold & Henderson, L.L.C.
Wheat, First Securities, Inc.
<PAGE>
THE PREFERRED GROUP OF MUTUAL FUNDS
RECORD OF SECURITIES PURCHASED
UNDER THE TRUST'S RULE 10F-3 PROCEDURES
1. Subadviser: JENNISON ASSOCIATES CAPITAL CORP.
2. Fund: PREFERRED BALANCED FUND
3. Securities are: (Select One)
"Municipal securities" Part of an issue
as defined in Section registered under the
3(a) (29) of the Securities Act of
Securities Exchange 1933 which is being
Act of 1934 offered to the public
Yes No Yes No
4. Issuer: LUCENT TECHNOLOGIES
5. Description of Security: COMMON STOCK
6. Date of Purchase: 04/03/96
7. Underwriter from whom
purchased: MORGAN STANLEY & CO.
8. Name of Affiliated Underwriter
managing or participating in
syndicate (attach list of all
members of syndicate): PRUDENTIAL SECURITIES INCORPORATED
other members of the syndicate* PLEASE SEE ATTACHED LIST
* Please note the underwriters used a "severally" form of agreement.
9. Aggregate principal amount of
purchase [this amount, when added
to purchases by other investment
companies for whom Preferred and
the relevant Subadviser act as adviser,
may not exceed (A) the greater of
4% of (10) or $500,000, or
(B) 10% of (11)]: $21,600.00
<PAGE>
10. Aggregate principal amount of
class of securities being
offered (i.e., existing
securities plus current offering,
both of which are the same
class of securities): $17,189,872,137.00
11. Aggregate principal amount of
offering: $3,024,999,999
12. Purchase price, net of fees and
expenses [may not exceed (14)]: 27.00
13. Date offering commenced: 04/03/96
14. a. Public offering price: 27.00
b. Was it purchased prior to first
full business day after offering
Commenced? YES
15. Commission, spread or profit: 3.89% $1.05
-------
16. Have the following conditions been
satisfied? YES NO
a. The purchase price did not exceed
the offering price prior to the close
of the first full business day after the
first day of the offering (or, if a rights
offering, the securities were purchased
on the fourth day preceding the day
on which the offering terminated)? X
b. The underwriting was a firm
commitment underwriting? X
c. The commission, spread or profit
was reasonable and fair in relation
to that being received by others for
underwriting similar securities
during the same period? X
<PAGE>
d. (FOR SECURITIES THAT ARE NOT
MUNICIPAL SECURITIES) The issuer
has been in continuous operation
for not less than three years,
including the operations of any
predecessors? X
e. (FOR MUNICIPAL SECURITIES ONLY)
The issue of securities has received
an investment grade rating from a
nationally recognized statistical
rating organization or, if the issuer
or entity supplying the revenues from
which the issue is to be paid shall have
been in existence less than three years
(including any predecessors), it has
received one of the three highest ratings
from at least one such rating service?
f. The amount of such securities purchased by
all of the investment companies advised by
Preferred and the Subadviser(s) to the Fund
purchasing such securities did not exceed
10% of the principal amount of the offering
AND did not exceed the greater of (i)
4% of the principal amount of the class of
securities being offered, or (ii) $500,000? X*
*With regard to the Preferred Balanced Fund only
g. The purchase price was less than
3% of the value of the total assets of
the Fund for which the securities were
purchased? X
<PAGE>
h. No Affiliated Underwriter was a
a direct or indirect participant in the
sale? X**
** Prudential Securities Incorporated, an affiliate of Jennison, did not
participate in the Lucent Technologies sale to Jennison.
<PAGE>
NAME
U.S. Underwriters:
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Bear, Stearns & Co. Inc.
CS First Boston Corporation
J.P. Morgan Securities Inc.
Paine Webber Incorporated
Advest, Inc.
Arnhold & S. Bleichroeder, Inc.
Robert W. Baird & Co. Incorporated
M. R. Beal & Company
Sanford C. Bernstein & Co., Inc.
William Blair & Company, L.L.C.
J. C. Bradford & Co.
Alex. Brown & Sons Incorporated
Cowen & Company
Crowell, Weedon & Co.
Dain Bosworth Incorporated
Dean Witter Reynolds Inc.
Deutsche Morgan Grenfell/C. J. Lawrence Inc.
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
A. G. Edwards & Sons, Inc.
EVEREN Securities, Inc.
Fahnestock & Co. Inc.
First Manhattan Co.
First of Michigan Corporation
Furman Selz LLC
Gabelli & Company, Inc.
Gerard Klauer Mattison & Co., LLC
Gruntal & Co., Incorporated
Guzman & Company
Hambrecht & Quist LLC
Interstate/Johnson Lane Corporation
Janney Montgomery Scott Inc.
Edward D. Jones & Co., L.P.
WR Lazard, Laidlaw & Luther
Lazard Freres & Co. LLC
Legg Mason Wood Walker, Incorporated
<PAGE>
Lehman Brothers Inc.
McDonald & Company Securities, Inc.
Montgomery Securities
Needham & Company, Inc.
Oppenheimer & Co., Inc.
Paribas Corporation
Parker/Hunter Incorporated
Piper Jaffray Inc.
Prudential Securities Incorporated
Pryor, McClendon, Counts & Co., Inc.
Ragen Mackenzie Incorporated
Rauscher Pierce Refsnes, Inc.
Raymond James & Associates, Inc.
Robertson, Stephens & Company LLC
The Robinson-Humphrey Company, Inc.
Salomon Brothers Inc.
SBC Capital Markets Inc.
Schroder Wertheim & Co. Incorporated
Scott & Stringfellow, Inc.
Muriel Siebert & Co., Inc.
Smith Barney Inc.
Stifel, Nicholas & Company Incorporated
Sutro & Co. Incorporated
UBS Securities Inc.
Wasserstein Perella Securities, Inc.
Wheat, First Securities, Inc.
<PAGE>
THE PREFERRED GROUP OF MUTUAL FUNDS
RECORD OF SECURITIES PURCHASED
UNDER THE TRUST'S RULE 10F-3 PROCEDURES
1. Subadviser: JENNISON ASSOCIATES CAPITAL CORP.
2. Fund: PREFERRED BALANCED FUND
3. Securities are: (Select one)
"Municipal securities" Part of an issue
as defined in Section registered under the
3(a)(29) of the Securities Act of
Securities Exchange 1933 which is being
Act of 1934 offered to the public
4. Issuer: INTERSTATE HOTELS COMPANY
5. Description of Security: COMMON STOCK
6. Date of Purchase: 06/19/96
7. Underwriter from whom purchased: MERRILL LYNCH & CO.
8. Name of Affiliated Underwriter
managing or participating in
syndicate (attach list of all
members of syndicate): PRUDENTIAL SECURITIES INCORPORATED
other members of the syndicate:* PLEASE SEE ATTACHED LIST
*Please note the underwriters used a "severally" form of agreement.
9. Aggregate principal amount of purchase [this
amount, when added to purchases by other
investment companies for whom Preferred and the
relevant Subadviser act as adviser, may not
exceed (A) the greater of 4% of (10) or
$500,000, or (B) 10% of (11)]: $4,200.00
<PAGE>
10. Aggregate principal amount of class of
securities being offered (i.e., existing
securities plus current offering, both of
which are the same class of securities): $571,620,000
11. Aggregate principal amount of offering: $231,000,000
12. Purchase price, net of fees and
expenses [may not exceed (14)]: 21.00
13. Date offering commenced: 06/19/96
14. a. Public offering price: 21.00
b. Was it purchased prior to close of first full
business day after offering commenced? YES
15. Commission, spread or profit: 6.00 % $1.26
----------
16. Have the following conditions been satisfied? YES NO
a. The purchase price did not exceed the
offering price prior to the close of the
first full business day after the first day
of the offering (or, if a rights offering,
the securities were purchased on the fourth
day preceding the day on which the offering
terminated)? X
b. The underwriting was firm
commitment underwriting? X
c. The commission, spread or profit was
reasonable and fair in relation to that
being received by others for
underwriting similar securities during
the same period? X
d. (FOR SECURITIES THAT ARE NOT
MUNICIPAL SECURITIES) The issuer has
been in continuous operation for not
less than three years, including the
operations of any predecessors? X
<PAGE>
e. (FOR MUNICIPAL SECURITIES ONLY) The
issue of securities has received an
investment grade rating from a
nationally recognized statistical rating
organization or, if the issuer or entity
supplying the revenues from which the
issue is to be paid shall have been in
existence less than three years
(including any predecessors), it has
received one of the three highest
ratings from at least one such rating
service?
f. The amount of such securities
purchased by all of the investment
companies advised by Preferred and the
Subadviser(s) to the Fund purchasing
such securities did not exceed 10% of
the principal amount of the offering
AND did not exceed the greater of (I)
4% of the principal amount of the class
of securities being offered, or (ii)
$500,000? X*
*With regard to the Preferred Balanced Fund only
g. The purchase price was less than 3%
of the value of the total assets of the
Fund for which the securities were
purchased? X
h. No Affiliated Underwriter was a direct
or indirect participant in the sale? X**
**Prudential Securities Incorporated, an affiliate of Jennison, did not
participate in the CompuServe Corporation sale to Jennison.
<PAGE>
UNDERWRITING
U.S. UNDERWRITERS
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Montgomery Securities
Morgan Stanley & Co. Incorporated
Smith Barney Inc.
Credit Lyonnais Securities (USA) Inc.
Alex. Brown & Sons Incorporated
BT Securities Corporation
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Oppenheimer & Co., Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Brothers Inc.
Schroder Wertheim & Co. Incorporated
CIBC Wood Gundy Securities Corp.
Advest, Inc.
J.C. Bradford & Co.
JW Charles Securities, Inc.
Crowell, Weedon & Co.
Davenport & Co. of Virginia, Inc.
Dominick & Dominick, Incorporated
First Albany Corporation
Furman Selz LLC
Genesis Merchant Group Securities
Interstate/Johnson Lane Corporation
Janney Montgomery Scott Inc.
Legg Mason Wood Walker, Incorporated
Morgan Keegan & Company, Inc.
Parker/Hunter Incorporated
Pennsylvania Merchant Group Ltd.
Ragen Mackenzie Incorporated
Raymond James & Associates, Inc.
The Robinson-Humphrey Company, Inc.
The Seidler Companies Incorporated
Sutro & Co. Incorporated
Tucker Anthony Incorporated
Utendahl Capital Partners, L.P.
Van Kasper & Company
Wheat, First Securities, Inc.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFERRED GROUP OF MUTUAL FUNDS
<SERIES>
<NUMBER> 1
<NAME> PREFERRED VALUE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 181,565,161
<INVESTMENTS-AT-VALUE> 265,484,834
<RECEIVABLES> 2,333,368
<ASSETS-OTHER> 244
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 267,818,446
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 236,753
<TOTAL-LIABILITIES> 236,753
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,542,675
<SHARES-COMMON-STOCK> 16,068,137
<SHARES-COMMON-PRIOR> 15,386,666
<ACCUMULATED-NII-CURRENT> 1,639,979
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,479,366
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 83,919,673
<NET-ASSETS> 267,581,693
<DIVIDEND-INCOME> 3,982,227
<INTEREST-INCOME> 1,062,522
<OTHER-INCOME> 0
<EXPENSES-NET> 2,082,863
<NET-INVESTMENT-INCOME> 2,961,886
<REALIZED-GAINS-CURRENT> 11,101,033
<APPREC-INCREASE-CURRENT> 37,625,337
<NET-CHANGE-FROM-OPS> 51,688,256
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,049,939
<DISTRIBUTIONS-OF-GAINS> 4,345,798
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,426,357
<NUMBER-OF-SHARES-REDEEMED> 5,241,207
<SHARES-REINVESTED> 496,321
<NET-CHANGE-IN-ASSETS> 54,903,330
<ACCUMULATED-NII-PRIOR> 1,726,706
<ACCUMULATED-GAINS-PRIOR> 725,459
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,799,524
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,082,863
<AVERAGE-NET-ASSETS> 239,035,316
<PER-SHARE-NAV-BEGIN> 13.82
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> 3.13
<PER-SHARE-DIVIDEND> .21
<PER-SHARE-DISTRIBUTIONS> .29
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.65
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFERRED GROUP OF MUTUAL FUNDS
<SERIES>
<NUMBER> 2
<NAME> PREFERRED GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 298,461,259
<INVESTMENTS-AT-VALUE> 405,599,127
<RECEIVABLES> 7,127,992
<ASSETS-OTHER> 489
<OTHER-ITEMS-ASSETS> 2,152,692
<TOTAL-ASSETS> 414,880,300
<PAYABLE-FOR-SECURITIES> 2,812,856
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 379,298
<TOTAL-LIABILITIES> 3,192,154
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 270,213,156
<SHARES-COMMON-STOCK> 22,231,801
<SHARES-COMMON-PRIOR> 22,520,286
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 34,337,122
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,137,868
<NET-ASSETS> 411,688,146
<DIVIDEND-INCOME> 2,674,984
<INTEREST-INCOME> 277,564
<OTHER-INCOME> 0
<EXPENSES-NET> 3,608,995
<NET-INVESTMENT-INCOME> (656,477)
<REALIZED-GAINS-CURRENT> 45,847,473
<APPREC-INCREASE-CURRENT> 13,169,169
<NET-CHANGE-FROM-OPS> 58,360,195
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 171,060
<DISTRIBUTIONS-OF-GAINS> 12,083,363
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,749,419
<NUMBER-OF-SHARES-REDEEMED> 8,758,721
<SHARES-REINVESTED> 720,817
<NET-CHANGE-IN-ASSETS> 37,095,446
<ACCUMULATED-NII-PRIOR> 171,036
<ACCUMULATED-GAINS-PRIOR> 573,036
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,095,694
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,608,995
<AVERAGE-NET-ASSETS> 411,506,638
<PER-SHARE-NAV-BEGIN> 16.63
<PER-SHARE-NII> .00
<PER-SHARE-GAIN-APPREC> 2.44
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> .54
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.52
<EXPENSE-RATIO> .86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFERRED GROUP OF MUTUAL FUNDS
<SERIES>
<NUMBER> 3
<NAME> PREFERRED INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 132,624,392
<INVESTMENTS-AT-VALUE> 155,964,922
<RECEIVABLES> 1,574,500
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 321,043
<TOTAL-ASSETS> 157,860,465
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 233,056
<TOTAL-LIABILITIES> 233,056
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130,184,069
<SHARES-COMMON-STOCK> 11,488,707
<SHARES-COMMON-PRIOR> 9,661,134
<ACCUMULATED-NII-CURRENT> 1,729,622
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,378,251
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,335,467
<NET-ASSETS> 157,627,409
<DIVIDEND-INCOME> 4,158,327
<INTEREST-INCOME> 452,403
<OTHER-INCOME> 0
<EXPENSES-NET> 2,355,275
<NET-INVESTMENT-INCOME> 2,255,455
<REALIZED-GAINS-CURRENT> 5,860,835
<APPREC-INCREASE-CURRENT> 10,126,131
<NET-CHANGE-FROM-OPS> 18,242,421
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,800,796
<DISTRIBUTIONS-OF-GAINS> 126,594
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,347,892
<NUMBER-OF-SHARES-REDEEMED> 3,673,667
<SHARES-REINVESTED> 153,348
<NET-CHANGE-IN-ASSETS> 39,411,371
<ACCUMULATED-NII-PRIOR> 1,317,178
<ACCUMULATED-GAINS-PRIOR> (3,398,143)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,305,859
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,355,275
<AVERAGE-NET-ASSETS> 136,127,848
<PER-SHARE-NAV-BEGIN> 12.24
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> 1.47
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.72
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFERRED GROUP OF MUTUAL FUNDS
<SERIES>
<NUMBER> 4
<NAME> PREFERRED FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 110,750,306
<INVESTMENTS-AT-VALUE> 110,213,325
<RECEIVABLES> 7,466,280
<ASSETS-OTHER> 18,102
<OTHER-ITEMS-ASSETS> 4,505
<TOTAL-ASSETS> 117,702,212
<PAYABLE-FOR-SECURITIES> 6,413,559
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 104,161
<TOTAL-LIABILITIES> 6,517,720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111,602,553
<SHARES-COMMON-STOCK> 11,021,259
<SHARES-COMMON-PRIOR> 5,624,590
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 105,245
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (523,306)
<NET-ASSETS> 111,184,492
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,719,794
<OTHER-INCOME> 0
<EXPENSES-NET> 666,424
<NET-INVESTMENT-INCOME> 4,053,370
<REALIZED-GAINS-CURRENT> 820,902
<APPREC-INCREASE-CURRENT> (2,103,083)
<NET-CHANGE-FROM-OPS> 2,771,189
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,053,370
<DISTRIBUTIONS-OF-GAINS> 317,329
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,413,968
<NUMBER-OF-SHARES-REDEEMED> 1,440,043
<SHARES-REINVESTED> 422,744
<NET-CHANGE-IN-ASSETS> 53,272,593
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (392,815)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 466,424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 666,424
<AVERAGE-NET-ASSETS> 71,452,461
<PER-SHARE-NAV-BEGIN> 10.30
<PER-SHARE-NII> .58
<PER-SHARE-GAIN-APPREC> (.16)
<PER-SHARE-DIVIDEND> .58
<PER-SHARE-DISTRIBUTIONS> .05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.09
<EXPENSE-RATIO> .93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFERRED GROUP OF MUTUAL FUNDS
<SERIES>
<NUMBER> 5
<NAME> PREFERRED ASSET ALLOCATION FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 81,933,809
<INVESTMENTS-AT-VALUE> 95,879,297
<RECEIVABLES> 1,042,510
<ASSETS-OTHER> 73,692
<OTHER-ITEMS-ASSETS> 525
<TOTAL-ASSETS> 96,996,024
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 106,676
<TOTAL-LIABILITIES> 106,676
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,525,812
<SHARES-COMMON-STOCK> 7,520,167
<SHARES-COMMON-PRIOR> 6,492,607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,130,641
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,232,895
<NET-ASSETS> 96,889,348
<DIVIDEND-INCOME> 996,509
<INTEREST-INCOME> 2,745,493
<OTHER-INCOME> 0
<EXPENSES-NET> 923,445
<NET-INVESTMENT-INCOME> 2,818,557
<REALIZED-GAINS-CURRENT> 6,580,785
<APPREC-INCREASE-CURRENT> 4,678,262
<NET-CHANGE-FROM-OPS> 14,077,604
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,806,264
<DISTRIBUTIONS-OF-GAINS> 5,044,890
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,326,968
<NUMBER-OF-SHARES-REDEEMED> 1,923,331
<SHARES-REINVESTED> 623,923
<NET-CHANGE-IN-ASSETS> 19,144,330
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 594,651
<OVERDISTRIB-NII-PRIOR> 12,293
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 613,440
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 923,445
<AVERAGE-NET-ASSETS> 87,665,290
<PER-SHARE-NAV-BEGIN> 11.97
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> 1.72
<PER-SHARE-DIVIDEND> .40
<PER-SHARE-DISTRIBUTIONS> .81
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.88
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFERRED GROUP OF MUTUAL FUNDS
<SERIES>
<NUMBER> 6
<NAME> PREFERRED SHORT-TERM GOVERNMENT SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
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<TOTAL-ASSETS> 51,798,104
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<TOTAL-LIABILITIES> 42,787
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,746,970
<SHARES-COMMON-STOCK> 5,304,037
<SHARES-COMMON-PRIOR> 3,278,603
<ACCUMULATED-NII-CURRENT> 64
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (720,872)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (270,845)
<NET-ASSETS> 51,755,317
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,318,768
<OTHER-INCOME> 0
<EXPENSES-NET> 252,564
<NET-INVESTMENT-INCOME> 2,066,204
<REALIZED-GAINS-CURRENT> 217,718
<APPREC-INCREASE-CURRENT> (540,502)
<NET-CHANGE-FROM-OPS> 1,743,420
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,066,140
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,384,848
<NUMBER-OF-SHARES-REDEEMED> 570,108
<SHARES-REINVESTED> 210,694
<NET-CHANGE-IN-ASSETS> 19,634,146
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (938,590)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 134,564
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 252,564
<AVERAGE-NET-ASSETS> 38,172,554
<PER-SHARE-NAV-BEGIN> 9.80
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> .53
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> .66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFERRED GROUP OF MUTUAL FUNDS
<SERIES>
<NUMBER> 7
<NAME> PREFERRED MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 90,665,744
<INVESTMENTS-AT-VALUE> 90,665,744
<RECEIVABLES> 321,591
<ASSETS-OTHER> 1,000
<OTHER-ITEMS-ASSETS> 1,189
<TOTAL-ASSETS> 90,989,524
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 507,089
<TOTAL-LIABILITIES> 507,089
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 90,482,435
<SHARES-COMMON-STOCK> 90,482,435
<SHARES-COMMON-PRIOR> 79,585,753
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 90,482,435
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,480,191
<OTHER-INCOME> 0
<EXPENSES-NET> 386,135
<NET-INVESTMENT-INCOME> 4,094,056
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,094,056
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,094,056
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 150,542,997
<NUMBER-OF-SHARES-REDEEMED> 143,742,439
<SHARES-REINVESTED> 4,096,124
<NET-CHANGE-IN-ASSETS> 10,896,682
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 236,873
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 424,873
<AVERAGE-NET-ASSETS> 78,958,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFFERED GROUP OF MUTUAL FUNDS
<SERIES>
<NUMBER> 8
<NAME> PREFERRED BALANCED FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 3,838,896
<INVESTMENTS-AT-VALUE> 4,032,995
<RECEIVABLES> 79,584
<ASSETS-OTHER> 383
<OTHER-ITEMS-ASSETS> 905
<TOTAL-ASSETS> 4,113,867
<PAYABLE-FOR-SECURITIES> 51,103
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56,771
<TOTAL-LIABILITIES> 107,874
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,741,269
<SHARES-COMMON-STOCK> 374,637
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 70,625
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 194,099
<NET-ASSETS> 4,005,993
<DIVIDEND-INCOME> 31,511
<INTEREST-INCOME> 108,198
<OTHER-INCOME> 0
<EXPENSES-NET> 41,071
<NET-INVESTMENT-INCOME> 98,638
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