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<PAGE> PAGE 2
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<PAGE> PAGE 3
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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 26
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<PAGE> PAGE 27
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<PAGE> PAGE 40
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<PAGE> PAGE 44
SIGNATURE FRED KAUFMAN
TITLE VICE PRES/TREASURER
Item 77C. On December 12, 1997, an information statement relating to the
subadvisory agreement for the Preferred Short-Term Government Securities Fund
(the "Fund") was mailed to shareholders, and shareholders constituting a
majority (3,304,739.676 shares) of the outstanding securities of the Fund
consented to such subadvisory agreement.
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<ARTICLE> 6
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<ARTICLE> 6
<CIK> 0000885414
<NAME> THE PREFERRED GROUP OF MUTUAL FUNDS
<SERIES>
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<NAME> PREFERRED ASSET ALLOCATION FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
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<NAME> PREFERRED BALANCED FUND
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<NAME> THE PREFFERED GROUP OF MUTUAL FUNDS
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<NAME> PREFERRED SMALL CAP FUND
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