-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HahuHoHiQ6myHxD/OU65ASMOLsYrmJJRYTFZYasLOYc0TwLKFsjladueqHaqLhMp ART/F1LGKdIvaSw7ecY05g== 0000950152-98-007862.txt : 19981002 0000950152-98-007862.hdr.sgml : 19981002 ACCESSION NUMBER: 0000950152-98-007862 CONFORMED SUBMISSION TYPE: ARS PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19980928 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIQUID CAPITAL INCOME TRUST CENTRAL INDEX KEY: 0000059744 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 341151595 FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: ARS SEC ACT: SEC FILE NUMBER: 811-02528 FILM NUMBER: 98715676 BUSINESS ADDRESS: STREET 1: 1228 EUCLID AVE STREET 2: 1100 HALLE BLDG CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2167814440 FORMER COMPANY: FORMER CONFORMED NAME: LIQUID CAPITAL INCOME INC DATE OF NAME CHANGE: 19820407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARNEGIE GOVERNMENT SECURITIES TRUST CENTRAL INDEX KEY: 0000315991 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 341306766 FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: ARS SEC ACT: SEC FILE NUMBER: 811-03037 FILM NUMBER: 98715677 BUSINESS ADDRESS: STREET 1: 1100 HALLE BLDG STREET 2: 1228 EUCLID AVE CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2167814440 MAIL ADDRESS: ZIP: 44115 FORMER COMPANY: FORMER CONFORMED NAME: CARNEGIE GOVERNMENT SECURITIES FUND INC DATE OF NAME CHANGE: 19820407 FORMER COMPANY: FORMER CONFORMED NAME: CARNEGIE LIQUID ASSETS INC DATE OF NAME CHANGE: 19801027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARNEGIE TAX FREE INCOME TRUST CENTRAL INDEX KEY: 0000701816 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 341370355 FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: ARS SEC ACT: SEC FILE NUMBER: 811-03446 FILM NUMBER: 98715678 BUSINESS ADDRESS: STREET 1: 1228 EUCLID AVE STREET 2: 1100 HALLE BLDG CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2167814440 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARNEGIE TAX EXEMPT INCOME TRUST CENTRAL INDEX KEY: 0000785973 STANDARD INDUSTRIAL CLASSIFICATION: FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: ARS SEC ACT: SEC FILE NUMBER: 811-04538 FILM NUMBER: 98715679 BUSINESS ADDRESS: STREET 1: 1228 EUCLID AVE STREET 2: 1100 HALLE BLDG CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2167814440 ARS 1 CARNEGIE CAPITAL MANAGEMENT COMPANY FORM ARS 1 ANNUAL MESSAGE FROM THE PRESIDENT: Dear Fellow Shareholders: Once again we have seen an incredible year which had positive returns for investors in short, intermediate, and long-term fixed-income investments as well as equities. The only area that seemed to be negatively impacted in general was Southeast Asia and specifically, Japan, Indonesia, Malaysia and other smaller Asian countries. It would appear once again that our domestic economy remains in a very strong position with growth continuing, although not at a record pace, and inflation being kept well under control. Although wage rates appear to be increasing at a rate faster than that of inflation, it would seem very difficult at this point in time for the Federal Reserve Board to arbitrarily raise interest rates in light of international concerns. We continue to believe that the balance of the 1990's will represent opportunities for investors in fixed income securities as well as equities and, greatly appreciate the trust you continue to show in the Carnegie Funds Group and our philosophy of high quality fixed-income investments. Thank you for your continued support as shareholders of the Carnegie Funds Group. Sincerely, /s/ George R. Mateyo ------------------------- President INDEPENDENT AUDITORS' REPORT KPMG PEAT MARWICK LLP To the Board of Trustees and Shareholders Liquid Capital Income Trust, Carnegie Government Securities Trust, Carnegie Tax Free Income Trust and Carnegie Tax Exempt Income Trust We have audited the accompanying statements of net assets of Liquid Capital Income Trust, Carnegie Government Securities Trust, Carnegie Tax Free Income Trust and Carnegie Tax Exempt Income Trust (comprising the Ohio General Municipal Fund), as of July 31, 1998, 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 each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trusts' 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 July 31, 1998, by correspondence with the custodian. 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 the financial highlights referred to above present fairly, in all material respects, the financial position of Liquid Capital Income Trust, Carnegie Government Securities Trust, Carnegie Tax Free Income Trust and Carnegie Tax Exempt Income Trust, as of July 31, 1998, 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 the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. August 21, 1998 /s/ KPMG Peat Marwick LLP Cleveland, Ohio 1 2 LIQUID CAPITAL INCOME TRUST -- FINANCIAL HIGHLIGHTS Data for each share outstanding throughout the period
YEAR ENDED JULY 31, ------------------------------------------------------------------------ 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period........................ $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income......... 0.047 0.045 0.047 0.047 0.026 ------------ ------------ ------------ ------------ ------------ Total from Investment Operations.................. 0.047 0.045 0.047 0.047 0.026 LESS DISTRIBUTIONS: Distributions from Net Investment Income........... (0.047) (0.045) (0.047) (0.047) (0.026) ------------ ------------ ------------ ------------ ------------ Total Distributions........... (0.047) (0.045) (0.047) (0.047) (0.026) Net Asset Value, End of Period........................ $1.00 $1.00 $1.00 $1.00 $1.00 ============ ============ ============ ============ ============ RATIOS/SUPPLEMENTAL INFORMATION Expenses as a percentage of average daily net assets(1)................... 0.88% 0.94% 0.90% 0.87% 0.88% Net investment income as a percentage of average daily net assets(1)............... 4.71% 4.48% 4.69% 4.72% 2.62% Net Assets at end of period.... $164,475,955 $185,185,738 $205,508,605 $247,385,884 $289,950,268 ============ ============ ============ ============ ============
(1) The percentages should not be construed as representative of the yield or expenses related to further investments in the Trust. CARNEGIE GOVERNMENT SECURITIES TRUST -- FINANCIAL HIGHLIGHTS Data for each share outstanding throughout the period
YEAR ENDED JULY 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........................... $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income............ 0.045 0.042 0.045 0.044 0.024 ----------- ----------- ----------- ----------- ----------- Total from Investment Operations..................... 0.045 0.042 0.045 0.044 0.024 LESS DISTRIBUTIONS: Distributions from Net Investment Income......................... (0.045) (0.042) (0.045) (0.044) (0.024) ----------- ----------- ----------- ----------- ----------- Total Distributions.............. (0.045) (0.042) (0.045) (0.044) (0.024) Net Asset Value, End of Period.... $1.00 $1.00 $1.00 $1.00 $1.00 =========== =========== =========== =========== =========== RATIOS/SUPPLEMENTAL INFORMATION Expenses as a percentage of average daily net assets(1).... 0.98% 1.11% 1.03% 1.06% 0.98% Net investment income as a percentage of average daily net assets(1)...................... 4.51% 4.25% 4.50% 4.38% 2.37% Net Assets at end of period....... $14,534,252 $12,440,409 $12,737,746 $14,424,876 $18,078,719 =========== =========== =========== =========== ===========
(1) The percentages should not be construed as representative of the yield or expenses related to further investments in the Trust. 2 3 CARNEGIE TAX FREE INCOME TRUST -- FINANCIAL HIGHLIGHTS Data for each share outstanding throughout the period
YEAR ENDED JULY 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period.............................. $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income............... 0.028 0.027 0.029 0.029 0.018 ----------- ----------- ----------- ----------- ----------- Total from Investment Operations.... 0.028 0.027 0.029 0.029 0.018 LESS DISTRIBUTIONS: Distributions from Net Investment Income............................ (0.028) (0.027) (0.029) (0.029) (0.018) ----------- ----------- ----------- ----------- ----------- Total Distributions................. (0.028) (0.027) (0.029) (0.029) (0.018) Net Asset Value, End of Period....... $1.00 $1.00 $1.00 $1.00 $1.00 =========== =========== =========== =========== =========== RATIOS/SUPPLEMENTAL INFORMATION Expenses as a percentage of average daily net assets(1)............... 0.90% 0.84% 0.80% 0.82% 0.77% Net investment income as a percentage of average daily net assets(1)......................... 2.78% 2.74% 2.92% 2.86% 1.77% Net Assets at end of period.......... $21,805,702 $20,188,763 $25,266,098 $27,615,905 $31,640,760 =========== =========== =========== =========== ===========
(1) The percentages should not be construed as representative of the yield or expenses related to further investments in the Trust. CARNEGIE TAX EXEMPT INCOME TRUST -- OHIO GENERAL MUNICIPAL FUND FINANCIAL HIGHLIGHTS -- Data for each share outstanding throughout the period
YEAR ENDED JULY 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period.............................. $9.66 $9.41 $9.46 $9.50 $9.87 INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.477 0.484 0.514 0.556 0.549 Net realized and unrealized gains/(losses) on securities...... (0.019) 0.250 (0.050) (0.040) (0.370) ----------- ----------- ----------- ----------- ----------- Total from investment operations.... 0.458 0.734 0.464 0.516 0.179 LESS DISTRIBUTIONS: Distributions from net investment income............................ (0.477) (0.484) (0.514) (0.556) (0.549) ----------- ----------- ----------- ----------- ----------- Total distributions................. (0.477) (0.484) (0.514) (0.556) (0.549) Net Asset Value, End of Period....... $9.64 $9.66 $9.41 $9.46 $9.50 =========== =========== =========== =========== =========== ANNUAL TOTAL RETURN.................. 4.84% 9.41% 4.98% 5.50% 1.82% =========== =========== =========== =========== =========== RATIOS/SUPPLEMENTAL INFORMATION Net assets at end of period......... $9,220,496 $10,283,205 $11,655,988 $11,448,521 $12,574,835 Expenses as a percentage of average daily net assets(1)(2)............ 1.00% 0.95% 0.88% 0.97% 0.93% Net investment income as a percentage of average daily net assets(1)......................... 4.96% 5.12% 5.41% 5.95% 5.68% Portfolio Turnover rate............. 5.36% 3.88% 23.45% 8.77% 10.04%
(1) The percentages should not be construed as representative of the yield or expenses related to further investments in the Fund. (2) During the periods indicated, the Fund did not make payments or made partial payments under their Distribution Expenses Plan and CCMC waived management fees. Net investment income for the Ohio General Municipal Fund would have been $.448, $.455, $.483, $.528, and $.520 for the years ended July 31, 1998, 1997, 1996, 1995, and 1994, respectively; had such Distribution Expense Plan payments been made and had such fees not been waived. Expenses as a percentage of average net assets would have been 1.30%, 1.25%, 1.18%, 1.27%, and 1.23%, for the same periods, respectively. 3 4 LIQUID CAPITAL INCOME TRUST STATEMENT OF NET ASSETS JULY 31, 1998
PRINCIPAL MATURITY DATES VALUE AMOUNT (1998) (NOTE A) --------- -------------- -------- COMMERCIAL PAPER -- 44.7% $ 5,000,000 Abbott Laboratories, 5.48%.................................. 8/13 $ 4,992,389 5,000,000 American Express Company, 5,50%............................. 8/5 4,998,472 3,525,000 Associates First Capital Corp., 6.00%....................... 3/15/99 3,536,104 5,000,000 BankAmerica Corp., 5.51%.................................... 8/12 4,993,113 5,000,000 Bank One Corp., 5.52%....................................... 8/26 4,982,367 5,000,000 Coca-Cola Company, 5.47%.................................... 8/17 4,989,364 5,000,000 Ford Motor Credit Company, 5.52%............................ 8/7 4,996,933 5,000,000 General Electric Company, 5.48%............................. 8/10 4,994,672 5,000,000 Guardian Industries Corp., 5.53%............................ 9/11 4,970,046 5,000,000 International Lease Finance Corp., 5.49%.................... 8/24 4,983,988 5,000,000 Lucent Technologies Inc., 5.48% 8/27 4,981,733 5,000,000 Merrill Lynch & Company, 5.52% 8/25 4,983,133 5,000,000 National City Corp., 5.51% 9/4 4,975,511 5,000,000 National Rural Utilities Cooperative Finance Corp., 5.51% 9/2 4,977,042 5,000,000 Walt Disney Company, 5.44% 9/15 4,967,511 ------------- TOTAL COMMERCIAL PAPER (Cost $73,322,378)................... 73,322,378 ------------- U.S. GOVERNMENT INTEREST BEARING AND AGENCIES -- 42.6% 5,000,000 Federal Farm Credit Bank, 5.53%............................. 10/1 5,000,000 4,000,000 Federal Home Loan Bank, 5.63%............................... 3/2/99 4,000,000 16,000,000 Federal Home Loan Bank, 5.60%............................... 3/5/99 16,000,000 5,000,000 Federal Home Loan Mortgage Corp., 5.44%..................... 8/7 4,996,978 5,000,000 Federal Home Loan Mortgage Corp., 5.42%..................... 8/13 4,992,472 5,000,000 Federal Home Loan Mortgage Corp., 5.46% 8/20 4,987,108 5,000,000 Federal Home Loan Mortgage Corp., 5.45%..................... 8/21 4,986,375 5,000,000 Federal Home Loan Mortgage Corp., 5.45%..................... 8/28 4,981,076 5,000,000 Federal Home Loan Mortgage Corp., 5.45%..................... 9/18 4,965,181 5,000,000 Federal National Mortgage Association, 5.44%................ 8/14 4,991,689 5,000,000 Federal National Mortgage Association, 5.43%................ 8/21 4,986,425 5,000,000 Federal National Mortgage Association, 5.46%................ 9/18 4,984,075 ------------- TOTAL U.S. GOVERNMENT INTEREST BEARING AND AGENCIES (Cost 69,871,379)........................................... 69,871,379 ------------- REPURCHASE AGREEMENTS -- 12.6% 20,729,000 Merrill Lynch Government Securities, Inc., 5.63%; Collateralized by $21,145,000 Federal Home Loan Bank, 5.66% due 7/30/99 (repurchase proceeds $20,738,725)............... 8/3 20,729,000 ------------- TOTAL INVESTMENTS -- 99.9% (COST $163,922,757).............. 163,922,757 OTHER ASSETS LESS LIABILITIES-.1............................ 553,198 ------------- NET ASSETS -- 100.0% -- equivalent to $1.00 per share for 164,475,955 outstanding Capital Shares in the Trust, $.10 par value (unlimited number of shares authorized) -- Note E........................................................... $ 164,475,955 =============
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1998 INTEREST INCOME.................................................... $12,128,269 EXPENSES -- NOTE B Management fees................................................... $1,091,375 Custodian and transfer agent fees................................. 510,975 Printing.......................................................... 89,149 Postage........................................................... 76,701 Registration and filing fees...................................... 47,296 Professional fees................................................. 40,087 Trustees' fees.................................................... 24,000 Insurance expense................................................. 17,206 Miscellaneous..................................................... 15,072 1,911,861 ---------- ----------- INVESTMENT INCOME -- NET........................................... $10,216,408 ===========
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, ----------------------------- 1998 1997 ------------- ------------ INCREASE (DECREASE) IN NET ASSETS -- NOTE E Operations: Investment income -- net........................................ $ 10,216,408 $ 8,808,056 Distributions to shareholders from net investment income............................................... (10,216,408) (8,808,056) Capital share transactions -- net................................. (20,709,783) (20,322,867) ------------ ------------ Total decrease in net assets................................. (20,709,783) (20,322,867) NET ASSETS Beginning of year................................................. 185,185,738 205,508,605 ------------ ------------ End of year....................................................... $164,475,955 $185,185,738 ============ ============
+ At July 31, 1998, investments in commercial paper are diversified among several industries with no significant concentration. At the time of purchase, all commercial paper investments are rated A-1 by S&P or P-1 by Moody's Rating Services. See Notes to Financial Statements. 4 5 CARNEGIE GOVERNMENT SECURITIES TRUST STATEMENT OF NET ASSETS JULY 31, 1998
PRINCIPAL MATURITY VALUE AMOUNT DATES (1998) (NOTE A) - - - - --------- ------------ -------- U.S. GOVERNMENT AGENCIES -- 82.3% $1,000.000 Federal Home Loan Mortgage Corp., 5.44%..................... 8/7 $ 999,396 1,000,000 Federal Home Loan Mortgage Corp., 5.44%..................... 8/7 999,396 1,000,000 Federal Home Loan Mortgage Corp., 5.45%..................... 8/17 997,880 1,000,000 Federal Home Loan Mortgage Corp., 5.46%..................... 8/20 997,422 1,000,000 Federal Home Loan Mortgage Corp., 5.45%..................... 8/21 997,275 1,000,000 Federal Home Loan Mortgage Corp., 5.44%..................... 8/28 996,222 1,000,000 Federal Home Loan Mortgage Corp., 5.40%..................... 9/3 995,350 1,000,000 Federal Home Loan Mortgage Corp., 5.42%..................... 9/4 995,182 1,000,000 Federal Home Loan Mortgage Corp., 5.45%..................... 9/30 991,219 1,000,000 Federal National Mortgage Association, 5.43%................ 8/4 999,849 1,000,000 Federal National Mortgage Association, 5.44%................ 8/14 998,338 1,000,000 Federal National Mortgage Association, 5.46%................ 8/24 996,815 ----------- TOTAL U.S. GOVERNMENT AGENCIES (Cost $11,963,344).......................................... 11,964,344 ===========
REPURCHASE AGREEMENTS -- 17.7% 2,580,000 Merrill Lynch Government Securities, Inc., 5.63%; Collateralized by $2,640,000 Federal Home Loan Mortgage Corp., 6.59% due 7/23/08 (repurchase proceeds $2,581,210)................................................ 8/3 2,580,000 ----------- TOTAL INVESTMENTS -- 100.0% (Cost $14,544,344)......................................... 14,544,344 OTHER ASSETS LESS LIABILITIES............................... (10,092) ----------- NET ASSETS -- 100.0% -- equivalent to $1.00 per share for 14,534,252 outstanding Capital Shares in the Trust, $.10 par value (unlimited number of shares authorized) -- Note E.......................................................... $14,534,252 ===========
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1998 INTEREST INCOME............................................. $800,138 EXPENSES -- NOTE B Management fees............................................ $ 72,460 Custodian and transfer agent fees.......................... 25,321 Registration and filing fees............................... 11,925 Professional fees.......................................... 11,265 Trustees' fees............................................. 8,000 Printing................................................... 6,873 Postage.................................................... 2,769 Insurance expense.......................................... 1,450 Miscellaneous.............................................. 2,909 142,972 -------- -------- INVESTMENT INCOME -- NET.................................... $657,166 ========
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, ----------------------------------------- 1998 1997 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS -- NOTE E Operations: Investment income -- net................................. $ 657,166 $ 523,418 Distributions to shareholders from net investment income........................................ (657,166) (523,418) Capital share transactions -- net.......................... 2,093,843 (297,337) ----------- ----------- Total increase in net assets......................... 2,093,843 (297,337) NET ASSETS Beginning of year.......................................... 12,440,409 12,737,746 ----------- ----------- End of year................................................ $14,534,252 $12,440,409 =========== ===========
See Notes to Financial Statements. 5 6 CARNEGIE TAX FREE INCOME TRUST STATEMENT OF NET ASSETS+ JULY 31, 1998
PRINCIPAL VALUE AMOUNT RATING* (NOTE A) - - - - --------- ------- -------- MUNICIPAL SECURITIES -- 99.6% ALABAMA -- 4.6% $ 200,000 Alabama Special Care Facility Variable Rate Demand Revenue Bonds 3.50%, 8/5/98......................................... Aaa $ 200,000 500,000 Columbia Industrial Development Board Pollution Control Variable Rate Demand Revenue Bonds 3.70%, 8/3/98............ A2 500,000 300,000 North Alabama Environmental Improvement Authority Variable Rate Demand Revenue Bonds 3.75%, 8/3/98..................... Aa3 300,000 ARIZONA -- 5.0% 600,000 Arizona Health Facilities Authority Variable Rate Demand Revenue Bonds 3.65%, 8/5/98................................. Aaa 600,000 500,000 Pima County Variable Rate Demand Industrial Development Revenue Bonds 3.60%, 8/5/98................................. NR 500,000 CALIFORNIA -- 4.1% 200,000 California Health Facilities Financing Authority Variable Rate Demand Revenue Bonds 3.20%, 8/5/98..................... Aaa 200,000 600,000 Palm Springs Community Redevelopment Agency Variable Rate Demand Revenue Bonds 3.375%, 8/5/98......................... AA- 600,000 100,000 Los Angeles Regional Airports Improvement Corporation Variable Rate Demand Revenue Bonds 3.75%, 8/3/98............ Aa2 100,000 DELAWARE -- 2.3% 500,000 Delaware State Economic Development Authority Demand Revenue Bonds 3.70%, 8/5/98......................................... A2 500,000 FLORIDA -- .5% 100,000 Florida Housing Finance Agency Variable Rate Demand Revenue Bonds 3.55%, 8/5/98......................................... AA 100,000 GEORGIA -- 4.1% 900,000 Burke County Pollution Control Variable Rate Demand Revenue Bonds 3.70%, 8/3/98......................................... A1 900,000 HAWAII -- 2.3% 500,000 Hawaii Housing Financial and Development Corporation Variable Rate Demand Revenues Bonds 3.55%, 8/5/98........... Aa3 500,000 ILLINOIS -- .9% 200,000 Chicago O'Hare International Airport Variable Rate Demand Revenue Bonds 3.50%, 8/5/98................................. Aa3 200,000 LOUISIANA -- 5.5% 1,000,000 Delhi Louisiana Industrial Development Variable Rate Demand Revenue Bonds 3.70%, 8/5/98 A1 1,000,000 200,000 Lake Charles Louisiana Harbor and Terminal District Variable Rate Demand Revenue Bonds 3.50%, 8/5/98..................... AA- 200,000 MARYLAND -- 4.6% 1,000,000 Montgomery County Housing Variable Rate Demand Revenue Bonds 3.55%, 8/5/98............................................... Aa2 1,000,000 MICHIGAN -- 5.0% 300,000 Cornell Michigan Economic Development Corporation Variable Rate Demand Revenue Bonds 3.65%, 8/3/98..................... AA+ 300,000 800,000 Michigan State Hospital Finance Authority Variable Rate Demand Revenue Bonds 3.55%, 8/5/98.......................... A1 800,000 NEW YORK -- 2.3% 100,000 New York State Energy Research Variable Rate Demand Revenue Bonds 3.65%, 8/3/98......................................... Aaa 100,000 400,000 New York State Medical Care Facilities Variable Rate Demand Revenue Bonds 3.43%, 8/5/98................................. Aa2 400,000 NORTH DAKOTA -- 2.3% 500,000 Grand Forks North Dakota Hospital Facilities Variable Rate Demand Revenue Bonds 3.75%, 8/5/98.......................... Aa3 500,000 OHIO -- 11.9% 600,000 Hamilton County Health System Variable Rate Demand Revenue Bonds 3.50%, 8/5/98......................................... Aa2 600,000 1,000,000 Ohio State Environmental Improvement Variable Rate Demand Revenue Bonds 3.70%, 8/5/98................................. A1 1,000,000 1,000,000 Ohio State Water Development Authority Variable Rate Demand Revenue Bonds 3.65%, 8/3/98................................. AA- 1,000,000 OKLAHOMA -- 1.8% 400,000 Garfield County Oklahoma Pollution Control Variable Rate Demand Revenue Bonds 3.55%, 8/5/98.......................... Aa3 400,000 OREGON -- 1.4% 300,000 Port of Portland Pollution Control Variable Rate Demand Revenue Bonds 3.75%, 8/3/98................................. Aa3 300,000 PENNSYLVANIA -- 11.0% 1,000,000 Allegheny County Pennsylvania Hospital Development Authority Variable Rate Demand Revenue Bonds 3.60%, 8/5/98............ Aaa 1,000,000 100,000 Delaware County Variable Rate Industrial Development Demand Revenue Bonds 3.65%, 8/3/98................................. Aaa 100,000 300,000 New Castle Pennsylvania Hospital Authority Variable Rate Demand Revenue Bonds 3.60%, 8/5/98.......................... Aaa 300,000 1,000,000 Pennsylvania State Higher Educational Facilities Authority Variable Rate Demand Revenue Bonds 3.60%, 8/5/98............ Aa3 1,000,000 TEXAS -- 16.1% 500,000 Bexar County Housing Finance Variable Rate Demand Revenue Bonds 3.55%, 8/5/98......................................... AA+ 500,000 400,000 Grapevine Texas Industrial Development Corporation Variable Rate Demand Revenue Bonds 3.75%, 8/3/98..................... Aa2 400,000 500,000 Harris County Texas Health Facilities Variable Rate Demand Revenue Bonds 3.75%, 8/3/98................................. AA 500,000 1,000,000 Harris County Texas Flood Control General Obligation Bonds 7.00%, 10/1/98.............................................. Aa2 1,015,994 600,000 Lone Star Texas Airport Variable Rate Demand Revenue Bonds 3.75%, 8/3/98............................................... VMIG1 600,000 500,000 Lower Neches Valley Authority Variable Rate Demand Revenue Bonds 3.50%, 8/5/98......................................... Aa2 500,000 VIRGINIA -- 1.4% 300,000 Fairfax County Industrial Development Authority Variable Rate Demand Revenue Bonds 3.50%, 8/5/98..................... Aa2 300,000
6 7
PRINCIPAL VALUE AMOUNT RATING* (NOTE A) - - - - --------- ------- -------- MUNICIPAL SECURITIES -- CONTINUED WASHINGTON --9.6% $ 500,000 Port of Seattle Washington Variable Rate Demand General Obligation Bonds, 3.50%, 8/5/98.................................................................. Aa1 $ 500,000 600,000 Seattle Washington Municipal Light and Power Variable Rate Demand Revenue Bonds 3.50%, 8/5/98.................................................................. Aa2 600,000 1,000,000 Yakima County Washington Bond Anticipation Notes 4.125%, 9/1/98................ MIG1 1,002,420 WISCONSIN -- 2.8% 600,000 Wisconsin Health Facilities Variable Rate Demand Revenue Bonds 3.55%, 8/5/98... Aaa 600,000 ---------- TOTAL INVESTMENTS -- 99.6% (Cost $21,718,414).................................. 21,718,414 OTHER ASSETS LESS LIABILITIES -- .4%........................................... 87,288 ---------- NET ASSETS -- 100% -- equivalent to $1.00 per share for 21,780,058 outstanding Capital Shares in the Trust, $.10 par value (unlimited number of shares authorized) -- Note E.......................................................... $21,805,702 ==========
+ Variable Rate Demand Notes (V.R.D.N.) are instruments whose interest rates change on a specified date (such as coupon date or interest payment date). These instruments are payable on demand and are secured by one or more of the following: letters of credit or other credit support agreements from either banks, corporate obligors, insurance companies and/or the taxing authority of the municipality. * All ratings are stated as of July 31, 1998 by Moody's Investor Services, Inc. or Standard and Poor's. The unrated municipal obligations are considered by the Trust's investment adviser, Carnegie Capital Management Company, to have characteristics and quality comparable to the rated municipal obligations purchased by the Fund, and are in accordance with policies established by the Board of Trustees. These ratings were not audited by our independent auditors KPMG Peat Marwick. See Notes to Financial Statements. CARNEGIE TAX FREE INCOME TRUST STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1998 INTEREST INCOME............................................................... $755,228 EXPENSES -- NOTE B Management fees.............................................................. $103,404 Custodian and transfer agent fees............................................ 20,710 Registration and filing fees................................................. 16,979 Professional fees............................................................ 14,591 Printing..................................................................... 11,824 Trustees' fees............................................................... 8,000 Postage...................................................................... 3,412 Insurance expense............................................................ 2,326 Miscellaneous................................................................ 3,485 184,731 -------- -------- INVESTMENT INCOME -- NET...................................................... $570,497 ========
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, ------------------------- 1998 1997 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS -- NOTE E Operations: Investment income -- net................................................... $ 570,497 $ 612,577 Distributions to shareholders from net investment income.......................................................... (570,497) (612,577) Capital share transactions -- net............................................ 1,616,939 (5,077,335) ----------- ----------- Total increase in net assets........................................... 1,616,939 (5,077,335) NET ASSETS Beginning of year............................................................ $20,188,763 25,266,098 ----------- ----------- End of year.................................................................. 21,805,702 20,188,763 =========== ===========
See Notes to Financial Statements. 7 8 CARNEGIE TAX EXEMPT INCOME TRUST OHIO GENERAL MUNICIPAL FUND STATEMENT OF NET ASSETS -- JULY 31, 1998
PRINCIPAL VALUE AMOUNT RATING (NOTE A) - - - - --------- ------ ----------- MUNICIPAL BONDS -- 98.1% $750,000 Columbus Citation Housing Corp. Revenue Bonds 7.63%, 1/1/2022.................................................... AA $ 923,186 400,000 Cuyahoga Cnty. University Hosp. Rev Refunding & Improvement 5.63%, 1/15/2026............................................ AAA 413,617 500,000 Cuyahoga Cnty. Meridia Hlth. Care Sys. Rev. Bonds 7.00%, 8/15/2006................................................... A 551,832 500,000 Dublin Ohio City Schl Dist. General Obligation Bonds 6.20%, 12/1/2002................................................... AAA 550,284 600,000 Franklin Cnty. Hosp. Rev. Refunding & Improvement Riverside 7.60%, 5/15/2020............................................ AAA 649,257 200,000 Franklin Cnty. Riverside Hosp. Rev. Bonds 7.25%, 5/15/2020................................................... AAA 215,221 200,000 Hamilton Cnty. General Obligation Bonds 5.10%, 12/1/2013.... NR 202,426 850,000 Hamilton Cnty. Bethesda Hosp. Rev. Bonds 7.00%, 1/1/2009.... A 857,577 450,000 Mahoning Cnty. Sanitary Sewer Sys. Rev. Bonds 7.50%, 2/1/2009.................................................... AAA 478,740 500,000 Mahoning Cnty. Western Reserve Care Sys. Rev. Bonds 5.38%, 10/15/2015.................................................. AAA 508,976 145,000 Ohio Capital Corp. Housing Revenue Bonds 7.60%, 11/1/2023... AAA 152,389 500,000 Ohio Housing Finance Agency Mtg. Rev. Bonds 5.40%, 9/1/2029.................................................... AAA 499,227 271,000 Ohio Housing Finance Agency Rev. Bonds 7.05% 9/1/2016....... AAA 285,200 120,000 Ohio State Higher Ed. Oberlin College Rev. Bonds 7.10%, 10/1/2012................................................... NR 127,050 500,000 Ohio State Water Dev. Auth. Ref. & Impt. Rev. Bonds 5.50%, 12/1/2018................................................... AAA 513,119 250,000 Parma Community Hospital Rev. Bonds 7.13%, 11/15/2013....... AAA 256,860 500,000 Richland Cnty. General Obligation Bonds 5.40%, 12/1/2015.... AAA 516,242 150,000 Rural Lorain Water Auth. Ref. & Impt. Rev. Rev. Bonds 5.45% 10/1/2018................................................... AAA 154,013 500,000 Stark Cnty. General Obligation Bonds 5.70%, 11/15/2017...... AAA 519,880 145,000 University Heights B General Obligation Bonds 6.20%, 12/1/2014................................................... NR 157,207 500,000 Washington Water Sys. Rev. Bonds 5.38%, 12/1/2019........... AAA 508,544 ----------- TOTAL MUNICIPAL BONDS -- (COST $8,551,460).................. 9,040,847 ----------- TOTAL INVESTMENTS -- 98.1% (COST $8,551,460)................ 9,040,847 OTHER ASSETS LESS LIABILITIES -- 1.9%....................... 179,649 ----------- NET ASSETS -- 100%.......................................... $ 9,220,496 =========== NET ASSET VALUE PER SHARE................................... $ 9.64 =========== SHARES OUTSTANDING (unlimited number of shares authorized; $.10 par value) -- NOTE C...................................................... 956,516 =========== MAXIMUM OFFERING PRICE PER SHARE (net asset value plus 4.71% of net amount invested or 4.5% of the offering price)....... $ 10.09 =========== NET ASSETS, AS OF JULY 31, 1998, ARE COMPRISED OF THE FOLLOWING: Aggregate paid in capital................................... $ 9,260,616 Accumulated undistributed net realized losses............... (532,132) Unrealized appreciation of investments -- net............... 492,012 ----------- $ 9,220,496 ===========
* All ratings are stated as of July 31, 1998 by Moody's Investor Services, Inc. or Standard and Poor's. The unrated municipal obligations are considered by the Trust's investment adviser, Carnegie Capital Management Company, to have characteristics and quality comparable to the rated municipal obligations purchased by the Fund, and are in accordance with policies established by the Board of Trustees. These ratings were not audited by our independent auditors KPMG Peat Marwick. See Notes to Financial Statements. 8 9 CARNEGIE TAX EXEMPT INCOME TRUST OHIO GENERAL MUNICIPAL FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1998 INTEREST INCOME............................................. $565,506 -------- EXPENSES -- NOTE B Management fees............................................. 47,508 Professional fees........................................... 9,415 Printing and postage........................................ 9,151 Pricing service fees........................................ 8,494 Trustees' fees.............................................. 8,000 Custodian and transfer agent fees........................... 7,270 Insurance expense........................................... 1,202 Miscellaneous............................................... 3,619 -------- Total expenses.......................................... 94,659 -------- INVESTMENT INCOME -- NET.................................... 470,847 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain on investments................................ 47,896 Change in unrealized appreciation of investments............ (67,102) -------- Net loss on investments..................................... (19,206) -------- NET INCREASE IN NET ASSETS FROM OPERATIONS.................. 451,641 ========
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, -------------------------- 1998 1997 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net investment income....................................... $ 470,847 $ 544,512 Realized gain on investments -- net......................... 47,896 66,008 Change in unrealized appreciation of investments -- net..... (67,102) 202,087 ----------- ----------- Net increase in net assets from operations.................. 451,641 812,607 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME -- NOTE A.................................................... (470,847) (544,512) CAPITAL SHARE TRANSACTIONS -- NOTE C Shares sold................................................. 616,998 631,315 Shares issued on reinvestment of distributions.............. 319,004 369,749 ----------- ----------- 936,002 1,001,064 Shares redeemed............................................. (1,979,505) (2,641,942) ----------- ----------- Net increase/(decrease) from capital shares transactions.... (1,043,503) (1,640,878) ----------- ----------- Total increase/(decrease) in net assets............ (1,062,709) (1,372,783) NET ASSETS Beginning of year........................................... 10,283,205 11,655,988 ----------- ----------- End of year................................................. $ 9,220,496 $10,283,205 =========== ===========
See Notes to Financial Statements. 9 10 CARNEGIE FUNDS GROUP (THE "TRUSTS") NOTES TO FINANCIAL STATEMENTS NOTE A -- ACCOUNTING POLICIES Liquid Capital Income Trust (LCI), Carnegie Government Securities Trust (CGST) and Carnegie Tax Free Income Trust (CTF) (the "Money Funds") are money market funds. The Trusts are open-end, diversified management investment companies registered under the Investment Company Act of 1940, as amended. Carnegie Tax-Exempt Income Trust is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust offers shares of beneficial interest in the Ohio General Municipal Fund ("Ohio General"). The following is a summary of significant accounting policies followed by the Trusts. The policies are in conformity with generally accepted accounting principles. Use of estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. Actual results could differ from those estimates. Security valuations -- Investment securities for LCI, CGST and CTF are valued using the amortized cost method whereby a security is valued at cost adjusted for the amortization of any premiums or discounts over the period until maturity. The cost of portfolio securities is substantially the same for financial reporting and federal income tax purposes. The value of municipal obligations held by Ohio General are furnished by pricing services approved by the Trust's Board of Trustees using methods based on market transactions for comparable securities and other factors which are generally recognized by institutional traders. Short-term portfolio securities are valued using the amortized cost method whereby a security is valued at cost adjusted for the amortization of any premiums or discounts over the period until maturity. Security transactions and related investment income -- Security transactions are accounted for on the trade date (date order to buy or sell is executed). Interest income is determined on the basis of accrued interest and discount earned (including original issue and market discount) and premium amortized. Realized gains and losses, if any, on sales of securities are calculated on the identified cost basis. Repurchase Agreements -- For LCI and CGST, all repurchase agreements are collateralized by United States Government Securities and such collateral is in the possession of the Trusts' custodian. Each Trust evaluates collateral daily. The market value of collateral is noted in the Statement of Net Assets. Unless otherwise noted, the purchase date for all repurchase agreements was July 31, 1998. Federal income taxes -- The Trusts have elected to fulfill the applicable requirements of the Internal Revenue Code relating to regulated investment companies by distributing all income to shareholders and, accordingly, no provision for federal income taxes is required. Distributions paid by Ohio General from net investment income on tax-exempt municipal obligations are not includable by shareholders as gross income for federal income tax purposes because Ohio General has fulfilled certain requirements of the Internal Revenue Code applicable to regulated investment companies which will enable Ohio General to pay exempt-interest distributions. For the year ended July 31, 1998, Ohio General has capital loss carryovers for federal income tax purposes of $273,926. If unused, such amount will expire on July 31, 1999. Securities purchased on a when-issued basis -- Delivery and payment for securities which have been purchased on a when-issued or delayed delivery basis can take place a month or more after the date of the transaction. The securities so purchased are subject to market fluctuation during this period. The Trusts instruct the custodian to segregate assets in a separate account with a market value equal to the amount of its purchase commitment. At July 31, 1998, there were no when-issued securities. Capital share transactions and distributions to shareholders -- The Money Funds' shares are sold in continuous public offerings and are redeemed at their respective net asset values. LCI and CGST declare and pay dividends each business day to distribute their net investment income and realized net short-term capital gains, if any. CTF declares a dividend each business day and pays the dividend monthly. For LCI and CGST, all such dividends are automatically reinvested in additional shares of the applicable Trust at their respective net asset values. For CTF, the shareholders may elect a cash distribution of dividends or elect automatic reinvestment in additional shares of the Trust at its net asset value. Ohio General shares are sold in a continuous public offering and are redeemed at the net asset value. The Fund declares distributions each business day and pays the distributions monthly. Shareholders may elect to reinvest such distributions at the net asset value on the payment date or receive the distributions in cash. Ohio General concentrates its investments in Ohio, and therefore may have more credit risk related to the economic conditions in the state of Ohio than a portfolio with broader geographical diversification. NOTE B -- MANAGEMENT FEE AND DISTRIBUTION FEE Pursuant to the investment advisory contract (the "Advisory Contract") in effect between the Trusts and Carnegie Capital Management Company ("CCMC"), CCMC is responsible for the management of the investments for the Trusts, and the overall management of the business affairs, subject to the general supervision and control of the Board of Trustees. CCMC performs and bears the cost of research, statistical analysis and continuous supervision of the investment portfolios of the Trusts and furnishes office facilities and certain clerical and administrative services. In addition, CCMC, together with Carnegie Fund Distributors, Inc. ("CFD"), the Fund's principal underwriter and a wholly-owned subsidiary of CCMC, bears promotional expenses, including costs of printing and distributing prospectuses utilized for promotional purposes, other than those waived under the Distribution Expense Plan described below. LCI compensates CCMC with a management fee at an annual rate of .50% of LCI's average daily net assets up to $700 million, .45% of the next $500 million, .40% of the next $800 million and .35% of the average daily net assets exceeding $2.0 billion. At July 31, 1998, LCI had $76,281 payable to CCMC for management fees, and for the year then ended CCMC earned management fees of $1,091,375. CGST compensates CCMC with a management fee at an annual rate of .50% of CGST's average daily net assets up to $100 million, .40% of the next $200 million and .35% of average daily net assets in excess of $300 million. At July 31, 1998, CGST had $6,586 payable to CCMC for management fees, and for the year then ended CCMC earned management fees of $72,460. CTF compensates CCMC with a management fee at an annual rate of .50% of CTF's average daily net assets. At July 31, 1998, CTF had $9,825 payable to CCMC for management fees, and for the year then ended CCMC earned management fees of $103,404. Ohio General compensates CCMC with a management fee at an annual rate of .50% of Ohio General's average daily net assets. At July 31, 1998, Ohio General had $3,917 payable to CCMC for management fees, and for the year then ended CCMC earned management fees of $47,508. 10 11 NOTES TO FINANCIAL STATEMENTS -- CONTINUED The Trustees have adopted a Distribution Expense Plan pursuant to Rule 12b-1 under the 1940 Act with respect to Ohio General. Pursuant to the Distribution Expense Plan, Ohio General will pay to CFD quarterly a Distribution Fee at the annual rate of .30 of 1% of the average daily net assets. If actual Distribution Expenses incurred for the year are less than the yearly Distribution Fee, as calculated above, the Ohio General will pay an amount equal to such Distribution Expenses. CFD is required to use .20 of 1% of such fee to make continuing payments to authorized securities dealers for their continuing distribution and promotional assistance in connection with the sale of the shares of Ohio General. The remaining portion of the Distribution Fee must be utilized by CFD for expenses incurred which are primarily intended to result in the sale of shares including, but not limited to, paying for the preparation, printing and distribution of sales literature and other promotional materials to existing and prospective investors and by directly or indirectly purchasing radio, television, newspaper and other media advertising and conducting sales seminars, sales contests, and other incentives. Distribution fees in the amount of $28,499 for the year ended July 31, 1998 were waived for the Ohio General Municipal Fund. For the year ended July 31, 1998, CFD received sales charges paid by the purchasers of Ohio General's shares of $711. Such sales charges are not expenses of Ohio General and hence are not reflected in the accompanying Statements of Operations. CCMC, CFD and the Trusts have certain officers in common. LCI compensates independent trustees with a quarterly fee of $1,500. CGST, CTF and Ohio General each compensate trustees with a quarterly fee of $500. NOTE C -- CAPITAL SHARES Transactions in capital shares were as follows:
YEAR ENDED JULY 31 ------------------------------- 1998 1997 -------------- -------------- LCI Shares sold................................................ 666,052,853 386,866,751 Shares issued on reinvestment of distributions............. 10,216,408 8,808,056 -------------- -------------- 676,269,261 395,674,807 Shares redeemed............................................ (696,979,044) (415,997,674) -------------- -------------- Net decrease in capital shares............................. (20,709,783) (20,322,867) ============== ============== CGST Shares sold................................................ 14,224,541 15,408,580 Shares issued on reinvestment of distributions............. 657,166 523,418 -------------- -------------- 14,881,707 15,931,998 Shares redeemed............................................ (12,787,864) (16,229,335) -------------- -------------- Net increase in capital shares............................. 2,093,843 (297,337) ============== ============== CTF Shares sold................................................ 41,751,665 35,113,852 Shares issued on reinvestment of distributions............. 570,497 612,577 -------------- -------------- 42,322,162 35,726,429 Shares redeemed............................................ (40,705,223) (40,803,764) -------------- Net increase in capital shares............................. 1,616,939 (5,077,335) ============== ============== Ohio General Shares sold................................................ 64,230 66,452 Shares issued on reinvestment of distributions from net investment income........................................ 33,074 39,040 -------------- -------------- 97,304 105,492 Shares redeemed............................................. (205,805) (278,926) -------------- -------------- Net increase/(decrease) in capital shares................... (108,501) (173,434) ============== ==============
NOTE D -- PURCHASES AND SALES OF INVESTMENT SECURITIES -- OHIO GENERAL MUNICIPAL FUND Purchases of investment securities and value of securities maturing or sold excluding short-term securities during the year ended July 31, 1998 amounted to $499,500 and $1,539,280 respectively. For Federal income tax purposes, the identified cost of securities owned on July 31, 1998 was $8,551,460. Aggregate unrealized appreciation on the cost basis of investments was zero and aggregate unrealized depreciation was $67,102. Net realized appreciation at July 31, 1998 was $492,012. NOTE E -- NET ASSETS Net Assets, as of July 31, 1998, are comprised of the following:
LCI CGST CTF ------------ ----------- ----------- Capital shares, at par...................................... $ 16,447,596 $ 1,453,425 $ 2,180,570 Capital shares in excess of par............................. 148,028,359 13,080,827 19,625,132 ------------ ----------- ----------- Net Assets........................................... $164,475,955 $14,534,252 $21,805,702 ============ =========== ===========
11 12 CARNEGIE CAPITAL MANAGEMENT COMPANY THE CARNEGIE FUNDS GROUP 1228 Euclid Avenue, Cleveland, Ohio 44115 Phone: (216) 781-4440 call toll free (800) 321-2322 CARNEGIE FUNDS GROUP - - - - -------------------------------------------------------------------------------- CARNEGIE Liquid Capital Income Trust is a money market fund with dividends compounded daily. CARNEGIE Government Securities Trust is a money market fund investing in securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and repurchase agreements. CARNEGIE Tax Free Income Trust provides income free from federal income taxation-- while offering all the advantages of a money market fund. CARNEGIE Tax Exempt Income Trust Ohio General Municipal Fund provides a high level of current income exempt from federal and Ohio state income taxes. This report was prepared for shareholders of the Trusts. It is not authorized for distribution to others unless it is accompanied or preceded by a current combined prospectus. For more complete information on the Carnegie funds, including sales charges and expenses, see the appropriate sections of the combined prospectus, which may be obtained from your broker. Read the prospectus carefully before you invest or send money. (LOGO) CARNEGIE CAPITAL MANAGEMENT COMPANY -- Liquid Capital Income Trust -- Carnegie Government Securities Trust -- Carnegie Tax Free Income Trust -- Carnegie Tax Exempt Income Trust -- Ohio General Municipal Fund - - - - ------------------------------------------------------------------- Annual Reports July 31, 1998 - - - - ------------------------------------------------------------------- (LOGO) CARNEGIE CAPITAL MANAGEMENT COMPANY 1100 The Halle Building 1228 Euclid Avenue Cleveland, Ohio 44115-1831 -----END PRIVACY-ENHANCED MESSAGE-----