PROSPECTUS
November 1, 1996
Revised March 31, 1997
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TAX-FREE MONEY FUND
TAX-FREE INTERMEDIATE TERM FUND
==============================================================================
The Tax-Free Money Fund and the Tax-Free Intermediate Term Fund (individually
a "Fund" and collectively the "Funds") are two separate series of Countrywide
Tax-Free Trust.
The Tax-Free Money Fund seeks the highest level of interest income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-quality, short-term municipal obligations.
THE TAX-FREE MONEY FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST
BASIS. FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES
GOVERNMENT OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE,
THAT THE FUND WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The Tax-Free Intermediate Term Fund offers two classes of shares: Class A
shares (sold subject to a maximum 2% front-end sales load and a 12b-1 fee of
up to .25% of average daily net assets) and Class C shares (sold subject to a
1% contingent deferred sales load for a one-year period and a 12b-1 fee of up
to 1% of average daily net assets). Each Class A and Class C share of the Fund
represents identical interests in the Fund's investment portfolio and has the
same rights, except that (i) Class C shares bear the expenses of higher
distribution fees, which will cause Class C shares to have a higher expense
ratio and to pay lower dividends than those related to Class A shares; (ii)
certain other class specific expenses will be borne solely by the class to
which such expenses are attributable; and (iii) each class has exclusive
voting rights with respect to matters relating to its own distribution
arrangements.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Countrywide Investments, Inc. (the "Adviser") manages the Funds' investments
and their business affairs.
This Prospectus sets forth concisely the information about the Funds that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 1, 1996, and
amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by
calling one of the numbers listed below.
- ------------------------------------------------------------------------------
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free)............................................800-543-0407
Cincinnati........................................................513-629-2050
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
==============================================================================
TAX-FREE MONEY FUND
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases................................. None
Sales Load Imposed on Reinvested Dividends...................... None
Exchange Fee.................................................... None
Redemption Fee ................................................. None *
Check Redemption Processing Fee (per check):
First six checks per month.................................... None
Additional checks per month................................... $0.25
* A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees................................................ .50%
12b-1 Fees..................................................... .09% (A)
Other Expenses................................................. .40%
------
Total Fund Operating Expenses.................................. .99%
======
(A) The Fund may incur 12b-1 fees in an amount up to .25% of its average
net assets.
TAX-FREE INTERMEDIATE TERM FUND
<TABLE>
<CAPTION>
CLASS A CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES
----------------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)......................................................... 2% None
Maximum Contingent Deferred Sales Load (as a percentage of original
purchase price)......................................................... None * 1%
Sales Load Imposed on Reinvested Dividends.............................. None None
Exchange Fee............................................................ None None
Redemption Fee.......................................................... None ** None **
Check Redemption Processing Fee (per check):
First six checks per month............................................ None None
Additional checks per month........................................... $0.25 $0.25
<FN>
* Purchases at net asset value of amounts totaling $1 million or more may be
subject to a contingent deferred sales load of .75% if a redemption
occurred within 12 months of purchase and a commission was paid by the
Adviser to a participating unaffiliated dealer.
** A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
</FN>
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) SHARES SHARES
-----------------
<S> <C> <C>
Management Fees...................................................... .50% .50%
12b-1 Fees(A) ....................................................... .16% .69%
Other Expenses....................................................... .33% .55%
-------- -------
Total Fund Operating Expenses........................................ .99% 1.74%
======== =======
<FN>
(A)Class A shares may incur 12b-1 fees in an amount up to .25% of average net
assets and Class C shares may incur 12b-1 fees in an amount up to 1.00% of
average net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the National
Association of Securities Dealers.
</FN>
</TABLE>
<PAGE>
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages expressing annual fund operating expenses are
based on amounts incurred during the most recent fiscal year except that 12b-1
fees for Class C shares of the Tax-Free Intermediate Term Fund have been
restated to reflect an anticipated increase in distribution expenses to be
incurred by such shares during the current fiscal year. THE EXAMPLE BELOW
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
CLASS A CLASS C
SHARES, SHARES,
TAX-FREE TAX-FREE
TAX-FREE INTERMEDIATE INTERMEDIATE
MONEY FUND TERM FUND TERM FUND
-----------------------------------------------
<S> <C> <C> <C>
1 Year $ 10 $ 30 $ 28
3 Years 32 51 55
5 Years 55 74 94
10 Years 121 139 205
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP, is
an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1996 and related auditors' report appear in the Statement of Additional
Information of the Funds, which can be obtained by shareholders at no charge
by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
Tax-Free Money Fund
<TABLE>
<CAPTION>
Per Share Data for a Share Outstanding Throughout Each Year(A)
===================================================================================================================
Year Ended June 30,
- -------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Net investment
income ............ 0.031 0.030 0.021 0.024 0.036 0.050 0.055 0.053 0.045 0.040
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Distributions from net
investment income. ( 0.031) (0.030) (0.021) (0.024) (0.036) (0.050) (0.055) (0.053) (0.045) (0.040)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Net asset value at
end of year ...... $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
======== ======= ======== ======= ======= ======= ======= ======= ======== ========
Total return ....... 3.15% 3.07% 2.12% 2.40% 3.63% 5.09% 5.69% 5.48% 4.53% 4.01%
======== ======= ======== ======= ======= ======= ======= ======= ======== ========
Net assets at end
of year (000's) .. $25,342 $26,692 $31,168 $34,787 $50,000 $45,210 $46,727 $83,634 $115,670 $107,398
======== ======= ======== ======= ======= ======= ======= ======= ======== ========
Ratio of expenses to
average net assets 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.97% 0.94% 0.96% 0.93%
Ratio of net investment
income to average
net assets........ 3.09% 3.00% 2.09% 2.39% 3.55% 4.98% 5.57% 5.30% 4.47% 3.93%
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) All per share data for the years ended prior to June 30, 1991 has been
restated to reflect a 10 for 1 share split on February 28, 1990.
</FN>
</TABLE>
<PAGE>
<TABLE>
Tax-Free Intermediate Term Fund - Class A
<CAPTION>
Per Share Data for a Share Outstanding Throughout Each Year
==================================================================================================================
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year... $10.86 $10.69 $ 10.98 $ 10.42 $ 10.15 $ 10.05 $ 10.07 $ 10.13 $ 10.30 $10.34
------ ------ ------- ------- ------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income 0.50 0.49 0.48 0.53 0.59 0.62 0.64 0.63 0.56 0.55
Net realized and
unrealized gains
(losses) on
investments... (0.01) 0.17 (0.29) 0.56 0.27 0.10 (0.02) (0.06) (0.17) (0.04)
------ ------ ------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations ....... 0.49 0.66 0.19 1.09 0.86 0.72 0.62 0.57 0.39 0.51
------ ------ ------- ------- ------- ------- ------- ------- ------- ------
Distributions from net
investment income .. (0.50) (0.49) (0.48) (0.53) (0.59) (0.62) (0.64) (0.63) (0.56) (0.55)
------ ------ ------- ------- ------- ------- ------- ------- ------- ------
Net asset value at
end of year ...... $10.85 $10.86 $ 10.69 $ 10.98 $ 10.42 $ 10.15 $ 10.05 $ 10.07 $ 10.13 $10.30
======= ======= ======== ======= ======= ======= ======= ======= ======= =======
Total return(A) .... 4.51% 6.36% 1.70% 10.75% 8.78% 7.38% 6.35% 5.76% 3.88% 5.24%
======= ======= ======== ======= ======= ======= ======= ======= ======= =======
Net assets at end of
year (000's) ..... $67,675 $81,140 $106,472 $82,168 $26,720 $15,638 $15,875 $17,741 $21,916 $32,140
======= ======= ======== ======= ======= ======= ======= ======= ======= =======
Ratio of expenses to
average net
assets(B) ........ 0.99% 0.99% 0.99% 0.99% 1.07% 1.13% 1.09% 1.13% 1.19% 1.10%
Ratio of net investment
income to average
net assets........ 4.52% 4.59% 4.35% 4.90% 5.75% 6.15% 6.39% 6.23% 5.51% 5.30%
Portfolio turnover
rate.............. 37% 32% 46% 28% 12% 48% 58% 82% 59% 26%
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) The total returns shown do not include the effect of applicable sales
loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 1.08% and 1.25% for the
years ended June 30, 1992 and 1988, respectively.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Intermediate Term Fund - Class C
Per Share Data for a Share Outstanding Throughout Each Period
===================================================================================================================
From Date of
Public Offering
Year Ended June 30, (Feb. 1, 1994)
through
1996 1995 June 30, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.......................... $ 10.86 $ 10.69 $ 11.27
------------ ------------ -------------
Income from investment operations:
Net investment income........................................ 0.44 0.44 0.20
Net realized and unrealized gains (losses) on investments.... ( 0.01 ) 0.17 (0.58)
------------ ------------ -------------
Total from investment operations................................ 0.43 0.61 (0.38)
------------ ------------ -------------
Distributions from net investment income........................ ( 0.44 ) ( 0.44 ) (0.20)
------------ ------------ -------------
Net asset value at end of period................................ $ 10.85 $ 10.86 $ 10.69
============ ============ =============
Total return(A) ................................................ 4.00% 5.82% (8.28%)(C)
============ ============ =============
Net assets at end of period (000's)............................. $ 5,239 $ 4,814 $ 3,084
============ ============ =============
Ratio of expenses to average net assets(B) ..................... 1.49% 1.49% 1.45%(C)
Ratio of net investment income to average net assets............ 4.02% 4.08% 3.79%(C)
Portfolio turnover rate......................................... 37% 32% 46%(C)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) The total returns shown do not include the effect of applicable sales
loads.
(B) Absent expense reimbursements by the Adviser, the ratio of expenses to
average net assets would have been 1.75%(C) for the period ended June 30,
1994.
(C) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES
==============================================================================
The Tax-Free Money Fund and the Tax-Free Intermediate Term Fund are two series
of Countrywide Tax-Free Trust (the "Trust"), each with its own portfolio and
investment objective(s). Neither Fund is intended to be a complete investment
program, and there is no assurance that the investment objectives of either
Fund can be achieved. Unless otherwise indicated, all investment practices and
limitations of the Funds are nonfundamental policies which may be changed by
the Board of Trustees without shareholder approval. For a discussion of each
Fund's investment practices, see "Investment Policies."
The TAX-FREE MONEY FUND seeks the highest level of interest income exempt from
federal income tax, consistent with protection of capital. The Fund seeks to
achieve its investment objective by investing primarily in high-quality
municipal obligations determined by the Adviser, under the direction of the
Board of Trustees, to present minimal credit risks, maturing within thirteen
months or less with a dollar-weighted average maturity of 90 days or less.
The investment objective of the Tax-Free Money Fund is fundamental and as such
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Fund. The term "majority" of the outstanding shares
means the lesser of (1) 67% or more of the outstanding shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented at such meeting or (2) more than
50% of the outstanding shares of the Fund.
The TAX-FREE INTERMEDIATE TERM FUND seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The investment objectives of the Tax-Free Intermediate Term Fund may be
changed by the Board of Trustees without shareholder approval, but only after
notification has been given to shareholders and after this Prospectus has been
revised accordingly. If there is a change in the Fund's investment objectives,
shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial position and needs.
INVESTMENT POLICIES
==============================================================================
The TAX-FREE MONEY FUND seeks to achieve its investment objective by investing
primarily in high-quality, short-term Municipal Obligations (described below)
determined by the Adviser, under the direction of the Board of Trustees, to
present minimal credit risks. The Fund will purchase only obligations that
enable it to employ the amortized cost method of valuation. Under the
amortized cost method of valuation, the Fund's obligations are valued at
original cost adjusted for amortization of premium or accumulation of
discount, rather than valued at market. This method should enable the Fund to
maintain a stable net asset value per share. The Fund will invest in
obligations which have received a short-term rating in one of the two highest
categories by any two nationally recognized statistical rating organizations
("NRSROs") or by any one NRSRO if the obligation is rated by only that NRSRO.
The Fund may purchase unrated obligations determined by the Adviser, under the
direction of the Board of Trustees, to be of comparable quality to rated
obligations meeting the Fund's quality standards. These standards must be
satisfied at the time an investment is made. If an obligation ceases to meet
these standards, or if the Board of Trustees believes such obligation no
longer presents minimal credit risks, the Trustees will cause the Fund to
dispose of the obligation as soon as practicable. The Statement of Additional
Information describes ratings of the NRSROs.
The dollar-weighted average maturity of the Tax-Free Money Fund will be 90
days or less. The Fund will invest in obligations with remaining maturities of
thirteen months or less at the time of purchase.
The TAX-FREE INTERMEDIATE TERM FUND seeks to achieve its investment objectives
by investing primarily in high-grade Municipal Obligations. The Fund invests
in Municipal Obligations and other securities which are rated at the time of
purchase within the three highest grades assigned by Moody's Investors
Service, Inc. (Aaa, Aa or A), Standard & Poor's Ratings Group (AAA, AA or A)
or Fitch Investors Services, Inc. (AAA, AA or A), or unrated securities
determined by the Adviser to be of comparable quality.
<PAGE>
It is anticipated that under normal circumstances the Tax-Free Intermediate
Term Fund will invest in Municipal Obligations with remaining maturities of
twenty years or less and that the dollar-weighted average maturity of the Fund
will be between three and ten years, although the Fund may invest in
securities of any maturity, including tax-exempt notes and commercial paper
determined by the Adviser to meet the Fund's quality standards. The Fund's
quality standards limit its investments in tax-exempt notes to those which are
rated within the three highest grades by Moody's (MIG 1, MIG 2 or MIG 3) or
Fitch (F-1+, F-1 or F-2) or the two highest grades by Standard & Poor's (SP-1
or SP-2) and in tax-exempt commercial paper to those which are rated within
the two highest grades by Moody's (Prime-1 or Prime-2), Standard & Poor's (A-1
or A-2) or Fitch (Fitch-1 or Fitch-2). The Statement of Additional Information
contains a description of tax-exempt notes and commercial paper and a
description of Moody's, Standard & Poor's and Fitch ratings. If the Adviser
determines that market conditions warrant a shorter or longer dollar-weighted
average maturity, the Fund's investments will be adjusted accordingly.
It is a fundamental policy that under normal market conditions the assets of
each Fund will be invested so that at least 80% of the annual income of each
Fund will be exempt from federal income tax, including the alternative minimum
tax. This policy may not be changed without the affirmative vote of a majority
of the outstanding shares of the applicable Fund.
Each Fund may, from time to time, invest in taxable short-term, high-quality
obligations for temporary defensive purposes (subject to the fundamental
policy that under normal market conditions the assets of each Fund will be
invested so that at least 80% of annual income will be exempt from federal
income tax, including the alternative minimum tax). These include, but are not
limited to, certificates of deposit and other bank debt instruments,
commercial paper, obligations issued by the U.S. Government or any of its
agencies or instrumentalities and repurchase agreements. Interest earned from
such investments will be taxable to investors. Except for temporary defensive
purposes, the assets of each Fund will be invested so that no more than 20% of
each Fund's annual income will be subject to federal income tax. Under normal
market conditions, each Fund anticipates that not more than 5% of the value of
its net assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional
Information. Each Fund may invest in these taxable short-term obligations, for
example, due to market conditions under which Municipal Obligations are
temporarily unavailable for purchase or available only in limited amounts, or
pending investment of proceeds of sales of shares or proceeds from the sale of
portfolio securities or in anticipation of redemptions. The Funds reserve the
right to hold cash reserves as the Adviser deems necessary for temporary
defensive purposes. Although interest earned on these short-term obligations
is taxable as ordinary income for federal income tax purposes, each Fund
intends to minimize taxable income through investment, when possible, in other
available securities exempt from federal income tax, including shares of
investment companies whose dividends are tax-exempt. Each Fund may invest up
to 10% of its total assets in shares of other investment companies.
Investments by a Fund in shares of other investment companies may result in
duplication of sales loads and advisory, administrative and distribution fees.
Each Fund will not invest more than 5% of its total assets in securities of
any single investment company and will not purchase more than 3% of the
outstanding voting securities of any investment company. The Tax-Free Money
Fund will only invest in securities of other investment companies which hold
themselves out to be money market funds.
MUNICIPAL OBLIGATIONS
Municipal Obligations are debt obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia,
and their political subdivisions, agencies, authorities and instrumentalities
and other qualifying issuers which pay interest that is, in the opinion of
bond counsel to the issuer, exempt from federal income tax, including the
alternative minimum tax. For purposes of this definition, Municipal
Obligations include participation interests in Municipal Obligations and
shares of an investment company which invests its assets so that at least 80%
of its annual income is exempt from federal income tax, including the
alternative minimum tax. Municipal Obligations are issued to obtain funds to
construct, repair or improve various public facilities such as airports,
bridges, highways, hospitals, housing, schools, streets and water and sewer
works, to pay general operating expenses or to refinance outstanding debts.
They also may be issued to finance various private activities, including the
lending of funds to public or private institutions for construction of
housing, educational or medical facilities or the financing of privately owned
or operated facilities. Municipal Obligations consist of tax-exempt bonds,
tax-exempt notes and tax-exempt commercial paper. The Statement of Additional
Information contains a description of tax-exempt bonds, notes and commercial
paper.
<PAGE>
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the
revenues of a specific project, facility or tax. Industrial development
revenue bonds are a specific type of revenue bond backed by the credit of the
private user of the facility, and therefore investments in these bonds have
more potential risk. Each Fund's ability to achieve its investment objective
depends to a great extent on the ability of these various issuers to meet
their scheduled payments of principal and interest. Tax-exempt notes generally
are used to provide short-term capital needs and generally have maturities of
one year or less. The tax-exempt notes in which the Funds may invest are tax
anticipation notes (TANs), revenue anticipation notes (RANs) and bond
anticipation notes (BANs). TANs, RANs and BANs are issued by state and local
government and public authorities as interim financing in anticipation of tax
collections, revenue receipts or bond sales, respectively. Tax-exempt
commercial paper typically represents short-term, unsecured, negotiable
promissory notes.
Each Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. Each Fund may invest more than 25% of
its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, each Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, neither Fund will invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on Municipal Obligations (including certain
industrial development bonds) which are private activity obligations, as
defined in the Internal Revenue Code, issued after August 7, 1986, while
exempt from federal income tax, is a preference item for purposes of the
alternative minimum tax. Where a regulated investment company receives such
interest, a proportionate share of any exempt-interest dividend paid by the
investment company will be treated as such a preference item to shareholders.
Each Fund will invest its assets so that no more than 20% of its annual income
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
Each Fund may purchase other types of Municipal Obligations which may become
available in the future, provided the obligations are consistent with the
Fund's investment objectives and policies, the Adviser believes their quality
meets the Fund's quality standards, and this Prospectus has been appropriately
revised to reflect the Fund's policies with respect to such obligations.
RISK FACTORS
The market value of investments available to the Funds, and therefore each
Fund's yield, will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the
Adviser. The net asset value of the Tax-Free Intermediate Term Fund also will
fluctuate due to these changes. The portfolio securities held by the Funds are
subject to price fluctuations based upon changes in the level of interest
rates, which will generally result in all those securities changing in price
in the same way, i.e., all those securities experiencing appreciation when
interest rates decline and depreciation when interest rates rise. In addition,
the financial condition of an issuer or adverse changes in general economic
conditions, or both, may impair the issuer's ability to make payments of
interest and principal.
There are additional risks associated with an investment in the Tax-Free
Intermediate Term Fund. The Fund may purchase Municipal Obligations which are
rated at the time of purchase within the three highest grades assigned by
Moody's, Standard & Poor's or Fitch. Subsequent to its purchase by the Fund, a
security may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. In the event a security's rating is reduced
below the Fund's minimum requirements, the Fund will sell the security,
subject to market conditions and the Adviser's assessment of the most
opportune time for sale. Although lower rated securities will generally
provide higher yields than higher rated securities of similar maturities, they
are subject to a greater degree of market fluctuation. The lower rating also
reflects a greater possibility that changing circumstances may impair the
ability of the issuer to make timely payments of interest and principal. In
addition, Municipal Obligations with longer maturities generally offer both
higher yields and greater exposure to market fluctuation from changes in
interest rates. Consequently, investors in the Tax-Free Intermediate Term Fund
should be aware that there is a possibility of greater fluctuation in the
Fund's net asset value.
<PAGE>
Certain provisions in the Internal Revenue Code relating to the issuance of
Municipal Obligations may reduce the volume of Municipal Obligations
qualifying for federal tax exemptions. Shareholders should consult their tax
advisors concerning the effect of these provisions on an investment in the
Funds. Proposals that may further restrict or eliminate the income tax
exemptions for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability
of Municipal Obligations for investment by the Funds so as to adversely affect
their shareholders, the Funds would reevaluate their investment objectives and
policies and submit possible changes in the Funds' structure to shareholders
for their consideration. If legislation were enacted that would treat a type
of Municipal Obligation as taxable, each Fund would treat such security as a
permissible taxable investment within the applicable limits set forth herein.
OTHER INVESTMENT TECHNIQUES
The Funds may also engage in the following investment techniques, each of
which may involve certain risks:
PARTICIPATION INTERESTS. Each Fund may purchase participation interests in
Municipal Obligations owned by banks or other financial institutions. A
participation interest gives a Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation
interests will be purchased only if, in the opinion of counsel to the issuer,
interest income on the participation interests will be tax-exempt when
distributed as dividends to shareholders. For certain participation interests,
a Fund will have the right to demand payment, on not more than seven days'
notice, for all or any part of its participation interest in the Municipal
Obligation, plus accrued interest. As to these instruments, the Funds intend
to exercise their right to demand payment only upon a default under the terms
of the obligation, as needed to provide liquidity to meet redemptions, or to
maintain a high-quality investment portfolio. Each Fund will not invest more
than 10% of its net assets in participation interests that do not have this
demand feature and all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. Each Fund may invest in floating or
variable rate Municipal Obligations. Floating rate obligations have an
interest rate which is fixed to a specified interest rate, such as a bank
prime rate, and is automatically adjusted when the specified interest rate
changes. Variable rate obligations have an interest rate which is adjusted at
specified intervals to a specified interest rate. Periodic interest rate
adjustments help stabilize the obligations' market values. Each Fund may
purchase these obligations from the issuers or may purchase participation
interests in pools of these obligations from banks or other financial
institutions. Variable and floating rate obligations usually carry demand
features that permit a Fund to sell the obligations back to the issuers or to
financial intermediaries at par value plus accrued interest upon not more than
30 days' notice at any time or prior to specific dates. Certain of these
variable rate obligations, often referred to as "adjustable rate put bonds,"
may have a demand feature exercisable on specific dates once or twice each
year. Neither Fund will invest more than 10% of its net assets in floating or
variable rate obligations as to which it cannot exercise the demand feature on
not more than seven days' notice if the Adviser, under the direction of the
Board of Trustees, determines that there is no secondary market available for
these obligations and all other illiquid securities. If a Fund invests a
substantial portion of its assets in obligations with demand features
permitting sale to a limited number of entities, the inability of the entities
to meet demands to purchase the obligations could affect the Fund's liquidity.
However, obligations with demand features frequently are secured by letters of
credit or comparable guarantees that may reduce the risk that an entity would
not be able to meet such demands. In determining whether an obligation secured
by a letter of credit meets a Fund's quality standards, the Adviser will
ascribe to such obligation the same rating given to unsecured debt issued by
the letter of credit provider. In looking to the creditworthiness of a party
relying on a foreign bank for credit support, the Adviser will consider
whether adequate public information about the bank is available and whether
the bank may be subject to unfavorable political or economic developments,
currency controls or other governmental restrictions affecting its ability to
honor its credit commitment.
INVERSE FLOATING OBLIGATIONS. The Tax-Free Intermediate Term Fund may invest
in securities representing interests in Municipal Obligations, known as
inverse floating obligations, which pay interest rates that vary inversely to
changes in the interest rates of specified short-term Municipal Obligations or
an index of short-term Municipal Obligations. The interest rates on inverse
floating obligations will typically decline as short-term market interest
rates increase and increase as short-term market rates decline. Such
securities have the effect of providing a degree of investment leverage, since
they will generally increase or decrease in value in response to changes in
market interest rates at a rate which is a multiple (typically two) of the
rate at which fixed-rate, long-term Municipal Obligations increase or decrease
in response to such changes. As a result, the market value of inverse floating
obligations will generally be more volatile than the market values of
fixed-rate Municipal Obligations.
<PAGE>
WHEN-ISSUED OBLIGATIONS. Each Fund may invest in when-issued Municipal
Obligations. Obligations offered on a when-issued basis are settled by
delivery and payment after the date of the transaction, usually within 15 to
45 days. A Fund will maintain a segregated account with its Custodian of cash
or high-quality liquid debt securities, marked to market daily, in an amount
equal to its when-issued commitments. Because these transactions are subject
to market fluctuations, a significant commitment to when-issued purchases
could result in fluctuation of the net asset value of the Tax-Free Money Fund
and greater fluctuation of the net asset value of the Tax-Free Intermediate
Term Fund. Each Fund will only make commitments to purchase when-issued
obligations with the intention of actually acquiring the obligations and not
for the purpose of investment leverage.
LENDING PORTFOLIO SECURITIES. Each Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio
securities exposes a Fund to the risk that the borrower may fail to return the
loaned securities or may not be able to provide additional collateral or that
a Fund may experience delays in recovery of the loaned securities or loss of
rights in the collateral if the borrower fails financially. To minimize these
risks, the borrower must agree to maintain collateral marked to market daily,
in the form of cash and/or U.S. Government obligations, with the Funds'
Custodian in an amount at least equal to the market value of the loaned
securities. Each Fund will limit the amount of its loans of portfolio
securities to no more than 25% of its net assets. This lending policy may not
be changed by either Fund without the affirmative vote of a majority of its
outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. Each Fund may purchase Municipal Obligations
with the right to resell the obligation to the seller at a specified price or
yield within a specified period. The right to resell is commonly known as a
"put" or a "standby commitment." Each Fund may purchase Municipal Obligations
with puts attached from banks and broker-dealers. Each Fund intends to use
obligations with puts attached for liquidity purposes to ensure a ready market
for the underlying obligations at an acceptable price. Although no value is
assigned to any puts on Municipal Obligations, the price which a Fund pays for
the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the
risk that the seller may not be able to repurchase the underlying obligation.
Each Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal
credit risks. In addition, the value of the obligations with puts attached
held by a Fund will not exceed 10% of its net assets.
LEASE OBLIGATIONS. The Tax-Free Intermediate Term Fund may invest in Municipal
Obligations that constitute participations in lease obligations or installment
purchase contract obligations ("lease obligations") of municipal authorities
or entities. Although lease obligations do not constitute general obligations
of the municipality for which the municipality's taxing power is pledged, a
lease obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on an annual basis. In addition to the "non-appropriation" risk, these
securities represent a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional bonds.
Although "non-appropriation" lease obligations are secured by the leased
property, the disposition of the property in the event of foreclosure might
prove difficult. The Tax-Free Intermediate Term Fund will seek to minimize
these risks by not investing more than 10% of its net assets in lease
obligations if the Adviser determines that there is no secondary market
available for these obligations and all other illiquid securities, and by only
investing in "non-appropriation" lease obligations that meet certain criteria
of the Adviser. The Fund does not intend to invest more than an additional 5%
of its net assets in municipal lease obligations determined by the Adviser,
under the direction of the Board of Trustees, to be liquid. The Fund will only
purchase unrated lease obligations which meet the Fund's quality standards, as
determined by the Adviser, under the direction of the Board of Trustees,
including an assessment of the likelihood that the lease will not be
cancelled.
SECURITIES WITH LIMITED MARKETABILITY. Each Fund may invest in the aggregate
up to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to the demand feature
described above; floating and variable rate obligations as to which the Funds
cannot exercise the related demand feature described above and as to which
there is no secondary market; lease obligations for which there is no
secondary market; and repurchase agreements not terminable within seven days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, each Fund may borrow money from banks or other persons in an amount
not exceeding 10% of its total assets. Each Fund may pledge assets in
connection with borrowings but will not pledge more than 10% of its total
assets. Neither Fund will make any additional purchases of portfolio
securities while borrowings are outstanding. Borrowing magnifies the potential
for gain or loss on the portfolio securities of the Funds and, therefore, if
employed, increases the possibility of fluctuation in a Fund's net asset
value. This is the speculative factor known as leverage. To reduce the risks
of borrowing, the Funds will limit their borrowings as described above. Each
Fund's policies on borrowing and pledging are fundamental policies which may
not be changed without the affirmative vote of a majority of its outstanding
shares.
<PAGE>
HOW TO PURCHASE SHARES
==============================================================================
TAX-FREE MONEY FUND
Your initial investment in the Tax-Free Money Fund ordinarily must be at least
$1,000. Shares of the Fund are sold on a continuous basis at the net asset
value next determined after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Tax-Free Money Fund by sending a check and a completed
account application form to Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made
payable to the "Tax-Free Money Fund." An account application is included in
this Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month.
Certificates representing shares are not issued. The Trust and the Adviser
reserve the rights to limit the amount of investments and to refuse to sell to
any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
to the various services (for example, telephone redemptions and exchanges and
check redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Tax-Free
Money Fund by wire. Please telephone the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629-2050) for instructions. You
should be prepared to give the name in which the account is to be established,
the address, telephone number and taxpayer identification number for the
account, and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided you
have given notice of your intention to make such investment to the Transfer
Agent by 4:00 p.m., Eastern time, on the preceding business day (or 12:00
noon, Eastern time, on the same day of a wire investment in the case of
investors utilizing institutions that have made appropriate arrangements with
the Transfer Agent). Your investment will be made at the net asset value next
determined after your wire is received together with the account information
indicated above. If the Trust does not receive timely and complete account
information, there may be a delay in the investment of your money and any
accrual of dividends. To make your initial wire purchase, you are required to
mail a completed account application to the Transfer Agent. Your bank may
impose a charge for sending your wire. There is presently no fee for receipt
of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to the Transfer Agent, P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Tax-Free Money Fund." Bank wires should be sent as outlined above. You may
also make additional investments at the Trust's offices at 312 Walnut Street,
21st Floor, Cincinnati, Ohio 45202. Each additional purchase request must
contain the name of your account and your account number to permit proper
crediting to your account. While there is no minimum amount required for
subsequent investments, the Trust reserves the right to impose such
requirement.
<PAGE>
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial institutions
may be automatically invested in shares of the Tax-Free Money Fund at the next
determined net asset value on a day selected by the institution or its
customer, or when the account balance reaches a predetermined dollar amount
(e.g., $5,000).
Participating institutions are responsible for prompt transmission of orders
relating to the program. Institutions participating in this program may charge
their customers fees for services relating to the program which would reduce
the customers' yield from an investment in the Fund. This Prospectus should,
therefore, be read together with any agreement between the customer and the
participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
TAX-FREE INTERMEDIATE TERM FUND
Your initial investment in the Tax-Free Intermediate Term Fund ordinarily must
be at least $1,000. You may purchase additional shares through the Open
Account Program described below. You may open an account and make an initial
investment through securities dealers having a sales agreement with the
Trust's principal underwriter, Countrywide Investments, Inc. (the "Adviser").
You may also make a direct initial investment by sending a check and a
completed account application form to Countrywide Fund Services, Inc. (the
"Transfer Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should
be made payable to the "Tax-Free Intermediate Term Fund." An account
application is included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of shares of
the Tax-Free Intermediate Term Fund. Certificates representing shares are not
ordinarily issued, but you may receive a certificate without charge by sending
a written request to the Transfer Agent. Certificates for fractional shares
will not be issued. If a certificate has been issued to you, you will not be
permitted to redeem shares by check, to redeem or exchange shares by telephone
or to use the automatic withdrawal plan as to those shares. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
to the various services (for example, telephone redemptions and exchanges and
check redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers
listed below.
After an initial investment, all investors are considered participants in the
Open Account Program. The Open Account Program helps investors make purchases
of shares of the Tax-Free Intermediate Term Fund over a period of years and
permits the automatic reinvestment of dividends and distributions of the Fund
in additional shares without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a
check to the Transfer Agent, P.O. Box 5354, Cincinnati, Ohio 45201-5354. The
check should be made payable to the "Tax-Free Intermediate Term Fund."
Under the Open Account Program, you may also purchase shares of the Tax-Free
Intermediate Term Fund by bank wire. Please telephone the Transfer Agent
(Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050) for
instructions. Your bank may impose a charge for sending your wire. There is
presently no fee for receipt of wired funds, but the Transfer Agent reserves
the right to charge shareholders for this service upon thirty days' prior
notice to shareholders.
Each additional purchase request must contain the name of your account and
your account number to permit proper crediting to your account. While there is
no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for
selling shares of the Tax-Free Intermediate Term Fund to a current
shareholder, such broker-dealer will receive the concessions described above
with respect to additional investments by the shareholder.
<PAGE>
SALES LOAD ALTERNATIVES
The Tax-Free Intermediate Term Fund offers two classes of shares which may be
purchased at the election of the purchaser. The two classes of shares each
represent interests in the same portfolio of investments of the Fund, have the
same rights and are identical in all material respects except that (i) Class C
shares bear the expenses of higher distribution fees; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable, including transfer agent fees attributable to a specific class
of shares, printing and postage expenses related to preparing and distributing
materials to current shareholders of a specific class, registration fees
incurred by a specific class of shares, the expenses of administrative
personnel and services required to support the shareholders of a specific
class, litigation or other legal expenses relating to a class of shares,
Trustees' fees or expenses incurred as a result of issues relating to a
specific class of shares and accounting fees and expenses relating to a
specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements. The net
income attributable to Class C shares and the dividends payable on Class C
shares will be reduced by the amount of the incremental expenses associated
with the distribution fee. See "Distribution Plans." Shares of the Tax-Free
Intermediate Term Fund purchased prior to February 1, 1994 are Class A shares.
The Fund's alternative sales arrangements permit investors to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold his shares and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur a front-end sales
load and be subject to lower ongoing charges, as discussed below, or to have
all of the initial purchase price invested in the Fund with the investment
thereafter being subject to higher ongoing charges. A salesperson or any other
person entitled to receive any portion of a distribution fee may receive
different compensation for selling Class A or Class C shares.
As an illustration, investors who qualify for reduced sales loads as described
below, might elect the Class A sales load alternative because similar sales
load reductions are not available for purchases under the Class C sales load
alternative. Moreover, shares acquired under the Class A sales load
alternative would be subject to lower ongoing distribution fees as described
below. Investors not qualifying for reduced initial sales loads who expect to
maintain their investment for an extended period of time might also elect the
Class A sales load alternative because over time the accumulated continuing
distribution fees on Class C shares may exceed the difference in initial sales
loads between Class A and Class C shares. Again, however, such investors must
weigh this consideration against the fact that less of their funds will be
invested initially under the Class A sales load alternative. Furthermore, the
higher ongoing distribution fees will be offset to the extent any return is
realized on the additional funds initially invested under the Class C sales
load alternative.
Some investors might determine that it would be more advantageous to utilize
the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 2% initial sales load on Class A shares who elects to reinvest
dividends in additional shares would have to hold the investment in Class A
shares approximately 2-1/2 years before the accumulated ongoing distribution
fees on the alternative Class C shares would exceed the initial sales load
plus the accumulated ongoing distribution fees on Class A shares. In this
example and assuming the investment was maintained for more than 2-1/2 years,
the investor might consider purchasing Class A shares. This example does not
take into account the time value of money which reduces the impact of the
higher ongoing Class C distribution fees, fluctuations in net asset value or
the effect of different performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Adviser may from time to time pay from its own resources additional cash
bonuses or other incentives to selected dealers in connection with the sale of
shares of the Tax-Free Intermediate Term Fund. On some occasions, such bonuses
or incentives may be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other funds of Countrywide Investments
during a specific period of time. Such bonuses or incentives may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and other dealer-sponsored programs or events.
<PAGE>
CLASS A SHARES
Class A shares of the Tax-Free Intermediate Term Fund are sold on a continuous
basis at the public offering price next determined after receipt of a purchase
order by the Trust. Purchase orders received by dealers prior to 4:00 p.m.,
Eastern time, on any business day and transmitted to the Adviser by 5:00 p.m.,
Eastern time, that day are confirmed at the public offering price determined
as of the close of the regular session of trading on the New York Stock
Exchange on that day. It is the responsibility of dealers to transmit properly
completed orders so that they will be received by the Adviser by 5:00 p.m.,
Eastern time. Dealers may charge a fee for effecting purchase orders. Direct
purchase orders received by the Transfer Agent by 4:00 p.m., Eastern time, are
confirmed at that day's public offering price. Direct investments received by
the Transfer Agent after 4:00 p.m., Eastern time, and orders received from
dealers after 5:00 p.m., Eastern time, are confirmed at the public offering
price next determined on the following business day.
The public offering price of Class A shares applicable to investors whose
accounts are opened after January 31, 1995 is the next determined net asset
value per share plus a sales load as shown in the following table.
<TABLE>
<CAPTION>
SALES LOAD AS % OF: DEALER
PUBLIC NET REALLOWANCE
OFFERING AMOUNT AS % OF PUBLIC
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------- -------- -------- -------------
<S> <C> <C> <C>
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50 1.52 1.35
$250,000 but less than $500,000 1.00 1.01 .90
$500,000 but less than $1,000,000 .75 .76 .65
$1,000,000 or more None* None*
</TABLE>
Investors whose accounts were opened prior to February 1, 1995 are
subject to a different table of sales loads as follows:
<TABLE>
SALES LOAD AS % OF: DEALER
PUBLIC NET REALLOWANCE
OFFERING AMOUNT AS % OF PUBLIC
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------- -------- -------- -------------
<S> <C> <C> <C>
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 .75 .76 .75
$1,000,000 or more None* None*
</TABLE>
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .75% may apply with respect to Class A
shares if a commission was paid by the Adviser to a participating
unaffiliated dealer and the shares are redeemed within twelve months from
the date of purchase.
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may
be deemed to be underwriters under the Securities Act of 1933. The Adviser
retains the entire sales load on all direct initial investments in the Fund
and on all investments in accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made after
October 1, 1995 and subsequent purchases further increasing the size of the
account, a dealer's commission of .75% of the purchase amount may be paid by
the Adviser to participating unaffiliated dealers through whom such purchases
are effected. In determining a dealer's eligibility for such commission,
purchases of Class A shares of the Tax-Free Intermediate Term Fund may be
aggregated with concurrent purchases of Class A shares of other funds of
Countrywide Investments. Dealers should contact the Adviser concerning the
applicability and calculation of the dealer's commission in the case of
combined purchases. An exchange from other funds of Countrywide Investments
will not qualify for payment of the dealer's commission, unless such exchange
is from a Countrywide fund with assets as to which a dealer's commission or
similar payment has not been previously paid. Redemptions of Class A shares
may result in the imposition of a contingent deferred sales load if the
dealer's commission described in this paragraph was paid in connection with
the purchase of such shares. See "Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares" below.
<PAGE>
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the tables above. Purchases made in any
load fund distributed by the Adviser pursuant to a Letter of Intent may also
be eligible for the reduced sales loads. The minimum initial investment under
a Letter of Intent is $10,000. The load funds currently distributed by the
Adviser are listed in the Exchange Privilege section of this Prospectus.
Shareholders should contact the Transfer Agent for information about the Right
of Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase Class A shares of the Tax-Free
Intermediate Term Fund at net asset value when the payment for your investment
represents the proceeds from the redemption of shares of any other mutual fund
which has a front-end sales load and is not distributed by the Adviser. Your
investment will qualify for this provision if the purchase price of the shares
of the other fund included a sales load and the redemption occurred within one
year of the purchase of such shares and no more than sixty days prior to your
purchase of Class A shares of the Fund. To make a purchase at net asset value
pursuant to this provision, you must submit photocopies of the confirmations
(or similar evidence) showing the purchase and redemption of shares of the
other fund. Your payment may be made with the redemption check representing
the proceeds of the shares redeemed, endorsed to the order of the "Tax-Free
Intermediate Term Fund." The redemption of shares of the other fund is, for
federal income tax purposes, a sale on which you may realize a gain or loss.
These provisions may be modified or terminated at any time. Contact your
securities dealer or the Trust for further information.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase Class A shares
of the Tax-Free Intermediate Term Fund at net asset value. To the extent
permitted by regulatory authorities, a bank trust department may charge fees
to clients for whose account it purchases shares at net asset value. Federal
and state credit unions may also purchase Class A shares at net asset value.
In addition, Class A shares of the Tax-Free Intermediate Term Fund may be
purchased at net asset value by broker-dealers who have a sales agreement with
the Adviser, and their registered personnel and employees, including members
of the immediate families of such registered personnel and employees.
Clients of investment advisers and financial planners may also purchase Class
A shares of the Tax-Free Intermediate Term Fund at net asset value if their
investment adviser or financial planner has made arrangements to permit them
to do so with the Trust and the Adviser. The investment adviser or financial
planner must notify the Transfer Agent that an investment qualifies as a
purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the Adviser or the
Transfer Agent, including members of the immediate family of such individuals,
may also purchase Class A shares of the Tax-Free Intermediate Term Fund at net
asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Tax-Free Intermediate Term Fund (or shares into which such Class
A shares were exchanged) purchased at net asset value in amounts totaling $1
million or more, if the dealer's commission described above was paid by the
Adviser and the shares are redeemed within twelve months from the date of
purchase. The contingent deferred sales load will be paid to the Adviser and
will be equal to .75% of the lesser of (1) the net asset value at the time of
purchase of the Class A shares being redeemed or (2) the net asset value of
such Class A shares at the time of redemption. In determining whether the
contingent deferred sales load is payable, it is assumed that shares not
subject to the contingent deferred sales load are the first redeemed followed
by other shares held for the longest period of time. The contingent deferred
sales load will not be imposed upon shares representing reinvested dividends
or capital gains distributions, or upon amounts representing share
appreciation. If a purchase of Class A shares is subject to the contingent
deferred sales load, the investor will be so notified on the confirmation for
such purchase.
Redemptions of such Class A shares of the Tax-Free Intermediate Term Fund held
for at least 12 months will not be subject to the contingent deferred sales
load and an exchange of such Class A shares into another fund of Countrywide
Investments is not treated as a redemption and will not trigger the imposition
of the contingent deferred sales load at the time of such exchange. A fund
will "tack" the period for which such Class A shares being exchanged were held
onto the holding period of the acquired shares for purposes of determining if
a contingent deferred sales load is applicable in the event that the acquired
shares are redeemed following the exchange; however, the period of time that
the redemption proceeds of such Class A shares are held in a money market fund
will not count toward the holding period for determining whether a contingent
deferred sales load is applicable. See "Exchange Privilege."
<PAGE>
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986) of a shareholder (including one who owns the shares with
his or her spouse as a joint tenant with rights of survivorship) from an
account in which the deceased or disabled is named. The Adviser may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the applicable sales load
and for purposes of the Letter of Intent and Right of Accumulation privileges,
a purchaser includes an individual, his spouse and their children under the
age of 21, purchasing shares for his or their own account; or a trustee or
other fiduciary purchasing shares for a single fiduciary account although more
than one beneficiary is involved; or employees of a common employer, provided
that economies of scale are realized through remittances from a single source
and quarterly confirmation of such purchases; or an organized group, provided
that the purchases are made through a central administration, or a single
dealer, or by other means which result in economy of sales effort or expense.
Contact the Transfer Agent for additional information concerning purchases at
net asset value or at reduced sales loads.
CLASS C SHARES
Class C shares of the Tax-Free Intermediate Term Fund are sold on a continuous
basis at the net asset value next determined after receipt of a purchase order
by the Trust. Purchase orders received by dealers prior to 4:00 p.m., Eastern
time, on any business day and transmitted to the Adviser by 5:00 p.m., Eastern
time, that day are confirmed at the net asset value determined as of the close
of the regular session of trading on the New York Stock Exchange on that day.
It is the responsibility of dealers to transmit properly completed orders so
that they will be received by the Adviser by 5:00 p.m., Eastern time. Dealers
may charge a fee for effecting purchase orders. Direct purchase orders
received by the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at
that day's net asset value. Direct investments received by the Transfer Agent
after 4:00 p.m., Eastern time, and orders received from dealers after 5:00
p.m., Eastern time, are confirmed at the net asset value next determined on
the following business day.
A contingent deferred sales load is imposed on Class C shares of the Tax-Free
Intermediate Term Fund if an investor redeems an amount which causes the
current value of the investor's account to fall below the total dollar amount
of purchase payments subject to the deferred sales load, except that no such
charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or to the extent the
amount redeemed is derived from increases in the value of the account above
the amount of purchase payments subject to the deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the amount
of time since the investor made a purchase payment from which an amount is
being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
------------------- -------------------
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it is
assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that an individual opens an account and purchases 1,000
shares at $10 per share and that six months later the net asset value per
share is $12 and, during such time, the investor has acquired 50 additional
shares through reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not be subject
to the load because of dividend reinvestment. With respect to the remaining
400 shares, the load is applied only to the original cost of $10 per share and
not to the increase in net asset value of $2 per share. Therefore, $4,000 of
the $5,400 redemption proceeds will be charged the load. At the rate of 1%,
the contingent deferred sales load would be $40. In determining whether an
amount is available for redemption without incurring a deferred sales load,
the purchase payments made for all Class C shares of the Tax-Free Intermediate
Term Fund in the shareholder's account are aggregated, and the current value
of all such shares is aggregated.
<PAGE>
All sales loads imposed on redemptions are paid to the Adviser. The Adviser
intends to pay a commission of 1% of the purchase amount to participating
brokers at the time the investor purchases Class C shares of the Tax-Free
Intermediate Term Fund.
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986) of a shareholder (including one who owns the shares with
his or her spouse as a joint tenant with rights of survivorship) from an
account in which the deceased or disabled is named. The Adviser may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
SHAREHOLDER SERVICES
==============================================================================
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may elect
to receive, or may designate another person to receive, monthly or quarterly
payments in a specified amount of not less than $50 each. There is no charge
for this service. Purchases of additional Class A shares of the Tax-Free
Intermediate Term Fund while the plan is in effect are generally undesirable
because a sales load is incurred whenever purchases are made.
DIRECT DEPOSIT PLANS
Shares of either Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder to
have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Funds.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in either Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds.
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Tax-Free Intermediate Term Fund, you may
reinvest all or part of the proceeds without any additional sales load. This
reinvestment must occur within ninety days of the redemption and the privilege
may only be exercised once per year
<PAGE>
HOW TO REDEEM SHARES
==============================================================================
You may redeem shares of either Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described below, less any applicable contingent deferred sales load. Payment
is normally made within three business days after tender in such form,
provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares
of the Funds by certified check or wire.
A contingent deferred sales load may apply to a redemption of Class C shares
of the Tax-Free Intermediate Term Fund or to a redemption of certain Class A
shares of the Fund purchased at net asset value. See "How to Purchase Shares."
A contingent deferred sales load may be imposed on a redemption of shares of
the Tax-Free Money Fund if such shares had previously been acquired in
connection with an exchange from another fund of Countrywide Investments which
imposes a contingent deferred sales load, as described in the Prospectus of
such other fund.
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent by
mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call the Transfer
Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050).
The redemption proceeds from your Tax-Free Money Fund account will normally be
sent by mail or by wire within one business day (but not later than three
business days) after receipt of your telephone instructions. Any redemption
requests by telephone must be received in proper form prior to 12:00 noon,
Eastern time, on any business day in order for payment by wire to be made that
day.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to the Transfer Agent
with your signature guaranteed by any eligible guarantor institution
(including banks, brokers and dealers, municipal securities brokers and
dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
Neither the Trust, the Transfer Agent, nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses
due to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares or the dollar amount to be redeemed and your account number. The
request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by
mail are mailed within three business days following receipt of instructions
in proper form.
BY CHECK. You may establish a special checking account with either Fund
for the purpose of redeeming shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer Agent, as
your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check. Checks
will be processed at the net asset value on the day the check is presented to
the Custodian for payment.
<PAGE>
If the amount of a check is greater than the value of the shares held in your
account, the check will be returned. Shareholders of the Tax-Free Intermediate
Term Fund should consider potential fluctuations in the net asset value of the
Fund's shares when writing checks. A check representing a redemption request
will take precedence over any other redemption instructions issued by a
shareholder.
As long as no more than six check redemptions are effected in your account in
any month, there will be no charge for the check redemption privilege.
However, after six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. The Transfer Agent charges shareholders its costs for
each stop payment and each check returned for insufficient funds. In addition,
the Transfer Agent reserves the right to make additional charges to recover
the costs of providing the check redemption service. All charges will be
deducted from your account by redemption of shares in your account. The check
redemption procedure may be suspended or terminated at any time upon written
notice by the Trust or the Transfer Agent.
Shareholders of the Tax-Free Intermediate Term Fund should be aware that
writing a check (a redemption of shares) is a taxable event. Shares of the
Tax-Free Intermediate Term Fund for which certificates have been issued may
not be redeemed by check. Shareholders who invest in the Tax-Free Money Fund
through a cash sweep or similar program with a financial institution are not
eligible for the checkwriting privilege.
THROUGH BROKER-DEALERS. You may also redeem shares of the Tax-Free
Intermediate Term Fund by placing a wire redemption request through a
securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per
share next determined after receipt by the Trust or its agent of your wire
redemption request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a redemption
by wire, you will be charged an $8 processing fee by the Funds' Custodian. The
Trust reserves the right, upon thirty days' written notice, to change the
processing fee. All charges will be deducted from your account by redemption
of shares in your account. Your bank or brokerage firm may also impose a
charge for processing the wire. In the event that wire transfer of funds is
impossible or impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for
ACH transactions. Contact the Transfer Agent for more information about ACH
transactions.
If a certificate for shares of the Tax-Free Intermediate Term Fund was issued,
it must be delivered to the Transfer Agent, or the dealer in the case of a
wire redemption, duly endorsed or accompanied by a duly endorsed stock power,
with the signature guaranteed by any of the eligible guarantor institutions
outlined above.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested including any
sales load paid, unaffected by market fluctuations) or such other minimum
amount as the Trust may determine from time to time. After notification to you
of the Trust's intention to close your account, you will be given thirty days
to increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
<PAGE>
EXCHANGE PRIVILEGE
==============================================================================
Shares of either Fund and of any other fund of Countrywide Investments may be
exchanged for each other.
Shares of the Tax-Free Money Fund and Class A shares of the Tax-Free
Intermediate Term Fund which are not subject to a contingent deferred sales
load may be exchanged for Class A shares of any other fund and for shares of
any other fund which offers only one class of shares (provided such shares are
not subject to a contingent deferred sales load). A sales load will be imposed
equal to the excess, if any, of the sales load rate applicable to the shares
being acquired over the sales load rate, if any, previously paid on the shares
being exchanged.
Class C shares of the Tax-Free Intermediate Term Fund, as well as Class A
shares of the Fund subject to a contingent deferred sales load, may be
exchanged, on the basis of relative net asset value per share, for shares of
any other fund which imposes a contingent deferred sales load and for shares
of any fund which is a money market fund. A fund will "tack" the period for
which the shares being exchanged were held onto the holding period of the
acquired shares for purposes of determining if a contingent deferred sales
load is applicable in the event that the acquired shares are redeemed
following the exchange. The period of time that shares are held in a money
market fund will not count toward the holding period for determining whether a
contingent deferred sales load is applicable.
The following are the funds of Countrywide Investments currently offered to
the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
<TABLE>
<CAPTION>
COUNTRYWIDE TAX-FREE TRUST COUNTRYWIDE INVESTMENT TRUST COUNTRYWIDE STRATEGIC TRUST
<S> <C> <C>
Tax-Free Money Fund Short Term Government Income Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund *Equity Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund *Utility Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government *Treasury Total Return Fund
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
</TABLE>
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are
unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati,
Ohio 45202. An exchange will be effected at the next determined net asset
value (or offering price, if sales load is applicable) after receipt of a
request by the Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated
by the Board of Trustees upon 60 days' prior notice to shareholders. An
exchange results in a sale of fund shares, which may cause you to recognize a
capital gain or loss. Before making an exchange, contact the Transfer Agent to
obtain a current prospectus for any of the other funds of Countrywide
Investments and more information about exchanges among Countrywide
Investments.
DIVIDENDS AND DISTRIBUTIONS
==============================================================================
All of the net investment income of each Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Each Fund expects to distribute any net realized long-term capital gains at
least once each year. Management will determine the timing and frequency of
the distributions of any net realized short-term capital gains. The Funds
will, at the time dividends are paid, designate as tax-exempt the same
percentage of the distribution as the actual tax-exempt income earned during
the period covered by the distribution bore to total income earned during the
period; the percentage of the distribution which is tax-exempt may vary from
distribution to distribution.
<PAGE>
Distributions are paid according to one of the following options:
Share Option -- income distributions and capital
gains distributions reinvested in
additional shares.
Income Option -- income distributions and
short-term capital gains distributions
paid in cash; long-term capital gains
distributions reinvested in additional
shares.
Cash Option -- income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested
in additional shares. All distributions will be based on the net asset value
in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then-current net asset
value and your account will be converted to the Share Option.
An investor in the Tax-Free Intermediate Term Fund who has received in cash
any dividend or capital gains distribution may return the distribution within
thirty days of the distribution date to the Transfer Agent for reinvestment at
the net asset value next determined after its return. The investor or his
dealer must notify the Transfer Agent that a distribution is being reinvested
pursuant to this provision.
TAXES
==============================================================================
Each Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. Each Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified
to pay "exempt-interest dividends," which means that it may pass on to
shareholders the federal tax-exempt status of its investment income.
Each Fund intends to distribute substantially all of its net investment income
and any net realized capital gains to its shareholders. For federal income tax
purposes, a shareholder's proportionate share of taxable distributions from a
Fund's net investment income as well as from net realized short-term capital
gains, if any, is taxable as ordinary income. Since the Funds' investment
income is derived from interest rather than dividends, no portion of such
distributions is eligible for the dividends received deduction available to
corporations. Distributions of net realized long-term capital gains are
taxable as long-term capital gains regardless of how long you have held your
Fund shares.
Issuers of tax-exempt securities issued after August 31, 1986 are required to
comply with various restrictions on the use and investment of proceeds of
sales of the securities. Any failure by the issuer to comply with these
restrictions would cause interest on such securities to become taxable to the
security holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax Reform
Act of 1986, is an item of tax preference possibly subject to the alternative
minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Funds may invest in such "specified private activity bonds"
subject to the requirement that each Fund invest its assets so that at least
80% of its annual income will be exempt from federal income tax, including the
alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net
book income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Funds may be a tax preference for
corporate investors.
Redemptions and exchanges of shares of the Tax-Free Intermediate Term Fund are
taxable events on which a shareholder may realize a gain or loss. If a
shareholder buys shares of the Tax-Free Intermediate Term Fund and sells them
at a loss within six months, any loss will be disallowed for federal income
tax purposes to the extent of the exempt-interest dividends received on such
shares. Any loss realized upon the sale of shares of the Tax-Free Intermediate
Term Fund within six months from the date of their purchase will be treated as
a long-term capital loss to the extent of amounts treated as distributions of
net realized long-term capital gains during such six month period. In
addition, shareholders should be aware that interest on indebtedness incurred
to purchase or carry shares of either Fund is not deductible for federal
income tax purposes. Shareholders receiving Social Security benefits may be
taxed on a portion of those benefits as a result of receiving tax-exempt
income.
<PAGE>
The Funds will mail to each of their shareholders a statement indicating the
amount and federal income tax status of all distributions made during the
year. Each Fund will report to its shareholders the percentage and source of
income earned on tax-exempt obligations held by it during the preceding year.
An exemption from federal income tax may not result in similar exemptions
under the laws of a particular state or local taxing authority.
Shareholders should consult their tax advisors about the tax effect of
distributions and withdrawals from the Funds and the use of the Automatic
Withdrawal Plan and the Exchange Privilege. The tax consequences described in
this section apply whether distributions are taken in cash or reinvested in
additional shares. The Funds may not be appropriate investments for persons
who are "substantial users" of facilities financed by industrial development
bonds or are "related persons" to such users; such persons should consult
their tax advisors before investing in the Funds.
OPERATION OF THE FUNDS
==============================================================================
The Funds are diversified series of Countrywide Tax-Free Trust, an open-end
management investment company organized as a Massachusetts business trust on
April 13, 1981. The Board of Trustees supervises the business activities of
the Trust. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Funds.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Funds' investments and
their business affairs. The Adviser was organized in 1974 and is also the
investment adviser to four other series of the Trust, five series of
Countrywide Investment Trust and four series of Countrywide Strategic Trust.
The Adviser is an indirect wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending. Each Fund pays the Adviser a
fee equal to the annual rate of .5% of the average value of its daily net
assets up to $100 million; .45% of such assets from $100 million to $200
million; .4% of such assets from $200 million to $300 million; and .375% of
such assets in excess of $300 million.
John J. Goetz, the Chief Investment Officer of the Adviser, is primarily
responsible for managing the portfolio of each Fund. Mr. Goetz has been
employed by the Adviser in various capacities since 1981 and has been managing
each Fund's portfolio since October 1986.
The Funds are responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees
and expenses of the custodian, transfer agent and accounting and pricing agent
of the Funds, fees and expenses of members of the Board of Trustees who are
not interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders,
expenses of shareholders' meetings and proxy solicitations, and such
extraordinary or non-recurring expenses as may arise, including litigation to
which the Funds may be a party and indemnification of the Trust's officers and
Trustees with respect thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary
of Countrywide Credit Industries, Inc., to serve as the Funds' transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Funds.
The Transfer Agent receives a monthly fee from each Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Funds. In this capacity,
the Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the
Funds) pays the Transfer Agent a fee for these administrative services equal
to the annual rate of .1% of the average value of each Fund's daily net
assets.
<PAGE>
The Adviser serves as principal underwriter for the Funds and, as such, is the
exclusive agent for the distribution of shares of the Funds. Robert H.
Leshner, President and a director of the Adviser, is President and a Trustee
of the Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to
sales of shares of the Funds as a factor in the selection of brokers and
dealers to execute portfolio transactions of the Funds. Subject to the
requirements of the Investment Company Act of 1940 and procedures adopted by
the Board of Trustees, the Funds may execute portfolio transactions through
any broker or dealer and pay brokerage commissions to a broker (i) which is an
affiliated person of the Trust, or (ii) which is an affiliated person of such
person, or (iii) an affiliated person of which is an affiliated person of the
Trust or the Adviser.
Shares of each Fund have equal voting rights and liquidation rights. Each Fund
shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Tax-Free Intermediate Term Fund shall vote separately on matters
relating to its plan of distribution pursuant to Rule 12b-1 (see "Distribution
Plans"). When matters are submitted to shareholders for a vote, each
shareholder is entitled to one vote for each full share owned and fractional
votes for fractional shares owned. The Trust does not normally hold annual
meetings of shareholders. The Trustees shall promptly call and give notice of
a meeting of shareholders for the purpose of voting upon the removal of any
Trustee when requested to do so in writing by shareholders holding 10% or more
of the Trust's outstanding shares. The Trust will comply with the provisions
of Section 16(c) of the Investment Company Act of 1940 in order to facilitate
communications among shareholders.
DISTRIBUTION PLANS
==============================================================================
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Tax-Free Money Fund and Class A shares of the Tax-Free Intermediate
Term Fund have adopted a plan of distribution (the "Class A Plan") under which
such shares may directly incur or reimburse the Adviser for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses
of maintaining personnel who engage in or support distribution of shares or
who render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for
recipients other than existing shareholders of the Funds; expenses of
obtaining such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable;
and any other expenses related to the distribution of such shares.
Pursuant to the Class A Plan, the Funds may make payments to dealers and other
persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of shares of the Funds.
For the fiscal year ended June 30, 1996, the Tax-Free Money Fund and Class A
shares of the Tax-Free Intermediate Term Fund paid $24,000 and $110,441,
respectively, to the Adviser to reimburse it for payments made to dealers and
other persons who may be advising shareholders regarding the retention of
shares of the Funds.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.25% of the Tax-Free Money Fund's average daily net assets and .25% of the
Tax-Free Intermediate Term Fund's average daily net assets allocable to Class
A shares. Unreimbursed expenditures will not be carried over from year to
year. In the event the Class A Plan is terminated by a Fund in accordance with
its terms, the Fund will not be required to make any payments for expenses
incurred by the Adviser after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Tax-Free Intermediate Term Fund has adopted a plan of distribution
(the "Class C Plan") which provides for two categories of payments. First, the
Class C Plan provides for the payment to the Adviser of an account maintenance
fee, in an amount equal to an annual rate of .25% of the Fund's average daily
net assets allocable to Class C shares, which may be paid to other dealers
based on the average value of such shares owned by clients of such dealers. In
addition, the Class C shares may directly incur or reimburse the Adviser in an
amount not to exceed .75% per annum of the Fund's average daily net assets
allocable to Class C shares for expenses incurred in the distribution and
promotion of the Fund's Class C shares, including payments to securities
dealers and others who are engaged in the sale of such shares and who may be
advising investors regarding the purchase, sale or retention of such shares;
expenses of maintaining personnel who engage in or support distribution of
shares or who render shareholder support services not otherwise provided by
the Transfer Agent; expenses of formulating and implementing marketing and
promotional activities, including direct mail promotions and mass media
advertising; expenses of preparing, printing and distributing sales literature
and prospectuses and statements of additional information and reports for
recipients other than existing shareholders of the Fund; expenses of obtaining
such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable;
and any other expenses related to the distribution of such shares.
<PAGE>
Pursuant to the Class C Plan, the Tax-Free Intermediate Term Fund may make
payments to dealers and other persons, including the Adviser and its
affiliates, who may be advising investors regarding the purchase, sale or
retention of Class C shares. For the fiscal year ended June 30, 1996, Class C
shares of the Tax-Free Intermediate Term Fund paid $22,343 to the Adviser to
reimburse it for payments made to dealers and other persons who may be
advising shareholders regarding the retention of shares of the Fund.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class C Plan is terminated by the Tax-Free Intermediate Term Fund in
accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Adviser after the date the Class C Plan
terminates. The Adviser may make payments to dealers and other persons in an
amount up to .75% per annum of the average value of Class C shares owned by
their clients, in addition to the .25% account maintenance fee described
above.
GENERAL. Pursuant to the Plans, the Funds may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to
state law. If a bank were prohibited from continuing to perform all or a part
of such services, management of the Trust believes that there would be no
material impact on the Funds or their shareholders. Banks may charge their
customers fees for offering these services to the extent permitted by
applicable regulatory authorities, and the overall return to those
shareholders availing themselves of the bank services will be lower than to
those shareholders who do not. The Funds may from time to time purchase
securities issued by banks which provide such services; however, in selecting
investments for the Funds, no preference will be shown for such securities.
The National Association of Securities Dealers, in its Rules of Fair Practice,
places certain limitations on asset-based sales charges of mutual funds. The
Rules require fund-level accounting in which all sales charges--front-end
load, 12b-1 fees or contingent deferred load--terminate when a percentage of
gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
==============================================================================
On each day that the Trust is open for business, the share price (net asset
value) of the Tax-Free Money Fund's shares is determined as of 12:00 noon and
4:00 p.m., Eastern time. The share price of Class C shares and the public
offering price (net asset value plus applicable sales load) of Class A shares
of the Tax-Free Intermediate Term Fund are determined as of the close of the
regular session of trading on the New York Stock Exchange, currently 4:00
p.m., Eastern time. The Trust is open for business on each day the New York
Stock Exchange is open for business and on any other day when there is
sufficient trading in a Fund's investments that its net asset value might be
materially affected. The net asset value per share of each Fund is calculated
by dividing the sum of the value of the securities held by the Fund plus cash
or other assets minus all liabilities (including estimated accrued expenses)
by the total number of shares outstanding of the Fund, rounded to the nearest
cent.
The Tax-Free Money Fund's portfolio securities are valued on an amortized cost
basis. In connection with the use of the amortized cost method of valuation,
the Tax-Free Money Fund maintains a dollar-weighted average portfolio maturity
of 90 days or less, purchases only United States dollar-denominated securities
having remaining maturities of thirteen months or less and invests only in
securities determined by the Board of Trustees to meet the Fund's quality
standards and to present minimal credit risks. Other assets of the Fund are
valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general
supervision of the Board of Trustees. It is anticipated, but there is no
assurance, that the use of the amortized cost method of valuation will enable
the Tax-Free Money Fund to maintain a stable net asset value per share of $1.
<PAGE>
Tax-exempt portfolio securities are valued for the Tax-Free Intermediate Term
Fund by an outside independent pricing service approved by the Board of
Trustees. The service generally utilizes a computerized grid matrix of
tax-exempt securities and evaluations by its staff to determine what it
believes is the fair value of the portfolio securities. The Board of Trustees
believes that timely and reliable market quotations are generally not readily
available to the Tax-Free Intermediate Term Fund for purposes of valuing
tax-exempt securities and that valuations supplied by the pricing service are
more likely to approximate the fair value of the tax-exempt securities. If, in
the Adviser's opinion, the valuation provided by the service does not
accurately reflect the fair value of a tax-exempt security, it will value the
security at the average of the prices quoted by at least two independent
market makers. The quoted price will represent the market maker's opinion as
to the price that a willing buyer would pay for the security. All other
securities (and other assets) of the Fund for which market quotations are not
readily available are valued at their fair value as determined in good faith
in accordance with consistently applied procedures established by and under
the general supervision of the Board of Trustees. The net asset value per
share of the Tax-Free Intermediate Term Fund will fluctuate with the value of
the securities it holds.
PERFORMANCE INFORMATION
==============================================================================
From time to time, the Tax-Free Money Fund may advertise its "current yield"
and "effective yield." Both yield figures are based on historical earnings and
are not intended to indicate future performance. The "current yield" of the
Tax-Free Money Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. In
addition, the Tax-Free Money Fund may advertise together with its "current
yield" or "effective yield" a tax-equivalent "current yield" or "effective
yield" which reflects the yield which would be required of a taxable
investment at a stated income tax rate in order to equal the Fund's "current
yield" or "effective yield."
From time to time, the Tax-Free Intermediate Term Fund may advertise its
"average annual total return." The Fund may also advertise "yield." Both yield
and average annual total return figures are based on historical earnings and
are not intended to indicate future performance. Total return and yield are
computed separately for Class A and Class C shares. The yield of Class A
shares is expected to be higher than the yield of Class C shares due to the
higher distribution fees imposed on Class C shares.
The "average annual total return" of the Tax-Free Intermediate Term Fund
refers to the average annual compounded rates of return over the most recent
1, 5 and 10 year periods or, where the Fund has not been in operation for such
period, over the life of the Fund (which periods will be stated in the
advertisement) that would equate an initial amount invested at the beginning
of a stated period to the ending redeemable value of the investment. The
calculation of "average annual total return" assumes the reinvestment of all
dividends and distributions and, for Class A shares, the deduction of the
current maximum sales load from the initial investment. The Tax-Free
Intermediate Term Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from "average annual total
return." A nonstandardized quotation of total return may be a cumulative
return which measures the percentage change in the value of an account between
the beginning and end of a period, assuming no activity in the account other
than reinvestment of dividends and capital gains distributions. A
nonstandardized quotation of total return may also indicate average annual
compounded rates of return over periods other than those specified for
"average annual total return." These nonstandardized returns do not include
the effect of the applicable sales load which, if included, would reduce total
return. A nonstandardized quotation of total return will always be accompanied
by the Fund's "average annual total return" as described above.
<PAGE>
The "yield" of the Tax-Free Intermediate Term Fund is computed by dividing the
net investment income per share earned during a thirty-day (or one month)
period stated in the advertisement by the maximum public offering price per
share on the last day of the period (using the average number of shares
entitled to receive dividends). The yield formula assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end
of a six-month period. In addition, the Tax-Free Intermediate Term Fund may
advertise together with its "yield" a tax-equivalent yield which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's "yield."
From time to time, the Funds may advertise their performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also
compare their performance to that of other selected mutual funds, averages of
the other mutual funds within their categories as determined by Lipper, or
recognized indicators. In connection with a ranking, the Funds may provide
additional information, such as the particular category of funds to which the
ranking relates, the number of funds in the category, the criteria upon which
the ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. Each Fund may also present its performance and other
investment characteristics, such as volatility or a temporary defensive
posture, in light of the Adviser's view of current or past market conditions
or historical trends.
Further information about the Tax-Free Intermediate Term Fund's performance is
contained in the Trust's annual report which can be obtained by shareholders
at no charge by calling the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<PAGE>
ACCOUNT APPLICATION (check appropriate Fund)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o Tax-Free Money Fund (2) $_____________________
Tax-Free Intermediate Term Fund
o A Shares (3) $_____________________
o C Shares (16) $_____________________
ACCOUNT NO. ___________________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________________
Home Office Address:___________________________
Branch Address:________________________________
Rep Name & No.:________________________________
Rep Signature:_________________________________
==============================================================================
o Check or draft enclosed payable to the Fund(s) designated above.
o Bank Wire From: __________________________________________________________
o Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
____________________________________________________ ________________________
Name of Individual, Corporation, Organization, or (In case of custodial
Minor, etc. account please list
minor's S.S.#)
____________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other____
Address Phone
____________________________________________________ ( )_________________
Street or P.O. Box Business Phone
____________________________________________________ ( )_________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (Right of survivorship presumed)
o Partnership o Corporation o Trust o Custodial
o Non-Profit o Other
Occupation and Employer Name/Address__________________________________________
Are you an associated person of an NASD member? o Yes o No
==============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the
Taxpayer Identification Number listed above is my correct number. The Internal
Revenue Service does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box
if appropriate:
o I am exempt from backup withholding under the provisions of section 3406
(a) (1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends; or the
Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
==============================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
==============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, or upon receipt of and in the amounts of
checks as described below (if checkwriting is selected), to have amounts
withdrawn from my (our) account in any fund of Countrywide Investments (see
prospectus for limitations on this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I
(we) further authorize the use of automated cash transfers to and from the
account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Please attach a voided check for the account.
Bank Account Number_____________ Bank Routing Transit Number__________________
Name of Account Holder________________________________________________________
Bank Name________________________________Bank Address_________________________
City State
o CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable
Countrywide Pay Through Draft Account (PTDA) or otherwise arrange for
application of such proceeds to payment of said checks. I (we) authorize the
persons whose signatures appear on the PTDA signature card to draw checks on the
PTDA and to cause the redemption of my (our) shares of the Trust. I (we) agree
to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time
==============================================================================
REDUCED SALES CHARGES (TAX-FREE INTERMEDIATE TERM FUND'S CLASS A SHARES ONLY)
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's
confirmation of the following holdings of eligible load funds of Countrywide
Investments.
Account Number/Name Account Number/Name
_________________________________ _________________________________
_________________________________ _________________________________
Letter of Intent: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o I agree to the Letter of Intent in the current Prospectus of Countrywide
Tax-Free Trust. Although I am not obligated to purchase, and the Trust is not
obligated to sell, I intend to invest over a 13 month period beginning
____________________ 19 _______ (Purchase Date of not more than 90 days prior
to this Letter) an aggregate amount in the load funds of Countrywide
Investments at least equal to (check appropriate box):
o $100,000 o $250,000 o $500,000 o $1,000,000
==============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of
the Funds' current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions
for automatic reinvestment in additional shares of the Funds for credit to the
investor's account and to surrender for redemption shares held in the investor's
account in accordance with any of the procedures elected above or for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release Countrywide
Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide Investments, Inc.,
and their respective officers, employees, agents and affiliates from any and all
liability in the performance of the acts instructed herein. Neither the Trust,
Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine
or for any loss, damage, cost or expense in acting on such telephone
instructions. The investor(s) will bear the risk of any such loss. The Trust or
Countrywide Fund Services, Inc., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or
Countrywide Fund Services, Inc. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
_________________________________ _________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
_________________________________ _________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each joint
owner shall have full authority to act on behalf of the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund(s))
The Automatic Investment Plan is available for all established accounts of
Countrywide Tax-Free Trust. There is no charge for this service, and it offers
the convenience of automatic investing on a regular basis. The minimum
investment is $50.00 per month. For an account that is opened by using this
Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be
discontinued by the shareholder at any time.
Please invest $ ______________ per month in (Check applicable Fund)
o Tax-Free Money Fund o Tax-Free Intermediate Term Fund
______________________________________________________________________
Name of Financial Institution (FI)
______________________________________________________________________
City State
X_____________________________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records)
ABA Routing Number__________________________________________
FI Account Number___________________________________________
o Checking Account o Savings Account
Please make my automatic investment on:
o the last business day of each month
o the 15th day of each month
o both the 15th and last business day
X___________________________________________________________
(Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names.
Please sign exactly as signature appears on your FI's records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. ("CFS") has put into effect, by which amounts, determined by
your depositor, payable to the applicable Fund designated above, for purchase
of shares of said Fund, are collected by CFS, CFS hereby agrees:
CFS will indemnify and hold you harmless from any liability to any person
or persons whatsoever arising out of the payment by you of any amount drawn by
the Funds to their own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you whether
with or without cause or intentionally or inadvertently, of any such amount. CFS
will defend, at its own cost and expense, any action which might be brought
against you by any person or persons whatsoever because of your actions taken
pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously
paid by you to the Funds if the claim for the amount of such erroneous payment
is made by you within six (6) months from the date of such erroneous payment;
your participation in this arrangement and that of the Funds may be terminated
by thirty (30) days written notice from either party to the other.
==============================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund(s))
This is an authorization for you to withdraw $_________ from my mutual fund
account beginning the last business day of the month of_____________________.
Please Indicate Withdrawal Schedule (Check One):
o Monthly -- Withdrawals will be made on the last business day of each month.
o Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30
and 12/31.
o Annually -- Please make withdrawals on the last business day of the
month of:__________.
Please indicate which Fund: o Tax-Free Money Fund
o Tax-Free Intermediate Term Fund
Please Select Payment Method (Check One):
o Exchange: Please exchange the withdrawal proceeds into another Countrywide
account number: ____ ____-- ____ ____ ____ ____ ____ ____ -- ____
o Check: Please mail a check for my withdrawal proceeds to the mailing address
on this account.
o ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my
bank checking or savings account as indicated below. I understand that the
transfer will be completed in two to three business days and that there is
no charge.
o Bank Wire: Please send my withdrawal proceeds via bank wire, to the account
indicated below. I understand that the wire will be completed in one business
day and that there is an $8.00 fee.
Please attach a voided
check for ACH or bank wire
______________________________________________________________________________
Bank Name Bank Address
______________________________________________________________________________
Bank ABA# Account # Account Name
o Send to special payee (other than applicant): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_________________________________________________________________
Please send to:_______________________________________________________________
Street address City State Zip
==============================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide Tax-Free Trust (the Trust) and that
______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of
the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the Trust,
and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint Countrywide Fund
Services, Inc. as redemption agent of the corporation or organization for
shares of the applicable series of the Trust, to establish or acknowledge terms
and conditions governing the redemption of said shares and to otherwise
implement the privileges elected on the Application, and it is (If checkwriting
privilege is not desired, please cross out the following resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the
Countrywide Pay Through Draft Account (PTDA) and that until otherwise ordered
in writing, Countrywide Fund Services, Inc. is authorized to make redemptions
of shares held by the corporation or organization, and to make payment from
PTDA upon and according to the check, draft, note or order of this corporation
or organization when signed by
______________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the
payee or any other holder without inquiry as to the circumstances of issue or
the disposition or proceeds, whether drawn to the individual order or tendered
in payment of individual obligations of the persons above named or other
officers of this corporation or organization or otherwise.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on__________________at which a
quorum was present and acting throughout, and that the same are now in full
force and effect. I further certify that the following is (are) duly elected
officer(s) of the corporation or organization, authorized to act in accordance
with the foregoing resolutions.
Name Title
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
Witness my hand and seal of the corporation or organization this___________day
of________________, 19_______
_____________________________________ _____________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the
above resolutions, this certificate must also be signed by another officer.
<PAGE>
TAX-EXEMPT
PROSPECTUS
NOVEMBER 1, 1996
Revised March 31, 1997
TAX-FREE
MONEY FUND
TAX-FREE
INTERMEDIATE
TERM FUND
COUNTRYWIDE
INVESTMENTS
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 4
Investment Objectives......................... 7
Investment Policies........................... 7
How to Purchase Shares ....................... 12
Shareholder Services.......................... 18
How to Redeem Shares.......................... 19
Exchange Privilege............................ 21
Dividends and Distributions................... 21
Taxes......................................... 22
Operation of the Funds........................ 23
Distribution Plans............................ 24
Calculation of Share Price and
Public Offering Price.................... 25
Performance Information....................... 26
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1996
Revised March 31, 1997
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
OHIO INSURED TAX-FREE FUND
===============================================================================
The Ohio Insured Tax-Free Fund (the "Fund"), a separate series of Countrywide
Tax-Free Trust, seeks the highest level of interest income exempt from federal
income tax and Ohio personal income tax, consistent with protection of capital.
The Fund invests primarily in high and medium-quality, long-term Ohio municipal
obligations which are protected by insurance guaranteeing the payment of
principal and interest in the event of a default. Insurance does not guarantee
the value of the Fund's shares. See "Investment Objective and Policies -
Insurance".
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT PERCENTAGE OF
ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE FUND MAY BE
RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MUTUAL FUNDS.
The Fund offers two classes of shares: Class A shares (sold subject to a maximum
4% front-end sales load and a 12b-1 fee of up to .25% of average daily net
assets) and Class C shares (sold subject to a 1% contingent deferred sales load
for a one-year period and a 12b-1 fee of up to 1% of average daily net assets).
Each Class A and Class C share of the Fund represents identical interests in the
Fund's investment portfolio and has the same rights, except that (i) Class C
shares bear the expenses of higher distribution fees, which will cause Class C
shares to have a higher expense ratio and to pay lower dividends than those
related to Class A shares; (ii) certain other class specific expenses will be
borne solely by the class to which such expenses are attributable; and (iii)
each class has exclusive voting rights with respect to matters relating to its
own distribution arrangements.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's investments
and its business affairs.
This Prospectus sets forth concisely the information about the Fund that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 1, 1996, and
amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by calling
one of the numbers listed below.
- -------------------------------------------------------------------------------
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free).............................................800-543-0407
Cincinnati.........................................................513-629-2050
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
===============================================================================
<TABLE>
<CAPTION>
CLASS A CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).... 4% None
Maximum Contingent Deferred Sales Load (as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends..................................... None None
Exchange Fee .................................................................. None None
Redemption Fee................................................................. None** None**
<FN>
* Purchases at net asset value of amounts totaling $1 million or more may be
subject to a contingent deferred sales load of .75% if a redemption occurred
within 12 months of purchase and a commission was paid by the Adviser to a
participating unaffiliated dealer.
** A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is
currently $8. See "How to Redeem Shares."
</FN>
<CAPTION>
CLASS A CLASS C
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) SHARES SHARES
<S> <C> <C>
Management Fees ............................................................... .50% .50%
12b-1 Fees(A) ................................................................. .02% .54%
Other Expenses................................................................. .23% .46%
-------- -------
Total Fund Operating Expenses.................................................. .75% 1.50%
======== =======
<FN>
(A)Class A shares may incur 12b-1 fees in an amount up to .25% of average net
assets and Class C shares may incur 12b-1 fees in an amount up to 1.00% of
average net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the National
Association of Securities Dealers.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year except that 12b-1 fees
for Class C shares have been restated to reflect an anticipated increase in
distribution expenses to be incurred by such shares during the current fiscal
year. THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------
Class A Shares $ 47 $ 63 $ 80 $ 129
Class C Shares $ 25 $ 47 $ 81 $ 177
<PAGE>
FINANCIAL HIGHLIGHTS
===============================================================================
The following information, which has been audited by Arthur Andersen LLP, is an
integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1996 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
<TABLE>
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================================
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year ........ $ 11.99 $ 11.74 $ 12.41 $ 11.67 $ 11.13 $ 10.96 $ 11.11 $ 10.85 $ 10.91 $ 10.94
--------- --------- --------- --------- --------- -------- ------- ------- ------- -------
Income from investment
operations:
Net investment income .... 0.62 0.63 0.61 0.65 0.70 0.68 0.74 0.76 0.77 0.76
Net realized and
unrealized gains (losses)
on investments .......... (0.02) 0.25 (0.64) 0.74 0.54 0.17 (0.15) 0.26 (0.06) (0.03)
--------- --------- --------- --------- --------- -------- ------- ------- ------- -------
Total from investment
operations ............... 0.60 0.88 (0.03) 1.39 1.24 0.85 0.59 1.02 0.71 0.73
--------- --------- --------- --------- --------- -------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income ....... (0.62) (0.63) (0.61) (0.65) (0.70) (0.68) (0.74) (0.76) (0.77) (0.76)
Distributions from net
realized gains .......... -- -- (0.03) -- -- -- -- -- -- --
--------- --------- --------- --------- --------- -------- ------- ------- ------- -------
Total distributions ........ (0.62) (0.63) (0.64) (0.65) (0.70) (0.68) (0.74) (0.76) (0.77) (0.76)
--------- --------- --------- --------- --------- -------- ------- ------- ------- -------
Net asset value at
end of year .............. $ 11.97 $ 11.99 $ 11.74 $ 12.41 $ 11.67 $ 11.13 $ 10.96 $ 11.11 $ 10.85 $ 10.91
========= ========= ========= ========= ========= ======== ======= ======= ======= =======
Total return(A) ............ 5.05% 7.75% (0.41%) 12.24% 11.55% 7.98% 5.53% 9.75% 6.80% 6.73%
========= ========= ========= ========= ========= ======== ======= ======= ======= =======
Net assets at
end of year (000's) ..... $ 75,938 $ 71,393 $ 79,889 $ 81,101 $ 49,288 $ 20,791 $ 16,928 $ 17,741 $ 11,822 $17,534
========= ========= ========= ========= ========= ======== ======= ======= ======= =======
Ratio of expenses to
average net assets(B) .... 0.75% 0.75% 0.75% 0.75% 0.60% 1.07% 1.02% 1.15% 1.28% 1.06
Ratio of net investment
income to average
net assets ............... 5.12% 5.35% 4.94% 5.35% 6.10% 6.14% 6.74% 6.96% 7.21% 6.77%
Portfolio turnover rate .... 46% 29% 45% 15% 3% 86% 29% 49% 19% 24%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(A) The total returns shown do not include the effect of applicable sales loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 0.77%, 0.77%, 1.07%, 1.52%
and 1.20% for the years ended June 30, 1995, 1992, 1990, 1988 and 1987,
respectively.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
CLASS C
- -------------------------------------------------------------------------------------------------------------------
FROM DATE OF
PUBLIC OFFERING
YEAR ENDED JUNE 30, (NOV. 1, 1993)
THROUGH
1996 1995 JUNE 30, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.......................... $ 12.00 $ 11.74 $ 12.62
------------ ------------ -------------
Income from investment operations:
Net investment income........................................ 0.56 0.57 0.36
Net realized and unrealized gains (losses) on investments.... (0.03) 0.26 (0.85)
------------ ------------ -------------
Total from investment operations................................ 0.53 0.83 (0.49)
------------ ------------ ------------
Less distributions:
Distributions from net investment income..................... (0.56) (0.57) (0.36)
Distributions from net realized gains........................ -- -- (0.03)
------------ ------------ -------------
Total distributions............................................. (0.56) (0.57) (0.39)
------------ ------------ ------------
Net asset value at end of period................................ $ 11.97 $ 12.00 $ 11.74
============ ============ =============
Total return(A) ................................................ 4.44% 7.31% (6.05%)(C)
============ ============ =============
Net assets at end of period (000's)............................. $ 3,972 $ 4,165 $ 2,659
============ ============ =============
Ratio of expenses to average net assets(B) ..................... 1.25% 1.25% 1.22%(C)
Ratio of net investment income to average net assets............ 4.62% 4.84% 4.09%(C)
Portfolio turnover rate......................................... 46% 29% 45%(C)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) The total returns shown do not include the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 1.27% and 1.28%(C) for the
periods ended June 30, 1995 and 1994, respectively.
(C) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The Fund seeks
the highest level of interest income exempt from federal income tax and Ohio
personal income tax, consistent with protection of capital. The Fund is not
intended to be a complete investment program, and there is no assurance that its
investment objective can be achieved. The Fund's investment objective may be
changed by the Board of Trustees without shareholder approval, but only after
notification has been given to shareholders and after this Prospectus has been
revised accordingly. If there is a change in the Fund's investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs. Unless otherwise
indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.
The Fund seeks to achieve its investment objective by investing primarily in
investment grade, long-term Ohio Obligations (described below) that are insured
as to the timely payment of principal and interest. Under normal market
conditions, at least 65% of the value of the Fund's total assets will be
invested in Ohio Obligations which are insured as to payment of interest and
principal either by an insurance policy obtained by the issuer of the obligation
at original issuance or by an insurance policy obtained by the Fund from a
recognized insurer. In the event of a default on an insured obligation, the
insurer is required to make payments of interest and principal, when due, to the
Fund. Insurance does not guarantee the market value of the obligations or the
value of the shares of the Fund. The Fund also may own uninsured Ohio
Obligations, including obligations where the payment of interest and principal
is guaranteed by an agency or instrumentality of the U.S. Government, or where
the payment of interest and principal is secured by an escrow account consisting
of obligations of the U.S. Government. The Fund may also invest up to 20% of its
net assets in short-term Ohio Obligations which are not insured, since insurance
on these obligations is generally unavailable. For temporary defensive purposes,
the Fund may invest more than 20% of its net assets in uninsured short-term Ohio
Obligations. The Board of Trustees may terminate the practice of investing in
insured obligations if it determines that such practice is not in the best
interests of the Fund's shareholders. For a further discussion of the types of
insurance available to the Fund, see "Insurance."
The Fund invests in Ohio Obligations and other securities which are rated at the
time of purchase within the four highest grades assigned by Moody's Investors
Service, Inc. (Aaa, Aa, A or Baa), Standard & Poor's Ratings Group (AAA, AA, A
or BBB) or Fitch Investors Services, Inc. (AAA, AA, A or BBB), or unrated
securities determined by the Adviser to be of comparable quality. While
securities in these categories are generally accepted as being of investment
grade, the fourth highest grade is considered to be a medium grade and has
speculative characteristics even though it is regarded as having adequate
capacity to pay interest and repay principal.
It is anticipated that under normal circumstances the Fund's dollar-weighted
average maturity will be more than fifteen years, although the Fund may invest
in securities of any maturity, including tax-exempt notes and commercial paper
determined by the Adviser to meet the Fund's quality standards. The Fund's
quality standards limit its investments in tax-exempt notes to those which are
rated within the three highest grades by Moody's (MIG 1, MIG 2 or MIG 3) or
Fitch (F-1+, F-1 or F-2) or the two highest grades by Standard & Poor's (SP-1 or
SP-2) and in tax-exempt commercial paper to those which are rated within the two
highest grades by Moody's (Prime-1 or Prime-2), Standard & Poor's (A-1 or A-2)
or Fitch (Fitch-1 or Fitch-2). The Statement of Additional Information contains
a description of tax-exempt notes and commercial paper and a description of
Moody's, Standard & Poor's and Fitch ratings. If the Adviser determines that the
market conditions warrant a shorter dollar-weighted average maturity, the Fund's
investments will be adjusted accordingly, but not so as to reduce the Fund's
dollar-weighted average maturity below ten years.
It is a fundamental policy that under normal market conditions the Fund's assets
will be invested so that at least 80% of the annual income of the Fund will be
exempt from federal income tax, including the alternative minimum tax, and Ohio
<PAGE>
personal income tax. This policy may not be changed without the affirmative vote
of a majority of the outstanding shares of the Fund. The term "majority" of the
outstanding shares means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund.
The Fund may, from time to time, invest in other short-term, high-quality
obligations for temporary defensive purposes (subject to the fundamental policy
that under normal market conditions the assets of the Fund will be invested so
that at least 80% of its annual income is exempt from federal income tax,
including the alternative minimum tax, and Ohio personal income tax). These
include, but are not limited to, obligations the interest on which is exempt
from federal, but not Ohio, income tax and taxable obligations such as
certificates of deposit and other bank debt instruments, commercial paper,
obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. Except for temporary defensive
purposes, the Fund's assets will be invested so that no more than 20% of the
Fund's annual income will be subject to federal income tax. Under normal market
conditions, the Fund anticipates that not more than 5% of the value of its net
assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional Information.
The Fund may invest in these other short-term obligations, for example, due to
market conditions under which Ohio Obligations are temporarily unavailable for
purchase or available only in limited amounts, or pending investment of proceeds
of sales of shares or proceeds from the sale of portfolio securities or in
anticipation of redemptions. The Fund reserves the right to hold cash reserves
as the Adviser deems necessary for temporary defensive purposes. Although
interest earned on these short-term obligations is taxable as ordinary income
for federal and/or Ohio income tax purposes, the Fund intends to minimize
taxable income through investment, when possible, in other available securities
exempt from federal and/or Ohio income taxes, including shares of investment
companies whose dividends are tax-exempt. The Fund may invest up to 10% of its
total assets in shares of other investment companies. Investments by the Fund in
shares of other investment companies may result in duplication of sales loads
and advisory, administrative and distribution fees. The Fund will not invest
more than 5% of its total assets in securities of any single investment company
and will not purchase more than 3% of the outstanding voting securities of any
investment company.
OHIO OBLIGATIONS
Ohio Obligations are debt obligations issued by the State of Ohio and its
political subdivisions, agencies, authorities and instrumentalities and other
qualifying issuers which pay interest that is, in the opinion of bond counsel to
the issuer, exempt from both federal income tax, including the alternative
minimum tax, and Ohio personal income tax. For purposes of this definition, Ohio
Obligations include participation interests in Ohio Obligations and shares of an
investment company which invests its assets so that at least 80% of its annual
income is exempt from federal income tax, including the alternative minimum tax,
and Ohio personal income tax. Ohio Obligations are issued to obtain funds to
construct, repair or improve various public facilities such as airports,
bridges, highways, hospitals, housing, schools, streets and water and sewer
works, to pay general operating expenses or to refinance outstanding debts. They
also may be issued to finance various private activities, including the lending
of funds to public or private institutions for construction of housing,
educational or medical facilities or the financing of privately owned or
operated facilities. Ohio Obligations consist of tax-exempt bonds, tax-exempt
notes and tax-exempt commercial paper. The Statement of Additional Information
contains a description of tax-exempt bonds, notes and commercial paper.
The two principal classifications of Ohio Obligations are "general obligation"
and "revenue" bonds. General obligation bonds are backed by the issuer's full
credit and taxing power. Revenue bonds are backed by the revenues of a specific
project, facility or tax. Industrial development revenue bonds are a specific
type of revenue bond backed by the credit of the private user of the facility,
and therefore investments in these bonds have more potential risk. The Fund's
ability to achieve its investment objective depends to a great extent on the
ability of these various issuers to meet their scheduled payments of principal
and interest on obligations which are not insured. Tax-exempt notes generally
<PAGE>
are used to provide short-term capital needs and generally have maturities of
one year or less. The tax-exempt notes in which the Fund may invest are tax
anticipation notes (TANs), revenue anticipation notes (RANs) and bond
anticipation notes (BANs). TANs, RANs and BANs are issued by state and local
government and public authorities as interim financing in anticipation of tax
collections, revenue receipts or bond sales, respectively. Tax-exempt commercial
paper typically represents short-term, unsecured, negotiable promissory notes.
The Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. The Fund may invest more than 25% of its
assets in tax-exempt obligations issued by municipal governments or political
subdivisions of governments within a particular segment of the bond market, such
as housing agency bonds, hospital revenue bonds or airport bonds. It is possible
that economic, business or political developments or other changes affecting one
bond may also affect other bonds in the same segment in the same manner, thereby
potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of its total
assets in industrial development bonds which, although issued by industrial
development authorities, may be backed only by the assets and revenues of the
nongovernmental users. However, the Fund will not invest more than 25% of its
assets in securities backed by nongovernmental users which are in the same
industry. Interest on municipal obligations (including certain industrial
development bonds) which are private activity obligations, as defined in the
Internal Revenue Code, issued after August 7, 1986, while exempt from federal
income tax, is a preference item for purposes of the alternative minimum tax.
Where a regulated investment company receives such interest, a proportionate
share of any exempt-interest dividend paid by the investment company will be
treated as such a preference item to shareholders. The Fund will invest its
assets so that no more than 20% of its annual income gives rise to a preference
item for the purpose of the alternative minimum tax and in other investments
subject to federal income tax.
The Fund may purchase other types of tax-exempt obligations which may become
available in the future, provided the obligations are consistent with the Fund's
investment objective and policies, the Adviser believes their quality meets the
Fund's quality standards, and this Prospectus has been appropriately revised to
reflect the Fund's policies with respect to such obligations.
INSURANCE
Ohio Obligations purchased by the Fund may be insured by one of the following
types of insurance: new issue insurance, mutual fund insurance, or secondary
insurance.
NEW ISSUE INSURANCE. A new issue insurance policy is purchased by the issuer or
underwriter of an obligation in order to increase the credit rating of the
obligation. All premiums are paid in advance by the issuer or underwriter. A new
issue insurance policy is non-cancelable and continues in effect as long as the
obligation is outstanding and the insurer remains in business.
MUTUAL FUND INSURANCE. A mutual fund insurance policy is purchased by the Fund
from an insurance company. All premiums are paid from the Fund's assets, thereby
reducing the yield from an investment in the Fund. A mutual fund insurance
policy is non-cancelable except for non-payment of premiums and remains in
effect only as long as the Fund holds the insured obligation. In the event the
Fund sells an obligation covered by a mutual fund policy, the insurance company
is liable only for those payments of principal and interest then due and in
default. If the Fund holds a defaulted obligation, the Fund continues to pay the
insurance premium thereon but is entitled to collect interest payments from the
insurer and may collect the full amount of principal from the insurer when the
obligation becomes due. Accordingly, it is expected that the Fund will retain in
its portfolio any obligations so insured which are in default or are in
significant risk of default to avoid forfeiture of the value of the insurance
feature of such obligations, which would not be reflected in the price for which
the Fund could sell such obligations. In valuing such defaulted obligations, the
<PAGE>
Fund will value the insurance in an amount equal to the difference between the
market value of the defaulted obligation and the market value of similar
obligations which are not in default. Because the Fund must hold defaulted
obligations in its portfolio, its ability in certain circumstances to purchase
other obligations with higher yields will be limited.
SECONDARY INSURANCE. A secondary insurance policy insures an obligation for as
long as it remains outstanding, regardless of the owner of such obligation.
Premiums are paid by the Fund and coverage is non-cancelable, except for
non-payment of premiums. Because secondary insurance provides continuous
coverage during the term of the obligation, it provides greater marketability of
the Fund's obligations than is allowed under a mutual fund insurance policy.
Thus, the Fund with secondary insurance may sell an obligation to a third party
as a high-rated insured security at a higher market price than would otherwise
be obtained if the obligation were insured under a mutual fund policy. Secondary
insurance also gives the Fund the option of selling a defaulted obligation
rather than compelling it to hold a defaulted security in its portfolio so that
it may continue to be afforded insurance protection.
The Fund currently intends to purchase only Ohio Obligations which are insured
by the issuer of the obligation under a new issue insurance policy. In the event
the Adviser makes a recommendation to purchase an obligation which is not
otherwise insured, the Fund may purchase such obligation and thereafter obtain
mutual fund or secondary insurance. The Fund will purchase insurance from, or
obligations insured by, MBIA Insurance Corp., AMBAC Indemnity Corp., Financial
Guaranty Insurance Company and Financial Security Assurance Inc. The Fund may
also purchase insurance from, or obligations insured by, other insurance
companies provided that such companies have a claims-paying ability rated AAA by
Standard and Poor's or Aaa by Moody's. There can be no assurance that any
insurer will be able to meet its obligations under an insurance policy.
RISK FACTORS
The market value of investments available to the Fund, and therefore the Fund's
yield and net asset value, will fluctuate due to changes in interest rates,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. The Fund's portfolio securities are subject to price fluctuations based
upon changes in the level of interest rates, which will generally result in all
those securities changing in price in the same way, i.e., all those securities
experiencing appreciation when interest rates decline and depreciation when
interest rates rise. In addition, in instances where a security is not insured,
the financial condition of an issuer or adverse changes in general economic
conditions, or both, may impair the issuer's ability to make payments of
interest and principal. There is no limit on the percentage of a single issue of
tax-exempt obligations that the Fund may own. If the Fund holds a significant
portion of the obligations of an issuer, there may not be a readily available
market for the obligations. Reduced diversification could involve an increased
risk to the Fund should an issuer of an uninsured obligation be unable to make
interest or principal payments or should the market value of Ohio Obligations
decline.
The Fund may purchase Ohio Obligations which are rated at the time of purchase
within the four highest grades assigned by Moody's, Standard & Poor's or Fitch.
Subsequent to its purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. In
the event a security's rating is reduced below the Fund's minimum requirements,
the Fund will sell the security, subject to market conditions and the Adviser's
assessment of the most opportune time for sale. Although lower rated securities
will generally provide higher yields than higher rated securities of similar
maturities, they are subject to a greater degree of market fluctuation. Ohio
Obligations rated Baa or BBB have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to pay principal and interest than is the case with higher grade
securities. In management's opinion, however, the risk involved in investing in
these Baa or BBB rated obligations will be substantially reduced by insurance.
In addition, Ohio Obligations with longer maturities generally offer both higher
yields and greater exposure to market fluctuation from changes in interest
rates. While insurance minimizes the risks to the Fund by protecting against
loss from defaults by the issuer, it does not protect against market
fluctuation. Consequently, investors in the Fund should be aware that there is a
possibility of greater fluctuation in the Fund's net asset value.
<PAGE>
There are also risks of reduced diversification because the Fund invests
primarily in obligations of issuers within a single state. The Fund is more
likely to invest its assets in the securities of fewer issuers because of the
relatively smaller number of issuers of Ohio Obligations. The Fund's performance
is closely tied to conditions within the State of Ohio and to the financial
condition of the State and its authorities and municipalities. The economy in
the State of Ohio is reliant in part upon durable goods manufacturing, largely
concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, economic activity in Ohio tends to be more
cyclical than in some other states and in the nation as a whole. However, during
the last decade, the State has experienced steady growth and diversification of
employment and earnings. Statewide employment increased 3% between 1990 and 1995
and Ohio's unemployment rate since 1991 has remained below that of the nation.
Ohio remains highly industrialized, but the manufacturing component of the
economy in 1995 represents only 21.1% of employment, compared to 28.9% in 1980.
This is still above the national average of 15.9%. Although manufacturing is
expected to slow in the future, growth in nonmanufacturing output and
employment, led by the financial services, distribution and trade sectors, has
contributed to greater stability in the State's economy. Economic problems,
including high unemployment, have had and may have varying effects on the
different geographic areas of the State and the political subdivisions located
therein. While Ohio has in the past experienced budget shortfalls due to weak
revenue results and higher-than-budgeted human services expenditures, improved
economic performance has enabled the State to accumulate sizable financial
reserves. The State's unaudited financial statements indicate a $500 million
operating surplus for fiscal 1996 as a result of tax revenues exceeding
forecasts and spending below budgeted amounts. Although revenue obligations of
the State of Ohio or its political subdivisions may be payable from a specific
project or source, there can be no assurance that future economic and political
developments and the resulting impact on state and local governmental finances
will not adversely affect the market values and marketability of the Ohio
Obligations held by the Fund or the ability of a specific issuer to make
interest or principal payments.
The Fund is a non-diversified fund under the Investment Company Act of 1940.
Thus, its investments may be more concentrated in fewer issuers than those of a
diversified fund. This concentration may cause greater fluctuation in the Fund's
net asset value. As the Fund intends to comply with Subchapter M of the Internal
Revenue Code, it may invest up to 50% of its assets at the end of each quarter
of its fiscal year in as few as two issuers, provided that no more than 25% of
the assets are invested in one issuer. With respect to the remaining 50% of its
assets at the end of each quarter, it may invest no more than 5% in one issuer.
Certain provisions in the Internal Revenue Code relating to the issuance of
municipal obligations may reduce the volume of municipal obligations qualifying
for federal tax exemptions. Shareholders should consult their tax advisors
concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on municipal obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of municipal
obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of municipal
obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
tax-exempt obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
<PAGE>
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the tax-exempt obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the obligation,
as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating or
variable rate tax-exempt obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at specified intervals
to a specified interest rate. Periodic interest rate adjustments help stabilize
the obligations' market values. The Fund may purchase these obligations from the
issuers or may purchase participation interests in pools of these obligations
from banks or other financial institutions. Variable and floating rate
obligations usually carry demand features that permit the Fund to sell the
obligations back to the issuers or to financial intermediaries at par value plus
accrued interest upon not more than 30 days' notice at any time or prior to
specific dates. Certain of these variable rate obligations, often referred to as
"adjustable rate put bonds," may have a demand feature exercisable on specific
dates once or twice each year. The Fund will not invest more than 10% of its net
assets in floating or variable rate obligations as to which the Fund cannot
exercise the demand feature on not more than seven days' notice if the Adviser,
under the direction of the Board of Trustees, determines that there is no
secondary market available for these obligations and all other illiquid
securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
INVERSE FLOATING OBLIGATIONS. The Fund may invest in securities representing
interests in tax-exempt obligations, known as inverse floating obligations,
which pay interest rates that vary inversely to changes in the interest rates of
specified short-term tax-exempt obligations or an index of short-term tax-exempt
obligations. The interest rates on inverse floating obligations will typically
decline as short-term market interest rates increase and increase as short-term
market rates decline. Such securities have the effect of providing a degree of
investment leverage, since they will generally increase or decrease in value in
response to changes in market interest rates at a rate which is a multiple
(typically two) of the rate at which fixed-rate, long-term tax-exempt
obligations increase or decrease in response to such changes. As a result, the
market value of inverse floating obligations will generally be more volatile
than the market values of fixed-rate tax-exempt obligations.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued tax-exempt
obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or
high-quality liquid debt securities, marked to market daily, in an amount equal
to its when-issued commitments. Because these transactions are subject to market
fluctuations, a significant commitment to when-issued purchases could result in
greater fluctuation of the Fund's net asset value. The Fund will only make
commitments to purchase when-issued obligations with the intention of actually
acquiring the obligations and not for the purpose of investment leverage.
<PAGE>
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or U.S. Government obligations, with the Fund's Custodian in an
amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase tax-exempt obligations
with the right to resell the obligation to the seller at a specified price or
yield within a specified period. The right to resell is commonly known as a
"put" or a "standby commitment." The Fund may purchase tax-exempt obligations
with puts attached from banks and broker-dealers. The Fund intends to use
obligations with puts attached for liquidity purposes to ensure a ready market
for the underlying obligations at an acceptable price. Although no value is
assigned to any puts on tax-exempt obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. In addition, the value of the obligations with puts attached held by the
Fund will not exceed 10% of its net assets.
LEASE OBLIGATIONS. The Fund may invest in tax-exempt obligations that constitute
participations in lease obligations or installment purchase contract obligations
("lease obligations") of municipal authorities or entities. Although lease
obligations do not constitute general obligations of the municipality for which
the municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to budget for, appropriate and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on an annual basis. In addition to the
"non-appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated with
more conventional bonds. Although "non-appropriation" lease obligations are
secured by the leased property, the disposition of the property in the event of
foreclosure might prove difficult. The Fund will seek to minimize these risks by
not investing more than 10% of its net assets in lease obligations if the
Adviser determines that there is no secondary market available for these
obligations and all other illiquid securities, and by only investing in
"non-appropriation" lease obligations that meet certain criteria of the Adviser.
The Fund does not intend to invest more than an additional 5% of its net assets
in municipal lease obligations determined by the Adviser, under the direction of
the Board of Trustees, to be liquid. The Fund will only purchase unrated lease
obligations which meet the Fund's quality standards, as determined by the
Adviser, under the direction of the Board of Trustees, including an assessment
of the likelihood that the lease will not be cancelled.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the aggregate up
to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to the demand feature
described above; floating and variable rate obligations as to which the Fund
cannot exercise the related demand feature described above and as to which there
is no secondary market; lease obligations for which there is no secondary
market; and repurchase agreements not terminable within seven days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, the Fund may borrow money from banks or other persons in an amount not
exceeding 10% of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than 10% of its total assets. The Fund will
not make any additional purchases of portfolio securities while borrowings are
outstanding. Borrowing magnifies the potential for gain or loss on the Fund's
portfolio securities and, therefore, if employed, increases the possibility of
fluctuation in its net asset value. This is the speculative factor known as
<PAGE>
leverage. To reduce the risks of borrowing, the Fund will limit its borrowings
as described above. The Fund's policies on borrowing and pledging are
fundamental policies which may not be changed without the affirmative vote of a
majority of its outstanding shares.
HOW TO PURCHASE SHARES
===============================================================================
Your initial investment in the Fund ordinarily must be at least $1,000. You may
purchase additional shares through the Open Account Program described below. You
may open an account and make an initial investment through securities dealers
having a sales agreement with the Trust's principal underwriter, Countrywide
Investments, Inc. (the "Adviser"). You may also make a direct initial investment
by sending a check and a completed account application form to Countrywide Fund
Services, Inc. (the "Transfer Agent"), P.O. Box 5354, Cincinnati, Ohio
45201-5354. Checks should be made payable to the "Ohio Insured Tax-Free Fund."
An account application is included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of Fund
shares. Certificates representing shares are not ordinarily issued, but you may
receive a certificate without charge by sending a written request to the
Transfer Agent. Certificates for fractional shares will not be issued. If a
certificate has been issued to you, you will not be permitted to exchange shares
by telephone or to use the automatic withdrawal plan as to those shares. The
Trust and the Adviser reserve the rights to limit the amount of investments and
to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone exchanges) made available to
investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers
listed below.
After an initial investment, all investors are considered participants in the
Open Account Program. The Open Account Program helps investors make purchases of
shares of the Fund over a period of years and permits the automatic reinvestment
of dividends and distributions of the Fund in additional shares without a sales
load.
Under the Open Account Program, you may purchase and add shares to your account
at any time either through your securities dealer or by sending a check to the
Transfer Agent, P.O. Box 5354, Cincinnati, Ohio 45201-5354. The check should be
made payable to the "Ohio Insured Tax-Free Fund."
Under the Open Account Program, you may also purchase shares of the Fund by bank
wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050) for instructions. Your bank may
impose a charge for sending your wire. There is presently no fee for receipt of
wired funds, but the Transfer Agent reserves the right to charge shareholders
for this service upon thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account and your
account number to permit proper crediting to your account. While there is no
minimum amount required for subsequent investments, the Trust reserves the right
to impose such requirement. All purchases under the Open Account Program are
made at the public offering price next determined after receipt of a purchase
order by the Trust. If a broker-dealer received concessions for selling shares
of the Fund to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
<PAGE>
SALES LOAD ALTERNATIVES
The Fund offers two classes of shares which may be purchased at the election of
the purchaser. The two classes of shares each represent interests in the same
portfolio of investments of the Fund, have the same rights and are identical in
all material respects except that (i) Class C shares bear the expenses of higher
distribution fees; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable, including transfer
agent fees attributable to a specific class of shares, printing and postage
expenses related to preparing and distributing materials to current shareholders
of a specific class, registration fees incurred by a specific class of shares,
the expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements. The net
income attributable to Class C shares and the dividends payable on Class C
shares will be reduced by the amount of the incremental expenses associated with
the distribution fee. See "Distribution Plans." Shares of the Fund purchased
prior to November 1, 1993 are Class A shares.
The Fund's alternative sales arrangements permit investors to choose the method
of purchasing shares that is most beneficial given the amount of the purchase,
the length of time the investor expects to hold his shares and other relevant
circumstances. Investors should determine whether under their particular
circumstances it is more advantageous to incur a front-end sales load and be
subject to lower ongoing charges, as discussed below, or to have all of the
initial purchase price invested in the Fund with the investment thereafter being
subject to higher ongoing charges. A salesperson or any other person entitled to
receive any portion of a distribution fee may receive different compensation for
selling Class A or Class C shares.
As an illustration, investors who qualify for reduced sales loads as described
below, might elect the Class A sales load alternative because similar sales load
reductions are not available for purchases under the Class C sales load
alternative. Moreover, shares acquired under the Class A sales load alternative
would be subject to lower ongoing distribution fees as described below.
Investors not qualifying for reduced initial sales loads who expect to maintain
their investment for an extended period of time might also elect the Class A
sales load alternative because over time the accumulated continuing distribution
fees on Class C shares may exceed the difference in initial sales loads between
Class A and Class C shares. Again, however, such investors must weigh this
consideration against the fact that less of their funds will be invested
initially under the Class A sales load alternative. Furthermore, the higher
ongoing distribution fees will be offset to the extent any return is realized on
the additional funds initially invested under the Class C sales load
alternative.
Some investors might determine that it would be more advantageous to utilize the
Class C sales load alternative to have more of their funds invested initially,
although remaining subject to higher ongoing distribution fees and, for a
one-year period, being subject to a contingent deferred sales load. For example,
based on estimated fees and expenses, an investor subject to the maximum 4%
initial sales load on Class A shares who elects to reinvest dividends in
additional shares would have to hold the investment in Class A shares
approximately 5 years before the accumulated ongoing distribution fees on the
alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 5 years, the investor might
consider purchasing Class A shares. This example does not take into account the
time value of money which reduces the impact of the higher ongoing Class C
distribution fees, fluctuations in net asset value or the effect of different
performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Adviser may from time to time pay from its own resources additional cash bonuses
or other incentives to selected dealers in connection with the sale of shares of
the Fund. On some occasions, such bonuses or incentives may be conditioned upon
the sale of a specified minimum dollar amount of the shares of the Fund and/or
other funds of Countrywide Investments during a specific period of time. Such
bonuses or incentives may include financial assistance to dealers in connection
with conferences, sales or training programs for their employees, seminars for
<PAGE>
the public, advertising, sales campaigns and other dealer-sponsored programs or
events.
CLASS A SHARES
Class A shares of the Fund are sold on a continuous basis at the public offering
price next determined after receipt of a purchase order by the Trust. Purchase
orders received by dealers prior to 4:00 p.m., Eastern time, on any business day
and transmitted to the Adviser by 5:00 p.m., Eastern time, that day are
confirmed at the public offering price determined as of the close of the regular
session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Adviser by 5:00 p.m., Eastern time. Dealers may charge a
fee for effecting purchase orders. Direct purchase orders received by the
Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's public
offering price. Direct investments received by the Transfer Agent after 4:00
p.m., Eastern time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the public offering price next determined on the
following business day.
The public offering price of Class A shares is the next determined net asset
value per share plus a sales load as shown in the following table.
<TABLE>
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
Less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50 3.63 3.30
$250,000 but less than $500,000 2.50 2.56 2.30
$500,000 but less than $1,000,000 2.00 2.04 1.80
$1,000,000 or more None* None*
<FN>
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .75% may apply with respect to Class A
shares if a commission was paid by the Adviser to a participating
unaffiliated dealer and the shares are redeemed within twelve months from the
date of purchase.
</FN>
</TABLE>
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made after October
1, 1995 and subsequent purchases further increasing the size of the account, a
dealer's commission of .75% of the purchase amount may be paid by the Adviser to
participating unaffiliated dealers through whom such purchases are effected. In
determining a dealer's eligibility for such commission, purchases of Class A
shares of the Fund may be aggregated with concurrent purchases of Class A shares
of other funds of Countrywide Investments. Dealers should contact the Adviser
concerning the applicability and calculation of the dealer's commission in the
case of combined purchases. An exchange from other funds of Countrywide
Investments will not qualify for payment of the dealer's commission, unless such
exchange is from a Countrywide fund with assets as to which a dealer's
commission or similar payment has not been previously paid. Redemptions of Class
A shares may result in the imposition of a contingent deferred sales load if the
dealer's commission described in this paragraph was paid in connection with the
purchase of such shares. See "Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares" below.
<PAGE>
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the table above. Purchases made in any load
fund distributed by the Adviser pursuant to a Letter of Intent may also be
eligible for the reduced sales loads. The minimum initial investment under a
Letter of Intent is $10,000. The load funds currently distributed by the Adviser
are listed in the Exchange Privilege section of this Prospectus. Shareholders
should contact the Transfer Agent for information about the Right of
Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase Class A shares of the Fund at net
asset value when the payment for your investment represents the proceeds from
the redemption of shares of any other mutual fund which has a front-end sales
load and is not distributed by the Adviser. Your investment will qualify for
this provision if the purchase price of the shares of the other fund included a
sales load and the redemption occurred within one year of the purchase of such
shares and no more than sixty days prior to your purchase of Class A shares of
the Fund. To make a purchase at net asset value pursuant to this provision, you
must submit photocopies of the confirmations (or similar evidence) showing the
purchase and redemption of shares of the other fund. Your payment may be made
with the redemption check representing the proceeds of the shares redeemed,
endorsed to the order of the "Ohio Insured Tax-Free Fund." The redemption of
shares of the other fund is, for federal income tax purposes, a sale on which
you may realize a gain or loss. These provisions may be modified or terminated
at any time. Contact your securities dealer or the Trust for further
information.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase Class A shares
of the Fund at net asset value. To the extent permitted by regulatory
authorities, a bank trust department may charge fees to clients for whose
account it purchases shares at net asset value. Federal and state credit unions
may also purchase Class A shares at net asset value.
In addition, Class A shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Adviser, and their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees.
Clients of investment advisers and financial planners may also purchase Class A
shares of the Fund at net asset value if their investment adviser or financial
planner has made arrangements to permit them to do so with the Trust and the
Adviser. The investment adviser or financial planner must notify the Transfer
Agent that an investment qualifies as a purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the Adviser or the
Transfer Agent, including members of the immediate family of such individuals,
may also purchase Class A shares of the Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Fund (or shares into which such Class A shares were exchanged)
purchased at net asset value in amounts totaling $1 million or more, if the
dealer's commission described above was paid by the Adviser and the shares are
redeemed within twelve months from the date of purchase. The contingent deferred
sales load will be paid to the Adviser and will be equal to .75% of the lesser
of (1) the net asset value at the time of purchase of the Class A shares being
redeemed or (2) the net asset value of such Class A shares at the time of
redemption. In determining whether the contingent deferred sales load is
payable, it is assumed that shares not subject to the contingent deferred sales
load are the first redeemed followed by other shares held for the longest period
of time. The contingent deferred sales load will not be imposed upon shares
representing reinvested dividends or capital gains distributions, or upon
amounts representing share appreciation. If a purchase of Class A shares is
subject to the contingent deferred sales load, the investor will be so notified
on the confirmation for such purchase.
<PAGE>
Redemptions of such Class A shares of the Fund held for at least 12 months will
not be subject to the contingent deferred sales load and an exchange of such
Class A shares into another fund of Countrywide Investments is not treated as a
redemption and will not trigger the imposition of the contingent deferred sales
load at the time of such exchange. A fund will "tack" the period for which such
Class A shares being exchanged were held onto the holding period of the acquired
shares for purposes of determining if a contingent deferred sales load is
applicable in the event that the acquired shares are redeemed following the
exchange; however, the period of time that the redemption proceeds of such Class
A shares are held in a money market fund will not count toward the holding
period for determining whether a contingent deferred sales load is applicable.
See "Exchange Privilege."
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986) of a shareholder (including one who owns the shares with
his or her spouse as a joint tenant with rights of survivorship) from an account
in which the deceased or disabled is named. The Adviser may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the applicable sales load
and for purposes of the Letter of Intent and Right of Accumulation privileges, a
purchaser includes an individual, his spouse and their children under the age of
21, purchasing shares for his or their own account; or a trustee or other
fiduciary purchasing shares for a single fiduciary account although more than
one beneficiary is involved; or employees of a common employer, provided that
economies of scale are realized through remittances from a single source and
quarterly confirmation of such purchases; or an organized group, provided that
the purchases are made through a central administration, or a single dealer, or
by other means which result in economy of sales effort or expense. Contact the
Transfer Agent for additional information concerning purchases at net asset
value or at reduced sales loads.
CLASS C SHARES
Class C shares of the Fund are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order by the Trust. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any business day and
transmitted to the Adviser by 5:00 p.m., Eastern time, that day are confirmed at
the net asset value determined as of the close of the regular session of trading
on the New York Stock Exchange on that day. It is the responsibility of dealers
to transmit properly completed orders so that they will be received by the
Adviser by 5:00 p.m., Eastern time. Dealers may charge a fee for effecting
purchase orders. Direct purchase orders received by the Transfer Agent by 4:00
p.m., Eastern time, are confirmed at that day's net asset value. Direct
investments received by the Transfer Agent after 4:00 p.m., Eastern time, and
orders received from dealers after 5:00 p.m., Eastern time, are confirmed at the
net asset value next determined on the following business day.
A contingent deferred sales load is imposed on Class C shares if an investor
redeems an amount which causes the current value of the investor's account to
fall below the total dollar amount of purchase payments subject to the deferred
sales load, except that no such charge is imposed if the shares redeemed have
been acquired through the reinvestment of dividends or capital gains
distributions or to the extent the amount redeemed is derived from increases in
the value of the account above the amount of purchase payments subject to the
deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the amount of
time since the investor made a purchase payment from which an amount is being
redeemed. Purchases are subject to the contingent deferred sales load according
to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
First Year 1%
Thereafter None
<PAGE>
In determining whether a contingent deferred sales load is payable, it is
assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that an individual opens an account and purchases 1,000
shares at $10 per share and that six months later the net asset value per share
is $12 and, during such time, the investor has acquired 50 additional shares
through reinvestment of distributions. If at such time the investor should
redeem 450 shares (proceeds of $5,400), 50 shares will not be subject to the
load because of dividend reinvestment. With respect to the remaining 400 shares,
the load is applied only to the original cost of $10 per share and not to the
increase in net asset value of $2 per share. Therefore, $4,000 of the $5,400
redemption proceeds will be charged the load. At the rate of 1%, the contingent
deferred sales load would be $40. In determining whether an amount is available
for redemption without incurring a deferred sales load, the purchase payments
made for all Class C shares in the shareholder's account are aggregated, and the
current value of all such shares is aggregated.
All sales loads imposed on redemptions are paid to the Adviser. The Adviser
intends to pay a commission of 1% of the purchase amount to participating
brokers at the time the investor purchases Class C shares.
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986) of a shareholder (including one who owns the shares with
his or her spouse as a joint tenant with rights of survivorship) from an account
in which the deceased or disabled is named. The Adviser may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
SHAREHOLDER SERVICES
===============================================================================
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may elect to
receive, or may designate another person to receive, monthly or quarterly
payments in a specified amount of not less than $50 each. There is no charge for
this service. Purchases of additional Class A shares of the Fund while the plan
is in effect are generally undesirable because a sales load is incurred whenever
purchases are made.
DIRECT DEPOSIT PLANS
Shares of the Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder to
have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Fund from your bank, savings
and loan or other depository institution account. The minimum initial and
subsequent investments must be $50 under the plan. The Transfer Agent pays the
costs associated with these transfers, but reserves the right, upon thirty days'
written notice, to make reasonable charges for this service. Your depository
institution may impose its own charge for debiting your account which would
reduce your return from an investment in the Fund.
<PAGE>
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Fund, you may reinvest all or part of the
proceeds without any additional sales load. This reinvestment must occur within
ninety days of the redemption and the privilege may only be exercised once per
year.
HOW TO REDEEM SHARES
===============================================================================
You may redeem shares of the Fund on each day that the Trust is open for
business by sending a written request to the Transfer Agent. The request must
state the number of shares or the dollar amount to be redeemed and your account
number. The request must be signed exactly as your name appears on the Trust's
account records. If the shares to be redeemed have a value of $25,000 or more,
your signature must be guaranteed by any eligible guarantor institution,
including banks, brokers and dealers, municipal securities brokers and dealers,
government securities brokers and dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations.
You may also redeem shares by placing a wire redemption request through a
securities broker or dealer. Unaffiliated broker-dealers may impose a fee on the
shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
If your instructions request a redemption by wire, you will be charged an $8
processing fee by the Fund's Custodian. The Trust reserves the right, upon
thirty days' written notice, to change the processing fee. All charges will be
deducted from your account by redemption of shares in your account. Your bank or
brokerage firm may also impose a charge for processing the wire. In the event
that wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an Automated
Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
If a certificate for the shares was issued, it must be delivered to the Transfer
Agent, or the dealer in the case of a wire redemption, duly endorsed or
accompanied by a duly endorsed stock power, with the signature guaranteed by any
of the eligible guarantor institutions outlined above.
A contingent deferred sales load may apply to a redemption of Class C shares or
to a redemption of certain Class A shares purchased at net asset value. See "How
to Purchase Shares."
Shares are redeemed at their net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check or wire.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege of
exchanging shares by telephone is automatically available to all shareholders.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
<PAGE>
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested including any sales
load paid, unaffected by market fluctuations) or such other minimum amount as
the Trust may determine from time to time. After notification to you of the
Trust's intention to close your account, you will be given thirty days to
increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
===============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other.
Class A shares of the Fund which are not subject to a contingent deferred sales
load may be exchanged for Class A shares of any other fund and for shares of any
other fund which offers only one class of shares (provided such shares are not
subject to a contingent deferred sales load). A sales load will be imposed equal
to the excess, if any, of the sales load rate applicable to the shares being
acquired over the sales load rate, if any, previously paid on the shares being
exchanged.
Class C shares of the Fund, as well as Class A shares of the Fund subject to a
contingent deferred sales load, may be exchanged, on the basis of relative net
asset value per share, for shares of any other fund which imposes a contingent
deferred sales load and for shares of any fund which is a money market fund. A
fund will "tack" the period for which the shares being exchanged were held onto
the holding period of the acquired shares for purposes of determining if a
contingent deferred sales load is applicable in the event that the acquired
shares are redeemed following the exchange. The period of time that shares are
held in a money market fund will not count toward the holding period for
determining whether a contingent deferred sales load is applicable.
The following are the funds of Countrywide Investments currently offered to the
public. Funds which may be subject to a front-end or contingent deferred sales
load are indicated by an asterisk.
COUNTRYWIDE TAX-FREE TRUST COUNTRYWIDE INVESTMENT TRUST
- -------------------------- ----------------------------
Tax-Free Money Fund Short Term Government Income Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
COUNTRYWIDE STRATEGIC TRUST
---------------------------
*U.S. Government Securities Fund
*Equity Fund
*Utility Fund
*Treasury Total Return Fund
You may request an exchange by sending a written request to the Transfer Agent.
The request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
<PAGE>
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to shareholders. An exchange results in a
sale of fund shares, which may cause you to recognize a capital gain or loss.
Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
===============================================================================
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly. The
Fund expects to distribute any net realized long-term capital gains at least
once each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains. The Fund will, at
the time dividends are paid, designate as tax-exempt the same percentage of the
distribution as the actual tax-exempt income earned during the period covered by
the distribution bore to total income earned during the period; the percentage
of the distribution which is tax-exempt may vary from distribution to
distribution.
Distributions are paid according to one of the following options:
Share Option -- income distributions and capital gains
distributions reinvested in additional shares.
Income Option -- income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option -- income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then-current net asset
value and your account will be converted to the Share Option.
An investor who has received in cash any dividend or capital gains distribution
from the Fund may return the distribution within thirty days of the distribution
date to the Transfer Agent for reinvestment at the net asset value next
determined after its return. The investor or his dealer must notify the Transfer
Agent that a distribution is being reinvested pursuant to this provision.
TAXES
===============================================================================
The Fund has qualified in all prior years and intends to continue to qualify for
the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The Fund also intends
to meet all IRS requirements necessary to ensure that it is qualified to pay
"exempt-interest dividends," which means that it may pass on to shareholders the
federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment income
and any net realized capital gains to its shareholders. For federal income tax
purposes, a shareholder's proportionate share of taxable distributions from the
Fund's net investment income as well as from net realized short-term capital
<PAGE>
gains, if any, is taxable as ordinary income. Since the Fund's investment income
is derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
Distributions of net realized long-term capital gains are taxable as long-term
capital gains regardless of how long you have held your Fund shares.
Dividends received from the Fund that are exempt from federal income tax are
exempt from the Ohio personal income tax and the net income base of the Ohio
corporation franchise tax to the extent derived from interest on Ohio
Obligations. However, shares of the Fund will be included in the computation of
the Ohio corporation franchise tax on the net worth basis. Distributions
received from the Fund are generally not subject to Ohio municipal income
taxation.
Issuers of tax-exempt securities issued after August 31, 1986 are required to
comply with various restrictions on the use and investment of proceeds of sales
of the securities. Any failure by the issuer to comply with these restrictions
would cause interest on such securities to become taxable to the security
holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax Reform Act
of 1986, is an item of tax preference possibly subject to the alternative
minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest its assets so that at least 80% of its
annual income will be exempt from federal income tax, including the alternative
minimum tax, and Ohio personal income tax. The Tax Reform Act of 1986 also
created a tax preference for corporations equal to one-half of the excess of
adjusted net book income over alternative minimum taxable income. As a result,
one-half of tax-exempt interest income received from the Fund may be a tax
preference for corporate investors.
Redemptions and exchanges of shares of the Fund are taxable events on which a
shareholder may realize a gain or loss. If a shareholder buys shares of the Fund
and sells them at a loss within six months, any loss will be disallowed for
federal and Ohio income tax purposes to the extent of the exempt-interest
dividends received on such shares. Any loss realized upon the sale of shares of
the Fund within six months from the date of their purchase will be treated as a
long-term capital loss to the extent of amounts treated as distributions of net
realized long-term capital gains during such six month period. In addition,
shareholders should be aware that interest on indebtedness incurred to purchase
or carry shares of the Fund is not deductible for federal income tax purposes.
Shareholders receiving Social Security benefits may be taxed on a portion of
those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating the amount
and federal income tax status of all distributions made during the year. The
Fund will report to its shareholders the percentage and source of income earned
on tax-exempt obligations held by it during the preceding year. An exemption
from federal income tax and Ohio personal income tax may not result in similar
exemptions under the laws of a particular state or local taxing authority.
Shareholders should consult their tax advisors about the tax effect of
distributions and withdrawals from the Fund and the use of the Automatic
Withdrawal Plan and the Exchange Privilege. The tax consequences described in
this section apply whether distributions are taken in cash or reinvested in
additional shares. The Fund may not be an appropriate investment for persons who
are "substantial users" of facilities financed by industrial development bonds
or are "related persons" to such users; such persons should consult their tax
advisors before investing in the Fund.
<PAGE>
OPERATION OF THE FUND
===============================================================================
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an open-end
management investment company organized as a Massachusetts business trust on
April 13, 1981. The Board of Trustees supervises the business activities of the
Trust. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street, Cincinnati,
Ohio 45202 (the "Adviser"), to manage the Fund's investments and its business
affairs. The Adviser was organized in 1974 and is also the investment adviser to
five other series of the Trust, five series of Countrywide Investment Trust and
four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
John J. Goetz, the Chief Investment Officer of the Adviser, is primarily
responsible for managing the portfolio of the Fund. Mr. Goetz has been employed
by the Adviser in various capacities since 1981 and has been managing the Fund's
portfolio since October 1986.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services equal to the
annual rate of .1% of the average value of the Fund's daily net assets.
The Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Robert H. Leshner,
President and a director of the Adviser, is President and a Trustee of the
Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
<PAGE>
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may give consideration to sales of shares
of the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. Each class of shares of the
Fund shall vote separately on matters relating to its plan of distribution
pursuant to Rule 12b-1 (see "Distribution Plans"). When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.
DISTRIBUTION PLANS
===============================================================================
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted a plan of distribution (the "Class A Plan") under which the
Class A shares may directly incur or reimburse the Adviser for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class A Plan, the Fund may make payments to dealers and other
persons, including the Adviser and its affiliates, who may be advising investors
regarding the purchase, sale or retention of Class A shares. For the fiscal year
ended June 30, 1996, Class A shares of the Fund paid $9,815 to the Adviser to
reimburse it for payments made to dealers and other persons who may be advising
shareholders regarding the retention of shares of the Fund.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.25% of the Fund's average daily net assets allocable to Class A shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class A Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Adviser after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted a plan of distribution (the "Class C Plan") which provides
for two categories of payments. First, the Class C Plan provides for the payment
to the Adviser of an account maintenance fee, in an amount equal to an annual
rate of .25% of the Fund's average daily net assets allocable to Class C shares,
which may be paid to other dealers based on the average value of such shares
owned by clients of such dealers. In addition, the Class C shares may directly
incur or reimburse the Adviser in an amount not to exceed .75% per annum of the
Fund's average daily net assets allocable to Class C shares for expenses
<PAGE>
incurred in the distribution and promotion of the Fund's Class C shares,
including payments to securities dealers and others who are engaged in the sale
of such shares and who may be advising investors regarding the purchase, sale or
retention of such shares; expenses of maintaining personnel who engage in or
support distribution of shares or who render shareholder support services not
otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Fund; expenses of obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Trust may, from time to time,
deem advisable; and any other expenses related to the distribution of such
shares.
Pursuant to the Class C Plan, the Fund may make payments to dealers and other
persons, including the Adviser and its affiliates, who may be advising investors
regarding the purchase, sale or retention of Class C shares. For the fiscal year
ended June 30, 1996, Class C shares of the Fund paid $12,009 to the Adviser to
reimburse it for payments made to dealers and other persons who may be advising
shareholders regarding the retention of shares of the Fund.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class C Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Adviser after the date the Class C Plan terminates. The Adviser may make
payments to dealers and other persons in an amount up to .75% per annum of the
average value of Class C shares owned by their clients, in addition to the .25%
account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Fund may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
The National Association of Securities Dealers, in its Rules of Fair Practice,
places certain limitations on asset-based sales charges of mutual funds. These
Rules require fund-level accounting in which all sales charges -- front-end
load, 12b-1 fees or contingent deferred load -- terminate when a percentage of
gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
===============================================================================
On each day that the Trust is open for business, the share price (net asset
value) of Class C shares and the public offering price (net asset value plus
applicable sales load) of Class A shares of the Fund are determined as of the
close of the regular session of trading on the New York Stock Exchange,
currently 4:00 p.m., Eastern time. The Trust is open for business on each day
the New York Stock Exchange is open for business and on any other day when there
is sufficient trading in the Fund's investments that its net asset value might
be materially affected. The net asset value per share of the Fund is calculated
by dividing the sum of the value of the securities held by the Fund plus cash or
other assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent.
<PAGE>
Tax-exempt portfolio securities are valued for the Fund by an outside
independent pricing service approved by the Board of Trustees. The service
generally utilizes a computerized grid matrix of tax-exempt securities and
evaluations by its staff to determine what it believes is the fair value of the
portfolio securities. The Board of Trustees believes that timely and reliable
market quotations are generally not readily available to the Fund for purposes
of valuing tax-exempt securities and that valuations supplied by the pricing
service are more likely to approximate the fair value of the tax-exempt
securities. If, in the Adviser's opinion, the valuation provided by the service
does not accurately reflect the fair value of a tax-exempt security, it will
value the security at the average of the prices quoted by at least two
independent market makers. The quoted price will represent the market maker's
opinion as to the price that a willing buyer would pay for the security. All
other securities (and other assets) of the Fund for which market quotations are
not readily available are valued at their fair value as determined in good faith
in accordance with consistently applied procedures established by and under the
general supervision of the Board of Trustees. The net asset value per share of
the Fund will fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
===============================================================================
From time to time, the Fund may advertise its "average annual total return." The
Fund may also advertise "yield." Both yield and average annual total return
figures are based on historical earnings and are not intended to indicate future
performance. Total return and yield are computed separately for Class A and
Class C shares. The yield of Class A shares is expected to be higher than the
yield of Class C shares due to the higher distribution fees imposed on Class C
shares.
The "average annual total return" of the Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and, for
Class A shares, the deduction of the current maximum sales load from the initial
investment. The Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from "average annual total return."
A nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized quotation of
total return may also indicate average annual compounded rates of return over
periods other than those specified for "average annual total return." These
nonstandardized returns do not include the effect of the applicable sales load
which, if included, would reduce total return. A nonstandardized quotation of
total return will always be accompanied by the Fund's "average annual total
return" as described above.
The "yield" of the Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period. In addition,
the Fund may advertise together with its "yield" a tax-equivalent yield which
reflects the yield which would be required of a taxable investment at a stated
income tax rate in order to equal the Fund's "yield."
From time to time, the Fund may advertise its performance rankings as published
by recognized independent mutual fund statistical services such as Lipper
Analytical Services, Inc. ("Lipper"), or by publications of general interest
such as Forbes, Money, The Wall Street Journal, Business Week, Barron's, Fortune
or Morningstar Mutual Fund Values. The Fund may also compare its performance to
that of other selected mutual funds, averages of the other mutual funds within
its category as determined by Lipper, or recognized indicators. In connection
with a ranking, the Fund may provide additional information, such as the
particular category of funds to which the ranking relates, the number of funds
<PAGE>
in the category, the criteria upon which the ranking is based, and the effect of
fee waivers and/or expense reimbursements, if any. The Fund may also present its
performance and other investment characteristics, such as volatility or a
temporary defensive posture, in light of the Adviser's view of current or past
market conditions or historical trends.
Further information about the Fund's performance is contained in the Trust's
annual report which can be obtained by shareholders at no charge by calling the
Transfer Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call
629-2050) or by writing to the Trust at the address on the front of this
Prospectus.
<PAGE>
ACCOUNT APPLICATION ACCOUNT NO. ______________________
Please mail account application to: (For Fund Use Only)
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
============================================
FOR BROKER/DEALER USE ONLY
Firm Name:________________________________
Home Office Address:______________________
Branch Address:___________________________
Rep Name & No.:___________________________
Rep Signature:____________________________
============================================
OHIO INSURED TAX-FREE FUND
o A Shares (9)
o C Shares (14)
==============================================================================
Initial Investment of $__________________ ($1,000 minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From: __________________________________________________________
o Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/Tax I.D.#
_____________________________________________ ____________________________
Name of Individual, Corporation, Organization, (In case of custodial account
or Minor, etc. please list minor's S.S.#)
_____________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other_______
ADDRESS PHONE
_____________________________________________ ( )_________________________
Street or P.O. Box Business Phone
_____________________________________________ ( )_________________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (Right of survivorship presumed)
o Partnership
o Corporation
o Trust
o Custodial
o Non-Profit
o Other
Occupation and Employer Name/Address__________________________________________
Are you an associated person of an NASD member? o Yes o No
==============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the
Taxpayer Identification Number listed above is my correct number. The Internal
Revenue Service does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if
appropriate:
o I am exempt from backup withholding under the provisions of
section 3406(a)(1)(c) of the Internal Revenue Code; or I am not subject
to backup withholding because I have not been notified that I am subject to
backup withholding as a result of a failure to report all interest or
dividends; or the Internal Revenue Service has notified me that I am no
longer subject to backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
==============================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions paid
in cash.
==============================================================================
<PAGE>
REDUCED SALES CHARGES (CLASS A SHARES ONLY)
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's
confirmation of the following holdings of eligible load funds of Countrywide
Investments.
Account Number/Name Account Number/Name
___________________________________ _______________________________________
___________________________________ _______________________________________
LETTER OF INTENT: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o I agree to the Letter of Intent in the current Prospectus of Countrywide
Tax-Free Trust. Although I am not obligated to purchase, and the Trust is not
obligated to sell, I intend to invest over a 13 month period beginning
______________________ 19 _______ (Purchase Date of not more than 90 days
prior to this Letter) an aggregate amount in the load funds of Countrywide
Investments at least equal to (check appropriate box):
o $100,000 o $250,000 o $500,000 o $1,000,000
===============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions
for automatic reinvestment in additional shares of the Fund for credit to the
investor's account and to surrender for redemption shares held in the investor's
account in accordance with any of the procedures elected above or for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release Countrywide
Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide Investments, Inc.,
and their respective officers, employees, agents and affiliates from any and all
liability in the performance of the acts instructed herein provided that such
entities have exercised due care to determine that the instructions are genuine.
- --------------------------------- --------------------------------------
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
- --------------------------------- --------------------------------------
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified,
each joint owner shall have full authority to act on behalf of
the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of
Countrywide Tax-Free Trust. There is no charge for this service, and it offers
the convenience of automatic investing on a regular basis. The minimum
investment is $50.00 per month. For an account that is opened by using this
Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be
discontinued by the shareholder at any time.
Please invest $ _______ per month ABA Routing Number__________________
in the Fund.
FI Account Number___________________
o Checking Account o Savings Account
___________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
___________________________________ o the 15th day of each month
City State o both the 15th and last business day
X_____________________________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records)
X___________________________________________________________
(Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please
sign exactly as signature appears on your FI's records.)
- Please attach a voided check for the Automatic Investment Plan.
INDEMNIFICATION TO DEPOSITOR'S BANK
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. ("CFS") has put into effect, by which amounts, determined by your
depositor, payable to the Fund, for purchase of shares of the Fund, are
collected by CFS, CFS hereby agrees:
CFS will indemnify and hold you harmless from any liability to any person or
persons whatsoever arising out of the payment by you of any amount drawn by
the Fund to its own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you
whether with or without cause or intentionally or inadvertently, of any
such amount. CFS will defend, at its own cost and expense, any action
which might be brought against you by any person or persons whatsoever
because of your actions taken pursuant to the foregoing request or in any
manner arising by reason of your participation in this arrangement. CFS will
refund to you any amount erroneously paid by you to the Fund if the claim
for the amount of such erroneous payment is made by you within six (6)
months from the date of such erroneous payment; your participation in
this arrangement and that of the Fund may be terminated by thirty (30) days
written notice from either party to the other.
===============================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund
account beginning the last business day of the month of_______________.
Please Indicate Withdrawal Schedule (Check One):
o Monthly -- Withdrawals will be made on the last business day of each month.
o Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o Annually -- Please make withdrawals on the last business day of the
month of:__________.
Please Select Payment Method (Check One):
o Exchange: Please exchange the withdrawal proceeds into another
Countrywide account number: __ __ -__ __ __ __ __ __- __
o Check: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank
checking or savings account as indicated below. I understand
that the transfer will be completed in two to three business
days and that there is no charge.
o Bank Wire: Please send my withdrawal proceeds via bank wire, to the
account indicated below. I understand that the wire will be
completed in one business day and that there is an $8.00 fee.
Please attach a voided ________________________________________________
check for ACH or bank wire Bank Name Bank Address
________________________________________________
Bank ABA# Account # Account Name
o Send to special payee (other than applicant): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee__________________________________________________________________
Please send to:________________________________________________________________
Street address City State Zip
===============================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide Tax-Free Trust (the Trust) and that
_______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of
the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the Trust,
and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized
to sign any documents necessary or appropriate to appoint Countrywide Fund
Services, Inc. as redemption agent of the corporation or organization for
shares of the applicable series of the Trust, to establish or acknowledge terms
and conditions governing the redemption of said shares and to otherwise
implement the privileges elected on the Application.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
_______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of_______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on_________ at which a
quorum was present and acting throughout, and that the same are now in full
force and effect. I further certify that the following is (are) duly elected
officer(s) of the corporation or organization, authorized to act in
accordance with the foregoing resolutions.
Name Title
______________________________________ _____________________________________
______________________________________ _____________________________________
______________________________________ _____________________________________
Witness my hand and seal of the corporation or organization this___________day
of__________, 19_______
___________________________________ ______________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
TAX-EXEMPT
PROSPECTUS
NOVEMBER 1, 1996
Revised March 31, 1997
OHIO INSURED
TAX - FREE FUND
COUNTRYWIDE
INVESTMENTS
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 3
Investment Objective and Policies............. 5
How to Purchase Shares ....................... 12
Shareholder Services.......................... 17
How to Redeem Shares.......................... 18
Exchange Privilege............................ 19
Dividends and Distributions................... 20
Taxes......................................... 20
Operation of the Fund......................... 22
Distribution Plans............................ 23
Calculation of Share Price and
Public Offering Price.................... 24
Performance Information....................... 25
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
January 7, 1997
Revised March 31, 1997
OHIO TAX-FREE MONEY FUND
RETAIL SHARES
==============================================================================
The Ohio Tax-Free Money Fund (the "Fund"), a separate series of Countrywide
Tax-Free Trust, seeks the highest level of current income exempt from federal
income tax and Ohio personal income tax, consistent with liquidity and stability
of principal. The Fund invests primarily in a portfolio of high-quality,
short-term Ohio municipal obligations.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS. FUND
SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT OR ANY
OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND WILL
MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT PERCENTAGE OF
ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE FUND MAY BE
RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
The Fund offers two classes of shares: Class A shares ("Retail Shares"), sold
subject to a 12b-1 fee of up to .25% of average daily net assets, and Class B
shares ("Institutional Shares"), sold without a 12b-1 fee. Each Retail and
Institutional Share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Retail Shares bear
the expenses of distribution fees, which will cause Retail Shares to have a
higher expense ratio and to pay lower dividends than Institutional Shares; (ii)
certain class specific expenses will be borne solely by the class to which such
expenses are attributable; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Retail Shares are subject
to a lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional Shares such as checkwriting and
automatic investment and redemption plans.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's investments
and its business affairs.
This Prospectus sets forth concisely the information about Retail Shares that
you should know before investing. Please retain this Prospectus for future
reference. Institutional Shares are offered in a separate prospectus and
additional information about Institutional Shares may be obtained by calling one
of the numbers listed below. A Statement of Additional Information dated January
7, 1997, and amended March 31, 1997 has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference in its entirety. A
copy of the Statement of Additional Information can be obtained at no charge by
calling one of the numbers listed below.
- -------------------------------------------------------------------------------
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free)............................................800-543-0407
Cincinnati........................................................513-629-2050
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
===============================================================================
<TABLE>
<CAPTION>
RETAIL SHARES
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.............................................. None
Sales Load Imposed on Reinvested Dividends................................... None
Exchange Fee................................................................. None
Redemption Fee............................................................... None*
Check Redemption Processing Fee (per check):
First six checks per month............................................... None
Additional checks per month.............................................. $0.25
* A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees.............................................................. .46%
12b-1 Fees................................................................... .19%(A)
Other Expenses............................................................... .10%
-------
Total Operating Expenses.................................................... .75%
=======
<FN>
(A) Retail Shares may incur 12b-1 fees in an amount up to .25% of average net assets.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in Retail Shares will bear directly or
indirectly. The percentages expressing annual operating expenses are based on
amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$ 8 $ 24 $ 42 $ 93
<PAGE>
FINANCIAL HIGHLIGHTS
===============================================================================
The following information, which has been audited by Arthur Andersen LLP, is an
integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1996 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
<TABLE>
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
=============================================================================================================================
FROM
DATE OF
PUBLIC
OFFERING
FROM (OCT. 22,
SEPT. 1, 1988 1987)
YEAR ENDED JUNE 30, THROUGH THROUGH
JUNE 30, AUG. 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period....... $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
------ ------- ------- ------- ------- ------- ------- ------- ------
Net investment income....... 0.031 0.031 0.020 0.022 0.034 0.048 0.055 0.047 0.040
------ ------- ------- ------- ------- ------- ------- ------- ------
Distributions from net
investment income ........ (0.031) (0.031) (0.020) (0.022) (0.034) (0.048) (0.055) (0.047) (0.040)
------ ------- ------- ------- ------- ------- ------- ------- ------
Net asset value at end of period $1.000 $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
====== ======= ======= ======= ======= ======= ======= ======= ======
Total return................ 3.14% 3.12% 1.99% 2.19% 3.52% 4.99% 5.62% 5.77%(B) 4.51%(B)
====== ======= ======= ======= ======= ======= ======= ======= ======
Net assets at end of
period (000's).............. $240,323 $226,606 $213,001 $221,775 $218,503 $204,034 $124,145 $78,241 $ 62,777
====== ======= ======= ======= ======= ======= ======= ======= ======
Ratio of expenses to
average net assets(A) ... 0.75% 0.74% 0.73% 0.74% 0.75% 0.77% 0.75% 0.71%(B) 0.62%(B)
Ratio of net investment income to
average net assets........ 3.09% 3.08% 1.97% 2.16% 3.43% 4.80% 5.47% 5.64%(B 4.66%(B)
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net
assets would have been 0.85%(B) and 1.02%(B) for the periods ended June 30,
1989 and August 31, 1988, respectively.
(B) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The Fund seeks
the highest level of current income exempt from federal income tax and Ohio
personal income tax, consistent with liquidity and stability of principal. The
Fund is not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved. The Fund's investment
objective may be changed by the Board of Trustees without shareholder approval,
but only after notification has been given to shareholders and after this
Prospectus has been revised accordingly. If there is a change in the Fund's
investment objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Fund are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
The Fund seeks to achieve its investment objective by investing primarily in
high-quality, short-term Ohio Obligations (described below) determined by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. The Fund will purchase only obligations that enable it to employ the
amortized cost method of valuation. Under the amortized cost method of
valuation, the Fund's obligations are valued at original cost adjusted for
amortization of premium or accumulation of discount, rather than valued at
market. This method should enable the Fund to maintain a stable net asset value
per share. The Fund will invest in obligations which have received a short-term
rating in one of the two highest categories by any two nationally recognized
statistical rating organizations ("NRSROs") or by any one NRSRO if the
obligation is rated by only that NRSRO. The Fund may purchase unrated
obligations determined by the Adviser, under the direction of the Board of
Trustees, to be of comparable quality to rated obligations meeting the Fund's
quality standards. These standards must be satisfied at the time an investment
is made. If an obligation ceases to meet these standards, or if the Board of
Trustees believes such obligation no longer presents minimal credit risks, the
Trustees will cause the Fund to dispose of the obligation as soon as
practicable. The Statement of Additional Information describes ratings of the
NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less. The Fund
will invest in obligations with remaining maturities of thirteen months or less
at the time of purchase.
It is a fundamental policy that under normal market conditions the Fund will
invest at least 80% of the value of its net assets in short-term obligations the
interest on which is exempt from federal income tax, including the alternative
minimum tax, and Ohio personal income tax. This policy may not be changed
without the affirmative vote of a majority of the outstanding shares of the
Fund. The term "majority" of the outstanding shares means the lesser of (1) 67%
or more of the outstanding shares of the Fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented at such meeting or (2) more than 50% of the outstanding shares of
the Fund.
The Fund may, from time to time, invest in other short-term, high-quality
obligations for temporary defensive purposes (subject to the fundamental policy
that under normal market conditions the Fund will invest at least 80% of its net
assets in obligations the interest on which is exempt from federal income tax,
including the alternative minimum tax, and Ohio personal income tax). These
include, but are not limited to, obligations the interest on which is exempt
from federal, but not Ohio, income tax and taxable obligations such as
certificates of deposit and other bank debt instruments, commercial paper,
obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. Except for temporary defensive
purposes, at no time will more than 20% of the value of the Fund's net assets be
invested in taxable obligations. Under normal market conditions, the Fund
anticipates that not more than 5% of the value of its net assets will be
invested in any one type of taxable obligation. Taxable obligations are more
fully described in the Statement of Additional Information. The Fund may invest
in these other short-term obligations, for example, due to market conditions
under which Ohio Obligations are temporarily unavailable for purchase or
available only in limited amounts, or pending investment of proceeds of sales of
shares or proceeds from the sale of portfolio securities or in anticipation of
redemptions. The Fund reserves the right to hold cash reserves as the Adviser
deems necessary for temporary defensive purposes. Although interest earned on
these short-term obligations is taxable as ordinary income for federal and/or
Ohio income tax purposes, the Fund intends to minimize taxable income through
investment, when possible, in other available securities exempt from federal
and/or Ohio income taxes, including shares of investment companies whose
dividends are tax-exempt. The Fund may invest up to 10% of its total assets in
shares of other investment companies. Investments by the Fund in shares of other
investment companies may result in duplication of sales loads and advisory,
<PAGE>
administrative and distribution fees. The Fund will not invest more than 5% of
its total assets in securities of any single investment company and will not
purchase more than 3% of the outstanding voting securities of any investment
company. The Fund will only invest in securities of other investment companies
which hold themselves out to be money market funds.
OHIO OBLIGATIONS
Ohio Obligations are debt obligations issued by the State of Ohio and its
political subdivisions, agencies, authorities and instrumentalities and other
qualifying issuers which pay interest that is, in the opinion of bond counsel to
the issuer, exempt from both federal income tax, including the alternative
minimum tax, and Ohio personal income tax. For purposes of this definition, Ohio
Obligations include participation interests in Ohio Obligations and shares of an
investment company which invests at least 80% of its net assets in obligations
the interest on which is exempt from federal income tax, including the
alternative minimum tax, and Ohio personal income tax. Ohio Obligations are
issued to obtain funds to construct, repair or improve various public facilities
such as airports, bridges, highways, hospitals, housing, schools, streets and
water and sewer works, to pay general operating expenses or to refinance
outstanding debts. They also may be issued to finance various private
activities, including the lending of funds to public or private institutions for
construction of housing, educational or medical facilities or the financing of
privately owned or operated facilities. Ohio Obligations consist of tax-exempt
bonds, tax-exempt notes and tax-exempt commercial paper. The Statement of
Additional Information contains a description of tax-exempt bonds, notes and
commercial paper.
The two principal classifications of Ohio Obligations are "general obligation"
and "revenue" bonds. General obligation bonds are backed by the issuer's full
credit and taxing power. Revenue bonds are backed by the revenues of a specific
project, facility or tax. Industrial development revenue bonds are a specific
type of revenue bond backed by the credit of the private user of the facility,
and therefore investments in these bonds have more potential risk. The Fund's
ability to achieve its investment objective depends to a great extent on the
ability of these various issuers to meet their scheduled payments of principal
and interest. Tax-exempt notes generally are used to provide short-term capital
needs and generally have maturities of one year or less. The tax-exempt notes in
which the Fund may invest are tax anticipation notes (TANs), revenue
anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs and
BANs are issued by state and local government and public authorities as interim
financing in anticipation of tax collections, revenue receipts or bond sales,
respectively. Tax-exempt commercial paper typically represents short-term,
unsecured, negotiable promissory notes.
The Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. The Fund may invest more than 25% of its
assets in tax-exempt obligations issued by municipal governments or political
subdivisions of governments within a particular segment of the bond market, such
as housing agency bonds, hospital revenue bonds or airport bonds. It is possible
that economic, business or political developments or other changes affecting one
bond may also affect other bonds in the same segment in the same manner, thereby
potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of its total
assets in industrial development bonds which, although issued by industrial
development authorities, may be backed only by the assets and revenues of the
nongovernmental users. However, the Fund will not invest more than 25% of its
assets in securities backed by nongovernmental users which are in the same
industry. Interest on municipal obligations (including certain industrial
development bonds) which are private activity obligations, as defined in the
Internal Revenue Code, issued after August 7, 1986, while exempt from federal
income tax, is a preference item for purposes of the alternative minimum tax.
Where a regulated investment company receives such interest, a proportionate
share of any exempt-interest dividend paid by the investment company will be
treated as such a preference item to shareholders. The Fund will invest no more
than 20% of its net assets in obligations the interest from which gives rise to
a preference item for the purpose of the alternative minimum tax and in other
investments subject to federal income tax.
The Fund may purchase other types of tax-exempt obligations which may become
available in the future, provided the obligations are consistent with the Fund's
investment objective and policies, the Adviser believes their quality meets the
Fund's quality standards, and this Prospectus has been appropriately revised to
reflect the Fund's policies with respect to such obligations.
<PAGE>
RISK FACTORS
The Fund's yield will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the Adviser.
In addition, the financial condition of an issuer or adverse changes in general
economic conditions, or both, may impair the issuer's ability to make payments
of interest and principal. There is no limit on the percentage of a single issue
of tax-exempt obligations that the Fund may own. If the Fund holds a significant
portion of the obligations of an issuer, there may not be a readily available
market for the obligations. Reduced diversification could involve an increased
risk to the Fund should an issuer be unable to make interest or principal
payments or should the market value of Ohio Obligations decline.
There are also risks of reduced diversification because the Fund invests
primarily in obligations of issuers within a single state. The Fund is more
likely to invest its assets in the securities of fewer issuers because of the
relatively smaller number of issuers of Ohio Obligations. The Fund's performance
is closely tied to conditions within the State of Ohio and to the financial
condition of the State and its authorities and municipalities. The economy in
the State of Ohio is reliant in part upon durable goods manufacturing, largely
concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, economic activity in Ohio tends to be more
cyclical than in some other states and in the nation as a whole. However, during
the last decade, the State has experienced steady growth and diversification of
employment and earnings. Statewide employment increased 3% between 1990 and 1995
and Ohio's unemployment rate since 1991 has remained below that of the nation.
Ohio remains highly industrialized, but the manufacturing component of the
economy in 1995 represents only 21.1% of employment, compared to 28.9% in 1980.
This is still above the national average of 15.9%. Although manufacturing is
expected to slow in the future, growth in nonmanufacturing output and
employment, led by the financial services, distribution and trade sectors, has
contributed to greater stability in the State's economy. Economic problems,
including high unemployment, have had and may have varying effects on the
different geographic areas of the State and the political subdivisions located
therein. While Ohio has in the past experienced budget shortfalls due to weak
revenue results and higher-than-budgeted human services expenditures, improved
economic performance has enabled the State to accumulate sizable financial
reserves. The State's unaudited financial statements indicate a $500 million
operating surplus for fiscal 1996 as a result of tax revenues exceeding
forecasts and spending below budgeted amounts. Although revenue obligations of
the State of Ohio or its political subdivisions may be payable from a specific
project or source, there can be no assurance that future economic and political
developments and the resulting impact on state and local governmental finances
will not adversely affect the market values and marketability of the Ohio
Obligations held by the Fund or the ability of a specific issuer to make
interest or principal payments.
The Fund is a non-diversified fund under the Investment Company Act of 1940.
Thus, its investments may be more concentrated in fewer issuers than those of a
diversified fund. This concentration may increase the possibility of fluctuation
in the Fund's net asset value. As the Fund intends to comply with Subchapter M
of the Internal Revenue Code, it may invest up to 50% of its assets at the end
of each quarter of its fiscal year in as few as two issuers, provided that no
more than 25% of the assets are invested in one issuer. With respect to the
remaining 50% of its assets at the end of each quarter, it may invest no more
than 5% in one issuer.
Certain provisions in the Internal Revenue Code relating to the issuance of
municipal obligations may reduce the volume of municipal obligations qualifying
for federal tax exemptions. Shareholders should consult their tax advisors
concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on municipal obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of municipal
obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of municipal
obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
<PAGE>
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
tax-exempt obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the tax-exempt obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the obligation,
as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating or
variable rate tax-exempt obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at specified intervals
to a specified interest rate. Periodic interest rate adjustments help stabilize
the obligations' market values. The Fund may purchase these obligations from the
issuers or may purchase participation interests in pools of these obligations
from banks or other financial institutions. Variable and floating rate
obligations usually carry demand features that permit the Fund to sell the
obligations back to the issuers or to financial intermediaries at par value plus
accrued interest upon not more than 30 days' notice at any time or prior to
specific dates. Certain of these variable rate obligations, often referred to as
"adjustable rate put bonds," may have a demand feature exercisable on specific
dates once or twice each year. The Fund will not invest more than 10% of its net
assets in floating or variable rate obligations as to which the Fund cannot
exercise the demand feature on not more than seven days' notice if the Adviser,
under the direction of the Board of Trustees, determines that there is no
secondary market available for these obligations and all other illiquid
securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued tax-exempt
obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or
high-quality liquid debt securities, marked to market daily, in an amount equal
to its when-issued commitments. Because these transactions are subject to market
fluctuations, a significant commitment to when-issued purchases could result in
fluctuation of the Fund's net asset value. The Fund will only make commitments
to purchase when-issued obligations with the intention of actually acquiring the
obligations and not for the purpose of investment leverage.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or U.S. Government obligations, with the Fund's Custodian in an
amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
<PAGE>
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase tax-exempt obligations
with the right to resell the obligation to the seller at a specified price or
yield within a specified period. The right to resell is commonly known as a
"put" or a "standby commitment." The Fund may purchase tax-exempt obligations
with puts attached from banks and broker-dealers. The Fund intends to use
obligations with puts attached for liquidity purposes to ensure a ready market
for the underlying obligations at an acceptable price. Although no value is
assigned to any puts on tax-exempt obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. In addition, the value of the obligations with puts attached held by the
Fund will not exceed 10% of its net assets.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the aggregate up
to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to the demand feature
described above; floating and variable rate obligations as to which the Fund
cannot exercise the related demand feature described above and as to which there
is no secondary market; and repurchase agreements not terminable within seven
days.
BORROWING AND PLEDGING. The Fund may borrow money from banks (provided there is
300% asset coverage) or from banks or other persons for temporary purposes (in
an amount not exceeding 5% of its total assets). The Fund will not make any
borrowing which would cause its outstanding borrowings to exceed one-third of
the value of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than one-third of its total assets. The Fund
will not make any additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total assets. Borrowing magnifies the
potential for gain or loss on the Fund's portfolio securities and, therefore, if
employed, increases the possibility of fluctuation in its net asset value. This
is the speculative factor known as leverage. The Fund's policies on borrowing
and pledging are fundamental policies which may not be changed without the
affirmative vote of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
===============================================================================
Your initial investment in Retail Shares of the Fund ordinarily must be at least
$1,000. Shares of the Fund are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order by the Trust. Shares of the
Fund purchased prior to January 7, 1997 are Retail Shares.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Ohio Tax-Free
Money Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month a written
statement disclosing each purchase or redemption effected and each dividend or
distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by wire.
Please telephone the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for instructions. You should be prepared to give the
name in which the account is to be established, the address, telephone number
and taxpayer identification number for the account, and the name of the bank
which will wire the money.
<PAGE>
You may receive a dividend on the day of your wire investment provided you have
given notice of your intention to make such investment to the Transfer Agent by
4:00 p.m., Eastern time, on the preceding business day (or 12:00 noon, Eastern
time, on the same day of a wire investment in the case of investors utilizing
institutions that have made appropriate arrangements with the Transfer Agent).
Your investment will be made at the net asset value next determined after your
wire is received together with the account information indicated above. If the
Trust does not receive timely and complete account information, there may be a
delay in the investment of your money and any accrual of dividends. To make your
initial wire purchase, you are required to mail a completed account application
to the Transfer Agent. Your bank may impose a charge for sending your wire.
There is presently no fee for receipt of wired funds, but the Transfer Agent
reserves the right to charge shareholders for this service upon thirty days'
prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by mail
or by bank wire. Checks should be sent to the Transfer Agent, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Ohio Tax-Free
Money Fund." Bank wires should be sent as outlined above. You may also make
additional investments at the Trust's offices at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202. Each additional purchase request must contain the name
of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial institutions
may be automatically invested in shares of the Fund at the next determined net
asset value on a day selected by the institution or its customer, or when the
account balance reaches a predetermined dollar amount (e.g., $5,000).
Participating institutions are responsible for prompt transmission of orders
relating to the program. Institutions participating in this program may charge
their customers fees for services relating to the program which would reduce the
customers' yield from an investment in the Fund. This Prospectus should,
therefore, be read together with any agreement between the customer and the
participating institution with regard to the services provided, the fees charged
for these services and any restrictions and limitations imposed.
SHAREHOLDER SERVICES
===============================================================================
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the Retail Shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
DIRECT DEPOSIT PLANS
Retail Shares of the Fund may be purchased through direct deposit plans offered
by certain employers and government agencies. These plans enable a shareholder
to have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in Retail Shares of the Fund from
your bank, savings and loan or other depository institution account. The minimum
initial and subsequent investments must be $50 under the plan. The Transfer
Agent pays the costs associated with these transfers, but reserves the right,
upon thirty days' written notice, to make reasonable charges for this service.
Your depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Fund.
<PAGE>
HOW TO REDEEM SHARES
===============================================================================
You may redeem Retail Shares of the Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
check will be effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this delay, you may
purchase shares of the Fund by certified check or wire.
A contingent deferred sales load may be imposed on a redemption of shares of the
Fund if such shares had previously been acquired in connection with an exchange
from another fund of Countrywide Investments which imposes a contingent deferred
sales load, as described in the Prospectus of such other fund.
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent by
mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call the Transfer
Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050). The
redemption proceeds will normally be sent by mail or by wire within one business
day (but not later than three business days) after receipt of your telephone
instructions. Any redemption requests by telephone must be received in proper
form prior to 12:00 noon, Eastern time, on any business day in order for payment
by wire to be made that day.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to the Transfer Agent
with your signature guaranteed by any eligible guarantor institution (including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
or by completing a supplemental telephone redemption authorization form. Contact
the Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation, fiduciary
or other organization.
Neither the Trust, the Transfer Agent, nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares to be redeemed and your account number. The request must be signed
exactly as your name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be guaranteed by
any of the eligible guarantor institutions outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by mail
are normally mailed within three business days following receipt of instructions
in proper form.
BY CHECK. You may establish a special checking account with the Fund for
the purpose of redeeming Retail Shares by check. Checks may be made payable
to anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer Agent, as
your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check.
If the amount of a check is greater than the value of the shares held in your
account, the check will be returned. A check representing a redemption request
will take precedence over any other redemption instructions issued by a
shareholder.
<PAGE>
As long as no more than six check redemptions are effected in your account in
any month, there will be no charge for the check redemption privilege. However,
after six check redemptions are effected in your account in a month, the
Transfer Agent will charge you $.25 for each additional check redemption
effected that month. The Transfer Agent charges shareholders its costs for each
stop payment and each check returned for insufficient funds. In addition, the
Transfer Agent reserves the right to make additional charges to recover the
costs of providing the check redemption service. All charges will be deducted
from your account by redemption of shares in your account. The check redemption
procedure may be suspended or terminated at any time upon written notice by the
Trust or the Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar program with
a financial institution are not eligible for the checkwriting privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a redemption by
wire, you will be charged an $8 processing fee by the Fund's Custodian. The
Trust reserves the right, upon thirty days' written notice, to change the
processing fee. All charges will be deducted from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. In the event that wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by mail to the designated
account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an Automated
Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested, unaffected by
market fluctuations) or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
===============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other. A sales load will be imposed equal to the excess, if
any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently offered to the
public. Funds which may be subject to a front-end or contingent deferred sales
load are indicated by an asterisk.
COUNTRYWIDE TAX-FREE TRUST COUNTRYWIDE INVESTMENT TRUST
- -------------------------- ----------------------------
Tax-Free Money Fund Short Term Government Income Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
COUNTRYWIDE STRATEGIC TRUST
---------------------------
*U.S. Government Securities Fund
*Equity Fund
*Utility Fund
*Treasury Total Return Fund
You may request an exchange by sending a written request to the Transfer Agent.
The request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
<PAGE>
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to shareholders. An exchange results in a
sale of fund shares, which may cause you to recognize a capital gain or loss.
Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
===============================================================================
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
Dividends are automatically reinvested in additional shares of the Fund (the
Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option.
TAXES
===============================================================================
The Fund has qualified in all prior years and intends to continue to qualify for
the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The Fund also intends
to meet all IRS requirements necessary to ensure that it is qualified to pay
"exempt-interest dividends," which means that it may pass on to shareholders the
federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment income
and any net realized capital gains to its shareholders. For federal income tax
purposes, a shareholder's proportionate share of taxable distributions from the
Fund's net investment income as well as from net realized short-term capital
gains, if any, is taxable as ordinary income. Since the Fund's investment income
is derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
Dividends received from the Fund that are exempt from federal income tax are
exempt from the Ohio personal income tax and the net income base of the Ohio
corporation franchise tax to the extent derived from interest on Ohio
Obligations. However, shares of the Fund will be included in the computation of
the Ohio corporation franchise tax on the net worth basis. Distributions
received from the Fund are generally not subject to Ohio municipal income
taxation.
Issuers of tax-exempt securities issued after August 31, 1986 are required to
comply with various restrictions on the use and investment of proceeds of sales
of the securities. Any failure by the issuer to comply with these restrictions
would cause interest on such securities to become taxable to the security
holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax Reform Act
of 1986, is an item of tax preference possibly subject to the alternative
minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
<PAGE>
Shareholders should be aware that interest on indebtedness incurred to purchase
or carry shares of the Fund is not deductible for federal income tax purposes.
Shareholders receiving Social Security benefits may be taxed on a portion of
those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating the amount
and federal income tax status of all distributions made during the year. The
Fund will report to its shareholders the percentage and source of income earned
on tax-exempt obligations held by it during the preceding year. An exemption
from federal income tax and Ohio personal income tax may not result in similar
exemptions under the laws of a particular state or local taxing authority.
The tax consequences described in this section apply whether distributions are
taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
===============================================================================
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an open-end
management investment company organized as a Massachusetts business trust on
April 13, 1981. The Board of Trustees supervises the business activities of the
Trust. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street, Cincinnati,
Ohio 45202 (the "Adviser"), to manage the Fund's investments and its business
affairs. The Adviser was organized in 1974 and is also the investment adviser to
five other series of the Trust, five series of Countrywide Investment Trust and
four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, insurance expenses, taxes or governmental fees, fees and expenses of the
custodian, transfer agent and accounting and pricing agent of the Fund, fees and
expenses of members of the Board of Trustees who are not interested persons of
the Trust, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or nonrecurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Trust's officers and Trustees with respect thereto. Retail Shares are
also responsible for the payment of expenses related to the distribution of such
shares (see "Distribution Plan").
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services equal to the
annual rate of .1% of the average value of the Fund's daily net assets.
<PAGE>
The Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Robert H. Leshner,
President and a director of the Adviser, is President and a Trustee of the
Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may give consideration to sales of shares
of the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. Retail Shares of the Fund
shall vote separately on matters relating to the plan of distribution pursuant
to Rule 12b-1 (see "Distribution Plan"). When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.
The Fifth Third Bank Trust Department, 38 Fountain Square Plaza, Cincinnati,
Ohio, may be deemed to control the Fund by virtue of the fact that it owns of
record more than 25% of the Fund's shares as of the date of this Prospectus.
DISTRIBUTION PLAN
===============================================================================
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, Retail Shares
of the Fund have adopted a plan of distribution (the "Class A Plan") under which
such shares may directly incur or reimburse the Adviser for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class A Plan, Retail Shares may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Retail Shares of the
Fund. For the fiscal year ended June 30, 1996, Retail Shares of the Fund paid
$444,000 to the Adviser to reimburse it for payments made to dealers and other
persons who may be advising shareholders in this regard.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.25% of the average daily net assets allocable to Retail Shares. Unreimbursed
expenditures will not be carried over from year to year. In the event the Class
A Plan is terminated by the Fund in accordance with its terms, the Fund will not
be required to make any payments for expenses incurred by the Adviser after the
date the Class A Plan terminates.
Pursuant to the Class A Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
<PAGE>
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
CALCULATION OF SHARE PRICE
==============================================================================
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
==============================================================================
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. In
addition, the Fund may advertise together with its "current yield" or "effective
yield" a tax equivalent "current yield" or "effective yield" which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's "current yield" or "effective yield." Yields
are computed separately for Retail and Institutional Shares. The yield of
Institutional Shares is expected to be higher than the yield of Retail Shares
due to the distribution fees imposed on Retail Shares.
<PAGE>
ACCOUNT APPLICATION
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
ACCOUNT NO. 07-___________________
(For Fund Use Only)
OHIO TAX-FREE MONEY FUND
(RETAIL SHARES)
- --------------------------------------------------
FOR BROKER/DEALER USE ONLY
Firm Name:______________________________________
Home Office Address:____________________________
Branch Address:_________________________________
Rep Name & No.:_________________________________
- --------------------------------------------------
==============================================================================
Initial Investment of $_________________________ ($1,000 minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From: __________________________________________________________
o Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/TAX I.D.#
______________________________________________ ___________________________
Name of Individual, Corporation, Organization, (In case of custodial account
or Minor, etc. please list minor's S.S.#)
______________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other______
ADDRESS PHONE
______________________________________________ ( ) ______________________
Street or P.O. Box Business Phone
______________________________________________ ( ) ______________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (Right of survivorship presumed)
o Partnership
o Corporation
o Trust
o Custodial
o Non-Profit
o Other
==============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. The
Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding. Check box if appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject
to backup withholding because I have not been notified that I am subject to
backup withholding as a result of a failure to report all interest or
dividends; or the Internal Revenue Service has notified me that I am no
longer subject to backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
===============================================================================
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
o Reinvest all distributions
o Pay all distributions in cash
===============================================================================
<PAGE>
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, or upon receipt of and in the amounts of
checks as described below (if checkwriting is selected), to have amounts
withdrawn from my (our) account in any fund of Countrywide Investments (see
prospectus for limitations on this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I
(we) further authorize the use of automated cash transfers to and from
the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
PLEASE ATTACH A VOIDED CHECK FOR THE ACCOUNT.
Bank Account Number___________________ Bank Routing Transit Number____________
Name of Account Holder________________________________________________________
Bank Name________________Bank Address_________________________________________
City State
o CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide
Pay Through Draft Account (PTDA) or otherwise arrange for application of such
proceeds to payment of said checks. I (we) authorize the persons whose
signatures appear on the PTDA signature card to draw checks on the PTDA and to
cause the redemption of my (our) shares of the Trust. I (we) agree to be bound
by the Rules and Regulations for the Countrywide Pay Through Draft Account as
such Rules and Regulations may be amended from time to time
===============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for
shares whether by direct purchase or exchange, to receive dividends and
distributions for automatic reinvestment in additional shares of the Fund for
credit to the investor's account and to surrender for redemption shares held
in the investor's account in accordance with any of the procedures elected
above or for payment of service charges incurred by the investor. The investor
further agrees that Countrywide Fund Services, Inc. can cease to act as such
agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions
given pursuant to this Application and for himself and his successors and
assigns does hereby release Countrywide Fund Services, Inc., Countrywide
Tax-Free Trust, Countrywide Investments, Inc., and their respective officers,
employees, agents and affiliates from any and all liability in the performance
of the acts instructed herein. Neither the Trust, Countrywide Fund Services,
Inc., nor their respective affiliates will be liable for complying with
telephone instructions they reasonably believe to be genuine or for any loss,
damage, cost or expense in acting on such telephone instructions. The
investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund
Services, Inc., or both, will employ reasonable procedures to determine that
telephone instructions are genuine. If the Trust and/or Countrywide Fund
Services, Inc. do not employ such procedures, they may be liable for losses
due to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
____________________________________ _____________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
____________________________________ _____________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST
COMPLETE THE RESOLUTION FORM ON THE REVERSE SIDE. UNLESS
OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL
AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
<PAGE>
AUTOMATIC INVESTMENT PLAN (COMPLETE FOR INVESTMENTS INTO THE FUND)
The Automatic Investment Plan is available for all established accounts of
Countrywide Tax-Free Trust. There is no charge for this service, and it offers
the convenience of automatic investing on a regular basis. The minimum
investment is $50.00 per month. For an account that is opened by using this
Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be
discontinued by the shareholder at any time.
Please invest $ _________________ per ABA Routing Number__________________
month in the Fund.
FI Account Number___________________
o Checking Account o Savings Account
_____________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
_____________________________________ o the 15th day of each month
City State o both the 15th and last business day
X_____________________________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records)
X___________________________________________________________
(Signature of Joint Tenant - if any
(Joint Signatures are required when bank account is in joint names. Please
sign exactly as signature appears on your FI's records.)
- PLEASE ATTACH A VOIDED CHECK FOR THE AUTOMATIC INVESTMENT PLAN.
INDEMNIFICATION TO DEPOSITOR'S BANK
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. ("CFS") has put into effect, by which amounts, determined by
your depositor, payable to the Fund, for purchase of shares of the Fund, are
collected by CFS, CFS hereby agrees:
CFS will indemnify and hold you harmless from any liability to any person
or persons whatsoever arising out of the payment by you of any amount drawn
by the Fund to its own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you
whether with or without cause or intentionally or inadvertently, of any
such amount. CFS will defend, at its own cost and expense, any action
which might be brought against you by any person or persons whatsoever
because of your actions taken pursuant to the foregoing request or in any
manner arising by reason of your participation in this arrangement. CFS will
refund to you any amount erroneously paid by you to the Fund if the claim for
the amount of such erroneous payment is made by you within six (6) months
from the date of such erroneous payment; your participation in this
arrangement and that of the Fund may be terminated by thirty (30) days written
notice from either party to the other.
===============================================================================
AUTOMATIC WITHDRAWAL PLAN (COMPLETE FOR WITHDRAWALS FROM THE FUND)
This is an authorization for you to withdraw $_________ from my account
beginning the last business day of the month of___________.
Please Indicate Withdrawal Schedule (Check One):
o MONTHLY -- Withdrawals will be made on the last business day of each month.
o QUARTERLY -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o ANNUALLY -- Please make withdrawals on the last business day of the
month of:_________.
Please Select Payment Method (Check One):
o EXCHANGE: Please exchange the withdrawal proceeds into another
Countrywide account number: __ __-__ __ __ __ __ __-__
o CHECK: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o ACH TRANSFER: Please send my withdrawal proceeds via ACH transfer to my bank
checking or savings account as indicated below. I understand
that the transfer will be completed in two to three business
days and that there is no charge.
o BANK WIRE: Please send my withdrawal proceeds via bank wire, to the
account indicated below. I understand that the wire will be
completed in one business day and that there is an $8.00 fee.
PLEASE ATTACH A VOIDED _________________________________________________
CHECK FOR ACH OR BANK WIRE Bank Name Bank Address
_________________________________________________
Bank ABA# Account # Account Name
o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_________________________________________________________________
Please send to:_______________________________________________________________
Street address City State Zip
===============================================================================
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide Tax-Free Trust (the Trust) and that
______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf
of the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the
Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint Countrywide Fund
Services, Inc. as redemption agent of the corporation or organization for
shares of the applicable series of the Trust, to establish or acknowledge
terms and conditions governing the redemption of said shares and to otherwise
implement the privileges elected on the Application, and it is (If
checkwriting privilege is not desired, please cross out the following
resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the
Countrywide Pay Through Draft Account (PTDA) and that until otherwise ordered
in writing, Countrywide Fund Services, Inc. is authorized to make redemptions
of shares held by the corporation or organization, and to make payment from
PTDA upon and according to the check, draft, note or order of this
corporation or organization when signed by
_______________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the
payee or any other holder without inquiry as to the circumstances of issue or
the disposition or proceeds, whether drawn to the individual order or tendered
in payment of individual obligations of the persons above named or other
officers of this corporation or organization or otherwise.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on______ at which a quorum was
present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s)
of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
NAME TITLE
____________________________________ ______________________________________
____________________________________ ______________________________________
____________________________________ ______________________________________
Witness my hand and seal of the corporation or organization this___________day
of_____________, 19_______
____________________________________ ______________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
TAX-EXEMPT
PROSPECTUS
JANUARY 7, 1997
Revised March 31, 1997
OHIO TAX-FREE
MONEY FUND
Retail Shares
COUNTRYWIDE
INVESTMENTS
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 3
Investment Objective and Policies............. 4
How to Purchase Shares ....................... 8
Shareholder Services.......................... 9
How to Redeem Shares.......................... 10
Exchange Privilege............................ 11
Dividends and Distributions................... 12
Taxes......................................... 12
Operation of the Fund......................... 13
Distribution Plan............................. 14
Calculation of Share Price.................... 15
Performance Information....................... 15
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
January 7, 1997
Revised March 31, 1997
OHIO TAX-FREE MONEY FUND
INSTITUTIONAL SHARES
==============================================================================
The Ohio Tax-Free Money Fund (the "Fund"), a separate series of Countrywide
Tax-Free Trust, seeks the highest level of current income exempt from federal
income tax and Ohio personal income tax, consistent with liquidity and stability
of principal. The Fund invests primarily in a portfolio of high-quality,
short-term Ohio municipal obligations.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS. FUND
SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT OR ANY
OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND WILL
MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
The Fund offers two classes of shares: Class A shares ("Retail Shares"),
sold subject to a 12b-1 fee of up to .25% of average daily net assets, and Class
B shares ("Institutional Shares"), sold without a 12b-1 fee. Each Retail and
Institutional Share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Retail Shares bear
the expenses of distribution fees, which will cause Retail Shares to have a
higher expense ratio and to pay lower dividends than Institutional Shares; (ii)
certain class specific expenses will be borne solely by the class to which such
expenses are attributable; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Retail Shares are subject
to a lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional Shares such as checkwriting and
automatic investment and redemption plans.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's investments
and its business affairs.
This Prospectus sets forth concisely the information about Institutional
Shares that you should know before investing. Please retain this Prospectus for
future reference. Retail Shares are offered in a separate prospectus and
additional information about Retail Shares may be obtained by calling one of the
numbers listed below. A Statement of Additional Information dated January 7,
1997, and amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by calling
one of the numbers listed below.
- ------------------------------------------------------------------------------
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free)............................................800-543-0407
Cincinnati........................................................513-629-2050
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
==============================================================================
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.............................................. None
Sales Load Imposed on Reinvested Dividends................................... None
Exchange Fee................................................................. None
Redemption Fee............................................................... None
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees.............................................................. .46%
12b-1 Fees................................................................... None
Other Expenses After Reimbursements.......................................... .04% (A)
-------
Total Operating Expenses After Reimbursements............................... .50% (B)
=======
<FN>
(A) Absent expense reimbursements by the Adviser, other expenses would be
.10%.
(B) Absent expense reimbursements by the Adviser, total operating expenses
would be .56%.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in Institutional Shares will bear
directly or indirectly. The percentages expressing annual operating expenses are
based on estimated amounts for the current fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------
$ 5 $ 16 $ 28 $ 63
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
==============================================================================
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The Fund
seeks the highest level of current income exempt from federal income tax and
Ohio personal income tax, consistent with liquidity and stability of principal.
The Fund is not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved. The Fund's investment
objective may be changed by the Board of Trustees without shareholder approval,
but only after notification has been given to shareholders and after this
Prospectus has been revised accordingly. If there is a change in the Fund's
investment objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Fund are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
The Fund seeks to achieve its investment objective by investing primarily
in high-quality, short-term Ohio Obligations (described below) determined by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. The Fund will purchase only obligations that enable it to employ the
amortized cost method of valuation. Under the amortized cost method of
valuation, the Fund's obligations are valued at original cost adjusted for
amortization of premium or accumulation of discount, rather than valued at
market. This method should enable the Fund to maintain a stable net asset value
per share. The Fund will invest in obligations which have received a short-term
rating in one of the two highest categories by any two nationally recognized
statistical rating organizations ("NRSROs") or by any one NRSRO if the
obligation is rated by only that NRSRO. The Fund may purchase unrated
obligations determined by the Adviser, under the direction of the Board of
Trustees, to be of comparable quality to rated obligations meeting the Fund's
quality standards. These standards must be satisfied at the time an investment
is made. If an obligation ceases to meet these standards, or if the Board of
Trustees believes such obligation no longer presents minimal credit risks, the
Trustees will cause the Fund to dispose of the obligation as soon as
practicable. The Statement of Additional Information describes ratings of the
NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less. The
Fund will invest in obligations with remaining maturities of thirteen months or
less at the time of purchase.
It is a fundamental policy that under normal market conditions the Fund
will invest at least 80% of the value of its net assets in short-term
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax, and Ohio personal income tax. This policy may not
be changed without the affirmative vote of a majority of the outstanding shares
of the Fund. The term "majority" of the outstanding shares means the lesser of
(1) 67% or more of the outstanding shares of the Fund present at a meeting, if
the holders of more than 50% of the outstanding shares of the Fund are present
or represented at such meeting or (2) more than 50% of the outstanding shares of
the Fund.
The Fund may, from time to time, invest in other short-term, high-quality
obligations for temporary defensive purposes (subject to the fundamental policy
that under normal market conditions the Fund will invest at least 80% of its net
assets in obligations the interest on which is exempt from federal income tax,
including the alternative minimum tax, and Ohio personal income tax). These
include, but are not limited to, obligations the interest on which is exempt
from federal, but not Ohio, income tax and taxable obligations such as
certificates of deposit and other bank debt instruments, commercial paper,
obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. Except for temporary defensive
purposes, at no time will more than 20% of the value of the Fund's net assets be
invested in taxable obligations. Under normal market conditions, the Fund
anticipates that not more than 5% of the value of its net assets will be
invested in any one type of taxable obligation. Taxable obligations are more
fully described in the Statement of Additional Information. The Fund may invest
in these other short-term obligations, for example, due to market conditions
under which Ohio Obligations are temporarily unavailable for purchase or
available only in limited amounts, or pending investment of proceeds of sales of
shares or proceeds from the sale of portfolio securities or in anticipation of
redemptions. The Fund reserves the right to hold cash reserves as the Adviser
deems necessary for temporary defensive purposes. Although interest earned on
these short-term obligations is taxable as ordinary income for federal and/or
Ohio income tax purposes, the Fund intends to minimize taxable income through
investment, when possible, in other available securities exempt from federal
and/or Ohio income taxes, including shares of investment companies whose
dividends are tax-exempt. The Fund may invest up to 10% of its total assets in
shares of other investment companies. Investments by the Fund in shares of other
investment companies may result in duplication of sales loads and advisory,
administrative and distribution fees. The Fund will not invest more than 5% of
its total assets in securities of any single investment company and will not
purchase more than 3% of the outstanding voting securities of any investment
company. The Fund will only invest in securities of other investment companies
which hold themselves out to be money market funds.
<PAGE>
OHIO OBLIGATIONS
Ohio Obligations are debt obligations issued by the State of Ohio and its
political subdivisions, agencies, authorities and instrumentalities and other
qualifying issuers which pay interest that is, in the opinion of bond counsel to
the issuer, exempt from both federal income tax, including the alternative
minimum tax, and Ohio personal income tax. For purposes of this definition, Ohio
Obligations include participation interests in Ohio Obligations and shares of an
investment company which invests at least 80% of its net assets in obligations
the interest on which is exempt from federal income tax, including the
alternative minimum tax, and Ohio personal income tax. Ohio Obligations are
issued to obtain funds to construct, repair or improve various public facilities
such as airports, bridges, highways, hospitals, housing, schools, streets and
water and sewer works, to pay general operating expenses or to refinance
outstanding debts. They also may be issued to finance various private
activities, including the lending of funds to public or private institutions for
construction of housing, educational or medical facilities or the financing of
privately owned or operated facilities. Ohio Obligations consist of tax-exempt
bonds, tax-exempt notes and tax-exempt commercial paper. The Statement of
Additional Information contains a description of tax-exempt bonds, notes and
commercial paper.
The two principal classifications of Ohio Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax-exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
The Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. The Fund may invest more than 25% of its
assets in tax-exempt obligations issued by municipal governments or political
subdivisions of governments within a particular segment of the bond market, such
as housing agency bonds, hospital revenue bonds or airport bonds. It is possible
that economic, business or political developments or other changes affecting one
bond may also affect other bonds in the same segment in the same manner, thereby
potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on municipal obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest no more than 20% of its net assets in obligations the interest from which
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
<PAGE>
The Fund may purchase other types of tax-exempt obligations which may
become available in the future, provided the obligations are consistent with the
Fund's investment objective and policies, the Adviser believes their quality
meets the Fund's quality standards, and this Prospectus has been appropriately
revised to reflect the Fund's policies with respect to such obligations.
RISK FACTORS
The Fund's yield will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the Adviser.
In addition, the financial condition of an issuer or adverse changes in general
economic conditions, or both, may impair the issuer's ability to make payments
of interest and principal. There is no limit on the percentage of a single issue
of tax-exempt obligations that the Fund may own. If the Fund holds a significant
portion of the obligations of an issuer, there may not be a readily available
market for the obligations. Reduced diversification could involve an increased
risk to the Fund should an issuer be unable to make interest or principal
payments or should the market value of Ohio Obligations decline.
There are also risks of reduced diversification because the Fund invests
primarily in obligations of issuers within a single state. The Fund is more
likely to invest its assets in the securities of fewer issuers because of the
relatively smaller number of issuers of Ohio Obligations. The Fund's performance
is closely tied to conditions within the State of Ohio and to the financial
condition of the State and its authorities and municipalities. The economy in
the State of Ohio is reliant in part upon durable goods manufacturing, largely
concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, economic activity in Ohio tends to be more
cyclical than in some other states and in the nation as a whole. However, during
the last decade, the State has experienced steady growth and diversification of
employment and earnings. Statewide employment increased 3% between 1990 and 1995
and Ohio's unemployment rate since 1991 has remained below that of the nation.
Ohio remains highly industrialized, but the manufacturing component of the
economy in 1995 represents only 21.1% of employment, compared to 28.9% in 1980.
This is still above the national average of 15.9%. Although manufacturing is
expected to slow in the future, growth in nonmanufacturing output and
employment, led by the financial services, distribution and trade sectors, has
contributed to greater stability in the State's economy. Economic problems,
including high unemployment, have had and may have varying effects on the
different geographic areas of the State and the political subdivisions located
therein. While Ohio has in the past experienced budget shortfalls due to weak
revenue results and higher-than-budgeted human services expenditures, improved
economic performance has enabled the State to accumulate sizable financial
reserves. The State's unaudited financial statements indicate a $500 million
operating surplus for fiscal 1996 as a result of tax revenues exceeding
forecasts and spending below budgeted amounts. Although revenue obligations of
the State of Ohio or its political subdivisions may be payable from a specific
project or source, there can be no assurance that future economic and political
developments and the resulting impact on state and local governmental finances
will not adversely affect the market values and marketability of the Ohio
Obligations held by the Fund or the ability of a specific issuer to make
interest or principal payments.
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may increase the possibility of
fluctuation in the Fund's net asset value. As the Fund intends to comply with
Subchapter M of the Internal Revenue Code, it may invest up to 50% of its assets
at the end of each quarter of its fiscal year in as few as two issuers, provided
that no more than 25% of the assets are invested in one issuer. With respect to
the remaining 50% of its assets at the end of each quarter, it may invest no
more than 5% in one issuer.
<PAGE>
Certain provisions in the Internal Revenue Code relating to the issuance of
municipal obligations may reduce the volume of municipal obligations qualifying
for federal tax exemptions. Shareholders should consult their tax advisors
concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on municipal obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of municipal
obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of municipal
obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of
which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
tax-exempt obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the tax-exempt obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the obligation,
as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating or
variable rate tax-exempt obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at specified intervals
to a specified interest rate. Periodic interest rate adjustments help stabilize
the obligations' market values. The Fund may purchase these obligations from the
issuers or may purchase participation interests in pools of these obligations
from banks or other financial institutions. Variable and floating rate
obligations usually carry demand features that permit the Fund to sell the
obligations back to the issuers or to financial intermediaries at par value plus
accrued interest upon not more than 30 days' notice at any time or prior to
specific dates. Certain of these variable rate obligations, often referred to as
"adjustable rate put bonds," may have a demand feature exercisable on specific
dates once or twice each year. The Fund will not invest more than 10% of its net
assets in floating or variable rate obligations as to which the Fund cannot
exercise the demand feature on not more than seven days' notice if the Adviser,
under the direction of the Board of Trustees, determines that there is no
secondary market available for these obligations and all other illiquid
securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
<PAGE>
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued tax-exempt
obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or
high-quality liquid debt securities, marked to market daily, in an amount equal
to its when-issued commitments. Because these transactions are subject to market
fluctuations, a significant commitment to when-issued purchases could result in
fluctuation of the Fund's net asset value. The Fund will only make commitments
to purchase when-issued obligations with the intention of actually acquiring the
obligations and not for the purpose of investment leverage.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or U.S. Government obligations, with the Fund's Custodian in an
amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase tax-exempt
obligations with the right to resell the obligation to the seller at a specified
price or yield within a specified period. The right to resell is commonly known
as a "put" or a "standby commitment." The Fund may purchase tax-exempt
obligations with puts attached from banks and broker-dealers. The Fund intends
to use obligations with puts attached for liquidity purposes to ensure a ready
market for the underlying obligations at an acceptable price. Although no value
is assigned to any puts on tax-exempt obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. In addition, the value of the obligations with puts attached held by the
Fund will not exceed 10% of its net assets.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the aggregate
up to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to the demand feature
described above; floating and variable rate obligations as to which the Fund
cannot exercise the related demand feature described above and as to which there
is no secondary market; and repurchase agreements not terminable within seven
days.
BORROWING AND PLEDGING. The Fund may borrow money from banks (provided
there is 300% asset coverage) or from banks or other persons for temporary
purposes (in an amount not exceeding 5% of its total assets). The Fund will not
make any borrowing which would cause its outstanding borrowings to exceed
one-third of the value of its total assets. The Fund may pledge assets in
connection with borrowings but will not pledge more than one-third of its total
assets. The Fund will not make any additional purchases of portfolio securities
if outstanding borrowings exceed 5% of the value of its total assets. Borrowing
magnifies the potential for gain or loss on the Fund's portfolio securities and,
therefore, if employed, increases the possibility of fluctuation in its net
asset value. This is the speculative factor known as leverage. The Fund's
policies on borrowing and pledging are fundamental policies which may not be
changed without the affirmative vote of a majority of its outstanding shares.
<PAGE>
HOW TO PURCHASE SHARES
==============================================================================
Your initial investment in Institutional Shares of the Fund ordinarily must
be at least $500,000. Shares are sold on a continuous basis at the net asset
value next determined after receipt of a purchase order by the Trust. Shares of
the Fund purchased prior to January 7, 1997 are Retail Shares.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Ohio Tax-Free
Money Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges) made
available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by
wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided you
have given notice of your intention to make such investment to the Transfer
Agent by 12:00 noon, Eastern time, on that day. Your investment will be made at
the net asset value next determined after your wire is received together with
the account information indicated above. If the Trust does not receive timely
and complete account information, there may be a delay in the investment of your
money and any accrual of dividends. To make your initial wire purchase, you are
required to mail a completed account application to the Transfer Agent. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to the Transfer Agent, P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Ohio
Tax-Free Money Fund." Bank wires should be sent as outlined above. You may also
make additional investments at the Trust's offices at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202. Each additional purchase request must contain the
name of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
<PAGE>
HOW TO REDEEM SHARES
==============================================================================
You may redeem Institutional Shares of the Fund on each day that the Trust
is open for business. You will receive the net asset value per share next
determined after receipt by the Transfer Agent of a proper redemption request in
the form described below. Payment is normally made within three business days
after tender in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been collected,
which may take up to fifteen days from the purchase date. To eliminate this
delay, you may purchase shares of the Fund by certified check or wire.
A contingent deferred sales load may be imposed on a redemption of shares
of the Fund if such shares had previously been acquired in connection with an
exchange from another fund of Countrywide Investments which imposes a contingent
deferred sales load, as described in the Prospectus of such other fund.
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent
by mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call the Transfer
Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050). The
redemption proceeds will normally be sent by mail or by wire within one business
day (but not later than three business days) after receipt of your telephone
instructions. Any redemption requests by telephone must be received in proper
form prior to 12:00 noon, Eastern time, on any business day in order for payment
by wire to be made that day.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to the Transfer Agent
with your signature guaranteed by any eligible guarantor institution (including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
or by completing a supplemental telephone redemption authorization form. Contact
the Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation, fiduciary
or other organization.
Neither the Trust, the Transfer Agent, nor their respective affiliates will
be liable for complying with telephone instructions they reasonably believe to
be genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares to be redeemed and your account number. The request must be signed
exactly as your name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be guaranteed by
any of the eligible guarantor institutions outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by mail
are normally mailed within three business days following receipt of instructions
in proper form.
<PAGE>
ADDITIONAL REDEMPTION INFORMATION. There is currently no charge for
processing wire redemptions. However, the Trust reserves the right, upon thirty
days' written notice, to make reasonable charges for wire redemptions. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $500,000 (based on actual amounts invested, unaffected by
market fluctuations) or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
==============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other. A sales load will be imposed equal to the excess, if
any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently offered to
the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C> <C>
Countrywide Tax-Free Trust Countrywide Investment Trust Countrywide Strategic Trust
Tax-Free Money Fund Short Term Government Income Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund *Equity Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund *Utility Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government *Treasury Total Return Fund
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
</TABLE>
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
<PAGE>
SUBACCOUNTING SERVICES
==============================================================================
Institutions are encouraged to open single master accounts. However,
certain institutions may wish to use the Transfer Agent's subaccounting system
to minimize their internal recordkeeping requirements. The Transfer Agent may
charge a subaccounting fee based on the level of services rendered. Institutions
holding Fund shares in a fiduciary, agency, custodial or similar capacity may
charge or pass through subaccounting fees as part of or in addition to normal
trust or agency account fees. This Prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fee charged for those services and any
restrictions and limitations imposed.
DIVIDENDS AND DISTRIBUTIONS
==============================================================================
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
Dividends are automatically reinvested in additional shares of the Fund
(the Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option.
TAXES
==============================================================================
The Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified to
pay "exempt-interest dividends," which means that it may pass on to shareholders
the federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. For federal
income tax purposes, a shareholder's proportionate share of taxable
distributions from the Fund's net investment income as well as from net realized
short-term capital gains, if any, is taxable as ordinary income. Since the
Fund's investment income is derived from interest rather than dividends, no
portion of such distributions is eligible for the dividends received deduction
available to corporations.
Dividends received from the Fund that are exempt from federal income tax
are exempt from the Ohio personal income tax and the net income base of the Ohio
corporation franchise tax to the extent derived from interest on Ohio
Obligations. However, shares of the Fund will be included in the computation of
the Ohio corporation franchise tax on the net worth basis. Distributions
received from the Fund are generally not subject to Ohio municipal income
taxation.
<PAGE>
Issuers of tax-exempt securities issued after August 31, 1986 are required
to comply with various restrictions on the use and investment of proceeds of
sales of the securities. Any failure by the issuer to comply with these
restrictions would cause interest on such securities to become taxable to the
security holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax
Reform Act of 1986, is an item of tax preference possibly subject to the
alternative minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Shareholders receiving Social Security benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
The Fund will report to its shareholders the percentage and source of income
earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax and Ohio personal income tax may not result in
similar exemptions under the laws of a particular state or local taxing
authority.
The tax consequences described in this section apply whether distributions
are taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
==============================================================================
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to five other series of the Trust, five series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, insurance expenses, taxes or governmental fees, fees and expenses of the
custodian, transfer agent and accounting and pricing agent of the Fund, fees and
expenses of members of the Board of Trustees who are not interested persons of
the Trust, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or non-recurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Trust's officers and Trustees with respect thereto.
<PAGE>
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist
the Adviser in providing administrative services to the Fund. In this capacity,
the Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services equal to the
annual rate of .1% of the average value of the Fund's daily net assets.
The Adviser serves as principal underwriter for the Fund and, as such, is
the exclusive agent for the distribution of shares of the Fund. Robert H.
Leshner, President and a director of the Adviser, is President and a Trustee of
the Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may give consideration to sales of shares
of the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Fund shall vote separately on matters relating to its own
distribution arrangements. When matters are submitted to shareholders for a
vote, each shareholder is entitled to one vote for each full share owned and
fractional votes for fractional shares owned. The Trust does not normally hold
annual meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon the removal
of any Trustee when requested to do so in writing by shareholders holding 10% or
more of the Trust's outstanding shares. The Trust will comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 in order to
facilitate communications among shareholders.
The Fifth Third Bank Trust Department, 38 Fountain Square Plaza,
Cincinnati, Ohio, may be deemed to control the Fund by virtue of the fact that
it owns of record more than 25% of the Fund's shares as of the date of this
Prospectus.
CALCULATION OF SHARE PRICE
==============================================================================
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
<PAGE>
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
==============================================================================
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. In
addition, the Fund may advertise together with its "current yield" or "effective
yield" a tax equivalent "current yield" or "effective yield" which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's "current yield" or "effective yield." Yields
are computed separately for Institutional and Retail Shares. The yield of
Institutional Shares is expected to be higher than the yield of Retail Shares
due to the distribution fees imposed on Retail Shares.
<PAGE>
Account Application
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Ohio Tax-Free Money Fund
(Institutional Shares)
ACCOUNT NO. 04 -_______________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:______________________________
Home Office Address:____________________
Branch Address:_________________________
Rep Name & No.:_________________________
==============================================================================
Initial Investment of $__________________________ ($500,000 Minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From: __________________________________________________________
o Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
___________________________________________________ ________________________
Name of Individual, Corporation, Organization, (In case of custodial
or Minor, etc. account please list
minor's S.S.#)
___________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other ___
Address Phone
___________________________________________________ ( )__________________
Street or P.O. Box Business Phone
___________________________________________________ ( )__________________
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship
presumed) o Partnership o Corporation o Trust o Custodial o Non-Profit
o Other
==============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. The
Internal Revenue Service does not require your consent to any provision of this
document other than the certifications required to avoid backup withholding.
Check box if appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends; or the
Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
o I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me and I have mailed or delivered an application
to receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do not
provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
==============================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
==============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, to have amounts withdrawn from my (our)
account in any fund of Countrywide Investments (see prospectus for limitations
on this option) and:
WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below.
I (we) further authorize the use of automated cash transfers to and from the
account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Please attach a voided check for the account.
Bank Account Number_________________ Bank Routing Transit Number______________
Name of Account Holder________________________________________________________
Bank Name____________________________Bank Address_____________________________
City State
==============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of
the Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions
for automatic reinvestment in additional shares of the Fund for credit to the
investor's account and to surrender for redemption shares held in the investor's
account in accordance with any of the procedures elected above or for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release Countrywide
Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide Investments, Inc.,
and their respective officers, employees, agents and affiliates from any and all
liability in the performance of the acts instructed herein. Neither the Trust,
Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine
or for any loss, damage, cost or expense in acting on such telephone
instructions. The investor(s) will bear the risk of any such loss. The Trust or
Countrywide Fund Services, Inc., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or
Countrywide Fund Services, Inc. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
_____________________________________ _____________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
_____________________________________ _____________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each joint
owner shall have full authority to act on behalf of the account.
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide Tax_Free Trust (the Trust) and that
______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on
behalf of the corporation or organization and to take any action for it as may
be necessary or appropriate with respect to its shareholder account with the
Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint Countrywide Fund
Services, Inc. as redemption agent of the corporation or organization for shares
of the applicable series of the Trust, to establish or acknowledge terms and
conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on______ at which a quorum was
present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
______________________________________ ______________________________________
______________________________________ ______________________________________
______________________________________ ______________________________________
Witness my hand and seal of the corporation or organization this___________day
of________________, 19_______
______________________________________ ______________________________________
*Secretary_Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the
above resolutions, this certificate must also be signed by another officer.
<PAGE>
TAX-EXEMPT
PROSPECTUS
JANUARY 7, 1997
Revised March 31, 1997
OHIO TAX-FREE
MONEY FUND
Institutional Shares
COUNTRYWIDE
INVESTMENTS
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Investment Objective and Policies............. 3
How to Purchase Shares ....................... 8
How to Redeem Shares.......................... 9
Exchange Privilege............................ 10
Subaccounting Services........................ 11
Dividends and Distributions................... 11
Taxes......................................... 11
Operation of the Fund......................... 12
Calculation of Share Price.................... 13
Performance Information....................... 14
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1996
Revised March 31, 1997
FLORIDA TAX-FREE MONEY FUND
RETAIL SHARES
==============================================================================
The Florida Tax-Free Money Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of interest income exempt
from federal income tax, consistent with liquidity and stability of principal,
by investing primarily in high-quality, short-term Florida municipal obligations
the value of which is exempt from the Florida intangible personal property tax.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS. FUND
SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT OR ANY
OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND WILL
MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
The Fund offers two classes of shares: Class A shares ("Retail Shares"),
sold subject to a 12b-1 fee of up to .25% of average daily net assets, and Class
B shares ("Institutional Shares"), sold without a 12b-1 fee. Each Retail and
Institutional Share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Retail Shares bear
the expenses of distribution fees, which will cause Retail Shares to have a
higher expense ratio and to pay lower dividends than Institutional Shares; (ii)
certain class specific expenses will be borne solely by the class to which such
expenses are attributable; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Retail Shares are subject
to a lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional Shares such as checkwriting and
automatic investment and redemption plans.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's investments
and its business affairs.
This Prospectus sets forth concisely the information about Retail Shares
that you should know before investing. Please retain this Prospectus for future
reference. Institutional Shares are offered in a separate prospectus and
additional information about Institutional Shares may be obtained by calling one
of the numbers listed below. A Statement of Additional Information dated
November 1, 1996, and amended March 31, 1997 has been filed with the Securities
and Exchange Commission and is hereby incorporated by reference in its entirety.
A copy of the Statement of Additional Information can be obtained at no charge
by calling one of the numbers listed below.
- ------------------------------------------------------------------------------
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free)............................................800-543-0407
Cincinnati........................................................513-629-2050
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
==============================================================================
RETAIL SHARES
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.............................................. None
Sales Load Imposed on Reinvested Dividends................................... None
Exchange Fee................................................................. None
Redemption Fee............................................................... None *
Check Redemption Processing Fee (per check):
First six checks per month............................................... None
Additional checks per month.............................................. $0.25
</TABLE>
* A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently $8.
See "How to Redeem Shares."
<TABLE>
<CAPTION>
<S> <C>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees After Waivers................................................ .23% (A)
12b-1 Fees................................................................... .25%
Other Expenses ............................................................. .27%
-------
Total Operating Expenses After Waivers....................................... .75% (B)
=======
<FN>
(A) Absent waivers of management fees, such fees would be .50%.
(B) Absent waivers of management fees, total operating expenses would be 1.02%.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in Retail Shares will bear directly
or indirectly. The percentages expressing annual operating expenses are based on
amounts incurred during the most recent fiscal year except that 12b-1 fees have
been restated to reflect an anticipated increase in distribution expenses to be
incurred during the current fiscal year. THE EXAMPLE BELOW SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
1 Year $ 8
3 Years 24
5 Years 42
10 Years 93
<PAGE>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1996 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
<TABLE>
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===============================================================================================================
FROM DATE OF
PUBLIC OFFERING
(NOV. 13, 1992)
YEAR ENDED JUNE 30, THROUGH
1996 1995 1994 JUNE 30, 1993(A)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ -------------- ------------- --------------
Net investment income.......................... 0.032 0.031 0.021 0.016
------------ -------------- ------------- --------------
Distributions from net investment income ...... ( 0.032) ( 0.031) ( 0.021 ) ( 0.016 )
------------ -------------- ------------- --------------
Net asset value at end of period .............. $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============== ============= ==============
Total return .................................. 3.29% 3.17% 2.11% 2.49% (C)
============ ============== ============= ==============
Net assets at end of period (000's) ........... $ 28,906 $ 24,119 $ 26,276 $ 21,907
============ ============== ============= ==============
Ratio of expenses to average net assets(B) ... 0.61% 0.66% 0.58% 0.34% (C)
Ratio of net investment income to average
net assets.................................. 3.24% 3.12% 2.10% 2.41% (C)
- ----------------------------------------------------------------------------------------------------------------
<FN>
(A) No income was earned or expenses incurred from the start of business
through the date of public offering.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 0.80%, 0.80%, 0.81% and
0.94%(C) for the periods ended June 30, 1996, 1995, 1994 and 1993,
respectively.
(C) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
==============================================================================
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The Fund
seeks the highest level of interest income exempt from federal income tax,
consistent with liquidity and stability of principal. The Fund seeks to achieve
its investment objective by investing primarily in high-quality, short-term
Florida Obligations determined by the Adviser, under the direction of the Board
of Trustees, to present minimal credit risks. Florida Obligations are debt
obligations issued by the State of Florida and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax, including the alternative minimum tax, and the value of
which is exempt from the Florida intangible personal property tax. To the extent
acceptable Florida Obligations are at any time unavailable for investment by the
Fund, the Fund will invest, for temporary defensive purposes, primarily in other
debt securities, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from federal income tax, but which are not Florida
Obligations.
The Fund is not intended to be a complete investment program, and there is
no assurance that its investment objective can be achieved. The Fund's
investment objective is fundamental and as such may not be changed without the
affirmative vote of a majority of its outstanding shares. The term "majority" of
the outstanding shares means the lesser of (1) 67% or more of the outstanding
shares of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund. Unless otherwise indicated,
all investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
MUNICIPAL OBLIGATIONS
Debt securities, the interest from which is, in the opinion of bond counsel
to the issuer, exempt from federal income tax ("Municipal Obligations")
generally include debt obligations issued to obtain funds to construct, repair
or improve various public facilities such as airports, bridges, highways,
hospitals, housing, schools, streets and water and sewer works, to pay general
operating expenses or to refinance outstanding debts. They also may be issued to
finance various private activities, including the lending of funds to public or
private institutions for construction of housing, educational or medical
facilities or the financing of privately owned or operated facilities. Municipal
Obligations consist of tax-exempt bonds, tax-exempt notes and tax-exempt
commercial paper. The Statement of Additional Information contains a description
of tax-exempt bonds, notes and commercial paper.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax-exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
BASIC INVESTMENT POLICIES
It is a fundamental policy that under normal market conditions the Fund
will invest at least 80% of the value of its net assets in short-term
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. This policy may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. Under
normal market conditions, at least 65% of the value of the Fund's total assets
will be invested in Florida Obligations and the remainder may be invested in
obligations that are not Florida Obligations. When the Fund has adopted a
temporary defensive position (including circumstances when acceptable Florida
Obligations are unavailable for investment by the Fund), the Fund may invest
more than 35% of its total assets in obligations that are not Florida
Obligations.
<PAGE>
The Fund seeks to achieve its investment objective by investing in
high-quality, short-term Municipal Obligations determined by the Adviser, under
the direction of the Board of Trustees, to present minimal credit risks. The
Fund will purchase only obligations that enable it to employ the amortized cost
method of valuation. Under the amortized cost method of valuation, the Fund's
obligations are valued at original cost adjusted for amortization of premium or
accumulation of discount, rather than valued at market. This method should
enable the Fund to maintain a stable net asset value per share. The Fund will
invest in obligations which have received a short-term rating in one of the two
highest categories by any two nationally recognized statistical rating
organizations ("NRSROs") or by any one NRSRO if the obligation is rated by only
that NRSRO. The Fund may purchase unrated obligations determined by the Adviser,
under the direction of the Board of Trustees, to be of comparable quality to
rated obligations meeting the Fund's quality standards. These standards must be
satisfied at the time an investment is made. If an obligation ceases to meet
these standards, or if the Board of Trustees believes such obligation no longer
presents minimal credit risks, the Trustees will cause the Fund to dispose of
the obligation as soon as practicable. The Statement of Additional Information
describes ratings of the NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less. The
Fund will invest in obligations with remaining maturities of thirteen months or
less at the time of purchase.
The Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. The Fund may invest more than 25% of its
assets in tax-exempt obligations issued by municipal governments or political
subdivisions of governments within a particular segment of the bond market, such
as housing agency bonds, hospital revenue bonds or airport bonds. It is possible
that economic, business or political developments or other changes affecting one
bond may also affect other bonds in the same segment in the same manner, thereby
potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on Municipal Obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest no more than 20% of its net assets in obligations the interest from which
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
The Fund may, from time to time, invest in taxable short-term, high-quality
obligations (subject to the fundamental policy that under normal market
conditions the Fund will invest at least 80% of its net assets in obligations
the interest on which is exempt from federal income tax, including the
alternative minimum tax). These include, but are not limited to, certificates of
deposit and other bank debt instruments, commercial paper, obligations issued by
the U.S. Government or any of its agencies or instrumentalities and repurchase
agreements. Interest earned from such investments will be taxable to investors.
Except for temporary defensive purposes, at no time will more than 20% of the
value of the Fund's net assets be invested in taxable obligations. Under normal
market conditions, the Fund anticipates that not more than 5% of the value of
its net assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional Information.
RISK FACTORS
The Fund's yield will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the Adviser.
In addition, the financial condition of an issuer or adverse changes in general
economic conditions, or both, may impair the issuer's ability to make payments
of interest and principal. There is no limit on the percentage of a single issue
of Municipal Obligations that the Fund may own. If the Fund holds a significant
portion of the obligations of an issuer, there may not be a readily available
market for the obligations. Reduced diversification could involve an increased
risk to the Fund should an issuer be unable to make interest or principal
payments or should the market value of Municipal Obligations decline.
There are also risks of reduced diversification because the Fund invests
primarily in obligations of issuers within a single state. The Fund is more
likely to invest its assets in the securities of fewer issuers because of the
relatively smaller number of issuers of Florida Obligations. The Fund's
performance is closely tied to conditions within the State of Florida and to the
financial condition of the State and its authorities and municipalities. Under
current law, the State of Florida is required to maintain a balanced budget such
that current expenses are met from current revenues. Florida does not currently
impose a tax on personal income but does impose taxes on corporate income
derived from activities within the State. In addition, Florida imposes an ad
valorem tax on intangible personal property as well as sales and use taxes.
These taxes are the principal source of funds to meet State expenses, including
repayment of, and interest on, obligations backed solely by the full faith and
credit of the State, without recourse to any specific project.
<PAGE>
Florida has been among the fastest growing states as a result of migration
to Florida from other areas of the United States and from foreign countries. Its
population in 1995 represents an increase of 45% from 1980 levels, ranking the
state fourth in the nation. Population growth in Florida is expected to continue
and it is anticipated that corresponding increases in state revenues will be
necessary during the next decade to meet increased burdens on the various public
and social services provided by the state. Florida's ability to meet these
increasing expenses will be dependent in part upon the state's ability to foster
business and economic growth. During the past decade, Florida has experienced
strong growth in the service, construction and trade sectors. These sectors now
account for more than 64% of the state's work force. Florida's service-based
economy has grown at a steady pace with economic performance exceeding national
levels. The largest components of this sector are health and business services
which should remain strong growth areas, given the state's demographics. This
growth has diversified the state's overall economy, which at one time was
dominated by the citrus and tourism industries. The tourism industry, which
supports many of the state's employment sectors, continues to be somewhat
cyclical. Moreover, the state's economic and business growth could be restricted
by the natural limitations of environment resources and the state's ability to
finance adequate public facilities such as roads and schools. However, the
state's recovery from the national economic recession is among the strongest
regionally, as well as nationally and per capita income is slightly above
national levels. Labor force growth has been steady since 1992 and employment
has increased by 5% between 1993 and 1995. Presently, the state has a
well-managed financial program with modest reserve levels and moderate debt.
Although no issuers of Florida Obligations are currently in default on their
payments of interest and principal, the occurrence of a default could adversely
affect the market values and marketability of all Florida Obligations and,
consequently, the net asset value of the Fund.
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may increase the possibility of
fluctuation in the Fund's net asset value. As the Fund intends to comply with
Subchapter M of the Internal Revenue Code, it may invest up to 50% of its assets
at the end of each quarter of its fiscal year in as few as two issuers, provided
that no more than 25% of the assets are invested in one issuer. With respect to
the remaining 50% of its assets at the end of each quarter, it may invest no
more than 5% in one issuer.
Certain provisions in the Internal Revenue Code relating to the issuance of
Municipal Obligations may reduce the volume of Municipal Obligations qualifying
for federal tax exemptions. Shareholders should consult their tax advisors
concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on Municipal Obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of
which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
Municipal Obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
<PAGE>
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating or
variable rate Municipal Obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at specified intervals
to a specified interest rate. Periodic interest rate adjustments help stabilize
the obligations' market values. The Fund may purchase these obligations from the
issuers or may purchase participation interests in pools of these obligations
from banks or other financial institutions. Variable and floating rate
obligations usually carry demand features that permit the Fund to sell the
obligations back to the issuers or to financial intermediaries at par value plus
accrued interest upon not more than 30 days' notice at any time or prior to
specific dates. Certain of these variable rate obligations, often referred to as
"adjustable rate put bonds," may have a demand feature exercisable on specific
dates once or twice each year. The Fund will not invest more than 10% of its net
assets in floating or variable rate obligations as to which the Fund cannot
exercise the demand feature on not more than seven days' notice if the Adviser,
under the direction of the Board of Trustees, determines that there is no
secondary market available for these obligations and all other illiquid
securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued Municipal
Obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or
high-quality liquid debt securities, marked to market daily, in an amount equal
to its when-issued commitments. Because these transactions are subject to market
fluctuations, a significant commitment to when-issued purchases could result in
fluctuation of the Fund's net asset value. The Fund will only make commitments
to purchase when-issued obligations with the intention of actually acquiring the
obligations and not for the purpose of investment leverage. No additional
when-issued commitments will be made if more than 20% of the Fund's net assets
would be so committed.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid high-grade debt obligations, with the Fund's Custodian in
an amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase Municipal Obligations
with the right to resell the obligation to the seller at a specified price or
yield within a specified period. The right to resell is commonly known as a
"put" or a "standby commitment." The Fund may purchase Municipal Obligations
with puts attached from banks and broker-dealers. The Fund intends to use
obligations with puts attached for liquidity purposes to ensure a ready market
for the underlying obligations at an acceptable price. Although no value is
assigned to any puts on Municipal Obligations, the price which the Fund pays for
the obligations may be higher than the price of similar obligations without puts
attached. The purchase of obligations with puts attached involves the risk that
the seller may not be able to repurchase the underlying obligation. The Fund
intends to purchase such obligations only from sellers deemed by the Adviser,
under the direction of the Board of Trustees, to present minimal credit risks.
<PAGE>
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the aggregate
up to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to the demand feature
described above; floating and variable rate obligations as to which the Fund
cannot exercise the related demand feature described above and as to which there
is no secondary market; and repurchase agreements not terminable within seven
days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or
emergency purposes, the Fund may borrow money from banks in an amount not
exceeding 10% of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than 10% of its total assets. The Fund will
not make any additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total assets. Borrowing magnifies the
potential for gain or loss on the Fund's portfolio securities and, therefore, if
employed, increases the possibility of fluctuation in its net asset value. This
is the speculative factor known as leverage. To reduce the risks of borrowing,
the Fund will limit its borrowings as described above. The Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
==============================================================================
Your initial investment in Retail Shares of the Fund ordinarily must be at
least $1,000. Shares of the Fund are sold on a continuous basis at the net asset
value next determined after receipt of a purchase order by the Trust. Shares of
the Fund purchased prior to May 29, 1996 are Retail Shares.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Florida
Tax-Free Money Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by
wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided you
have given notice of your intention to make such investment to the Transfer
Agent by 4:00 p.m., Eastern time, on the preceding business day (or 12:00 noon,
Eastern time, on the same day of a wire investment in the case of investors
utilizing institutions that have made appropriate arrangements with the Transfer
Agent). Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to the Transfer Agent. Your bank may impose a
charge for sending your wire. There is presently no fee for receipt of wired
funds, but the Transfer Agent reserves the right to charge shareholders for this
service upon thirty days' prior notice to shareholders.
<PAGE>
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to the Transfer Agent, P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Florida
Tax-Free Money Fund." Bank wires should be sent as outlined above. You may also
make additional investments at the Trust's offices at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202. Each additional purchase request must contain the
name of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
SHAREHOLDER SERVICES
==============================================================================
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the Retail Shares in your account have a value of at least $5,000, you
may elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
DIRECT DEPOSIT PLANS
Retail Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in Retail Shares of the Fund
from your bank, savings and loan or other depository institution account. The
minimum initial and subsequent investments must be $50 under the plan. The
Transfer Agent pays the costs associated with these transfers, but reserves the
right, upon thirty days' written notice, to make reasonable charges for this
service. Your depository institution may impose its own charge for debiting your
account which would reduce your return from an investment in the Fund.
HOW TO REDEEM SHARES
==============================================================================
You may redeem Retail Shares of the Fund on each day that the Trust is open
for business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
check will be effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this delay, you may
purchase shares of the Fund by certified check or wire.
A contingent deferred sales load may be imposed on a redemption of shares
of the Fund if such shares had previously been acquired in connection with an
exchange from another fund of Countrywide Investments which imposes a contingent
deferred sales load, as described in the Prospectus of such other fund.
<PAGE>
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent
by mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call the Transfer
Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050). The
redemption proceeds will normally be sent by mail or by wire within one business
day (but not later than three business days) after receipt of your telephone
instructions. Any redemption requests by telephone must be received in proper
form prior to 12:00 noon, Eastern time, on any business day in order for payment
by wire to be made that day.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to the Transfer Agent
with your signature guaranteed by any eligible guarantor institution (including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
or by completing a supplemental telephone redemption authorization form. Contact
the Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation, fiduciary
or other organization.
Neither the Trust, the Transfer Agent, nor their respective affiliates will
be liable for complying with telephone instructions they reasonably believe to
be genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares to be redeemed and your account number. The request must be signed
exactly as your name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be guaranteed by
any of the eligible guarantor institutions outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by mail
are normally mailed within three business days following receipt of instructions
in proper form.
BY CHECK. You may establish a special checking account with the Fund for
the purpose of redeeming Retail Shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer Agent,
as your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check.
If the amount of a check is greater than the value of the shares held in
your account, the check will be returned. A check representing a redemption
request will take precedence over any other redemption instructions issued by a
shareholder.
As long as no more than six check redemptions are effected in your account
in any month, there will be no charge for the check redemption privilege.
However, after six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. The Transfer Agent charges shareholders its costs for each
stop payment and each check returned for insufficient funds. In addition, the
Transfer Agent reserves the right to make additional charges to recover the
costs of providing the check redemption service. All charges will be deducted
from your account by redemption of shares in your account. The check redemption
procedure may be suspended or terminated at any time upon written notice by the
Trust or the Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar program
with a financial institution are not eligible for the checkwriting privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee by the Fund's
Custodian. The Trust reserves the right, upon thirty days' written notice, to
change the processing fee. All charges will be deducted from your account by
redemption of shares in your account. Your bank or brokerage firm may also
impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
<PAGE>
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested, unaffected by
market fluctuations) or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
==============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other. A sales load will be imposed equal to the excess, if
any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently offered to
the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C> <C>
Countrywide Tax-Free Trust Countrywide Investment Trust Countrywide Strategic Trust
Tax-Free Money Fund Short Term Government Income Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund *Equity Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund *Utility Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government *Treasury Total Return Fund
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
</TABLE>
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
==============================================================================
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
Dividends are automatically reinvested in additional shares of the Fund
(the Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option.
TAXES
==============================================================================
The Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified to
pay "exempt-interest dividends," which means that it may pass on to shareholders
the federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. For federal
income tax purposes, a shareholder's proportionate share of taxable
distributions from the Fund's net investment income as well as from net realized
short-term capital gains, if any, is taxable as ordinary income. Since the
Fund's investment income is derived from interest rather than dividends, no
portion of such distributions is eligible for the dividends received deduction
available to corporations.
Florida does not impose an income tax on individuals but does have a
corporate income tax. For purposes of the Florida income tax, corporate
shareholders are generally subject to tax on all distributions of the Fund.
Florida imposes an intangible personal property tax on shares of the Fund owned
by a Florida resident on January 1 of each year unless such shares qualify for
an exemption from that tax. Shares of the Fund owned by a Florida resident will
be exempt from the intangible personal property tax so long as the portion of
the Fund's portfolio which is not invested in direct U.S. Government obligations
is at least 95% invested in Florida Obligations which are exempt from that tax.
The Fund will attempt to ensure that at least 95% of the Fund's portfolio on
January 1 of each year consists of Florida Obligations exempt from the Florida
intangible personal property tax.
Issuers of tax-exempt securities issued after August 31, 1986 are required
to comply with various restrictions on the use and investment of proceeds of
sales of the securities. Any failure by the issuer to comply with these
restrictions would cause interest on such securities to become taxable to the
security holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax
Reform Act of 1986, is an item of tax preference possibly subject to the
alternative minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Shareholders receiving Social Security benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income.
<PAGE>
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
The Fund will report to its shareholders the percentage and source of income
earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax may not result in similar exemptions under the
laws of a particular state or local taxing authority.
The tax consequences described in this section apply whether distributions
are taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
==============================================================================
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to five other series of the Trust, five series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, insurance expenses, taxes or governmental fees, fees and expenses of the
custodian, transfer agent and accounting and pricing agent of the Fund, fees and
expenses of members of the Board of Trustees who are not interested persons of
the Trust, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or non-recurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Trust's officers and Trustees with respect thereto. Retail Shares are
also responsible for the payment of expenses related to the distribution of such
shares (see "Distribution Plan").
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist
the Adviser in providing administrative services to the Fund. In this capacity,
the Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services equal to the
annual rate of .1% of the average value of the Fund's daily net assets.
The Adviser serves as principal underwriter for the Fund and, as such, is
the exclusive agent for the distribution of shares of the Fund. Robert H.
Leshner, President and a director of the Adviser, is President and a Trustee of
the Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may give consideration to sales of shares
of the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
<PAGE>
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Retail Shares of
the Fund shall vote separately on matters relating to the plan of distribution
pursuant to Rule 12b-1 (see "Distribution Plan"). When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.
The Huntington Trust Company, N.A., 41 South High Street, Columbus, Ohio,
may be deemed to control the Fund by virtue of the fact that it owns of record
more than 25% of the Fund's shares as of the date of this Prospectus.
DISTRIBUTION PLAN
==============================================================================
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, Retail
Shares of the Fund have adopted a plan of distribution (the "Class A Plan")
under which such shares may directly incur or reimburse the Adviser for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class A Plan, the Fund may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Retail Shares of the
Fund. For the fiscal year ended June 30, 1996, Retail Shares of the Fund paid
$5,179 to the Adviser to reimburse it for payments made to dealers and other
persons who may be advising shareholders regarding the retention of Retail
Shares.
The annual limitation for payment of expenses pursuant to the Class A Plan
is .25% of the average daily net assets allocable to Retail Shares. Unreimbursed
expenditures will not be carried over from year to year. In the event the Class
A Plan is terminated by the Fund in accordance with its terms, the Fund will not
be required to make any payments for expenses incurred by the Adviser after the
date the Class A Plan terminates.
Pursuant to the Class A Plan, the Fund may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
<PAGE>
CALCULATION OF SHARE PRICE
==============================================================================
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
==============================================================================
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. In
addition, the Fund may advertise together with its "current yield" or "effective
yield" a tax equivalent "current yield" or "effective yield" which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's "current yield" or "effective yield." Yields
are computed separately for Retail and Institutional Shares. The yield of
Institutional Shares is expected to be higher than the yield of Retail Shares
due to the distribution fees imposed on Retail Shares.
<PAGE>
Account Application
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Florida Tax-Free Money Fund
(Retail Shares)
ACCOUNT NO. 11-__________________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:_______________________________
Home Office Address:_____________________
Branch Address:__________________________
Rep Name & No.:__________________________
==============================================================================
Initial Investment of $_________________________ ($1,000 minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From:____________________________________________________________
o Exchange From:_____________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
___________________________________________________ _________________________
Name of Individual, Corporation, Organization, (In case of custodial
or Minor, etc. account please list
minor's S.S.#)
___________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other ___
Address Phone
____________________________________________________ ( )________________
Street or P.O. Box Business Phone
____________________________________________________ ( )________________
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship
presumed) o Partnership o Corporation o Trust o Custodial o Non-Profit
o Other
==============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. The
Internal Revenue Service does not require your consent to any provision of this
document other than the certifications required to avoid backup withholding.
Check box if appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends; or the
Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
o I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me and I have mailed or delivered an application
to receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do not
provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
==============================================================================
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
o Reinvest all distributions
o Pay all distributions in cash
==============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, or upon receipt of and in the amounts of
checks as described below (if checkwriting is selected), to have amounts
withdrawn from my (our) account in any fund of Countrywide Investments (see
prospectus for limitations on this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account designated
below. I (we) further authorize the use of automated cash transfers to and from
the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Please attach a voided check for the account.
Bank Account Number_________________ Bank Routing Transit Number______________
Name of Account Holder________________________________________________________
Bank Name________________________Bank Address_________________________________
City State
o CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable
Countrywide Pay Through Draft Account (PTDA) or otherwise arrange for
application of such proceeds to payment of said checks. I (we) authorize the
persons whose signatures appear on the PTDA signature card to draw checks on the
PTDA and to cause the redemption of my (our) shares of the Trust. I (we) agree
to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time
==============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of
the Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services,Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions
for automatic reinvestment in additional shares of the Fund for credit to the
investor's account and to surrender for redemption shares held in the investor's
account in accordance with any of the procedures elected above or for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release Countrywide
Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide Investments, Inc.,
and their respective officers, employees, agents and affiliates from any and all
liability in the performance of the acts instructed herein. Neither the Trust,
Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine
or for any loss, damage, cost or expense in acting on such telephone
instructions. The investor(s) will bear the risk of any such loss. The Trust or
Countrywide Fund Services, Inc., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or
Countrywide Fund Services, Inc. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
______________________________________ ______________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
______________________________________ ______________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each joint
owner shall have full authority to act on behalf of the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of
Countrywide Tax-Free Trust. There is no charge for this service, and it offers
the convenience of automatic investing on a regular basis. The minimum
investment is $50.00 per month. For an account that is opened by using this
Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be
discontinued by the shareholder at any time.
Please invest $_______ per month in the Fund. ABA Routing Number____________
FI Account Number_____________
o Checking Account
o Savings Account
____________________________________________
Name of Financial Institution (FI) Please make my automatic
investment on:
o the last business day of
each month
_____________________________________________ o the 15th day of each month
City State o both the 15th and last
business day
X____________________________________________ X______________________________
(Signature of Depositor EXACTLY as it (Signature of Joint Tenant
appears on FI Records) - if any)
(Joint Signatures are required when bank account is in joint names. Please
sign exactly as signature appears on your FI's records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. ("CFS") has put into effect, by which amounts, determined by your
depositor, payable to the Fund, for purchase of shares of the Fund, are
collected by CFS, CFS hereby agrees:
CFS will indemnify and hold you harmless from any liability to any person
or persons whatsoever arising out of the payment by you of any amount drawn by
the Fund to its own order on the account of your depositor or from any liability
to any person whatsoever arising out of the dishonor by you whether with or
without cause or intentionally or inadvertently, of any such amount. CFS will
defend, at its own cost and expense, any action which might be brought against
you by any person or persons whatsoever because of your actions taken pursuant
to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously
paid by you to the Fund if the claim for the amount of such erroneous payment is
made by you within six (6) months from the date of such erroneous payment; your
participation in this arrangement and that of the Fund may be terminated by
thirty (30) days written notice from either party to the other.
==============================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my account
beginning the last business day of the month of _________.
Please Indicate Withdrawal Schedule (Check One):
o Monthly -- Withdrawals will be made on the last business day of each month.
o Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o Annually -- Please make withdrawals on the last business day of the
month of:_________.
Please Select Payment Method (Check One):
o Exchange: Please exchange the withdrawal proceeds into another Countrywide
account number: ____ ____-- ____ ____ ____ ____ ____ ____ -- ____
o Check: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my
bank checking or savings account as indicated below. I understand that the
transfer will be completed in two to three business days and that
there is no charge.
o Bank Wire: Please send my withdrawal proceeds via bank wire, to the account
indicated below. I understand that the wire will be completed in one
business day and that there is an $8.00 fee.
Please attach a voided ____________________________________________
check for ACH or bank wire Bank Name Bank Address
____________________________________________
Bank ABA# Account # Account Name
o Send to special payee (other than applicant): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_________________________________________________________________
Please send to:_______________________________________________________________
Street address City State Zip
==============================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide Tax_Free Trust (the Trust) and that
____________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on
behalf of the corporation or organization and to take any action for it as
may be necessary or appropriate with respect to its shareholder account with
the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint Countrywide Fund
Services, Inc. as redemption agent of the corporation or organization for shares
of the applicable series of the Trust, to establish or acknowledge terms and
conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application, and it is (If checkwriting privilege
is not desired, please cross out the following resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the
Countrywide Pay Through Draft Account (PTDA) and that until otherwise ordered in
writing, Countrywide Fund Services, Inc. is authorized to make redemptions of
shares held by the corporation or organization, and to make payment from PTDA
upon and according to the check, draft, note or order of this corporation or
organization when signed by
______________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the
payee or any other holder without inquiry as to the circumstances of issue or
the disposition or proceeds, whether drawn to the individual order or tendered
in payment of individual obligations of the persons above named or other
officers of this corporation or organization or otherwise.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By_Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on______ at which a quorum was
present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
______________________________________ ______________________________________
______________________________________ ______________________________________
______________________________________ ______________________________________
Witness my hand and seal of the corporation or organization this___________day
of____________, 19_______
______________________________________ ______________________________________
*Secretary_Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the
above resolutions, this certificate must also be signed by another officer.
<PAGE>
TAX-EXEMPT
PROSPECTUS
NOVEMBER 1, 1996
Revised March 31, 1997
FLORIDA TAX-FREE
MONEY FUND
Retail Shares
COUNTRYWIDE
INVESTMENTS
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 3
Investment Objective and Policies............. 4
How to Purchase Shares ....................... 8
Shareholder Services.......................... 9
How to Redeem Shares.......................... 9
Exchange Privilege............................ 11
Dividends and Distributions................... 12
Taxes......................................... 12
Operation of the Fund......................... 13
Distribution Plan............................. 14
Calculation of Share Price.................... 15
Performance Information....................... 15
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1996
Revised March 31, 1997
FLORIDA TAX-FREE MONEY FUND
INSTITUTIONAL SHARES
==============================================================================
The Florida Tax-Free Money Fund (the "Fund"), a separate series of Countrywide
Tax-Free Trust, seeks the highest level of interest income exempt from federal
income tax, consistent with liquidity and stability of principal, by investing
primarily in high-quality, short-term Florida municipal obligations the value of
which is exempt from the Florida intangible personal property tax.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS. FUND
SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT OR ANY
OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND WILL
MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT PERCENTAGE OF
ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE FUND MAY BE
RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
The Fund offers two classes of shares: Class A shares ("Retail Shares"), sold
subject to a 12b-1 fee of up to .25% of average daily net assets, and Class B
shares ("Institutional Shares"), sold without a 12b-1 fee. Each Retail and
Institutional Share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Retail Shares bear
the expenses of distribution fees, which will cause Retail Shares to have a
higher expense ratio and to pay lower dividends than Institutional Shares; (ii)
certain class specific expenses will be borne solely by the class to which such
expenses are attributable; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Retail Shares are subject
to a lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional Shares such as checkwriting and
automatic investment and redemption plans.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's investments
and its business affairs.
This Prospectus sets forth concisely the information about Institutional Shares
that you should know before investing. Please retain this Prospectus for future
reference. Retail Shares are offered in a separate prospectus and additional
information about Retail Shares may be obtained by calling one of the numbers
listed below. A Statement of Additional Information dated November 1, 1996, and
amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by calling
one of the numbers listed below.
- ------------------------------------------------------------------------------
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free)..........................................800-543-0407
Cincinnati......................................................513-629-2050
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
EXPENSE INFORMATION
============================================================================================
INSTITUTIONAL SHARES
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.............................................. None
Sales Load Imposed on Reinvested Dividends................................... None
Exchange Fee................................................................. None
Redemption Fee............................................................... None
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees After Waivers................................................ .23%(A)
12b-1 Fees................................................................... None
Other Expenses............................................................... .27%
-------
Total Operating Expenses After Waivers....................................... .50%(B)
=======
<FN>
(A) Absent waivers of management fees, such fees would be .50%.
(B) Absent waivers of management fees, total operating expenses would be .77%.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in Institutional Shares will bear directly
or indirectly. The percentages expressing annual operating expenses are based on
estimated amounts for the current fiscal year. THE EXAMPLE BELOW SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year $ 5
3 Years 16
5 Years 28
10 Years 63
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP, is an
integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1996 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
================================================================================================================
FROM DATE OF
PUBLIC OFFERING
(MAY 29, 1996)
THROUGH
JUNE 30, 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value at beginning of period....................................................... $ 1.00
-------------
Net investment income........................................................................ 0.003
-------------
Distributions from net investment income..................................................... (0.003)
-------------
Net asset value at end of period............................................................. $ 1.000
=============
Total return................................................................................. 3.03%(B)
=============
Net assets at end of period (000's).......................................................... $ 19,145
=============
Ratio of expenses to average net assets(A) .................................................. 0.50%(B)
Ratio of net investment income to average net assets......................................... 3.03%(B)
- ------------------------------------------------------------------------------------------------------------------
<FN>
(A) Absent fee waivers and expense reimbursements by the Adviser, the
ratio of expenses to average net assets would have been 0.87%.(B)
(B) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The Fund seeks
the highest level of interest income exempt from federal income tax, consistent
with liquidity and stability of principal. The Fund seeks to achieve its
investment objective by investing primarily in high-quality, short-term Florida
Obligations determined by the Adviser, under the direction of the Board of
Trustees, to present minimal credit risks. Florida Obligations are debt
obligations issued by the State of Florida and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax, including the alternative minimum tax, and the value of
which is exempt from the Florida intangible personal property tax. To the extent
acceptable Florida Obligations are at any time unavailable for investment by the
Fund, the Fund will invest, for temporary defensive purposes, primarily in other
debt securities, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from federal income tax, but which are not Florida
Obligations.
The Fund is not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved. The Fund's investment
objective is fundamental and as such may not be changed without the affirmative
vote of a majority of its outstanding shares. The term "majority" of the
outstanding shares means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund. Unless otherwise indicated,
all investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
MUNICIPAL OBLIGATIONS
Debt securities, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from federal income tax ("Municipal Obligations") generally
include debt obligations issued to obtain funds to construct, repair or improve
various public facilities such as airports, bridges, highways, hospitals,
housing, schools, streets and water and sewer works, to pay general operating
expenses or to refinance outstanding debts. They also may be issued to finance
various private activities, including the lending of funds to public or private
institutions for construction of housing, educational or medical facilities or
the financing of privately owned or operated facilities. Municipal Obligations
consist of tax-exempt bonds, tax-exempt notes and tax-exempt commercial paper.
The Statement of Additional Information contains a description of tax-exempt
bonds, notes and commercial paper.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax-exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
BASIC INVESTMENT POLICIES
It is a fundamental policy that under normal market conditions the Fund will
invest at least 80% of the value of its net assets in short-term obligations the
interest on which is exempt from federal income tax, including the alternative
minimum tax. This policy may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. Under normal market conditions,
at least 65% of the value of the Fund's total assets will be invested in Florida
Obligations and the remainder may be invested in obligations that are not
Florida Obligations. When the Fund has adopted a temporary defensive position
<PAGE>
(including circumstances when acceptable Florida Obligations are unavailable for
investment by the Fund), the Fund may invest more than 35% of its total assets
in obligations that are not Florida Obligations.
The Fund seeks to achieve its investment objective by investing in high-quality,
short-term Municipal Obligations determined by the Adviser, under the direction
of the Board of Trustees, to present minimal credit risks. The Fund will
purchase only obligations that enable it to employ the amortized cost method of
valuation. Under the amortized cost method of valuation, the Fund's obligations
are valued at original cost adjusted for amortization of premium or accumulation
of discount, rather than valued at market. This method should enable the Fund to
maintain a stable net asset value per share. The Fund will invest in obligations
which have received a short-term rating in one of the two highest categories by
any two nationally recognized statistical rating organizations ("NRSROs") or by
any one NRSRO if the obligation is rated by only that NRSRO. The Fund may
purchase unrated obligations determined by the Adviser, under the direction of
the Board of Trustees, to be of comparable quality to rated obligations meeting
the Fund's quality standards. These standards must be satisfied at the time an
investment is made. If an obligation ceases to meet these standards, or if the
Board of Trustees believes such obligation no longer presents minimal credit
risks, the Trustees will cause the Fund to dispose of the obligation as soon as
practicable. The Statement of Additional Information describes ratings of the
NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less. The Fund
will invest in obligations with remaining maturities of thirteen months or less
at the time of purchase.
The Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. The Fund may invest more than 25% of its
assets in tax-exempt obligations issued by municipal governments or political
subdivisions of governments within a particular segment of the bond market, such
as housing agency bonds, hospital revenue bonds or airport bonds. It is possible
that economic, business or political developments or other changes affecting one
bond may also affect other bonds in the same segment in the same manner, thereby
potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of its total
assets in industrial development bonds which, although issued by industrial
development authorities, may be backed only by the assets and revenues of the
nongovernmental users. However, the Fund will not invest more than 25% of its
assets in securities backed by nongovernmental users which are in the same
industry. Interest on Municipal Obligations (including certain industrial
development bonds) which are private activity obligations, as defined in the
Internal Revenue Code, issued after August 7, 1986, while exempt from federal
income tax, is a preference item for purposes of the alternative minimum tax.
Where a regulated investment company receives such interest, a proportionate
share of any exempt-interest dividend paid by the investment company will be
treated as such a preference item to shareholders. The Fund will invest no more
than 20% of its net assets in obligations the interest from which gives rise to
a preference item for the purpose of the alternative minimum tax and in other
investments subject to federal income tax.
The Fund may, from time to time, invest in taxable short-term, high-quality
obligations (subject to the fundamental policy that under normal market
conditions the Fund will invest at least 80% of its net assets in obligations
the interest on which is exempt from federal income tax, including the
alternative minimum tax). These include, but are not limited to, certificates of
deposit and other bank debt instruments, commercial paper, obligations issued by
the U.S. Government or any of its agencies or instrumentalities and repurchase
agreements. Interest earned from such investments will be taxable to investors.
Except for temporary defensive purposes, at no time will more than 20% of the
value of the Fund's net assets be invested in taxable obligations. Under normal
market conditions, the Fund anticipates that not more than 5% of the value of
its net assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional Information.
<PAGE>
RISK FACTORS
The Fund's yield will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the Adviser.
In addition, the financial condition of an issuer or adverse changes in general
economic conditions, or both, may impair the issuer's ability to make payments
of interest and principal. There is no limit on the percentage of a single issue
of Municipal Obligations that the Fund may own. If the Fund holds a significant
portion of the obligations of an issuer, there may not be a readily available
market for the obligations. Reduced diversification could involve an increased
risk to the Fund should an issuer be unable to make interest or principal
payments or should the market value of Municipal Obligations decline.
There are also risks of reduced diversification because the Fund invests
primarily in obligations of issuers within a single state. The Fund is more
likely to invest its assets in the securities of fewer issuers because of the
relatively smaller number of issuers of Florida Obligations. The Fund's
performance is closely tied to conditions within the State of Florida and to the
financial condition of the State and its authorities and municipalities. Under
current law, the State of Florida is required to maintain a balanced budget such
that current expenses are met from current revenues. Florida does not currently
impose a tax on personal income but does impose taxes on corporate income
derived from activities within the State. In addition, Florida imposes an ad
valorem tax on intangible personal property as well as sales and use taxes.
These taxes are the principal source of funds to meet State expenses, including
repayment of, and interest on, obligations backed solely by the full faith and
credit of the State, without recourse to any specific project.
Florida has been among the fastest growing states as a result of migration to
Florida from other areas of the United States and from foreign countries. Its
population in 1995 represents an increase of 45% from 1980 levels, ranking the
state fourth in the nation. Population growth in Florida is expected to continue
and it is anticipated that corresponding increases in state revenues will be
necessary during the next decade to meet increased burdens on the various public
and social services provided by the state. Florida's ability to meet these
increasing expenses will be dependent in part upon the state's ability to foster
business and economic growth. During the past decade, Florida has experienced
strong growth in the service, construction and trade sectors. These sectors now
account for more than 64% of the state's work force. Florida's service-based
economy has grown at a steady pace with economic performance exceeding national
levels. The largest components of this sector are health and business services
which should remain strong growth areas, given the state's demographics. This
growth has diversified the state's overall economy, which at one time was
dominated by the citrus and tourism industries. The tourism industry, which
supports many of the state's employment sectors, continues to be somewhat
cyclical. Moreover, the state's economic and business growth could be restricted
by the natural limitations of environment resources and the state's ability to
finance adequate public facilities such as roads and schools. However, the
state's recovery from the national economic recession is among the strongest
regionally, as well as nationally and per capita income is slightly above
national levels. Labor force growth has been steady since 1992 and employment
has increased by 5% between 1993 and 1995. Presently, the state has a
well-managed financial program with modest reserve levels and moderate debt.
Although no issuers of Florida Obligations are currently in default on their
payments of interest and principal, the occurrence of a default could adversely
affect the market values and marketability of all Florida Obligations and,
consequently, the net asset value of the Fund.
The Fund is a non-diversified fund under the Investment Company Act of 1940.
Thus, its investments may be more concentrated in fewer issuers than those of a
diversified fund. This concentration may increase the possibility of fluctuation
in the Fund's net asset value. As the Fund intends to comply with Subchapter M
of the Internal Revenue Code, it may invest up to 50% of its assets at the end
of each quarter of its fiscal year in as few as two issuers, provided that no
more than 25% of the assets are invested in one issuer. With respect to the
remaining 50% of its assets at the end of each quarter, it may invest no more
than 5% in one issuer.
Certain provisions in the Internal Revenue Code relating to the issuance of
Municipal Obligations may reduce the volume of Municipal Obligations qualifying
for federal tax exemptions. Shareholders should consult their tax advisors
concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on Municipal Obligations may be introduced in the future. If any such
<PAGE>
proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
Municipal Obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating or
variable rate Municipal Obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at specified intervals
to a specified interest rate. Periodic interest rate adjustments help stabilize
the obligations' market values. The Fund may purchase these obligations from the
issuers or may purchase participation interests in pools of these obligations
from banks or other financial institutions. Variable and floating rate
obligations usually carry demand features that permit the Fund to sell the
obligations back to the issuers or to financial intermediaries at par value plus
accrued interest upon not more than 30 days' notice at any time or prior to
specific dates. Certain of these variable rate obligations, often referred to as
"adjustable rate put bonds," may have a demand feature exercisable on specific
dates once or twice each year. The Fund will not invest more than 10% of its net
assets in floating or variable rate obligations as to which the Fund cannot
exercise the demand feature on not more than seven days' notice if the Adviser,
under the direction of the Board of Trustees, determines that there is no
secondary market available for these obligations and all other illiquid
securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued Municipal
Obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or
high-quality liquid debt securities, marked to market daily, in an amount equal
to its when-issued commitments. Because these transactions are subject to market
fluctuations, a significant commitment to when-issued purchases could result in
fluctuation of the Fund's net asset value. The Fund will only make commitments
to purchase when-issued obligations with the intention of actually acquiring the
obligations and not for the purpose of investment leverage. No additional
when-issued commitments will be made if more than 20% of the Fund's net assets
would be so committed.
<PAGE>
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid high-grade debt obligations, with the Fund's Custodian in
an amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase Municipal Obligations with
the right to resell the obligation to the seller at a specified price or yield
within a specified period. The right to resell is commonly known as a "put" or a
"standby commitment." The Fund may purchase Municipal Obligations with puts
attached from banks and broker-dealers. The Fund intends to use obligations with
puts attached for liquidity purposes to ensure a ready market for the underlying
obligations at an acceptable price. Although no value is assigned to any puts on
Municipal Obligations, the price which the Fund pays for the obligations may be
higher than the price of similar obligations without puts attached. The purchase
of obligations with puts attached involves the risk that the seller may not be
able to repurchase the underlying obligation. The Fund intends to purchase such
obligations only from sellers deemed by the Adviser, under the direction of the
Board of Trustees, to present minimal credit risks.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the aggregate up
to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to the demand feature
described above; floating and variable rate obligations as to which the Fund
cannot exercise the related demand feature described above and as to which there
is no secondary market; and repurchase agreements not terminable within seven
days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, the Fund may borrow money from banks in an amount not exceeding 10% of
its total assets. The Fund may pledge assets in connection with borrowings but
will not pledge more than 10% of its total assets. The Fund will not make any
additional purchases of portfolio securities if outstanding borrowings exceed 5%
of the value of its total assets. Borrowing magnifies the potential for gain or
loss on the Fund's portfolio securities and, therefore, if employed, increases
the possibility of fluctuation in its net asset value. This is the speculative
factor known as leverage. To reduce the risks of borrowing, the Fund will limit
its borrowings as described above. The Fund's policies on borrowing and pledging
are fundamental policies which may not be changed without the affirmative vote
of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
==============================================================================
Your initial investment in Institutional Shares of the Fund ordinarily must be
at least $100,000. Shares are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order by the Trust. Shares of the
Fund purchased prior to May 29, 1996 are Retail Shares.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Florida
Tax-Free Money Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month a written
statement disclosing each purchase or redemption effected and each dividend or
distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
<PAGE>
the various services (for example, telephone redemptions and exchanges) made
available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by wire.
Please telephone the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for instructions. You should be prepared to give the
name in which the account is to be established, the address, telephone number
and taxpayer identification number for the account, and the name of the bank
which will wire the money.
You may receive a dividend on the day of your wire investment provided you have
given notice of your intention to make such investment to the Transfer Agent
by 12:00 noon, Eastern time, on that day. Your investment will be made at the
net asset value next determined after your wire is received together with the
account information indicated above. If the Trust does not receive timely and
complete account information, there may be a delay in the investment of your
money and any accrual of dividends. To make your initial wire purchase, you are
required to mail a completed account application to the Transfer Agent. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by mail
or by bank wire. Checks should be sent to the Transfer Agent, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Florida
Tax-Free Money Fund." Bank wires should be sent as outlined above. You may also
make additional investments at the Trust's offices at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202. Each additional purchase request must contain the
name of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial institutions
may be automatically invested in shares of the Fund at the next determined net
asset value on a day selected by the institution or its customer, or when the
account balance reaches a predetermined dollar amount (e.g., $5,000).
Participating institutions are responsible for prompt transmission of orders
relating to the program. Institutions participating in this program may charge
their customers fees for services relating to the program which would reduce the
customers' yield from an investment in the Fund. This Prospectus should,
therefore, be read together with any agreement between the customer and the
participating institution with regard to the services provided, the fees charged
for these services and any restrictions and limitations imposed.
HOW TO REDEEM SHARES
===============================================================================
You may redeem Institutional Shares of the Fund on each day that the Trust is
open for business. You will receive the net asset value per share next
determined after receipt by the Transfer Agent of a proper redemption request in
the form described below. Payment is normally made within three business days
after tender in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been collected,
which may take up to fifteen days from the purchase date. To eliminate this
delay, you may purchase shares of the Fund by certified check or wire.
A contingent deferred sales load may be imposed on a redemption of shares of the
Fund if such shares had previously been acquired in connection with an exchange
from another fund of Countrywide Investments which imposes a contingent deferred
sales load, as described in the Prospectus of such other fund.
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent by
mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call the Transfer
Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050). The
<PAGE>
redemption proceeds will normally be sent by mail or by wire within one business
day (but not later than three business days) after receipt of your telephone
instructions. Any redemption requests by telephone must be received in proper
form prior to 12:00 noon, Eastern time, on any business day in order for payment
by wire to be made that day.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to the Transfer Agent
with your signature guaranteed by any eligible guarantor institution (including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
or by completing a supplemental telephone redemption authorization form. Contact
the Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation, fiduciary
or other organization.
Neither the Trust, the Transfer Agent, nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares to be redeemed and your account number. The request must be signed
exactly as your name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be guaranteed by
any of the eligible guarantor institutions outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by mail
are normally mailed within three business days following receipt of instructions
in proper form.
ADDITIONAL REDEMPTION INFORMATION. There is currently no charge for processing
wire redemptions. However, the Trust reserves the right, upon thirty days'
written notice, to make reasonable charges for wire redemptions. All charges
will be deducted from your account by redemption of shares in your account. Your
bank or brokerage firm may also impose a charge for processing the wire. In the
event that wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an Automated
Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $100,000 (based on actual amounts invested, unaffected by
market fluctuations) or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
<PAGE>
EXCHANGE PRIVILEGE
===============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other. A sales load will be imposed equal to the excess, if
any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently offered to the
public. Funds which may be subject to a front-end or contingent deferred sales
load are indicated by an asterisk.
COUNTRYWIDE TAX-FREE TRUST COUNTRYWIDE INVESTMENT TRUST
Tax-Free Money Fund Short Term Government Income Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
COUNTRYWIDE STRATEGIC TRUST
*U.S. Government Securities Fund
*Equity Fund
*Utility Fund
*Treasury Total Return Fund
You may request an exchange by sending a written request to the Transfer Agent.
The request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to shareholders. An exchange results in a
sale of fund shares, which may cause you to recognize a capital gain or loss.
Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
SUBACCOUNTING SERVICES
===============================================================================
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the Transfer Agent's subaccounting system to
minimize their internal recordkeeping requirements. The Transfer Agent may
charge a subaccounting fee based on the level of services rendered. Institutions
holding Fund shares in a fiduciary, agency, custodial or similar capacity may
charge or pass through subaccounting fees as part of or in addition to normal
trust or agency account fees. This Prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fee charged for those services and any
restrictions and limitations imposed.
DIVIDENDS AND DISTRIBUTIONS
===============================================================================
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
<PAGE>
Dividends are automatically reinvested in additional shares of the Fund (the
Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option.
TAXES
==============================================================================
The Fund has qualified in all prior years and intends to continue to qualify for
the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The Fund also intends
to meet all IRS requirements necessary to ensure that it is qualified to pay
"exempt-interest dividends," which means that it may pass on to shareholders the
federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment income
and any net realized capital gains to its shareholders. For federal income tax
purposes, a shareholder's proportionate share of taxable distributions from the
Fund's net investment income as well as from net realized short-term capital
gains, if any, is taxable as ordinary income. Since the Fund's investment income
is derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
Florida does not impose an income tax on individuals but does have a corporate
income tax. For purposes of the Florida income tax, corporate shareholders are
generally subject to tax on all distributions of the Fund. Florida imposes an
intangible personal property tax on shares of the Fund owned by a Florida
resident on January 1 of each year unless such shares qualify for an exemption
from that tax. Shares of the Fund owned by a Florida resident will be exempt
from the intangible personal property tax so long as the portion of the Fund's
portfolio which is not invested in direct U.S. Government obligations is at
least 95% invested in Florida Obligations which are exempt from that tax. The
Fund will attempt to ensure that at least 95% of the Fund's portfolio on January
1 of each year consists of Florida Obligations exempt from the Florida
intangible personal property tax.
Issuers of tax-exempt securities issued after August 31, 1986 are required to
comply with various restrictions on the use and investment of proceeds of sales
of the securities. Any failure by the issuer to comply with these restrictions
would cause interest on such securities to become taxable to the security
holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax Reform Act
of 1986, is an item of tax preference possibly subject to the alternative
minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to purchase
or carry shares of the Fund is not deductible for federal income tax purposes.
Shareholders receiving Social Security benefits may be taxed on a portion of
those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating the amount
and federal income tax status of all distributions made during the year. The
Fund will report to its shareholders the percentage and source of income earned
on tax-exempt obligations held by it during the preceding year. An exemption
from federal income tax may not result in similar exemptions under the laws of a
particular state or local taxing authority.
The tax consequences described in this section apply whether distributions are
taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
<PAGE>
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
==============================================================================
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an open-end
management investment company organized as a Massachusetts business trust on
April 13, 1981. The Board of Trustees supervises the business activities of the
Trust. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street, Cincinnati,
Ohio 45202 (the "Adviser"), to manage the Fund's investments and its business
affairs. The Adviser was organized in 1974 and is also the investment adviser to
five other series of the Trust, five series of Countrywide Investment Trust and
four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, insurance expenses, taxes or governmental fees, fees and expenses of the
custodian, transfer agent and accounting and pricing agent of the Fund, fees and
expenses of members of the Board of Trustees who are not interested persons of
the Trust, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or non-recurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Trust's officers and Trustees with respect thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services equal to the
annual rate of .1% of the average value of the Fund's daily net assets.
The Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Robert H. Leshner,
President and a director of the Adviser, is President and a Trustee of the
Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may give consideration to sales of shares
of the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
<PAGE>
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. Each class of shares of the
Fund shall vote separately on matters relating to its own distribution
arrangements. When matters are submitted to shareholders for a vote, each
shareholder is entitled to one vote for each full share owned and fractional
votes for fractional shares owned. The Trust does not normally hold annual
meetings of shareholders. The Trustees shall promptly call and give notice of a
meeting of shareholders for the purpose of voting upon the removal of any
Trustee when requested to do so in writing by shareholders holding 10% or more
of the Trust's outstanding shares. The Trust will comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 in order to facilitate
communications among shareholders.
The Huntington Trust Company, N.A., 41 South High Street, Columbus, Ohio, may be
deemed to control the Fund by virtue of the fact that it owns of record more
than 25% of the Fund's shares as of the date of this Prospectus.
CALCULATION OF SHARE PRICE
==============================================================================
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
==============================================================================
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. In
addition, the Fund may advertise together with its "current yield" or "effective
yield" a tax equivalent "current yield" or "effective yield" which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's "current yield" or "effective yield." Yields
are computed separately for Institutional and Retail Shares. The yield of
Institutional Shares is expected to be higher than the yield of Retail Shares
due to the distribution fees imposed on Retail Shares.
<PAGE>
ACCOUNT APPLICATION
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
FLORIDA TAX-FREE MONEY FUND
(Institutional Shares)
ACCOUNT NO. 6 -___________________
(For Fund Use Only)
- ------------------------------------------------
FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________________
Home Office Address:___________________________
Branch Address:________________________________
Rep Name & No.:________________________________
- ------------------------------------------------
==============================================================================
Initial Investment of $__________________________ ($100,000 Minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From: __________________________________________________________
o Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/TAX I.D.#
____________________________________________ ______________________________
Name of Individual, Corporation, (In case of custodial account
Organization, or Minor, etc. please list minor's S.S.#)
____________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other________
ADDRESS PHONE
____________________________________________ ( )___________________________
Street or P.O. Box Business Phone
____________________________________________ ( )___________________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (Right of survivorship presumed)
o Partnership
o Corporation
o Trust
o Custodial
o Non-Profit
o Other
===============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the
Taxpayer Identification Number listed above is my correct number. The Internal
Revenue Service does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if
appropriate:
o I am exempt from backup withholding under the provisions of
section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am
subject to backup withholding as a result of a failure to report all
interest or dividends; or the Internal Revenue Service has notified me that
I am no longer subject to backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue
Service Center or Social Security Administration Office. I understand
that if I do not provide a Taxpayer Identification Number within
60 days that 31% of all reportable payments will be withheld until
I provide a number.
==============================================================================
<PAGE>
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
==============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, to have amounts withdrawn from my (our)
account in any fund of Countrywide Investments (see prospectus for limitations
on this option) and:
WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I
(we) further authorize the use of automated cash transfers to and from the
account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
PLEASE ATTACH A VOIDED CHECK FOR THE ACCOUNT.
Bank Account Number__________________Bank Routing Transit Number______________
Name of Account Holder________________________________________________________
Bank Name___________________Bank Address______________________________________
City State
==============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions
for automatic reinvestment in additional shares of the Fund for credit to the
investor's account and to surrender for redemption shares held in the investor's
account in accordance with any of the procedures elected above or for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release Countrywide
Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide Investments, Inc.,
and their respective officers, employees, agents and affiliates from any and all
liability in the performance of the acts instructed herein. Neither the Trust,
Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine
or for any loss, damage, cost or expense in acting on such telephone
instructions. The investor(s) will bear the risk of any such loss. The Trust or
Countrywide Fund Services, Inc., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or
Countrywide Fund Services, Inc. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
______________________________________ ___________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
______________________________________ ___________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST
COMPLETE THE RESOLUTION FORM ON THE REVERSE SIDE. UNLESS
OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL
AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide Tax-Free Trust (the Trust) and that
______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf
of the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the
Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign
any documents necessary or appropriate to appoint Countrywide Fund Services,
Inc. as redemption agent of the corporation or organization for shares of the
applicable series of the Trust, to establish or acknowledge terms and conditions
governing the redemption of said shares and to otherwise implement the
privileges elected on the Application.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on______ at which a quorum was
present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
NAME TITLE
____________________________________ ______________________________________
____________________________________ ______________________________________
____________________________________ ______________________________________
Witness my hand and seal of the corporation or organization this___________day
of______________, 19_______
____________________________________ ______________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
TAX-EXEMPT
PROSPECTUS
NOVEMBER 1, 1996
Revised March 31, 1997
FLORIDA TAX-FREE
MONEY FUND
Institutional Shares
COUNTRYWIDE
INVESTMENTS
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 3
Investment Objective and Policies............. 4
How to Purchase Shares ....................... 8
How to Redeem Shares.......................... 9
Exchange Privilege............................ 11
Subaccounting Services........................ 11
Dividends and Distributions................... 11
Taxes......................................... 12
Operation of the Fund......................... 13
Calculation of Share Price.................... 14
Performance Information....................... 14
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1996
Revised March 31, 1997
CALIFORNIA TAX-FREE MONEY FUND
==============================================================================
The California Tax-Free Money Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of interest income exempt
from federal and California income taxes, consistent with liquidity and
stability of principal, by investing primarily in high-quality, short-term
California municipal obligations.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS. FUND
SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT OR ANY
OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND WILL
MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about the Fund that
you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 1, 1996, and
amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by calling
one of the numbers listed below.
- ------------------------------------------------------------------------------
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free)............................................800-543-0407
Cincinnati........................................................513-629-2050
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
==============================================================================
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.............................................. None
Sales Load Imposed on Reinvested Dividends................................... None
Exchange Fee................................................................. None
Redemption Fee............................................................... None *
Check Redemption Processing Fee (per check):
First six checks per month............................................... None
Additional checks per month.............................................. $0.25
</TABLE>
* A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently $8.
See "How to Redeem Shares."
<TABLE>
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees After Waivers................................................ .48% (A)
12b-1 Fees................................................................... .03% (B)
Other Expenses............................................................... .29%
-------
Total Fund Operating Expenses After Waivers................................. .80% (C)
=======
<FN>
(A) Absent waivers of management fees, such fees would have been .50% for
the fiscal year ended June 30, 1996.
(B) The Fund may incur 12b-1 fees in an amount up to .25% of its average
net assets.
(C) Absent waivers of management fees, total Fund operating expenses would
have been .82% for the fiscal year ended June 30, 1996.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
$ 8 $ 26 $ 44 $ 99
<PAGE>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1996 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
<TABLE>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
==================================================================================================================
FROM DATE OF
PUBLIC OFFERING
(JULY 25, 1989)
YEAR ENDED JUNE 30, THROUGH
JUNE 30,
1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
------- ------- ------- ------- ------- ------- ------
Net investment income.......................... 0.029 0.029 0.019 0.022 0.035 0.046 0.053
------- ------- ------- ------- ------- ------- ------
Distributions from net investment income....... ( 0.029) ( 0.029) ( 0.019) ( 0.022) ( 0.035) ( 0.046) (0.053)
------- ------- ------- ------- ------- ------- ------
Net asset value at end of period............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= ======= =======
Total return................................... 2.95% 2.95% 1.93% 2.26% 3.71% 4.70% 5.79% (B)
======= ======= ======= ======= ======= ======= =======
Net assets at end of period (000's)............ $36,122 $19,525 $24,508 $34,487 $21,246 $13,524 $12,205
======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets(A) .... 0.80% 0.70% 0.60% 0.56% 0.34% 0.40% 0.08% (B)
Ratio of net investment income to average
net assets.................................. 2.88% 2.83% 1.90% 2.22% 3.49% 4.56% 5.65% (B)
<FN>
- ----------------------------------------------------------------------------------------------------------------
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the
ratio of expenses to average net assets would have been 0.82%, 0.85%,
0.86%, 0.85%, 0.89%, 1.01% and 1.15%(B) for the periods ended June 30,
1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively.
(B) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
==============================================================================
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The Fund
seeks the highest level of interest income exempt from federal and California
income taxes, consistent with liquidity and stability of principal. The Fund
seeks to achieve its investment objective by investing primarily in
high-quality, short-term California Obligations determined by the Adviser, under
the direction of the Board of Trustees, to present minimal credit risks.
California Obligations are debt obligations issued by the State of California
and its political subdivisions, agencies, authorities and instrumentalities and
other qualifying issuers which pay interest that is, in the opinion of bond
counsel to the issuer, exempt from both federal income tax, including the
alternative minimum tax, and California income tax. To the extent acceptable
California Obligations are at any time unavailable for investment by the Fund,
the Fund will invest, for temporary defensive purposes, primarily in other debt
securities, the interest from which is, in the opinion of bond counsel to the
issuer, exempt from federal, but not California, income tax.
The Fund is not intended to be a complete investment program, and there is
no assurance that its investment objective can be achieved. The Fund's
investment objective is fundamental and as such may not be changed without the
affirmative vote of a majority of its outstanding shares. The term "majority" of
the outstanding shares means the lesser of (1) 67% or more of the outstanding
shares of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund. Unless otherwise indicated,
all investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
MUNICIPAL OBLIGATIONS
Debt securities, the interest from which is, in the opinion of bond counsel
to the issuer, exempt from federal income tax ("Municipal Obligations")
generally include debt obligations issued to obtain funds to construct, repair
or improve various public facilities such as airports, bridges, highways,
hospitals, housing, schools, streets and water and sewer works, to pay general
operating expenses or to refinance outstanding debts. They also may be issued to
finance various private activities, including the lending of funds to public or
private institutions for construction of housing, educational or medical
facilities or the financing of privately owned or operated facilities. Municipal
Obligations consist of tax-exempt bonds, tax-exempt notes and tax-exempt
commercial paper. The Statement of Additional Information contains a description
of tax-exempt bonds, notes and commercial paper.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax-exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
BASIC INVESTMENT POLICIES
It is a fundamental policy that under normal market conditions the Fund
will invest at least 80% of the value of its net assets in short-term
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. This policy may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. Under
normal market conditions, at least 65% of the value of the Fund's total assets
will be invested in California Obligations and the remainder may be invested in
obligations that are not California Obligations and therefore are subject to
California income tax (see "Taxes"). When the Fund has adopted a temporary
defensive position (including circumstances when acceptable California
Obligations are unavailable for investment by the Fund), the Fund may invest
more than 35% of its total assets in obligations that are not exempt from
California income tax.
<PAGE>
The Fund seeks to achieve its investment objective by investing in
high-quality, short-term Municipal Obligations determined by the Adviser, under
the direction of the Board of Trustees, to present minimal credit risks. The
Fund will purchase only obligations that enable it to employ the amortized cost
method of valuation. Under the amortized cost method of valuation, the Fund's
obligations are valued at original cost adjusted for amortization of premium or
accumulation of discount, rather than valued at market. This method should
enable the Fund to maintain a stable net asset value per share. The Fund will
invest in obligations which have received a short-term rating in one of the two
highest categories by any two nationally recognized statistical rating
organizations ("NRSROs") or by any one NRSRO if the obligation is rated by only
that NRSRO. These standards must be satisfied at the time an investment is made.
If an obligation ceases to meet these standards, or if the Board of Trustees
believes such obligation no longer presents minimal credit risks, the Trustees
will cause the Fund to dispose of the obligation as soon as practicable. The
Statement of Additional Information describes ratings of the NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less. The
Fund will invest in obligations with remaining maturities of thirteen months or
less at the time of purchase.
The Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. The Fund may invest more than 25% of
its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on Municipal Obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest no more than 20% of its net assets in obligations the interest from which
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
The Fund may, from time to time, invest in taxable short-term, high-quality
obligations (subject to the fundamental policy that under normal market
conditions the Fund will invest at least 80% of its net assets in obligations
the interest on which is exempt from federal income tax, including the
alternative minimum tax). These include, but are not limited to, certificates of
deposit and other bank debt instruments, commercial paper, obligations issued by
the U.S. Government or any of its agencies or instrumentalities and repurchase
agreements. Interest earned from such investments will be taxable to investors.
Except for temporary defensive purposes, at no time will more than 20% of the
value of the Fund's net assets be invested in taxable obligations. Under normal
market conditions, the Fund anticipates that not more than 5% of the value of
its net assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional Information.
RISK FACTORS
The Fund's yield will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the Adviser.
In addition, the financial condition of an issuer or adverse changes in general
economic conditions, or both, may impair the issuer's ability to make payments
of interest and principal. There is no limit on the percentage of a single issue
of Municipal Obligations that the Fund may own. If the Fund holds a significant
portion of the obligations of an issuer, there may not be a readily available
market for the obligations. Reduced diversification could involve an increased
risk to the Fund should an issuer be unable to make interest or principal
payments or should the market value of Municipal Obligations decline.
<PAGE>
There are also risks of reduced diversification because the Fund invests
primarily in obligations of issuers within a single state. The Fund is more
likely to invest its assets in the securities of fewer issuers because of the
relatively smaller number of issuers of California Obligations. The Fund's
performance is closely tied to conditions within the State of California and to
the financial condition of the State and its authorities and municipalities. The
nationwide recession of the early 1990s severely affected several key industries
in California's economy, such as defense, aerospace and high technology. Many of
the job losses resulting from military base closings and cutbacks in the
aerospace industry are expected to be permanent. However, the decline in the
aerospace industry has been matched by a similar number of new jobs in the
entertainment industry and significant increases in California's employment rate
have brought employment near to its pre-recession level. This has improved the
state's liquidity and has eliminated the need for external note borrowing across
fiscal years. In August 1996, Standard & Poor's Ratings Group ("S&P") raised
California's general obligation bond rating to "A+" from "A." This revision
followed the state's second year of operating surpluses and passage of a fiscal
1997 budget with assumptions that appear more realistic than in prior years.
Nevertheless, the state's cash position remains poor, as general fund operating
deficits since 1990 have resulted in a fiscal 1996 accumulated deficit of $1.4
billion. Despite the increase in jobs, the state has experienced a long-term
decline in its above-average income relative to the nation. The state's
financial condition has been hampered by certain structural elements. These
include, Proposition 98 which requires a mandated minimum percentage of general
fund revenues to be used towards education, new sentencing laws which have led
to a growing prison population, local infrastructure needs and the need to
borrow to cover loans to schools. On December 6, 1994, Orange County, California
filed for Chapter 9 bankruptcy after it was discovered that the County Treasurer
had practiced investment techniques that were not prudent with the fiduciary
guidelines for County co-mingled funds. The county emerged from bankruptcy in
1996 and has issued post-bankruptcy recovery bonds in order to pay its
outstanding debt and to fund bankruptcy-related and operating costs. A portion
of the new debt is insured and carries an "AAA" rating by S&P. The upgraded
rating in Orange County's debt reflects its success in restraining expenses and
forecasting revenues since the bankruptcy filing, as well as the adoption of a
conservative investment policy and the establishment of an investment oversight
committee. However, the county's general fund remains vulnerable with virtually
no tolerance for contingencies, and has already undergone sharp reductions. The
county's financial flexibility is further constrained by its severely limited
revenue-raising capacity.
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may increase the possibility of
fluctuation in the Fund's net asset value. As the Fund intends to comply with
Subchapter M of the Internal Revenue Code, it may invest up to 50% of its assets
at the end of each quarter of its fiscal year in as few as two issuers, provided
that no more than 25% of the assets are invested in one issuer. With respect to
the remaining 50% of its assets at the end of each quarter, it may invest no
more than 5% in one issuer.
Certain provisions in the Internal Revenue Code relating to the issuance of
Municipal Obligations may reduce the volume of Municipal Obligations qualifying
for federal tax exemptions. Shareholders should consult their tax advisors
concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on Municipal Obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of
which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
Municipal Obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
<PAGE>
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating or
variable rate Municipal Obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at specified intervals
to a specified interest rate. Periodic interest rate adjustments help stabilize
the obligations' market values. The Fund may purchase these obligations from the
issuers or may purchase participation interests in pools of these obligations
from banks or other financial institutions. Variable and floating rate
obligations usually carry demand features that permit the Fund to sell the
obligations back to the issuers or to financial intermediaries at par value plus
accrued interest upon not more than 30 days' notice at any time or prior to
specific dates. Certain of these variable rate obligations, often referred to as
"adjustable rate put bonds," may have a demand feature exercisable on specific
dates once or twice each year. The Fund will not invest more than 10% of its net
assets in floating or variable rate obligations as to which the Fund cannot
exercise the demand feature on not more than seven days' notice if the Adviser,
under the direction of the Board of Trustees, determines that there is no
secondary market available for these obligations and all other illiquid
securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued Municipal
Obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or
high-quality liquid debt securities, marked to market daily, in an amount equal
to its when-issued commitments. Because these transactions are subject to market
fluctuations, a significant commitment to when-issued purchases could result in
fluctuation of the Fund's net asset value. The Fund will only make commitments
to purchase when-issued obligations with the intention of actually acquiring the
obligations and not for the purpose of investment leverage. No additional
when-issued commitments will be made if more than 20% of the Fund's net assets
would be so committed.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid high-grade debt obligations, with the Fund's Custodian in
an amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
<PAGE>
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase Municipal Obligations
with the right to resell the obligation to the seller at a specified price or
yield within a specified period. The right to resell is commonly known as a
"put" or a "standby commitment." The Fund may purchase Municipal Obligations
with puts attached from banks and broker-dealers. The Fund intends to use
obligations with puts attached for liquidity purposes to ensure a ready market
for the underlying obligations at an acceptable price. Although no value is
assigned to any puts on Municipal Obligations, the price which the Fund pays for
the obligations may be higher than the price of similar obligations without puts
attached. The purchase of obligations with puts attached involves the risk that
the seller may not be able to repurchase the underlying obligation. The Fund
intends to purchase such obligations only from sellers deemed by the Adviser,
under the direction of the Board of Trustees, to present minimal credit risks.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the aggregate
up to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to the demand feature
described above; floating and variable rate obligations as to which the Fund
cannot exercise the related demand feature described above and as to which there
is no secondary market; and repurchase agreements not terminable within seven
days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or
emergency purposes, the Fund may borrow money from banks in an amount not
exceeding 10% of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than 10% of its total assets. The Fund will
not make any additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total assets. Borrowing magnifies the
potential for gain or loss on the Fund's portfolio securities and, therefore, if
employed, increases the possibility of fluctuation in its net asset value. This
is the speculative factor known as leverage. To reduce the risks of borrowing,
the Fund will limit its borrowings as described above. The Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
==============================================================================
Your initial investment in the Fund ordinarily must be at least $1,000.
Shares of the Fund are sold on a continuous basis at the net asset value next
determined after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "California
Tax-Free Money Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by
wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided you
have given notice of your intention to make such investment to the Transfer
Agent by 4:00 p.m., Eastern time, on the preceding business day (or 12:00 noon,
Eastern time, on the same day of a wire investment in the case of investors
utilizing institutions that have made appropriate arrangements with the Transfer
Agent). Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to the Transfer Agent. Your bank may impose a
charge for sending your wire. There is presently no fee for receipt of wired
funds, but the Transfer Agent reserves the right to charge shareholders for this
service upon thirty days' prior notice to shareholders.
<PAGE>
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to the Transfer Agent, P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"California Tax-Free Money Fund." Bank wires should be sent as outlined above.
You may also make additional investments at the Trust's offices at 312 Walnut
Street, 21st Floor, Cincinnati, Ohio 45202. Each additional purchase request
must contain the name of your account and your account number to permit proper
crediting to your account. While there is no minimum amount required for
subsequent investments, the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
SHAREHOLDER SERVICES
==============================================================================
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
DIRECT DEPOSIT PLANS
Shares of the Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder to
have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.
<PAGE>
HOW TO REDEEM SHARES
==============================================================================
You may redeem shares of the Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
check will be effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this delay, you may
purchase shares of the Fund by certified check or wire.
A contingent deferred sales load may be imposed on a redemption of shares
of the Fund if such shares had previously been acquired in connection with an
exchange from another fund of Countrywide Investments which imposes a contingent
deferred sales load, as described in the Prospectus of such other fund.
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent
by mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call the Transfer
Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050). The
redemption proceeds will normally be sent by mail or by wire within one business
day (but not later than three business days) after receipt of your telephone
instructions. Any redemption requests by telephone must be received in proper
form prior to 12:00 noon, Eastern time, on any business day in order for payment
by wire to be made that day.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to the Transfer Agent
with your signature guaranteed by any eligible guarantor institution (including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
or by completing a supplemental telephone redemption authorization form. Contact
the Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation, fiduciary
or other organization.
Neither the Trust, the Transfer Agent, nor their respective affiliates will
be liable for complying with telephone instructions they reasonably believe to
be genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares to be redeemed and your account number. The request must be signed
exactly as your name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be guaranteed by
any of the eligible guarantor institutions outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by mail
are normally mailed within three business days following receipt of instructions
in proper form.
BY CHECK. You may establish a special checking account with the Fund for
the purpose of redeeming shares by check. Checks may be made payable to anyone
for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer Agent,
as your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check.
<PAGE>
If the amount of a check is greater than the value of the shares held in
your account, the check will be returned. A check representing a redemption
request will take precedence over any other redemption instructions issued by a
shareholder.
As long as no more than six check redemptions are effected in your account
in any month, there will be no charge for the check redemption privilege.
However, after six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. The Transfer Agent charges shareholders its costs for each
stop payment and each check returned for insufficient funds. In addition, the
Transfer Agent reserves the right to make additional charges to recover the
costs of providing the check redemption service. All charges will be deducted
from your account by redemption of shares in your account. The check redemption
procedure may be suspended or terminated at any time upon written notice by the
Trust or the Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar program
with a financial institution are not eligible for the checkwriting privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee by the Fund's
Custodian. The Trust reserves the right, upon thirty days' written notice, to
change the processing fee. All charges will be deducted from your account by
redemption of shares in your account. Your bank or brokerage firm may also
impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for
ACH transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested, unaffected by
market fluctuations) or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
==============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other. A sales load will be imposed equal to the excess, if
any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently offered to
the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C> <C>
Countrywide Tax-Free Trust Countrywide Investment Trust Countrywide Strategic Trust
Tax-Free Money Fund Short Term Government Income Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund *Equity Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund *Utility Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government *Treasury Total Return Fund
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
</TABLE>
<PAGE>
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
==============================================================================
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
Dividends are automatically reinvested in additional shares of the Fund
(the Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option.
TAXES
==============================================================================
The Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified to
pay "exempt-interest dividends," which means that it may pass on to shareholders
the federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. Except for
dividends from taxable investments, the Fund anticipates that substantially all
dividends paid by the Fund will not be subject to California state income tax.
For federal income tax purposes, a shareholder's proportionate share of taxable
distributions from the Fund's net investment income as well as from net realized
short-term capital gains, if any, is taxable as ordinary income. Since the
Fund's investment income is derived from interest rather than dividends, no
portion of such distributions is eligible for the dividends received deduction
available to corporations.
Issuers of tax-exempt securities issued after August 31, 1986 are required
to comply with various restrictions on the use and investment of proceeds of
sales of the securities. Any failure by the issuer to comply with these
restrictions would cause interest on such securities to become taxable to the
security holders as of the date the securities were issued.
<PAGE>
Interest on "specified private activity bonds," as defined by the Tax
Reform Act of 1986, is an item of tax preference possibly subject to the
alternative minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Shareholders receiving Social Security benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
The Fund will report to its shareholders the percentage and source of income
earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax and California state income tax may not result
in similar exemptions under the laws of a particular state or local taxing
authority.
The tax consequences described in this section apply whether distributions
are taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
==============================================================================
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to five other series of the Trust, five series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
<PAGE>
In addition, the Transfer Agent has been retained by the Adviser to assist
the Adviser in providing administrative services to the Fund. In this capacity,
the Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services equal to the
annual rate of .1% of the average value of the Fund's daily net assets.
The Adviser serves as principal underwriter for the Fund and, as such, is
the exclusive agent for the distribution of shares of the Fund. Robert H.
Leshner, President and a director of the Adviser, is President and a Trustee of
the Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may give consideration to sales of shares
of the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional shares owned. The
Trust does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
DISTRIBUTION PLAN
==============================================================================
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
has adopted a plan of distribution (the "Plan") under which the Fund may
directly incur or reimburse the Adviser for certain distribution-related
expenses, including payments to securities dealers and others who are engaged in
the sale of shares of the Fund and who may be advising investors regarding the
purchase, sale or retention of Fund shares; expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services not otherwise provided by the Transfer Agent; expenses of
formulating and implementing marketing and promotional activities, including
direct mail promotions and mass media advertising; expenses of preparing,
printing and distributing sales literature and prospectuses and statements of
additional information and reports for recipients other than existing
shareholders of the Fund; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable; and any other expenses related to the
distribution of the Fund's shares.
Pursuant to the Plan, the Fund may make payments to dealers and other
persons, including the Adviser and its affiliates, who may be advising investors
regarding the purchase, sale or retention of shares of the Fund. For the fiscal
year ended June 30, 1996, the Fund paid $7,000 to the Adviser to reimburse it
for payments made to dealers and other persons who may be advising shareholders
regarding the retention of shares of the Fund.
The annual limitation for payment of expenses pursuant to the Plan is .25%
of the Fund's average daily net assets. Unreimbursed expenditures will not be
carried over from year to year. In the event the Plan is terminated by the Fund
in accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Adviser after the date the Plan terminates.
<PAGE>
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
CALCULATION OF SHARE PRICE
==============================================================================
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
==============================================================================
From time to time, the Fund may advertise its "current yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "current yield" of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment. In addition, the Fund may advertise together with its "current
yield" or "effective yield" a tax-equivalent "current yield" or "effective
yield" which reflects the yield which would be required of a taxable investment
at a stated income tax rate in order to equal the Fund's "current yield" or
"effective yield."
<PAGE>
Account Application
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
California Tax-Free
Money Fund
ACCOUNT NO. 24 -_______________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________
Home Office Address:___________________
Branch Address:________________________
Rep Name & No.:________________________
==============================================================================
Initial Investment of $_________________________ ($1,000 minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From:____________________________________________________________
o Exchange From:_____________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
____________________________________________________ _______________________
Name of Individual, Corporation, Organization, (In case of custodial
or Minor, etc. account please list
minor's S.S.#)
____________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other___
Address Phone
____________________________________________________ ( )________________
Street or P.O. Box Business Phone
____________________________________________________ ( )________________
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship
presumed) o Partnership o Corporation o Trust o Custodial o Non-Profit
o Other
==============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. The
Internal Revenue Service does not require your consent to any provision of this
document other than the certifications required to avoid backup withholding.
Check box if appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends;
or the Internal Revenue Service has notified me that I am no longer subject
to backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me and I have mailed or delivered an
application to receive a Taxpayer Identification Number to the Internal
Revenue Service Center or Social Security Administration Office. I
understand that if I do not provide a Taxpayer Identification Number within
60 days that 31% of all reportable payments will be withheld until I
provide a number.
==============================================================================
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
o Reinvest all distributions
o Pay all distributions in cash
==============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, or upon receipt of and in the amounts of
checks as described below (if checkwriting is selected), to have amounts
withdrawn from my (our) account in any fund of Countrywide Investments (see
prospectus for limitations on this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account designated
below. I (we) further authorize the use of automated cash transfers to and from
the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Please attach a voided check for the account.
Bank Account Number_______________ Bank Routing Transit Number________________
Name of Account Holder________________________________________________________
Bank Name_____________________________Bank Address____________________________
City State
o CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable
Countrywide Pay Through Draft Account (PTDA) or otherwise arrange for
application of such proceeds to payment of said checks. I (we) authorize the
persons whose signatures appear on the PTDA signature card to draw checks on the
PTDA and to cause the redemption of my (our) shares of the Trust. I (we) agree
to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time.
==============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of
the Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions
for automatic reinvestment in additional shares of the Fund for credit to the
investor's account and to surrender for redemption shares held in the investor's
account in accordance with any of the procedures elected above or for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release Countrywide
Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide Investments, Inc.,
and their respective officers, employees, agents and affiliates from any and all
liability in the performance of the acts instructed herein. Neither the Trust,
Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine
or for any loss, damage, cost or expense in acting on such telephone
instructions. The investor(s) will bear the risk of any such loss. The Trust or
Countrywide Fund Services, Inc., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or
Countrywide Fund Services, Inc. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
_____________________________________ _____________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
_____________________________________ _____________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each joint
owner shall have full authority to act on behalf of the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of
Countrywide Tax-Free Trust. There is no charge for this service, and it offers
the convenience of automatic investing on a regular basis. The minimum
investment is $50.00 per month. For an account that is opened by using this
Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be
discontinued by the shareholder at any time.
Please invest $ _______ per month in the Fund.
ABA Routing Number_____________________________
FI Account Number______________________________
o Checking Account o Savings Account
___________________________________________
Name of Financial Institution (FI)
___________________________________________
City State
Please make my automatic investment on:
o the last business day of each month
o the 15th day of each month
o both the 15th and last business day
X___________________________________ X___________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant - if any)
it appears on FI Records)
(Joint Signatures are required when bank account is in joint names. Please
sign exactly as signature appears on your FI's records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. ("CFS") has put into effect, by which amounts, determined by your
depositor, payable to the Fund, for purchase of shares of the Fund, are
collected by CFS, CFS hereby agrees:
CFS will indemnify and hold you harmless from any liability to any person
or persons whatsoever arising out of the payment by you of any amount drawn by
the Fund to its own order on the account of your depositor or from any liability
to any person whatsoever arising out of the dishonor by you whether with or
without cause or intentionally or inadvertently, of any such amount. CFS will
defend, at its own cost and expense, any action which might be brought against
you by any person or persons whatsoever because of your actions taken pursuant
to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously
paid by you to the Fund if the claim for the amount of such erroneous payment is
made by you within six (6) months from the date of such erroneous payment; your
participation in this arrangement and that of the Fund may be terminated by
thirty (30) days written notice from either party to the other.
==============================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my account
beginning the last business day of the month of _________ .
Please Indicate Withdrawal Schedule (Check One):
o Monthly -- Withdrawals will be made on the last business day of each month.
o Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30
and 12/31.
o Annually -- Please make withdrawals on the last business day of the
month of:_________.
Please Select Payment Method (Check One):
o Exchange: Please exchange the withdrawal proceeds into another
Countrywide account number: ____ ____-- ____ ____ ____ ____ ____ ____ -- ____
o Check: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my
bank checking or savings account as indicated below. I understand that the
transfer will be completed in two to three business days and that there is no
charge.
o Bank Wire: Please send my withdrawal proceeds via bank wire, to the
account indicated below. I understand that the wire will be completed in one
business day and that there is an $8.00 fee.
Please attach a voided ___________________________________________
check for ACH or bank wire Bank Name Bank Address
___________________________________________
Bank ABA# Account# Account Name
o Send to special payee (other than applicant): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_________________________________________________________________
Please send to:_______________________________________________________________
Street address City State Zip
==============================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide Tax-Free Trust (the Trust) and that
______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on
behalf of the corporation or organization and to take any action for it as may
be necessary or appropriate with respect to its shareholder account with the
Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint Countrywide Fund
Services, Inc. as redemption agent of the corporation or organization for
shares of the applicable series of the Trust, to establish or acknowledge terms
and conditions governing the redemption of said shares and to otherwise
implement the privileges elected on the Application, and it is (If checkwriting
privilege is not desired, please cross out the following resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the
Countrywide Pay Through Draft Account (PTDA) and that until otherwise ordered
in writing, Countrywide Fund Services, Inc. is authorized to make redemptions
of shares held by the corporation or organization, and to make payment from
PTDA upon and according to the check, draft, note or order of this corporation
or organization when signed by
______________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the
payee or any other holder without inquiry as to the circumstances of issue or
the disposition or proceeds, whether drawn to the individual order or tendered
in payment of individual obligations of the persons above named or other
officers of this corporation or organization or otherwise.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on ________ at which a quorum
was present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s)
of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
Witness my hand and seal of the corporation or organization this___________day
of_____________, 19_______
_____________________________________ _____________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the
above resolutions, this certificate must also be signed by another officer.
<PAGE>
TAX-EXEMPT
PROSPECTUS
NOVEMBER 1, 1996
Revised March 31, 1997
CALIFORNIA TAX-FREE
MONEY FUND
COUNTRYWIDE
INVESTMENTS
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 3
Investment Objective and Policies............. 4
How to Purchase Shares ....................... 8
Shareholder Services.......................... 9
How to Redeem Shares.......................... 10
Exchange Privilege............................ 11
Dividends and Distributions................... 12
Taxes......................................... 12
Operation of the Fund......................... 13
Distribution Plan............................. 14
Calculation of Share Price.................... 15
Performance Information....................... 15
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1996
Amended March 31, 1997
Tax-Free Money Fund
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
Ohio Tax-Free Money Fund
California Tax-Free Money Fund
Florida Tax-Free Money Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the applicable Fund of Countrywide
Tax-Free Trust dated November 1, 1996 and revised March 31, 1997 (except for the
Ohio Tax-Free Money Fund, which Prospectus is dated January 7, 1997 and revised
March 31, 1997). A copy of a Fund's Prospectus can be obtained by writing the
Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202-4094, or by
calling the Trust nationwide toll-free 800-543-0407, in Cincinnati 629-2050.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS PAGE
THE TRUST................................................................ 3
MUNICIPAL OBLIGATIONS.................................................... 5
QUALITY RATINGS OF MUNICIPAL OBLIGATIONS................................. 8
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS............................12
INVESTMENT LIMITATIONS...................................................16
INSURERS OF THE OHIO INSURED TAX-FREE FUND'S PORTFOLIO SECURITIES....... 22
TRUSTEES AND OFFICERS....................................................23
THE INVESTMENT ADVISER AND UNDERWRITER...................................26
DISTRIBUTION PLANS.......................................................28
SECURITIES TRANSACTIONS..................................................31
PORTFOLIO TURNOVER.......................................................33
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE.....................34
OTHER PURCHASE INFORMATION...............................................37
TAXES....................................................................39
REDEMPTION IN KIND.......................................................41
HISTORICAL PERFORMANCE INFORMATION.......................................42
PRINCIPAL SECURITY HOLDERS...............................................47
CUSTODIAN................................................................48
AUDITORS.................................................................48
TRANSFER AGENT . ........................................................48
TAX EQUIVALENT YIELD TABLES..............................................50
ANNUAL REPORT . . . .....................................................52
- 2 -
<PAGE>
THE TRUST
- ---------
Countrywide Tax-Free Trust (the "Trust"), formerly Midwest Group Tax
Free Trust, was organized as a Massachusetts business trust on April 13, 1981.
The Trust currently offers six series of shares to investors: the Tax-Free Money
Fund, the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the
Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida
Tax-Free Money Fund (formerly the Royal Palm Florida Tax- Free Money Fund)
(referred to individually as a "Fund" and collectively as the "Funds"). Each
Fund has its own investment objective(s) and policies.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
Both Class A (Retail) shares and Class B (Institutional) shares of the
Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund represent an
interest in the same assets of such Fund, have the same rights and are identical
in all material respects except that (i) Class A shares bear the expenses of
distribution fees; (ii) certain class specific expenses will be borne solely by
the class to which such expenses are attributable, including transfer agent fees
attributable to a specific class of shares, printing and postage expenses
related to preparing and distributing materials to current shareholders of a
specific class, registration fees incurred by a specific class of shares, the
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; (iii) each class has exclusive voting
- 3 -
<PAGE>
rights with respect to matters affecting only that class; and (iv) Class A
shares are subject to a lower minimum initial investment requirement and offer
certain shareholder services not available to Class B shares such as
checkwriting privileges and automatic investment and redemption plans. Both
Class A shares and Class C shares of the Tax-Free Intermediate Term Fund and the
Ohio Insured Tax-Free Fund represent an interest in the same assets of such
Fund, have the same rights and are identical in all material respects except
that (i) Class C shares bear the expenses of higher distribution fees; (ii)
certain other class specific expenses will be borne solely by the class to which
such expenses are attributable, including transfer agent fees attributable to a
specific class of shares, printing and postage expenses related to preparing and
distributing materials to current shareholders of a specific class, registration
fees incurred by a specific class of shares, the expenses of administrative
personnel and services required to support the shareholders of a specific class,
litigation or other legal expenses relating to a class of shares, Trustees' fees
or expenses incurred as a result of issues relating to a specific class of
shares and accounting fees and expenses relating to a specific class of shares;
and (iii) each class has exclusive voting rights with respect to matters
relating to its own distribution arrangements. The Board of Trustees may
classify and reclassify the shares of a Fund into additional classes of shares
at a future date.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of an instance where such result has occurred. In addition, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the Trustees.
The Trust Agreement also provides for the indemnification out of the Trust
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Moreover, it provides that the Trust will,
upon request, assume the defense of any claim made against any shareholder for
any act or obligation of the Trust and satisfy any judgment thereon. As a
result, and particularly because the Trust assets are readily marketable and
ordinarily substantially exceed liabilities, management believes that the risk
of shareholder liability is slight and limited to circumstances in which the
Trust itself would be unable to meet its obligations. Management believes that,
in view of the above, the risk of personal liability is remote.
- 4 -
<PAGE>
MUNICIPAL OBLIGATIONS
- ---------------------
Each Fund invests primarily in Municipal Obligations. Municipal
Obligations are debt obligations issued by a state and its political
subdivisions, agencies, authorities and instrumentalities and other qualifying
issuers which pay interest that is, in the opinion of bond counsel to the
issuer, exempt from federal income tax. Municipal Obligations include tax-exempt
bonds, notes and commercial paper. The Ohio Insured Tax- Free Fund and the Ohio
Tax-Free Money Fund invest primarily in Ohio Obligations, which are Municipal
Obligations issued by the State of Ohio and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
both federal income tax and Ohio personal income tax. The California Tax-Free
Money Fund invests primarily in California Obligations, which are Municipal
Obligations issued by the State of California and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
both federal income tax and California income tax. The Florida Tax-Free Money
Fund invests primarily in Florida Obligations, which are Municipal Obligations
issued by the State of Florida and its political subdivisions, agencies,
authorities and instrumentalities and other qualifying issuers, the value of
which is exempt from the Florida intangible personal property tax, which pay
interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax.
TAX-EXEMPT BONDS. Tax-exempt bonds are issued to obtain funds to
construct, repair or improve various facilities such as airports, bridges,
highways, hospitals, housing, schools, streets and water and sewer works, to pay
general operating expenses or to refinance outstanding debts. They also may be
issued to finance various private activities, including the lending of funds to
public or private institutions for construction of housing, educational or
medical facilities or the financing of privately owned or operated facilities.
The two principal classifications of tax-exempt bonds are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility.
TAX-EXEMPT NOTES. Tax-exempt notes generally are used to provide for
short-term capital needs and generally have maturities of one year or less.
Tax-exempt notes include:
- 5 -
<PAGE>
1. Tax Anticipation Notes. Tax anticipation notes
are issued to finance working capital needs of
municipalities. Generally, they are issued in anticipation
of various seasonal tax revenues, such as income, sales, use
and business taxes, and are payable from these specific
future taxes.
2. Revenue Anticipation Notes. Revenue anticipation
notes are issued in expectation of receipt of other kinds of
revenue, such as federal revenues available under the
federal revenue sharing programs.
3. Bond Anticipation Notes. Bond anticipation notes
are issued to provide interim financing until long-term
financing can be arranged. In most cases, the long-term
bonds then provide the money for the repayment of the notes.
TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial paper typically
represents short-term, unsecured, negotiable promissory notes issued by a state
and its political subdivisions. These notes are issued to finance seasonal
working capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are refinanced
with long-term debt. In most cases, tax-exempt commercial paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions and is
actively traded.
WHEN-ISSUED OBLIGATIONS. Each Fund may invest in when- issued Municipal
Obligations. In connection with these investments, each Fund will direct its
Custodian to place cash, U.S. Government obligations or other liquid high-grade
debt instruments in a segregated account in an amount sufficient to make payment
for the securities to be purchased. When a segregated account is maintained
because a Fund purchases securities on a when-issued basis, the assets deposited
in the segregated account will be valued daily at market for the purpose of
determining the adequacy of the securities in the account. If the market value
of such securities declines, additional cash or securities will be placed in the
account on a daily basis so that the market value of the account will equal the
amount of the Fund's commitments to purchase securities on a when-issued basis.
To the extent funds are in a segregated account, they will not be available for
new investment or to meet redemptions. Securities purchased on a when-issued
basis and the securities held in a Fund's portfolio are subject to changes in
market value based upon changes in the level of interest rates (which will
generally result in all of those securities changing in value in the same way,
i.e, all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise). Therefore, if in order to achieve
higher returns, a Fund remains substantially fully invested at the same time
that it has purchased securities on a when-issued basis, there will be a
- 6 -
<PAGE>
possibility that the market value of the Fund's assets will have greater
fluctuation. The purchase of securities on a when-issued basis may involve a
risk of loss if the broker-dealer selling the securities fails to deliver after
the value of the securities has risen.
When the time comes for a Fund to make payment for securities purchased
on a when-issued basis, the Fund will do so by using then-available cash flow,
by sale of the securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the securities purchased on a when-issued basis themselves (which may
have a market value greater or less than the Fund's payment obligation).
Although a Fund will only make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, the
Funds may sell these obligations before the settlement date if it is deemed
advisable by the Adviser as a matter of investment strategy. Sales of securities
for these purposes carry a greater potential for the realization of capital
gains and losses, which are not exempt from federal income taxes.
PARTICIPATION INTERESTS. Each Fund may invest in participation
interests in Municipal Obligations. A Fund will have the right to sell the
interest back to the bank or other financial institution and draw on the letter
of credit on demand, generally on seven days' notice, for all or any part of the
Fund's participation interest in the par value of the Municipal Obligation plus
accrued interest. Each Fund intends to exercise the demand on the letter of
credit only under the following circumstances: (1) default of any of the terms
of the documents of the Municipal Obligation, (2) as needed to provide liquidity
in order to meet redemptions, or (3) to maintain a high quality investment
portfolio. The bank or financial institution will retain a service and letter of
credit fee and a fee for issuing the repurchase commitment in an amount equal to
the excess of the interest paid by the issuer on the Municipal Obligations over
the negotiated yield at which the instruments were purchased by the Fund.
Participation interests will be purchased only if, in the opinion of counsel of
the issuer, interest income on the interests will be tax-exempt when distributed
as dividends to shareholders.
Banks and financial institutions are subject to extensive governmental
regulations which may limit the amounts and types of loans and other financial
commitments that may be made and interest rates and fees which may be charged.
The profitability of banks and financial institutions is largely dependent upon
the availability and cost of capital funds to finance lending operations under
prevailing money market conditions. General economic conditions also play an
important part in the operations of these entities and exposure to credit losses
arising from
- 7 -
<PAGE>
possible financial difficulties of borrowers may affect the ability of a bank or
financial institution to meet its obligations with respect to a participation
interest.
LEASE OBLIGATIONS. The Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund may invest in Municipal Obligations that constitute
participation in lease obligations or installment purchase contract obligations
(hereinafter collectively called "lease obligations") of municipal authorities
or entities. Lease obligations provide a premium interest rate, which along with
the regular amortization of the principal, may make them attractive for a
portion of the assets of the Funds. As described in the Prospectus, certain of
these lease obligations contain "non-appropriation" clauses, and the Trust will
seek to minimize the special risks associated with such securities by only
investing in "non-appropriation" lease obligations where (1) the nature of the
leased equipment or property is such that its ownership or use is essential to a
governmental function of the municipality, (2) the lease payments will commence
amortization of principal at an early date resulting in an average life of seven
years or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if the lease payments are not appropriated, (4) the lease
obligor has maintained good market acceptability in the past, (5) the investment
is of a size that will be attractive to institutional investors, and (6) the
underlying leased equipment has elements of portability and/or use that enhance
its marketability in the event foreclosure on the underlying equipment were ever
required.
Neither the Tax-Free Intermediate Term Fund nor the Ohio Insured
Tax-Free Fund will invest more than 10% of its net assets in lease obligations
if the Adviser determines that there is no secondary market available for these
obligations and all other illiquid securities. Neither Fund intends to invest
more than an additional 5% of its net assets in municipal lease obligations
determined by the Adviser to be liquid. In determining the liquidity of such
obligations, the Adviser will consider such factors as (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the security; and (4)
the nature of the marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers and the mechanics of transfer.
QUALITY RATINGS OF MUNICIPAL OBLIGATIONS
The Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California
Tax-Free Money Fund and the Florida Tax-Free Money Fund may invest in Municipal
Obligations only if rated at the
- 8 -
<PAGE>
time of purchase within the two highest grades assigned by any two nationally
recognized statistical rating organizations ("NRSROs") (or by any one NRSRO if
the obligation is rated by only that NRSRO). The NRSROs which may rate the
obligations of the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund include
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group
("S&P") or Fitch Investors Services, Inc. ("Fitch").
The Tax-Free Intermediate Term Fund may invest in tax-exempt bonds
rated at the time of purchase within the three highest grades assigned by
Moody's, S&P or Fitch. The Ohio Insured Tax- Free Fund may invest in tax-exempt
bonds rated at the time of purchase within the four highest grades assigned by
Moody's, S&P or Fitch. The Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund may also invest in tax-exempt notes and commercial paper
determined by the Adviser to meet the Funds' quality standards. In making this
determination, the Adviser will consider the ratings assigned by the NRSROs for
those obligations.
MOODY'S RATINGS
1. Tax-Exempt Bonds. The four highest ratings of Moody's for tax-exempt
bonds are Aaa, Aa, A and Baa. Bonds rated Aaa are judged by Moody's to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issuers. Bonds
rated Aa are judged to be of high quality by all standards. Together with the
Aaa group, they comprise what are generally known as high-grade bonds. Moody's
says that Aa bonds are rated lower than the best bonds because margins of
protection or other elements make long term risks appear somewhat larger than
Aaa bonds. Moody's describes bonds rated A as possessing many favorable
investment attributes and as upper medium grade obligations. Factors giving
security to principal and interest of A rated bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Bonds which are rated by Moody's in the fourth highest rating (Baa)
are considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Those obligations in the A and Baa group which Moody's
believes possess the strongest investment attributes are designated by the
symbol A 1 and Baa 1.
- 9 -
<PAGE>
2. Tax-Exempt Notes. Moody's highest rating for tax-exempt notes is
MIG-1. Moody's says that notes rated MIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
Notes bearing the MIG-2 designation are of high quality, with margins of
protection ample although not so large as in the MIG-1 group. Notes bearing the
designation MIG-3 are of favorable quality, with all security elements accounted
for but lacking the undeniable strength of the preceding grades. Market access
for refinancing, in particular, is likely to be less well established.
3. Tax-Exempt Commercial Paper. The rating Prime-1 is the highest
tax-exempt commercial paper rating assigned by Moody's. Issuers rated Prime-1
are judged to be of the best quality. Their short-term debt obligations carry
the smallest degree of investment risk. Margins of support for current
indebtedness are large or stable with cash flow and asset protection well
assured. Current liquidity provides ample coverage of near-term liabilities and
unused alternative financing arrangements are generally available. While
protective elements may change over the intermediate or long term, such changes
are most unlikely to impair the fundamentally strong position of short-term
obligations. Issuers rated Prime-2 have a strong capacity for repayment of
short-term obligations.
S&P RATINGS
1. Tax-Exempt Bonds. The four highest ratings of S&P for tax-exempt
bonds are AAA, AA, A and BBB. Bonds rated AAA have the highest rating assigned
by S&P to a debt obligation. Capacity to pay interest and repay principal is
extremely strong. Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in a small degree.
Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
Bonds which are rated by S&P in the fourth highest rating (BBB) are regarded as
having an adequate capacity to pay interest and repay principal and are
considered "investment grade." Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal than
for bonds in higher rated categories. The ratings for tax-exempt bonds may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
- 10 -
<PAGE>
2. Tax-Exempt Notes. Tax-exempt note ratings are generally given by S&P
to notes that mature in three years or less. Notes rated SP-1 have very strong
or strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics will be given a plus designation. Notes
rated SP-2 have satisfactory capacity to pay principal and interest.
3. Tax-Exempt Commercial Paper. The ratings A-1+ and A-1 are the
highest tax-exempt commercial paper ratings assigned by S&P. These designations
indicate the degree of safety regarding timely payment is either overwhelming
(A-1+) or very strong (A- 1). Capacity for timely payment on issues rated A-2 is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated A-1.
FITCH RATINGS
1. Tax-Exempt Bonds. The four highest ratings of Fitch for tax-exempt
bonds are AAA, AA, A and BBB. Bonds rated AAA are regarded by Fitch as being of
the highest quality, with the obligor having an extraordinary ability to pay
interest and repay principal which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are regarded by Fitch as high quality
obligations. The obligor's ability to pay interest and repay principal, while
very strong, is somewhat less than for AAA rated bonds, and more subject to
possible change over the term of the issue. Bonds rated A are regarded by Fitch
as being of good quality. The obligor's ability to pay interest and repay
principal is strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings. Bonds rated BBB are
regarded by Fitch as being of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to weaken this
ability than bonds with higher ratings. Fitch ratings may be modified by the
addition of a plus (+) or minus (-) sign.
2. Tax-Exempt Notes. The ratings F-1+, F-1 and F-2 are the highest
ratings assigned by Fitch for tax-exempt notes. Notes assigned the F-1+ rating
are regarded by Fitch as having the strongest degree of assurance for timely
payment. Notes assigned the F-1 rating reflect an assurance for timely payment
only slightly less than the strongest issues. Notes assigned the F-2 rating have
a degree of assurance for timely payment with a lesser margin of safety than
higher-rated notes.
3. Tax-Exempt Commercial Paper. Commercial paper rated Fitch-1
is regarded as having the strongest degree of assurance for timely payment.
Issues assigned the Fitch-2 rating reflect an assurance of timely payment only
slightly less in degree than the strongest issues.
- 11 -
<PAGE>
GENERAL. The ratings of Moody's, S&P and Fitch represent their opinions
of the quality of the obligations rated by them. It should be emphasized that
such ratings are general and are not absolute standards of quality.
Consequently, obligations with the same maturity, coupon and rating may have
different yields, while obligations of the same maturity and coupon, but with
different ratings, may have the same yield. It is the responsibility of the
Adviser to appraise independently the fundamental quality of the obligations
held by the Funds. Certain Municipal Obligations may be backed by letters of
credit or similar commitments issued by banks and, in such instances, the
obligation of the bank and other credit factors will be considered in assessing
the quality of the Municipal Obligations.
Any Municipal Obligation which depends on the credit of the U.S.
Government (e.g. project notes) will be considered by the Adviser as having the
equivalent of the highest rating of Moody's, S&P or Fitch. In addition, unrated
Municipal Obligations will be considered as being within the foregoing quality
ratings if other equal or junior Municipal Obligations of the same issuer are
rated and their ratings are within the foregoing ratings of Moody's, S&P or
Fitch. Each Fund (except the California Tax-Free Money Fund) may also invest in
Municipal Obligations which are not rated if, in the opinion of the Adviser,
subject to the review of the Board of Trustees, such obligations are of
comparable quality to those rated obligations in which the applicable Fund may
invest.
Subsequent to its purchase by a Fund, an obligation may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. If the rating of an obligation held by a Fund is reduced below its
minimum requirements, the Fund will be required to exercise the demand provision
or sell the obligation as soon as practicable.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and investment
policies described in the Prospectuses (see "Investment Objectives and
Policies") appears below:
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or of banks or institutions the accounts of which are insured by
the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable certificates
evidencing the indebtedness of a commercial bank to repay funds deposited with
it for a definite period of time (usually from fourteen days to one year) at a
stated or variable interest rate. Bankers' acceptances are credit instruments
- 12 -
<PAGE>
evidencing the obligation of a bank to pay a draft which has been drawn on it by
a customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. The Funds will
only invest in bankers' acceptances of banks having a short-term rating of A-1
by Standard & Poor's Ratings Group or Prime-1 by Moody's Investors Service, Inc.
Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Each Fund will not
invest in time deposits maturing in more than seven days if, as a result
thereof, more than 10% of the value of its net assets would be invested in such
securities and other illiquid securities.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from
one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations. Each Fund will only
invest in taxable commercial paper provided the paper is rated in one of the two
highest categories by any two NRSROs (or by any one NRSRO if the security is
rated by only that NRSRO). Each Fund other than the California Tax-Free Money
Fund may also invest in unrated commercial paper of issuers who have outstanding
unsecured debt rated Aa or better by Moody's or AA or better by Standard &
Poor's. Certain notes may have floating or variable rates. Variable and floating
rate notes with a demand notice period exceeding seven days will be subject to
each Fund's restrictions on illiquid investments (see "Investment Limitations")
unless, in the judgment of the Adviser, subject to the direction of the Board of
Trustees, such note is liquid. The Funds do not presently intend to invest in
taxable commercial paper.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Service, Inc. Among the factors considered by Moody's in
assigning ratings are the following: valuation of the management of the issuer;
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial strength of the parent company and the relationships which
exist with the issuer; and recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors are all considered in
determining whether the commercial paper is rated Prime-1 or Prime-2. Commercial
paper rated A (highest quality) by Standard & Poor's Ratings Group has the
following characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated "A" or better, although in some
cases "BBB" credits may be allowed; the issuer has access to at least two
additional channels of borrowing;
- 13 -
<PAGE>
basic earnings and cash flow have an upward trend with allowance made for
unusual circumstances; typically, the issuer's industry is well established and
the issuer has a strong position within the industry; and the reliability and
quality of management are unquestioned. The relative strength or weakness of the
above factors determines whether the issuer's commercial paper is rated A-1 or
A-2.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 10% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time a Fund enters
into a repurchase agreement, the value of the underlying security, including
accrued interest, will equal or exceed the value of the repurchase agreement,
and in the case of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including accrued interest,
will at all times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must consist of either certificates
of deposit, eligible bankers' acceptances or securities which are issued or
guaranteed by the United States Government or its agencies. The collateral will
be held by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Fund to the seller subject to the
repurchase agreement and is therefore subject to that Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the
- 14 -
<PAGE>
securities purchased by a Fund subject to a repurchase agreement as being owned
by that Fund or as being collateral for a loan by the Fund to the seller. In the
event of the commencement of bankruptcy or insolvency proceedings with respect
to the seller of the securities before repurchase of the security under a
repurchase agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve loss of interest or decline in
price of the security. If a court characterized the transaction as a loan and a
Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for a Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case, the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case a Fund may
incur a loss if the proceeds to that Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund involved will direct the seller of the
security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
enforce the seller's contractual obligation to deliver additional securities.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities subject to the restrictions stated in its Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by a Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Funds receive amounts equal to the interest on loaned securities and also
receive one or more of (a) negotiated loan fees, (b) interest on securities used
as collateral, or (c) interest on short-term debt securities purchased with such
collateral; either type of interest may be shared with the borrower. The Funds
may also pay fees to placing brokers as well as custodian and administrative
fees in connection with loans. Fees may only be paid to a placing broker
provided that the Trustees determine that the fee paid to the placing broker is
reasonable and based solely upon services rendered, that the Trustees separately
consider the propriety of any fee shared by the placing broker with the
borrower, and that the fees are not used to compensate the Adviser or any
affiliated person of the Trust or an affiliated person of the Adviser or other
affiliated person. The terms of the Funds' loans must meet applicable tests
under the Internal Revenue Code and permit the
- 15 -
<PAGE>
Funds to reacquire loaned securities on five days' notice or in time to vote on
any important matter.
MAJORITY. As used in the Prospectuses and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
any Fund) means the lesser of (1) 67% or more of the outstanding shares of the
Trust (or the applicable Fund) present at a meeting, if the holders of more than
50% of the outstanding shares of the Trust (or the applicable Fund) are present
or represented at such meeting or (2) more than 50% of the outstanding shares of
the Trust (or the applicable Fund).
INVESTMENT LIMITATIONS
- ----------------------
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to any Fund without the affirmative vote of a
majority of the outstanding shares of that Fund. For the purpose of these
investment limitations, the identification of the "issuer" of Municipal
Obligations which are not general obligation bonds is made by the Adviser on the
basis of the characteristics of the obligation, the most significant of which is
the source of funds for the payment of principal of and interest on such
obligations.
THE LIMITATIONS APPLICABLE TO THE TAX-FREE MONEY FUND, THE TAX-FREE
INTERMEDIATE TERM FUND AND THE OHIO INSURED TAX-FREE FUND ARE:
1. Borrowing Money. Each Fund will not borrow money or pledge, mortgage
or hypothecate its assets, except as a temporary measure for extraordinary or
emergency purposes and then only in amounts not in excess of 10% of the value of
its total assets. A Fund will not make any additional purchases of portfolio
securities while borrowings are outstanding.
2. Underwriting. Each Fund will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), a
Fund may be deemed an underwriter under certain federal securities laws.
3. Illiquid Investments. Each Fund will not purchase securities for
which there are legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 10% of the value of the total assets of the Fund would be invested in
such securities.
- 16 -
<PAGE>
4. Real Estate. Each Fund will not purchase, hold or deal in real
estate, but this shall not prevent investments in Municipal Obligations which
are secured by or represent interests in real estate.
5. Commodities. Each Fund will not purchase, hold or deal in
commodities or commodities futures contracts, or invest in oil, gas or other
mineral explorative or development programs.
6. Loans. Each Fund will not make loans to other persons, except (a)
by the purchase of a portion of an issue of debt securities in accordance with
its investment objective, policies and limitations, (b) by loaning portfolio
securities, or (c) by engaging in repurchase transactions.
7. Certain Companies. Each Fund will not purchase securities of a
company, if such purchase at the time thereof, would cause more than 5% of the
Fund's total assets to be invested in securities of companies, which, including
predecessors, have a record of less than three years' continuous operation.
8. Obligations of One Issuer. Each Fund will not purchase more than 10%
of the outstanding publicly issued debt obligations of any issuer. With respect
to the Ohio Insured Tax-Free Fund, this limitation does not apply to securities
issued or guaranteed by the State of Ohio and its political subdivisions and
duly constituted authorities and corporations. This limitation is not applicable
to privately issued Municipal Obligations.
9. Investing for Control. Each Fund will not invest in companies for
the purpose of exercising control.
10. Other Investment Companies. Each Fund will not invest more than 10%
of its total assets in the securities of other investment companies and then
only for temporary purposes in companies whose dividends are tax-exempt or
invest more than 5% of its total assets in the securities of any investment
company. Each Fund will not purchase more than 3% of the outstanding voting
stock of any investment company.
11. Margin Purchases. Each Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short-term credit obtained by a Fund for the clearance of purchases and sales
or redemption of securities.
12. Common Stocks. Each Fund will not invest in common stocks.
13. Securities Owned by Affiliates. Each Fund will not
purchase or retain the securities of any issuer if, to the Trust's knowledge,
those Trustees and officers of the Trust or of the Adviser, who individually
own beneficially more than 0.5% of
- 17 -
<PAGE>
the outstanding securities of such issuer, together own beneficially more than
5% of such securities.
14. Short Sales and Options. Each Fund will not sell any securities
short or write call options. This limitation is not applicable to the extent
that sales by a Fund of Municipal Obligations with puts attached or sales by a
Fund of other securities in which the Fund may otherwise invest would be
considered to be sales of options.
As diversified series of the Trust, the Tax-Free Money Fund and the
Tax-Free Intermediate Term Fund have adopted the following additional investment
limitation, which may not be changed with respect to either Fund without the
affirmative vote of a majority of the outstanding shares of the applicable Fund.
Neither Fund will purchase the securities of any issuer if such purchase at the
time thereof would cause less than 75% of the value of the total assets of the
Fund to be invested in cash and cash items (including receivables), securities
issued by the U.S. Government, its agencies or instrumentalities, securities of
other investment companies, and other securities for the purposes of this
calculation limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the total assets of a Fund and to not more than
10% of the outstanding voting securities of such issuer.
THE LIMITATIONS APPLICABLE TO THE OHIO TAX-FREE MONEY FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that, when made, such temporary borrowings are
in an amount not exceeding 5% of the Fund's total assets. The Fund also will not
make any borrowing which would cause outstanding borrowings to exceed one-third
of the value of its total assets. The Fund will not make any additional
purchases of portfolio securities if outstanding borrowings exceed 5% of the
value of its total assets.
2. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by it
except as may be necessary in connection with borrowings described in limitation
(1) above. The Fund will not mortgage, pledge or hypothecate more than one-third
of its assets in connection with borrowings.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of its portfolio securities (including
restricted securities), the Fund may be deemed an underwriter under certain
federal securities laws.
- 18 -
<PAGE>
4. Illiquid Investments. The Fund will not invest more than 10% of
its net assets in securities for which there are legal or contractual
restrictions on resale, repurchase agreements maturing in more than seven days
and other illiquid securities.
5. Real Estate. The Fund will not purchase, hold or deal in real
estate. This limitation is not applicable to investments in securities which
are secured by or represent interests in real estate.
6. Commodities. The Fund will not purchase, hold or deal in commodities
or commodities futures contracts, or invest in oil, gas or other mineral
explorative or development programs. This limitation is not applicable to the
extent that the tax-exempt obligations, U.S. Government obligations and other
securities in which the Fund may otherwise invest would be considered to be such
commodities, contracts or investments.
7. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
a portion of an issue of tax-exempt obligations or publicly distributed bonds,
debentures or other securities.
8. Margin Purchases. The Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable
to short-term credit obtained by the Fund for the clearance of purchases and
sales or redemption of securities.
9. Short Sales and Options. The Fund will not sell any securities short
or sell put and call options. This limitation is not applicable to the extent
that sales by the Fund of tax-exempt obligations with puts attached or sales by
the Fund of other securities in which the Fund may otherwise invest would be
considered to be sales of options.
10. Other Investment Companies. The Fund will not invest more than 5%
of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Concentration. The Fund will not invest more than 25% of its total
assets in a particular industry; this limitation is not applicable to
investments in tax-exempt obligations issued by the U.S. Government, its
territories and possessions, the District of Columbia and their respective
agencies and instrumentalities or any state and its political subdivisions,
agencies, authorities and instrumentalities. The Fund may invest more than 25%
of its total assets in tax-exempt obligations in a particular segment of the
bond market.
- 19 -
<PAGE>
THE LIMITATIONS APPLICABLE TO THE CALIFORNIA TAX-FREE MONEY
FUND AND THE FLORIDA TAX-FREE MONEY FUND ARE:
1. Borrowing Money. Each Fund will not borrow money, except from a bank
for temporary purposes only, provided that, when made, such temporary borrowings
are in an amount not exceeding 10% of its total assets. Each Fund will not make
any additional purchases of portfolio securities if outstanding borrowings
exceed 5% of the value of its total assets.
2. Pledging. Each Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. Each Fund will not mortgage, pledge or hypothecate more
than 10% of the value of its total assets in connection with borrowings.
3. Underwriting. Each Fund will not act as underwriter of
securities issued by other persons. This limitation is not applicable to the
extent that, in connection with the disposition of its portfolio securities
(including restricted securities), a Fund may be deemed an underwriter under
certain federal securities laws.
4. Illiquid Investments. Each Fund will not invest more than 10% of
its net assets in securities for which there are legal or contractual
restrictions on resale, repurchase agreements maturing in more than seven days
and other illiquid securities.
5. Real Estate. Each Fund will not purchase, hold or deal in real
estate. This limitation is not applicable to investments in securities which
are secured by or represent interests in real estate.
6. Commodities. Each Fund will not purchase, hold or deal in
commodities or commodities futures contracts, or invest in oil, gas or other
mineral explorative or development programs. This limitation is not applicable
to the extent that the tax-exempt obligations, U.S. Government obligations and
other securities in which the Funds may otherwise invest would be considered to
be such commodities, contracts or investments.
7. Loans. Each Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
a portion of an issue of tax-exempt obligations or publicly distributed bonds,
debentures or other securities.
- 20 -
<PAGE>
8. Margin Purchases. Each Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable
to short-term credit obtained by the Funds for the clearance of purchases and
sales or redemption of securities.
9. Short Sales and Options. Each Fund will not sell any securities
short or sell put and call options. This limitation is not applicable to the
extent that sales by a Fund of tax-exempt obligations with puts attached or
sales by a Fund of other securities in which a Fund may otherwise invest would
be considered to be sales of options.
10. Other Investment Companies. Each Fund will not invest more than
5% of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Concentration. Each Fund will not invest more than 25% of its
total assets in a particular industry; this limitation is not applicable to
investments in tax-exempt obligations issued by governments or political
subdivisions of governments.
12. Senior Securities. Each Fund will not issue or sell any class of
senior security as defined by the Investment Company Act of 1940 except to the
extent that notes evidencing temporary borrowings or the purchase of securities
on a when-issued basis might be deemed as such.
With respect to the percentages adopted by the Trust as maximum
limitations on the Funds' investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.
The Trust has never pledged, mortgaged or hypothecated the assets of
any Fund, and the Trust presently intends to continue this policy. The Trust has
never acquired, nor does it presently intend to acquire, securities issued by
any other investment company or investment trust. The Funds will not purchase
securities for which there are legal or contractual restrictions on resale or
enter into a repurchase agreement maturing in more than seven days if, as a
result thereof, more than 10% of the value of a Fund's net assets would be
invested in such securities. The statements of intention in this paragraph
reflect nonfundamental policies which may be changed by the Board of Trustees
without shareholder approval.
- 21 -
<PAGE>
INSURERS OF THE OHIO INSURED TAX-FREE FUND'S PORTFOLIO SECURITIES
- -----------------------------------------------------------------
In connection with its investments in insured long-term Ohio
Obligations, the Ohio Insured Tax-Free Fund may purchase insurance from, or
obligations insured by, one of the following recognized insurers of municipal
obligations: MBIA Insurance Corp.("MBIA"), AMBAC Indemnity Corp. ("AMBAC"),
Financial Guaranty Insurance Co. ("FGIC") or Financial Security Assurance Inc.
("FSA"). Each insurer is rated Aaa by Moody's and AAA by S&P and each insurer
maintains a statutory capital claims ratio well below the exposure limits set by
the Insurance Commissioner of New York (300:1 insurance risk exposure to every
dollar of statutory capital). While such insurance reduces the risk that
principal or interest will not be paid when due, it is not a protection against
market risks arising from other factors, such as changes in prevailing interest
rates. If the issuer defaults on payments of interest or principal, the trustee
and/or payment agent of the issuer will notify the insurer who will make payment
to the bondholders. There is no assurance that any insurance company will meet
its obligations.
MBIA has been the leader in the bond insurance market for the past
fourteen years, holding a 42% share of the market in 1995. MBIA insured
approximately $28 billion of new issue municipal bonds in 1995, as compared to
$30 billion during the previous year. Although the dollar volume of insured new
issues in the municipal market increased from 37% in 1994 to 43% in 1995,
premium levels remained very competitive. Consequently, in order to further
enhance growth prospects, insurers throughout the industry are diversifying
their products by offering other finnacial products to their exisiting client
base and by targeting both the asset-based and the international market.
Although municipal bond insurance remains the dominant component of MBIA's
written and earned premiums, the company made efforts in 1995 to capitalize on
international insurance opportunities by entering into a European joint venture
with AMBAC. MBIA is 98.4% publicly owned, with its remaining shares owned by
Aetna Casualty & Surety Company.
AMBAC is the oldest and second largest bond insurer with a 25% market
share in 1995. AMBAC's portion of the insured new issue municipal market totaled
$16.8 billion in 1995. AMBAC's management remains committed to investment grade,
zero-loss underwriting and risk management standards. For the eighth year in a
row, AMBAC's capital charge has declined, a reflection of the company's efforts
to reposition its portfolio toward lower risk sectors. AMBAC's margin of safety
rose in 1995 to 1.4x - 1.5x, which compares favorably with S&P's minimum "AAA"
bond insurance standards of 1.25x. AMBAC is also diversifying its products and
services, which enabled it to post a 27% increase in total net par written in
1995. AMBAC is entirely owned by public shareholders.
- 22 -
<PAGE>
FGIC is 99% owned by General Electric Capital Corporation and 1% owned
by Sumitomo Marine & Fire Insurance Co. Ltd. In 1995, FGIC wrote $16.7 billion
in net par municipal insurance, compared with $16.4 billion for the prior year.
This slight increase was impressive in light of the generally tight environment
in the municipal bond insurance arena. FGIC's focus is on lower-risk segments
for the municipal market, such as G.O. and water and sewer. Health care, one of
the more riskier sectors of the municipal market, represents only 5.4% of the
company's business, compared with 11.9% for the industry. FGIC's net income for
1995 was $166.9 million, compared with $179.3 million in 1994.
FSA acquired Capital Guaranty Insurance Co.("CGIC") in 1995, which
increased its market share and boosted its claims-paying resources and its
margin of safety. The cost of acquiring CGIC was largely financed with newly
issued FSA stock. In addition, FSA secured a $125 million nonrecourse line of
credit which further increased policyholder protection. The acquisition of CGIC
also enabled FSA's volume of municipal insurance to surpass its asset-backed
business. In terms of the new issue municipal market, FSA insured $4.1 billion
of new issue municipal bonds in 1995 while $2.9 billion was insured by CGIC.
Municipal net par now represents 65% of the total book of business, with asset-
backed net par exposure falling off to about 35%. The company's quality and risk
measurements are generally equal to or slightly better than most industry
averages and it also maintains a well diversified portfolio. Half of FSA's stock
is owned by U.S. West Capital Corp., 36% is publicly owned and the remaining
shares are held by Fund American Enterprises Holding Inc. and Tokio Marine and
Fire Insurance Co., Ltd.
TRUSTEES AND OFFICERS
- ----------------------
The following is a list of the Trustees and executive officers of the
Trust and their aggregate compensation from the Trust and the funds of
Countrywide Investments (consisting of the Trust, Countrywide Investment Trust
and Countrywide Strategic Trust) for the fiscal year ended June 30, 1996. Each
Trustee who is an "interested person" of the Trust, as defined by the Investment
Company Act of 1940, is indicated by an asterisk. Each of the Trustees is also a
Trustee of Countrywide Investment Trust and Countrywide Strategic Trust.
- 23 -
<PAGE>
COMPENSATION
COMPENSATION FROM
NAME AGE POSITION HELD FROM TRUST COUNTRYWIDE INVESTMENTS
Donald L. Bodgon, MD 66 Trustee $ 0 $ 0
John R. Delfino 63 Trustee 0 0
H. Jerome Lerner 58 Trustee 2,467 7,500
*Robert H. Leshner 57 President/Trustee 0 0
*Angelo R. Mozilo 58 Trustee 0 0
Oscar P. Robertson 57 Trustee 1,167 4,700
John F. Seymour, Jr. 59 Trustee 0 0
Sebastiano Sterpa 67 Trustee 0 0
John F. Splain 40 Secretary 0 0
Mark J. Seger 35 Treasurer 0 0
* Mr. Leshner and Mr. Mozilo, as officers and directors of
Countrywide Investments, Inc., are each an "interested
person" of the Trust within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940.
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
DONALD L. BOGDON, M.D., 435 Arden Avenue, Glendale, California is a
physician with Hematology Oncology Consultants and a Director of Verdugo VNA (a
hospice facility). Until 1996 he was President of Western Hematology/Oncology
and until 1993 he was Chairman of the Board of Glendale Memorial Hospital.
JOHN R. DELFINO, 2029 Century Park East, Los Angeles, California is
President of Concorde Capital Corporation (an investment firm). Until 1993 he
was a director of Cypress Financial and Chairman of Rancho Santa Margarita,
mortgage banking firms.
H. JEROME LERNER, 7149 Knoll Road, Cincinnati, Ohio is a principal of
HJL Enterprises and is Chairman of Crane Electronics, Inc., a manufacturer of
electronic connectors.
ROBERT H. LESHNER, 312 Walnut Street, Cincinnati, Ohio is President and
a director of Countrywide Investments, Inc. (the investment adviser and
principal underwriter of the Trust) and Countrywide Financial Services, Inc.
(a financial services company and parent of Countrywide Investments, Inc. and
Countrywide Fund Services, Inc.). He is Vice Chairman and a director of
Countrywide Fund Services, Inc. (a registered transfer agent) and President and
a Trustee of Countrywide Investment Trust and Countrywide Strategic Trust,
registered investment companies.
ANGELO R. MOZILO, 155 North Lake Avenue, Pasadena, California is Vice
Chairman and Executive Vice President of Countrywide Credit Industries, Inc.
(a holding company). He is a director of Countrywide Home Loans, Inc.
(a residential mortgage
- 24 -
<PAGE>
lender), CTC Foreclosure Services Corporation (a foreclosure trustee) and
LandSafe, Inc. (the parent company of fifteen LandSafe entities which provide
property appraisals, credit reporting services, title insurance and/or closing
services for residential mortgages), each a subsidiary of Countrywide Credit
Industries, Inc. He is Chairman and a director of Countrywide Financial
Services, Inc., Countrywide Investments, Inc., Countrywide Fund Services, Inc.,
Countrywide Servicing Exchange (a loan servicing broker), Countrywide Capital
Markets, Inc., (parent company of Countrywide Securities Corporation and
Countrywide Servicing Exchange) and various LandSafe subsidiaries and is
Chairman and Chief Executive Officer of Countrywide Securities Corporation (a
registered broker-dealer), each a subsidiary of Countrywide Credit Industries,
Inc. He is also Vice Chairman of CWM Mortgage Holdings, Inc. (a publicly-held
real estate investment trust).
OSCAR P. ROBERTSON, 4293 Muhlhauser Road, Fairfield, Ohio is President
of Orchem Corp., a chemical specialties distributor, and Orpack Stone
Corporation, a corrugated box manufacturer.
JOHN F. SEYMOUR, JR., 46-393 Blackhawk Drive, Indian Wells, California
is Chief Executive Officer of the Southern California Housing Development Agency
and a consultant for Orange Coast Title Co. (a title insurance company). He is
also a director of Irvine Apartment Communities (a real estate investment trust)
and Inco Homes (a home builder). Until 1994 he was a director of the California
Housing Finance Agency.
SEBASTIANO STERPA, 200 West Glenoaks Boulevard, Glendale, California is
Chairman of Sterpa Realty, Inc. and Chairman and a director of the California
Housing Finance Agency. He is also a director of Real Estate Business Services
and a director of the SunAmerica Mutual Funds.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is Secretary and
General Counsel of Countrywide Investments, Inc. and Countrywide Financial
Services, Inc. and Vice President, Secretary and General Counsel of Countrywide
Fund Services, Inc. He is also Secretary of Countrywide Investment Trust,
Countrywide Strategic Trust, Brundage, Story and Rose Investment Trust,
Williamsburg Investment Trust, Markman MultiFund Trust, The Tuscarora Investment
Trust, PRAGMA Investment Trust, Maplewood Investment Trust, a series company,
and The Thermo Opportunity Fund, Inc. and Assistant Secretary of Schwartz
Investment Trust, Fremont Mutual Funds, Inc., Capitol Square Funds, The Gannett
Welsh & Kotler Funds and Interactive Investments, all of which are registered
investment companies.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio is Vice
President and Fund Controller of Countrywide Fund Services, Inc. He is also
Treasurer of Countrywide Investment Trust, Countrywide Strategic Trust,
Brundage, Story and Rose Investment Trust, Williamsburg Investment Trust,
Markman MultiFund Trust, PRAGMA Investment Trust, Maplewood Investment
- 25 -
<PAGE>
Trust, a series company, The Thermo Opportunity Fund, Inc. and Capitol Square
Funds, Assistant Treasurer of Schwartz Investment Trust, The Tuscarora
Investment Trust, The Gannett Welsh & Kotler Funds and Interactive Investments
and Assistant Secretary of Fremont Mutual Funds, Inc.
Each Trustee, except for Messrs. Leshner and Mozilo, receives a
quarterly retainer of $1,000 and a fee of $750 for each Board meeting attended.
Such fees are split equally among the Trust, Countrywide Investment Trust and
Countrywide Strategic Trust.
THE INVESTMENT ADVISER AND UNDERWRITER
- --------------------------------------
Countrywide Investments, Inc. (the "Adviser"), formerly Midwest Group
Financial Services, Inc., is the Funds' investment manager. The Adviser is a
subsidiary of Countrywide Financial Services, Inc., which is a wholly-owned
subsidiary of Countrywide Credit Industries, Inc., a New York Stock Exchange
listed company principally engaged in the business of residential mortgage
lending. Messrs. Mozilo and Leshner may be deemed to be affiliates of the
Adviser by reason of their position as Chairman and President, respectively,
of the Adviser. Messrs. Mozilo and Leshner, by reason of such affiliation, may
directly or indirectly receive benefits from the advisory fees paid to the
Adviser.
Under the terms of the investment advisory agreements between the Trust
and the Adviser, the Adviser manages the Funds' investments. Each Fund pays the
Adviser a fee computed and accrued daily and paid monthly at an annual rate of
.5% of its average daily net assets up to $100,000,000, .45% of such assets from
$100,000,000 to $200,000,000, .4% of such assets from $200,000,000 to
$300,000,000 and .375% of such assets in excess of $300,000,000. The total fees
paid by a Fund during the first and second halves of each fiscal year of the
Trust may not exceed the semiannual total of the daily fee accruals requested by
the Adviser during the applicable six month period.
For the fiscal years ended June 30, 1996, 1995 and 1994, the Tax-Free
Money Fund paid advisory fees of $140,891, $144,305 and $162,772, respectively.
For the fiscal years ended June 30, 1996, 1995 and 1994, the Tax-Free
Intermediate Term Fund accrued advisory fees of $398,576, $472,968 and $532,184,
respectively; however, the Adviser voluntarily waived $2,768 of such fees for
the fiscal year ended June 30, 1994 in order to reduce the operating expenses of
the Fund. For the fiscal years ended June 30, 1996, 1995 and 1994, the Ohio
Insured Tax-Free Fund accrued advisory fees of $397,265, $394,825 and $419,429,
respectively; however, the Adviser reimbursed the Fund for $2,708 of Class A
expenses for the fiscal year ended June 30, 1996, voluntarily waived $14,000 of
its advisory fees and reimbursed the Fund for
- 26 -
<PAGE>
$5,077 of Class A expenses for the fiscal year ended June 30, 1995 and
voluntarily waived $427 of its advisory fees for the fiscal year ended June 30,
1994 in order to reduce the operating expenses of the Fund. For the fiscal years
ended June 30, 1996, 1995 and 1994, the Ohio Tax-Free Money Fund paid advisory
fees of $1,117,233, $1,026,778 and $1,016,929, respectively. For the fiscal
years ended June 30, 1996, 1995 and 1994, the California Tax-Free Money Fund
accrued advisory fees of $142,143, $113,878 and $126,852, respectively; however,
the Adviser voluntarily waived $6,600, $34,500 and $66,715 of such fees for the
fiscal years ended June 30, 1996, 1995 and 1994, respectively, in order to
reduce the operating expenses of the Fund. For the fiscal years ended June 30,
1996, 1995 and 1994, the Florida Tax-Free Money Fund accrued advisory fees of
$152,663, $131,885 and $141,383, respectively; however, the Adviser voluntarily
waived $58,284, $38,141 and $65,243 of such fees for the fiscal years ended June
30, 1996, 1995 and 1994, respectively, in order to reduce the operating expenses
of the Fund.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The Adviser bears promotional expenses in
connection with the distribution of the Funds' shares to the extent that such
expenses are not assumed by the Funds under their plans of distribution (see
below). The compensation and expenses of any officer, Trustee or employee of the
Trust who is an officer, director, employee or stockholder of the Adviser are
paid by the Adviser.
By their terms, the Funds' investment advisory agreements remain in
force until February 28, 1999 and from year to year thereafter, subject to
annual approval by (a) the Board of Trustees or (b) a vote of the majority of a
Fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Trustees who are not interested persons of
the Trust, by a vote cast in person at a meeting called for the purpose of
voting such approval. The Funds' investment advisory agreements may be
terminated at any time, on sixty days' written notice, without the payment of
any penalty, by the Board of Trustees, by a vote of the majority of a Fund's
outstanding voting securities, or by the Adviser. The investment advisory
agreements automatically terminate in the event of their assignment, as defined
by the Investment Company Act of 1940 and the rules thereunder.
- 27 -
<PAGE>
The Adviser is also the principal underwriter of the Funds and, as
such, the exclusive agent for distribution of shares of the Funds. The Adviser
is obligated to sell the shares on a best efforts basis only against purchase
orders for the shares. Shares of each Fund are offered to the public on a
continuous basis.
The Adviser currently allows concessions to dealers who sell shares of
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund. The
Adviser retains the entire sales load on all direct initial investments in the
Funds and on all investments in accounts with no designated dealer of record.
For the fiscal year ended June 30, 1996, the aggregate underwriting commissions
on sales of the Funds' shares were $311,870 of which the Adviser paid $279,354
to unaffiliated dealers in the selling network, earned $14,509 as a
broker-dealer in the selling network and retained $18,007 in underwriting
commissions. For the fiscal year ended June 30, 1995, the aggregate underwriting
commissions on sales of the Funds' shares were $305,296 of which the Adviser
paid $274,170 to unaffiliated dealers in the selling network, earned $13,410 as
a broker-dealer in the selling network and retained $17,716 in underwriting
commissions. For the fiscal year ended June 30, 1994, the aggregate underwriting
commissions on sales of the Funds' shares were $758,606 of which the Adviser
paid $689,144 to unaffiliated dealers in the selling network, earned $33,328 as
a broker-dealer in the selling network and retained $36,134 in underwriting
commissions.
The Adviser retains the contingent deferred sales load on redemptions
of shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free
Fund which are subject to a contingent deferred sales load. For the fiscal year
ended June 30, 1996, the Adviser retained $5,802 and $349 of contingent deferred
sales loads on the redemption of Class C shares of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund, respectively.
The Funds may compensate dealers, including the Adviser and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plans" below.
DISTRIBUTION PLANS
- ------------------
CLASS A PLAN -- As stated in the Prospectus, the Funds have adopted a
plan of distribution (the "Class A Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 which permits each Fund to pay for expenses
incurred in the distribution and promotion of the Funds' shares, including but
not limited to, the printing of prospectuses, statements of additional
information and reports used for sales purposes, advertisements, expenses of
preparation and printing of sales literature, promotion, marketing and sales
expenses, and other distribution-related expenses, including any distribution
fees paid to securities dealers or other firms who have executed a distribution
or
- 30 -
<PAGE>
service agreement with the Adviser. The Class A Plan expressly limits payment of
the distribution expenses listed above in any fiscal year to a maximum of .25%
of the average daily net assets of the Tax-Free Money Fund and the California
Tax-Free Money Fund and .25% of the average daily net assets of the Class A
shares of the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund,
the Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund. Unreimbursed
expenses will not be carried over from year to year.
For the fiscal year ended June 30, 1996, the aggregate
distribution-related expenditures of the Tax-Free Money Fund ("MF"), the
Tax-Free Intermediate Term Fund ("ITF"), the Ohio Insured Tax-Free Fund ("OIF"),
the Ohio Tax-Free Money Fund ("OMF"), the California Tax-Free Money Fund ("CMF")
and the Florida Tax-Free Money Fund ("FMF") under the Class A Plan were $25,946,
$115,756, $14,824, $451,624, $8,687 and $8,631, respectively. Amounts were spent
as follows:
<TABLE>
<C> <C> <C> <C> <C> <C> <C>
MF ITF OIF OMF CMF FMF
Printing and mailing
of prospectuses and
reports to prospective
shareholders . . . . $1,946 $5,315 $5,009 $4,479 $1,687 $3,452
Payments to broker-
dealers and others
for the sale or
retention of assets . 24,000 110,441 9,815 444,000 7,000 5,179
Other promotional
expenses . . . . . . --- --- --- 3,145 --- ---
------- -------- ------- -------- ------ ------
$25,946 $115,756 $14,824 $451,624 $8,687 $8,631
======= ======== ======= ======== ====== ======
</TABLE>
CLASS C PLAN (Tax-Free Intermediate Term Fund and Ohio Insured Tax-Free
Fund) -- The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
have also adopted a plan of distribution (the "Class C Plan") with respect to
the Class C shares of such Funds. The Class C Plan provides for two categories
of payments. First, the Class C Plan provides for the payment to the Adviser of
an account maintenance fee, in an amount equal to an annual rate of .25% of the
average daily net assets of the Class C shares, which may be paid to other
dealers based on the average value of Class C shares owned by clients of such
dealers. In addition, a Fund may pay up to an additional .75% per annum of the
daily net assets of the Class C shares for expenses incurred in the distribution
and promotion of the shares, including prospectus costs for prospective
shareholders, costs of responding to prospective shareholder inquiries, payments
to brokers and dealers for selling and assisting in the distribution of Class C
shares, costs of advertising and promotion and any other expenses related to the
distribution of the Class C shares. Unreimbursed expenditures will not be
carried over from year to year. The Funds may make payments to dealers and other
persons in an amount up to .75% per annum of the average value of Class C shares
owned by their clients, in
- 31 -
<PAGE>
addition to the .25% account maintenance fee described above.
For the fiscal year ended June 30, 1996, the aggregate distribution-related
expenditures of the Tax-Free Intermediate Term Fund ("ITF") and the Ohio Insured
Tax-Free Fund ("OIF") under the Class C Plan were $22,701 and $12,297,
respectively. Amounts were spent as follows:
ITF OIF
Printing and mailing of
prospectuses and reports
to prospective shareholders. . . . . . . $ 358 $ 288
Payments to broker-dealers and
others for the sale or
retention of assets. . . . . . . . . . . 22,343 12,009
------- -------
$22,701 $12,297
======= =======
GENERAL INFORMATION -- Agreements implementing the Plans (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plans are made in accordance with written agreements.
The continuance of the Plans and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plans or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. A Plan may be terminated at any time
by a vote of a majority of the Independent Trustees or by a vote of the holders
of a majority of the outstanding shares of a Fund or the applicable class of a
Fund. In the event a Plan is terminated in accordance with its terms, the
affected Fund (or class) will not be required to make any payments for expenses
incurred by the Adviser after the termination date. Each Implementation
Agreement terminates automatically in the event of its assignment and may be
terminated at any time by a vote of a majority of the Independent Trustees or by
a vote of the holders of a majority of the outstanding shares of a Fund (or the
applicable class) on not more than 60 days' written notice to any other party to
the Implementation Agreement. The Plans may not be amended to increase
materially the amount to be spent for distribution without shareholder approval.
All material amendments to the Plans must be approved by a vote of the Trust's
Board of Trustees and by a vote of the Independent Trustees.
In approving the Plans, the Trustees determined, in the exercise of
their business judgment and in light of their
- 32 -
<PAGE>
fiduciary duties as Trustees, that there is a reasonable likelihood that the
Plans will benefit the Funds and their shareholders. The Board of Trustees
believes that expenditure of the Funds' assets for distribution expenses under
the Plans should assist in the growth of the Funds which will benefit the Funds
and their shareholders through increased economies of scale, greater investment
flexibility, greater portfolio diversification and less chance of disruption of
planned investment strategies. The Plans will be renewed only if the Trustees
make a similar determination for each subsequent year of the Plans. There can be
no assurance that the benefits anticipated from the expenditure of the Funds'
assets for distribution will be realized. While the Plans are in effect, all
amounts spent by the Funds pursuant to the Plans and the purposes for which such
expenditures were made must be reported quarterly to the Board of Trustees for
its review. Distribution expenses attributable to the sale of more than one
class of shares of a Fund will be allocated at least annually to each class of
shares based upon the ratio in which the sales of each class of shares bears to
the sales of all the shares of such Fund. In addition, the selection and
nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
Angelo R. Mozilo and Robert H. Leshner, as interested persons of the
Trust, may be deemed to have a financial interest in the operation of the Plans
and the Implementation Agreements.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
- 33 -
<PAGE>
directly from the issuer. Because the portfolio securities of the Funds are
generally traded on a net basis and transactions in such securities do not
normally involve brokerage commissions, the cost of portfolio securities
transactions of the Funds will consist primarily of dealer or underwriter
spreads. No brokerage commissions have been paid by the Funds during the last
three fiscal years.
The Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Funds and/or other accounts over
which the Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
Adviser determines in good faith that the commission is reasonable in relation
to the value of the brokerage and research services provided. The determination
may be viewed in terms of a particular transaction or the Adviser's overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Adviser and other affiliates
of the Trust or the Adviser may effect securities transactions which are
executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. No Fund will effect any
brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Funds do not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Adviser nor
affiliates of the Trust or the Adviser will receive reciprocal brokerage
business as a result of the brokerage business transacted by the Funds with
other brokers.
CODE OF ETHICS. The Trust and the Adviser have each adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act of
- 34 -
<PAGE>
1940. The Code significantly restricts the personal investing activities of all
employees of the Adviser and, as described below, imposes additional, more
onerous, restrictions on investment personnel of the Adviser. The Code requires
that all employees of the Adviser preclear any personal securities investment
(with limited exceptions, such as U.S. Government obligations). The preclearance
requirement and associated procedures are designed to identify any substantive
prohibition or limitation applicable to the proposed investment. In addition, no
employee may purchase or sell any security which at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any Fund. The substantive restrictions
applicable to investment personnel of the Adviser include a ban on acquiring any
securities in an initial public offering and a prohibition from profiting on
short-term trading in securities. Furthermore, the Code provides for trading
"blackout periods" which prohibit trading by investment personnel of the Adviser
within periods of trading by the Funds in the same (or equivalent) security.
PORTFOLIO TURNOVER
- ------------------
The Adviser intends to hold the portfolio securities of the Tax-Free
Money Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and
the Florida Tax-Free Money Fund to maturity and to limit portfolio turnover to
the extent possible. Nevertheless, changes in a Fund's portfolio will be made
promptly when determined to be advisable by reason of developments not foreseen
at the time of the original investment decision, and usually without reference
to the length of time a security has been held.
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
do not intend to purchase securities for short term trading; however, a security
may be sold in anticipation of a market decline, or purchased in anticipation of
a market rise and later sold. Securities will be purchased and sold in response
to the Adviser's evaluation of an issuer's ability to meet its debt obligations
in the future. A security may be sold and another purchased when, in the opinion
of the Adviser, a favorable yield spread exists between specific issues or
different market sectors.
A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. The Adviser anticipates that the portfolio turnover rate for each Fund
normally will not exceed 100%. A 100% turnover rate would occur if all of a
Fund's
- 35 -
<PAGE>
portfolio securities were replaced once within a one year period.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
The share price (net asset value) of the shares of the Tax- Free Money
Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the
Florida Tax-Free Money Fund is determined as of 12:00 noon and 4:00 p.m.,
Eastern time, on each day the Trust is open for business. The share price (net
asset value) and the public offering price (net asset value plus applicable
sales load) of the shares of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund are determined as of the close of the regular session of
trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time), on
each day the Trust is open for business. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. The Trust may also be open for business on other
days in which there is sufficient trading in a Fund's portfolio securities that
its net asset value might be materially affected. For a description of the
methods used to determine the share price and the public offering price, see
"Calculation of Share Price and Public Offering Price" in the Prospectus.
Pursuant to Rule 2a-7 promulgated under the Investment Company Act of
1940, the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California
Tax-Free Money Fund and the Florida Tax-Free Money Fund each value their
portfolio securities on an amortized cost basis. The use of the amortized cost
method of valuation involves valuing an instrument at its cost and, thereafter,
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. Under the amortized cost method of valuation, neither the amount
of daily income nor the net asset value of the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund or the Florida Tax-Free
Money Fund is affected by any unrealized appreciation or depreciation of the
portfolio. The Board of Trustees has determined in good faith that utilization
of amortized cost is appropriate and represents the fair value of the portfolio
securities of the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund.
Pursuant to Rule 2a-7, the Tax-Free Money Fund, the Ohio Tax-Free Money
Fund, the California Tax-Free Money Fund and the Florida Tax-Free Money Fund
each maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only securities having remaining maturities of thirteen months or less
and invest only in United States dollar-denominated securities determined by the
Board of Trustees to be of high quality and to
- 36 -
<PAGE>
present minimal credit risks. If a security ceases to be an eligible security,
or if the Board of Trustees believes such security no longer presents minimal
credit risks, the Trustees will cause the Fund to dispose of the security as
soon as possible.
The maturity of a floating or variable rate instrument subject to a
demand feature held by the Tax-Free Money Fund, the Ohio Tax-Free Money Fund,
the California Tax-Free Money Fund or the Florida Tax-Free Money Fund will be
determined as follows, provided that the conditions set forth below are met. The
maturity of a floating rate instrument with a demand feature (or a participation
interest in such a floating rate instrument) will be deemed to be the period of
time remaining until the principal amount owed can be recovered through demand.
The maturity of a variable rate instrument with a demand feature (or a
participation interest in such a variable rate instrument) will be deemed to be
the longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount owed can be recovered
through demand.
The demand feature of each such instrument must entitle a Fund to
receive the principal amount of the instrument plus accrued interest, if any, at
the time of exercise and must be exercisable either (1) at any time upon no more
than thirty days' notice or (2) at specified intervals not exceeding thirteen
months and upon no more than thirty days' notice. Furthermore, the maturity of
any such instrument may only be determined as set forth above as long as the
instrument continues to receive a short-term rating in one of the two highest
categories from any two nationally recognized statistical rating organizations
("NRSROs") (or from any one NRSRO if the security is rated by only that NRSRO)
or, if not rated, is determined to be of comparable quality by the Adviser,
under the direction of the Board of Trustees. However, an instrument having a
demand feature other than an "unconditional" demand feature must have both a
short-term and a long-term rating in one of the two highest categories from any
two NRSROs (or from any one NRSRO if the security is rated by only that NRSRO)
or, if not rated, to have been determined to be of comparable quality by the
Adviser, under the direction of the Board of Trustees. An "unconditional" demand
feature is one that by its terms would be readily exercisable in the event of a
default on the underlying instrument.
The Board of Trustees has established procedures designed to stabilize,
to the extent reasonably possible, the price per share of the Tax-Free Money
Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the
Florida Tax-Free Money Fund as computed for the purpose of sales and redemptions
at $1 per share. The procedures include review of each Fund's portfolio holdings
by the Board of Trustees to determine whether
- 37 -
<PAGE>
a Fund's net asset value calculated by using available market quotations
deviates more than one-half of one percent from $1 per share and, if so, whether
such deviation may result in material dilution or is otherwise unfair to
existing shareholders. In the event the Board of Trustees determines that such a
deviation exists, it will take corrective action as it regards necessary and
appropriate, including the sale of portfolio securities prior to maturity to
realize capital gains or losses or to shorten average portfolio maturities;
withholding dividends; redemptions of shares in kind; or establishing a net
asset value per share by using available market quotations. The Board of
Trustees has also established procedures designed to ensure that each Fund
complies with the quality requirements of Rule 2a-7.
While the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument, as determined by
amortized cost, is higher or lower than the price the Tax-Free Money Fund, the
Ohio Tax-Free Money Fund, the California Tax-Free Money Fund or the Florida
Tax-Free Money Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on shares of each Fund may tend to be
higher than a like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its portfolio securities. Thus, if the use of amortized cost
by a Fund resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in the Fund would be able to obtain a somewhat higher yield
than would result from investment in a fund utilizing solely market values and
existing investors would receive less investment income. The converse would
apply in a period of rising interest rates.
Tax-exempt portfolio securities are valued for the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund by an outside
independent pricing service approved by the Board of Trustees. The service
generally utilizes a computerized grid matrix of tax-exempt securities and
evaluations by its staff to determine what it believes is the fair value of the
portfolio securities. The Board of Trustees believes that timely and reliable
market quotations are generally not readily available to the Funds for purposes
of valuing tax-exempt securities and that valuations supplied by the pricing
service are more likely to approximate the fair value of the tax-exempt
securities.
If, in the Adviser's opinion, the valuation provided by the pricing
service ignores certain market conditions affecting the value of a security, the
Adviser will use (consistent with procedures established by the Board of
Trustees) such other valuation as it considers to represent fair value.
Valuations, market quotations and market equivalents provided to the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund by
- 38 -
<PAGE>
pricing services will only be used when such use and the methods employed have
been approved by the Board of Trustees. Valuations provided by pricing services
or the Adviser may be determined without exclusive reliance on matrixes and may
take into consideration appropriate factors such as bid prices, quoted prices,
institution-size trading in similar groups of securities, yield, quality, coupon
rates, maturity, type of issue, trading characteristics and other market data.
Since it is difficult to evaluate the likelihood of exercise or the
potential benefit of a put attached to an obligation, it is expected that such
puts will be determined to have a value of zero, regardless of whether any
direct or indirect consideration was paid.
The Board of Trustees has adopted the policy for the Tax- Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund, which may be changed
without shareholder approval, that the maturity of fixed rate or floating and
variable rate instruments with demand features will be determined as follows.
The maturity of each such fixed rate or floating rate instrument will be deemed
to be the period of time remaining until the principal amount owed can be
recovered through demand. The maturity of each such variable rate instrument
will be deemed to be the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount owed can be recovered through demand.
Taxable securities, if any, held by the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund for which market quotations are readily
available are valued at their most recent bid prices as obtained from one or
more of the major market makers for such securities. Securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees.
OTHER PURCHASE INFORMATION
- --------------------------
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of Class A
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus)
of Class A shares of the Tax-Free Intermediate Term Fund or the Ohio Insured
Tax-Free Fund has the right to combine the cost or current net asset value
(whichever is higher) of his existing shares of the load funds distributed by
the Adviser with the amount of his current purchases in order to take advantage
of the reduced sales loads set forth in the tables in the Prospectus. The
purchaser or his dealer must notify the Transfer Agent that an investment
qualifies for a reduced sales load. The
- 39 -
<PAGE>
reduced load will be granted upon confirmation of the purchaser's holdings by
the Transfer Agent.
LETTER OF INTENT. The reduced sales loads set forth in the tables in
the Prospectus may also be available to any "purchaser" (as defined in the
Prospectus) of Class A shares of the Tax-Free Intermediate Term Fund or the Ohio
Insured Tax-Free Fund who submits a Letter of Intent to the Transfer Agent. The
Letter must state an intention to invest within a thirteen month period in any
load fund distributed by the Adviser a specified amount which, if made at one
time, would qualify for a reduced sales load. A Letter of Intent may be
submitted with a purchase at the beginning of the thirteen month period or
within ninety days of the first purchase under the Letter of Intent. Upon
acceptance of this Letter, the purchaser becomes eligible for the reduced sales
load applicable to the level of investment covered by such Letter of Intent as
if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose a front-end sales load or
imposes a reduced sales load in connection with purchases of Class A shares of
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund made
under the reinvestment privilege or the purchases described in the "Reduced
Sales Load," "Purchases at Net Asset Value" or "Exchange Privilege" sections in
the Prospectus because such purchases require minimal sales effort by the
Adviser. Purchases described in the "Purchases at Net Asset Value" section may
be made for investment only, and the shares may not be resold except through
redemption by or on behalf of the Trust.
- 40 -
<PAGE>
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal and state taxes.
Each Fund has qualified and intends to qualify annually for the special
tax treatment afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; (ii) derive less than 30% of its gross income
in each taxable year from the sale or other disposition of the following assets
held for less than three months: (a) stock or securities, (b) options, futures
or forward contracts not directly related to its principal business of investing
in stock or securities; and (iii) diversify its holdings so that at the end of
each quarter of its taxable year the following two conditions are met: (a) at
least 50% of the value of the Fund's total assets is represented by cash, U.S.
Government securities, securities of other regulated investment companies and
other securities (for this purpose such other securities will qualify only if
the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
Each Fund intends to invest in sufficient obligations so that it will
qualify to pay, for federal income tax purposes, "exempt-interest dividends" (as
defined in the Internal Revenue Code) to shareholders. A Fund's dividends
payable from net tax-exempt interest earned from tax-exempt obligations will
qualify as exempt-interest dividends for federal income tax purposes if, at the
close of each quarter of the taxable year of the Fund, at least 50% of the value
of its total assets consists of tax-exempt obligations. The percentage of income
that is exempt from federal income taxes is applied uniformly to all
distributions made during each calendar year. This percentage may differ from
the actual tax-exempt percentage during any particular month.
- 41 -
<PAGE>
Each Fund intends to invest primarily in obligations with interest
income exempt from federal income taxes. To the extent possible, the Ohio
Insured Tax-Free Fund and the Ohio Tax-Free Money Fund intend to invest
primarily in obligations the income from which is exempt from Ohio personal
income tax, the California Tax-Free Money Fund intends to invest primarily in
obligations the income from which is exempt from California income tax and the
Florida Tax-Free Money Fund intends to invest primarily in obligations the value
of which is exempt from the Florida intangible personal property tax.
Distributions from net investment income and net realized capital gains,
including exempt-interest dividends, may be subject to state taxes in other
states.
Under the Internal Revenue Code, interest on indebtedness incurred or
continued to purchase or carry shares of investment companies paying
exempt-interest dividends, such as the Funds, will not be deductible by the
investor for federal income tax purposes. Shareholders should consult their tax
advisors as to the application of these provisions.
Shareholders receiving Social Security benefits may be subject to
federal income tax (and perhaps state personal income tax) on a portion of those
benefits as a result of receiving tax-exempt income (including exempt-interest
dividends distributed by the Funds). In general, the tax will apply to such
benefits only in cases where the recipient's provisional income, consisting of
adjusted gross income, tax-exempt interest income and 50% of any Social Security
benefits, exceeds a base amount ($25,000 for single individuals and $32,000 for
individuals filing a joint return). In such cases, the tax will be imposed on
the lesser of 50% of the recipient's Social Security benefits or the excess of
provisional income over the base amount. A second tier of inclusion rules for
high-income social security recipients has been added for tax years beginning
after 1993. These new rules apply to taxpayers who have provisional income over
$44,000 (married filing jointly) or $34,000 (single). For these taxpayers, the
amount of benefit subject to tax is the lesser of (1) 85% of the social security
benefit received or (2) 85% of the excess of the taxpayer's provisional income
over $44,000 (married filing jointly) or $34,000 (single) plus the smaller of
(a) $6,000 (married filing jointly) or $4,500 (single) or (b) the amount taxable
under the 50% inclusion rules described above. Shareholders receiving Social
Security benefits may wish to consult their tax advisors.
All or a portion of the sales load incurred in purchasing Class A
shares of the Tax-Free Intermediate Term Fund or shares of the Ohio Insured
Tax-Free Fund will not be included in the federal tax basis of any of such
shares sold within 90 days of their purchase (for the purpose of determining
gain or loss upon the sale of such shares) if the sales proceeds are reinvested
in
- 42 -
<PAGE>
any other fund of Countrywide Investments and a sales load that would otherwise
apply to the reinvestment is reduced or eliminated because the sales proceeds
were reinvested in the funds of Countrywide Investments. The portion of the
sales load so excluded from the tax basis of the shares sold will equal the
amount by which the sales load that would otherwise be applicable upon the
reinvestment is reduced. Any portion of such sales load excluded from the tax
basis of the shares sold will be added to the tax basis of the shares acquired
in the reinvestment.
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction. As of June 30, 1996, the Tax- Free Money Fund, the
Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund had capital loss carryforwards for federal income tax purposes of
$1,338, $1,620,782, $494, $709, $1,580 and $1,198, respectively, none of which
expire until at least June 30, 1999.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
- -------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
- 43 -
<PAGE>
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
Yield quotations on investments in the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund are provided on both a current and an effective (compounded) basis.
Current yields are calculated by determining the net change in the value of a
hypothetical account for a seven calendar day period (base period) with a
beginning balance of one share, dividing by the value of the account at the
beginning of the base period to obtain the base period return, multiplying the
result by (365/7) and carrying the resulting yield figure to the nearest
hundredth of one percent. Effective yields reflect daily compounding and are
calculated as follows: Effective yield = (base period return + 1)365/7 - 1. For
purposes of these calculations, no effect is given to realized or unrealized
gains or losses (the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund do not
normally recognize unrealized gains and losses under the amortized cost
valuation method). The Tax-Free Money Fund's current and effective yields for
the seven days ended June 30, 1996 were 2.85% and 2.89%, respectively. The
current and effective yields for Class A shares of the Ohio Tax-Free Money Fund
for the seven days ended June 30, 1996 were 2.90% and 2.94%, respectively. The
California Tax-Free Money Fund's current and effective yields for the seven days
ended June 30, 1996 were 2.74% and 2.78%, respectively. The Florida Tax-Free
Money Fund's current and effective yields for the seven days ended June 30, 1996
were 2.88% and 2.92%, respectively, for Class A shares and 3.13% and 3.18%,
respectively, for Class B shares. The Tax-Free Money Fund, the Ohio Tax-Free
Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free Money
Fund may also quote a tax- equivalent current or effective yield, computed by
dividing that portion of a Fund's current or effective yield which is tax-exempt
by one minus a stated income tax rate and adding the product to that portion, if
any, of the yield that is not tax-exempt. Based on the highest marginal federal
income tax rate for individuals (39.6%), the Tax-Free Money Fund's
tax-equivalent current and effective yields for the seven days ended June 30,
1996 were 4.72% and 4.78%, respectively. Based on the highest combined marginal
federal and Ohio income tax rate for individuals (44.13%), the tax-equivalent
current and effective yields for Class A shares of the Ohio Tax-Free Money Fund
for the seven days ended June 30, 1996 were 5.19% and 5.26%, respectively. Based
on the highest combined marginal federal and California income tax rate for
individuals (46.24%), the California Tax-Free Money Fund's tax-equivalent
current and effective yields for the seven days ended June 30, 1996 were 5.10%
and 5.17%, respectively. Based on the highest marginal federal income tax rate
for individuals (39.6%), the Florida Tax- Free Money Fund's tax-equivalent
current and effective yields for the seven days ended June 30, 1996 were 4.77%
and 4.83%, respectively, for Class A shares and 5.18% and 5.26%, respectively,
for Class B shares.
- 44 -
<PAGE>
From time to time, the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund may advertise average annual total return. Average annual
total return quotations will be computed by finding the average annual
compounded rates of return over 1, 5 and 10 year periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions. The calculation also assumes the deduction of the
current maximum sales load from the initial $1,000 payment and the deduction of
the current maximum contingent deferred sales load, at the times, in the
amounts, and under the terms disclosed in the Prospectus. If a Fund (or class)
has been in existence less than one, five or ten years, the time period since
the date of the initial public offering of shares will be substituted for the
periods stated. The average annual total returns of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund for the periods ended June 30, 1996
are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 year 2.42%
5 years 5.94%
10 years 5.83%
Tax-Free Intermediate Term Fund (Class C)
1 year 4.00%
Since inception (February 1, 1994) 2.57%
Ohio Insured Tax-Free Fund (Class A)
1 year .85%
5 years 6.26%
10 years 6.80%
Ohio Insured Tax-Free Fund (Class C)
1 year 4.44%
Since inception (November 1, 1993) 2.78%
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from average annual total return. A nonstandardized
quotation of total return may be
- 45 -
<PAGE>
a cumulative return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains distributions.
This computation does not include the effect of the applicable front-end or
contingent deferred sales load which, if included, would reduce total return.
The total returns of the Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund as calculated in this manner for each of the last ten fiscal years
(or since inception) are as follows:
Ohio Ohio
Tax-Free Tax-Free Insured Insured
Intermediate Intermediate Tax-Free Tax-Free
Term Fund Term Fund Fund Fund
Class A Class C Class A Class C
Period Ended
June 30, 1987 5.24% 6.73%
June 30, 1988 3.88% 6.80%
June 30, 1989 5.76% 9.75%
June 30, 1990 6.35% 5.53%
June 30, 1991 7.38% 7.98%
June 30, 1992 8.78% 11.55%
June 30, 1993 10.75% 12.24%
June 30, 1994 1.70% -3.40%(1) -0.41% -4.01%(2)
June 30, 1995 6.36% 5.82% 7.75% 7.31%
June 30, 1996 4.51% 4.00% 5.05% 4.44%
(1) From date of initial public offering on February 1, 1994.
(2) From date of initial public offering on November 1, 1993.
A nonstandardized quotation may also indicate average annual compounded rates of
return without including the effect of the applicable front-end or contingent
deferred sales load or over periods other than those specified for average
annual total return. The average annual compounded rates of return for Class A
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
(excluding sales loads) for the periods ended June 30, 1996 are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 Year 4.51%
3 Years 4.17%
5 Years 6.37%
10 Years 6.04%
Since inception (September 10, 1981) 6.49%
Ohio Insured Tax-Free Fund (Class A)
1 Year 5.05%
3 Years 4.07%
5 Years 7.13%
10 Years 7.24%
Since inception (April 1, 1985) 8.16%
- 46 -
<PAGE>
A nonstandardized quotation of total return will always be accompanied by the
Fund's average annual total return as described above.
From time to time, the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund may advertise their yield and tax- equivalent yield. A
yield quotation is based on a 30-day (or one month) period and is computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Generally, interest earned (for the purpose of "a" above) on debt obligations is
computed by reference to the yield to maturity of each obligation held based on
the market value of the obligation (including actual accrued interest) at the
close of business on the last business day prior to the start of the 30-day (or
one month) period for which yield is being calculated, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest). The yields of Class A and Class C shares of the Tax-Free Intermediate
Term Fund for June 1996 were 4.54% and 4.14%, respectively. The yields of Class
A and Class C shares of the Ohio Insured Tax-Free Fund for June 1996 were 4.91%
and 4.62%, respectively. Tax-equivalent yield is computed by dividing that
portion of a Fund's yield which is tax-exempt by one minus a stated income tax
rate and adding the product to that portion, if any, of the Fund's yield that is
not tax-exempt. Based on the highest marginal federal income tax rate for
individuals (39.6%), the tax-equivalent yields of Class A and Class C shares of
the Tax-Free Intermediate Term Fund for June 1996 were 7.52% and 6.85%,
respectively. Based on the highest combined marginal federal and Ohio income tax
rate for individuals (44.13%), the tax-equivalent yields of Class A and Class C
shares of the Ohio Insured Tax-Free Fund for June 1996 were 8.79% and 8.27%,
respectively.
The performance quotations described above are based on historical
earnings and are not intended to indicate future performance. Yield quotations
are computed separately for Class A and Class B shares of the Ohio Tax-Free
Money Fund and the Florida Tax-Free Money Fund. The yield of Class B shares is
expected to be higher than the yield of Class A shares due to the distribution
fees imposed on Class A shares. Average annual
- 47 -
<PAGE>
total return and yield are computed separately for Class A and Class C shares of
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund. The
yield of Class A shares is expected to be higher than the yield of Class C
shares due to the higher distribution fees imposed on Class C shares.
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding each Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Funds may use the following
publications or indices to discuss or compare Fund performance:
Donoghue's Money Fund Report provides a comparative analysis of
performance for various categories of money market funds. The Tax-Free Money
Fund may compare performance rankings with money market funds appearing in the
Tax Free Stockbroker & General Purpose Funds category. In addition, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund may compare performance rankings with money market funds appearing in
the Tax Free State Specific Stockbroker & General Purpose Funds categories.
Donoghue's Bond Fund Report provides a comparative analysis of performance for
various categories of bond funds. The Tax-Free Intermediate Term Fund may
compare performance rankings with bond funds appearing in the Municipal
Intermediate Term Funds category. The Ohio Insured Tax-Free Fund may compare
performance rankings with bond funds appearing in the Ohio Long-Term Municipal
Funds category.
Lipper Fixed Income Fund Performance Analysis measures total return and
average current yield for the mutual fund industry and ranks individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Tax-Free Money Fund may provide
comparative performance information appearing in the Tax-Exempt Money Market
Funds category, the Ohio Tax-Free Money Fund may provide comparative performance
information appearing in the Ohio Tax- Exempt Money Market Funds category, the
California Tax-Free Money Fund may provide comparative performance information
appearing in the California Tax-Exempt Money Market Funds category and the
Florida Tax-Free Money Fund may provide comparative performance information
appearing in the Other States Tax-Exempt Money Market Funds category. The
Tax-Free Intermediate Term Fund may provide comparative performance information
appearing in the Intermediate (5-10 year) Municipal Debt Funds category and the
Ohio Insured Tax-Free Fund may provide comparative performance information
appearing in the Ohio Municipal Debt Funds category.
- 48 -
<PAGE>
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Funds' portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Funds to calculate
their performance. In addition, there can be no assurance that the Funds will
continue this performance as compared to such other averages.
PRINCIPAL SECURITY HOLDERS
- --------------------------
As of October 4, 1996, The Fifth Third Bank Trust Department, 38
Fountain Square Plaza, Cincinnati, Ohio, owned of record 19.06% of the Trust's
outstanding shares, including 36.87% of the outstanding shares of the Ohio
Tax-Free Money Fund and 17.46% of the outstanding Class A shares of the Florida
Tax-Free Money Fund. The Fifth Third Bank may be deemed to control the Ohio
Tax-Free Money Fund by virtue of the fact that it owned of record more than 25%
of the Fund's shares as of such date. As of October 4, 1996, The Huntington
Trust Company, N.A., Trust Department, 41 South High Street, Columbus, Ohio,
owned of record 37.36% of the outstanding shares of the Florida Tax-Free Money
Fund, including all of the outstanding Class B shares of the Fund. The
Huntington Trust Company, N.A. may be deemed to control the Florida Tax-Free
Money Fund by virtue of the fact that it owned of record more than 25% of the
Fund's shares as of such date. For purposes of voting on matters submitted to
shareholders, any person who owns more than 50% of the outstanding shares of a
Fund generally would be able to cast the deciding vote on such matters.
As of October 4, 1996, Carole A. Steiger and Anthony B. Ullman
Trustees, c/o Island Investor Services, 180 Royal Palm Way, Palm Beach, Florida
owned of record 9.62% of the outstanding shares of the Tax-Free Money Fund;
Olmsted Manor Skilled Nursing Center Inc., 27500 Mill Road, North Olmsted, Ohio
owned of record 7.66% of the outstanding Class C shares of the Tax-Free
Intermediate Term Fund; Deye Family Trust, Thomas E. Deye Trustee, 6975 Presidio
Court, Cincinnati, Ohio owned of record 7.22% of the outstanding Class C shares
of the Tax-Free Intermediate Term Fund; BHC Securities, Inc., 2005 Market
Street, Philadelphia, Pennsylvania owned of record 14.48% of the outstanding
shares of the Ohio Tax-Free Money Fund; Fiduciary Trust Co. International
Customer's Account, 2 World Trade Center, New York, New York owned of record
6.57% of the outstanding shares of the California Tax-Free Money Fund; Bear
Stearns & Co. FBO 7204695410-55L, One Metrotech Center North, Brooklyn, New York
owned of record 11.07% of the outstanding shares of the California Tax-Free
Money Fund; Lawrence B. Taishoff, 3124 Collee Court, Naples, Florida owned of
record 11.11% of the outstanding Class A shares of the Florida Tax-Free Money
Fund; and Joseph H. Kanter, 4700 Ashwood Drive, Cincinnati, Ohio owned of record
7.78% of the outstanding Class A shares of the Florida Tax-Free Money Fund.
- 49 -
<PAGE>
As of October 4, 1996, the Trustees and officers of the Trust as a
group owned of record and beneficially less than 1% of the outstanding shares of
the Trust and of each Fund (or Class thereof).
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has
been retained to act as Custodian for investments of the Tax-Free Money Fund,
the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Fund and the California Tax-Free Money Fund. The Fifth Third Bank
acts as each Fund's depository, safekeeps its portfolio securities, collects all
income and other payments with respect thereto, disburses funds as instructed
and maintains records in connection with its duties. As compensation, The Fifth
Third Bank receives from each Fund a base fee at the annual rate of .005% of
average net assets (subject to a minimum annual fee of $1,500 per Fund and a
maximum fee of $5,000 per Fund) plus transaction charges for each security
transaction of the Funds.
The Huntington Trust Company, N.A., 41 South High Street, Columbus,
Ohio, has been retained to act as Custodian for investments of the Florida
Tax-Free Money Fund. The Huntington Trust Company, N.A. acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties. As compensation, The Huntington Trust
Company receives a fee at the annual rate of .026% of the Fund's average net
assets.
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent
auditors for the Trust for the fiscal year ending June 30, 1997. Arthur Andersen
LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of the
Trust's financial statements and advises the Funds as to certain accounting
matters.
TRANSFER AGENT
- --------------
The Trust's transfer agent, Countrywide Fund Services, Inc. ("CFS"),
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. CFS is an affiliate of the Adviser by
reason of common ownership. CFS receives for its services as transfer agent a
fee payable monthly at an annual rate of $25 per account from each of the
Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money
Fund and the Florida Tax-Free Money Fund and $21 per account from each of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund, provided,
however, that the minimum fee is $1,000 per month
- 50 -
<PAGE>
for each class of shares of a Fund. In addition, the Funds pay out-of-pocket
expenses, including but not limited to, postage, envelopes, checks, drafts,
forms, reports, record storage and communication lines.
CFS also provides accounting and pricing services to the Trust. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable CFS to perform its duties, the Tax-Free Money
Fund and the California Tax-Free Money Fund each pay CFS a fee in accordance
with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $100,000,000 $3,250
$100,000,000 - $250,000,000 $3,750
$250,000,000 - $400,000,000 $4,250
Over $400,000,000 $4,750
The Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund each pay CFS a
fee in accordance with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $100,000,000 $4,250
$100,000,000 - $250,000,000 $4,750
$250,000,000 - $400,000,000 $5,250
Over $400,000,000 $5,750
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund each pay
CFS a fee in accordance with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $4,250
$ 50,000,000 - $100,000,000 $4,750
$100,000,000 - $250,000,000 $5,250
Over $250,000,000 $5,750
In addition, each Fund pays all costs of external pricing services.
CFS is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, CFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. CFS supervises
the preparation of tax returns, reports to shareholders of the Funds, reports to
and filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For the
performance of these administrative services, CFS receives a fee from the
Adviser equal to .1% of the average value of each Fund's daily net assets. The
Adviser is solely responsible for the payment of these administrative fees to
CFS, and CFS has agreed to seek payment of such fees solely from the Adviser.
- 51 -
<PAGE>
TAX EQUIVALENT YIELD TABLES
- ---------------------------
The tax equivalent yield tables illustrate approximately the yield an
individual investor would have to earn on taxable investments to equal a
tax-exempt yield in various income tax brackets.
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND AND FLORIDA
TAX-FREE MONEY FUND TABLE. The table on the following page shows the approximate
taxable yields for individuals that are equivalent to tax-exempt yields under
marginal federal 1996 income tax rates. No adjustments have been made for state
or local taxes.
OHIO INSURED TAX-FREE FUND AND OHIO TAX-FREE MONEY FUND TABLE. The
table on the following page shows the approximate taxable yields for individuals
that are equivalent to tax-exempt yields under combined marginal federal and
Ohio 1996 income tax rates. Where more than one state bracket falls within a
federal bracket, the highest state tax bracket has been combined with the
federal bracket. The combined marginal state and federal tax brackets shown
reflect the fact that state income tax payments are currently deductible for
federal tax purposes.
CALIFORNIA TAX-FREE MONEY FUND TABLE. The table on the following page
shows the approximate taxable yields for individuals that are equivalent to
tax-exempt yields under combined marginal federal and California 1996 income tax
rates. Where more than one state bracket falls within a federal bracket, the
highest state tax bracket has been combined with the federal bracket. The
combined marginal state and federal tax brackets shown reflect the fact that
state income tax payments are currently deductible for federal tax purposes.
For federal income tax purposes, the total amount otherwise allowable
as a deduction for personal exemptions in computing taxable income is reduced by
2% for each $2,500 (or fraction of that amount) by which the taxpayer's adjusted
gross income exceeds $117,950 (single return) or $176,950 (joint return). In
addition, the total amount otherwise allowable as itemized deductions in
computing taxable income is reduced by 3% of the amount by which the taxpayer's
adjusted gross income exceeds $117,950. The tax equivalent yield tables have not
been adjusted to reflect the impact of these adjustments to taxable income.
- 52 -
<PAGE>
<TABLE>
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND
AND FLORIDA TAX-FREE MONEY FUND
- --------------------------------------
<C> <C> <C> <C> <C> <C> <C>
Tax-Exempt Yield
--------------------------------------------
2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
15% 2.94% 3.53% 4.12% 4.71% 5.29% 5.88%
28% 3.47 4.17 4.86 5.56 6.25 6.94
31% 3.62 4.35 5.07 5.80 6.52 7.25
36% 3.91 4.69 5.47 6.25 7.03 7.81
39.6% 4.14 4.97 5.79 6.62 7.45 8.28
OHIO INSURED TAX-FREE FUND
OHIO TAX-FREE MONEY FUND
- --------------------------
Tax-Exempt Yield
Combined --------------------------------------------
Ohio and 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
18.788% 3.08% 3.69% 4.31% 4.93% 5.54% 6.16%
31.745% 3.66 4.40 5.13 5.86 6.59 7.33
35.761% 3.89 4.67 5.45 6.23 7.01 7.78
40.800% 4.22 5.07 5.91 6.76 7.60 8.45
44.130% 4.47 5.37 6.26 7.16 8.05 8.95
CALIFORNIA TAX-FREE MONEY FUND
- ------------------------------
Tax-Exempt Yield
Combined --------------------------------------------
California and 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
20.100% 3.13% 3.75% 4.38% 5.01% 5.63% 6.26%
34.696% 3.83 4.59 5.36 6.13 6.89 7.66
37.900% 4.03 4.83 5.64 6.44 7.25 8.05
43.040% 4.39 5.27 6.14 7.02 7.90 8.78
46.244% 4.65 5.58 6.51 7.44 8.37 9.30
*Tax Brackets Combined Combined
- ------------- Ohio and California and
Federal Federal Federal
Single Joint Tax Tax Tax
Return Return Bracket Bracket Bracket
- -----------------------------------------------------------------------------------------------
Not over $24,000 Not Over $40,100 15% 18.788% 20.100%
$24,000-$58,150 $40,100-$96,900 28% 31.745% 34.696%
$58,150-$121,300 $96,900-$147,700 31% 35.761% 37.900%
$121,300-$263,750 $147,700-$263,750 36% 40.800% 43.040%
Over $263,750 Over $263,750 39.6% 44.130% 46.244%
</TABLE>
<PAGE>
ANNUAL REPORT
The Funds' financial statements as of June 30, 1996 appear in the Trust's
annual report which is attached to this Statement of Additional Information.
- 52 -
<PAGE>
ANNUAL REPORT
JUNE 30, 1996
OHIO TAX-FREE
Money Fund
o
TAX-FREE
Money Fund
o
CALIFORNIA TAX-FREE
Money Fund
o
FLORIDA TAX-FREE
Money Fund
o
TAX-FREE INTERMEDIATE
Term Fund
o
OHIO INSURED
Tax-Free Fund
- 54 -
<PAGE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
==============================================================================
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective. For
the fiscal year ended June 30, 1996, the Fund's total returns (excluding the
impact of applicable sales loads) were 4.51% and 4.00% for Class A shares and
Class C shares, respectively. The yield for the Fund's Class A shares at June
30, 1996 was 4.54%, which is equivalent to a taxable yield of 7.52%, and the
yield for the Fund's Class C shares was 4.14%, which is equivalent to a
taxable yield of 6.85%, assuming the maximum federal income tax bracket for
individuals.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income
exempt from federal income tax and Ohio personal income tax, consistent with
protection of capital. The Fund invests primarily in high and medium-quality
long-term Ohio municipal obligations which are protected by insurance
guaranteeing the payment of principal and interest in the event of a default.
For the fiscal year ended June 30, 1996, the Fund's total returns (excluding
the impact of applicable sales loads) were 5.05% and 4.44% for Class A shares
and Class C shares, respectively. The yield for the Fund's Class A shares at
June 30, 1996 was 4.91%, which is equivalent to a taxable yield of 8.79%, and
the yield for the Fund's Class C shares was 4.62%, which is equivalent to a
taxable yield of 8.27%, assuming the maximum combined federal and Ohio income
tax bracket for individuals.
Interest rates continued to decline in the second half of 1995 in response to
moderating economic growth and declining fears of inflation. Entering 1996,
interest rates were expected to remain low, aided by a slow economy. However,
this scenario changed dramatically in February as strong employment growth
indicated the economy was performing much better than expected. In the months
that followed, employment continued to surge, as did the overall economy.
Yields on bonds rose as investors anticipated a subsequent rise in the level
of inflation. Thus far, concerns about inflation have proved unwarranted.
Nevertheless, the damage had been done and interest rates at June 30, 1996
were higher by about 1% than they were at the beginning of 1996.
Performance in the municipal bond market during the first six months of the
fiscal year lagged the performance of the Treasury market. This was due
primarily to the persistent discussions regarding tax reform. The fears that
municipal income would lose its tax preference kept many investors out of the
market. As 1996 began and tax reform appeared less likely, investors began to
recognize the value of municipals compared to Treasuries. This caused
municipal bonds to outperform Treasury issues over the next six months. For
the twelve months ended June 30, 1996, the Lehman Brothers 5-Year Municipal
G.O. Bond Index returned 5.41% while the Lehman Brothers 15-Year Municipal
G.O. Bond Index returned 7.20%.
Performance of the Tax-Free Intermediate Term Fund was favorable in the first
half of the fiscal year as the average maturity was lengthened to take
advantage of declining interest rates. Conversely, the sharp reversal of
interest rates beginning in February 1996 negatively impacted the Fund's
performance versus the Lehman Brothers 5-Year Municipal G.O. Bond Index. We
have since shortened the average maturity of the Fund and continue to focus on
high quality issues which we believe will help to buffer the impact of
volatile market swings.
The Ohio Insured Tax-Free Fund performed comparably to the Lehman Brothers
15-Year Municipal G.O. Bond Index during the first six months of the fiscal
year. Again, the rise in interest rates experienced early in 1996, combined
with an average maturity slightly longer than the Index, had a detrimental
impact on the Fund's third quarter performance. Late in the fiscal year, we
initiated portfolio sales designed to generate tax losses for the Fund to
offset realized gains and, at the same time, shorten the Fund's average
maturity. This helped the Fund outperform the Index during the quarter ended
June 30, 1996.
Looking ahead, the economy appears strong as evidenced by robust second
quarter growth and employment which has continued to grow. Although there have
been some recent signs that the economy may be slowing, most notably in the
housing and manufacturing sectors, more evidence is necessary to confirm a
changing trend. As 1996 progresses, we believe that the economy will weaken
and interest rates will move lower; however, the timing of the slowdown
remains in question.
<PAGE>
APPENDIX
A representation of the graphic material contained in the Midwest Group Tax
Free Trust June 30, 1996 Annual Report is setforth below:
Comparison of the Change in Value since June 30, 1986 of a $10,000 Investment
in the Tax-Free Intermediate Term Fund* and the Lehman Brothers 5-Year Municipal
G.O. Index
<TABLE>
LEHMAN BROTHERS 5-YEAR MUNICIPAL G.O. INDEX: TAX-FREE INTERMEDIATE TERM FUND-CLASS A:
<S> <C> <C> <C> <C> <C>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/86 10,000 06/30/86 9,800
09/30/86 3.69% 10,369 09/30/86 2.14% 10,010
12/31/86 2.63% 10,642 12/31/86 2.08% 10,219
03/31/87 2.28% 10,884 03/31/87 1.47% 10,369
06/30/87 -0.92% 10,784 06/30/87 -0.54% 10,313
09/30/87 -2.06% 10,562 09/30/87 -1.38% 10,171
12/31/87 3.82% 10,966 12/31/87 2.19% 10,395
03/31/88 3.10% 11,305 03/31/88 2.35% 10,639
06/30/88 0.42% 11,353 06/30/88 0.71% 10,714
09/30/88 1.14% 11,482 09/30/88 1.14% 10,836
12/31/88 0.61% 11,552 12/31/88 1.16% 10,962
03/31/89 -0.28% 11,520 03/31/89 0.79% 11,048
06/30/89 4.70% 12,061 06/30/89 2.56% 11,331
09/30/89 1.11% 12,195 09/30/89 1.54% 11,505
12/31/89 2.99% 12,560 12/31/89 2.32% 11,773
03/31/90 0.48% 12,620 03/31/90 0.57% 11,840
06/30/90 2.24% 12,903 06/30/90 1.78% 12,050
09/30/90 1.06% 13,040 09/30/90 0.47% 12,108
12/31/90 3.32% 13,473 12/31/90 3.11% 12,483
03/31/91 2.15% 13,762 03/31/91 1.93% 12,724
06/30/91 1.75% 14,003 06/30/91 1.69% 12,939
09/30/91 3.55% 14,500 09/30/91 2.89% 13,313
12/31/91 3.35% 14,986 12/31/91 2.29% 13,619
03/31/92 -0.08% 14,974 03/31/92 0.48% 13,684
06/30/92 3.25% 15,461 06/30/92 2.87% 14,076
09/30/92 2.49% 15,846 09/30/92 2.19% 14,384
12/31/92 1.59% 16,098 12/31/92 1.98% 14,669
03/31/93 2.54% 16,507 03/31/93 3.40% 15,167
06/30/93 2.36% 16,896 06/30/93 2.78% 15,589
09/30/93 2.16% 17,261 09/30/93 3.17% 16,083
12/31/93 1.23% 17,473 12/31/93 1.19% 16,274
03/31/94 -3.15% 16,923 03/31/94 -3.37% 15,724
06/30/94 1.34% 17,150 06/30/94 0.82% 15,853
09/30/94 0.81% 17,289 09/30/94 0.57% 15,943
12/31/94 -0.33% 17,232 12/31/94 -0.91% 15,797
03/31/95 4.06% 17,931 03/31/95 4.34% 16,484
06/30/95 2.55% 18,388 06/30/95 2.29% 16,861
09/30/95 2.73% 18,890 09/30/95 2.07% 17,209
12/31/95 1.83% 19,236 12/31/95 2.43% 17,627
03/31/96 0.32% 19,299 03/31/96 -0.43% 17,552
06/30/96 0.43% 19,382 06/30/96 0.40% 17,622
</TABLE>
Past performance is not predictive of future performance.
Tax-Free Intermediate Term Fund Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 2.42% 5.94% 5.83% 6.34%
Class C 4.00% N/A N/A 2.57%
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and
fees paid by shareholders in the different classes. Fund inception was
September 10, 1981, and the initial public offering of Class C shares commenced
on February 1, 1994.
<PAGE>
Comparison of the Change in Value since June 30, 1986 of a $10,000 Investment
in the Ohio Insured Tax-Free Fund* and the Lehman Brothers 15-Year Municipal
G.O. Index
<TABLE>
LEHMAN BROTHERS 15-YEAR MUNICIPAL G.O. INDEX: OHIO INSURED TAX-FREE FUND-CLASS A:
<S> <C> <C> <C> <C> <C>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/86 10,000 06/30/86 9,600
09/30/86 6.37% 10,637 09/30/86 4.23% 10,006
12/31/86 3.60% 11,020 12/31/86 3.60% 10,366
03/31/87 2.71% 11,319 03/31/87 2.58% 10,634
06/30/87 -4.83% 10,772 06/30/87 -3.65% 10,246
09/30/87 -3.49% 10,396 09/30/87 -2.38% 10,002
12/31/87 6.64% 11,086 12/31/87 3.41% 10,343
03/31/88 3.11% 11,431 03/31/88 3.62% 10,717
06/30/88 1.98% 11,657 06/30/88 2.10% 10,943
09/30/88 2.57% 11,957 09/30/88 2.15% 11,178
12/31/88 1.94% 12,189 12/31/88 2.24% 11,428
03/31/89 0.38% 12,235 03/31/89 0.79% 11,518
06/30/89 6.32% 13,008 06/30/89 4.27% 12,010
09/30/89 -0.43% 12,953 09/30/89 -0.04% 12,005
12/31/89 4.42% 13,525 12/31/89 3.71% 12,450
03/31/90 -0.01% 13,524 03/31/90 -0.10% 12,438
06/30/90 2.29% 13,833 06/30/90 1.90% 12,673
09/30/90 -0.41% 13,777 09/30/90 0.08% 12,684
12/31/90 4.42% 14,386 12/31/90 3.97% 13,187
03/31/91 1.85% 14,652 03/31/91 1.78% 13,422
06/30/91 1.96% 14,939 06/30/91 1.96% 13,685
09/30/91 4.09% 15,550 09/30/91 3.66% 14,186
12/31/91 3.13% 16,037 12/31/91 3.19% 14,638
03/31/92 0.54% 16,123 03/31/92 -0.06% 14,630
06/30/92 3.81% 16,738 06/30/92 4.35% 15,266
09/30/92 2.86% 17,216 09/30/92 1.95% 15,563
12/31/92 2.47% 17,641 12/31/92 2.29% 15,920
03/31/93 4.24% 18,389 03/31/93 3.78% 16,522
06/30/93 3.67% 19,064 06/30/93 3.70% 17,134
09/30/93 4.17% 19,859 09/30/93 3.86% 17,795
12/31/93 1.56% 20,169 12/31/93 0.73% 17,924
03/31/94 -6.78% 18,802 03/31/94 -5.28% 16,978
06/30/94 1.42% 19,069 06/30/94 0.50% 17,063
09/30/94 0.41% 19,147 09/30/94 0.17% 17,092
12/31/94 -1.75% 18,812 12/31/94 -0.77% 16,962
03/31/95 8.41% 20,394 03/31/95 6.59% 18,080
06/30/95 2.23% 20,849 06/30/95 1.69% 18,385
09/30/95 3.65% 21,610 09/30/95 2.33% 18,814
12/31/95 4.05% 22,485 12/31/95 4.45% 19,652
03/31/96 -0.95% 22,271 03/31/96 -2.15% 19,228
06/30/96 0.35% 22,349 06/30/96 0.44% 19,313
</TABLE>
Past performance is not predictive of future performance.
Ohio Insured Tax-Free Fund Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 0.85% 6.26% 6.80% 7.76%
Class C 4.44% N/A N/A 2.78%
*The chart above represents performance of Class A shares only, which
will vary from the performance of Class C shares based on the difference in
loads and fees paid by shareholders in the different classes. Fund inception
was April 1, 1985, and the initial public offering of Class C shares commenced
on November 1, 1993.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
==========================================================================================================================
OHIO CALIFORNIA
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities:
At acquisition cost.................................... $ 239,927,043 $ 25,006,218 $ 37,663,286
=============== =============== ===============
At amortized cost...................................... $ 239,821,479 $ 24,955,523 $ 37,579,388
=============== =============== ===============
At value (Note 2)...................................... $ 239,821,479 $ 24,955,523 $ 37,579,388
Cash ..................................................... 389,643 201,132 217,437
Receivable for securities sold............................ 1,200,000 -- --
Interest receivable ...................................... 1,735,318 215,571 378,408
Other assets ............................................. 8,229 1,452 1,288
--------------- --------------- ---------------
TOTAL ASSETS......................................... 243,154,669 25,373,678 38,176,521
--------------- --------------- ---------------
LIABILITIES
Dividends payable......................................... 196,018 1,410 4,318
Payable for securities purchased.......................... 2,510,625 -- 2,017,280
Payable to affiliates (Note 4) ........................... 107,176 25,211 27,177
Other accrued expenses and liabilities ................... 17,958 4,669 5,685
--------------- --------------- ---------------
TOTAL LIABILITIES.................................... 2,831,777 31,290 2,054,460
--------------- --------------- ---------------
NET ASSETS .............................................. $ 240,322,892 $ 25,342,388 $ 36,122,061
=============== =============== ===============
Net assets consist of:
Capital shares ........................................... $ 240,309,987 $ 25,343,438 $ 36,123,641
Accumulated net realized gains (losses) from
security transactions.................................. 12,905 ( 1,050 ) ( 1,580 )
--------------- --------------- ---------------
Net assets................................................ $ 240,322,892 $ 25,342,388 $ 36,122,061
=============== =============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ............ 240,309,987 25,353,881 36,123,641
=============== =============== ===============
Net asset value, offering price and redemption price
per share (Note 2) .................................... $ 1.00 $ 1.00 $ 1.00
=============== =============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
=========================================================================================================================
OHIO CALIFORNIA
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income........................................ $ 9,278,740 $ 1,149,293 $ 1,046,105
--------------- --------------- ---------------
EXPENSES
Investment advisory fees (Note 4)...................... 1,117,233 140,891 142,143
Distribution expenses (Note 4)......................... 451,624 25,946 8,687
Accounting services fees (Note 4)...................... 45,000 39,000 39,000
Shareholder services and transfer agent fees (Note 4).. 71,194 25,208 14,237
Postage and supplies................................... 44,641 15,894 4,936
Professional fees...................................... 18,887 5,687 6,387
Insurance expense...................................... 21,136 4,054 3,615
Registration fees...................................... 6,791 8,994 1,223
Custodian fees (Note 4)................................ 7,148 3,701 4,639
Pricing expenses....................................... 5,954 2,099 3,108
Trustees' fees and expenses ........................... 3,433 3,433 3,433
Reports to shareholders ............................... 6,478 2,257 1,194
Other expenses ........................................ 13,633 1,796 1,424
--------------- --------------- ---------------
TOTAL EXPENSES ........................................... 1,813,152 278,960 234,026
Fees waived by the Adviser (Note 4) ................... -- -- ( 6,600)
--------------- --------------- ---------------
NET EXPENSES ............................................. 1,813,152 278,960 227,426
--------------- --------------- ---------------
NET INVESTMENT INCOME .................................... 7,465,588 870,333 818,679
--------------- --------------- ---------------
NET REALIZED GAINS (LOSSES) FROM
SECURITY TRANSACTIONS ................................. ( 709) ( 564) 116
--------------- --------------- ---------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ....................................... $ 7,464,879 $ 869,769 $ 818,795
=============== =============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
==================================================================================================================================
CALIFORNIA
OHIO TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ............... $7,465,588 $6,762,272 $870,333 $ 865,650 $ 818,679 $ 643,953
Net realized gains (losses) from
security transactions .............. ( 709) 8,226 ( 564) ( 774) 116 234
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets from
operations........................ 7,464,879 6,770,498 869,769 864,876 818,795 644,187
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME ......... ( 7,465,588) ( 6,764,671) ( 873,034) ( 862,949) ( 818,679) (644,370)
----------- ----------- ----------- ----------- ----------- -----------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
Proceeds from shares sold ........... 565,969,095 532,441,705 49,546,956 51,748,931 119,659,991 84,546,054
Net asset value of shares issued
in reinvestment of distributions
to shareholders.................... 4,885,920 4,449,982 839,246 814,800 753,406 572,727
Payments for shares redeemed ........ (557,137,769) ( 523,292,513) (51,732,766) (57,041,748) (103,816,208) (90,102,140)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from capital share transactions...... 13,717,246 13,599,174 (1,346,564) (4,478,017) 16,597,189 (4,983,359)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ......................... 13,716,537 13,605,001 (1,349,829) ( 4,476,090) 16,597,305 (4,983,542)
NET ASSETS:
Beginning of year................... 226,606,355 213,001,354 26,692,217 31,168,307 19,524,756 24,508,298
----------- ----------- ----------- ----------- ----------- -----------
End of year........................ $240,322,892 $226,606,355 $25,342,388 $26,692,217 $36,122,061 $19,524,756
============ ============ =========== =========== =========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME... $ -- $ -- $ -- $ 2,701 $ -- $ --
============ ============ =========== =========== =========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
===========================================================================================================================
ROYAL PALM
TAX-FREE OHIO INSURED FLORIDA
INTERMEDIATE TAX-FREE TAX-FREE
TERM FUND FUND MONEY FUND
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities:
At acquisition cost.................................... $ 71,673,021 $ 76,483,492 $ 47,075,493
=============== =============== ===============
At amortized cost...................................... $ 71,287,629 $ 76,453,032 $ 46,976,072
=============== =============== ===============
At value (Note 2) ..................................... $ 72,708,536 $ 79,588,215 $ 46,976,072
Cash ..................................................... 100,018 40,602 18,144
Receivable for capital shares sold........................ 217,106 13,090 --
Recevable for securities sold............................. -- -- 750,000
Interest receivable ...................................... 1,321,055 692,613 383,034
Other assets ............................................. 3,657 3,374 1,355
--------------- --------------- ---------------
TOTAL ASSETS........................................... 74,350,372 80,337,894 48,128,605
--------------- --------------- ---------------
LIABILITIES
Dividends payable......................................... 47,457 73,272 50,161
Payable for capital shares redeemed ...................... 326,049 299,745 --
Payable for securities purchased.......................... 995,174 -- --
Payable to affiliates (Note 4) ........................... 57,085 43,498 21,006
Other accrued expenses and liabilities.................... 11,202 10,702 6,299
--------------- --------------- ---------------
TOTAL LIABILITIES ................................... 1,436,967 427,217 77,466
--------------- --------------- ---------------
NET ASSETS .............................................. $ 72,913,405 $ 79,910,677 $ 48,051,139
=============== =============== ===============
Net assets consist of:
Capital shares ........................................... $ 73,113,280 $ 76,775,988 $ 48,052,337
Accumulated net realized losses from security
transactions ........................................ ( 1,620,782) ( 494) ( 1,198)
Net unrealized appreciation on investments................ 1,420,907 3,135,183 --
--------------- --------------- ---------------
Net assets................................................ $ 72,913,405 $ 79,910,677 $ 48,051,139
=============== =============== ===============
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares................... $ 67,674,858 $ 75,938,183 $ 28,906,381
=============== =============== ===============
Shares of beneficial interest outstanding
(unlimited number of shares
authorized, no par value) (Note 5)..................... 6,238,847 6,345,325 28,907,579
=============== =============== ===============
Net asset value and redemption price per share (Note 2) .. $ 10.85 $ 11.97 $ 1.00
=============== =============== ===============
Maximum offering price per share (Note 2) ................ $ 11.07 $ 12.47 $ 1.00
=============== =============== ===============
PRICING OF CLASS C SHARES(A)
Net assets applicable to Class C shares(A)................ $ 5,238,547 $ 3,972,494 $ 19,144,758
=============== =============== ===============
Shares of beneficial interest outstanding
(unlimited number of shares
authorized, no par value) (Note 5) .................... 482,869 331,937 19,144,758
=============== =============== ===============
Net asset value, offering price and redemption
price per share (Note 2) ............................ $ 10.85 $ 11.97 $ 1.00
=============== =============== ===============
<FN>
(A) Except for the Royal Palm Florida Tax-Free Money Fund which offers Class B shares (Note 2).
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
==========================================================================================================================
ROYAL PALM
TAX-FREE OHIO INSURED FLORIDA
INTERMEDIATE TAX-FREE TAX-FREE
TERM FUND FUND MONEY FUND
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income........................................ $ 4,390,262 $ 4,651,670 $ 1,170,195
--------------- --------------- ---------------
EXPENSES
Investment advisory fees (Note 4)...................... 398,576 397,265 152,663
Distribution expenses, Class A (Note 4)................ 115,756 14,824 8,631
Distribution expenses, Class C (Note 4) ............... 22,701 12,297 --
Shareholder services and transfer agent fees,
Class A (Note 4) .................................... 72,503 40,277 12,000
Shareholder services and transfer agent fees,
Class C (Note 4) .................................... 12,000 12,000 --
Shareholder services and transfer agent fees,
Class B (Note 4) .................................... -- -- 1,000
Accounting services fees (Note 4) ..................... 57,000 57,000 40,000
Postage and supplies................................... 60,880 29,106 6,538
, Pricing expenses....................................... 17,468 15,413 2,778
Professional fees ..................................... 8,849 9,070 6,187
Insurance expense...................................... 10,086 9,181 3,637
Custodian fees......................................... 8,584 6,967 3,166
Registration fees, Common.............................. 3,924 2,285 2,129
Registration fees, Class A............................. 4,233 661 --
Registration fees, Class C............................. 4,145 353 --
Reports to shareholders ............................... 8,618 5,199 732
Trustees' fees and expenses ........................... 3,433 3,433 3,433
Other expenses ........................................ 5,970 4,866 1,766
--------------- --------------- ---------------
TOTAL EXPENSES ........................................... 814,726 620,197 244,660
Fees waived by the Advisor (Note 4).................... -- -- ( 58,284)
Class A expenses reimbursed by the Adviser (Note 4).... -- ( 2,708) --
Class B expenses reimbursed by the Advisor (Note 4).... -- -- ( 506)
--------------- --------------- ---------------
NET EXPENSES ............................................. 814,726 617,489 185,870
--------------- --------------- ---------------
NET INVESTMENT INCOME .................................... 3,575,536 4,034,181 984,325
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ....... 418,573 637,863 --
Net change in unrealized appreciation/depreciation
on investments .................................... (378,154) (557,750) --
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ........ 40,419 80,113 --
--------------- --------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............... $ 3,615,955 $ 4,114,294 $ 984,325
=============== =============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
==================================================================================================================================
ROYAL PALM
TAX-FREE FLORIDA
INTERMEDIATE OHIO INSURED TAX-FREE
TERM FUND TAX-FREE FUND MONEY FUND
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30 JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income .................. $3,575,536 $4,323,906 $4,034,181 $4,204,284 $ 984,325 $ 821,944
Net realized gains (losses) from
security transactions ................. 418,573 (1,487,447) 637,863 (553,505) -- 2
Net change in unrealized appreciation/
depreciation on investments ........... (378,154) 2,397,778 (557,750) 2,078,922 -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets from operations 3,615,955 5,234,237 4,114,294 5,729,701 984,325 821,946
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A .... (3,370,231) (4,158,531) (3,835,050) (4,060,262) (941,390) (822,616)
From net investment income, Class C .... (205,305) (182,065) (199,131) (165,164) -- --
From net investment income, Class B .... -- -- -- -- (42,935) --
----------- ----------- ----------- ----------- ----------- -----------
Decrease in net assets from
distributions to shareholders .......... (3,575,536) (4,340,596) (4,034,181) (4,225,426) (984,325) (822,616)
----------- ----------- ----------- ----------- ----------- -----------
FROM CAPITAL SHARES
TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold .............. 15,528,848 27,134,058 149,454,410 135,489,969 51,380,671 44,740,157
Net asset value of shares
issued in reinvestment
of distributions to shareholders ...... 2,685,608 3,413,920 2,832,266 3,071,603 836,936 747,824
Payments for shares redeemed ........... (31,733,808) (56,693,107) (147,848,817) (148,483,241) (47,429,798) (47,644,429)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from Class A share transactions ........ (13,519,352) (26,145,129) 4,437,859 (9,921,669) 4,787,809 (2,156,448)
----------- ----------- ----------- ----------- ----------- -----------
CLASS C (A)
Proceeds from shares sold .............. 3,208,583 7,031,053 1,212,806 1,936,052 19,950,303 --
Net asset value of shares issued
in reinvestment of distributions
to shareholders ....................... 192,684 174,884 173,201 141,387 -- --
Payments for shares redeemed ........... (2,962,890) (5,556,496) ( 1,551,557) (650,441) (805,545) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from Class C share transactions (A) .... 438,377 1,649,441 (165,550) 1,426,998 19,144,758 --
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ......................... (13,040,556) (23,602,047) 4,352,422 (6,990,396) 23,932,567 (2,157,118)
NET ASSETS:
Beginning of year ...................... 85,953,961 109,556,008 75,558,255 82,548,651 24,118,572 26,275,690
----------- ----------- ----------- ----------- ----------- -----------
End of year ............................ $72,913,405 $85,953,961 $79,910,677 $75,558,255 $48,051,139 $24,118,572
=========== =========== =========== =========== =========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME ...... $ -- $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== =========== ===========
<FN>
(A) Except for the Royal Palm Florida Tax-Free Money Fund which offers Class B shares (Note 2).
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
===========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ----------
Net investment income........................... 0.031 0.031 0.020 0.022 0.034
---------- ---------- ---------- ---------- ----------
Distributions from net investment income ....... ( 0.031) ( 0.031) ( 0.020) ( 0.022) ( 0.034)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ==========
Total return.................................... 3.14% 3.12% 1.99% 2.19% 3.52%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $240,323 $226,606 $ 213,001 $ 221,775 $ 218,503
========== ========== ========== ========== ==========
Ratio of expenses to average net assets ........ 0.75% 0.74% 0.73% 0.74% 0.75%
Ratio of net investment income to average
net assets ............................... 3.09% 3.08% 1.97% 2.16% 3.43%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ---------
Net investment income........................... 0.031 0.030 0.021 0.024 0.036
---------- ---------- ---------- ---------- ----------
Distributions from net investment income........ ( 0.031 ) ( 0.030) ( 0.021) ( 0.024) ( 0.036)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ==========
Total return ................................... 3.15% 3.07% 2.12% 2.40% 3.63%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $25,342 $ 26,692 $ 31,168 $ 34,787 $ 50,000
========== ========== ========== ========== ==========
Ratio of expenses to average net assets......... 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to average
net assets................................ 3.09% 3.00% 2.09% 2.39% 3.55%
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ----------
Net investment income........................... 0.029 0.029 0.019 0.022 0.035
---------- ---------- ---------- ---------- ----------
Distributions from net investment income........ ( 0.029) ( 0.029) ( 0.019) ( 0.022) ( 0.035)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ==========
Total return ................................... 2.95% 2.95% 1.93% 2.26% 3.71%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $36,122 $ 19,525 $ 24,508 $ 34,487 $ 21,246
========== ========== ========== ========== ==========
Ratio of expenses to average net assets(A) .... 0.80% 0.70% 0.60% 0.56% 0.34%
Ratio of net investment income to average
net assets................................. 2.88% 2.83% 1.90% 2.22% 3.49%
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 0.82%, 0.85%, 0.86%, 0.85% and 0.89% for the years ended June 30, 1996, 1995, 1994, 1993 and 1992,
respectively (Note 4).
See accompanying notes to finacial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND - CLASS A
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 10.86 $ 10.69 $ 10.98 $ 10.42 $ 10.15
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ....................... 0.50 0.49 0.48 0.53 0.59
Net realized and unrealized gains (losses)
on investments............................. ( 0.01 ) 0.17 ( 0.29) 0.56 0.27
---------- ---------- ---------- ---------- ----------
Total from investment operations ............... 0.49 0.66 0.19 1.09 0.86
---------- ---------- ---------- ---------- ----------
Distributions from net investment income ....... ( 0.50 ) ( 0.49) ( 0.48) ( 0.53 ) ( 0.59 )
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 10.85 $ 10.86 $ 10.69 $ 10.98 $ 10.42
========== ========== ========== ========== ==========
Total return(A) ................................ 4.51% 6.36% 1.70% 10.75% 8.78%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $67,675 $ 81,140 $106,472 $ 82,168 $ 26,720
========== ========== ========== ========== ==========
Ratio of expenses to average net assets ........ 0.99% 0.99% 0.99% 0.99% 1.07%
Ratio of net investment income to average net
assets..................................... 4.52% 4.59% 4.35% 4.90% 5.75%
Portfolio turnover rate......................... 37% 32% 46% 28% 12%
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND - CLASS C
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
==========================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR ENDED JUNE 30, (FEB. 1, 1994)
THROUGH
1996 1995 JUNE 30, 1994
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................... $ 10.86 $ 10.69 $ 11.27
--------------- --------------- ---------------
Income from investment operations:
Net investment income.................................. 0.44 0.44 0.20
Net realized and unrealized gains (losses) on
investments.......................................... ( 0.01) 0.17 ( 0.58)
--------------- --------------- ---------------
Total from investment operations.......................... 0.43 0.61 ( 0.38 )
--------------- --------------- ---------------
Distributions from net investment income.................. ( 0.44 ) ( 0.44 ) ( 0.20 )
--------------- --------------- ---------------
Net asset value at end of period.......................... $ 10.85 $ 10.86 $ 10.69
=============== =============== ===============
Total return(A) .......................................... 4.00% 5.82% ( 8.28%)(C)
=============== =============== ===============
Net assets at end of period (000's)....................... $ 5,239 $ 4,814 $ 3,084
=============== =============== ===============
Ratio of expenses to average net assets(B) ............... 1.49% 1.49% 1.45% (C)
Ratio of net investment income to average net assets...... 4.02% 4.08% 3.79% (C)
Portfolio turnover rate................................... 37% 32% 46% (C)
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
(B)Absent expense reimbursements by the Adviser, the ratio of expenses to average net assets would have been 1.75%(C) for
the period ended June 30, 1994 (Note 4).
(C)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND - CLASS A
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 11.99 $ 11.74 $ 12.41 $ 11.67 $ 11.13
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ....................... 0.62 0.63 0.61 0.65 0.70
Net realized and unrealized gains (losses)
on investments............................. ( 0.02 ) 0.25 ( 0.64) 0.74 0.54
---------- ---------- ---------- ---------- ----------
Total from investment operations ............... 0.60 0.88 ( 0.03) 1.39 1.24
---------- ---------- ---------- ---------- ----------
Less distributions:
Distributions from net investment income .... ( 0.62 ) ( 0.63) ( 0.61) ( 0.65 ) ( 0.70 )
Distributions from net realized gains........ -- -- ( 0.03) -- --
---------- ---------- ---------- ---------- ----------
Total distributions ............................ ( 0.62 ) ( 0.63) ( 0.64) ( 0.65 ) ( 0.70 )
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 11.97 $ 11.99 $ 11.74 $ 12.41 $ 11.67
========== ========== ========== ========== ==========
Total return(A) ............................... 5.05% 7.75% ( 0.41%) 12.24% 11.55%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $75,938 $ 71,393 $ 79,889 $ 81,101 $ 49,288
========== ========== ========== ========== ==========
Ratio of expenses to average net assets(B) .... 0.75% 0.75% 0.75% 0.75% 0.60%
Ratio of net investment income to average
net assets................................. 5.12% 5.35% 4.94% 5.35% 6.10%
Portfolio turnover rate......................... 46% 29% 45% 15% 3%
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 0.77% and 0.77% for the years ended June 30, 1995 and 1992, respectively (Note 4).
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND - CLASS C
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
==========================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR ENDED JUNE 30, (NOV. 1, 1993)
THROUGH
1996 1995 JUNE 30, 1994
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................... $ 12.00 $ 11.74 $ 12.62
--------------- --------------- ---------------
Income from investment operations:
Net investment income.................................. 0.56 0.57 0.36
Net realized and unrealized gains (losses)
on investments....................................... ( 0.03) 0.26 ( 0.85)
--------------- --------------- ---------------
Total from investment operations.......................... 0.53 0.83 ( 0.49 )
--------------- --------------- --------------
Less distributions:
Distributions from net investment income............... ( 0.56 ) ( 0.57 ) ( 0.36 )
Distributions from net realized gains.................. -- -- ( 0.03 )
--------------- --------------- ---------------
Total distributions....................................... ( 0.56 ) ( 0.57 ) ( 0.39 )
--------------- --------------- --------------
Net asset value at end of period.......................... $ 11.97 $ 12.00 $ 11.74
=============== =============== ===============
Total return(A) .......................................... 4.44% 7.31% ( 6.05%)(C)
=============== =============== ===============
Net assets at end of period (000's)....................... $ 3,972 $ 4,165 $ 2,659
=============== =============== ===============
Ratio of expenses to average net assets(B) ............... 1.25% 1.25% 1.22% (C)
Ratio of net investment income to average net assets...... 4.62% 4.84% 4.09% (C)
Portfolio turnover rate................................... 46% 29% 45% (C)
- - -------------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 1.27% and 1.28%(C) for the periods ended June 30, 1995 and 1994, respectively (Note 4).
(C)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM FLORIDA TAX-FREE MONEY FUND - CLASS A
FINANCIAL HIGHLIGHTS
===========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===========================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR ENDED JUNE 30, (NOV. 13, 1992)
THROUGH
1996 1995 1994 JUNE 30, 1993(A)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------- ------------- ------------
Net investment income.......................... 0.032 0.031 0.021 0.016
------------ ------------- ------------- ------------
Distributions from net investment income ...... ( 0.032) ( 0.031) ( 0.021) ( 0.016)
------------ ------------- ------------- ------------
Net asset value at end of period .............. $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============= ============= ============
Total return .................................. 3.29% 3.17% 2.11% 2.49%(C)
============ ============= ============= ============
Net assets at end of period (000's) ........... $ 28,906 $ 24,119 $ 26,276 $ 21,907
============ ============= ============= ============
Ratio of expenses to average net assets(B) ... 0.61% 0.66% 0.58% 0.34%(C)
Ratio of net investment income to average
net assets............................... 3.24% 3.12% 2.10% 2.41%(C)
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)No income was earned or expenses incurred from the start of business through the date of public offering.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 0.80%, 0.80%, 0.81% and 0.94%(C) for the periods ended June 30, 1996, 1995, 1994 and 1993, respectively (Note 4).
(C)Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM FLORIDA TAX-FREE MONEY FUND - CLASS B
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
==========================================================================================================================
PERIOD
ENDED
JUNE 30, 1996 (A)
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value at beginning of period ........................................................ $ 1.000
------------
Net investment income.......................................................................... 0.003
------------
Distributions from net investment income ...................................................... $ ( 0.003)
------------
Net asset value at end of period .............................................................. $ 1.000
============
Total return................................................................................... 3.03%(C)
============
Net assets at end of period (000's) ........................................................... $ 19,145
============
Ratio of expenses to average net assets(B) ................................................... 0.50%(C)
Ratio of net investment income to average net assets........................................... 3.03%(C)
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)Represents the period from the initial public offering of Class B shares
(May 29, 1996) through June 30, 1996.
(B)Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 0.87%(C) (Note 4).
(C)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
==============================================================================
1. ORGANIZATION
Midwest Group Tax Free Trust (the Trust) is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company. The Trust was established as a Massachusetts business
trust under a Declaration of Trust dated April 13, 1981. The Declaration of
Trust, as amended, permits the Trustees to issue an unlimited number of shares
of six funds: the Ohio Tax-Free Money Fund, the Tax-Free Money Fund, the
California Tax-Free Money Fund, the Royal Palm Florida Tax-Free Money Fund,
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
(individually a Fund and collectively the Funds).
The Ohio Tax-Free Money Fund seeks the highest level of current income exempt
from federal income tax and Ohio personal income tax, consistent with
liquidity and stability of principal. The Fund invests primarily in a
portfolio of high-quality, short-term Ohio municipal obligations.
The Tax-Free Money Fund seeks the highest level of interest income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-quality, short-term municipal obligations.
The California Tax-Free Money Fund seeks the highest level of interest income
exempt from federal and California income taxes, consistent with liquidity and
stability of principal, by investing primarily in high-quality, short-term
California municipal obligations.
The Royal Palm Florida Tax-Free Money Fund seeks the highest level of interest
income exempt from federal income tax, consistent with liquidity and stability
of principal, by investing primarily in high-quality, short-term Florida
municipal obligations the value of which is exempt from the Florida intangible
personal property tax.
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income
exempt from federal income tax and Ohio personal income tax, consistent with
protection of capital. The Fund invests primarily in high and medium-quality,
long-term Ohio municipal obligations which are protected by insurance
guaranteeing the payment of principal and interest in the event of a default.
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund each
offer two classes of shares: Class A shares (sold subject to a maximum
front-end sales load of 2% for the Tax-Free Intermediate Term Fund and 4% for
the Ohio Insured Tax-Free Fund and a distribution fee of up to .25% of average
daily net assets of each Fund) and Class C shares (sold subject to a maximum
contingent deferred sales load of 1% if redeemed within a one-year period from
purchase and a distribution fee of up to 1% of average daily net assets). Each
Class A and Class C share of the Fund represents identical interests in the
Fund's investment portfolio and has the same rights, except that (i) Class C
shares bear the expenses of higher distribution fees, which is expected to
cause Class C shares to have a higher expense ratio and to pay lower dividends
than Class A shares; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable; and (iii) each
class has exclusive voting rights with respect to matters relating to its own
distribution arrangements.
<PAGE>
The Royal Palm Florida Tax-Free Money Fund offers two classes of shares: Class
A shares (Retail shares), sold subject to a distribution fee of up to .25% of
average daily net assets, and Class B shares (Institutional shares) sold
without a distribution fee. Each Retail and Institutional share of the Fund
represents identical interests in the Fund's investment portfolio and has the
same rights, except that (i) Retail shares bear the expenses of distribution
fees, which is expected to cause Retail shares to have a higher expense ratio
and to pay lower dividends than Institutional shares; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable; (iii) each class has exclusive voting rights with respect to
matters affecting only that class; and (iv) Retail shares are subject to a
lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional shares such as check writing and
automatic investment and redemption plans.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Trust's significant accounting policies:
Security valuation -- Ohio Tax-Free Money Fund, Tax-Free Money Fund,
California Tax-Free Money Fund and Royal Palm Florida Tax-Free Money Fund
securities are valued on the amortized cost basis, which approximates market.
This involves initially valuing a security at its original cost and thereafter
assuming a constant amortization to maturity of any discount or premium. This
method of valuation is expected to enable these Funds to maintain a constant
net asset value per share. The Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund are valued at market and use an independent pricing
service which generally utilizes a computerized grid matrix of tax-exempt
securities and evaluations by its staff to determine what it believes is the
fair value of the securities. On limited occasions, if the valuation provided
by the pricing service ignores certain market conditions affecting the value
of a security or the pricing service cannot provide a valuation, the fair
value of the security will be determined in good faith consistent with
procedures established by the Board of Trustees.
Share valuation -- The net asset value per share of the Ohio Tax-Free Money
Fund, the Tax-Free Money Fund, the California Tax-Free Money Fund and the
Royal Palm Florida Tax-Free Money Fund is calculated daily. Net asset value
per share is calculated for each of these Funds by dividing the total value of
a Fund's assets, less liabilities, by its number of shares outstanding. The
offering price and redemption price per share is equal to the net asset value
per share.
The net asset value per share of each of the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund is also calculated daily. Net asset value
per share is calculated for each class of a Fund by dividing the total value
of a Fund's assets attributable to that class, less liabilities attributable
to that class, by the number of shares of that class outstanding. The maximum
offering price of Class A shares of the Tax-Free Intermediate Term Fund is
equal to net asset value per share plus a sales load equal to 2.04% of the net
asset value (or 2% of the offering price). The maximum offering price of Class
A shares of the Ohio Insured Tax-Free Fund is equal to net asset value per
share plus a sales load equal to 4.17% of the net asset value (or 4% of the
offering price). The offering price of Class C shares of each Fund is equal to
the net asset value per share.
The redemption price per share of Class A shares and Class C shares of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund is equal to
the net asset value per share. However, Class C shares of each Fund are
subject to a contingent deferred sales load of 1% of the original purchase
price if redeemed within a one-year period from the date of purchase.
Investment income -- Interest income is accrued as earned. Discounts and
premiums on securities purchased are amortized in accordance with income tax
regulations which approximate generally accepted accounting principles.
<PAGE>
Distributions to shareholders -- Distributions from net investment income are
declared daily and paid on the last business day of each month. Net realized
short-term capital gains, if any, may be distributed throughout the year and
net realized long-term capital gains, if any, are distributed at least once
each year. Income distributions and capital gain distributions are determined
in accordance with income tax regulations.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Allocations between classes -- Investment income earned by the Royal Palm
Florida Tax-Free Money Fund, the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund is allocated daily to each class of shares based on the
percentage of the net asset value of settled shares of such class to the total
of the net asset value of settled shares of both classes of shares. Realized
capital gains and losses and unrealized appreciation and depreciation are
allocated daily to each class of shares based upon its proportionate share of
total net assets of the Fund. Class specific expenses are charged directly to
the class incurring the expense. Common expenses which are not attributable to
a specific class are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund
will be relieved of federal income tax on the income distributed. Accordingly,
no provision for income taxes has been made. In addition, each Fund intends to
satisfy conditions which enable it to designate the interest income generated
by its investment in municipal securities, which is exempt from federal income
tax when received by the Fund, as exempt-interest dividends upon distribution
to shareholders.
<PAGE>
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ended October 31) plus undistributed amounts from prior
years.
The following information is based upon the federal income tax cost of
portfolio investments as of June 30, 1996:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
TAX-FREE
INTERMEDIATE OHIO INSURED
TERM FUND TAX-FREE FUND
<S> <C> <C>
Gross unrealized appreciation............................................. $ 1,757,875 $ 3,422,103
Gross unrealized depreciation............................................. ( 336,968) ( 286,920)
--------------- ---------------
Net unrealized appreciation............................................... $ 1,420,907 $ 3,135,183
=============== ===============
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
The tax basis of investments for each Fund is equal to the amortized cost as
shown on the Statements of Assets and Liabilities.
As of June 30, 1996, the Ohio Tax-Free Money Fund, the Tax-Free Money Fund,
the California Tax-Free Money Fund, the Royal Palm Florida Tax-Free Money
Fund, the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
had capital loss carryforwards for federal income tax purposes of $709,
$1,338, $1,580, $1,198, $1,620,782 and $494, respectively, none of which
expire prior to June 30, 1999. These capital loss carryforwards may be
utilized in the current or future years to offset net realized capital gains
prior to distributing such gains to shareholders.
3. INVESTMENT TRANSACTIONS
For the year ended June 30, 1996, purchases and proceeds from sales and
maturities of investment securities, excluding short-term investments,
amounted to $28,765,136 and $45,159,470, respectively, for the Tax-Free
Intermediate Term Fund and $35,124,299 and $38,276,155, respectively, for the
Ohio Insured Tax-Free Fund.
<PAGE>
4. TRANSACTIONS WITH AFFILIATES
The President of the Trust is the controlling shareholder of Leshner
Financial, Inc., whose subsidiaries include Midwest Group Financial Services,
Inc. (the Adviser), the Trust's investment adviser and principal underwriter,
and MGF Service Corp. (MGF), the shareholder servicing and transfer agent and
accounting and pricing agent for the Trust.
MANAGEMENT AGREEMENT
Each Fund's investments are managed by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, each Fund pays the
Adviser a fee, computed and accrued daily and paid monthly, at an annual rate
of 0.5% of its respective average daily net assets up to $100,000,000, 0.45%
of such assets from $100,000,000 to $200,000,000, 0.4% of such assets from
$200,000,000 to $300,000,000 and 0.375% of such assets in excess of
$300,000,000.
States in which shares of the Trust are offered may impose an expense
limitation based upon net assets. The Adviser has agreed to reimburse each
Fund for expenses which exceed the most restrictive applicable expense
limitation of any state. No reimbursement was required from the Adviser with
respect to any Fund for the year ended June 30, 1996. However, in order to
reduce the operating expenses of the California Tax-Free Money Fund and the
Royal Palm Florida Tax-Free Money Fund, the Adviser voluntarily waived
advisory fees of $6,600 and $58,284, respectively, during the year ended June
30, 1996. In addition, in order to reduce the operating expenses of Class A
shares of the Ohio Insured Tax-Free Fund and Class B shares of the Royal Palm
Florida Tax-Free Money Fund, the Adviser voluntarily reimbursed $2,708 of
Class A expenses for the Ohio Insured Tax-Free Fund and $506 of Class B
expenses for the Royal Palm Florida Tax-Free Money Fund during the period.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer Agent and Shareholder Service Agreement
between the Trust and MGF, MGF maintains the records of each shareholder's
account, answers shareholders' inquiries concerning their accounts, processes
purchases and redemptions of each Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service
functions. For these services, MGF receives a monthly fee at an annual rate of
$25.00 per shareholder account from each of the Ohio Tax-Free Money Fund, the
Tax-Free Money Fund, the California Tax-Free Money Fund and the Royal Palm
Florida Tax-Free Money Fund and $21.00 per shareholder account from each of
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund,
subject to a $1,000 minimum monthly fee for each Fund or for each class of
shares of a Fund. In addition, each Fund pays out-of-pocket expenses
including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and
MGF, MGF calculates the daily net asset value per share and maintains the
financial books and records of each Fund. For these services, MGF receives a
monthly fee, based on current asset levels, of $3,750 per month from the Ohio
Tax-Free Money Fund, $3,250 per month from each of the Tax-Free Money Fund and
the California Tax-Free Money Fund, $4,250 per month from the Royal Palm
Florida Tax-Free Money Fund and $4,750 per month from each of the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund. In addition, each
Fund pays certain out-of-pocket expenses incurred by MGF in obtaining
valuations of such Fund's portfolio securities.
<PAGE>
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and the Adviser, the Adviser and
affiliates earned $9,779 and $22,737 from underwriting and broker commissions
on the sale of shares of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund, respectively, during the year ended June 30, 1996. In
addition, the Advisor collected $5,802 and $349 of contingent deferred sales
loads on the redemption of Class C shares of the Tax-Free Intermediate Term
Fund and the Ohio Insured Tax-Free Fund, respectively.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of each
Fund having one class of shares and Class A shares of each Fund having two
classes of shares may directly incur or reimburse the Adviser for expenses
related to the distribution and promotion of shares. The annual limitation for
payment of such expenses under the Class A Plan is .25% of average daily net
assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free
Fund may directly incur or reimburse the Adviser for expenses related to the
distribution and promotion of shares. The annual limitation for payment of
such expenses under the Class C Plan is 1% of average daily net assets
attributable to Class C shares.
CUSTODIAN AGREEMENTS
The Fifth Third Bank, which serves as the custodian for each Fund except for
the Royal Palm Florida Tax-Free Money Fund, was a significant shareholder of
record of the Ohio Tax-Free Money Fund as of June 30, 1996. Under the terms of
its Custodian Agreement, The Fifth Third Bank receives from each such Fund an
asset-based fee plus transaction charges for each security transaction entered
into by the Funds. Huntington Trust Company, N.A. (Huntington), which serves
as the custodian for the Royal Palm Florida Tax-Free Money Fund, was a
significant shareholder of record of such Fund as of June 30, 1996. Under the
term of its Custodian Agreement, Huntington receives from the Fund an
asset-based fee.
<PAGE>
<TABLE>
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes
in Net Assets are the result of the following capital share transactions for
the years ended June 30, 1996 and 1995:
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
TAX-FREE INTERMEDIATE OHIO INSURED
TERM FUND TAX-FREE FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C>
Shares sold.................................... 1,417,723 2,523,254 12,319,913 11,576,223
Shares issued in reinvestment of
distributions to shareholders............... 244,633 320,606 232,739 262,171
Shares redeemed................................ ( 2,894,267) ( 5,334,216) ( 12,159,274) ( 12,691,802)
------------ ------------- ------------- ------------
Net increase (decrease) in shares outstanding.. ( 1,231,911) ( 2,490,356) 393,378 ( 853,408)
Shares outstanding, beginning of year.......... 7,470,758 9,961,114 5,951,947 6,805,355
------------ ------------- ------------- ------------
Shares outstanding, end of year................ 6,238,847 7,470,758 6,345,325 5,951,947
============ ============= ============= ============
CLASS C
Shares sold.................................... 292,369 661,291 99,911 164,356
Shares issued in reinvestment of
distributions to shareholders............... 17,558 16,430 14,227 12,037
Shares redeemed................................ ( 270,313) ( 522,939) ( 129,418) ( 55,643)
------------ ------------- ------------- ------------
Net increase (decrease) in shares outstanding.. 39,614 154,782 ( 15,280) 120,750
Shares outstanding, beginning of year.......... 443,255 288,473 347,217 226,467
------------ ------------- ------------- ------------
Shares outstanding, end of year................ 482,869 443,255 331,937 347,217
============ ============= ============= ============
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Capital share transactions for the Ohio Tax-Free Money Fund, the Tax-Free
Money Fund, the California Tax-Free Money Fund and the Royal Palm Florida
Tax-Free Money Fund are identical to the dollar value of those transactions as
shown in the Statements of Changes in Net Assets.
<PAGE>
6. PORTFOLIO COMPOSITION
As of June 30, 1996, the Ohio Tax-Free Money Fund and the Ohio Insured
Tax-Free Fund were invested exclusively in debt obligations issued by the
State of Ohio and its political subdivisions, agencies, authorities and
instrumentalities and by other issuers the interest from which is exempt from
Ohio income tax. The California Tax-Free Money Fund was invested in debt
obligations issued by the State of California and its political subdivisions,
agencies, authorities and instrumentalities and by other issuers the interest
from which is exempt from California income tax. As of June 30, 1996, 77.4% of
the Royal Palm Florida Tax-Free Money Fund was invested in debt obligations
issued by the State of Florida and its political subdivisions, agencies,
authorities and instrumentalities and by other issuers the value of which is
exempt from the Florida intangible personal property tax. As of June 30, 1996,
19.5% of the portfolio securities of the Tax-Free Money Fund were concentrated
in the State of Ohio, 13.5% in the State of Minnesota and 10.2% in the State
of Florida. For information regarding portfolio composition by state for the
Tax-Free Intermediate Term Fund as of June 30, 1996, see the Fund's Portfolio
of Investments.
As diversified Funds registered under the 1940 Act, it is the policy of the
Tax-Free Money Fund and the Tax-Free Intermediate Term Fund that not more than
25% of the total assets of each such Fund be invested in securities of issuers
which individually comprise more than 5% of its total assets.
The Ohio Tax-Free Money Fund, the California Tax-Free Money Fund, the Royal
Palm Florida Tax-Free Money Fund and the Ohio Insured Tax-Free Fund are each
non-diversified Funds under the 1940 Act. Thus, investments may be
concentrated in fewer issuers than those of a diversified fund. As of June 30,
1996, neither the Ohio Tax-Free Money Fund nor the Royal Palm Florida Tax-Free
Money Fund had concentrations of investments (10% or greater) in any one
issuer. The California Tax-Free Money Fund and the Ohio Insured Tax-Free Fund
had 12.6% and 14.6% of their respective investments concentrated in the
securities of a single issuer as of June 30, 1996.
The Ohio Tax-Free Money Fund, the Tax-Free Money Fund, the California Tax-Free
Money Fund and the Royal Palm Florida Tax-Free Money Fund each invest in
municipal securities maturing in 13 months or less and having a short-term
rating in one of the top two ratings categories by at least two nationally
recognized statistical rating agencies (or by one such agency if a security is
rated by only that agency) or, if unrated, are determined by the Adviser,
under the supervision of the Board of Trustees, to be of comparable quality.
As of June 30, 1996, 46.9% of the Tax-Free Intermediate Term Fund's portfolio
securities were rated AAA/Aaa [using the higher of Standard & Poor's
Corporation (S&P) or Moody's Investors Service, Inc. (Moody's) ratings], 28.6%
were rated AA/Aa, 21.8% were rated A/A and 2.7% were not rated.
<PAGE>
As of June 30, 1996, 99.1% of the Ohio Insured Tax-Free Fund's long-term
portfolio securities were either (1) insured by an insurance policy obtained
from a recognized insurer which carries a rating of AAA by S&P or Aaa by
Moody's, (2) guaranteed as to the payment of interest and principal by an
agency or instrumentality of the U.S. Government, or (3) secured as to the
payment of interest and principal by an escrow account consisting of
obligations of the U.S. Government. Four private insurers individually insure
more than 10% of the Ohio Insured Tax-Free Fund's portfolio securities and
collectively insure 82.9% of its portfolio securities.
The concentration of investments for each Fund as of June 30, 1996, classified
by revenue source, was as follows:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
ROYAL PALM
OHIO CALIFORNIA FLORIDA TAX-FREE OHIO
TAX-FREE TAX-FREE TAX-FREE TAX-FREE INTERMEDIATE INSURED
MONEY MONEY MONEY MONEY TERM TAX-FREE
FUND FUND FUND FUND FUND FUND
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
General Obligations................. 28.6% 14.4% 11.3% 8.0% 21.8% 30.3%
Revenue Bonds:
Industrial Development/
Pollution Control............ 32.0% 42.8% 36.0% 30.6% 8.2% 15.2%
Hospital/Health Care.............. 22.7% 4.8% 2.2% 24.8% 18.0% 19.7%
Housing/Mortgage.................. 3.8% 17.8% 2.0% 19.1% 11.5% 5.5%
Utilities......................... 0.2% 3.6% 17.9% 5.6% 10.9% 18.0%
Education......................... 2.3% 3.0% 2.0% 1.9% 11.8% 3.4%
Transportation.................... -- 3.7% 4.0% 2.8% 3.9% 3.3%
Public Facilities................. -- 1.0% 4.7% 2.4% 3.6% 1.4%
Economic Development.............. 5.2% 6.4% -- -- 2.1% --
Leases............................ -- 1.2% 7.2% 1.8% 2.3% 0.7%
Special Tax....................... -- -- 4.9% 0.5% 3.9% --
Miscellaneous..................... 5.2% 1.3% 7.8% 2.5% 2.0% 2.5%
----------- ----------- ----------- ----------- ----------- -----------
Total .............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=========== =========== =========== =========== =========== ===========
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See each Fund's Portfolio of Investments for additional information on
portfolio composition.
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 31.5% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,665,000 Euclid City, OH, Various Impt. GO BANS......................... 4.250% 07/12/1996 $ 1,665,072
5,484,000 Greene Co., OH, GO............................................. 4.125 07/18/1996 5,485,568
675,000 Dayton, OH, Airport Impt. GO BANS.............................. 4.050 07/25/1996 675,063
1,667,040 Willoughby, OH, Landfill Closure GO BANS....................... 4.200 07/25/1996 1,667,355
1,450,000 Powell Village, OH, Road Impt. GO BANS......................... 4.100 08/15/1996 1,450,519
180,000 Powell Village, OH, Street Impt. GO BANS....................... 4.380 08/15/1996 180,103
2,500,000 Univ. of Cincinnati, OH, General Receipts, Ser. S.............. 4.250 08/28/1996 2,500,952
1,105,000 Lorain Co., OH, Water & Sewer Impt. GO BANS.................... 4.250 08/30/1996 1,105,261
245,000 Ohio HFA Mtg. Rev., Ser. A-1................................... 4.400 09/01/1996 245,150
1,000,000 Plain Township, OH, Fire Station Const. & Impt. BANS........... 4.390 09/17/1996 1,001,117
3,000,000 Cincinnati, OH, CSD Energy Conserv. BANS....................... 4.030 09/20/1996 3,003,437
800,000 Miamisburg, OH, Street Impt. GO BANS........................... 4.250 09/27/1996 800,462
2,260,000 Canfield, OH, LSD School Impt. GO BANS......................... 4.150 10/03/1996 2,261,115
2,000,000 Franklin Co., OH, Waterworks Sys. Impt. GO..................... 4.000 10/09/1996 2,002,033
400,000 Akron Bath Copley, OH, Rev. (Akron City Hosp. Proj.)........... 7.700 11/15/1996 405,905
2,300,000 Belmont Co., OH, Sanitary Sewer Impt. BANS..................... 4.090 11/26/1996 2,302,595
2,000,000 Euclid, OH, CSD TRANS.......................................... 3.520 12/12/1996 2,001,481
3,400,000 Loveland, OH, GO BANS.......................................... 3.875 12/12/1996 3,405,840
975,000 Marysville, OH, GO BANS........................................ 4.140 12/12/1996 976,220
1,064,490 Champaign Co., OH, GO BANS..................................... 4.750 12/17/1996 1,066,879
870,000 Highland, OH, LSD GO BANS...................................... 4.375 12/19/1996 872,086
1,432,500 Groveport-Madison, OH, LSD GO TANS............................. 3.990 12/30/1996 1,434,584
1,900,000 Erie Co., OH, Hosp. Impt. Rev. (Firelands Comm. Hosp.),
Prerefunded @101.............................................. 8.875 01/01/1997 1,967,510
675,000 Worthington, OH, CSD School Impt. GO BANS...................... 3.750 01/17/1997 675,533
500,000 Marysville, OH (Water Storage Tank Proj.) GO BANS.............. 3.880 01/31/1997 500,792
2,000,000 Toledo, OH, CSD (Energy Conservation) GO BANS.................. 4.000 01/31/1997 2,005,664
1,950,000 Marion Co., OH, GO BANS........................................ 3.600 02/13/1997 1,952,919
700,000 Ottawa Co., OH, GO BANS........................................ 3.550 02/27/1997 701,114
2,000,000 East Palestine, OH, CSD GO BANS................................ 3.500 02/28/1997 2,001,273
1,550,000 Salem, OH, CSD GO BANS......................................... 3.490 03/06/1997 1,550,708
932,000 Huron, OH, GO BANS............................................. 3.860 03/19/1997 933,666
800,000 Marysville, OH, GO BANS........................................ 3.960 03/21/1997 801,441
3,185,700 Greene Co., OH, GO............................................. 4.000 03/26/1997 3,192,455
950,000 Geneva on the Lake, OH, GO..................................... 4.100 04/03/1997 952,076
2,300,000 Ottawa Co., OH, GO BANS........................................ 3.980 04/09/1997 2,303,931
1,000,000 Trumbull Co., OH, Correctional Fac. GO BANS.................... 4.070 04/10/1997 1,002,016
1,000,000 Ashland, OH, CSD (Energy Conservation) GO BANS................. 4.150 04/15/1997 1,002,293
3,239,200 Hamilton, OH, GO BANS.......................................... 4.000 05/09/1997 3,240,442
2,300,000 Oregon, OH, GO BANS............................................ 4.050 05/29/1997 2,304,603
3,500,000 Claymont, OH, CSD GO BANS...................................... 4.000 06/04/1997 3,501,556
3,000,000 Greene Co., OH, GO............................................. 3.880 06/04/1997 3,004,278
1,040,000 Brook Park, OH, GO BANS........................................ 4.050 06/06/1997 1,042,519
2,000,000 Hudson, OH, Waterworks Impt. GO BANS........................... 4.000 06/11/1997 2,004,915
2,500,000 Mansfield, OH, CSD GO TANS..................................... 4.500 06/27/1997 2,510,620
- - ------------- ------------
$75,494,930 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $75,661,121)................................... $75,661,121
------------
<CAPTION>
OHIO TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 55.5% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 Ohio Higher Educ. Fac. Rev. (John Carroll Univ.)............... 4.125% 07/01/1996 $ 1,000,000
2,800,000 Cuyahoga Co., OH, Hosp. Impt. Rev. (Univ. Hosp. Cleveland)..... 3.750 07/01/1996 2,800,000
400,000 Franklin Co., OH, Health Sys. Rev. (St. Anthony Medical Ctr.).. 3.600 07/01/1996 400,000
3,900,000 Hamilton Co., OH, Health Sys. Rev. (Franciscan Sisters)........ 3.750 07/01/1996 3,900,000
500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1995A............... 3.750 07/01/1996 500,000
1,700,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B
(Cincinnati Gas & Elec.)..................................... 3.750 07/01/1996 1,700,000
700,000 Ohio St. PCR (Sohio Air Proj.)................................. 3.600 07/01/1996 700,000
4,320,000 Cuyahoga Co., OH, IDR (S & R Playhouse Realty)................. 3.750 07/01/1996 4,320,000
1,600,000 Delaware Co., OH, IDR (Radiation Sterilizers, Inc.)............ 3.750 07/01/1996 1,600,000
210,000 Franklin Co., OH, IDR (Boa Ltd. Proj.)......................... 3.850 07/01/1996 210,000
1,300,000 Franklin Co., OH, IDR (Jacobsen Stores)........................ 3.800 07/01/1996 1,300,000
600,000 Franklin Co., OH, IDR (Capitol South).......................... 3.800 07/01/1996 600,000
2,900,000 Muskingum Co., OH, IDR (Elder-Beerman)......................... 3.900 07/01/1996 2,900,000
500,000 Ohio St. Environ. Impt. Rev. (U.S. Steel Corp.)................ 3.800 07/01/1996 500,000
4,250,000 Cincinnati-Hamilton Co., OH, Port. Auth. Rev.
(Kaiser Agric. Chemical Co.)................................. 3.400 07/02/1996 4,250,000
245,000 Akron, OH, Sani. Sewer Sys. Rev., Ser. 1994.................... 3.450 07/03/1996 245,000
1,000,000 Butler Co., OH, IDR (Phillip Morris Co.)....................... 3.350 07/03/1996 1,000,000
1,000,000 Centerville, OH, Health Care Rev. (Bethany-Lutheran)........... 3.700 07/03/1996 1,000,000
8,100,000 Clermont Co., OH, Hosp. Fac. Rev., Ser. B (Mercy Health Sys.).. 3.500 07/03/1996 8,100,000
1,800,000 Cleveland-Cuyahoga Co., OH, Port. Auth. Rev.
(Rock & Roll Hall of Fame)................................... 3.450 07/03/1996 1,800,000
1,075,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993A
(Hospice of the Western Reserve)............................. 3.600 07/03/1996 1,075,000
1,750,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993B
(Hospice of the Western Reserve)............................. 3.600 07/03/1996 1,750,000
1,250,000 Cuyahoga Co., OH, Health Care Fac. Rev. (Benjamin Rose Inst.).. 3.500 07/03/1996 1,250,000
160,000 Cuyahoga Co., OH, IDR (Schottenstein Stores)................... 3.550 07/03/1996 160,000
2,000,000 Cuyahoga Co., OH, IDR, Ser. 1989 (Motch Corp. Proj.)........... 3.850 07/03/1996 2,000,000
970,000 Cuyahoga Co., OH, IDR (Pleasant Lake Assoc.)................... 3.600 07/03/1996 970,000
900,000 Delaware Co., OH, Indust. Rev., Ser. 1985 (MRG Limited Proj.).. 3.550 07/03/1996 900,000
2,390,000 Erie Co., OH, IDR (Toft Dairy, Inc.)........................... 3.600 07/03/1996 2,390,000
435,000 Franklin Co., OH, IDR (Columbus Dist.)......................... 3.600 07/03/1996 435,000
564,000 Franklin Co., OH, IDR, Ser. D (Kindercare)..................... 3.700 07/03/1996 564,000
1,605,000 Greene Co., OH, Healthcare Fac. Rev. (Green Oaks Proj.)........ 3.600 07/03/1996 1,605,000
900,000 Hardin Co., OH, Hosp. Impt. Rev., Ser. A
(Hardin Memorial Hosp.)..................................... 3.600 07/03/1996 900,000
375,000 Hudson Village, OH, IDR, Ser. A (Kindercare)................... 3.700 07/03/1996 375,000
1,160,000 Huron Co., OH, Ref. Rev. (Norfolk Furniture Corp.)............. 3.600 07/03/1996 1,160,000
494,000 Lorain Co., OH, IDR, Ser. C (Kindercare)....................... 3.700 07/03/1996 494,000
1,120,000 Lucas Co., OH, EDR (Glendale Meadows).......................... 3.600 07/03/1996 1,120,000
935,000 Lucas Co., OH, IDR, Ser. D (Kindercare)........................ 3.700 07/03/1996 935,000
300,000 Medina, OH, IDR (Kindercare)................................... 3.700 07/03/1996 300,000
1,100,000 Meigs Co., OH, IDR, Ser. 1985 (MRG Limited Proj.).............. 3.550 07/03/1996 1,100,000
287,000 Middletown, OH, IDR, Ser. A (Kindercare)....................... 3.700 07/03/1996 287,000
2,000,000 Montgomery Co., OH, EDR (Dayton Art Institute)................. 3.400 07/03/1996 2,000,000
935,000 Montgomery Co., OH, Healthcare Rev., Ser. A
(Dayton Area MRI Consortium)................................. 3.600 07/03/1996 935,000
340,000 Montgomery Co., OH, IDR (Kindercare)........................... 3.700 07/03/1996 340,000
1,000,000 Morrow Co., OH, IDR (Field Container Corp.).................... 3.400 07/03/1996 1,000,000
700,000 Ohio St. Air Quality Dev. Auth. Rev. (Honda of America)........ 3.700 07/03/1996 700,000
200,000 Ohio St. Water Dev. Auth. Rev. (Timken Co. Proj.).............. 3.350 07/03/1996 200,000
1,300,000 Ohio St. Environ. Impt. Rev. (Honda of America)................ 3.700 07/03/1996 1,300,000
850,000 Orrville, OH, Hosp. Fac. Rev., Ser. 1990 (Orrville Hosp.)...... 3.550 07/03/1996 850,000
200,000 Stark Co., OH, IDR, Ser. D (Kindercare)........................ 3.700 07/03/1996 200,000
2,650,000 Summit Co., OH, IDR (Bowery Assoc.)............................ 3.400 07/03/1996 2,650,000
375,000 Wadsworth, OH, IDR (Kindercare)................................ 3.700 07/03/1996 375,000
1,200,000 Wyandot Co., OH, Indust. Rev., Ser. 1985 (MRG Limited Proj.)... 3.550 07/03/1996 1,200,000
475,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Visiting Nurse Svcs. Proj.)................................. 3.500 07/04/1996 475,000
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 55.5% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,750,000 Ashland, OH, IDR (Landover Properties)......................... 3.350% 07/04/1996 $ 1,750,000
4,190,000 Ashtabula Co., OH, Hosp. Fac. Rev., Ser. 95
(Ashtabula Co. Med. Ctr. Proj.).............................. 3.400 07/04/1996 4,190,000
1,900,000 Clinton Co., OH, Hosp. Rev. (Clinton Memorial)................. 3.500 07/04/1996 1,900,000
8,000,000 Franklin Co., OH, IDR (Berwick Steel).......................... 3.550 07/04/1996 8,000,000
1,240,000 Franklin Co., OH, IDR (Ohio Girl Scouts)....................... 3.400 07/04/1996 1,240,000
400,000 Franklin Co., OH, IDR (Columbus College)....................... 3.400 07/04/1996 400,000
2,000,000 Franklin Co., OH, IDR (Alco Standard Corp.).................... 3.400 07/04/1996 2,000,000
1,350,000 Hamilton Co., OH, EDR, Ser. 1995
(Cincinnati Assoc. Performing Arts).......................... 3.400 07/04/1996 1,350,000
425,000 Lucas Co., OH, Rev. (Sunshine Children's Home)................. 3.500 07/04/1996 425,000
2,000,000 Lucas Co., OH, IDR (Ohio Citizens Bank Proj.).................. 3.500 07/04/1996 2,000,000
485,000 Lucas Co., OH, IDR (Associates Proj.).......................... 3.500 07/04/1996 485,000
2,045,000 Mahoning Co., OH, Healthcare Fac. Rev. (Copeland Oaks)......... 3.400 07/04/1996 2,045,000
1,790,000 Mahoning Co., OH, Healthcare Fac. Rev. (Ohio Heart Institute).. 3.400 07/04/1996 1,790,000
4,150,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.).......... 3.400 07/04/1996 4,150,000
3,920,000 Montgomery Co., OH, Healthcare Rev. (Comm. Blood Ctr. Proj.)... 3.400 07/04/1996 3,920,000
4,800,000 Ohio EDR, Ser. 1983 (Court St. Ctr. Assoc. Ltd. Proj.)......... 3.400 07/04/1996 4,800,000
1,265,000 Pike Co., OH, EDR (Pleasant Hill).............................. 3.400 07/04/1996 1,265,000
1,100,000 Rickenbacker, OH, Port. Auth. Rev.
(Rickenbacker Holdings, Inc.)................................ 3.400 07/04/1996 1,100,000
660,000 Summit Co., OH, IDR (Go-Jo Indust.)............................ 3.400 07/04/1996 660,000
2,435,000 Toledo-Lucas Co., OH, Port. Auth. IDR Ref., Ser. 1994.......... 3.500 07/04/1996 2,435,000
4,200,000 Toledo, OH, City Svcs. Special Assessment Notes................ 3.350 07/04/1996 4,200,000
4,690,000 Trumbull Co., OH, Hosp. Rev. (Shepherd Valley Lutheran)........ 3.400 07/04/1996 4,690,000
1,600,000 Warren Co., OH, IDR (Liquid Container)......................... 3.550 07/04/1996 1,600,000
2,650,000 Westlake, OH, IDR (Nordson Co.)................................ 3.400 07/04/1996 2,650,000
100,000 Wood Co., OH, IDR (North American Science)..................... 3.600 07/04/1996 100,000
2,125,000 Ashland Co., OH, Hosp. Fac. Rev., Ser. 1989 (Good Shepherd).... 3.800 07/05/1996 2,125,000
1,400,000 Hamilton Co., OH, IDR (ADP System)............................. 3.700 07/15/1996 1,400,000
- - ------------- ------------
$133,490,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $133,490,000).................................. $133,490,000
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 12.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$2,500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. A (Duquesne Light).. 3.650% 08/15/1996 $ 2,500,000
971,155 Citizens Federal Tax-Exempt Mtg. Bond Trust.................... 3.450 09/01/1996 971,155
680,000 Riverside, OH, EDR (Riverside Assoc. Ltd. Proj.)............... 3.550 09/01/1996 680,000
4,895,000 Cuyahoga Co., OH, IDR (Halle Office Bldg.)..................... 3.883 10/01/1996 4,895,000
175,000 Franklin Co., OH, IDR (Pan Western Life)....................... 3.900 10/01/1996 175,000
1,270,000 Miami Valley Tax-Exempt Mtg. Bond Trust........................ 4.880 10/15/1996 1,270,000
690,000 Franklin Co., OH, IDR (GSW Proj.).............................. 3.650 11/01/1996 690,000
3,300,000 Ohio HFA MFH (Lincoln Park).................................... 3.900 11/01/1996 3,300,000
125,000 Ohio Company Tax-Exempt Mtg. Bond Trust, Ser. 1................ 3.760 11/01/1996 125,000
100,000 Summit Co., OH, IDR (SGS Tool Co. II).......................... 3.700 11/01/1996 100,000
3,835,000 Richland Co., OH, IDR (Mansfield Sq. Proj.).................... 3.650 11/15/1996 3,835,000
825,000 Cuyahoga Co., OH, Healthcare Rev.
(Cleveland Neighborhood Health Svcs.)........................ 4.375 12/01/1996 825,000
570,000 Cuyahoga Co., OH, IDR (Welded Ring)............................ 3.750 12/01/1996 570,000
2,415,000 Franklin Co., OH, IDR (Leveque & Assoc. Proj.)................. 3.750 12/01/1996 2,415,000
340,000 Lucas Co., OH, EDR (Cross County Inns., Inc.).................. 4.000 12/01/1996 340,000
960,000 Scioto Co., OH, Healthcare Rev. (Hillview Retirement).......... 3.750 12/01/1996 960,000
1,115,000 Gallia Co., OH, IDR (Jackson Pike Assoc.)...................... 3.600 12/15/1996 1,115,000
3,280,000 Ohio Company Tax-Exempt Mtg. Bond Trust, Ser. 2................ 3.900 12/15/1996 3,279,203
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 12.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 810,000 Franklin Co., OH, EDR (JAL Realty)............................. 3.950% 01/15/1997 $ 810,000
1,405,000 Hamilton, OH, IDR (Continental Commercial Properties Proj.).... 3.400 02/01/1997 1,405,000
410,000 Middletown, OH, IDR (Continental Commercial Properties Proj.).. 3.450 02/01/1997 410,000
- - ------------- ------------
$ 30,671,155 TOTAL ADJUSTABLE RATE PUT BONDS
- - -------------
(Amortized Cost $30,670,358)................................... $30,670,358
------------
$239,656,085 TOTAL INVESTMENTS AT VALUE -- 99.8%
=============
(Amortized Cost $239,821,479).................................. $239,821,479
OTHER ASSETS AND LIABILITIES, NET-- 0.2% ...................... 501,413
------------
NET ASSETS-- 100.0% ........................................... $240,322,892
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 22.6% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 Greater Cleveland Regional Transit Auth. COP................... 9.100% 07/01/1996 $ 200,000
200,000 Pennsylvania St. IDA Rev., Escrowed to Maturity................ 6.300 07/01/1996 200,000
150,000 South Carolina St. Public Auth. Elec. Rev., Prerefunded @ 103.. 8.100 07/01/1996 154,500
110,000 Washington St. Pub. Power Supply Sys. Rev., Ser. 1990
(Nuclear Proj. #1), Prerefunded @ 103........................ 15.000 07/01/1996 113,300
100,000 Austin, TX, ISD GO............................................. 4.400 08/01/1996 100,045
100,000 Louisiana St. GO, Ser. A....................................... 6.400 08/01/1996 100,211
520,000 El Paso, TX, GO, Ser. 1994A.................................... 8.000 08/15/1996 522,531
200,000 Montgomery Co., AL, Waterworks & Sanit. Sewer Rev.,
Prerefunded @ 100............................................ 9.700 09/01/1996 200,000
500,000 Washington St. GO (Motor Vehicle Fuel Tax), Prerefunded @ 100.. 6.750 09/01/1996 502,430
245,000 Peoria, IL, School Dist. #150 Rev.............................. 4.600 09/15/1996 245,272
370,000 Brook Park, OH, Sewer Impt. GO BANS............................ 4.250 09/20/1996 370,157
105,000 Chicago, IL, Waterworks Rev., Prerefunded @ 101................ 6.750 11/01/1996 107,057
200,000 Greater New Orleans, LA, Expressway Rev., Prerefunded @ 103.... 7.800 11/01/1996 208,610
70,000 Connecticut St. Hsg. Fin. Auth. Refunding Rev., Ser. 1987B..... 7.900 11/15/1996 70,991
200,000 Chesapeake, VA, GO............................................. 3.750 12/01/1996 200,052
250,000 Columbia, SC, Parking Fac. Rev., Prerefunded @ 102............. 7.200 12/01/1996 258,471
300,000 Greensboro, NC, COP Pkg. Facs. Proj. Rev....................... 5.700 12/01/1996 302,070
105,000 Houston, TX, Water & Sewer Rev., Prerefunded @ 102............. 7.125 12/01/1996 108,534
200,000 Milwaukee, WI, GO.............................................. 4.100 12/01/1996 200,336
150,000 Jefferson Co., OH, School Dist. #R-001 GO...................... 4.400 12/15/1996 150,442
250,000 Broward Co., FL, GO, Ser. C.................................... 5.000 01/01/1997 251,580
525,000 Ross Co., OH, Airport Impt. GO BANS ........................... 4.540 04/25/1997 526,191
250,000 Columbus, OH, GO, Ser. 1....................................... 5.500 05/15/1997 253,430
200,000 Grand River, OK, Dam Auth., Rev................................ 6.450 06/01/1997 208,033
160,000 Mid-Prairie, IA, Comm. School Dist. GO......................... 6.750 06/01/1997 164,020
- - ------------- ------------
$ 5,660,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $5,718,263).................................... $ 5,718,263
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 48.1% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 300,000 Franklin Co., OH, Health Sys. Rev. (St. Anthony Medical Ctr.).. 3.600% 07/01/1996 $ 300,000
900,000 Harris Co., TX, Health Facs. Dev. Hosp. Rev., Ser. D
(St. Luke's Episcopal)....................................... 3.700 07/01/1996 900,000
300,000 Hillsborough Co., FL, PCR (Tampa Elec.)........................ 3.550 07/01/1996 300,000
700,000 Jacksonville, FL, PCR (Florida Power & Light).................. 3.550 07/01/1996 700,000
330,000 NCNB Pooled Tax-Exempt Rev., Ser. 1990A........................ 4.125 07/01/1996 330,000
1,000,000 New Jersey EDA & EDR (Union Avenue Assoc.)..................... 3.650 07/01/1996 1,000,000
700,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B
(Cincinnati Gas & Elec.)..................................... 3.750 07/01/1996 700,000
400,000 Pinal Co., AZ, IDA PCR (Magma Copper Co.)...................... 3.600 07/01/1996 400,000
900,000 Eddyville, IA, IDR (Heartland Lysine, Inc.).................... 3.850 07/03/1996 900,000
1,000,000 Illinois Dev. Fin. Auth. MFH Rev. (Cobbler Square Proj.)....... 3.850 07/03/1996 1,000,000
825,000 Brooklyn Park, MN, IDR (Schmidt Proj.)......................... 3.750 07/05/1996 825,000
1,000,000 District of Columbia MFH, Tyler House Trust COP, Ser. 1995A.... 3.800 07/05/1996 1,000,000
425,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)...................... 3.950 07/05/1996 425,000
575,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)...................... 3.650 07/05/1996 575,000
700,000 Marion, FL, Hsg. Fin. Auth. Rev. (Summer Trace Apts.).......... 3.600 07/05/1996 700,000
1,140,000 Redwood Falls, MN, IDR (Zytec Corp. Proj.)..................... 4.100 07/05/1996 1,140,000
<PAGE>
<CAPTION>
TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 48.1% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 400,000 St. Cloud, MN, Hsg. & Redev. Auth. (Coborn Realty Co.)......... 3.750% 07/05/1996 $ 400,000
600,000 Tamarac, FL, IDR, Ser. 1995 (Tamarac Business Ctr.)............ 3.550 07/05/1996 600,000
- - ------------- ------------
$12,195,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $12,195,000)................................... $12,195,000
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 27.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,125,000 Buckeye Tax-Exempt Mtg. Bond Trust............................. 3.800% 08/01/1996 $ 1,123,481
535,000 Milwaukee, WI, IDR (Wayne C. Oldenburg Proj.).................. 3.950 08/01/1996 535,000
330,000 Lansing, MI, EDR (LGH Office Bldg. Proj.)...................... 3.650 08/15/1996 330,000
153,845 Citizens Federal Tax-Exempt Mtg. Bond Trust.................... 3.450 09/01/1996 153,845
1,200,000 Owensboro, KY, IDR, Ser. 1985 (Dart Container)................. 3.600 09/01/1996 1,200,000
165,000 Cuyahoga Co., OH, IDR (Halle Office Bldg.)..................... 3.880 10/01/1996 165,000
230,000 Kansas City, KS, IDR (Lady Baltimore Foods).................... 4.250 10/01/1996 230,000
505,000 Romulus, MI, Econ. Dev. Corp. (Airport Realty Proj.)........... 3.700 10/01/1996 505,000
230,000 Medina Co., OH, IDR (Nationwide One Proj.)..................... 3.850 11/01/1996 229,934
560,000 Summit Co., OH, IDR (Akromold, Inc. Proj.)..................... 4.000 11/01/1996 560,000
275,000 Westlake, OH, EDR (Cross County Inns, Inc.).................... 3.750 11/01/1996 275,000
1,000,000 Westmoreland Co., PA, IDR (White Cons Indust.)................. 3.875 12/01/1996 1,000,000
735,000 Lexington-Fayette Co., KY, Urban Gov't. Rev.
(Providence Montessori)...................................... 3.900 01/01/1997 735,000
- - ------------- ------------
$ 7,043,845 TOTAL ADJUSTABLE RATE PUT BONDS
- - -------------
(Amortized Cost $7,042,260).................................... $ 7,042,260
------------
$24,898,845 TOTAL INVESTMENTS AT VALUE-- 98.5%
=============
(Amortized Cost $24,955,523)................................... $24,955,523
OTHER ASSETS AND LIABILITIES, NET-- 1.5% ...................... 386,865
------------
NET ASSETS-- 100.0% .......................................... $25,342,388
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 29.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 Orange Co., CA, Muni. Water Dist. 1992B (Allen McColloch Pipeline).......... 4.500% 07/01/1996 $ 250,000
120,000 Southern California Public Power Auth. Rev., Ser. 1986B, Prerefunded @ 102.. 7.000 07/01/1996 122,400
150,000 California Health Fac. Auth. Insured Hosp. (Childrens Hosp. San Diego)...... 4.250 07/01/1996 150,000
125,000 Southern California Public Power Auth. Rev., Ser 1986B, Prerefunded @ 102... 7.125 07/01/1996 127,500
500,000 San Mateo Co., CA, Schools Insurance Group RANS, Ser. 1995.................. 4.750 07/05/1996 500,040
500,000 Los Angeles Co., CA, Local Educ. Agy. COP TRANS, Ser. A..................... 4.750 07/05/1996 500,038
240,000 Oakland, CA, Misc. Rev. Bonds, Ser. 1988A................................... 6.800 08/01/1996 240,596
250,000 Brea & Olinda, CA, USD COP, Prerefunded @ 102............................... 7.700 08/01/1996 255,844
500,000 Sacramento, CA, School Dist. COP (Admin. Ctr. Proj.), Prerefunded @100...... 4.600 08/01/1996 500,447
100,000 Mountain View, CA, Cap. Impt. Fin. Auth. Rev. (City Hall/Community Theater). 5.100 08/01/1996 100,104
500,000 Orange Co., CA, Sanitation COP, Escrowed to Maturity........................ 12.000 08/01/1996 503,504
200,000 Fresno, CA, COP (City Hall/Golf Course), Prerefunded @ 102.................. 7.875 08/01/1996 204,642
230,000 Folsom, CA, School Facs. Proj. GO, Ser. B................................... 6.000 08/01/1996 230,542
500,000 South Coast, CA, Local Educ. Agencies Pooled TRANS.......................... 5.000 08/14/1996 500,866
135,000 La Mirada, CA, Redev. Agy. Tax Allocation, Ser. A........................... 5.625 08/15/1996 135,289
100,000 South Orange Co., CA, Pub. Fin. Auth. Special Tax Rev., Ser. 1994C.......... 4.250 08/15/1996 100,038
500,000 Victor Valley, CA, Union High School Dist. TRANS............................ 4.500 08/30/1996 500,336
250,000 San Jose, CA, COP (Convention Center Proj.), Prerefunded @ 102.............. 7.500 09/01/1996 256,494
245,000 Contra Costa Co., CA, Public Fac. Corp. COP, Escrowed to Maturity........... 7.100 09/01/1996 246,424
100,000 San Francisco, CA, City & Co. Sewer Ref. Rev................................ 5.500 10/01/1996 100,340
500,000 Santa Clara Co., CA, COP, Prerefunded @ 102................................. 8.000 10/01/1996 515,376
150,000 Sacramento, CA, Muni. Util. Dist. Elec. Rev., Ser. H, Escrowed to Maturity.. 6.100 10/01/1996 150,883
350,000 Univ. of California Hsg. Sys. Group A Rev, Prerefunded @ 102................ 7.600 11/01/1996 361,478
360,000 Univ. of California Hsg. Sys. Group A Rev., Ser. W, Prerefunded @ 102....... 7.800 11/01/1996 372,069
245,000 California Health Fac. Auth. Rev. (Stanford Univ. Hosp.), Prerefunded @ 102. 7.125 11/01/1996 252,407
300,000 California St. Public Works Dept. of Corrections Rev., Prerefunded @ 102.... 7.375 11/01/1996 309,315
100,000 Palm Springs, CA, COP (Palm Springs Public Fac. Corp.), Escrowed to Maturity 6.700 11/01/1996 101,046
400,000 Univ. of California Medical Ctr. Rev. (Satellite Medical Ctr.),
Escrowed to Maturity...................................................... 7.900 12/01/1996 407,005
100,000 California St. Dept. of Water Rev., Ser. B, Prerefunded @ 101.50............ 7.500 12/01/1996 103,042
150,000 Poway, CA, Redev. Agy. Tax Rev., Prerefunded @ 103.......................... 8.100 12/15/1996 157,460
500,000 California School Cash Reserve Program Auth. 1995 Pool Bonds, Ser. B........ 4.500 12/20/1996 501,583
2,000,000 California School Cash Reserve Program Auth. 1996 Pool Bonds, Ser. A........ 4.750 07/02/1997 2,017,280
- - ------------- ------------
$10,650,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $10,774,388)................................................ $10,774,388
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 64.9% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 400,000 Irvine Ranch, CA, Water Dist. Rev., Ser. 1985B................. 3.450% 07/01/96 $ 400,000
1,700,000 California PCR Fin. Auth. (Delano Proj.)....................... 3.750 07/01/96 1,700,000
1,300,000 California PCR Fin. Auth. (Del Marva Power & Light -
Burney Forest Proj.)......................................... 3.650 07/01/96 1,300,000
800,000 California PCR Fin. Auth. (Honey Lake Power Proj.)............. 3.750 07/01/96 800,000
1,600,000 Irvine Ranch, CA, Assess. Dist. Impt. Rev., Ser. 1989-10....... 3.300 07/01/96 1,600,000
450,000 Irvine Ranch, CA, Water Dist. Cap. Impt. Proj. Rev., Ser. 1986. 3.500 07/01/96 450,000
1,000,000 California PCR Fin. Auth., Ser. A (Ultrapower-Rocklin)......... 3.799 07/01/96 1,000,000
500,000 Irvine Ranch, CA, Water Dist. Rev.............................. 3.450 07/01/96 500,000
1,400,000 Anaheim, CA, COP Police Facs. Rev.............................. 3.100 07/03/96 1,400,000
1,500,000 California PCR Fin. Auth. (Pacific Gas & Electric)............. 3.450 07/03/96 1,500,000
1,600,000 Vacaville, CA, IDR (Leggett & Platt, Inc.)..................... 3.850 07/03/96 1,600,000
1,500,000 Los Angeles, CA, Pension Obligation Ref. Rev., Ser. 1996C...... 3.150 07/03/96 1,500,000
<PAGE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 64.9% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,900,000 San Rafael, CA, IDR, Ser. 1994 (Phoenix American, Inc.)........ 3.600% 07/03/96 $ 1,900,000
1,000,000 Santa Paula, CA, Public Fin. Auth. Rev., Ser. 1996
(Water Sys. Aquisition Proj.)................................ 3.750 07/03/96 1,000,000
1,500,000 Hanford, CA, Sewer Rev., Ser. A................................ 3.750 07/05/96 1,500,000
1,200,000 Los Angeles, CA, Dept. of Water & Power Rev.................... 3.300 07/05/96 1,200,000
1,000,000 San Bernardino Co., CA, IDR (LaQuinta Motor Inns).............. 3.400 07/05/96 1,000,000
1,000,000 San Bernardino Co., CA, Capital Impt. Proj. Rev................ 3.800 07/05/96 1,000,000
1,300,000 San Bernardino Co., CA, COP.................................... 3.600 07/05/96 1,300,000
800,000 San Francisco, CA, City & Co. Parking Auth. Rev................ 3.300 07/05/96 800,000
- - ------------- ------------
$23,450,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $23,450,000)................................... $23,450,000
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 2.4% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 855,000 California PCR Fin. Auth. (San Diego Gas & Elec.)............. 4.000% 09/01/1996 $ 855,000
- - ------------- ------------
$ 855,000 TOTAL ADJUSTABLE RATE PUT BONDS
- - -------------
(Amortized Cost $855,000)...................................... $ 855,000
------------
<PAGE>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 6.9% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,500,000 Riverside Co., CA, Transportation Sales Tax Rev................ 3.400% 07/18/1996 $ 1,500,000
1,000,000 California PCR Fin. Auth. (Pacific Gas & Elec.)................ 3.400 08/08/1996 1,000,000
- - ------------- ------------
$2,500,000 TOTAL COMMERCIAL PAPER
- - -------------
(Amortized Cost $2,500,000).................................... $ 2,500,000
------------
$37,455,000 TOTAL INVESTMENTS AT VALUE -- 104.0%
=============
(Amortized Cost $37,579,388)................................... $37,579,388
OTHER ASSETS AND LIABILITIES, NET-- (4.0)% .................... ( 1,457,327 )
------------
NET ASSETS-- 100.0% ........................................... $36,122,061
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM FLORIDA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 27.2% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100,000 Broward Co., FL, GO, Prerefunded @ 102......................... 7.400% 07/01/1996 $ 102,000
100,000 Broward Co., FL, GO, Prerefunded @ 102......................... 7.500 07/01/1996 102,000
200,000 Cape Coral, FL, Special Obligation Wastewater Assessment Rev... 4.800 07/01/1996 200,000
100,000 Ft. Lauderdale, FL, GO, Prerefunded @ 102...................... 7.600 07/01/1996 102,000
250,000 Hernando Co., FL, School Board COP............................. 5.250 07/01/1996 250,000
100,000 Miami, FL, Sewer Impt. GO ..................................... 6.600 07/01/1996 100,000
110,000 Orlando & Orange Co., FL, Expressway Auth. Rev.,
Prerefunded @ 102............................................ 7.500 07/01/1996 112,200
125,000 Brevard Co., FL, Local Option Gas Tax Rev., Ser. B............. 4.300 08/01/1996 125,046
1,000,000 Dade Co., FL, Gtd. Entitlement Rev., Escrowed to Maturity...... 9.500 08/01/1996 1,004,694
100,000 Duval Co., FL, School Dist. GO, Prerefunded @ 102.............. 7.300 08/01/1996 102,276
100,000 Duval Co., FL, School Dist. GO, Ser. 1988, Prerefunded @ 102... 7.500 08/01/1996 102,298
340,000 Pinellas Co., FL, Transportation Impt. Rev..................... 5.000 08/01/1996 340,372
330,000 New York, NY, GO, Ser. A, Escrowed to Maturity................. 7.375 08/15/1996 331,480
250,000 Univ. of Texas General Tuition Rev., Prerefunded @ 102......... 8.000 08/15/1996 256,289
400,000 Immokalee, FL, Water & Sewer Dist. Rev. BANS................... 3.650 08/30/1996 400,000
120,000 Albany-Dougherty Co., GA, Hosp. Rev. (Pheobe Putney
Memorial Hosp.).............................................. 4.000 09/01/1996 120,083
250,000 Charleston, SC, Public Impt. COP............................... 3.700 09/01/1996 250,000
680,000 Nevada St. COP................................................. 3.900 09/01/1996 680,000
110,000 Ormond Beach, FL, Water & Sewer Rev., Prerefunded @ 102........ 7.875 09/01/1996 112,891
500,000 West Volusia, FL, Hosp. Auth. Rev., Ser. B, Prerefunded @ 103.. 9.375 09/01/1996 519,608
230,000 Broward Co., FL, Airport Sys. Rev., Prerefunded @ 100.......... 10.000 10/01/1996 233,453
175,000 Jacksonville, FL, Elec. Auth. Rev., Ser. 2 1987A-1............. 6.600 10/01/1996 176,110
130,000 Lee Co., FL, Water & Sewer Rev., Prerefunded @ 102............. 6.900 10/01/1996 133,534
1,295,000 Manatee Co., FL, GO, Ser. A, Prerefunded @ 102................. 7.375 10/01/1996 1,332,397
500,000 Orange Co., FL, Health Fac. Auth. Rev., Prerefunded Muni. Certfs.,
Ser. 3, Escrowed to Maturity................................... 4.650 10/01/1996 501,159
100,000 Orlando, FL, Waste Water Sys. Rev., Ser. B, Prerefunded @ 102.. 7.500 10/01/1996 102,901
100,000 Palm Beach Co., FL, Impt. Rev., Escrowed to Maturity........... 6.900 10/01/1996 100,737
250,000 St. Petersburg, FL, Public Util. Rev........................... 5.850 10/01/1996 251,197
100,000 Tampa, FL, Rev................................................. 6.200 10/01/1996 100,565
225,000 West Palm Beach, FL, Parking Fac. Rev., Prerefunded @ 102...... 7.700 10/01/1996 231,572
150,000 Brevard Co., FL, Second Gtd. Entitlement Rev................... 4.750 11/01/1996 150,560
500,000 Florida HFA MFH Rev., Prerefunded @ 100........................ 5.500 11/01/1996 502,602
435,000 West Virginia St. Hsg. Dev. Rev................................ 6.800 11/01/1996 438,730
125,000 Cook Co., IL, GO............................................... 3.800 11/15/1996 125,015
400,000 Philadelphia, PA, Muni. Auth. Justice Lease Rev., Ser. A....... 6.150 11/15/1996 403,815
420,000 Philadelphia, PA, Muni. Auth. Justice Lease Rev., Ser. B....... 6.150 11/15/1996 424,006
145,000 Clarksville, TN, Public Bldg. Auth. Rev........................ 4.000 12/01/1996 145,276
160,000 Ohio St. Higher Educ. Fac. Comm. Rev. (Kenyon College),
Prerefunded @ 102............................................ 7.125 12/01/1996 165,592
200,000 Utah St. University Agric. & Applied Science Rev., Ser. A,
Escrowed to Maturity......................................... 6.500 12/01/1996 202,291
250,000 Champaign Co., IL, Comm. USD #116 GO........................... 7.400 12/30/1996 254,867
100,000 Wakulla Co., FL, Sales Tax Rev., Prerefunded @ 102............. 7.000 01/01/1997 103,630
175,000 Escambia Co., FL, School Board COP............................. 5.250 02/01/1997 176,436
250,000 Dallas, TX, GO................................................. 5.000 02/15/1997 251,507
580,000 Florida St. Div. Board Fin. Dept. Rev. (Sunshine Skyway)....... 9.800 06/01/1997 611,099
375,000 Florida St. Div. Board Fin. Dept. Rev. (Dept. of
Nature Preservation)......................................... 5.750 07/01/1997 381,718
250,000 Venice, FL, Util. Rev., Prerefunded @ 102...................... 6.900 07/01/1997 262,066
- - ------------- ------------
$12,885,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $13,076,072)................................... $13,076,072
------------
<PAGE>
<CAPTION>
ROYAL PALM FLORIDA TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 62.6% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 900,000 Dade Co., FL, IDA PCR (Florida Power & Light).................. 3.550% 07/01/1996 $ 900,000
1,000,000 Hamilton Co., OH, Health Sys. Rev. (Franciscan Sisters)........ 3.750 07/01/1996 1,000,000
2,600,000 Hillsborough Co., FL, IDA PCR (Tampa Elec.).................... 3.550 07/01/1996 2,600,000
300,000 Jacksonville, FL, Health Fac. Auth. Rev., Ser. 1988
(River Garden)............................................... 4.200 07/01/1996 300,000
1,500,000 Jacksonville, FL, Health Fac. Auth. Rev., Ser. 1996
(Genesis Rehab. Hosp.)....................................... 3.800 07/01/1996 1,500,000
2,500,000 Jacksonville, FL, PCR (Florida Power & Light).................. 3.550 07/01/1996 2,500,000
2,200,000 Ohio Air Quality Dev. Auth. Rev., Ser. 1985B (Cincinnati
Gas & Elec.)................................................. 3.750 07/01/1996 2,200,000
200,000 Pinal Co., AZ, IDA PCR (Magma Copper Co.)...................... 3.600 07/01/1996 200,000
1,200,000 Pinellas Co., FL, Health Fac. Rev. (Pooled Hosp. Loan)......... 3.600 07/01/1996 1,200,000
1,100,000 Broward Co., FL, HFA (Lake Park Assoc. Ltd. Partnership)....... 3.450 07/03/1996 1,100,000
1,735,000 Illinois Dev. Fin. Auth. MFH Rev. (Cobbler Square Proj.)....... 3.850 07/03/1996 1,735,000
2,000,000 Orange Co., FL, IDR, Ser. 1996A (Univ. of Central Florida
Proj.)....................................................... 3.350 07/03/1996 2,000,000
800,000 Rockport, IN, PCR, Ser. B (Indiana Michigan Power Co.)......... 3.250 07/03/1996 800,000
720,000 Volusia Co., FL, Health Facs. Auth. Rev. (Pooled Hosp. Loan)... 3.700 07/03/1996 720,000
1,000,000 Boca Raton, FL, IDR (Parking Garage)........................... 3.675 07/05/1996 1,000,000
980,000 Dade Co., FL, HFA (Kendall Court Apts.)........................ 3.450 07/05/1996 980,000
1,500,000 Jacksonville, FL, Health Fac. Auth. Rev. (Faculty Practice
Assoc.)...................................................... 3.400 07/05/1996 1,500,000
1,500,000 Marion Co., FL, HFA (Paddock Pl. Proj.)........................ 3.600 07/05/1996 1,500,000
1,000,000 Marion Co., FL, HFA (Summer Trace Apts.)....................... 3.600 07/05/1996 1,000,000
1,000,000 Orlando, FL, Util. Comm. Water & Elec. Rev..................... 3.250 07/05/1996 1,000,000
1,800,000 Plant City, FL, Hosp. Rev. (South Florida Baptist Hosp.)....... 3.550 07/05/1996 1,800,000
2,500,000 Volusia Co., FL, Health Facs. Auth. Rev. (West Volusia Health). 3.350 07/05/1996 2,500,000
- - ------------- ------------
$30,035,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $30,035,000)................................... $30,035,000
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 4.9% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 650,000 Broomfield, CO, Rev., Ser. 1992 (Up With People Proj.)......... 4.000% 07/01/1996 $ 650,000
1,715,000 Florida HFA Rev................................................ 3.800 12/15/1996 1,715,000
- - ------------- ------------
$ 2,365,000 TOTAL ADJUSTABLE RATE PUT BONDS
- - -------------
(Amortized Cost $2,365,000).................................... $ 2,365,000
------------
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 3.1% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 St. Lucie Co., FL, PCR (Florida Power & Light Proj. B)......... 3.600% 08/07/1996 $ 1,500,000
- - ------------- ------------
$ 1,500,000 TOTAL COMMERCIAL PAPER
- - -------------
(Amortized Cost $1,500,000).................................... $ 1,500,000
------------
$46,785,000 TOTAL INVESTMENTS AT VALUE -- 97.8%
=============
(Amortized Cost $46,976,072)................................... $46,976,072
OTHER ASSETS AND LIABILITIES, NET-- 2.2% ...................... 1,075,067
------------
NET ASSETS-- 100.0% ........................................... $48,051,139
============
</TABLE>
<PAGE>
<TABLE>
TAX-FREE INTERMEDIATE TERM FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALASKA -- 0.5%
$ 385,000 Alaska St. HFC Rev............................................. 7.650% 12/01/2010 $ 393,874
------------
ARIZONA -- 3.0%
300,000 Pinal Co., AZ, IDA PCR VRDN (Magma Copper Co.)................. 3.600 07/01/1996 300,000
500,000 Pima Co., AZ, USD No. 1 (Tuscon), Prerefunded @ 102............ 6.750 07/01/1998 533,610
400,000 Arizona Educ. Loan Mkt. Corp. Rev., Ser. A..................... 6.700 03/01/2000 416,948
600,000 Maricopa Co., AZ, School Dist. Rev., Ser. 1991C (Tempe Elem.).. 8.000 07/01/2004 713,664
205,000 Maricopa Co., AZ, SFM Rev., Ser. 1991.......................... 7.375 08/01/2005 216,365
------------
2,180,587
------------
CALIFORNIA -- 3.5%
800,000 Irvine, CA, Assess. Dist. Impt. Rev., VRDN, Ser. 89-10......... 3.300 07/01/1996 800,000
500,000 Santa Clara Co., CA, Hsg. Auth. ARPB (Orchard Glen Apts.)...... 5.250 11/01/1998 501,245
480,000 Sacramento Co., CA, MFH ARPB (Fairway One Apts.)............... 5.875 02/01/2003 486,461
500,000 Santa Monica, CA, Redev. Agy. Lease Rev........................ 6.000 07/01/2003 529,254
250,000 California HFA Multi-Unit Rental Rev., Ser. B.................. 6.500 08/01/2005 261,323
------------
2,578,283
------------
COLORADO -- 1.4%
1,000,000 Westminster, CO, MFH ARPB (Oasis Wexford Apts.)................ 5.350 12/01/2005 996,300
------------
FLORIDA -- 6.4%
1,200,000 Univ. of Florida Athletic Assn. Capital Impt. Rev. VRDN
(Stadium Proj.).............................................. 3.600 07/01/1996 1,200,000
800,000 Pinellas Co., FL, Health Fac. Rev. VRDN (Pooled Hosp. Loan).... 3.600 07/01/1996 800,000
200,000 Jacksonville, FL, Health Fac. Auth. Rev. VRDN, Ser. 1988
(River Garden)............................................... 4.200 07/01/1996 200,000
500,000 Florida HFA MFH ARPB, Ser. 1978B (Hampton Lakes II Proj.)...... 5.700 04/01/2001 505,025
1,000,000 Florida Board of Educ. Capital Outlay GO, Ser. A............... 5.500 05/01/2004 1,021,160
200,000 Florida St. GO................................................. 6.500 05/01/2004 202,994
750,000 Hillsborough Co., FL, Solid Waste Rev.......................... 5.500 10/01/2006 764,648
------------
4,693,827
------------
GEORGIA -- 2.1%
255,000 Atlanta, GA, Airport Extension & Impt. Rev.,
Escrowed to Maturity......................................... 7.250 01/01/1998 267,215
700,000 Fulton Co., GA, Water & Sewer Rev., Ser. 1986, Prerefunded
@ 101........................................................ 6.800 01/01/2000 753,921
500,000 Columbus, GA, Med. Ctr. Hosp. Auth. Rev........................ 6.400 08/01/2006 537,185
------------
1,558,321
------------
ILLINOIS -- 3.9%
500,000 Aurora, IL, MFH Rev., Ser. 1988 (Fox Valley)................... 7.750 09/01/1998 524,485
680,000 Illinois Educ. Fac. Auth. Rev., Ser. A (Loyola Univ.),
Prerefunded @ 102............................................ 7.125 07/01/2001 758,112
500,000 Chicago, IL, Public Bldg. Comm. Rev., Escrowed to Maturity..... 7.700 01/01/2008 523,360
1,000,000 Evergreen Park, IL, Hosp. Fac. Rev. (Little Co. Mary Hosp.).... 7.750 02/15/2009 1,065,140
------------
2,871,097
------------
INDIANA -- 2.2%
1,000,000 Indiana Bond Bank Special Prog. Rev., Ser. A1.................. 6.650 01/01/2004 1,064,740
500,000 Indiana HFA Multi-Unit Mtg. Prog. Rev., Ser. 1992A............. 6.600 01/01/2012 519,425
------------
1,584,165
------------
IOWA -- 1.7%
250,000 Iowa Student Loan Liquidity Corp. Rev.......................... 6.400 07/01/2004 262,765
420,000 Iowa HFA Rev................................................... 6.500 07/01/2006 438,346
240,000 Iowa Student Loan Liquidity Corp. Rev.......................... 6.600 07/01/2008 250,754
250,000 Cedar Rapids, IA, Hosp. Fac. Rev. (St. Luke's Methodist Hosp.). 6.000 08/15/2009 256,693
------------
1,208,558
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KENTUCKY -- 3.2%
$ 675,000 Owensboro, KY, Elec. Light & Power Rev., Prerefunded @ 102..... 10.250% 01/01/2000 $ 804,640
750,000 Kentucky St. Turnpike Auth. EDR (Revitalization Proj.)......... 5.250 07/01/2005 758,040
750,000 Kentucky St. Property & Bldg. Comm. Proj. #59 Rev.............. 5.200 05/01/2006 744,248
------------
2,306,928
------------
LOUISIANA -- 1.4%
440,000 Louisiana Public Fac. Auth. Rev. (Medical Ctr. of Louisiana)... 6.000 10/15/2003 462,026
500,000 West Ouachita Parish, LA, School Dist. GO, Ser. A.............. 6.700 03/01/2006 542,590
------------
1,004,616
------------
MARYLAND -- 1.5%
500,000 Maryland St. Health & Higher Educ. Fac. Auth. Rev.
(Univ. of Maryland Medical Sys.)............................. 6.500 07/01/2001 538,130
500,000 Maryland St. Comm. Dev. Admin. Rev............................. 8.500 04/01/2002 523,155
------------
1,061,285
------------
MASSACHUSETTS -- 4.4%
750,000 Massachusetts St. Indust. Fin. Agy. ARPB (Asahi/America, Inc.). 5.100 03/01/1999 755,348
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992A............. 6.500 09/01/2002 533,370
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992B............. 6.600 09/01/2002 534,345
1,280,000 Worcester, MA, GO.............................................. 6.000 07/01/2006 1,355,008
------------
3,178,071
------------
MICHIGAN -- 2.3%
1,000,000 Michigan St. Bldg. Auth. Rev., Ser. II......................... 6.400 10/01/2004 1,076,470
600,000 Kalamazoo, MI, Hosp. Fin. Auth. Rev., Ser. A
(Borgess Medical Ctr.)....................................... 5.000 06/01/2006 575,934
------------
1,652,404
------------
MINNESOTA -- 1.0%
700,000 Centennial, MN, ISD GO, Ser. A................................. 5.600 02/01/2002 727,839
------------
MISSISSIPPI -- 1.0%
500,000 Mississippi Higher Educ. Rev., Ser. B.......................... 6.100 07/01/2001 513,415
250,000 Hattiesburg, MS, Water & Sewer Rev............................. 4.800 08/01/2002 247,545
------------
760,960
------------
NEBRASKA -- 1.1%
47,000 Nebraska Invest. Fin. Auth. SFM Rev., Ser. A................... 8.600 05/15/1997 48,116
680,000 Nebraska Invest. Fin. Auth. Rev., Ser. 1989 (Foundation for
Educ. Fund), Escrowed to Maturity............................. 7.000 11/01/2009 734,237
------------
782,353
------------
NEVADA -- 2.2%
315,000 Washoe Co., NV, GO, Prerefunded @ 102.......................... 7.375 07/01/1999 344,790
1,000,000 Las Vegas, NV, GO, Sewer Impt. Rev............................. 6.500 10/01/2006 1,077,200
185,000 Washoe Co., NV, GO............................................. 7.375 07/01/2009 200,373
------------
1,622,363
------------
NEW YORK -- 2.6%
415,000 New York, NY, GO, Prerefunded @ 102............................ 8.000 08/01/1997 441,842
500,000 New York Local Gov't. Asst. Corp. Rev., Ser. 1991B............. 7.000 04/01/2002 549,710
85,000 New York, NY, GO............................................... 8.000 08/01/2005 89,833
810,000 New York St. Dorm. Auth. Rev. (Devereux Foundation)............ 4.850 07/01/2006 786,494
------------
1,867,879
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTH CAROLINA -- 8.0%
$ 500,000 Charlotte, NC, GO.............................................. 4.750% 02/01/2006 $ 485,355
1,065,000 Durham, NC, COP................................................ 6.375 12/01/2006 1,132,457
1,200,000 Asheville, NC, GO.............................................. 6.100 03/01/2008 1,266,072
1,000,000 Charlotte-Mecklenberg Hosp. NC, Health Care Sys. Rev........... 5.600 01/15/2009 1,005,040
980,000 Univ. of North Carolina Chapel Hill Rev. (Univ. NC Hosp.)...... 5.050 02/15/2009 924,816
1,000,000 Univ. of North Carolina Chapel Hill Rev. (Univ. NC Hosp.)...... 5.150 02/15/2010 947,380
------------
5,761,120
------------
OHIO -- 19.0%
1,400,000 Ohio Air Quality Dev. Auth. Rev., VRDN, Ser. 1985B
(Cincinnati Gas & Elec.)..................................... 3.750 07/01/1996 1,400,000
500,000 Ohio St. Bldg. Auth. Rev., Ser. A, Escrowed to Maturity........ 7.150 03/01/1999 532,870
700,000 Franklin Co., OH, Dev. & Ref. Rev., Ser. 1993
(American Chemical Soc.)..................................... 5.500 04/01/2000 700,707
500,000 Franklin Co., OH, Rev. (Online Computer Library Ctr.)......... 5.500 04/15/2000 499,750
750,000 Fairfield, OH, IDR ARPB (Skyline Chili, Inc.).................. 5.000 09/01/2000 746,048
950,000 Akron Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Summa Health Systems)....................................... 5.900 11/15/2002 990,888
270,000 Warren Co., OH, Hosp. Fac. Rev. (Otterbein Home)............... 7.000 07/01/2003 290,528
1,000,000 Ohio St. EDR Ohio Enterprise Bond Fd. (Smith Steelite Proj.)... 5.600 12/01/2003 984,480
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Episcopal Retirement Home).. 6.600 01/01/2004 532,970
825,000 Jackson, OH, Electric Sys. Mtg. Rev............................ 5.200 07/15/2004 796,686
445,000 Ohio St. EDR Ohio Enterprise Bond Fd. (Cheryl & Co.)........... 5.500 12/01/2004 471,740
625,000 Cuyahoga Co., OH, Util. Sys. Impt. & Ref. Rev., Ser. 1995B..... 5.500 08/15/2005 632,106
1,005,000 Franklin Co., OH, Health Care Fac. Rev. (First Comm. Village).. 6.000 06/01/2006 1,004,940
400,000 Painesville, OH, Elec. Rev..................................... 6.000 11/01/2006 414,828
1,000,000 Mahoning Co., OH, GO........................................... 6.600 12/01/2006 1,086,970
590,000 Ohio St. GO.................................................... 4.950 08/01/2008 567,326
800,000 West Clermont, OH, LSD GO...................................... 6.150 12/01/2008 846,248
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Bethesda Hosp.)............. 7.000 01/01/2009 513,815
750,000 Univ. of Cincinnati, OH, General Receipts, Ser. G.............. 7.000 06/01/2011 818,580
------------
13,831,480
------------
PENNSYLVANIA -- 5.0%
605,000 Chartiers Valley, PA, Comm. Dev. ARPB
(Colonial Bldg. Partners Proj.).............................. 5.625 12/01/1997 609,271
500,000 Pennsylvania St., IDR, Ser. A, Prerefunded @ 102............... 7.000 07/01/2001 555,630
1,000,000 Allegheny Co., PA, Hosp. Dev. Auth. Rev.
(Univ. of Pittsburgh Medical Ctr.)........................... 4.850 12/01/2006 944,050
1,000,000 Pennsylvania Intergovt. Coop. Auth. Rev. (City of Philadelphia) 5.200 06/15/2007 980,190
500,000 Pennsylvania Fin. Auth. Muni. Cap. Impt. Proj. Rev............. 6.600 11/01/2009 527,750
------------
3,616,891
------------
PUERTO RICO -- 0.2%
175,000 Puerto Rico Commonwealth GO, Prerefunded @ 102................. 7.125 07/01/1997 184,408
------------
SOUTH CAROLINA -- 3.2%
1,000,000 Piedmont, SC, Muni. Power Agy. Rev., Ser. A.................... 6.000 01/01/2002 1,054,020
525,000 South Carolina St. GO, Ser. A.................................. 6.000 03/01/2004 557,655
725,000 Richland-Lexington, SC, Airport Dist. Rev., Ser. 1995
(Columbia Metro.)............................................ 6.000 01/01/2008 746,881
------------
2,358,556
------------
TENNESSEE -- 1.5%
525,000 Southeast, TN, Tax-Exempt Mtg. Trust ARPB,
Ser. 1990, Mandatory Put..................................... 7.250 04/01/2003 576,214
500,000 Nashville, TN, Metro. Airport Rev., Ser. C..................... 6.625 07/01/2007 536,045
------------
1,112,259
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS -- 8.2%
$ 510,000 Pasadena, TX, IDR (Univ. Space Research Assn.)................. 6.650% 10/01/1996 $ 512,876
500,000 Texas Turnpike Auth. Rev. (Dallas N. Tollway),
Prerefunded @ 102............................................ 7.250 01/01/1999 542,210
500,000 Houston, TX, Sr. Lien Rev., Ser. A (Hotel Tax & Parking Fac.),
Prerefunded @ 100............................................ 7.000 07/01/2001 549,155
350,000 Univ. of Texas, TX, Rev., Ser. B, Prerefunded @102............. 6.750 08/15/2001 386,680
1,000,000 Texas National Research Lab. Fin. Corp. Lease Rev.,
Prerefunded @ 102............................................ 6.850 12/01/2001 1,111,800
500,000 N. Texas Higher Educ. Student Loan Rev., Ser. 1991A............ 6.875 04/01/2002 523,945
650,000 Galveston, TX, Health Fac. Rev. (Devereux Foundation).......... 4.900 11/01/2006 628,056
500,000 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS............................................... 8.150 05/15/2008 539,755
479,105 Midland, TX, HFC Rev., Ser. A2................................. 8.450 12/01/2011 511,253
650,000 Univ. of Texas, TX, Rev., Ser. B............................... 6.750 08/15/2013 701,441
------------
6,007,171
------------
UTAH -- 1.2%
870,000 Utah St. School Dist. Fin. Corp. Rev., Mandatory Redemption.... 8.375 08/15/1998 927,255
------------
VIRGINIA -- 1.4%
500,000 Chesterfield Co., VA, GO, Ser. B............................... 6.200 01/01/1999 521,995
500,000 Chesapeake, VA, GO............................................. 5.900 08/01/2005 527,285
------------
1,049,280
------------
WASHINGTON -- 5.2%
750,000 Seattle, WA, Drain & Wastewater Util. Rev., Prerefunded @ 102.. 7.000 12/01/1999 819,487
1,000,000 Seattle, WA, Muni. Metro. Sewer Rev., Prerefunded @ 102........ 6.875 01/01/2000 1,087,940
335,000 Washington St. GO, Ser. A, Prerefunded @ 100................... 6.400 03/01/2001 357,613
440,000 Port of Everett, WA, Rev....................................... 6.500 04/01/2000 441,791
1,000,000 Washington St. Motor Vehicle Fuel Tax Ref. GO.................. 6.000 09/01/2004 1,056,040
------------
3,762,871
------------
WISCONSIN -- 1.4%
505,000 Village of Dresser, WI, PCR Ref. Rev. (F & A Dairy, Inc.)...... 6.000 05/01/2000 509,215
500,000 Wisconsin Public Power System Rev., Ser. A, Prerefunded @ 102.. 7.500 07/01/2000 558,320
- - ------------- ------------
1,067,535
------------
$69,946,105 TOTAL MUNICIPAL BONDS -- 99.7%
=============
(Amortized Cost $71,287,629) .................................. $72,708,536
OTHER ASSETS AND LIABILITIES, NET-- 0.3% ...................... 204,869
------------
NET ASSETS-- 100.0% ........................................... $72,913,405
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 88.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 470,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.),
Prerefunded @ 102............................................ 7.500% 09/01/1999 $ 519,256
500,000 Montgomery Co., OH, Garbage & Refuse Rev., Ser. A,
Prerefunded @ 102............................................ 7.100 11/01/1999 547,675
500,000 Ohio St. Bldg. Auth. Local Jail Rev. , Prerefunded @ 102....... 7.350 04/01/2000 554,040
500,000 Ohio St. Higher Educ. Fac. Rev. (Ohio Northern Univ.),
Prerefunded @ 100............................................ 7.250 05/15/2000 544,525
500,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Children's Hosp.), Prerefunded @ 102........................ 7.450 11/15/2000 561,440
500,000 Franklin Co., OH, Convention Fac. Auth. Tax & Lease Rev.,
Prerefunded @ 102............................................ 7.000 12/01/2000 553,370
500,000 Fairfield Co., OH, Hosp. Fac. Rev. (Lancaster-Fairfield Hosp.),
Prerefunded @ 102............................................ 7.100 06/15/2001 558,855
250,000 Franklin Co., OH, IDR (1st Community Village Healthcare),
Prerefunded @ 101.50......................................... 10.125 08/01/2001 306,442
30,000 Clermont Co., OH, Hosp. Fac. Rev., Ser. A (Mercy Health Sys.),
Prerefunded @ 100........................................... 7.500 09/01/2001 33,685
460,000 Westerville, Minerva Park & Blendon, OH, Joint Hosp. Dist.
Rev. (St. Ann's), Prerefunded @ 102.......................... 7.100 09/15/2001 516,111
1,310,000 Cuyahoga Co., OH, Hosp. Rev. (Mt. Sinai), Prerefunded @ 102.... 6.625 11/01/2001 1,444,367
500,000 Clermont Co., OH, Sewer Sys. Rev., Ser. 1991, Prerefunded @ 102 7.100 12/01/2001 562,830
15,000 Summit Co., OH, GO, Ser. A, Prerefunded @ 100.................. 6.900 08/01/2002 16,579
40,000 Ohio St. Bldg. Auth. Rev. (Frank Lausch Proj.),
Prerefunded @ 100............................................ 10.125 04/01/2003 48,878
160,000 Ohio St. Bldg. Auth. Rev. (Columbus St. Proj.),
Prerefunded @ 100............................................ 10.125 04/01/2003 194,533
230,000 Summit Co., OH, GO, Ser. A, Prerefunded @ 100.................. 6.900 08/01/2003 256,100
290,000 Alliance, OH, CSD GO........................................... 6.900 12/01/2006 316,410
1,635,000 Montgomery Co., OH, Solid Waste Rev............................ 5.000 11/01/2007 1,594,828
500,000 Cleveland, OH, Waterworks Impt. Rev., Ser. G (First Mtg.)...... 5.500 01/01/2009 502,245
1,000,000 Franklin Co., OH, Hosp. Impt. Rev. (Holy Cross Health Sys.).... 7.625 06/01/2009 1,104,770
500,000 Mansfield, OH, Hosp. Impt. Rev. (Mansfield General)............ 6.700 12/01/2009 537,435
250,000 Ohio St. Water Dev. Auth. Ref. & Impt. Rev. (Pure Water),
Escrowed to Maturity......................................... 7.000 12/01/2009 281,370
500,000 Ohio Capital Corp. MFH Rev..................................... 7.500 01/01/2010 535,435
500,000 Hamilton, OH, Water Sys. Mtg. Rev., Ser. 1991A................. 6.400 10/15/2010 527,005
500,000 Montgomery Co., OH, Solid Waste Rev............................ 5.350 11/01/2010 488,230
500,000 Butler Co., OH, Hosp. Fac. Rev. (Middletown Regional Hosp.).... 6.750 11/15/2010 539,355
1,000,000 Canton, OH, Waterworks Sys. GO, Ser. 1995...................... 5.750 12/01/2010 1,013,330
500,000 St. Mary's, OH, Elec. Sys. Rev................................. 7.150 12/01/2010 550,845
500,000 Cleveland, OH, Waterworks Impt. Rev............................ 6.500 01/01/2011 530,100
275,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.), Escrowed to
Maturity..................................................... 9.000 06/01/2011 303,979
1,700,000 Ohio St. Water Dev. Auth. PCR.................................. 5.700 06/01/2011 1,708,143
1,500,000 Ohio St. Water Dev. Auth. PCR.................................. 5.300 06/01/2011 1,448,925
590,000 Ohio HFA SFM Rev., Ser. 1991D.................................. 7.000 09/01/2011 622,167
365,000 Bexley, OH, CSD GO............................................. 7.125 12/01/2011 426,371
500,000 Greene Co., OH, Water Sys. Rev................................. 6.850 12/01/2011 541,900
500,000 Maple Heights, OH, Various Purpose GO.......................... 7.000 12/01/2011 551,860
760,000 Springboro, OH, CSD GO......................................... 6.000 12/01/2011 799,946
500,000 Stark Co., OH, Various Purpose GO.............................. 7.050 12/01/2011 548,670
530,000 Urbana, OH, Wastewater Impt. GO................................ 7.050 12/01/2011 593,038
600,000 Westerville, OH, Water Sys. Impt. GO........................... 6.450 12/01/2011 637,992
500,000 Cleveland, OH, GO, Ser. A...................................... 6.375 07/01/2012 524,400
255,000 Summit Co., OH, GO, Ser. A..................................... 6.900 08/01/2012 272,641
500,000 Brunswick, OH, CSD GO.......................................... 6.900 12/01/2012 541,835
500,000 Ohio St. Higher Educ. Fac. Rev. (Univ. of Dayton).............. 7.250 12/01/2012 552,805
500,000 Springfield, OH, LSD GO........................................ 6.600 12/01/2012 534,865
500,000 Summit Co., OH, Various Purpose GO............................. 6.625 12/01/2012 535,445
500,000 Warrensville Heights, OH, GO................................... 6.400 12/01/2012 536,455
1,095,000 West Clermont, OH, LSD GO...................................... 6.900 12/01/2012 1,211,103
500,000 Worthington, OH, CSD GO........................................ 6.375 12/01/2012 524,825
2,500,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. D
(Children's Hosp. Medical Ctr.).............................. 5.000 05/15/2013 2,296,450
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 88.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 370,000 Ohio HFA SFM Rev., Ser. 1990D.................................. 7.500% 09/01/2013 $ 390,195
1,425,000 Butler Co., OH, Sewer Sys. Rev................................. 5.125 12/01/2013 1,338,160
500,000 Ohio St. Bldg. Auth. Rev., Ser. 1994A
(Juvenile Correctional Bldg.)................................ 6.600 10/01/2014 533,735
500,000 Mahoning Co., OH, Hosp. Impt. Rev. (YHA, Inc.)................. 7.000 10/15/2014 541,020
460,000 Bedford Heights, OH, GO........................................ 6.500 12/01/2014 488,971
290,000 Garfield Heights, OH, Various Purpose GO....................... 6.300 12/01/2014 301,438
1,250,000 Maumee, OH, Hosp. Fac. Rev., Ser. 1994 (St. Luke's Hosp. Proj.) 5.800 12/01/2014 1,241,550
290,000 Northwest, OH, LSD GO.......................................... 7.050 12/01/2014 320,322
530,000 Ottawa Co., OH, GO............................................. 5.750 12/01/2014 527,588
1,000,000 Portage Co., OH, GO............................................ 6.200 12/01/2014 1,035,660
1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.).......... 5.875 09/01/2015 999,330
550,000 Cambridge, OH, Water Sys. Mtg. Rev............................. 5.500 12/01/2015 534,638
1,750,000 Dayton, OH, Airport Rev. (James M. Cox Dayton Int'l. Airport).. 5.250 12/01/2015 1,644,440
500,000 Delaware, OH, CSD GO........................................... 5.750 12/01/2015 498,235
1,700,000 Massillon, OH, GO.............................................. 6.625 12/01/2015 1,821,754
500,000 Ohio St. Higher Educ. Fac. Rev. (Univ. of Dayton).............. 6.750 12/01/2015 539,065
1,420,000 Stow, OH, Safety Center Const., GO............................. 6.150 12/01/2015 1,463,409
1,000,000 Tuscarawas, OH, LSD GO, Ser. 1995.............................. 6.600 12/01/2015 1,076,500
500,000 Cleveland, OH, Waterworks Impt. Rev............................ 6.250 01/01/2016 512,925
750,000 Columbus-Polaris Hsg. Corp. Ohio Mtg. Rev., Prerefunded @100... 7.400 01/01/2016 840,540
500,000 Ohio St. Air Quality Dev. Auth. Rev. (Ohio Edison)............. 7.450 03/01/2016 547,185
1,000,000 Montgomery Co., OH, Hosp. Rev. (Kettering Medical Ctr.)........ 5.625 04/01/2016 976,030
405,000 Ohio HFA SFM Rev., Ser. 1990F.................................. 7.600 09/01/2016 429,191
1,085,000 Ohio HFA SFM Rev., Ser. 1991D.................................. 7.050 09/01/2016 1,140,834
500,000 Celina, OH, Wastewater Sys. Mtg. Rev........................... 6.550 11/01/2016 527,195
1,000,000 Cleveland, OH, Public Power Sys. Rev........................... 7.000 11/15/2016 1,104,420
750,000 Montgomery Co., OH, Hosp. Rev. (Miami Valley Hosp.)............ 6.250 11/15/2016 771,090
705,000 Big Walnut, OH, LSD GO (Community Library Proj.)............... 6.650 12/01/2016 756,310
590,000 Garfield Heights, OH, Various Purpose GO....................... 7.050 12/01/2016 646,687
850,000 Alliance, OH, Waterworks Sys. Rev.............................. 6.650 10/15/2017 906,245
500,000 Toledo, OH, Sewer Sys. Rev..................................... 6.350 11/15/2017 521,580
675,000 Reynoldsburg, OH, CSD GO....................................... 6.550 12/01/2017 718,963
500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1990B (Ohio Edison). 7.100 06/01/2018 542,230
500,000 Newark, OH, Water Sys. Impt. Rev............................... 6.000 12/01/2018 505,350
15,000 Ohio St. Water Dev. Auth. Ref. Rev............................. 9.375 12/01/2018 15,684
1,000,000 S. Euclid-Lyndhurst, OH, CSD GO, Ser. 1996..................... 6.400 12/01/2018 1,051,640
500,000 Seneca Co., OH, GO (Jail Fac.)................................. 6.500 12/01/2018 530,215
500,000 Franklin Co., OH, Hosp. Rev., Ser. 1991 (Mt. Carmel)........... 6.750 06/01/2019 533,075
500,000 Crawford Co., OH, GO........................................... 6.750 12/01/2019 541,630
360,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.)................ 6.250 01/15/2020 368,230
500,000 Lucas Co., OH, Hosp. Impt. Rev. (St. Vincent's Hosp.).......... 6.750 08/15/2020 539,435
1,750,000 Celina, OH, CSD GO............................................. 5.250 12/01/2020 1,625,033
1,000,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985A
(Columbus Southern Power).................................... 6.375 12/01/2020 1,037,170
200,000 Montgomery Co., OH, Hosp. Rev. (Sisters of Charity)............ 6.625 05/15/2021 211,324
1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.).......... 6.733 10/05/2021 1,058,390
20,000 Puerto Rico HFC SFM Rev., Ser. A .............................. 7.800 10/15/2021 20,599
1,220,000 Butler Co., OH, Sewer Sys. Rev................................. 5.250 12/01/2021 1,131,294
1,000,000 Kent St. Univ. General Receipts Rev............................ 6.500 05/01/2022 1,057,040
165,000 Puerto Rico HFC Rev............................................ 6.850 10/15/2023 171,092
1,000,000 Springboro, OH, Community CSD GO............................... 5.100 12/01/2023 904,420
1,000,000 Ohio St. Turnpike Rev., Ser. 1996A............................. 5.500 02/15/2026 953,630
1,000,000 Ohio St. Air Quality PCR (Penn Power).......................... 6.450 05/01/2027 1,041,670
- - ------------- ------------
$68,385,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $67,853,032)................................... $70,988,215
------------
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 10.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,600,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B............... 3.750% 07/01/1996 $ 8,600,000
- - ------------- ------------
$ 8,600,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $8,600,000).................................... $ 8,600,000
------------
$76,985,000 TOTAL INVESTMENTS AT VALUE -- 99.6%
=============
(Amortized Cost $76,453,032)................................... $79,588,215
OTHER ASSETS AND LIABILITIES, NET-- 0.4% ..................... 322,462
------------
NET ASSETS-- 100.0% .......................................... $79,910,677
</TABLE>
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS
JUNE 30, 1996
==============================================================================
Variable and adjustable rate put bonds earn interest at a coupon rate which
fluctuates at specified intervals, usually daily, monthly or semi-annually.
The rates shown in the Portfolios of Investments are the coupon rates in
effect at June 30, 1996.
Put bonds may be redeemed at the discretion of the holder on specified dates
prior to maturity. Mandatory put bonds are automatically redeemed at a
specified put date unless action is taken by the holder to prevent redemption.
Bonds denoted as prerefunded are anticipated to be redeemed prior to their
scheduled maturity. The dates indicated in the Portfolios of Investments are
the stipulated prerefunded dates.
PORTFOLIO ABBREVIATIONS:
ARPB - Adjustable Rate Put Bonds
BANS - Bond Anticipation Notes
COP - Certificates of Participation
CSD - City School District
EDA - Economic Development Authority
EDR - Economic Development Revenue
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corporation
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
ISD - Independent School District
LSD - Local School District
MFH - Multi-Family Housing
MFM - Multi-Family Mortgage
PCR - Pollution Control Revenue
RANS - Revenue Anticipation Notes
SFM - Single Family Mortgage
TANS - Tax Anticipation Notes
TRANS - Tax Revenue Anticipation Notes
USD - Unified School District
VRDN - Variable Rate Demand Notes
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
==============================================================================
Logo: Arthur Andersen LLP
To the Shareholders and Board of Trustees of the Midwest Group Tax Free Trust:
We have audited the accompanying statements of assets and liabilities of the
Ohio Tax-Free Money Fund, Tax-Free Money Fund, Tax-Free Intermediate Term
Fund, Ohio Insured Tax-Free Fund, California Tax-Free Money Fund and Royal
Palm Florida Tax-Free Money Fund of the Midwest Group Tax Free Trust (a
Massachusetts business trust), including the portfolios of investments, as of
June 30, 1996, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 June 30, 1996, by correspondence with custodians and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
Ohio Tax-Free Money Fund, Tax-Free Money Fund, Tax-Free Intermediate Term
Fund, Ohio Insured Tax-Free Fund, California Tax-Free Money Fund and Royal
Palm Florida Tax-Free Money Fund of the Midwest Group Tax Free Trust as of
June 30, 1996, 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 the periods indicated thereon, in
conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Cincinnati, Ohio,
August 1, 1996
<PAGE>
