SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.
------
Post-Effective Amendment No. 41
------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 40
------
(Check appropriate box or boxes.)
COUNTRYWIDE TAX-FREE TRUST File Nos. 2-72101 and 811-3174
- ------------------------------------------------------------
312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202
- -------------------------------------------------------
(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code:(513) 629-2000
---------------
Robert H. Leshner, 312 Walnut Street, 21st Floor, Cincinnati, OH 45202
- ----------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on November 1, 1997 pursuant to paragraph (b)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
CROSS REFERENCE SHEET
----------------------
FORM N-1A
----------
ITEM SECTION IN PROSPECTUS
- ---- ---------------------
1....................... Cover Page
2....................... Expense Information
3....................... Financial Highlights, Performance Information
4....................... Operation of the Funds, Investment Objectives
and Policies
5....................... Operation of the Funds, Financial Highlights
6....................... Cover Page, Operation of the Funds, Dividends and
Distributions, Taxes
7....................... How to Purchase Shares, Operation of the Funds,
Shareholder Services, Calculation of
Share Price and Public Offering Price, Exchange
Privilege, Distribution Plans, Subaccounting Services,
Application
8....................... How to Redeem Shares, Shareholder Services
9....................... None
ITEM SECTION IN STATEMENT OF ADDITIONAL
- ---- ----------------------------------
INFORMATION
-----------
10...................... Cover Page
11...................... Table of Contents
12...................... The Trust
13...................... Municipal Obligations, Quality Ratings of Municipal
Obligations, Definitions, Policies and Risk
Considerations, Investment Limitations, Insurers of
the Ohio Insured Tax-Free Fund, Portfolio Turnover
14...................... Trustees and Officers
15...................... Principal Security Holders
16...................... The Investment Adviser and Underwriter,
Distribution Plans, Custodian, Accountants,
Transfer Agent, Securities Transactions
17...................... Securities Transactions
18...................... The Trust
19...................... Calculation of Share Price and Public Offering Price,
Other Purchase Information, Redemption in Kind
20...................... Taxes
21...................... The Investment Adviser and Underwriter
22...................... Historical Performance Information, Tax
Equivalent Yield Tables
23...................... Annual Report
<PAGE>
PROSPECTUS
November 1, 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 BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
Countrywide Investments, Inc. (the "Adviser") manages the Funds'
investments and their business affairs.
<PAGE>
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, 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 .07%(A)
Other Expenses .42%
-----
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
Class A Class C
Shares Shares
SHAREHOLDER TRANSACTION EXPENSES --------- --------
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
* 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."
- 2 -
<PAGE>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Class A Class C
Shares Shares
Management Fees .50% .50%
12b-1 Fees(A) .13% .63%
Other Expenses .36% .61%
----- -----
Total Fund Operating Expenses .99% 1.74%
===== =====
(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.
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 such fees 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
- ------- Class A Class C
You would pay the following Shares, Shares,
expenses on a $1,000 invest- Tax-Free Tax-Free
ment, assuming (1) 5% annual Tax-Free Intermediate Intermediate
return and (2) redemption Money Fund Term Fund Term Fund
---------- ---------- ----------
at the end of each time
period:
1 Year $ 10 $ 30 $28
3 Years 32 51 55
5 Years 55 74 94
10 Years 121 139 205
- 3 -
<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, 1997 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.
<TABLE>
Tax-Free Money Fund
Per Share Data for a Share Outstanding Throughout Each Year(A)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended June 30,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
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. 0.029 0.031 0.030 0.021 0.024 0.036 0.050 0.055 0.053 0.045
------ ------- ------- ------- ------- -------- ------ ------- ------ ------
Distributions from
net investment
income.......... (0.029) (0.031) (0.030) (0.021) (0.024) (0.036) (0.050) (0.055) (0.053) (0.045)
------- ------- ------- ------- ------- ------- ------ ------- ------- -------
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 ....... 2.89% 3.15% 3.07% 2.12% 2.40% 3.63% 5.09% 5.69% 5.48% 4.53%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Net assets at end
of year (000's) .. $30,126 $25,342 $26,692 $31,168 $34,787 $50,000 $45,210 $46,727 $83,634 $115,670
======= ====== ======= ======= ======= ======= ======= ======= ======== ========
Ratio of expenses to
average net assets.. 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.97% 0.94% 0.96%
Ratio of net investment
income to average
net assets........ 2.85% 3.09% 3.00% 2.09% 2.39% 3.55% 4.98% 5.57% 5.30% 4.47%
(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.
</TABLE>
<PAGE>
Tax-Free Intermediate Term Fund
<TABLE>
Per Share Data for a Share Outstanding Throughout Each Year
===================================================================================================================
CLASS A
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended June 30,
- --------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value at
beginning of year. $10.85 $10.86 $10.69 $10.98 $10.42 $10.15 $10.05 $10.07 $10.13 $10.30
------ ------ ------ ----- ------ ------- ------ ------ ------ ------
Income from
investment operations:
Net investment
income ....... 0.50 0.50 0.49 0.48 0.53 0.59 0.62 0.64 0.63 0.56
Net realized and unrealized
gains (losses)
on investments... 0.16 (0.01) 0.17 (0.29) 0.56 0.27 0.10 (0.02) (0.06) (0.17)
----- ------- ------ ------ ----- ---- ----- ------ ----- -----
Total from investment
operations..... 0.66 0.49 0.66 0.19 1.09 0.86 0.72 0.62 0.57 0.39
----- ------ ------ ------ ------ ---- ---- ----- ----- -----
Distributions from net
investment income... (0.50) (0.50) (0.49) (0.48) (0.53) (0.59) (0.62) (0.64) (0.63) (0.56)
------ ------- ------ ------ ------ ----- ----- ----- ------ ------
Net asset value at
end of year ...... $11.01 $10.85 $10.86 $10.69 $10.98 $10.42 $10.15 $10.05 $10.07 $10.13
====== ====== ====== ====== ====== ====== ====== ======= ====== ======
Total return(A) .... 6.19% 4.51% 6.36% 1.70% 10.75% 8.78% 7.38% 6.35% 5.76% 3.88%
====== ======= ====== ===== ====== ====== ===== ===== ===== ======
Net assets at end of
year (000's) ..... $58,485 $67,675 $81,140 $106,472 $82,168 $26,720 $15,638 $15,875 $17,741 $21,916
======== ======= ====== ======== ======= ======= ======= ======= ======= =======
Ratio of expenses to average
net assets(B) ..... 0.99% 0.99% 0.99% 0.99% 0.99% 1.07% 1.13% 1.09% 1.13% 1.19%
Ratio of net investment
income to average
net assets........ 4.55% 4.52% 4.59% 4.35% 4.90% 5.75% 6.15% 6.39% 6.23% 5.51%
Portfolio turnover rate 30% 37% 32% 46% 28% 12% 48% 58% 82% 59%
</TABLE>
(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.
- 5 -
<PAGE>
Tax-Free Intermediate Term Fund
Per Share Data for a Share Outstanding Throughout Each Period
===============================================================================
CLASS C
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
From Date
of
Public
Offering
(Feb. 1,
1994)
through
Year Ended June 30, June 30,
1997 1996 1995 1994
- -------------------------------------------------------------------------------
Net asset value at beginning of period..... $10.85 $10.86 $ 10.69 $11.27
------ ------ ------- ------
Income from investment operations:
Net investment income................. 0.43 0.44 0.44 0.20
Net realized and unrealized
gains (losses) on investments..... 0.16 (0.01) 0.17 (0.58)
---- ------ ----- ------
Total from investment operations..... 0.59 0.43 0.61 (0.38)
----- ------ ----- ------
Distributions from net investment income.... (0.43) (0.44) (0.44) (0.20)
------ ------ ------ ------
Net asset value at end of period.......... $11.01 $10.85 $10.86 $10.69
====== ====== ====== ======
Total return(A) .......................... 5.49% 4.00% 5.82% 8.28%(C)
======= ======= ===== =======
Net assets at end of period (000's)....... $5,161 $5,239 $4,814 $3,084
====== ====== ====== ========
Ratio of expenses to average net assets(B). 1.65% 1.49% 1.49% 1.45%(C)
Ratio of net investment income to
average net assets............... 3.89% 4.02% 4.08% 3.79%(C)
Portfolio turnover rate.............. 30% 37% 32% 46%(C)
(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.
</TABLE>
- 6 -
<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.
- 7 -
<PAGE>
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.
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
- 8 -
<PAGE>
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.
- 9 -
<PAGE>
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.
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
- 10 -
<PAGE>
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
- 11 -
<PAGE>
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.
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.
- 12 -
<PAGE>
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
- 13 -
<PAGE>
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.
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.
- 14 -
<PAGE>
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 liquid high-grade debt 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
- 15 -
<PAGE>
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.
HOW TO PURCHASE SHARES
- ----------------------
TAX-FREE MONEY FUND
Your initial investment in the Tax-Free Money Fund ordinarily must be
at least $1,000. However, the minimum initial investment for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is
- 16 -
<PAGE>
$50. 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,
- 17 -
<PAGE>
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 Countrywide Fund Services,
Inc., 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.
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. However, the minimum initial investment in
Class A shares for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. 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
- 18 -
<PAGE>
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 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.
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 Countrywide Fund Services, Inc., 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.
- 19 -
<PAGE>
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.
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.
- 20 -
<PAGE>
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 in 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.
- 21 -
<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.
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- --------- -------- --------
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*
Investors whose accounts were opened prior to February 1, 1995 are subject to a
different table of sales loads as follows:
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- ------------------- ----- -------- --------
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*
- 22 -
<PAGE>
* 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.
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.
- 23 -
<PAGE>
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.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, 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.
- 24 -
<PAGE>
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."
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 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 initial
investment requirements and 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
- 25 -
<PAGE>
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:
- 26 -
<PAGE>
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.
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 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.
- 27 -
<PAGE>
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.
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.
- 28 -
<PAGE>
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.
- 29 -
<PAGE>
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.
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. 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. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals. 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.
- 30 -
<PAGE>
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 the minimum amount required by the Trust for your
account (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.
- 31 -
<PAGE>
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 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.
Countrywide Tax-Free Trust Countrywide Strategic Trust
- -------------------------- ----------------------------
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
- 32 -
<PAGE>
Countrywide Investment Trust
--------------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond 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 in 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.
Distributions are paid according to one of the following options:
- 33 -
<PAGE>
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. No interest
will accrue on amounts represented by uncashed dividend checks.
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'
- 34 -
<PAGE>
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.
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.
- 35 -
<PAGE>
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 five other series of the Trust, seven series of
Countrywide Investment Trust and five 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 Adviser serves as principal underwriter for the Funds and, as such,
is the exclusive agent for the distribution of shares of the Funds. Angelo R.
Mozilo, Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of
both the Trust and the Adviser.
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,
- 36 -
<PAGE>
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.
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.
- 37 -
<PAGE>
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, 1997, the Tax-Free Money Fund and Class A shares
of the Tax-Free Intermediate Term Fund paid $18,000 and $75,490, respectively,
to the Adviser to reimburse it for payments made to dealers and other persons
who may be advising shareholders in this regard.
- 39 -
<PAGE>
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.
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, 1997, Class C shares of the Tax-
Free Intermediate Term Fund paid $27,510 to the Adviser to reimburse it for
payments made to dealers and other persons who may be advising shareholders in
this regard.
- 40 -
<PAGE>
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,
- 41 -
<PAGE>
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.
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.
- 42 -
<PAGE>
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
- 43 -
<PAGE>
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 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.
- 44 -
<PAGE>
<TABLE>
<S> <C>
Account Application (check appropriate Fund) ACCOUNT NO. ____________________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354 FOR BROKER/DEALER USE ONLY
Cincinnati, Ohio 45201-5354 Firm Name:______________________________________
[ ] Tax Free Money Fund (2) $____________________ Home Office Address:____________________________
Tax Free Intermediate Term Fund Branch Address:_________________________________
[ ] A Shares (3) $____________________ Rep Name & No.:_________________________________
[ ] C Shares (16) $____________________ Rep Signature:__________________________________
___________________________________________________________________________________________________________________
[ ] Check or draft enclosed payable to the Fund(s) designated above.
[ ] Bank Wire From: _________________________________________________________________________________________________
[ ] Exchange From: _________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax l.D.#
_________________________________________________________________ _________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_________________________________________________________________ Citizenship: [ ] U.S.
Name of Joint Tenant, Partner, Custodian [ ] Other ______________________
Address Phone
_________________________________________________________________ (_____)__________________________________________
Street or P.O. Box Business Phone
_________________________________________________________________ (_____)__________________________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
Occupation and Employer Name/Address __________________________________________________________________________________
Are you an associated person of an NASD member? [ ] Yes [ ] 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 my consent to any provision of this document other than the
certifications required to avoid backup withholding. Check box if appropriate:
[ ] 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.
[ ] 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.)
[ ] Share Option _ Income distributions and capital gains distributions automatically 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
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
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 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 Address_____________________________________________________
<PAGE>
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 ure
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.)
[ ] l 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):
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
___________________________________________________________________________________________________________________
_______________________________________________________________- ________________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
___________________________________________________________- ________________________________________________________
Title of Corporate Officer, Trustee, etc. Date
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.
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 the Fund. (Check applicable Fund) ABA Routing Number_______________________
[ ] Tax Free Money Fund [ ] Tax Free Intermediate Term Fund FI Account Number________________________
[ ] Checking Account [ ] Savings Account
_____________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[ ] the last business day of each month
_____________________________________________________________ [ ] the 15th day of each month
City State [ ] both the 15th and last business day
X____________________________________________________________ X________________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (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.
<PAGE>
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 checks. 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 on any such check 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(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): Please indicate which Fund: [ ] Tax Free Money Fund
[ ] Tax Free Intermediate Term Fund
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly - Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ___ ___ _ ___ ___ ___ ___
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] 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.
[ ] 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
[ ] 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 Fund, 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 Fund, 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.
</TABLE>
- 43 -
<PAGE>
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
Countrywide Always Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
- 45 -
<PAGE>
TABLE OF CONTENTS
Expense Information.........................................................
Financial Highlights. . . . . . ............................................
Investment Objectives.......................................................
Investment Policies.........................................................
How to Purchase Shares......................................................
Shareholder Services........................................................
How to Redeem Shares........................................................
Exchange Privilege..........................................................
Dividends and Distributions.................................................
Taxes.......................................................................
Operation of the Funds......................................................
Distribution Plan. . . . ...................................................
Calculation of Share Price and Public Offering Price........................
Performance Information.....................................................
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.
- 46 -
<PAGE>
PROSPECTUS
November 1, 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. SHARES OF
THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
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.
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, 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.
- 2 -
<PAGE>
EXPENSE INFORMATION Class A Class C
- -------------------- Shares Shares
SHAREHOLDER TRANSACTION EXPENSES ------ --------
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**
* 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."
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Class A Class C
Shares Shares
Management Fees .50% .50%
12b-1 Fees(A) .02% .48%
Other Expenses .23% .52%
---- -----
Total Fund Operating Expenses .75% 1.50%
==== =====
(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.
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 such
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
- 3 -
<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, 1997 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 Year
===================================================================================================================
CLASS A
Year Ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of year. $11.97 $11.99 $11.74 $12.41 $11.67 $11.13 $10.96 $11.11 $10.85 $10.91
------ ------- ------- ------ ------ ------- ------ ------ ------ ------
Income from investment
operations:
Net investment income..... 0.61 0.62 0.63 0.61 0.65 0.70 0.68 0.74 0.76 0.77
Net realized and
unrealized gains (losses)
on investments........... 0.25 (0.02) 0.25 (0.64) 0.74 0.54 0.17 (0.15) 0.26 (0.06)
------ ------- ------- ------ ------ ------ ----- ----- ----- ------
Total from investment
operations ............... 0.86 0.60 0.88 (0.03) 1.39 1.24 0.85 0.59 1.02 0.71
----- ----- ----- ------ ---- ----- ----- ---- ---- ----
Less distributions:
Distributions from net
investment income........... (0.61) (0.62) (0.63) (0.61) (0.65) (0.70) (0.68) (0.74) (0.76) (0.77)
Distributions from net
realized gains............ - - - (0.03) - - - - - -
------ ------ ------ ------ ------ ------ ------ ----- ----- ------
Total distributions........... (0.61) (0.62) (0.63) (0.64) (0.65) (0.70) (0.68) (0.74) (0.76) (0.77)
------ ------ ------ ------ ------ ------ ------- ------ ------ ------
Net asset value at
end of year............... $12.22 $11.97 $11.99 $11.74 $12.41 $11.67 $11.13 $10.96 $11.11 $10.85
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return(A)........... 7.36% 5.05% 7.75% (0.41%) 12.24% 11.55% 7.98% 5.53% 9.75% 6.80%
===== ===== ====== ====== ====== ====== ===== ===== ===== =====
Net assets at
end of year (000's)........ $70,816 $75,938 $71,393 $79,889 $81,101 $49,288 $20,791 $16,928 $17,741 $11,822
======= ======= ======= ======= ======= ======= ====== ======== ======= ======
Ratio of expenses to average
net assets(B)......... 0.75% 0.75% 0.75% 0.75% 0.75% 0.60% 1.07% 1.02% 1.15% 1.28%
Ratio of net investment
income to average
net assets............... 5.05% 5.12% 5.35% 4.94% 5.35% 6.10% 6.14% 6.74% 6.96% 7.21%
Portfolio turnover rate...... 33% 46% 29% 45% 15% 3% 86% 29% 49% 19%
(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% and 1.52% for the years ended June 30, 1995, 1992, 1990 and
1988, respectively.
</TABLE>
<PAGE>
<TABLE>
Per Share Data for a Share Outstanding Throughout Each Period
===================================================================================================================
CLASS C
<S> <C> <C> <C> <C>
From Date of
Public Offering
Year Ended June 30, (Nov. 1, 1993)
--------------------------------- through
1997 1996 1995 June 30, 1994
Net asset value at beginning of period.................. $ 11.97 $ 12.00 $ 11.74 $ 12.62
------- ------- ------- -------
Income from investment operations:
Net investment income................................ 0.53 0.56 0.57 0.36
Net realized and unrealized gains (losses) on investments 0.25 (0.03) 0.26 (0.85)
------- ------- ------- -------
Total from investment operations........................ 0.78 0.53 0.83 (0.49)
------- -------- -------- --------
Less distributions:
Distributions from net investment income............. (0.53) (0.56) (0.57) (0.36)
Distributions from net realized gains................ - - - (0.03)
------- -------- -------- --------
Total distributions..................................... (0.53) (0.56) (0.57) (0.39)
------- --------- --------- --------
Net asset value at end of period........................ $ 12.22 $ 11.97 $ 12.00 $ 11.74
======= ======= ======== ========
Total return(A) ........................................ 6.65% 4.44% 7.31% (6.05%)(C)
======= ===== ======= =========
Net assets at end of period (000's)..................... $4,639 $ 3,972 $ 4,165 $ 2,659
======= ========= ======== =======
Ratio of expenses to average net assets(B) ............. 1.42% 1.25% 1.25% 1.22% (C)
Ratio of net investment income to average net assets.... 4.37% 4.62% 4.84% 4.09% (C)
Portfolio turnover rate................................. 33% 46% 29% 45% (C)
(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.
</TABLE>
- 5 -
<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."
- 6 -
<PAGE>
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 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,
- 7 -
<PAGE>
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,
- 8 -
<PAGE>
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 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
- 9 -
<PAGE>
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
- 10 -
<PAGE>
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 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
- 11 -
<PAGE>
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.
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
- 12 -
<PAGE>
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. Economic diversification since the early 1980's had brought the
State's employment mix more in line with that of the nation, although
manufacturing is still above the national average, at 21.1% of employment in
1995, versus 15.9% for the nation. Nonetheless, the State is benefiting from
strength in its traditional manufacturing industries, as growth in personal
income exceeded the national average between 1985-1995. Statewide employment
increased 3% between 1990 and 1995 and Ohio's unemployment rate since 1991 has
remained below that of the nation. 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. Other key factors which have contributed to Ohio's ongoing strong
economic performance include strong export activity, a stable real estate market
and a stable banking/financial services industry. While Ohio has in the past
experienced budget shortfalls due to weak revenue results and
higher-than-budgeted human services expenditures, improved economic performance
and sound financial management have enabled the State to accumulate sizable
financial reserves. Combined reserves in the general revenue fund and the budget
stabilization fund exceeded $1.6 billion at June 30, 1996, or 9.6% of the
general revenue fund's $17.2 billion fiscal 1997 budget. 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.
- 13 -
<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.
- 14 -
<PAGE>
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
- 15 -
<PAGE>
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.
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 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
- 16 -
<PAGE>
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
- 17 -
<PAGE>
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 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.
However, the minimum initial investment in Class A shares for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is $50. 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 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 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.
- 18 -
<PAGE>
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 Countrywide Fund Services, Inc., 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.
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
- 19 -
<PAGE>
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
- 20 -
<PAGE>
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 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.
- 21 -
<PAGE>
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
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*
* 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 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.
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
- 22 -
<PAGE>
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
- 23 -
<PAGE>
Adviser. The investment adviser or financial planner must notify the Transfer
Agent that an investment qualifies as a purchase at net asset value.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, 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.
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 a shareholder
- 24 -
<PAGE>
(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 initial
investment requirements and 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.
- 25 -
<PAGE>
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 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 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.
- 26 -
<PAGE>
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.
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
- 27 -
<PAGE>
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.
- 28 -
<PAGE>
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
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 the minimum amount required by the Trust for your
account (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.
- 29 -
<PAGE>
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 Strategic Trust
-------------------------- ---------------------------
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund Countrywide Investment Trust
-----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond 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.
- 30 -
<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. No interest
will accrue on amounts represented by uncashed dividend checks.
- 31 -
<PAGE>
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 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.
- 32 -
<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 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.
- 33 -
<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 six other series of the Trust, seven series of Countrywide Investment
Trust and five 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 Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. Angelo R.
Mozilo, Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of
both the Trust and the Adviser.
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.
- 34 -
<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.
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
- 35 -
<PAGE>
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, 1997, Class A shares of the Fund paid $5,300 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 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
- 37 -
<PAGE>
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.
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, 1997, Class C shares of the Fund paid $16,200 to the
Adviser to reimburse it for payments made to dealers and other persons who may
be advising shareholders in this regard.
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
- 38 -
<PAGE>
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.
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,
- 39 -
<PAGE>
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.
- 40 -
<PAGE>
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 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.
- 41 -
<PAGE>
<TABLE>
<S> <C>
Account Application ACCOUNT NO. ____________________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354 FOR BROKER/DEALER USE ONLY
Cincinnati, Ohio 45201-5354 Firm Name:______________________________________
Ohio Insured Home Office Address:____________________________
Tax-Free Fund Branch Address:_________________________________
[ ] A Shares (9) Rep Name & No.:_________________________________
[ ] C Shares (14) Rep Signature:__________________________________
___________________________________________________________________________________________________________________
Initial Investment of $___________________ ($1,000 Minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________________________________________________________
[ ] Exchange From: _________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax l.D.#
_________________________________________________________________ _________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_________________________________________________________________ Citizenship: [ ] U.S.
Name of Joint Tenant, Partner, Custodian [ ] Other ______________________
Address Phone
_________________________________________________________________ (_____)__________________________________________
Street or P.O. Box Business Phone
_________________________________________________________________ (_____)__________________________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
Occupation and Employer Name/Address __________________________________________________________________________________
Are you an associated person of an NASD member? [ ] Yes [ ] 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 my consent to any provision of this document other than the
certifications required to avoid backup withholding. Check box if appropriate:
[ ] 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.
[ ] 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.)
[ ] Share Option - Income distributions and capital gains distributions automatically 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.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
__________________________________________________________________________________________________________________________
<PAGE>
REDUCED SALES CHARGES
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.)
[ ] 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):
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $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 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, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
___________________________________________________________- ________________________________________________________
Title of Corporate Officer, Trustee, etc. Date
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.
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__________
[ ] Savings Account
_____________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
_____________________________________________________________ [ ] the last business day
City State [ ] 15th and last business day
X____________________________________________________________ X________________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (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.
<PAGE>
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
checks. 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 on any such check 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):
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly - Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: __ __ - __ __ __ __ __ __
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] 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
[ ] 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.
</TABLE>
<PAGE>
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
Countrywide Always Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
- 42 -
<PAGE>
TABLE OF CONTENTS
Expense Information...................................................
Financial Highlights. . . . . ........................................
Investment Objective and Policies.....................................
How to Purchase Shares................................................
Shareholder Services..................................................
How to Redeem Shares..................................................
Exchange Privilege....................................................
Dividends and Distributions...........................................
Taxes.................................................................
Operation of the Fund.................................................
Distribution Plans . . . .............................................
Calculation of Share Price and Public Offering Price..................
Performance Information...............................................
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.
- 43 -
<PAGE>
PROSPECTUS
November 1, 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 BANKING OR DEPOSITORY INSTITUTION. SHARES 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, 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.
- 2 -
<PAGE>
EXPENSE INFORMATION
- --------------------
RETAIL SHARES
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 After Waivers .44%(A)
12b-1 Fees .20%(B)
Other Expenses .11%
----
Total Operating Expenses After Waivers .75%(C)
====
(A) Absent waivers of management fees, such fees would be .46%.
(B) Retail Shares may incur 12b-1 fees in an amount up to .25% of
average net assets.
(C) Absent waivers of management fees by the Adviser, total operating
expenses would be .77%.
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 1 Year 3 Years 5 Years 10 Years
------- ------ ------- ------- --------
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $ 8 $ 24 $ 42 $ 93
- 3 -
<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, 1997 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
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
From
Date of
Public
Offering
From (Oct. 22,
Sept. 1, 1987)
Year Ended June 30, 1988 through
through Aug.
June 30, 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------------------------------------------------------------------------------------------
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 $1.000
------ ------ ------- ------- ------- ------- ------- ------- ------- ------
Net investment income....... 0.030 0.031 0.031 0.020 0.022 0.034 0.048 0.055 0.047 0.040
------ ------ ------- ------- ------- ------- ------ ------- ------- -------
Distributions from net
investment income ........ (0.030) (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 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return............. 2.99% 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)........ $166,719 $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%(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...... 2.93% 3.09% 3.08% 1.97% 2.16% 3.43% 4.80% 5.47% 5.64%(B) 4.66%(B)
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net assets would have been 0.77%, 0.85%(B)
and 1.02%(B) for the periods ended June 30, 1997 and 1989 and August 31, 1988, respectively.
(B) Annualized.
</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.
- 5 -
<PAGE>
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 advisory, administrative and
distribution fees. The Fund will not invest more than 5% of its total assets in
securities of any single investment company
- 6 -
<PAGE>
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.
- 7 -
<PAGE>
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.
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
- 8 -
<PAGE>
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. Economic diversification since
the early 1980's had brought the State's employment mix more in line with that
of the nation, although manufacturing is still above the national average, at
21.1% of employment in 1995, versus 15.9% for the nation. Nonetheless, the State
is benefiting from strength in its traditional manufacturing industries, as
growth in personal income exceeded the national average between 1985-1995.
Statewide employment increased 3% between 1990 and 1995 and Ohio's unemployment
rate since 1991 has remained below that of the nation. 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. Other key factors which have contributed to
Ohio's ongoing strong economic performance include strong export activity, a
stable real estate market and a stable banking/financial services industry.
While Ohio has in the past experienced budget shortfalls due to weak revenue
results and higher-than-budgeted human services expenditures, improved economic
performance and sound financial management have enabled the State to accumulate
sizable financial reserves. Combined reserves in the general revenue fund and
the budget stabilization fund exceeded $1.6 billion at June 30, 1996, or 9.6% of
the general revenue fund's $17.2 billion fiscal 1997 budget. 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.
- 9 -
<PAGE>
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 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
- 10 -
<PAGE>
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
- 11 -
<PAGE>
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 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 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
- 12 -
<PAGE>
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. However, the minimum initial investment for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is $50. 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
- 13 -
<PAGE>
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.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account
by mail or by bank wire. Checks should be sent to Countrywide Fund Services,
Inc., 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
- 14 -
<PAGE>
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
- 15 -
<PAGE>
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.
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.
- 16 -
<PAGE>
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. After six check redemptions are effected in your account in a month,
the Transfer Agent will
- 17 -
<PAGE>
charge you $.25 for each additional check redemption effected that month.
However, there is no charge for any check redemptions effected by employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals. 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 the minimum amount required by the Trust for your
account (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.
- 18 -
<PAGE>
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 Strategic Trust
- -------------------------- ---------------------------
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
-----------------------------
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond 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.
- 19 -
<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. No interest will accrue on amounts represented by
uncashed distribution checks.
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.
- 20 -
<PAGE>
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.
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-
- 21 -
<PAGE>
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 six other series of the Trust, seven series of Countrywide Investment
Trust and five 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 Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Angelo R. Mozilo,
Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of both the
Trust and the Adviser.
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
- 22 -
<PAGE>
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.
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
- 23 -
<PAGE>
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. BHC
Securities Inc., 2005 Market Street, Philadelphia Pennsylvania, may be deemed to
control Retail Shares of the Fund by virtue of the fact that it owns of record
more than 25% of such 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,
- 24 -
<PAGE>
sale or retention of Retail Shares of the Fund. For the fiscal year ended June
30, 1997, Retail Shares of the Fund paid $422,148 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
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.
- 25 -
<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 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.
-26-
<PAGE>
Account Application Account No. 07 - ____________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354 FOR BROKER/DEALER USE ONLY
Firm Name: __________________________
OHIO TAX-FREE MONEY FUND Home Office Address:_________________
(RETAIL SHARES) Branch Address:______________________
Rep Name & No. ______________________
________________________________________________________________________________
Initial Investment of $___________________________ ($1,000 minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________________
[ ] Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
<TABLE>
<S> <C> <C>
Account Name S.S.#/Tax I.D.#
_____________________________________________________________ ____________________________
Name of Individual, Corporation, Organization, or Minor, etc. In case of custodial account
please list minor's S.S.#
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian Citizenship: [ ] U.S.
[ ] Other _______
Address Phone
___________________________________________________________________ ( ) _________________________
Street or P.O. Box Business Phone
___________________________________________________________________ ( ) _________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] 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 my consent to any provision of this
document other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] 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.
[ ] 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)
[ ] Reinvest all distributions
[ ] 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:
[ ] 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
<PAGE>
[ ] 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 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 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, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
__________________________________________________
_______________________________________________________________ Date
Title of Corporate Officer, 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.
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________________________
[ ] Checking Account [ ] Savings Account
________________________________________________
Name of Financial Institution (FI)
_________________________________________________
City State
Please make my automatic investment on:
[ ] the last business day of each month
[ ] the 15th day of each month
[ ] 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.
<PAGE>
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):
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly - Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________.
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ____ ____ _ ____ ____ ____
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] 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.
[ ] 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
[ ] 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 ction for it as may be necessary or appropriate with respect to its shareholder account with the Fund, 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 Fund,
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.
<PAGE>
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.
</TABLE>
<PAGE>
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. Bodgon, 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
Countrywide Always Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information................................
Financial Highlights . . . . . . . . . . . . . . .
Investment Objective and Policies..................
How to Purchase Shares.............................
Shareholder Services...............................
How to Redeem Shares...............................
Exchange Privilege.................................
Dividends and Distributions........................
Taxes..............................................
Operation of the Fund..............................
Distribution Plan. . . . ..........................
Calculation of Share Price.........................
Performance Information............................
- ----------------------------------------------------------------
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, 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 BANKING OR DEPOSITORY INSTITUTION. SHARES 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,
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.
- 2 -
<PAGE>
EXPENSE INFORMATION
- -------------------
INSTITUTIONAL SHARES
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 .44%(A)
12b-1 Fees None
Other Expensees After Reimbursements .06%(B)
-------
Total Operating Expenses After
Waivers and Expense Reimbursements .50%(C)
=======
(A) Absent waivers of management fees, such fees would be .46%.
(B) Absent expense reimbursements by the Adviser, other expenses would
be .10%.
(C) Absent waivers of management fees and expense reimbursements by the
Adviser, total operating expenses would be .56%.
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 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
- ------- 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
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: $ 5 $ 16 $ 28 $ 63
- 2 -
<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, 1997 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
Period
Ended
June 30,
1997(A)
_______________________________________________________________________________
Net asset value at beginning of period.................$1.000
------
Net investment income.................................. 0.016
------
Distributions from net investment income.............. (0.016)
-------
Net asset value at end of period.......................$1.000
======
Total return............................................3.31%(C)
=====
Net assets at end of period (000's)...................$97,589
=======
Ratio of expenses to average net assets(B)..............0.50%(C)
Ratio of net investment income to average net assets....3.28%(C)
________________________________________________________________________________
(A) Represents the period from the initial public offering of Class B
shares (January 7, 1997) through June 30, 1997.
(B) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 0.56% for the period ended
June 30, 1997.
(C) Annualized.
- 3 -
<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.
- 4 -
<PAGE>
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 advisory and administrative
fees. The Fund will not invest more than 5% of its total assets in securities of
any single investment company
- 5 -
<PAGE>
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-
- 6 -
<PAGE>
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.
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
- 7 -
<PAGE>
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. Economic diversification since
the early 1980's had brought the State's employment mix more in line with that
of the nation, although manufacturing is still above the national average, at
21.1% of employment in 1995, versus 15.9% for the nation. Nonetheless, the State
is benefiting from strength in its traditional manufacturing industries, as
growth in personal income exceeded the national average between 1985-1995.
Statewide employment increased 3% between 1990 and 1995 and Ohio's unemployment
rate since 1991 has remained below that of the nation. 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. Other key factors which have contributed to
Ohio's ongoing strong economic performance include strong export activity, a
stable real estate market and a stable banking/financial services industry.
While Ohio has in the past experienced budget shortfalls due to weak revenue
results and higher-than-budgeted human services expenditures, improved economic
performance and sound financial management have enabled the State to accumulate
sizable financial reserves. Combined reserves in the general revenue fund and
the budget stabilization fund exceeded $1.6 billion at June 30, 1996, or 9.6% of
the general revenue fund's $17.2 billion fiscal 1997 budget. 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.
- 8 -
<PAGE>
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 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
- 9 -
<PAGE>
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.
- 10 -
<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 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 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.
- 11 -
<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. 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 Institutional Shares of the Fund ordinarily
must be at least $1,000,000. 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.
- 12 -
<PAGE>
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 Countrywide Fund Services,
Inc., 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.
- 13 -
<PAGE>
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
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.
- 14 -
<PAGE>
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
- 15 -
<PAGE>
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 $1,000,000 (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 Strategic Trust
- -------------------------- ----------------------------
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
- 16 -
<PAGE>
Countrywide Investment Trust
----------------------------
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond 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.
- 17 -
<PAGE>
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. No interest will accrue on amounts represented by
uncashed distribution checks.
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.
- 18 -
<PAGE>
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.
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.
- 19 -
<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 six other series of the Trust, seven series of Countrywide Investment
Trust and five 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 Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. Angelo R.
Mozilo, Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of
both the Trust and the Adviser.
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.
- 20 -
<PAGE>
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.
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.
- 21 -
<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 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.
-22-
<PAGE>
Account Application
ACCOUNT NO. 04 - ________________
(For Fund Use Only)
Please mail account application to:
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._________________________________
OHIO TAX-FREE MONEY FUND
(Institutional Shares)
Initial Investment of $___________________________ ($500,000 Minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________
[ ] Exchange From: __________________________________________________
(Fund Name) (Fund Account Number)
Account Name
_________________________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc.
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian
Address
___________________________________________________________________
Street or P.O. Box
____________________________________________________________________
City State Zip
S.S.#/Tax I.D.#
________________________________________________________
(In case of custodial account please list minor's S.S.#)
Citizenship: ___ U.S. Phone
___ Other ( )______________________
Business Phone
( )______________________
Home Phone
<TABLE>
<S> <C> <C> <C>
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] 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 my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] 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.
[ ] 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.)
[ ] Share Option - Income distributions and capital gains distributions automatically reinvested in additional shares.
[ ] 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 in 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 used 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, Corporate Officer, Trustee, etc.
- --------------------------------------------------------------
Signature of Joint Owner, if Any
- ---------------------------------------------------------------
Title of Corporate Officer, Trustee, etc.
- ---------------------------------------------------------------
Date
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 Fund, 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 Fund, 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.
</TABLE>
<PAGE>
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
Countrywide Always Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information...........................................
Financial Highlights..........................................
Investment Objective and Policies.............................
How to Purchase Shares........................................
How to Redeem Shares..........................................
Exchange Privilege............................................
Subaccounting Services .......................................
Dividends and Distributions...................................
Taxes.........................................................
Operation of the Fund.........................................
Calculation of Share Price....................................
Performance Information.......................................
- ----------------------------------------------------------------
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, 1997
CALIFORNIA TAX-FREE MONEY FUND
RETAIL SHARES
-------------------------------
The California Tax-Free Money Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of current 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 BANKING OR DEPOSITORY INSTITUTION. SHARES 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, 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.
- 2 -
<PAGE>
EXPENSE INFORMATION
RETAIL SHARES
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 .50%
12b-1 Fees .04%(A)
Other Expenses .26%
----
Total Operating Expenses .80%
====
(A)Retail Shares may incur 12b-1 fees in an amount up to .25% of average net
assets.
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.
<TABLE>
<S> <C> <C> <C> <C>
Example 1 Year 3 Years 5 Years 10 Years
------- ------ ------- ------- --------
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: $ 8 $ 26 $ 44 $ 99
</TABLE>
- 3 -
<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, 1997 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 EACH PERIOD
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FROM DATE
OF PUBLIC
OFFERING
(JULY 25,
1989)
THROUGH
YEAR ENDED JUNE 30, JUNE
____________________________________________________________ 30,
1997 1996 1995 1994 1993 1992 1991 1990
______________________________________________________________________
Net asset value at
beginning of period..............$1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------- ----- ------
Net investment income...............0.028 0.029 0.029 0.019 0.022 0.035 0.046 0.053
----- ----- ----- ----- ------ ----- ----- -----
Distributions from net
investment income................(0.028) (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 $1.000
====== ====== ====== ====== ====== ====== ====== ======
Total return........................2.81% 2.95% 2.95% 1.93% 2.26% 3.71% 4.70% 5.79%(B)
===== ===== ===== ===== ===== ===== ====== ======
Net assets at end
of period (000's)................$32,186 $36,122 $19,525 $24,508 $34,487 $21,246 $13,524 $12,205
======= ======= ======= ======= ======= ======= ======= =======
Ratio of expenses to
average net assets(A)..............0.80% 0.80% 0.70% 0.60% 0.56% 0.34% 0.40% 0.08%(B)
Ratio of net investment
income to average net
assets.............................2.76% 2.88% 2.83% 1.90% 2.22% 3.49% 4.56% 5.65%(B)
_______________________________________________________________________________________________________________
(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.
</TABLE>
- 3 -
<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.
- 5 -
<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. 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.
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
- 6 -
<PAGE>
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
- 7 -
<PAGE>
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 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, gains in the export,
entertainment, tourism and computer services sectors have helped drive the
recent recovery. Despite strong job growth, the unemployment level of 6.2% in
June 1997, although a seven year low for the state, remains above that of the
nation. However, the long-term decline in wealth levels relative to the nation
appears to have stabilized, as personal income growth in 1997 was 6.5%. The
economic upturn has led to improved state finances, after the 1990's recession
caused general fund balances to reach a deficit of 8.9% of expenditures.
Increased liquidity has eliminated the
- 8 -
<PAGE>
need to borrow externally across fiscal years for cash flow purposes. In the
past, overly optimistic assumptions have caused extremely large variances from
budget. However, fiscals 1996 and 1997 have come in much closer to budget, which
is the result of economically improved revenues offsetting some unattainable
assumptions. Nevertheless, the state's cash position remains weak, as a result
of expenditures for school loans, a recent court mandated payment of $1.2
billion to a state pension fund and Proposition 98, which requires a mandated
minimum percentage of general fund revenues to be used towards education. The
state's future budgets will be challenged by school enrollment growth,
Proposition 98 mandates, prison funding required by new mandatory sentencing
laws, social services needs and a two-thirds legislative requirement for budget
passage. These impediments will offset some of the economic benefits of the
state's recovery. 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, a portion of which is insured and carries an "AAA" rating by
Standard & Poor's. 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. Although no issuers of California
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 California 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
- 9 -
<PAGE>
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.
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
- 10 -
<PAGE>
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.
- 11 -
<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
- 12 -
<PAGE>
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. However, the minimum initial investment for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is $50. 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.
- 13 -
<PAGE>
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.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account
by mail or by bank wire. Checks should be sent to Countrywide Fund Services,
Inc., 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
- 14 -
<PAGE>
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.
- 15 -
<PAGE>
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
- 16 -
<PAGE>
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. 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. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals. 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.
- 17 -
<PAGE>
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 the minimum amount required by the Trust for your
account (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.
- 18 -
<PAGE>
Countrywide Tax-Free Trust Countrywide Strategic Trust
- -------------------------- ---------------------------
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
----------------------------
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
*Intermediate Bond 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.
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
- 19 -
<PAGE>
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. No interest will accrue on amounts represented by
uncashed distribution checks.
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.
- 20 -
<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 six other series of the Trust, seven series of Countrywide Investment
Trust and five series of Countrywide Strategic Trust. The Adviser is
- 21 -
<PAGE>
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 Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Angelo R. Mozilo,
Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of both the
Trust and the Adviser.
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,
- 22 -
<PAGE>
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.
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.
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
- 23 -
<PAGE>
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, 1997, Retail Shares of the Fund paid
$12,000 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
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.
- 25 -
<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
- 26 -
<PAGE>
"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.
- 27 -
<PAGE>
<TABLE>
<S> <C>
Account Application ACCOUNT NO. 24-_______________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354 FOR BROKER/DEALER USE ONLY
Cincinnati, Ohio 45201-5354 Firm Name:______________________________________
CALIFORNIA TAX-FREE MONEY FUND HOME OFFICE ADDRESS:____________________________
(RETAIL SHARES) BRANCH ADDRESS:_________________________________
Rep Name & No.:_________________________________
_________________________________________________________________________________________________________________________________
Initial Investment of $___________________________
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________________________________________________________
[ ] Exchange From: _________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________ _______________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_________________________________________________________________ Citizenship: [ ] U.S.
Name of Joint Tenant, Partner, Custodian [ ] Other _____________________
Address Phone
___________________________________________________________________ ( )____________________________________
Street or P.O. Box Business Phone
___________________________________________________________________ ( )____________________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] 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 my consent to any provision of this document other than the
certifications required to avoid backup withholding. Check box if appropriate:
[ ] 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.
[ ] 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)
[ ] Reinvest all distributions
[ ] Pay all distributions in cash [ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
- -------------------------------------------------------------------------------------------------------------------
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 Investements (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 used 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
<PAGE>
[ ] 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, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
- ---------------------------------------------------------------- --------------------------------------------------------
Title of Corporate Officer, Trustee, etc. Date
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.
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 California Tax-Free Money Fund. ABA Routing Number_______________________
FI Account Number________________________
[ ] Checking Account [ ] Savings Account
- -------------------------------------------------------------------------
Name of Financial Institution (FI) Please make my automatic investment on:
[ ] the last business day of each month
_________________________________________________________________________ [ ] the 15th day of each month
City State [ ] both the 15th and last business day
X________________________________________________________________________ X_______________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (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
checks. 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 on any such check 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.
___________________________________________________________________________________________________________________________________
<PAGE>
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):
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ____ ____ _ ____ ____ ____ ____
____ ____ _ ____
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] 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.
[ ] 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
[ ] 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 Fund, 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 Fund, 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.
<PAGE>
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.
</TABLE>
<PAGE>
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. Bodgon, 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
Countrywide Always Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information.......................................................
Financial Highlights .....................................................
Investment Objective and Policies.........................................
How to Purchase Shares....................................................
Shareholder Services......................................................
How to Redeem Shares......................................................
Exchange Privilege........................................................
Dividends and Distributions...............................................
Taxes.....................................................................
Operation of the Fund.....................................................
Distribution Plan. . . . .................................................
Calculation of Share Price................................................
Performance Information...................................................
- -------------------------------------------------------------------------------
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, 1997
CALIFORNIA TAX-FREE MONEY FUND
INSTITUTIONAL SHARES
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 BANKING OR DEPOSITORY INSTITUTION. SHARES 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, 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
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 .50%
12b-1 Fees None
Other Expenses After Reimbursements .05%(A)
Total Operating Expenses After ------
Expense Reimbursements .55%(B)
=======
(A) Absent expense reimbursements by the Adviser, other expenses would be
.26%.
(B) Absent expense reimbursements by the Adviser, total operating expenses
would be .76%.
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.
1 Year 3 Years 5 Years 10 Years
EXAMPLE ------ ------- ------- --------
You would pay the following
expenses on a $1,000 investment,
asuming (1) 5% annual return and
(2) redemption at the end
of each time period: $ 6 $ 18 $ 31 $ 69
- 2 -
<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
- 3 -
<PAGE>
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.
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,
- 4 -
<PAGE>
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
- 5 -
<PAGE>
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 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, gains in the export,
entertainment, tourism and computer services sectors have helped drive the
recent recovery. Despite strong job growth, the unemployment level of 6.2% in
June 1997, although a seven year low for the state, remains above that of the
nation. However, the long-term decline in wealth levels relative to the nation
appears to have stabilized, as personal income growth in 1997 was 6.5%. The
- 6 -
<PAGE>
economic upturn has led to improved state finances, after the 1990's recession
caused general fund balances to reach a deficit of 8.9% of expenditures.
Increased liquidity has eliminated the need to borrow externally across fiscal
years for cash flow purposes. In the past, overly optimistic assumptions have
caused extremely large variances from budget. However, fiscals 1996 and 1997
have come in much closer to budget, which is the result of economically improved
revenues offsetting some unattainable assumptions. Nevertheless, the state's
cash position remains weak, as a result of expenditures for school loans, a
recent court mandated payment of $1.2 billion to a state pension fund and
Proposition 98, which requires a mandated minimum percentage of general fund
revenues to be used towards education. The state's future budgets will be
challenged by school enrollment growth, Proposition 98 mandates, prison funding
required by new mandatory sentencing laws, social services needs and a
two-thirds legislative requirement for budget passage. These impediments will
offset some of the economic benefits of the state's recovery. 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, a portion of which is insured and
carries an "AAA" rating by Standard & Poor's. 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
- 7 -
<PAGE>
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.
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
- 8 -
<PAGE>
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
- 9 -
<PAGE>
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
- 10 -
<PAGE>
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 $1,000,000. 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 August 15, 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 "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) 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.
- 11 -
<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 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 Countrywide Fund Services, Inc.,
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.
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
- 12 -
<PAGE>
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
- 13 -
<PAGE>
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 $1,000,000 (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.
- 14 -
<PAGE>
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 Strategic Trust
- --------------------------- ----------------------------
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
-----------------------------
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
*Intermediate Bond 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.
- 15 -
<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.
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. No interest will accrue on amounts represented by
uncashed dividend checks.
- 16 -
<PAGE>
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.
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.
- 17 -
<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 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 six other series of the Trust, seven series of Countrywide Investment
Trust and five 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 Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Angelo R. Mozilo,
Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of both the
Trust and the Adviser.
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
- 18 -
<PAGE>
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.
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
- 19 -
<PAGE>
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.
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
- 20 -
<PAGE>
"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.
- 21 -
<PAGE>
Account Application
ACCOUNT NO. - ________________
(For Fund Use Only)
Please mail account application to:
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._________________________________
CALIFORNIA TAX-FREE MONEY FUND
(Institutional Shares)
Initial Investment of $___________________________ ($1,000,000 Minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________
[ ] Exchange From: __________________________________________________
(Fund Name) (Fund Account Number)
Account Name
_________________________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc.
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian
Address
___________________________________________________________________
Street or P.O. Box
____________________________________________________________________
City State Zip
S.S.#/Tax I.D.#
________________________________________________________
(In case of custodial account please list minor's S.S.#)
Citizenship: ___ U.S. Phone
___ Other ( )______________________
Business Phone
( )______________________
Home Phone
<TABLE>
<S> <C> <C> <C>
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] 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 my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] 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.
[ ] 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.)
[ ] Share Option - Income distributions and capital gains distributions automatically reinvested in additional shares.
[ ] 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 in 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 used 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, Corporate Officer, Trustee, etc.
- --------------------------------------------------------------
Signature of Joint Owner, if Any
- ---------------------------------------------------------------
Title of Corporate Officer, Trustee, etc.
- ---------------------------------------------------------------
Date
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 Fund, 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 Fund, 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.
</TABLE>
<PAGE>
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
Countrywide Always Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information...................................................
Investment Objective and Policies.....................................
How to Purchase Shares................................................
How to Redeem Shares..................................................
Exchange Privilege....................................................
Subaccounting Services................................................
Dividends and Distributions...........................................
Taxes.................................................................
Operation of the Fund.................................................
Calculation of Share Price............................................
Performance Information...............................................
- ----------------------------------------------------------------
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, 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 BANKING OR DEPOSITORY INSTITUTION. SHARES 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, 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.
- 2 -
<PAGE>
EXPENSE INFORMATION
RETAIL SHARES
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 After Waivers .31%(A)
12b-1 Fees .17%(B)
Other Expenses .27%
----
Total Operating Expenses After Waivers .75%(C)
====
(A) Absent waivers of management fees, such fees would be .50%.
(B) Retail Shares may incur 12b-1 fees in an amount up to .25% of
average net assets.
(C) Absent waivers of management fees, total operating expenses would be
.94%.
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
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
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: $ 8 $ 24 $42 $ 93
- 2 -
<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, 1997 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>
<S> <C> <C> <C> <C> <C>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Period
Ended
Year Ended June 30, June 30,
_______________________________________________________
1997 1996 1995 1994 1993(A)
Net asset value at beginning
of period.................................. $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Net investment income........................ 0.029 0.032 0.031 0.021 0.016
----- ----- ----- ----- -----
Distributions from net
investment income....................... (0.029) (0.032) (0.031) (0.021) (0.016)
------- ------- ------- ------ -------
Net asset value at end of
period...................................... $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total return................................... 2.90% 3.29% 3.17% 2.11% 2.49%(C)
===== ===== ===== ===== ======
Net assets at end of period
(000's)..................................... $22,434 $28,906 $24,119 $26,276 $21,907
======= ======= ======= ======= =======
Ratio of expenses to average
net assets(B)................................ 0.75% 0.61% 0.66% 0.58% 0.34%(C)
Ratio of net investment income
to average net assets........................ 2.85% 3.24% 3.12% 2.10% 2.41%(C)
__________________________________________________________________________________________________________
(A) Represents the period from the initial public offering of Class A shares (November 13, 1992) through
June 30, 1993. 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 0.94%, 0.80%, 0.80%, 0.81% and 0.94%(C) for the periods ended June 30, 1997,
1996, 1995, 1994 and 1993, respectively.
(C) Annualized.
</TABLE>
- 3 -
<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
- 4 -
<PAGE>
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.
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,
- 5 -
<PAGE>
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.
- 6 -
<PAGE>
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.
- 7 -
<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 1996 represents an increase of 48% from 1980 levels, ranking the
state fourth in the nation. Florida's per capita income is on par with national
averages and is 11% above regional levels, reflecting healthy growth since the
early 1990s recession. The state's income structure is more dependent on
property income (dividends, income and rent) and transfer payments (social
security and pension benefits) due to the significant retirement age population.
During the past decade, Florida has experienced strong growth in the services,
construction and trade sectors. These sectors now account for more than 64% of
the state's work force. Florida's service-based economy continues to grow 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. Growth in the services,
contruction and trade sectors represented 82% of all new employment between
1993-1996 and will be the state's primary growth sectors in the future. 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. The state continues to have a relatively narrow tax base, with 70% of
revenues derived from the 6% sales and use tax. Despite this reliance on a
cyclical revenue source, Florida has managed its overall financial program well.
The state has generated operating surpluses in recent years, while maintaining
tax levels and funding growth-related service requirements. The state expects to
end fiscal 1997 with the highest reserve level recorded in more than a decade.
In December 1996, it was reported that Miami, Florida was facing a budget
shortfall of $68 million. As a result, Miami's debt ratings were reduced to
"junk" bond status by both Standard & Poor's and Moody's Investors Service, Inc.
Florida's governor has appointed an oversight panel to assist Miami in
recovering from its financial crisis, and all expenses and debts for at least
five years must be approved by the panel. 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
- 8 -
<PAGE>
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.
- 9 -
<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
- 10 -
<PAGE>
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.
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.
- 11 -
<PAGE>
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. However, the minimum initial investment for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is $50. 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
- 12 -
<PAGE>
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.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to Countrywide Fund Services, Inc.,
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.
- 13 -
<PAGE>
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.
- 14 -
<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
- 15 -
<PAGE>
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. 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.
However, there is no charge for any check redemptions effected by employees,
shareholders and customers of Countrywide Credit
- 16 -
<PAGE>
Industries, Inc. or any affiliated company, including members of the immediate
fmaily of such individuals. 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 the minimum amount required by the Trust for your account
(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.
- 17 -
<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 Strategic Trust
- -------------------------- --------------------------------
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
----------------------------
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond 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
- 18 -
<PAGE>
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. No interest will accrue on amounts represented by
uncashed distribution checks.
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
- 19 -
<PAGE>
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
- 20 -
<PAGE>
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 six other series of the Trust, seven series of Countrywide Investment
Trust and five 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 Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Angelo R. Mozilo,
Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of both the
Trust and the Adviser.
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
- 21 -
<PAGE>
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.
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.
- 22 -
<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, 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, 1997, Retail Shares of the Fund paid
$45,259 to the Adviser to reimburse it for payments made to dealers and
- 24 -
<PAGE>
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
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.
- 25 -
<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 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.
- 26 -
<PAGE>
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
FLORIDA 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)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________________
[ ] Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
Account Name
_____________________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc.
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian
Address
___________________________________________________________________
Street or P.O. Box
___________________________________________________________________
City State Zip
S.S.#/Tax I.D.#
________________________________________________________
(In case of custodial account please list minor's S.S.#)
Citizenship: ___ U.S.
___ Other____________________
Phone
( )_________________________________
Business Phone
( )___________________________________
Home Phone
<TABLE>
<S> <C> <C>
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] 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 my consent to any provision of this
document other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] 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.
[ ] 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 (Distributions are reinvested if no choice is indicated)
[ ] Reinvest all distributions
[ ] 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:
[ ] 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
[ ] 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, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
__________________________________________________
_______________________________________________________________ Date
Title of Corporate Officer, 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________________________
[ ] Checking Account [ ] Savings Account
________________________________________________
Name of Financial Institution (FI)
_________________________________________________
City State
Please make my automatic investment on:
[ ] the last business day of each month
[ ] the 15th day of each month
[ ] 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):
[ ] Monthly _ Withdrawals will be made on the last business day of each month.
[ ] Quarterly _ Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually _ Please make withdrawals on the last business day of the month of:____________________.
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ____ ____ _ ____ ____ ____
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] 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.
[ ] 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
[ ] 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 ction for it as may be necessary or appropriate with respect to its shareholder account with the Fund, 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 Fund,
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.
</TABLE>
<PAGE>
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
Countrywide Always Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information...............................................
Financial Highlights .............................................
Investment Objective and Policies.................................
How to Purchase Shares............................................
Shareholder Services..............................................
How to Redeem Shares..............................................
Exchange Privilege................................................
Dividends and Distributions.......................................
Taxes.............................................................
Operation of the Fund.............................................
Distribution Plan. . . . .........................................
Calculation of Share Price........................................
Performance Information...........................................
- ----------------------------------------------------------------
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, 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 BANKING OR DEPOSITORY INSTITUTION. SHARES 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, 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.
- 2 -
<PAGE>
EXPENSE INFORMATION
- -------------------
INSTITUTIONAL SHARES
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 .31%(A)
12b-1 Fees None
Other Expenses After Reimbursements .19%(B)
--------
Total Operating Expenses After Waivers
and Expense Reimbursements .50%(C)
========
(A) Absent waivers of management fees, such fees would be .50%.
(B) Absent expense reimbursements by the Adviser, other expenses would
be .29%.
(C) Absent waivers of management fees and expense reimbursements by the
Adviser, total operating expenses would be .79%.
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 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
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
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: $ 5 $ 16 $ 28 $ 63
- 2 -
<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, 1997 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 EACH PERIOD
Year Period
Ended Ended
June 30, June 30,
1997 1996(A)
________________________________________________________________________________
Net asset value at beginning of period................$1.000 $1.000
------ ------
Net investment income................................. 0.031 0.003
------ -----
Distributions from net investment income............. (0.031) (0.003)
----- -------
Net asset value at end of period......................$1.000 $1.000
======= ======
Total return...........................................3.16% 3.03%(C)
===== =====
Net assets at end of period (000's)....................$19,349 $19,145
======= =======
Ratio of expenses to average net assets(B).............0.50% 0.50%(C)
Ratio of net investment income to average net assets...3.11% 3.03%(C)
________________________________________________________________________________
(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 0.79% and 0.87%(C) for the
periods ended June 30, 1997 and 1996, respectively.
(C) Annualized.
- 3 -
<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
- 4 -
<PAGE>
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.
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,
- 5 -
<PAGE>
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.
- 6 -
<PAGE>
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.
- 7 -
<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 1996 represents an increase of 48% from 1980 levels, ranking the
state fourth in the nation. Florida's per capita income is on par with national
averages and is 11% above regional levels, reflecting healthy growth since the
early 1990s recession. The state's income structure is more dependent on
property income (dividends, income and rent) and transfer payments (social
security and pension benefits) due to the significant retirement age population.
During the past decade, Florida has experienced strong growth in the services,
construction and trade sectors. These sectors now account for more than 64% of
the state's work force. Florida's service-based economy continues to grow 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. Growth in the services,
contruction and trade sectors represented 82% of all new employment between
1993-1996 and will be the state's primary growth sectors in the future. 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. The state continues to have a relatively narrow tax base, with 70% of
revenues derived from the 6% sales and use tax. Despite this reliance on a
cyclical revenue source, Florida has managed its overall financial program well.
The state has generated operating surpluses in recent years, while maintaining
tax levels and funding growth-related service requirements. The state expects to
end fiscal 1997 with the highest reserve level recorded in more than a decade.
In December 1996, it was reported that Miami, Florida was facing a budget
shortfall of $68 million. As a result, Miami's debt ratings were reduced to
"junk" bond status by both Standard & Poor's and Moody's Investors Service, Inc.
Florida's governor has appointed an oversight panel to assist Miami in
recovering from its financial crisis, and all expenses and debts for at least
five years must be approved by the panel. 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
- 8 -
<PAGE>
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.
- 9 -
<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
- 10 -
<PAGE>
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.
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
- 11 -
<PAGE>
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
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.
- 12 -
<PAGE>
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 Countrywide Fund Services, Inc.,
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
- 13 -
<PAGE>
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
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.
- 14 -
<PAGE>
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.
- 15 -
<PAGE>
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.
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 Strategic Trust
- -------------------------- ---------------------------
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
-----------------------------
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
- 16 -
<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.
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.
- 17 -
<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. No interest will accrue on amounts represented by
uncashed distribution checks.
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.
- 18 -
<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 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.
- 19 -
<PAGE>
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 six other series of the Trust, seven series of Countrywide Investment
Trust and five 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 Adviser servs as principal underwriter for the Fund and, as such, is
the exclusive agent for the distribution of shares of the Fund. Angelo R.
Mozilo, Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of
both the Trust and the Adviser.
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. (the "Transfer
Agent"), an indirect wholly-owned subsidiary of Countrywide Credit Industries,
Inc., P.O. Box 5354, Cincinnati, Ohio, 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
- 20 -
<PAGE>
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.
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 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
- 21 -
<PAGE>
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.
- 22 -
<PAGE>
Account Application
ACCOUNT NO. 6 - ________________
(For Fund Use Only)
Please mail account application to:
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._________________________________
FLORIDA TAX-FREE MONEY FUND
(Institutional Shares)
Initial Investment of $___________________________ ($100,000 Minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________
[ ] Exchange From: __________________________________________________
(Fund Name) (Fund Account Number)
Account Name
_________________________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc.
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian
Address
___________________________________________________________________
Street or P.O. Box
____________________________________________________________________
City State Zip
S.S.#/Tax I.D.#
________________________________________________________
(In case of custodial account please list minor's S.S.#)
Citizenship: ___ U.S. Phone
___ Other ( )______________________
Business Phone
( )______________________
Home Phone
<TABLE>
<S> <C> <C> <C>
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] 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 my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] 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.
[ ] 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.)
[ ] Share Option - Income distributions and capital gains distributions automatically reinvested in additional shares.
[ ] 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 in 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 used 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 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 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, Corporate Officer, Trustee, etc.
- --------------------------------------------------------------
Signature of Joint Owner, if Any
- ---------------------------------------------------------------
Title of Corporate Officer, Trustee, etc.
- ---------------------------------------------------------------
Date
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 Fund, 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 Fund, 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.
</TABLE>
<PAGE>
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
Countrywide Always Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information....................................
Financial Highlights...................................
Investment Objective and Policies......................
How to Purchase Shares.................................
How to Redeem Shares...................................
Exchange Privilege.....................................
Subaccounting Services ................................
Dividends and Distributions............................
Taxes..................................................
Operation of the Fund..................................
Calculation of Share Price.............................
Performance Information................................
- ----------------------------------------------------------------
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, 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, 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............................. 9
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS........................12
INVESTMENT LIMITATIONS...............................................16
INSURERS OF THE OHIO INSURED TAX-FREE FUND'S PORTFOLIO SECURITIES... 22
TRUSTEES AND OFFICERS................................................24
THE INVESTMENT ADVISER AND UNDERWRITER...............................27
DISTRIBUTION PLANS...................................................29
SECURITIES TRANSACTIONS..............................................32
PORTFOLIO TURNOVER...................................................34
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE.................34
OTHER PURCHASE INFORMATION...........................................38
TAXES................................................................39
REDEMPTION IN KIND...................................................42
HISTORICAL PERFORMANCE INFORMATION...................................42
PRINCIPAL SECURITY HOLDERS.......................................... 48
CUSTODIAN............................................................49
AUDITORS.............................................................49
TRANSFER AGENT . ....................................................49
TAX EQUIVALENT YIELD TABLES..........................................51
ANNUAL REPORT . . . .................................................53
- 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 seven 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, the Florida
Tax-Free Money Fund and the Kentucky Tax-Free Fund. This Statement of Additional
Information provides information relating to 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 (referred to individually as a "Fund" and collectively as the
"Funds"). Information relating to the Kentucky Tax-Free Fund is contained in a
separate Statement of Additional Information. 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, the California 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
- 3 -
<PAGE>
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 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
- 4 -
<PAGE>
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.
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.
- 5 -
<PAGE>
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:
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 or liquid securities 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
- 6 -
<PAGE>
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 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
- 7 -
<PAGE>
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 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.
- 8 -
<PAGE>
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 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
- 9 -
<PAGE>
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.
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 S&P or Prime-1 by Moody's. 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 (except 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 S&P. 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. 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 S&P 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; basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; typically, the
issuer's
- 13 -
<PAGE>
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
- 15 -
<PAGE>
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 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.
- 17 -
<PAGE>
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 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.
- 18 -
<PAGE>
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.
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.
- 19 -
<PAGE>
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.
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.
- 20 -
<PAGE>
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.
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
- 21 -
<PAGE>
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.
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
fifteen years, holding a 40% share of the market in 1996. MBIA insured
approximately $37 billion of new issue municipal bonds in 1996, as compared to
$28 billion during the previous year. As premium levels in the municipal market
continue to be very competitive, insurers throughout the industry are
diversifying their products by targeting both the asset-based and the
international markets. Although municipal bond insurance remains the dominant
component of MBIA's written and earned premiums, the company's municipal book of
business increased in 1996 by 11.6%, while growth in the asset-backed and other
sectors increased by 148%. In 1995, MBIA entered into a European joint venture
with AMBAC in order to capitalize on international insurance opportunities. This
arrangement has been so positive that the relationship will be expanded to
address insurance opportunities as they arise in Asia and Latin America. 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. AMBAC's portion of
the insured new issue municipal market totaled $24.7 billion in 1996,
representing a market share of 29%, up from 25% in 1995. This increase was
primarily attributable to insurance opportunities gained from FGIC relinquishing
some of its market share as a result of its new business plan. AMBAC has
- 22 -
<PAGE>
historically taken a very conservative approach to the bond insurance business,
beyond simply underwriting, to a zero-loss philosophy. For the ninth 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. As with other insurers,
product diversification has been a cornerstone of the AMBAC strategic plan. The
most successful element of the diversification initiative has been AMBAC's entry
into asset-based insurance, as net par written for 1996 increased by
approximately 74%. AMBAC is entirely owned by public shareholders.
FGIC is 99% owned by General Electric Capital Services and 1% owned by
Sumitomo Marine & Fire Insurance Co. Ltd. FGIC remains committed to
investment-grade, zero-loss underwriting and risk management standards. This has
resulted in a high-quality book of insured business. FGIC employs a conservative
underwriting strategy in terms of its target markets, focusing on general
obligations, tax-backed, water and sewer and transportation sectors. Based on
unpredictable regulatory changes and the uncertainty of governmental support and
subsidy, FGIC has withdrawn from the healthcare, private higher education and
electric utilities sectors. As a result, FGIC reported a 24% decline in net par
written in 1996. With little pressure from its parent to provide ever increasing
returns, FGIC is able to focus on the lower-risk sectors that provide stable,
predictable earnings.
FSA's acquisition in 1995 of the west coast based insurer, Capital
Guaranty Insurance Company, has solidified its position as one of the big four
monoline bond insurance companies in the country. As a result of the acquisition
and FSA's own steadily building municipal activity throughout 1996 and 1997,
FSA's portion of the municipal market share has increased considerably, to
approximately 14%. The company's increased capital base and visibility has
enhanced marketability and liquidity, enabling it to pursue larger issues and
gain greater efficiencies from its underwriting staff due to economies of scale.
Although FSA's roots are in asset-based insurance, from an annual volume and
total book of business perspective, municipal insurance has achieved product
line parity. Municipal net par now represents 62% of the total par book of
business with asset-backed net exposure declining to about 38%. 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.
- 23 -
<PAGE>
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, 1997. 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.
AGGREGATE
COMPENSATION
COMPENSATION FROM
POSITION FROM COUNTRYWIDE
NAME AGE HELD TRUST INVESTMENTS
- ---- --- -------- ----- ----------
Donald L. Bodgon, MD 66 Trustee $ 583 $ 1,750
John R. Delfino 64 Trustee 333 1,000
+H. Jerome Lerner 59 Trustee 2,333 7,000
*Robert H. Leshner 58 President/Trustee 0 0
*Angelo R. Mozilo 58 Chairman/Trustee 0 0
+Oscar P. Robertson 58 Trustee 2,583 7,750
John F. Seymour, Jr. 59 Trustee 583 1,750
+Sebastiano Sterpa 68 Trustee 583 1,750
Robert G. Dorsey 40 Vice President 0 0
John F. Splain 41 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.
+ Member of Audit Committee.
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.
- 24 -
<PAGE>
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 Strategic Trust and Countrywide Investment Trust,
registered investment companies.
ANGELO R. MOZILO, 4500 Park Granada Road, Calabasas, 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 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). He is Chairman of
Countrywide Strategic Trust and Countrywide 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.
- 25 -
<PAGE>
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.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio is President and
Treasurer of Countrywide Fund Services, Inc., First Vice President - Finance and
Treasurer of Countrywide Financial Services, Inc. and Treasurer of Countrywide
Investments, Inc. He is also Vice President of Countrywide Investment Trust,
Countrywide Strategic Trust, Brundage, Story and Rose Investment Trust, Markman
MultiFund Trust, PRAGMA Investment Trust, Maplewood Investment Trust, a series
company, The Thermo Opportunity Fund, Inc., The Dean Family of Funds and The New
York State Opportunity Funds and Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust, The Tuscarora Investment Trust, The
Gannett Welsh & Kotler Funds and Interactive Investments, all of which are
registered investment companies.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is First Vice
President, Secretary and General Counsel of Countrywide Fund Services, Inc. and
Secretary and General Counsel of Countrywide Investments, Inc. and Countrywide
Financial Services, Inc. He is also Secretary of Countrywide Strategic Trust,
Countrywide Investment 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, The Gannett Welsh & Kotler Funds, Interactive Investments, the
New York State Opportunity Funds and the Dean Family of Funds.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio is Chief
Operating Officer of Countrywide Fund Services, Inc. He is also Treasurer of
Countrywide Strategic Trust, Countrywide Investment Trust, Brundage, Story and
Rose Investment Trust, Williamsburg Investment Trust, Markman MultiFund Trust,
PRAGMA Investment Trust, Maplewood Investment Trust, a series company, The
Thermo Opportunity Fund, Inc., the New York State Opportunity Funds and the Dean
Family of Funds and Assistant Treasurer of Schwartz Investment Trust, The
Tuscarora Investment Trust, The Gannett Welsh & Kotler Funds and Interactive
Investments.
Each Trustee, except for Messrs. Leshner and Mozilo, receives a
quarterly retainer of $1,500 and a fee of $1,500 for each Board meeting
attended. Such fees are split equally among the Trust, Countrywide Strategic
Trust and Countrywide Investment Trust.
- 26 -
<PAGE>
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, 1997, 1996 and 1995, the Tax-Free
Money Fund paid advisory fees of $149,097, $140,891 and $144,305, respectively.
For the fiscal years ended June 30, 1997, 1996 and 1995, the Tax-Free
Intermediate Term Fund paid advisory fees of $343,509, $398,576 and $472,968,
respectively. For the fiscal years ended June 30, 1997, 1996 and 1995, the Ohio
Insured Tax-Free Fund accrued advisory fees of $393,579, $397,265 and $394,825,
respectively; however, the Adviser reimbursed the Fund for $2,708 of Class A
expenses for the fiscal year ended June 30, 1996 and voluntarily waived $14,000
of its advisory fees and reimbursed the Fund for $5,077 of Class A expenses for
the fiscal year ended June 30, 1995 in order to reduce the operating expenses of
the Fund. For the fiscal years ended June 30, 1997, 1996 and 1995, the Ohio
Tax-Free Money Fund accrued advisory fees of $1,181,638, $1,117,233 and
$1,026,778, respectively; however, the Adviser voluntarily waived $54,672 of its
advisory fees and reimbursed the Fund for $9,148 of Class B expenses for the
fiscal year ended June 30, 1997 in order to reduce the operating expenses of the
Fund. For the fiscal years ended June 30, 1997, 1996 and 1995, the California
Tax-Free Money Fund accrued advisory fees of $200,103, $142,143 and $113,878,
respectively; however, the Adviser voluntarily waived $6,600 and $34,500 of such
fees for the fiscal years ended June 30, 1996 and 1995, respectively, in order
to reduce the operating expenses of the Fund. For the fiscal years ended June
30, 1997, 1996 and 1995, the Florida Tax-Free Money Fund accrued advisory fees
of $234,628, $152,663 and $131,885, respectively; however, the Adviser
voluntarily waived $87,852, $58,284 and $38,141 of such
- 27 -
<PAGE>
fees for the fiscal years ended June 30, 1997, 1996 and 1995, respectively, and
reimbursed the Fund for $18,259 of Class B expenses for the fiscal year ended
June 30, 1997 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 or employee 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.
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, 1997, the aggregate underwriting commissions
on sales of the Funds' shares were $190,011 of which the Adviser paid $170,321
to unaffiliated broker-dealers in the
- 28 -
<PAGE>
selling network, earned $5,456 as a broker-dealer in the selling network and
retained $14,234 in underwriting commissions. 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.
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, 1997, the Adviser retained $5,958 and $1,441 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. 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 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 .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, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund. Unreimbursed
expenses will not be carried over from year to year.
- 29 -
<PAGE>
For the fiscal year ended June 30, 1997, 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 $21,442,
$82,961, $13,046, $434,537, $16,900 and $48,951, respectively. Amounts were
spent as follows:
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C>
MF ITF OIF OMF CMF FMF
Printing and mailing
of prospectuses and
reports to prospective
shareholders . . . . $3,442 $7,471 $7,746 $8,149 $4,900 $3,692
Payments to broker-
dealers and others
for the sale or
retention of assets . 18,000 75,490 5,300 422,148 12,000 45,259
Other promotional
expenses . . . . . . --- --- --- 4,240 --- ---
------- -------- ------- -------- ------ ------
$21,442 $ 82,961 $13,046 $434,537 $16,900 $48,951
======= ======== ======= ======== ======= =======
</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 addition to the .25% account maintenance fee
described above.
For the fiscal year ended June 30, 1997, 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 $28,121 and $16,632,
respectively.
Amounts were spent as follows:
- 30 -
<PAGE>
ITF OIF
Printing and mailing of
prospectuses and reports
to prospective shareholders. . . . . . . $ 611 $ 432
Payments to broker-dealers and
others for the sale or
retention of assets. . . . . . . . . . . 27,510 16,200
------- -------
$28,121 $16,632
======= =======
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 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
- 31 -
<PAGE>
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
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
- 32 -
<PAGE>
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 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
- 33 -
<PAGE>
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 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
- 34 -
<PAGE>
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, Martin Luther King, Jr. 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 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
- 35 -
<PAGE>
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 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.
- 36 -
<PAGE>
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 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.
- 37 -
<PAGE>
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 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
- 38 -
<PAGE>
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.
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
- 39 -
<PAGE>
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). The Funds will no longer have to comply with
requirement (ii) upon completion of the June 30, 1997 fiscal year, since this
requirement was eliminated under the provisions of the Taxpayer Relief Act of
1997.
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.
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.
- 40 -
<PAGE>
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 each of the Tax-Free Intermediate Term Fund and 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 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
- 41 -
<PAGE>
for eight years, after which any undeducted capital loss remaining is lost as a
deduction. As of June 30, 1997, the Tax-Free Money Fund, the Tax-Free
Intermediate Term 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 $1,331, $1,500,636, $663, $3,503 and $828,
respectively, none of which expire prior to 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.
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
- 42 -
<PAGE>
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, 1997 were 3.34% and 3.40%, respectively. The Ohio
Tax-Free Money Fund's current and effective yields for the seven days ended June
30, 1997 were 3.42% and 3.48%, respectively, for Class A shares and 3.67% and
3.74%, respectively, for Class B shares. The current and effective yields for
Class A shares of the California Tax- Free Money Fund for the seven days ended
June 30, 1997 were 3.19% and 3.24%, respectively. The Florida Tax-Free Money
Fund's current and effective yields for the seven days ended June 30, 1997 were
3.32% and 3.37%, respectively, for Class A shares and 3.57% and 3.63%,
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,
1997 were 5.53% and 5.63%, respectively. Based on the highest combined marginal
federal and Ohio income tax rate for individuals (44.13%), the Ohio Tax-Free
Money Fund's tax- equivalent current and effective yields for the seven days
ended June 30, 1997 were 6.12% and 6.23%, respectively, for Class A shares and
6.57% and 6.69%, respectively, for Class B shares. Based on the highest combined
marginal federal and California income tax rate for individuals (46.24%), the
tax-equivalent current and effective yields for Class A shares of the California
Tax-Free Money Fund for the seven days ended June 30, 1997 were 5.93% and 6.03%,
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, 1997 were 5.50% and
5.58%, respectively, for Class A shares and 5.91% and 6.01%, respectively, for
Class B shares.
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:
- 43 -
<PAGE>
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, 1997
are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 year 4.06%
5 years 5.43%
10 years 5.92%
Tax-Free Intermediate Term Fund (Class C)
1 year 5.49%
Since inception (February 1, 1994) 3.41%
Ohio Insured Tax-Free Fund (Class A)
1 year 3.06%
5 years 5.45%
10 years 6.87%
Ohio Insured Tax-Free Fund (Class C)
1 year 6.65%
Since inception (November 1, 1993) 3.82%
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 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
- 44 -
<PAGE>
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, 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%
June 30, 1997 6.19% 5.49% 7.36% 6.65%
(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, 1997 are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 Year 6.19%
3 Years 5.68%
5 Years 5.86%
10 Years 6.14%
Since inception (September 10, 1981) 6.47%
Ohio Insured Tax-Free Fund (Class A)
1 Year 7.36%
3 Years 6.71%
5 Years 6.31%
10 Years 7.30%
Since inception (April 1, 1985) 8.09%
A nonstandardized quotation of total return will always be accompanied by the
Fund's average annual total return as described above.
- 45 -
<PAGE>
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 1997 were 4.31% and 3.65%, respectively. The yields of Class
A and Class C shares of the Ohio Insured Tax-Free Fund for June 1997 were 4.81%
and 4.26%, 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 1997 were 7.14% and 6.04%,
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 1997 were 8.61% and 7.62%,
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, the California 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 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.
- 46 -
<PAGE>
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.
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.
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.
- 47 -
<PAGE>
PRINCIPAL SECURITY HOLDERS
- ---------------------------
As of October 3, 1997, The Fifth Third Bank Trust Department, 38
Fountain Square Plaza, Cincinnati, Ohio, owned of record 25.73% of the Trust's
outstanding shares, including 97.23% of the outstanding Class B shares of the
Ohio Tax-Free Money Fund and 7.69% of the outstanding Class B shares of the
Florida Tax- Free Money Fund. The Fifth Third Bank may be deemed to control the
Trust and the Ohio Tax-Free Money Fund by virtue of the fact that it owned of
record more than 25% of such shares as of such date. As of October 3, 1997, The
Huntington Trust Company, N.A., Trust Department, 41 South High Street,
Columbus, Ohio, owned of record 92.31% of the outstanding Class B shares of the
Florida Tax-Free Money 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. As of October 3,
1997, BHC Securities, Inc., 2005 Market Street, Philadelphia, Pennsylvania owned
of record 29.29% of the outstanding Class A shares of the Ohio Tax- Free Money
Fund and 9.21% of the outstanding Class A shares of the Florida Tax-Free Money
Fund. BHC Securities, Inc. may be deemed to control Class A shares of the Ohio
Tax-Free Money Fund by virtue of the fact that it owned of record more than 25%
of such 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 3, 1997, Carole A. Steiger and Anthony B. Ullman
Trustees, c/o First United Bank, 180 Royal Palm Way, Palm Beach, Florida owned
of record 8.78% of the outstanding shares of the Tax-Free Money Fund; Merrill
Lynch, Pierce, Fenner & Smith Inc., For the Sole Benefit of Its Customers, 4800
Deer Lake Drive East, Jacksonville, Florida owned of record 5.55% of the
outstanding Class A shares of the Tax-Free Intermediate Term Fund; Olmsted Manor
Skilled Nursing Center Inc., 584 Linford Drive, Bay Village, Ohio owned of
record 11.97% of the outstanding Class C shares of the Tax-Free Intermediate
Term Fund; Mutual Service, 312 Walnut Street, Cincinnati, Ohio owned of record
10.30% of the outstanding Class C shares of the Ohio Insured Tax-Free Fund;
PaineWebber FBO Leland Brubaker, 4229 Westleton Court, Columbus, Ohio owned of
record 5.89% of the outstanding Class C shares of the Ohio Insured Tax-Free
Fund; Cortland Financial Services, as Agent for Customers, 600 Fifth Avenue, New
York, New York owned of record 5.19% of the outstanding Class A shares of the
Ohio Tax-Free Money Fund; Daniel R. Manning Trust, 7605 Production Drive,
Cincinnati, Ohio owned of record 6.33% of the outstanding Class A shares of the
California Tax-Free Money Fund; Bear Stearns & Co. FBO a customer, One Metrotech
Center North, Brooklyn, New York owned of record 7.92% of the outstanding Class
A shares of the California Tax-Free Money Fund; Sten A. Lilja Trustee, S.A.
Lilja, c/o First United Bank, 180 Royal Palm Way, Palm Beach, Florida owned of
record 8.31% of the outstanding Class A shares of the Florida Tax-Free Money
Fund; Lawrence B. Taishoff, c/o Highpoint General
- 48 -
<PAGE>
Contracting Inc., 4420 Mercantile Avenue, Naples, Florida owned of record 7.79%
of the outstanding Class A shares of the Florida Tax-Free Money Fund; and Upham
Co., P.O. Box 10260, Bradenton, Florida owned of record 7.36% of the outstanding
Class A shares of the Florida Tax-Free Money Fund.
As of October 3, 1997, the Trustees and officers of the Trust as a
group owned of record and beneficially 2.91% of the outstanding shares of the
Tax-Free Money Fund. As of the same date, the Trustees and officers owned of
record or beneficially less than 1% of the outstanding shares of the Trust and
of each other 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, 1998. 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
- 49 -
49
<PAGE>
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 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
- 50 -
<PAGE>
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. 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.
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 1997 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 1997 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 1997 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 $121,200 (single return) or $181,800 (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 $121,200. The tax equivalent yield tables have not
been adjusted to reflect the impact of these adjustments to taxable income.
- 51 -
<PAGE>
<TABLE>
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND
AND FLORIDA TAX-FREE MONEY FUND
- -----------------------------------------------------
<S>
<C> <C> <C> <C> <C> <C> <C>
Tax-Exempt Yield
--------------------------------------------
3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
15% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47
28% 4.17 4.86 5.56 6.25 6.94 7.64
31% 4.35 5.07 5.80 6.52 7.25 7.97
36% 4.69 5.47 6.25 7.03 7.81 8.59
39.6% 4.97 5.79 6.62 7.45 8.28 9.11
OHIO INSURED TAX-FREE FUND
OHIO TAX-FREE MONEY FUND
- --------------------------
Tax-Exempt Yield
Combined --------------------------------------------
Ohio and 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
18.788% 3.69% 4.31% 4.93% 5.54% 6.16% 6.77
31.745% 4.40 5.13 5.86 6.59 7.33 8.06
35.761% 4.67 5.45 6.23 7.01 7.78 8.56
40.800% 5.07 5.91 6.76 7.60 8.45 9.29
44.130% 5.37 6.26 7.16 8.05 8.95 9.84
CALIFORNIA TAX-FREE MONEY FUND
- ------------------------------
Tax-Exempt Yield
Combined --------------------------------------------
California and 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
20.100% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88
34.696% 4.59 5.36 6.13 6.89 7.66 8.42
37.900% 4.83 5.64 6.44 7.25 8.05 8.86
43.040% 5.27 6.14 7.02 7.90 8.78 9.66
46.244% 5.58 6.51 7.44 8.37 9.30 10.23
*Tax Brackets Combined Combined
- ------------- Ohio and California and
Federal Federal Federal
Single Joint Tax Tax Tax
Return Return Bracket Bracket Bracket
- -----------------------------------------------------------------------------------------------
Not over $24,650 Not Over $41,200 15% 18.788% 20.100%
$24,650-$59,750 $41,200-$99,600 28% 31.745% 34.696%
$59,750-$124,650 $99,600-$151,750 31% 35.761% 37.900%
$124,650-$271,050 $151,750-$271,050 36% 40.800% 43.040%
Over $271,050 Over $271,050 39.6% 44.130% 46.244%
</TABLE>
- 53 -
<PAGE>
ANNUAL REPORT
The Funds' financial statements as of June 30, 1997 appear in the Trust's
annual report which is attached to this Statement of Additional Information.
<PAGE>
ANNUAL REPORT
JUNE 30, 1997
TAX-FREE
MONEY FUND
CALIFORNIA TAX-FREE
MONEY FUND
OHIO TAX-FREE
MONEY FUND
FLORIDA TAX-FREE
MONEY FUND
TAX-FREE INTERMEDIATE
TERM FUND
OHIO INSURED
TAX-FREE FUND
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free 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. For the
fiscal year ended June 30, 1997, the Fund's total returns (excluding the impact
of applicable sales loads) were 6.19% and 5.49% for Class A shares and Class C
shares, respectively. The yield for the Fund's Class A shares at June 30, 1997
was 4.31%, which is equivalent to a taxable yield of 7.14%, and the yield for
the Fund's Class C shares was 3.65%, which is equivalent to a taxable yield of
6.04%, 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, 1997, the Fund's total returns (excluding the impact of
applicable sales loads) were 7.36% and 6.65% for Class A shares and Class C
shares, respectively. The yield for the Fund's Class A shares at June 30, 1997
was 4.81%, which is equivalent to a taxable yield of 8.61%, and the yield for
the Fund's Class C shares was 4.26%, which is equivalent to a taxable yield of
7.62%, assuming the maximum combined federal and Ohio income tax bracket for
individuals.
To begin the second half of 1996, interest rates peaked with the yield on the
30-year Treasury bond trading as high as 7.20%. Investors were concerned that
robust economic growth combined with a very strong labor market would lead to an
increase in the level of inflation. As the year progressed it became clear that
this was not the case and growth began to moderate. Slowing economic growth and
nominal inflation paved the way for lower interest rates with yields on
intermediate and long-term Treasuries declining approximately 0.40% by
mid-February. However, the positive sentiment was short-lived as it became
apparent that economic activity was beginning to surge, unemployment was
declining and personal incomes and consumer spending were on the rise. This
euphoric combination led to the belief that the economy was once again expanding
at an above-trend rate of growth. In an effort to stem the growth rate, the
Federal Reserve Board raised short-term interest rates in late March, increasing
the Federal Funds rate by 0.25%. During the second quarter of 1997, growth did
indeed moderate and interest rates again declined with the benchmark Treasury
bond yielding 6.75% on June 30, 1997.
With the uncertainties regarding tax reform a distant memory, performance of the
municipal bond market mirrored that of the Treasury market for much of the year.
New issue supply, which increased for the first time since 1993, was met
enthusiastically by investors seeking the tax-free income offered by municipal
bonds. For the twelve months ended June 30 ,1997, the Lehman Brothers 5-Year
Municipal G.O. Bond Index returned 6.27%, while the Lehman Brothers 15-Year
Municipal G.O. Bond Index returned 9.84%.
The Tax-Free Intermediate Term Fund performed comparably with the Lehman
Brothers 5-year Municipal G.O. Bond Index. During the first half of the fiscal
year, the average maturity of the Fund was lengthened slightly to take advantage
of declining interest rates. When rates did, in fact, move lower, the average
maturity was shortened to a more neutral stance which helped the Fund weather a
rather difficult first quarter of 1997. Our current strategy is unchanged as we
continue to focus on those issues which we believe will provide us the best
combination of quality and yield while minimizing principal volatility.
Performance of the Ohio Insured Tax-Free Fund during the first half of the
fiscal year was in line with that of the Lehman Brothers 15-Year Municipal G.O.
Bond Index. However, our longer average maturity hindered performance in the
first quarter of 1997 when interest rates increased sharply. In the second
quarter, our focus was on the 15 to 20-year maturity range which we felt offered
the best yield versus market risk. We continue to focus on this maturity range
and on those issues which offer the maximum call protection and yield.
As we move through 1997, the economy has slowed from its torrid pace and seems
to be expanding at a much more sustainable rate of growth. Inflation remains
muted running at a 1.4% annualized rate of growth year-to-date. This should keep
interest rates trading within a narrow range, possibly moving lower should the
economy slow further. However, continued strong employment growth and a
potential increase in consumer spending could again spark inflation fears.
<PAGE>
A Representation of the Graphic Material Contained in the Countrywide Tax-Free
Trust Annual Report is set forth below:
COMPARISON OF THE CHANGE IN VALUE SINCE JUNE 30, 1987 OF A $10,000 INVESTMENT
IN THE TAX-FREE INTERMEDIATE TERM FUND* AND THE LEHMAN BROTHERS 5-YEAR MUNICIPAL
G.O. INDEX
LEHMAN BROTHERS 5-YEAR MUNICIPAL TAX-FREE INTERMEDIATE TERM FUND:
G.O. INDEX CLASS A
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/87 10,000 06/30/87 9,800
09/30/87 -2.06% 9,794 09/30/87 -1.38% 9,665
12/31/87 3.82% 10,168 12/31/87 2.19% 9,877
03/31/88 3.10% 10,483 03/31/88 2.35% 10,109
06/30/88 0.42% 10,527 06/30/88 0.71% 10,181
09/30/88 1.14% 10,647 09/30/88 1.14% 10,296
12/31/88 0.61% 10,712 12/31/88 1.16% 10,416
03/31/89 -0.28% 10,682 03/31/89 0.79% 10,498
06/30/89 4.70% 11,184 06/30/89 2.56% 10,767
09/30/89 1.11% 11,309 09/30/89 1.54% 10,933
12/31/89 2.99% 11,647 12/31/89 2.32% 11,187
03/31/90 0.48% 11,703 03/31/90 0.57% 11,251
06/30/90 2.24% 11,965 06/30/90 1.78% 11,451
09/30/90 1.06% 12,092 09/30/90 0.47% 11,505
12/31/90 3.32% 12,493 12/31/90 3.11% 11,862
03/31/91 2.15% 12,762 03/31/91 1.93% 12,090
06/30/91 1.75% 12,985 06/30/91 1.69% 12,295
09/30/91 3.55% 13,446 09/30/91 2.89% 12,651
12/31/91 3.35% 13,896 12/31/91 2.29% 12,941
03/31/92 -0.08% 13,885 03/31/92 0.48% 13,002
06/30/92 3.25% 14,336 06/30/92 2.87% 13,375
09/30/92 2.49% 14,693 09/30/92 2.19% 13,668
12/31/92 1.59% 14,927 12/31/92 1.98% 13,938
03/31/93 2.54% 15,306 03/31/93 3.40% 14,412
06/30/93 2.36% 15,667 06/30/93 2.78% 14,813
09/30/93 2.16% 16,006 09/30/93 3.17% 15,282
12/31/93 1.23% 16,203 12/31/93 1.19% 15,463
03/31/94 -3.15% 15,692 03/31/94 -3.37% 14,942
06/30/94 1.34% 15,903 06/30/94 0.82% 15,064
09/30/94 0.81% 16,031 09/30/94 0.57% 15,149
12/31/94 -0.33% 15,979 12/31/94 -0.91% 15,011
03/31/95 4.06% 16,627 03/31/95 4.35% 15,663
06/30/95 2.55% 17,051 06/30/95 2.29% 16,021
09/30/95 2.73% 17,517 09/30/95 2.07% 16,352
12/31/95 1.83% 17,837 12/31/95 2.43% 16,750
03/31/96 0.32% 17,895 03/31/96 -0.43% 16,678
06/30/96 0.43% 17,972 06/30/96 0.40% 16,745
09/30/96 1.63% 18,265 09/30/96 1.60% 17,013
12/31/96 2.18% 18,663 12/31/96 2.26% 17,397
03/31/97 -0.16% 18,633 03/31/97 -0.15% 17,371
06/30/97 2.49% 19,098 06/30/97 2.36% 17,781
Past Performance is not Predictive of Future Performance.
*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.
Tax-Free Intermediate Term Fund Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 4.06% 5.43% 5.92% 6.33%
Class C 5.49% -- -- 3.41%
<PAGE>
COMPARISON OF THE CHANGE IN VALUE SINCE JUNE 30, 1987 OF A $10,000 INVESTMENT
IN THE OHIO INSURED TAX-FREE FUND* AND THE LEHMAN BROTHERS 15-YEAR MUNICIPAL
G.O. INDEX
LEHMAN BROTHERS 15-YEAR MUNICIPAL OHIO INSURED TAX-FREE FUND
G.O. INDEX CLASS A
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/87 10,000 06/30/87 9,600
09/30/87 -3.49% 9,651 09/30/87 -2.38% 9,371
12/31/87 6.64% 10,292 12/31/87 3.41% 9,691
03/31/88 3.11% 10,612 03/31/88 3.62% 10,042
06/30/88 1.98% 10,822 06/30/88 2.10% 10,253
09/30/88 2.57% 11,100 09/30/88 2.15% 10,473
12/31/88 1.94% 11,315 12/31/88 2.24% 10,707
03/31/89 0.38% 11,358 03/31/89 0.79% 10,792
06/30/89 6.32% 12,076 06/30/89 4.27% 11,253
09/30/89 -0.43% 12,024 09/30/89 -0.04% 11,248
12/31/89 4.42% 12,556 12/31/89 3.71% 11,665
03/31/90 -0.01% 12,555 03/31/90 -0.10% 11,654
06/30/90 2.29% 12,842 06/30/90 1.90% 11,874
09/30/90 -0.41% 12,789 09/30/90 0.08% 11,884
12/31/90 4.42% 13,355 12/31/90 3.97% 12,356
03/31/91 1.85% 13,602 03/31/91 1.78% 12,576
06/30/91 1.96% 13,868 06/30/91 1.96% 12,822
09/30/91 4.09% 14,436 09/30/91 3.66% 13,292
12/31/91 3.13% 14,887 12/31/91 3.19% 13,716
03/31/92 0.54% 14,968 03/31/92 -0.06% 13,708
06/30/92 3.81% 15,538 06/30/92 4.35% 14,304
09/30/92 2.86% 15,983 09/30/92 1.95% 14,582
12/31/92 2.47% 16,377 12/31/92 2.29% 14,917
03/31/93 4.24% 17,072 03/31/93 3.78% 15,481
06/30/93 3.67% 17,698 06/30/93 3.70% 16,054
09/30/93 4.17% 18,436 09/30/93 3.86% 16,673
12/31/93 1.56% 18,724 12/31/93 0.73% 16,794
03/31/94 -6.78% 17,454 03/31/94 -5.28% 15,907
06/30/94 1.42% 17,702 06/30/94 0.50% 15,987
09/30/94 0.41% 17,775 09/30/94 0.17% 16,015
12/31/94 -1.75% 17,464 12/31/94 -0.77% 15,892
03/31/95 8.41% 18,932 03/31/95 6.59% 16,940
06/30/95 2.23% 19,355 06/30/95 1.69% 17,226
09/30/95 3.65% 20,061 09/30/95 2.33% 17,628
12/31/95 4.05% 20,874 12/31/95 4.45% 18,413
03/31/96 -0.95% 20,675 03/31/96 -2.15% 18,016
06/30/96 0.35% 20,748 06/30/96 0.44% 18,096
09/30/96 2.40% 21,246 09/30/96 2.38% 18,526
12/31/96 3.03% 21,889 12/31/96 2.44% 18,978
03/31/97 -0.07% 21,874 03/31/97 -0.81% 18,823
06/30/97 4.18% 22,788 06/30/97 3.21% 19,427
Past performance is not predictive of future performance.
*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.
Ohio Insured Tax-Free Fund Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 3.06% 5.45% 6.87% 7.73%
Class C 6.65% -- -- 3.82%
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1997
===================================================================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- - --------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
At acquisition cost................................................... $ 30,184,507 $ 32,479,071
============== ===============
At amortized cost..................................................... $ 30,147,370 $ 32,408,985
============== ===============
At market value (Note 2).............................................. $ 30,147,370 $ 32,408,985
Cash .................................................................... 173,501 287,500
Interest receivable ..................................................... 304,930 517,323
Other assets ............................................................ 1,290 1,607
-------------- ---------------
TOTAL ASSETS........................................................ 30,627,091 33,215,415
-------------- ---------------
LIABILITIES
Dividends payable........................................................ 990 4,431
Payable for securities purchased......................................... 476,266 1,003,350
Payable to affiliates (Note 4) .......................................... 17,916 15,145
Other accrued expenses and liabilities .................................. 6,243 6,178
-------------- ---------------
TOTAL LIABILITIES................................................... 501,415 1,029,104
-------------- ---------------
NET ASSETS ............................................................. $ 30,125,676 $ 32,186,311
============== ===============
Net assets consist of:
Paid-in capital ......................................................... $ 30,126,719 $ 32,189,814
Accumulated net realized losses from security transactions............... ( 1,043) ( 3,503)
-------------- ---------------
Net assets............................................................... $ 30,125,676 $ 32,186,311
============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) .................. 30,137,162 32,189,814
============== ===============
Net asset value, offering price and redemption price per share (Note 2) . $ 1.00 $ 1.00
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1997
===================================================================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- - --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income....................................................... $ 1,145,840 $ 1,427,032
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4)..................................... 149,097 200,103
Distribution expenses (Note 4)........................................ 21,442 16,900
Accounting services fees (Note 4)..................................... 39,000 39,000
Transfer agent and shareholder services fees (Note 4)................. 28,729 22,110
Postage and supplies.................................................. 19,075 9,194
Professional fees..................................................... 6,403 6,703
Insurance expense..................................................... 3,721 4,537
Registration fees..................................................... 13,016 4,867
Custodian fees ....................................................... 1,631 4,984
Pricing expenses...................................................... 4,486 5,028
Trustees' fees and expenses .......................................... 4,080 4,080
Reports to shareholders .............................................. 2,310 1,697
Other expenses ....................................................... 2,223 945
-------------- ---------------
TOTAL EXPENSES .......................................................... 295,213 320,148
-------------- ---------------
NET INVESTMENT INCOME ................................................... 850,627 1,106,884
-------------- ---------------
NET REALIZED GAINS (LOSSES) FROM SECURITY TRANSACTIONS .................. 7 ( 1,923)
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................. $ 850,634 $ 1,104,961
============= ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1997 and 1996
===================================================================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
- - --------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income ...................... $ 850,627 $ 870,333 $ 1,106,884 $ 818,679
Net realized gains (losses) from
security transactions..................... 7 ( 564) ( 1,923) 116
------------ -------------- ------------- --------------
Net increase in net assets from operations..... 850,634 869,769 1,104,961 818,795
------------ -------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME ................. ( 850,627) ( 873,034) ( 1,106,884) ( 818,679)
------------ -------------- ------------- --------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
Proceeds from shares sold .................. 59,171,857 49,546,956 166,476,608 119,659,991
Net asset value of shares issued in
reinvestment of distributions
to shareholders........................... 828,537 839,246 1,029,746 753,406
Payments for shares redeemed ............... ( 55,217,113) ( 51,732,766) (171,440,181) ( 103,816,208)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets from
capital share transactions.................. 4,783,281 ( 1,346,564) ( 3,933,827) 16,597,189
------------ -------------- ------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............................. 4,783,288 ( 1,349,829) ( 3,935,750) 16,597,305
NET ASSETS:
Beginning of year........................... 25,342,388 26,692,217 36,122,061 19,524,756
------------ -------------- ------------- --------------
End of year................................. $ 30,125,676 $ 25,342,388 $32,186,311 36,122,061
============ ============= ============ =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
===================================================================================================================================
Year Ended June 30,
1997 1996 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------------------------
<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 0.031 0.030 0.021 0.024
---------- --------- ---------- --------- -----------
Distributions from net investment income........ ( 0.029) ( 0.031) ( 0.030) ( 0.021) ( 0.024)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ===========
Total return ................................... 2.89% 3.15% 3.07% 2.12% 2.40%
========== ========= ========== ========= ===========
Net assets at end of year (000's) .............. $ 30,126 $ 25,342 $ 26,692 $ 31,168 $34,787
========== ========= ========== ========= ===========
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.................................. 2.85% 3.09% 3.00% 2.09% 2.39%
- - --------------------------------------------------------------------------------------------------------------------------------
</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,
1997 1996 1995 1994 1993
- - ----------------------------------------------------------------------------------------------------------------------------------
<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........................... 0.028 0.029 0.029 0.019 0.022
---------- --------- ---------- --------- -----------
Distributions from net investment income........ ( 0.028) ( 0.029) ( 0.029) ( 0.019) ( 0.022)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
---------- --------- ---------- --------- -----------
Total return ................................... 2.81% 2.95% 2.95% 1.93% 2.26%
========== ========= ========= ======== ===========
Net assets at end of year (000's) .............. $ 32,186 $ 36,122 $ 19,525 $ 24,508 $34,487
========== ========= ========= ======== ===========
Ratio of expenses to average net assets(A) .... 0.80% 0.80% 0.70% 0.60% 0.56%
Ratio of net investment income to average
net assets................................. 2.76% 2.88% 2.83% 1.90% 2.22%
- - -------------------------------------------------------------------------------------------------------------------------------
<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% and 0.85%
for the years ended June 30, 1996, 1995, 1994 and 1993, respectively.
</FN>
See accompanying notes to finacial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1997
===================================================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in securities:
At acquisition cost................................................... $ 262,582,999 $ 42,979,267
============== ===============
At amortized cost..................................................... $ 262,508,765 $ 42,907,587
============== ===============
At market value (Note 2) ............................................. $ 262,508,765 $ 42,907,587
Cash .................................................................... 112,177 175,922
Interest receivable ..................................................... 2,111,040 349,792
Other assets ............................................................ 8,578 1,765
-------------- ---------------
TOTAL ASSETS ......................................................... 264,740,560 43,435,066
-------------- ---------------
LIABILITIES
Dividends payable........................................................ 302,770 60,826
Payable for securities purchased......................................... -- 1,567,623
Payable to affiliates (Note 4) .......................................... 109,798 16,878
Other accrued expenses and liabilities................................... 20,336 7,275
-------------- ---------------
TOTAL LIABILITIES .................................................. 432,904 1,652,602
-------------- ---------------
NET ASSETS ............................................................. $ 264,307,656 $ 41,782,464
============== ===============
Net assets consist of:
Paid-in capital ......................................................... $ 264,294,705 $ 41,783,292
Accumulated net realized gains (losses) from security transactions ...... 12,951 ( 828)
-------------- ---------------
Net assets............................................................... $ 264,307,656 $ 41,782,464
============== ===============
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares.................................. $ 166,719,026 $ 22,433,909
============== ===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 166,706,383 22,434,902
============== ===============
Net asset value, offering price and redemption price per share (Note 2).. $ 1.00 $ 1.00
============== ===============
PRICING OF CLASS B SHARES
Net assets applicable to Class B shares ................................. $ 97,588,630 $ 19,348,555
============== ===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5).................................... 97,588,320 19,348,390
============== ===============
Net asset value, offering price and redemption price per share (Note 2).. $ 1.00 $ 1.00
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1997
===================================================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income....................................................... $ 9,559,104 $ 1,692,646
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4)..................................... 1,181,638 234,628
Distribution expenses, Class A (Note 4)............................... 434,537 48,951
Transfer agent and shareholder services fees, Class A (Note 4)........ 73,519 12,000
Transfer agent and shareholder services fees, Class B (Note 4) ....... 6,000 12,000
Accounting services fees (Note 4) .................................... 57,500 51,000
Postage and supplies.................................................. 51,628 10,886
Pricing expenses...................................................... 8,260 4,182
Professional fees .................................................... 19,903 7,503
Insurance expense..................................................... 20,324 4,764
Custodian fees (Note 4)............................................... 539 12,890
Registration fees..................................................... 9,325 6,694
Reports to shareholders .............................................. 8,290 829
Trustees' fees and expenses .......................................... 4,080 4,080
Other expenses ....................................................... 13,626 1,625
-------------- ---------------
TOTAL EXPENSES .......................................................... 1,889,169 412,032
Fees waived by the Adviser (Note 4)................................... ( 54,672 ) ( 87,852 )
Class B expenses reimbursed by the Adviser (Note 4)................... ( 9,148 ) ( 18,259 )
-------------- ---------------
NET EXPENSES ............................................................ 1,825,349 305,921
-------------- ---------------
NET INVESTMENT INCOME ................................................... 7,733,755 1,386,725
-------------- ---------------
NET REALIZED GAINS FROM SECURITY TRANSACTIONS ........................... 46 370
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................. $ 7,733,801 $ 1,387,095
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1997 and 1996
===================================================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ...................... $ 7,733,755 $ 7,465,588 $ 1,386,725 $ 984,325
Net realized gains (losses) from
security transactions..................... 46 ( 709) 370 --
------------ -------------- ------------- --------------
Net increase in net assets from operations .... 7,733,801 7,464,879 1,387,095 984,325
------------ -------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ........ ( 6,297,760) ( 7,465,588) ( 814,499) ( 941,390)
From net investment income, Class B ........ ( 1,435,995) -- ( 572,226) ( 42,935)
------------ -------------- ------------- --------------
Decrease in net assets from distributions to
shareholders ............................... ( 7,733,755) ( 7,465,588) ( 1,386,725) ( 984,325)
------------ -------------- ------------- --------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold .................. 572,337,891 565,969,095 57,130,891 51,380,671
Net asset value of shares issued in
reinvestment of distributions to
shareholders.............................. 4,862,899 4,885,920 675,817 836,936
Payments for shares redeemed ............... (650,804,392) (557,137,769) (64,279,383) (47,429,798)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets
from Class A share transactions............. (73,603,602) 13,717,246 ( 6,472,675) 4,787,809
------------ -------------- ------------- --------------
CLASS B
Proceeds from shares sold .................. 216,396,635 -- 38,407,914 19,950,303
Payments for shares redeemed ............... (118,808,315) -- (38,204,284) ( 805,545)
------------ -------------- ------------- --------------
Net increase in net assets
from Class B share transactions ........... 97,588,320 -- 203,630 19,144,758
------------ -------------- ------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............................ 23,984,764 13,716,537 ( 6,268,675) 23,932,567
NET ASSETS:
Beginning of year........................... 240,322,892 226,606,355 48,051,139 24,118,572
------------ -------------- ------------- --------------
End of year................................. $264,307,656 $240,322,892 $41,782,464 $48,051,139
============ ============ ============ ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND - CLASS A
FINANCIAL HIGHLIGHTS
===================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
===================================================================================================================================
Year Ended June 30,
1997 1996 1995 1994 1993
- - -------------------------------------------------------------------------------------------------------------------------------
<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........................... 0.030 0.031 0.031 0.020 0.022
---------- --------- ---------- --------- -----------
Distributions from net investment income ....... ( 0.030) ( 0.031) ( 0.031) ( 0.020 ) ( 0.022 )
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ===========
Total return.................................... 2.99% 3.14% 3.12% 1.99% 2.19%
========== ========= ========== ========= ===========
Net assets at end of year (000's) .............. $166,719 $240,323 $226,606 $213,001 $221,775
========== ========= ========== ========= ===========
Ratio of expenses to average net assets ........ 0.75%(A) 0.75% 0.74% 0.73% 0.74%
Ratio of net investment income to average
net assets................................. 2.93% 3.09% 3.08% 1.97% 2.16%
- - -------------------------------------------------------------------------------------------------------------------------------
<FN>
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net
assets would have been 0.77% for the year ended June 30, 1997 (Note 4).
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND - CLASS B
FINANCIAL HIGHLIGHTS
===================================================================================================================================
Per Share Data for a Share Outstanding Throughout the Period
===================================================================================================================================
PERIOD ENDED
JUNE 30,
1997(A)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value at beginning of period ..................................................... $ 1.000
---------------
Net investment income....................................................................... 0.016
---------------
Distributions from net investment income ................................................... ( 0.016 )
---------------
Net asset value at end of period ........................................................... $ 1.000
===============
Total return................................................................................ 3.31% (C)
---------------
Net assets at end of period (000's) ........................................................ $ 97,589
===============
Ratio of expenses to average net assets(B) ................................................ 0.50% (C)
Ratio of net investment income to average net assets........................................ 3.28% (C)
- - ------------------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of Class B shares
(January 7, 1997) through June 30, 1997.
(B) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 0.56% for the period ended June
30, 1997 (Note 4).
(C) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND - CLASS A
FINANCIAL HIGHLIGHTS
===================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
===================================================================================================================================
Period
Ended
Year Ended June 30, June 30,
1997 1996 1995 1994 1993 (A)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period ......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- ---------- --------- -----------
Net investment income........................... 0.029 0.032 0.031 0.021 0.016
---------- --------- ---------- --------- -----------
Distributions from net investment income ....... ( 0.029) ( 0.032) ( 0.031) ( 0.021 ) ( 0.016 )
---------- --------- ---------- --------- -----------
Net asset value at end of period ............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ===========
Total return ................................... 2.90% 3.29% 3.17% 2.11% 2.49% (C)
========== ========= ========== ========= ===========
Net assets at end of period (000's) ............ $ 22,434 $ 28,906 $ 24,119 $ 26,276 $21,907
========== ========= ========== ========= ===========
Ratio of expenses to average net assets(B) .... 0.75% 0.61% 0.66% 0.58% 0.34% (C)
Ratio of net investment income to average net assets 2.85% 3.24% 3.12% 2.10% 2.41% (C)
- - -------------------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of Class A shares
(November 13, 1992) through June 30, 1993. 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 0.94%, 0.80%, 0.80%, 0.81% and
0.94%(C) for the periods ended June 30, 1997, 1996, 1995, 1994 and 1993,
respectively (Note 4).
(C) Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND - CLASS B
FINANCIAL HIGHLIGHTS
===================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
===================================================================================================================================
Year Period
Ended Ended
June 30, June 30,
1997 1996 (A)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period .................................. $ 1.000 $ 1.000
-------------- ---------------
Net investment income.................................................... 0.031 0.003
-------------- ---------------
Distributions from net investment income ................................ ( 0.031 ) ( 0.003 )
-------------- ---------------
Net asset value at end of period ........................................ $ 1.000 $ 1.000
============== ===============
Total return............................................................. 3.16% 3.03% (C)
============== ===============
Net assets at end of period (000's) ..................................... $ 19,349 $ 19,145
============== ===============
Ratio of expenses to average net assets(B) ............................. 0.50% 0.50% (C)
Ratio of net investment income to average net assets..................... 3.11% 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 0.79% and 0.87%(C) for the
periods ended June 30, 1997 and 1996, respectively (Note 4).
(C) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1997
===================================================================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in securities:
At acquisition cost................................................... $ 61,193,510 $ 70,231,497
============== ===============
At amortized cost..................................................... $ 60,807,141 $ 70,182,058
-------------- ---------------
At market value (Note 2) ............................................. $ 63,124,859 $ 74,882,287
Cash .................................................................... 235,778 46,602
Receivable for capital shares sold....................................... 39,154 7,235
Interest receivable ..................................................... 1,243,582 671,325
Other assets ............................................................ 2,896 3,104
-------------- ---------------
TOTAL ASSETS ......................................................... 64,646,269 75,610,553
-------------- ---------------
LIABILITIES
Dividends payable........................................................ 42,791 72,902
Payable for capital shares redeemed ..................................... 403,972 30,584
Payable for securities purchased......................................... 497,853 --
Payable to affiliates (Note 4) .......................................... 44,737 40,269
Other accrued expenses and liabilities................................... 10,749 11,611
-------------- ---------------
TOTAL LIABILITIES .................................................. 1,000,102 155,366
-------------- ---------------
NET ASSETS ............................................................. $ 63,646,167 $ 75,455,187
============== ===============
Net assets consist of:
Paid-in capital ......................................................... $ 62,829,085 $ 70,621,240
Accumulated net realized gains (losses) from security transactions ...... ( 1,500,636 ) 133,718
Net unrealized appreciation on investments............................... 2,317,718 4,700,229
-------------- ---------------
Net assets............................................................... $ 63,646,167 $ 75,455,187
============== ===============
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares.................................. $ 58,484,876 $ 70,816,181
============== ===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5).................................... 5,313,679 5,794,738
============== ===============
Net asset value and redemption price per share (Note 2) ................. $ 11.01 $ 12.22
============== ===============
Maximum offering price per share (Note 2) ............................... $ 11.23 $ 12.73
============== ===============
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares ................................. $ 5,161,291 $ 4,639,006
============== ===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 468,857 379,664
============== ===============
Net asset value, offering price and redemption price per share (Note 2) . $ 11.01 $ 12.22
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1997
===================================================================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income....................................................... $ 3,811,882 $ 4,567,667
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4)..................................... 343,509 393,579
Distribution expenses, Class A (Note 4)............................... 82,961 13,046
Distribution expenses, Class C (Note 4) .............................. 28,121 16,632
Transfer agent and shareholder services fees, Class A (Note 4)........ 65,211 37,726
Transfer agent and shareholder services fees, Class C (Note 4)........ 12,000 12,000
Accounting services fees (Note 4) .................................... 57,000 57,000
Postage and supplies.................................................. 55,697 29,869
Pricing expenses...................................................... 15,691 16,650
Professional fees .................................................... 8,703 9,703
Insurance expense..................................................... 7,601 8,103
Custodian fees........................................................ 3,047 3,008
Registration fees, Common............................................. 4,224 2,965
Registration fees, Class A............................................ 8,135 3,840
Registration fees, Class C............................................ 7,217 2,310
Reports to shareholders .............................................. 6,810 4,216
Trustees' fees and expenses .......................................... 4,080 4,080
Other expenses ....................................................... 4,678 3,584
-------------- ---------------
TOTAL EXPENSES .......................................................... 714,685 618,311
-------------- ---------------
NET INVESTMENT INCOME ................................................... 3,097,197 3,949,356
-------------- ---------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ...................... 120,146 134,212
Net change in unrealized appreciation/depreciation on investments... 896,811 1,565,046
-------------- ---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ....................... 1,016,957 1,699,258
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................. $ 4,114,154 $ 5,648,614
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS For the Years Ended June 30, 1997 and 1996
===================================================================================================================================
TAX-FREE
INTERMEDIATE OHIO INSURED
TERM FUND TAX-FREE FUND
Year Ended Year Ended Year Ended Year Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ...................... $ 3,097,197 $ 3,575,536 $ 3,949,356 $ 4,034,181
Net realized gains from security
transactions.............................. 120,146 418,573 134,212 637,863
Net change in unrealized appreciation/
depreciation on investments............... 896,811 ( 378,154) 1,565,046 ( 557,750)
------------ -------------- ------------- --------------
Net increase in net assets from operations .... 4,114,154 3,615,955 5,648,614 4,114,294
------------ -------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ........ ( 2,894,253) ( 3,370,231) ( 3,767,741) ( 3,835,050)
From net investment income, Class C......... ( 202,944) ( 205,305) ( 181,615) ( 199,131)
------------ -------------- ------------- --------------
Decrease in net assets from distributions to
shareholders ............................... ( 3,097,197) ( 3,575,536) ( 3,949,356) ( 4,034,181)
------------ -------------- ------------- --------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold .................. 12,588,991 15,528,848 171,413,856 149,454,410
Net asset value of shares issued in
reinvestment of distributions to
shareholders.............................. 2,298,321 2,685,608 2,840,761 2,832,266
Payments for shares redeemed ............... ( 25,016,687) ( 31,733,808) (180,995,415) ( 147,848,817)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets
from Class A share transactions............. ( 10,129,375) ( 13,519,352) ( 6,740,798) 4,437,859
------------ -------------- ------------- --------------
CLASS C
Proceeds from shares sold .................. 1,847,102 3,208,583 1,641,830 1,212,806
Net asset value of shares issued in
reinvestment of distributions to
shareholders.............................. 191,889 192,684 159,120 173,201
Payments for shares redeemed ............... ( 2,193,811) ( 2,962,890) ( 1,214,900 ) ( 1,551,557)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets
from Class C share transactions .......... ( 154,820) 438,377 586,050 ( 165,550)
------------ -------------- ------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............................ ( 9,267,238) ( 13,040,556) ( 4,455,490) 4,352,422
NET ASSETS:
Beginning of year........................... 72,913,405 85,953,961 79,910,677 75,558,255
------------ -------------- ------------- --------------
End of year................................. $ 63,646,167 $ 72,913,405 $75,455,187 $79,910,677
============ ============== ============= ==============
See accompanying notes to financial statements.
</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,
1997 1996 1995 1994 1993
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 10.85 $ 10.86 $ 10.69 $ 10.98 $ 10.42
---------- --------- ---------- --------- -----------
Income from investment operations:
Net investment income ....................... 0.50 0.50 0.49 0.48 0.53
Net realized and unrealized gains (losses)
on investments............................. 0.16 ( 0.01) 0.17 ( 0.29 ) 0.56
---------- --------- ---------- --------- -----------
Total from investment operations ............... 0.66 0.49 0.66 0.19 1.09
---------- --------- ---------- --------- -----------
Distributions from net investment income ....... ( 0.50) ( 0.50) ( 0.49) ( 0.48 ) ( 0.53 )
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 11.01 $ 10.85 $ 10.86 $ 10.69 $ 10.98
========== ========= ========== ========= ===========
Total return(A) ................................ 6.19% 4.51% 6.36% 1.70% 10.75%
========== ========= ========== ========= ===========
Net assets at end of year (000's) .............. $ 58,485 $ 67,675 $ 81,140 $106,472 $82,168
========== ========= ========== ========= ===========
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................................. 4.55% 4.52% 4.59% 4.35% 4.90%
Portfolio turnover rate......................... 30% 37% 32% 46% 28%
- - --------------------------------------------------------------------------------------------------------------------------------
<FN>
(A) The total returns shown do not include the effect of applicable sales loads.
</FN>
See accompanying notes to financial statements.
</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
1997 1996 1995 June 30, 1994
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 10.85 $ 10.86 $ 10.69 $ 11.27
------------ -------------- ------------- --------------
Income from investment operations:
Net investment income....................... 0.43 0.44 0.44 0.20
Net realized and unrealized gains (losses)
on investments............................ 0.16 ( 0.01) 0.17 ( 0.58 )
------------ -------------- ------------- --------------
Total from investment operations............... 0.59 0.43 0.61 ( 0.38 )
------------ -------------- ------------- --------------
Distributions from net investment income....... ( 0.43) ( 0.44) ( 0.44 ) ( 0.20 )
------------ -------------- ------------- --------------
Net asset value at end of period............... $ 11.01 $ 10.85 $ 10.86 $ 10.69
============ ============== ============= ==============
Total return(A) ............................... 5.49% 4.00% 5.82% ( 8.28%) (C)
============ ============== ============= ==============
Net assets at end of period (000's)............ $ 5,161 $ 5,239 $ 4,814 $ 3,084
============ ============== ============= ==============
Ratio of expenses to average net assets(B) .... 1.65% 1.49% 1.49% 1.45% (C)
Ratio of net investment income to average
net assets................................ 3.89% 4.02% 4.08% 3.79% (C)
Portfolio turnover rate........................ 30% 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>
See accompanying notes to financial statements.
</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,
1997 1996 1995 1994 1993
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 11.97 $ 11.99 $ 11.74 $ 12.41 $ 11.67
---------- --------- ---------- --------- -----------
Income from investment operations:
Net investment income ....................... 0.61 0.62 0.63 0.61 0.65
Net realized and unrealized gains (losses)
on investments............................. 0.25 ( 0.02) 0.25 ( 0.64 ) 0.74
---------- --------- ---------- --------- -----------
Total from investment operations ............... 0.86 0.60 0.88 ( 0.03 ) 1.39
---------- --------- ---------- --------- -----------
Less distributions:
Distributions from net investment income .... ( 0.61) ( 0.62) ( 0.63) ( 0.61 ) ( 0.65 )
Distributions from net realized gains........ -- -- -- ( 0.03 ) --
---------- --------- ---------- --------- -----------
Total distributions ............................ ( 0.61) ( 0.62) ( 0.63) ( 0.64 ) ( 0.65 )
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 12.22 $ 11.97 $ 11.99 $ 11.74 $12.41
========== ========= ========== ========= ===========
Total return(A) ............................... 7.36% 5.05% 7.75% ( 0.41% ) 12.24%
========== ========= ========== ========= ===========
Net assets at end of year (000's) .............. $ 70,816 $ 75,938 $ 71,393 $ 79,889 $81,101
========== ========= ========== ========= ===========
Ratio of expenses to average net assets(B) .... 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to average
net assets 5.05% 5.12% 5.35% 4.94% 5.35%
Portfolio turnover rate......................... 33% 46% 29% 45% 15%
- - -------------------------------------------------------------------------------------------------------------------------------
<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.
</FN>
See accompanying notes to financial statements.
</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
1997 1996 1995 June 30, 1994
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 11.97 $ 12.00 $ 11.74 $ 12.62
------------ -------------- ------------- --------------
Income from investment operations:
Net investment income....................... 0.53 0.56 0.57 0.36
Net realized and unrealized gains (losses)
on investments............................ 0.25 ( 0.03) 0.26 ( 0.85 )
------------ -------------- ------------- --------------
Total from investment operations............... 0.78 0.53 0.83 ( 0.49 )
------------ -------------- ------------- -------------
Less distributions:
Distributions from net investment income.... ( 0.53) ( 0.56) ( 0.57 ) ( 0.36 )
Distributions from net realized gains....... -- -- -- ( 0.03 )
------------ -------------- ------------- --------------
Total distributions............................ ( 0.53) ( 0.56) ( 0.57 ) ( 0.39 )
------------ -------------- ------------ --------------
Net asset value at end of period............... $ 12.22 $ 11.97 $ 12.00 $ 11.74
============ ============== ============= ==============
Total return(A) ............................... 6.65% 4.44% 7.31% ( 6.05%)(C)
============ ============== ============= ==============
Net assets at end of period (000's)............ $ 4,639 3,972 $ 4,165 $ 2,659
============ ============== ============= ==============
Ratio of expenses to average net assets(B) .... 1.42% 1.25% 1.25% 1.22% (C)
Ratio of net investment income to average
net assets................................ 4.37% 4.62% 4.84% 4.09% (C)
Portfolio turnover rate........................ 33% 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>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
===============================================================================
1. Organization
===============================================================================
The Tax-Free Money Fund, the California Tax-Free Money Fund, the Ohio Tax-Free
Money Fund, the Florida Tax-Free Money Fund (formerly the Royal Palm Florida
Tax-Free Money Fund), the Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund (collectively, the Funds) are each a separate series of shares of
Countrywide Tax-Free Trust (the Trust). The Trust (formerly Midwest Group
Tax-Free Trust) is registered under the Investment Company Act of 1940 (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 each Fund.
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 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 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 0.25% of average daily net
assets of each Fund) and Class C shares (sold subject to a maximum contingent
deferred sales load of 1% for a one-year period and a distribution fee of up to
1% of average daily net assets of each Fund). 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.
The Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund each offer two
classes of shares: Class A shares (Retail shares), sold subject to a
distribution fee of up to 0.25% of average daily net assets of each Fund, 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 will cause Retail shares to
have a higher expense ratio and to pay lower dividends than those related to
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 checkwriting and automatic investment and
redemption plans.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
2. Significant Accounting Policies
The following is a summary of the Trust's significant accounting policies:
Security valuation -- Tax-Free Money Fund, California Tax-Free Money Fund, Ohio
Tax-Free Money Fund and Florida Tax-Free Money Fund securities are valued on an
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. Tax-Free
Intermediate Term Fund and Ohio Insured Tax-Free Fund securities are valued at
market using 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 Tax-Free Money Fund, the
California Tax-Free Money, Ohio Tax-Free Money Fund and the Florida Tax-Free
Money Fund is calculated daily 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 class of shares of the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund is also calculated
daily 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
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.
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 Ohio Tax-Free
Money Fund, the 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
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.
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, 1997:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
Tax-Free
Intermediate Ohio Insured
Term Fund Tax-Free Fund
<S> <C> <C>
Gross unrealized appreciation............................................ $ 2,324,630 $ 4,724,477
Gross unrealized depreciation............................................ ( 6,912 ) ( 24,248 )
-------------- ---------------
Net unrealized appreciation.............................................. $ 2,317,718 $ 4,700,229
============== ===============
- - -------------------------------------------------------------------------------------------------------------------------------
</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, 1997, the Tax-Free Money Fund, the California Tax-Free Money
Fund, the Ohio Tax-Free Money Fund, the Florida Tax-Free Money Fund and the
Tax-Free Intermediate Term Fund had capital loss carryforwards for federal
income tax purposes of $1,331, $3,503, $663, $828 and $1,500,636, respectively,
none of which expire prior to June 30, 1999. These capital loss carryforwards
may be utilized in future years to offset net realized capital gains prior to
distributing such gains to shareholders.
3. Investment Transactions
For the year ended June 30, 1997, purchases and proceeds from sales and
maturities of investment securities, excluding short-term investments, amounted
to $19,506,970 and $25,890,112, respectively, for the Tax-Free Intermediate Term
Fund and $25,884,456 and $24,348,031, respectively, for the Ohio Insured
Tax-Free Fund.
4. Transactions with Affiliates
The Chairman and the President of the Trust are also officers of Countrywide
Financial Services, Inc., whose subsidiaries include Countrywide Investments,
Inc. (the Adviser), the Trust's investment adviser and principal underwriter,
and Countrywide Fund Services, Inc. (CFS), the Trust's transfer agent,
shareholder service agent and accounting services agent. Countrywide Financial
Services, Inc. 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.
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 million, 0.45% of such net
assets from $100 million to $200 million, 0.4% of such net assets from $200
million to $300 million and 0.375% of such net assets in excess of $300 million.
In order to voluntarily reduce operating expenses during the year ended June 30,
1997, the Adviser waived $54,672 of its advisory fees and reimbursed $9,148 of
Class B expenses for the Ohio Tax-Free Money Fund and waived $87,852 of its
advisory fees and reimbursed $18,259 of Class B expenses for the Florida
Tax-Free Money Fund.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and CFS, CFS maintains the records for
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, CFS receives a monthly fee at an annual
rate of $25.00 per shareholder account from each of the Tax-Free Money Fund, the
California Tax-Free Money Fund, the Ohio Tax-Free Money Fund and the 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, as
applicable. 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 CFS,
CFS calculates the daily net asset value per share and maintains the financial
books and records of each Fund. For these services, CFS receives a monthly fee,
based on current asset levels, of $5,250 per month from the Ohio Tax-Free Money
Fund, $4,250 per month from the Florida Tax-Free Money Fund, $3,250 per month
from each of the Tax-Free Money Fund and the California 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 CFS in obtaining valuations of such Fund's portfolio
securities.
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 earned $5,277 and
$14,414 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, 1997. In addition, the Adviser
collected $5,958 and $1,441 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 0.25% 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
Florida Tax-Free Money Fund, was a significant shareholder of record of the Ohio
Tax-Free Money Fund as of June 30, 1997. 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 Florida Tax-Free Money Fund, was a significant shareholder of
record of such Fund as of June 30, 1997. Under the terms of its Custodian
Agreement, Huntington receives from the Fund an asset-based fee.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
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, 1997 and 1996:
<TABLE>
<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,
1997 1996 1997 1996
- - -------------------------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C>
Shares sold.................................... 1,150,995 1,417,723 14,158,992 12,319,913
Shares issued in reinvestment of
distributions to shareholders............... 209,803 244,633 233,941 232,739
Shares redeemed................................ ( 2,285,966) ( 2,894,267) ( 14,943,520) ( 12,159,274)
------------ -------------- ------------- --------------
Net increase (decrease) in shares outstanding.. ( 925,168) ( 1,231,911) ( 550,587 ) 393,378
Shares outstanding, beginning of year.......... 6,238,847 7,470,758 6,345,325 5,951,947
------------ -------------- ------------- --------------
Shares outstanding, end of year................ 5,313,679 6,238,847 5,794,738 6,345,325
============ ============== ============= ==============
CLASS C
Shares sold.................................... 168,900 292,369 135,167 99,911
Shares issued in reinvestment of
distributions to shareholders............... 17,517 17,558 13,108 14,227
Shares redeemed................................ ( 200,429) ( 270,313) ( 100,548 ) ( 129,418)
------------ -------------- ------------- --------------
Net increase (decrease) in shares outstanding.. ( 14,012) 39,614 47,727 ( 15,280 )
Shares outstanding, beginning of year.......... 482,869 443,255 331,937 347,217
------------ -------------- ------------- --------------
Shares outstanding, end of year................ 468,857 482,869 379,664 331,937
============ ============== ============= ==============
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Capital share transactions for the Tax-Free Money Fund, the California Tax-Free
Money Fund, the Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund are
identical to the dollar value of those transactions as shown in the Statements
of Changes in Net Assets.
6. Portfolio Composition
As of June 30, 1997, 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 personal income
tax. The California Tax-Free Money Fund was invested exclusively 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. The Florida Tax-Free Money Fund
was 85.3% 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, 1997, 11.0% of the portfolio securities of the
Tax-Free Money Fund were concentrated in the State of Florida. For information
regarding portfolio composition by state for the Tax-Free Intermediate Term
Fund, 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
The California Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the 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, 1997, each non-diversified Fund
had no concentrations of investments (10% or greater) in any one issuer.
The Tax-Free Money Fund, the California Tax-Free Money Fund, the Ohio Tax-Free
Money Fund and the 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, 1997, 42.5% 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], 33.4% were rated
AA/Aa, 20.1% were rated A/A and 4.0% were not rated.
As of June 30, 1997, 98.2% 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. Three private insurers individually insure more than 10% of the
Ohio Insured Tax-Free Fund's portfolio securities and collectively insure 78.9%
of its portfolio securities.
The concentration of investments for each Fund as of June 30, 1997, classified
by revenue source, was as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
California Ohio 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................. 21.7% 28.9% 26.3% 16.8% 18.4% 41.1%
Revenue Bonds:
Industrial Development/
Pollution Control.............. 37.3% 18.8% 32.6% 11.7% 6.2% 4.5%
Hospital/Health Care.............. 3.4% 0.9% 24.5% 23.9% 12.7% 18.8%
Housing/Mortgage.................. 18.3% 1.2% 3.1% 19.7% 12.7% 5.6%
Utilities......................... 0.8% 27.2% 0.1% 11.9% 8.7% 18.1%
Education......................... 5.1% 1.0% 3.7% 7.9% 22.0% 4.9%
Transportation.................... 0.9% 8.2% 1.3% 1.5% 7.0% 2.3%
Public Facilities................. 2.6% 1.7% 1.5% 3.8% 2.5% 2.2%
Economic Development.............. 5.2% 0.5% 4.5% -- 2.2% --
Leases............................ -- 5.3% -- -- 2.6% 0.7%
Special Tax....................... -- 0.9% -- 0.3% 3.3% --
Miscellaneous..................... 4.7% 5.4% 2.4% 2.5% 1.7% 1.8%
----------------------- ----------- ------------ ----------- ------------
Total .............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100%
======================= =========== ============ =========== ============
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 30.5% RATE DATE VALUE
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 185,000 Philadelphia, PA, School Dist. GO, Ser. A................... 4.300% 07/01/1997 $ 185,000
220,000 Arizona St. Muni. Financing Prog. COP, Ser. 16, Escrowed
to Maturity............................................ 8.000 08/01/1997 220,735
250,000 Trinity River, TX, Reg. Wastewater Sys. Auth. Rev., Ser. A.. 4.375 08/01/1997 250,107
415,000 New York, NY, GO, Prerefunded @ 102......................... 8.000 08/01/1997 424,780
420,000 Missouri St. Health & Educ. Facs. Rev.
(William Jewell College)............................... 4.000 08/01/1997 420,085
225,000 San Juan Co., NM, Jr. College Dist. Rev.,
Escrowed to Maturity................................... 6.600 08/01/1997 225,466
1,000,000 Anchorage, AK, GO........................................... 4.150 08/01/1997 1,000,335
235,000 Hudson Co., NJ, Vocational School GO, Ser. B................ 5.050 10/01/1997 235,670
250,000 Salt Lake Co., UT, Muni. Bldg. Authority Lease Rev., Ser. A. 4.850 10/01/1997 250,583
200,000 Texas National Guard Armory Rev............................. 6.200 10/01/1997 201,005
100,000 Waterford Township, NJ, GO.................................. 4.850 11/01/1997 100,278
500,000 Hamilton, OH, Real Estate Acquisition Rev................... 4.700 11/20/1997 500,557
570,000 Metex Metro District, CO, Ser. A............................ 4.000 12/01/1997 570,590
250,000 Adams & Weld Co., CO, School Dist. #27J, Ser. B............. 4.050 12/01/1997 250,043
500,000 Shawano-Gresham, WI, School Dist. GO BANS................... 4.100 12/01/1997 500,118
100,000 Penn Hills, PA, GO.......................................... 4.400 12/01/1997 100,203
500,000 Chicago, IL, Public Bldg. Comm. Rev., Prerefunded @ 102..... 7.700 01/01/1998 518,857
255,000 Atlanta, GA, Airport Extension & Improvement Rev.,
Escrowed to Maturity................................... 7.250 01/01/1998 259,434
200,000 Buffalo, NY, GO............................................. 5.600 02/01/1998 201,818
235,000 Garland, TX, GO, Ser. A..................................... 7.000 02/15/1998 239,266
475,000 Kearny, NJ, GO.............................................. 4.000 02/15/1998 475,527
140,000 Rowlett, TX, GO............................................. 4.200 02/15/1998 140,000
140,000 New York St. Medical Care Fac. Rev., Escrowed to Maturity... 6.900 02/15/1998 142,472
500,000 Kaukauna, WI, Area School Dist. BANS........................ 4.350 02/26/1998 500,553
105,000 Richmond, TX, GO............................................ 6.500 03/01/1998 106,558
490,000 Ross Co., OH, Airport Impt. GO BANS......................... 4.560 04/24/1998 490,992
165,000 West Virginia University Dormitory Rev...................... 5.400 05/01/1998 166,462
500,000 Pima Co., AZ, USD #1(Tuscon), Prerefunded @ 102............. 6.750 07/01/1998 522,954
- - -------------- ------------
$ 9,125,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - --------------
(Amortized Cost $9,200,448)................................. $ 9,200,448
------------
<PAGE>
<CAPTION>
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 49.9% RATE DATE VALUE
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,350,000 Washington St. Hsg. Fin. Comm. Rev. (Panorama City Proj.)... 5.600% 07/01/1997 $ 1,350,000
1,000,000 New Jersey EDA (Union Avenue Assoc.)........................ 3.800 07/01/1997 1,000,000
700,000 Baltimore, MD, IDR (Wicomico Indust. Center Fac.)........... 3.673 07/01/1997 700,000
900,000 Pinellas Co., FL, Health Facility Rev.
(Pooled Hospital Loan)................................. 4.000 07/01/1997 900,000
400,000 Ohio St. PCR (SOHIO Air Proj.).............................. 4.050 07/01/1997 400,000
1,500,000 Pinal Co., AZ, IDA PCR (Magma Copper Co.)................... 4.000 07/01/1997 1,500,000
1,000,000 Michigan St. Strategic Fund Rev............................. 4.000 07/01/1997 1,000,000
400,000 Jacksonville, FL, PCR (Florida Power & Light)............... 4.000 07/01/1997 400,000
1,000,000 Illinois St. Dev. Fin. Auth. MFH Rev.
(Cobbler Square Proj.)................................. 4.600 07/02/1997 1,000,000
1,000,000 Dade Co., FL, IDR (Michael-Ann Russell Jewish Comm. Ctr.)... 4.200 07/02/1997 1,000,000
900,000 Eddyville, IA, IDR (Heartland Lysine, Inc.)................. 4.450 07/02/1997 900,000
1,000,000 Marion Co., FL, HFA (Summer Trace Apts.).................... 4.250 07/03/1997 1,000,000
550,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)................... 4.400 07/03/1997 550,000
380,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)................... 4.600 07/03/1997 380,000
1,000,000 District of Columbia MFH, Tyler House Trust COP, Ser. 1995A. 4.500 07/03/1997 1,000,000
980,000 Redwood Falls, MN, IDR (Zytec Corp. Proj.).................. 4.750 07/03/1997 980,000
<PAGE>
<CAPTION>
TAX-FREE MONEY FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 49.9% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 207,500 St. Cloud, MN, Hsg. & Redev. Auth. (Coborn Realty Co.)...... 4.600% 07/03/1997 $ 207,500
750,000 Brooklyn Park, MN, IDR (Schmidt Proj.)...................... 4.400 07/03/1997 750,000
- - -------------- ------------
$ 15,017,500 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - --------------
(Amortized Cost $15,017,500)................................ $15,017,500
------------
<PAGE>
<CAPTION>
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 19.7% RATE DATE VALUE
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 585,000 Fort Mitchell, KY, Indust. Bldg. Rev.
(Grandview/Hemmer Proj.)............................... 3.950% 08/01/1997 $ 585,000
550,000 Milwaukee, WI, IDR (Wayne C. Oldenburg Proj.)............... 3.750 08/01/1997 550,000
310,000 Lansing, MI, EDR (LGH Office Bldg. Proj.)................... 3.750 08/15/1997 310,000
121,000 Citizens Federal Tax-Exempt Mtg. Bond Trust................. 3.900 08/15/1997 121,000
1,200,000 Owensboro, KY, IDR, Ser. 1985 (Dart Container).............. 3.750 09/01/1997 1,200,000
160,000 Cuyahoga Co., OH, IDR (Halle Office Bldg.).................. 3.700 10/01/1997 160,000
205,000 Medina Co., OH, IDR (Nationwide One Proj.).................. 4.050 11/01/1997 204,941
255,000 Westlake, OH, EDR (Cross County Inns)....................... 3.900 11/01/1997 255,000
1,000,000 Westmoreland Co., PA, IDR (White Cons Indust.).............. 3.950 12/01/1997 1,000,000
710,000 Lexington-Fayette Co., KY, Urban Gov't. Rev.
(Providence Montessori)................................ 4.100 01/01/1998 710,000
835,000 Buckeye Tax-Exempt Mtg. Bond Trust.......................... 4.000 02/01/1998 833,481
- - -------------- ------------
$ 5,931,000 TOTAL ADJUSTABLE RATE PUT BONDS
- - --------------
(Amortized Cost $5,929,422)................................. $ 5,929,422
------------
$ 30,073,500 TOTAL INVESTMENTS AT VALUE-- 100.1%
==============
(Amortized Cost $30,147,370)................................ $30,147,370
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.1)% ............. ( 21,694 )
------------
NET ASSETS-- 100.0% ........................................ $30,125,676
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 40.4% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 150,000 Los Angeles Co., CA, Transportation Commission Sales Tax
Rev., Ser. A, Prerefunded @ 102........................ 8.000% 07/01/1997 $ 153,000
250,000 Puerto Rico Electric Power Auth. Rev., Ser. O............... 6.300 07/01/1997 250,000
100,000 Puerto Rico Public Bldg. Auth. Rev., Ser. H,
Prerefunded @ 102...................................... 7.875 07/01/1997 102,000
2,000,000 California School Cash Reserve Prog. Auth., Ser. 1996A...... 4.750 07/02/1997 2,000,048
1,600,000 Millbrae, CA, School Dist. GO TRANS......................... 4.250 07/10/1997 1,600,133
300,000 Puerto Rico Commonwealth TRANS, Ser. A...................... 4.000 07/30/1997 300,050
295,000 California Housing Finance Agcy. Rev., Ser. F-1............. 5.000 08/01/1997 295,261
100,000 San Jose, CA, Redev. Agcy., Ser. A (Merged Area Redev.
Proj.), Prerefunded @ 102.............................. 6.800 08/01/1997 102,238
175,000 Los Angeles, CA, Convention & Exhibition Center Auth. COPS.. 6.400 08/15/1997 175,569
170,000 Pico, CA, Water Dist. COPS ................................. 3.900 08/15/1997 170,041
1,000,000 Butte Co., CA, Office of Education TRANS.................... 4.500 08/20/1997 1,000,764
325,000 California St. GO........................................... 6.700 09/01/1997 326,608
100,000 Capistrano, CA, Unified Public Financing Auth. Rev., Ser. A. 4.500 09/01/1997 100,138
195,000 Capistrano, CA, Unified Public Financing Auth. Rev., Ser. B. 4.500 09/01/1997 195,208
320,000 Chula Vista, CA, COPS, Ser. A............................... 3.700 09/01/1997 320,037
500,000 Los Angeles, CA, GO......................................... 6.400 09/01/1997 502,184
275,000 Pleasant Hill, CA, COP (City Hall Proj.), Prerefunded @ 102. 7.000 09/01/1997 281,913
100,000 University of California, Rev., Ser. A, Prerefunded @ 102... 6.800 09/01/1997 102,465
215,000 University of California, Rev., Ser. A, Prerefunded @ 102... 7.000 09/01/1997 220,462
300,000 University of California, Rev., Ser. B...................... 4.000 09/01/1997 300,029
500,000 Fullerton, CA, Joint Union High School District TRANS....... 4.500 09/05/1997 500,565
325,000 California St. GO........................................... 9.250 10/01/1997 329,363
125,000 Folsom, CA, Public Financing Auth. Rev...................... 4.700 10/01/1997 125,315
145,000 Kern Co., CA, COPS Capital Improvements Proj., Ser. A....... 5.000 10/01/1997 145,472
1,000,000 San Diego, CA, Unified School Dist. GO TRANS................ 4.750 10/01/1997 1,002,365
500,000 California St. GO........................................... 4.600 11/01/1997 501,381
185,000 Grossmont, CA, Hosp. Dist. Rev., Ser. A, Prerefunded @ 102.. 8.000 11/15/1997 191,449
400,000 Los Angeles Co., CA, Capital Asset Leasing Corp.
Leasehold Rev.......................................... 4.700 12/01/1997 401,474
300,000 California St. GO........................................... 5.750 02/01/1998 303,243
1,000,000 Fremont, CA, Unified School Dist. GO TRANS.................. 4.250 06/30/1998 1,003,350
- - -------------- ------------
$ 12,950,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - --------------
(Amortized Cost $13,002,125)................................ $13,002,125
------------
<PAGE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 49.1% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600,000 California PCR Fin. Auth. (Del Marva Power & Light
Burney Forest Proj.)................................... 3.950% 07/01/1997 $ 600,000
500,000 Irvine Ranch, CA, Water Dist. Rev., Ser. 1993A.............. 3.800 07/01/1997 500,000
500,000 Irvine Ranch, CA, Water Dist. Rev., Ser. 1985B.............. 3.800 07/01/1997 500,000
500,000 California PCR Fin. Auth. (Honeylake Power)................. 4.250 07/01/1997 500,000
1,000,000 California PCR Fin. Auth. (Solag Disposal Project).......... 4.100 07/02/1997 1,000,000
1,900,000 San Rafael, CA, IDR, Ser. 1984 (Phoenix American, Inc.)..... 4.150 07/02/1997 1,900,000
2,900,000 Santa Paula, CA, Public Fin. Auth., Ser. 1996 (Water Sys.
Acquisition Proj.)..................................... 4.200 07/02/1997 2,900,000
1,600,000 Vacaville, CA, IDA IDR (Leggett & Platt, Inc.).............. 4.200 07/02/1997 1,600,000
1,500,000 Dinuba, CA, Fin. Auth., Ser. 1996A (Wastewater Treatment
Plant Proj.)........................................... 4.200 07/02/1997 1,500,000
1,000,000 San Bernardino Co., CA, Capital Impt. Refinancing
Proj. Rev.............................................. 4.250 07/03/1997 1,000,000
1,000,000 San Bernardino, CA, IDR (LaQuinta Motor Inns)............... 4.250 07/03/1997 1,000,000
1,500,000 Hanford, CA, Sewer Rev., Ser. A............................. 4.250 07/03/1997 1,500,000
1,300,000 San Bernardino Co., CA, COP................................. 4.350 07/03/1997 1,300,000
- - -------------- ------------
$ 15,800,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - --------------
(Amortized Cost $15,800,000)................................ $15,800,000
------------
<PAGE>
<CAPTION>
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 3.4% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,000,000 Orange Co., CA, Spec. Fin. Auth. Teeter Plan Rev., Ser. B... 5.850% 11/01/1997 $ 1,005,852
100,000 Sacramento Co., CA, HFA Rev., Ser 1 (Rancho Natomas)........ 6.500 12/15/1997 101,008
- - -------------- ------------
$ 1,100,000 TOTAL ADJUSTABLE RATE PUT BONDS
- - --------------
(Amortized Cost $1,106,860)................................. $ 1,106,860
------------
<CAPTION>
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 7.8% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 Riverside Co., CA, Trans. Auth. Sales Tax Rev. ............. 3.550% 07/14/1997 $ 1,500,000
1,000,000 Los Angeles Co., CA, Metro. Trans. Auth. Rev., Ser. A....... 3.750 09/04/1997 1,000,000
- - -------------- ------------
$ 2,500,000 TOTAL COMMERCIAL PAPER
- - --------------
(Amortized Cost $2,500,000)................................. $ 2,500,000
------------
$ 32,350,000 TOTAL INVESTMENTS AT VALUE-- 100.7%
==============
(Amortized Cost $32,408,985)................................ $32,408,985
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.7)% ............. ( 222,674 )
------------
NET ASSETS-- 100.0% ........................................ $32,186,311
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 28.9% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 Kent, OH, CSD School Impt. GO BANS, Ser. 1997............... 4.000% 07/15/1997 $ 2,000,264
1,000,000 Madeira, OH, LSD GO TANS.................................... 4.220 07/17/1997 1,000,267
180,000 Powell Village, OH, Street Impt. GO BANS.................... 4.440 07/22/1997 180,034
1,400,000 Powell Village, OH, Road Impt. GO BANS...................... 4.250 07/22/1997 1,400,116
2,203,000 Orange, OH, CSD GO BANS..................................... 4.100 07/22/1997 2,203,122
2,000,000 Parma, OH, CSD GO BANS...................................... 4.700 07/31/1997 2,000,949
2,000,000 Olentangy, OH, LSD GO BANS.................................. 4.250 08/15/1997 2,001,344
1,205,000 Shelby, OH, GO BANS, Ser. 1996.............................. 4.300 08/21/1997 1,205,408
600,000 Marysville, OH, Street Impt. GO BANS........................ 4.270 08/28/1997 600,247
2,500,000 Mentor City, OH, GO BANS.................................... 4.150 09/04/1997 2,502,380
600,000 Hancock Co., OH, GO BANS.................................... 4.820 09/06/1997 601,309
1,165,000 Loveland, OH, GO BANS....................................... 4.150 09/12/1997 1,165,879
2,300,000 Champaign Co., OH, GO BANS.................................. 4.250 09/17/1997 2,301,192
940,000 Pepper Pike, OH, Water Impt. GO BANS........................ 4.500 09/19/1997 940,989
3,425,000 Ohio St. Bldg. Auth. Rev., Ser. A (Highway Safety Bldg.).... 4.500 10/01/1997 3,431,730
1,250,000 Lake Co., OH, GO BANS....................................... 4.150 10/09/1997 1,250,493
1,400,000 Gates Mills Village, OH, Waterworks Impt. GO BANS........... 4.125 10/16/1997 1,400,886
1,050,000 Obetz Village, OH, GO BANS.................................. 4.370 10/23/1997 1,050,849
925,000 Vermillion, OH, Sewer Sys. GO BANS.......................... 4.150 10/31/1997 925,297
2,000,000 Ohio St. Public Fac., Rev. Comm. Higher Educ., Ser. II-B.... 4.500 11/01/1997 2,005,210
1,965,000 Ohio St. Public Fac., Rev. Comm. Higher Educ., Ser. II-A.... 4.375 11/01/1997 1,969,870
1,400,000 Bryan City, OH, Hydro Electric Dam BANS..................... 4.100 11/12/1997 1,400,987
3,000,000 Hamilton, OH, Real Estate Acquisition Rev. BANS............. 4.700 11/20/1997 3,003,345
1,390,000 Brooklyn, OH, GO BANS, Ser. 2............................... 4.250 12/04/1997 1,391,731
2,000,000 Euclid City, OH, CSD TRANS.................................. 3.980 12/11/1997 2,001,996
3,000,000 Geauga Co., OH, Park Dist. GO BANS.......................... 4.000 12/11/1997 3,000,019
800,000 Maple Heights, OH, CSD GO TRANS............................. 3.840 12/12/1997 800,243
950,000 Marysville, OH, GO BANS..................................... 4.070 12/15/1997 951,061
2,000,000 Ohio School Dist. TRANS COPS, Ser. 1997A.................... 4.470 12/31/1997 2,007,057
1,000,000 Springboro, OH, Water Sys. Impt. BANS....................... 4.350 01/28/1998 1,001,676
810,000 Marysville, OH, GO BANS..................................... 4.160 01/29/1998 811,175
4,000,000 East Palestine, OH, CSD GO BANS............................. 4.000 01/29/1998 4,002,236
950,000 South Euclid-Lydnhurst, OH, CSD GO BANS..................... 4.125 02/13/1998 951,849
500,000 Maple Heights, OH, CSD GO BANS.............................. 3.930 02/13/1998 500,327
1,200,000 Muskingum Co., OH, County Building BANS, Ser. 1997.......... 4.150 03/04/1998 1,202,329
2,000,000 Plain Township, OH, Fire Station Construction &
Impt. GO BANS.......................................... 4.300 03/09/1998 2,004,001
5,000,000 Indian Lake, OH, LSD GO BANS................................ 4.350 03/25/1998 5,010,534
1,150,000 Ohio St. Natural Resources Cap. Fac. GO, Ser. C............. 4.500 04/01/1998 1,156,257
1,411,000 Crestline Village, OH, Cap. Fac. GO BANS.................... 4.650 04/09/1998 1,414,126
670,000 Marysville, OH, Road Realignment GO BANS.................... 4.370 04/17/1998 671,121
900,000 Allen Co., OH, Bath Twp. Dist. GO BANS...................... 4.200 04/28/1998 900,351
2,000,000 Mentor, OH, Exempted Village School District GO BANS........ 4.250 05/07/1998 2,003,204
1,350,000 Marysville, OH, GO BANS..................................... 4.410 05/08/1998 1,352,861
1,170,000 Middleburg Heights, OH, GO BANS ............................ 4.100 05/29/1998 1,171,532
1,494,000 Groveport-Madison, OH, LSD RANS, Ser. 1997.................. 5.100 06/15/1998 1,502,225
2,400,000 Obetz Village, OH, Street Impt. GO BANS..................... 4.200 06/19/1998 2,403,342
1,190,000 Van Wert City, OH, Sewer Impt. GO BANS...................... 4.350 06/23/1998 1,193,909
500,730 Beavercreek, OH, LSD GO BANS................................ 4.430 06/25/1998 502,528
- - -------------- ------------
$ 76,343,730 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - --------------
(Amortized Cost $76,449,857)................................ $76,449,857
------------
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 56.5% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,600,000 Delaware Co., OH, IDR (Radiation Sterilizers, Inc.) ........ 3.600% 07/01/1997 $ 1,600,000
1,300,000 Franklin Co., OH, IDR (Jacobsen Stores)..................... 3.650 07/01/1997 1,300,000
1,100,000 Franklin Co., OH, IDR (Capitol South)....................... 3.600 07/01/1997 1,100,000
165,000 Franklin Co., OH, IDR (Boa Ltd. Proj.)...................... 3.650 07/01/1997 165,000
2,800,000 Muskingum Co., OH, IDR (Elder-Beerman)...................... 3.950 07/01/1997 2,800,000
350,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.)....... 4.200 07/01/1997 350,000
2,340,000 Defiance Co., OH, IDR (Isaac Property Proj.)................ 4.250 07/01/1997 2,340,000
40,000 Cuyahoga Co., OH, IDR (Schottenstein Stores)................ 4.250 07/01/1997 40,000
4,195,000 Cuyahoga Co., OH, IDR (S & R Playhouse Realty).............. 3.750 07/01/1997 4,195,000
445,000 Lucas Co., OH, IDR (Associates Proj.)....................... 4.300 07/01/1997 445,000
4,800,000 Ohio St. Higher Educ. Fac. Rev. (Pooled Financing).......... 4.200 07/01/1997 4,800,000
4,800,000 Ohio EDR, Ser. 1983 (Court St. Ctr. Assoc. Ltd. Proj.)...... 4.100 07/01/1997 4,800,000
4,250,000 Cincinnati-Hamilton Co., OH, Port. Auth. Rev.
(Kaiser Agric. Chemical Co.)........................... 3.150 07/01/1997 4,250,000
500,000 Ohio St. Environ. Impt. Rev. (U.S. Steel Corp.)............. 3.850 07/01/1997 500,000
494,000 Lorain Co., OH, IDR, Ser. C (Kindercare).................... 4.550 07/01/1997 494,000
1,000,000 Morrow Co., OH, IDR (Field Container Corp.)................. 4.200 07/02/1997 1,000,000
2,000,000 Montgomery Co., OH, EDR (Dayton Art Institute).............. 4.250 07/02/1997 2,000,000
340,000 Montgomery Co., OH, IDR (Kindercare)........................ 4.550 07/02/1997 340,000
805,000 Montgomery Co., OH, Health Care Rev., Ser. A
(Dayton Area MRI Consortium)........................... 4.250 07/02/1997 805,000
800,000 Orrville, OH, Hosp. Fac. Rev., Ser. 1990 (Orrville Hosp.)... 4.250 07/02/1997 800,000
4,000,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. 1997B,
(Health Alliance Of Greater Cincinnati)..................... 4.150 07/02/1997 4,000,000
200,000 Ohio St. Water Dev. Auth. Rev. (Timken Co. Proj.)........... 4.100 07/02/1997 200,000
1,000,000 Butler Co., OH, IDR (Phillip Morris Co.).................... 4.150 07/02/1997 1,000,000
437,000 Stark Co., OH, IDR, Ser. D (Kindercare)..................... 4.550 07/02/1997 437,000
2,410,000 Summit Co., OH, IDR (Bowery Assoc.)......................... 4.200 07/02/1997 2,410,000
375,000 Wadsworth, OH, IDR (Kindercare)............................. 4.550 07/02/1997 375,000
1,100,000 Wyandot Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.)............ 4.350 07/02/1997 1,100,000
287,000 Middletown, OH, IDR, Ser. A (Kindercare).................... 4.550 07/02/1997 287,000
1,100,000 Meigs Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.).............. 4.350 07/02/1997 1,100,000
300,000 Medina, OH, IDR (Kindercare)................................ 4.550 07/02/1997 300,000
2,390,000 Erie Co., OH, IDR (Toft Dairy, Inc.)........................ 4.250 07/02/1997 2,390,000
980,000 Centerville, OH, Health Care Rev. (Bethany Lutheran)........ 4.100 07/02/1997 980,000
1,050,000 Cuyahoga Co., OH, Health Care Fac. Rev.
(Benjamin Rose Inst.).................................. 4.300 07/02/1997 1,050,000
960,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993A
(Hospice of the Western Reserve)............................ 4.250 07/02/1997 960,000
935,000 Lucas Co., OH, IDR, Ser. D (Kindercare)..................... 4.550 07/02/1997 935,000
960,000 Cuyahoga Co., OH, IDR (Pleasant Lake Assoc.)................ 4.250 07/02/1997 960,000
2,000,000 Cuyahoga Co., OH, IDR, Ser. 1989 (Motch Corp. Proj.)........ 4.700 07/02/1997 2,000,000
1,100,000 Delaware Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.)........... 4.350 07/02/1997 1,100,000
1,750,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993B
(Hospice of the Western Reserve)............................ 4.250 07/02/1997 1,750,000
245,000 Franklin Co., OH, IDR (Columbus Dist.)...................... 4.300 07/02/1997 245,000
375,000 Hudson Village, OH, IDR, Ser. A (Kindercare)................ 4.550 07/02/1997 375,000
1,000,000 Lucas Co., OH, EDR (Glendale Meadows)....................... 4.250 07/02/1997 1,000,000
1,070,000 Huron Co., OH, Rev. (Norwalk Furniture Corp.)............... 4.250 07/02/1997 1,070,000
1,045,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.)....... 4.200 07/02/1997 1,045,000
564,000 Franklin Co., OH, IDR, Ser. D (Kindercare).................. 4.550 07/02/1997 564,000
1,505,000 Greene Co., OH, Health Care Fac. Rev. (Green Oaks Proj.).... 4.250 07/02/1997 1,505,000
5,775,000 Sharonville, OH, IDR (Duke Realty Proj)..................... 4.200 07/03/1997 5,775,000
500,000 Ohio St. Air Quality Dev. Auth. Rev. (Mead Corp.)........... 4.000 07/03/1997 500,000
4,000,000 Montgomery Co., OH, Ltd. Obligation Rev., Ser. 1996
(St. Vincent de Paul Proj.)............................ 4.250 07/03/1997 4,000,000
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 56.5% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,920,000 Montgomery Co., OH, Health Care Rev.
(Comm. Blood Ctr. Proj.)............................... 4.200% 07/03/1997 $ 3,920,000
1,015,000 Pike Co., OH, EDR (Pleasant Hill)........................... 4.200 07/03/1997 1,015,000
615,000 Summit Co., OH, IDR (Go-Jo Indust.)......................... 4.200 07/03/1997 615,000
1,000,000 Rickenbacker, OH, Port. Auth. Rev.
(Rickenbacker Holdings, Inc.).......................... 4.200 07/03/1997 1,000,000
5,000,000 Hamilton Co., OH, Health Fac. Rev., Sec. 1997A
(Episcopal Retirement Homes)........................... 4.180 07/03/1997 5,000,000
2,230,000 Toledo-Lucas Co., OH, Port. Auth. Rev.
(Countrymark Coop. Proj.).............................. 4.300 07/03/1997 2,230,000
5,800,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. 1997A
(Children's Hosp. Medical Ctr.)........................ 4.150 07/03/1997 5,800,000
1,565,000 Village of Andover, OH, Health Care Rev., Ser. 1996
(D&M Realty Proj.)..................................... 4.200 07/03/1997 1,565,000
1,600,000 Warren Co., OH, IDR (Liquid Container)...................... 4.100 07/03/1997 1,600,000
2,200,000 Westlake, OH, IDR (Nordson Co.)............................. 4.200 07/03/1997 2,200,000
4,590,000 Trumbull Co., OH, Hosp. Rev. (Shepherd Valley Lutheran)..... 4.200 07/03/1997 4,590,000
475,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Visiting Nurse Svcs. Proj.)........................... 4.250 07/03/1997 475,000
840,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.)....... 4.200 07/03/1997 840,000
1,700,000 Mahoning Co., OH, Health Care Fac. Rev.
(Ohio Heart Institute)................................. 4.200 07/03/1997 1,700,000
1,900,000 Cuyahoga Co., OH, Hosp. Impt. Rev. (Univ. Hosp. Cleveland).. 5.000 07/03/1997 1,900,000
5,300,000 Hamilton Co., OH, Health Sys. Rev. (Franciscan Sisters)..... 5.000 07/03/1997 5,300,000
1,400,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B
(Cincinnati Gas & Elect.)......................... 4.700 07/03/1997 1,400,000
1,800,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1995A
(Cincinnati Gas & Elect.).............................. 4.700 07/03/1997 1,800,000
3,920,000 Ashtabula Co., OH, Hosp. Fac. Rev., Ser. 1995
(Ashtabula Co. Med. Ctr. Proj.)................... 4.200 07/03/1997 3,920,000
1,800,000 Clinton Co., OH, Hosp. Rev. (Clinton Memorial).............. 4.300 07/03/1997 1,800,000
1,210,000 Franklin Co., OH, IDR (Ohio Girl Scouts)................... 4.200 07/03/1997 1,210,000
2,000,000 Franklin Co., OH, IDR (Alco Standard Corp.)................. 4.350 07/03/1997 2,000,000
8,000,000 Franklin Co., OH, IDR (Berwick Steel)....................... 4.250 07/03/1997 8,000,000
2,000,000 Lucas Co., OH, IDR (Ohio Citizens Bank Proj.)............... 4.300 07/03/1997 2,000,000
2,000,000 Mahoning Co., OH, Health Care Fac. Rev. (Copeland Oaks)..... 4.200 07/03/1997 2,000,000
400,000 Lucas Co., OH, Rev. (Sunshine Children's Home).............. 4.300 07/03/1997 400,000
3,600,000 Lima, OH, Hosp. Fac. & Impt. Rev., Ser. 1996
(Lima Memorial Hosp.)............................. 4.300 07/03/1997 3,600,000
400,000 Franklin Co., OH, IDR (Columbus College).................... 4.200 07/03/1997 400,000
1,389,000 Hamilton Co., OH, EDR, Ser. 1995
(Cincinnati Assoc. Performing Arts)............... 4.200 07/03/1997 1,389,000
800,000 Ohio St. Higher Educ. Fac. Rev. (John Carroll Univ.)........ 4.125 07/07/1997 800,000
1,900,000 Summit Co., OH, Health Care Fac. Rev., Ser. 1997
(Evant Inc. Proj.)................................ 4.250 07/10/1997 1,900,000
2,050,000 Ashland Co., OH, Hosp. Fac. Rev., Ser. 1989
(Good Shepherd Home).............................. 4.500 07/11/1997 2,050,000
1,400,000 Hamilton Co., OH, IDR (ADP System).......................... 3.700 07/15/1997 1,400,000
- - -------------- ------------
$149,356,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - --------------
(Amortized Cost $149,356,000)............................... $149,356,000
------------
<CAPTION>
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 13.9% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. A
(Duquesne Light)....................................... 3.950% 07/16/1997 $ 2,500,000
140,000 Middletown, OH, IDR (Continental Commercial
Properties Proj.)...................................... 3.850 08/01/1997 140,000
1,315,000 Hamilton, OH, IDR (Continental Commercial Properties Proj.). 3.850 08/01/1997 1,315,000
759,000 Citizens Federal Tax-Exempt Mtg. Bond Trust................. 4.150 09/01/1997 759,000
660,000 Riverside, OH, EDR (Riverside Assoc. Ltd. Proj.)............ 3.800 09/01/1997 660,000
2,545,000 Perry Co., OH, Nursing Fac. Rev., Ser. 1996
(New Lexington Hlth. Corp. Proj.)...................... 4.000 09/01/1997 2,545,000
4,740,000 Cuyahoga Co., OH, IDR (Halle Office Bldg.).................. 4.190 10/01/1997 4,740,000
170,000 Franklin Co., OH, IDR (Pan Western Life).................... 3.850 10/01/1997 170,000
1,240,000 Miami Valley Tax-Exempt Mtg. Bond Trust..................... 4.880 10/15/1997 1,240,000
1,450,000 Clermont Co., OH, EDR (John Q. Hammons Proj.)............... 4.000 11/01/1997 1,450,000
650,000 Franklin Co., OH, IDR (GSW Proj.)........................... 3.700 11/01/1997 650,000
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 13.9% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,215,000 Ohio HFA MFH (Lincoln Park)................................. 4.250% 11/01/1997 $ 3,215,000
3,705,000 Richland Co., OH, IDR (Mansfield Sq. Proj.)................. 3.700 11/15/1997 3,705,000
935,000 Scioto Co., OH, Health Care Rev. (Hillview Retirement)...... 3.650 12/01/1997 935,000
395,000 Cuyahoga Co., OH, IDR (Welded Ring)......................... 3.650 12/01/1997 395,000
710,000 Cuyahoga Co., OH, Health Care Rev. (Cleveland
Neighborhood Hlth. Svcs.).............................. 3.900 12/01/1997 710,000
320,000 Lucas Co., OH, EDR (Cross County Inns, Inc.)................ 3.750 12/01/1997 320,000
2,355,000 Franklin Co., OH, IDR (Leveque & Assoc. Proj.).............. 3.650 12/01/1997 2,355,000
1,060,000 Gallia Co., OH, IDR (Jackson Pike Assoc.)................... 3.600 12/15/1997 1,060,000
2,915,000 Ohio Company Tax-Exempt Mtg. Bond Trust, Ser. 2............. 3.900 12/15/1997 2,914,203
670,000 Franklin Co., OH, EDR (JAL Realty).......................... 3.900 01/15/1998 670,000
4,250,000 Ohio St. Air Quality Dev. Auth., Ser. A (Ohio Edison)....... 3.950 02/01/1998 4,254,705
- - -------------- ------------
$ 36,699,000 TOTAL ADJUSTABLE RATE PUT BONDS
- - --------------
(Amortized Cost $36,702,908)................................ $36,702,908
------------
$262,398,730 TOTAL INVESTMENTS AT VALUE -- 99.3%
==============
(Amortized Cost $262,508,765)............................... $262,508,765
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.7% ............... 1,798,891
------------
NET ASSETS-- 100.0% ........................................ $264,307,656
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 38.3% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 175,000 Puerto Rico Commonwealth GO, Prerefunded @ 102.............. 7.125% 07/01/1997 $ 178,500
250,000 Venice, FL, Util. Rev., Prerefunded @ 102................... 6.900 07/01/1997 255,000
375,000 Florida St. Dept. of Natural Resources, Ser. 1992
(Preservation 2000).................................... 5.750 07/01/1997 375,000
200,000 Florida St. Turnpike Auth. Rev., Ser. 1992A................. 5.000 07/01/1997 200,000
200,000 Florida St. Dept. of Natural Resources, Ser. 1993
(Preservation 2000).................................... 4.200 07/01/1997 200,000
100,000 Florida St. Turnpike Auth. Rev.............................. 3.900 07/01/1997 100,000
250,000 Florida St. Turnpike Auth. Rev., Ser. 1991A................. 6.200 07/01/1997 250,000
150,000 Florida St. Div. Board Fin. Rev. (Dept. of
Environmental Protection).............................. 4.500 07/01/1997 150,000
500,000 Broward Co., FL, GO, Prerefunded @ 102...................... 6.900 07/01/1997 510,000
1,000,000 Dade Co., FL, School Board COP, Ser. B...................... 4.250 08/01/1997 1,000,411
100,000 Pinellas Co., FL, Transportation Impt. Rev., Ser. A......... 3.800 08/01/1997 100,004
170,000 Walton Co., FL, GO.......................................... 3.650 08/01/1997 170,000
400,000 Cape Coral, FL, Water Rev................................... 6.625 08/01/1997 400,902
520,000 San Antonio, TX, GO......................................... 8.000 08/01/1997 521,765
100,000 Pasco Co., FL, Optional Gas Tax Rev......................... 6.900 08/01/1997 100,238
400,000 Venice, FL, Health Care Rev. (Bon Secours Health
Sys. Proj.)............................................ 3.800 08/15/1997 400,056
475,000 Homestead, FL, Special Insurance Assessment Rev.,
Escrowed to Maturity................................... 4.400 09/01/1997 475,562
350,000 Homestead, FL, Special Insurance Assessment Rev............. 4.400 09/01/1997 350,373
225,000 Port Everglades, FL, Port Auth. Rev......................... 6.900 09/01/1997 226,090
550,000 Okaloosa Co., FL, School Board COP.......................... 5.000 09/01/1997 551,090
1,500,000 Orange Co., FL, School Dist. TANS........................... 4.000 09/15/1997 1,500,800
1,240,000 Bay Medical Ctr., FL, Hosp. Rev. (Bay Medical Ctr. Proj.)... 4.000 10/01/1997 1,240,903
500,000 Jacksonville, FL, Elec. Auth. Rev. (St. Johns River)........ 4.000 10/01/1997 500,304
200,000 Hollywood, FL, Water & Sewer Rev............................ 5.800 10/01/1997 201,034
350,000 Key West, FL, Util. Board Elec. Rev......................... 3.650 10/01/1997 350,000
250,000 Dade Co., FL, Water & Sewer Rev............................. 4.500 10/01/1997 250,493
125,000 West Palm Beach, FL, Gtd. Entitlement Rev.,
Prerefunded @ 102...................................... 6.500 10/01/1997 128,307
155,000 Laguna Madre, TX, Water Dist. Rev........................... 4.100 11/01/1997 155,000
275,000 Matteson, IL, GO, Ser. A.................................... 4.900 12/01/1997 276,267
340,000 Wichita KS, GO.............................................. 6.850 12/01/1997 344,282
1,060,000 Cook Co., IL, School Dist. GO............................... 4.500 12/01/1997 1,063,191
2,000,000 Cheshire Co., NH, TANS...................................... 3.890 12/29/1997 2,000,383
250,000 Polk Co., FL, School Board COP.............................. 4.400 01/01/1998 250,744
400,000 St. Lucie Co., FL, School Dist. GO.......................... 4.000 02/01/1998 400,236
500,000 Collier Co., FL, Special Obligation Rev..................... 3.700 03/01/1998 500,000
335,000 Clay Co., FL, School Board COP.............................. 4.200 07/01/1998 335,652
- - -------------- ------------
$ 15,970,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - --------------
(Amortized Cost $16,012,587)................................ $16,012,587
------------
<PAGE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 44.1% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100,000 St. Lucie Co., FL, PCR (Florida Power & Light).............. 4.000% 07/01/1997 $ 100,000
1,200,000 Jacksonville, FL, Health Fac. Auth. Rev., Ser. 1996
(Genesis Rehab. Hosp.)................................. 4.200 07/01/1997 1,200,000
800,000 Jacksonville, FL, Health Fac. Auth. Rev.
(River Garden Proj.)................................... 4.650 07/01/1997 800,000
800,000 Hamilton Co., OH, Health Sys. Rev. (Franciscan Sisters)..... 4.150 07/01/1997 800,000
875,000 Volusia Co., FL, Health Fac. Auth. Rev.
(Sun Point Apt. Proj.)................................. 4.150 07/01/1997 875,000
2,000,000 Orange Co., FL, IDR, Ser. 1996A (Univ. of Central
Florida Proj.)......................................... 4.100 07/02/1997 2,000,000
1,735,000 Illinois St. Dev. Fin Auth. MFH Rev. (Cobbler Square Proj.). 4.600 07/02/1997 1,735,000
1,500,000 St. John's Co., FL, HFA Rev. (Anastasia Shores Apt. Proj.).. 4.250 07/02/1997 1,500,000
1,400,000 Broward Co., FL, MFH Rev. (Margate Proj.)................... 4.250 07/02/1997 1,400,000
720,000 Volusia Co., FL, Health Fac. Auth. Rev., Pooled Hosp.
Loan Prog. ............................................ 4.150 07/02/1997 720,000
400,000 San Rafael, CA, IDR, Ser. 1994 (Phoenix American, Inc.)..... 4.150 07/02/1997 400,000
300,000 York, PA, Gen. Auth. Pooled Fin. Rev........................ 4.150 07/03/1997 300,000
1,700,000 Plant City, FL, Hosp. Rev. (South Florida Baptist Hosp.).... 4.350 07/03/1997 1,700,000
1,500,000 Marion Co., FL, HFA (Paddock Place Proj.)................... 4.250 07/03/1997 1,500,000
1,400,000 Jacksonville, FL, Health Fac. Auth. Rev.
(Faculty Practice Assoc.) ............................. 4.250 07/03/1997 1,400,000
2,000,000 Boca Raton, FL, IDR (Parking Garage)........................ 4.500 07/03/1997 2,000,000
- - -------------- ------------
$ 18,430,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - --------------
(Amortized Cost $18,430,000)................................ $18,430,000
------------
<PAGE>
<CAPTION>
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 4.7% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,450,000 Florida HFA Rev............................................. 3.750% 12/15/1997 $ 1,450,000
515,000 Corpus Christi, TX, IDR..................................... 3.850 02/01/1998 515,000
- - -------------- ------------
$ 1,965,000 TOTAL ADJUSTABLE RATE PUT BONDS
- - --------------
(Amortized Cost $1,965,000)................................. $ 1,965,000
------------
<CAPTION>
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 15.6% RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 St. Lucie Co., FL, PCR (Florida Power & Light).............. 4.000% 07/07/1997 $ 1,500,000
1,500,000 St. Lucie Co., FL, PCR (Florida Power & Light).............. 3.950 07/10/1997 1,500,000
2,000,000 Orange Co., FL, Health Fac. Auth., Pooled Hosp. Loan Prog... 3.750 07/15/1997 2,000,000
1,500,000 Pinellas Co., FL Pooled Independent Higher Educ. Fac. Rev... 3.600 07/28/1997 1,500,000
- - -------------- ------------
$ 6,500,000 TOTAL COMMERCIAL PAPER
- - --------------
(Amortized Cost $6,500,000)................................. $ 6,500,000
------------
$ 42,865,000 TOTAL INVESTMENTS AT VALUE-- 102.7%
==============
(Amortized Cost $42,907,587)................................ $42,907,587
LIABILITIES IN EXCESS OF OTHER ASSETS-- (2.7)% ............. ( 1,125,123 )
------------
NET ASSETS-- 100.0% ........................................ $41,782,464
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALASKA -- 0.6%
$ 385,000 Alaska St. HFC Rev.......................................... 7.650% 12/01/2010 $ 385,038
------------
ARIZONA -- 1.8%
400,000 Arizona Educ. Loan Mkt. Corp. Rev., Ser. A.................. 6.700 03/01/2000 416,556
600,000 Maricopa Co., AZ, School Dist. Rev., Ser. 1991C
(Tempe Elem.)......................................... 8.000 07/01/2004 715,806
------------
1,132,362
------------
CALIFORNIA -- 2.8%
500,000 Santa Clara Co., CA, Hsg. Auth. ARPB (Orchard Glen Apts.)... 5.250 11/01/1998 502,185
470,000 Sacramento Co., CA, MFH ARPB (Fairway One Apts.)............ 5.875 02/01/2003 475,457
500,000 Santa Monica, CA, Redev. Agy. Lease Rev..................... 6.000 07/01/2003 537,440
250,000 California HFA Multi-Unit Rental Rev., Ser. B............... 6.500 08/01/2005 262,847
------------
1,777,929
------------
FLORIDA -- 8.4%
500,000 Florida HFA MFH ARPB, Ser. 1978B (Hampton Lakes II Proj.)... 5.700 04/01/2001 509,625
200,000 Florida St. GO.............................................. 6.500 05/01/2004 202,692
1,000,000 Jacksonville, FL, ExciseTax Rev., Ser. B.................... 5.400 10/01/2006 1,028,190
750,000 Hillsborough Co., FL, Solid Waste Rev....................... 5.500 10/01/2006 783,293
455,000 Pensacola, FL, Airport Rev., Ser. 1997B..................... 5.400 10/01/2007 467,954
1,000,000 Pasco Co., FL, HFA MFH Rev., Ser. 1997B
(Cypress Trail Apt. Proj.)............................. 5.500 06/01/2008 995,900
1,345,000 Florida HFA MFH Sr. Lien, Ser. I-1.......................... 6.100 01/01/2009 1,369,815
------------
5,357,469
------------
GEORGIA -- 0.9%
500,000 Columbus, GA, Med. Ctr. Hosp. Auth. Rev..................... 6.400 08/01/2006 542,375
------------
ILLINOIS -- 2.0%
500,000 Aurora, IL, MFH Rev., Ser. 1988 (Fox Valley)................ 7.750 09/01/1998 513,600
680,000 Illinois St. Educ. Fac. Auth. Rev., Ser. A (Loyola Univ.),
Prerefunded @ 102...................................... 7.125 07/01/2001 757,690
------------
1,271,290
------------
INDIANA -- 11.0%
3,185,000 Purdue University, IN, COP, Prerefunded @ 102............... 6.250 07/01/2001 3,451,393
1,000,000 Indiana Bond Bank Special Prog. Rev., Ser. A-1.............. 6.650 01/01/2003 1,035,280
1,865,000 Purdue University, IN, COP.................................. 5.750 07/01/2007 1,962,577
500,000 Indiana HFA Multi-Unit Mtg. Prog. Rev., Ser. 1992A.......... 6.600 01/01/2012 524,675
------------
6,973,925
------------
IOWA -- 1.9%
250,000 Iowa Student Loan Liquidity Corp. Rev....................... 6.400 07/01/2004 266,593
395,000 Iowa HFA Rev................................................ 6.500 07/01/2006 414,663
240,000 Iowa Student Loan Liquidity Corp. Rev....................... 6.600 07/01/2008 252,895
250,000 Cedar Rapids, IA, Hosp. Fac. Rev. (St. Luke's
Methodist Hosp.)....................................... 6.000 08/15/2009 263,777
------------
1,197,928
------------
KENTUCKY -- 2.4%
675,000 Owensboro, KY, Elec. Light & Power Rev., Prerefunded @ 102.. 10.250 01/01/2000 780,253
750,000 Kentucky St. Turnpike Auth. EDR (Revitalization Proj.)...... 5.250 07/01/2005 773,213
------------
1,553,466
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOUISIANA -- 1.6%
$ 440,000 Louisiana Public Fac. Auth. Rev. (Medical Ctr.
of Louisiana).......................................... 6.000% 10/15/2003 $ 466,910
500,000 West Ouachita Parish, LA, School Dist. GO, Ser. A........... 6.700 03/01/2006 543,150
------------
1,010,060
------------
MARYLAND -- 0.8%
500,000 Maryland St. Health & Higher Educ. Fac. Auth. Rev.,
(Univ. of Maryland Medical Sys.)............................ 6.500 07/01/2001 537,965
------------
MASSACHUSETTS -- 2.9%
750,000 Massachusetts St. Indust. Fin. Agy. ARPB
(Asahi/America, Inc.).................................. 5.100 03/01/1999 759,518
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992B.......... 6.500 09/01/2002 538,595
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992A.......... 6.600 09/01/2002 537,280
------------
1,835,393
------------
MICHIGAN -- 1.7%
1,000,000 Michigan St. Bldg. Auth. Rev., Ser. II...................... 6.400 10/01/2004 1,080,360
------------
MINNESOTA -- 1.2%
700,000 Centennial, MN, ISD GO, Ser. A.............................. 5.600 02/01/2002 732,739
------------
MISSISSIPPI -- 1.2%
500,000 Mississippi Higher Educ. Rev., Ser. B....................... 6.100 07/01/2001 520,095
250,000 Hattiesburg, MS, Water & Sewer Rev.......................... 4.800 08/01/2002 252,235
------------
772,330
------------
NEBRASKA -- 1.1%
655,000 Nebraska Invest. Fin. Auth. Rev., Ser. 1989 (Foundation for Educ. Fund),
Escrowed to Maturity................................... 7.000 11/01/2009 676,294
------------
NEVADA -- 2.6%
315,000 Washoe Co., NV, GO, Prerefunded @ 102....................... 7.375 07/01/1999 340,071
1,000,000 Las Vegas, NV, GO, Sewer Impt. Rev, Prerefunded @ 102....... 6.500 04/01/2002 1,100,820
185,000 Washoe Co., NV, GO.......................................... 7.375 07/01/2009 198,795
------------
1,639,686
------------
NEW YORK -- 3.1%
500,000 New York Local Govt. Asst. Corp. Rev., Ser. 1991B........... 7.000 04/01/2002 549,675
85,000 New York, NY, GO............................................ 8.000 08/01/2005 87,003
1,300,000 New York St. Twy Auth. Local Hwy. Impt. Rev................. 5.500 04/01/2006 1,355,809
------------
1,992,487
------------
NORTH CAROLINA -- 3.9%
1,065,000 Durham, NC, COP, Prerefunded @ 102.......................... 6.375 12/01/2001 1,167,975
1,200,000 Asheville, NC, GO........................................... 6.100 03/01/2008 1,288,404
------------
2,456,379
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OHIO -- 19.8%
$ 200,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B............ 5.500% 07/01/1997 $ 200,000
500,000 Ohio St. Bldg. Auth. Rev., Ser. A, Escrowed to Maturity..... 7.150 03/01/1999 523,775
700,000 Franklin Co., OH, Dev. & Ref. Rev., Ser. 1993
(American Chemical Soc.)............................... 5.500 04/01/2000 712,621
500,000 Franklin Co., OH, Rev. (Online Computer Library Ctr.)....... 5.500 04/15/2000 513,100
710,000 Fairfield, OH, IDR ARPB (Skyline Chili, Inc.)............... 5.000 09/01/2000 710,305
950,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Summa Health Systems)................................. 5.900 11/15/2002 1,003,077
270,000 Warren Co., OH, Hosp. Fac. Rev. (Otterbein Home)............ 7.000 07/01/2003 295,037
930,000 Ohio St. EDR Ohio Enterprise Bond Fd.
(Smith Steelite Proj.)................................. 5.600 12/01/2003 951,055
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Episcopal
Retirement Home)....................................... 6.600 01/01/2004 543,690
825,000 Jackson, OH, Electric Sys. Mtg. Rev......................... 5.200 07/15/2004 826,906
405,000 Ohio St. EDR, Ohio Enterprise Bond Fd. (Cheryl & Co.)....... 5.500 12/01/2004 421,479
1,000,000 Ohio St. Special Obligation Elem. & Secondary
Educ. Fac. Rev. ....................................... 5.000 12/01/2004 1,017,940
1,005,000 Franklin Co., OH, Health Care Fac. Rev.
(First Comm. Village).................................. 6.000 06/01/2006 1,031,019
550,000 Portage Co., OH, Hospital Rev. (Robinson Memorial
Hospital Proj.)........................................ 6.500 11/01/2006 610,704
400,000 Painesville, OH, Elec. Rev.................................. 6.000 11/01/2006 425,292
530,000 Toledo, OH, GO.............................................. 6.000 12/01/2006 575,628
840,000 Kent State University General Receipts Rev.................. 6.000 05/01/2007 911,366
800,000 West Clermont, OH, LSD GO................................... 6.150 12/01/2008 864,264
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Bethesda Hosp.).......... 7.000 01/01/2009 510,910
------------
12,648,168
------------
PENNSYLVANIA -- 2.6%
590,000 Chartiers Valley, PA, Comm. Dev. ARPB (Colonial Bldg.
Partners Proj.)........................................ 5.625 12/01/1997 592,808
500,000 Pennsylvania St., IDR, Ser. A, Prerefunded @ 102............ 7.000 07/01/2001 554,080
500,000 Pennsylvania Fin. Auth. Muni. Cap. Impt. Proj. Rev.......... 6.600 11/01/2009 539,205
------------
1,686,093
------------
SOUTH CAROLINA -- 4.5%
500,000 South Carolina EDA EDR (St. Francis Hosp.).................. 4.300 07/01/1997 500,000
145,000 Piedmont, SC, Muni. Power Agy. Rev., Ser. A,
Escrowed to Maturity................................... 6.000 01/01/2002 154,019
855,000 Piedmont, SC, Muni. Power Agy. Rev., Ser. A................. 6.000 01/01/2002 903,897
525,000 South Carolina St. GO, Ser. A............................... 6.000 03/01/2004 558,773
725,000 Richland-Lexington, SC, Airport Dist. Rev., Ser. 1995
(Columbia Metro.)...................................... 6.000 01/01/2008 766,180
------------
2,882,869
------------
TENNESSEE -- 1.8%
525,000 Southeast, TN, Tax-Exempt Mtg. Trust ARPB, Ser. 1990........ 7.250 04/01/2003 583,091
500,000 Nashville, TN, Metro. Airport Rev., Ser. C.................. 6.625 07/01/2007 544,010
------------
1,127,101
------------
TEXAS -- 10.5%
500,000 Texas Turnpike Auth. Rev. (Dallas N. Tollway),
Prerefunded @ 102...................................... 7.250 01/01/1999 532,210
500,000 Houston, TX, Sr. Lien Rev., Ser. A (Hotel Tax &
Parking Fac.), Prerefunded @ 100....................... 7.000 07/01/2001 547,815
350,000 Univ. of Texas, TX, Rev., Ser. B, Prerefunded @ 102......... 6.750 08/15/2001 386,967
1,000,000 Texas National Research Lab. Fin. Corp. Lease Rev.,
Prerefunded @ 102...................................... 6.850 12/01/2001 1,115,170
500,000 N. Texas Higher Educ. Student Loan Rev., Ser. 1991A......... 6.875 04/01/2002 529,455
650,000 Lufkin TX, ISD GO........................................... 7.250 02/15/2006 756,997
650,000 Galveston, TX, Health Fac. Rev. (Devereux Foundation)....... 4.900 11/01/2006 651,404
500,000 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS......................................... 7.300 05/15/2008 546,735
500,000 Tyler, TX, Health Fac. Rev. (East Texas Medical Center)..... 5.000 11/01/2008 494,430
394,818 Midland, TX, HFC Rev., Ser. A-2............................. 8.450 12/01/2011 424,599
650,000 Univ. of Texas, TX, Rev., Ser. B............................ 6.750 08/15/2013 706,037
------------
6,691,819
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTAH -- 1.5%
$ 870,000 Utah St. School Dist. Fin. Corp. Rev., Mandatory Redemption. 8.375% 08/15/1998 $ 924,906
------------
VIRGINIA -- 1.6%
500,000 Chesterfield Co., VA, GO, Ser. B............................ 6.200 01/01/1999 515,670
500,000 Chesapeake, VA, GO.......................................... 5.900 08/01/2005 531,595
------------
1,047,265
------------
WASHINGTON -- 3.5%
750,000 Seattle, WA, Drain & Wastewater Util. Rev.,
Prerefunded @ 102...................................... 7.000 12/01/1999 811,725
335,000 Washington St. GO, Ser. A, Prerefunded @ 100................ 6.400 03/01/2001 357,683
1,000,000 Washington St. Motor Vehicle Fuel Tax GO.................... 6.000 09/01/2004 1,066,840
------------
2,236,248
------------
WISCONSIN -- 1.5%
395,000 Village of Dresser, WI, PCR (F & A Dairy, Inc.)............. 6.000 05/01/2000 401,340
500,000 Wisconsin Public Power System Rev., Ser. A,
- - -------------- Prerefunded @ 102......................................000000 07/01/2000 553,575
------------
954,915
------------
$ 59,614,818 TOTAL MUNICIPAL BONDS-- 99.2%
==============
(Amortized Cost $60,807,141)................................ $63,124,859
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.8% ............... 521,308
------------
NET ASSETS-- 100.0% ........................................ $63,646,167
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 98.3% 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 $ 510,833
500,000 Montgomery Co., OH, Garbage & Refuse Rev., Ser. A,
Prerefunded @ 102...................................... 7.100 11/01/1999 541,800
500,000 Ohio St. Bldg. Auth. Local Jail Rev., Prerefunded @ 102..... 7.350 04/01/2000 548,725
500,000 Ohio St. Higher Educ. Fac. Rev. (Ohio Northern Univ.),
Prerefunded @ 100...................................... 7.250 05/15/2000 539,880
500,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Children's Hosp.), Prerefunded @ 102.................. 7.450 11/15/2000 557,615
500,000 Franklin Co., OH, Convention Fac. Auth. Tax & Lease Rev.,
Prerefunded @ 102...................................... 7.000 12/01/2000 551,635
500,000 Fairfield Co., OH, Hosp. Fac. Rev.
(Lancaster-Fairfield Hosp.), Prerefunded @ 102......... 7.100 06/15/2001 557,150
250,000 Franklin Co., OH, IDR (1st Community Village Healthcare),
Prerefunded @ 101.5.................................... 10.125 08/01/2001 301,623
30,000 Clermont Co., OH, Hosp. Fac. Rev., Ser. A (Mercy
Health Sys.), Prerefunded @ 100........................ 7.500 09/01/2001 33,517
460,000 Westerville, Minerva Park & Blendon, OH, Joint Hosp.
Dist. Rev. (St. Ann's), Prerefunded @ 102.............. 7.100 09/15/2001 515,048
1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.),
Prerefunded @ 102...................................... 6.733 09/25/2001 1,105,960
1,310,000 Cuyahoga Co., OH, Hosp. Rev. (Mt. Sinai), Prerefunded @ 102. 6.625 11/15/2001 1,446,974
500,000 Springfield, OH, LSD GO, Prerefunded @ 102.................. 6.600 12/01/2001 555,385
500,000 Clermont Co., OH, Sewer Sys. Rev., Ser. 1991,
Prerefunded @ 102...................................... 7.100 12/01/2001 562,770
5,000 Cleveland, OH, Waterworks Impt. Rev., Prerefunded @ 102..... 6.500 01/01/2002 5,498
15,000 Summit Co., OH, GO, Ser. A, Prerefunded @ 100............... 6.900 08/01/2002 16,663
40,000 Ohio St. Bldg. Auth. Rev. (Frank Lausch Proj.),
Prerefunded @ 100...................................... 10.125 04/01/2003 48,286
160,000 Ohio St. Bldg. Auth. Rev. (Columbus St. Proj.),
Prerefunded @ 100...................................... 10.125 04/01/2003 191,984
230,000 Summit Co., OH, GO, Ser. A, Prerefunded @ 100............... 6.900 08/01/2003 258,702
290,000 Northwest, OH, LSD GO....................................... 7.050 12/01/2003 320,760
290,000 Alliance, OH, CSD GO........................................ 6.900 12/01/2006 320,392
500,000 Cleveland, OH, Waterworks Impt. Rev., Ser. G................ 5.500 01/01/2009 521,670
1,000,000 Franklin Co., OH, Hosp. Impt. Rev. (Holy Cross Health Sys.). 7.625 06/01/2009 1,095,470
500,000 Mansfield, OH, Hosp. Impt. Rev. (Mansfield General)......... 6.700 12/01/2009 543,425
250,000 Ohio St. Water Dev. Auth. & Impt. Rev. (Pure Water),
Escrowed to Maturity................................... 7.000 12/01/2009 287,458
500,000 Ohio Capital Corp. MFH Rev.................................. 7.500 01/01/2010 532,175
500,000 Hamilton, OH, Water Sys. Mtg. Rev., Ser. 1991A.............. 6.400 10/15/2010 541,450
500,000 Montgomery Co., OH, Solid Waste Rev......................... 5.350 11/01/2010 503,910
500,000 Butler Co., OH, Hosp. Fac. Rev. (Middletown Regional Hosp.). 6.750 11/15/2010 543,465
500,000 St. Mary's, OH, Elec. Sys. Rev.............................. 7.150 12/01/2010 553,995
1,000,000 Canton, OH, Waterworks Sys. GO, Ser. 1995................... 5.750 12/01/2010 1,044,590
495,000 Cleveland, OH, Waterworks Impt. Rev., Ser. F (First Mtg.)... 6.500 01/01/2011 536,501
1,000,000 Ohio St. Water Dev. Auth. Rev............................... 5.300 06/01/2011 1,001,940
265,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.),
Escrowed to Maturity................................... 9.000 06/01/2011 296,721
535,000 Ohio HFA SFM Rev., Ser. 1991D............................... 7.000 09/01/2011 565,827
365,000 Bexley, OH, CSD GO.......................................... 7.125 12/01/2011 436,967
500,000 Greene Co., OH, Water Sys. Rev.............................. 6.850 12/01/2011 550,150
600,000 Westerville, OH, Water Sys. Impt. GO........................ 6.450 12/01/2011 653,898
500,000 Stark Co., OH, GO........................................... 7.050 12/01/2011 545,890
500,000 Strongsville, OH, CSD GO.................................... 5.350 12/01/2011 510,580
500,000 Maple Heights, OH, GO....................................... 7.000 12/01/2011 552,050
530,000 Urbana, OH, Wastewater Sys. Impt. GO........................ 7.050 12/01/2011 593,945
760,000 Springboro, OH, CSD GO...................................... 6.000 12/01/2011 828,385
500,000 Cleveland, OH, GO, Ser. A................................... 6.375 07/01/2012 542,310
255,000 Summit Co., OH, GO, Ser. A.................................. 6.900 08/01/2012 279,141
1,095,000 West Clermont, OH, LSD GO................................... 6.900 12/01/2012 1,240,405
500,000 Brunswick, OH, CSD GO....................................... 6.900 12/01/2012 550,080
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 98.3% RATE DATE VALUE
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 Summit Co., OH, GO.......................................... 6.625% 12/01/2012 $ 545,920
500,000 Ohio St. Higher Educ. Fac. Rev. (Univ. of Dayton)........... 7.250 12/01/2012 549,015
500,000 Worthington, OH, CSD GO..................................... 6.375 12/01/2012 540,890
500,000 Strongsville, OH, CSD GO.................................... 5.375 12/01/2012 509,980
500,000 Warrensville Heights, OH, GO................................ 6.400 12/01/2012 544,735
1,000,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. D (Children's
Hosp. Medical Ctr.).................................... 5.000 05/15/2013 961,780
330,000 Ohio HFA SFM Rev., Ser. 1990D............................... 7.500 09/01/2013 347,474
500,000 Ohio St. Bldg. Auth. Rev., Ser. 1994A (Juvenile
Correctional Bldg.).................................... 6.600 10/01/2014 554,460
500,000 Mahoning Co., OH, Hosp. Impt. Rev. (YHA, Inc.).............. 7.000 10/15/2014 542,750
1,000,000 Ohio St. Higher Educ. Fac. Rev. (John Carroll Univ.)........ 5.300 11/15/2014 986,760
530,000 Ottawa Co., OH, GO.......................................... 5.750 12/01/2014 545,031
290,000 Garfield Heights, OH, GO.................................... 6.300 12/01/2014 315,250
460,000 Bedford Heights, OH, GO..................................... 6.500 12/01/2014 508,084
1,000,000 Portage Co., OH, GO......................................... 6.200 12/01/2014 1,072,910
1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.)....... 5.875 09/01/2015 1,026,640
600,000 Toledo-Lucas Co., OH, Convention Ctr. Rev................... 5.700 10/01/2015 615,486
1,750,000 Dayton, OH, Airport Rev. (James M. Cox Dayton
Intl. Airport)......................................... 5.250 12/01/2015 1,717,520
1,000,000 Buckeye Valley, OH, LSD GO.................................. 6.850 12/01/2015 1,163,970
500,000 Delaware, OH, CSD GO........................................ 5.750 12/01/2015 511,280
500,000 Ohio St. Higher Educ. Fac. Rev. (Univ. of Dayton)........... 6.750 12/01/2015 549,720
1,420,000 Stow, OH, Safety Center Const., GO.......................... 6.150 12/01/2015 1,508,594
1,700,000 Massillon, OH, GO........................................... 6.625 12/01/2015 1,886,694
1,000,000 Tuscarawas, OH, LSD GO, Ser. 1995........................... 6.600 12/01/2015 1,108,130
750,000 Columbus-Polaris Hsg. Corp. Ohio Mtg. Rev.,
Prerefunded @100....................................... 7.400 01/01/2016 852,645
500,000 Cleveland, OH, Waterworks Impt. Rev......................... 6.250 01/01/2016 531,260
500,000 Ohio St. Air Quality Dev. Auth. Rev. (Ohio Edison).......... 7.450 03/01/2016 543,170
996,000 Ohio HFA SFM Rev., Ser. 1991D............................... 7.050 09/01/2016 1,051,417
361,000 Ohio HFA SFM Rev., Ser. 1990F............................... 7.600 09/01/2016 381,353
500,000 Celina, OH, Wastewater Sys. Mtg. Rev........................ 6.550 11/01/2016 539,750
750,000 Montgomery Co., OH, Hosp. Rev. (Miami Valley Hosp.)......... 6.250 11/15/2016 785,055
1,000,000 Cleveland, OH, Public Power Sys. Rev........................ 7.000 11/15/2016 1,141,920
590,000 Garfield Heights, OH, GO.................................... 7.050 12/01/2016 644,150
1,000,000 North Olmsted, OH, GO....................................... 5.000 12/01/2016 951,050
815,000 Butler Co., OH, GO.......................................... 5.750 12/01/2016 831,602
705,000 Big Walnut, OH, LSD GO (Community Library Proj.)............ 6.650 12/01/2016 775,683
1,000,000 Greater Cleveland, OH, Regional Transit Auth. GO............ 5.650 12/01/2016 1,011,700
800,000 Ohio St. Bldg. Auth. Rev. (Adult Correctional Bldg.)........ 5.600 04/01/2017 806,784
760,000 Puerto Rico Electric Power Auth. Rev., Ser. A............... 5.250 07/01/2017 744,336
1,000,000 Lorain Co., OH, Hosp. Rev. (Catholic Health Care Partners).. 5.625 09/01/2017 1,007,370
850,000 Alliance, OH, Waterworks Sys. Rev........................... 6.650 10/15/2017 927,247
500,000 Toledo, OH, Sewer Sys. Rev.................................. 6.350 11/15/2017 541,980
675,000 Reynoldsburg, OH, CSD GO.................................... 6.550 12/01/2017 739,490
500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1990B
(Ohio Edison).......................................... 7.100 06/01/2018 541,370
500,000 Seneca Co., OH, GO (Jail Fac.).............................. 6.500 12/01/2018 544,340
1,000,000 S. Euclid-Lyndhurst, OH, CSD GO, Ser. 1996.................. 6.400 12/01/2018 1,095,250
500,000 Newark, OH, Water Sys. Impt. Rev............................ 6.000 12/01/2018 518,005
500,000 Franklin Co., OH, Hosp. Rev., Ser. 1991 (Mt. Carmel)........ 6.750 06/01/2019 542,590
500,000 Crawford Co., OH, GO........................................ 6.750 12/01/2019 556,630
360,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.)............. 6.250 01/15/2020 375,660
500,000 Lucas Co., OH, Hosp. Impt. Rev. (St. Vincent's Hosp.)....... 6.750 08/15/2020 538,385
1,000,000 Ohio St. Air Quality Dev. Rev., Ser. 1985A
(Columbus Southern Power).............................. 6.375 12/01/2020 1,082,310
1,750,000 Celina, OH, CSD GO.......................................... 5.250 12/01/2020 1,681,575
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (Continued)
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 98.3% RATE DATE VALUE
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 Montgomery Co., OH, Hosp. Rev. (Sisters of Charity)......... 6.625% 05/15/2021 $ 214,244
15,000 Puerto Rico HFC SFM Rev., Ser. A ........................... 7.800 10/15/2021 15,380
1,220,000 Butler Co., OH, Sewer Sys. Rev.............................. 5.250 12/01/2021 1,169,748
1,000,000 Kent St. Univ. General Receipts Rev......................... 6.500 05/01/2022 1,082,540
160,000 Puerto Rico HFC Rev......................................... 6.850 10/15/2023 167,687
1,000,000 Springboro, OH, CSD GO...................................... 5.100 12/01/2023 947,230
1,000,000 West Holmes, OH, LSD GO..................................... 5.375 12/01/2023 974,490
2,500,000 Cleveland, OH, Public Power Sys. Rev., Ser. 1............... 5.000 11/15/2024 2,320,700
1,000,000 Ohio St. Air Quality Dev. Auth. Rev. (Penn Power)........... 6.450 05/01/2027 1,079,520
- - -------------- ------------
$ 70,037,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - --------------
(Amortized Cost $69,512,058)................................ $74,212,287
------------
<CAPTION>
===================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 0.9% RATE DATE VALUE
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B............ 5.500% 07/01/1997 $ 100,000
570,000 Cuyahoga Co., OH, Hosp. Impt. Rev. (Univ. Hosp. Cleveland).. 4.200 07/01/1997 570,000
- - -------------- ------------
$ 670,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - --------------
(Amortized Cost $670,000)................................... $ 670,000
------------
$ 70,707,000 TOTAL INVESTMENTS AT VALUE-- 99.2%
==============
(Amortized Cost $70,182,058)................................ $74,882,287
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.8% ............... 572,900
------------
NET ASSETS-- 100.0% ........................................ $75,455,187
============
</TABLE>
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS June 30, 1997
===============================================================================
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, 1997.
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
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
===============================================================================
Arthur Andersen LLP
To the Shareholders and Board of Trustees of Countrywide Tax-Free Trust
(formerly Midwest Group Tax Free Trust):
We have audited the accompanying statements of assets and liabilities of the
Tax-Free Money Fund, California Tax-Free Money Fund, Ohio Tax-Free Money Fund,
Florida Tax-Free Money Fund (formerly Royal Palm Florida Tax-Free Money Fund),
Tax-Free Intermediate Term Fund and Ohio Insured Tax-Free Fund of the
Countrywide Tax-Free Trust (a Massachusetts business trust), including the
portfolios of investments, as of June 30, 1997, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years 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, 1997, 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
Tax-Free Money Fund, California Tax-Free Money Fund, Ohio Tax-Free Money Fund,
Florida Tax-Free Money Fund, Tax-Free Intermediate Term Fund and Ohio Insured
Tax-Free Fund of the Countrywide Tax-Free Trust as of June 30, 1997, the results
of their operations for the year then ended, the changes in their net assets for
each of the two years 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 4, 1997
<PAGE>
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
February 28, 1997 (Unaudited)
===============================================================================
On February 28, 1997, a Special Meeting of Shareholders of the Trust was held
(1) to approve or disapprove a new investment advisory agreement with
Countrywide Investments, Inc. (formerly Midwest Group Financial Services, Inc.),
(2) to elect eight trustees and (3) to ratify or reject the selection of Arthur
Andersen LLP as the Trust's independent public accountants for the current
fiscal year. The total number of shares of the Trust present by proxy
represented 73.6% of the shares entitled to vote at the meeting.
Each of the matters submitted to shareholders was approved.
The results of the voting for or against the approval of the new investment
advisory agreement by each Fund follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
Number of Shares
For Against Abstain
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Free Money Fund 25,115,622.200 445,674.940 727,046.050
California Tax-Free Money Fund 32,987,445.770 60,870.730 170,862.090
Ohio Tax-Free Money Fund 192,287,347.050 1,767,190.110 1,212,383.020
Florida Tax-Free Money Fund 40,192,861.940 -- 212,899.750
Tax-Free Intermediate Term Fund 3,962,111.572 31,383.686 386,297.917
Ohio Insured Tax-Free Fund 4,091,196.523 72,837.433 247,000.150
- - --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
The results of the voting for the election of trustees follows:
- - --------------------------------------------------------------------------------------------------------------------------------
Withhold
Nominees For Election Authority Status
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald L. Bogdon, M.D. 301,097,986.596 2,873,044.335 New Trustee
John R. Delfino 302,110,178.726 1,860,852.205 New Trustee
H. Jerome Lerner 302,101,778.163 1,869,252.768 Incumbent
Robert H. Leshner 302,070,400.086 1,900,630.845 Incumbent
Angelo R. Mozilo 301,122,746.216 2,848,284.715 New Trustee
Oscar P. Robertson 300,942,417.774 3,028,613.157 Incumbent
John F. Seymour, Jr. 301,038,801.576 2,932,229.355 New Trustee
Sebastiano Sterpa 301,121,761.916 2,849,269.015 New Trustee
- - --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
The results of the voting for or against the ratification of Arthur Andersen LLP
as independent public accountants by each Fund follows:
- - --------------------------------------------------------------------------------------------------------------------------------
Number of Shares
For Against Abstain
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Free Money Fund 25,625,027.910 286,977,880 376,337.400
California Tax-Free Money Fund 33,154,401.010 55,799.840 8,977.740
Ohio Tax-Free Money Fund 192,902,190.560 875,777.430 1,488,952.190
Florida Tax-Free Money Fund 40,368,453.390 -- 37,308.300
Tax-Free Intermediate Term Fund 4,239,312.650 15,926.693 124,553.832
Ohio Insured Tax-Free Fund 4,295,133.611 25,321.159 90,579.336
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a)(i) Financial Statements included in Part A:
Financial Highlights
(ii) Financial Statements included in Part B:
Statements of Assets and Liabilities, June 30,
1997
Statements of Operations For the Year Ended
June 30, 1997
Statements of Changes in Net Assets for the
Years Ended June 30, 1997 and 1996
Financial Highlights
Notes to Financial Statements, June 30, 1997
Portfolio of Investments, June 30, 1997
(b) Exhibits:
(1)(i) Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 36, is hereby incorporated by
reference.
(ii) Amendment No. 1, dated May 25, 1994, to
Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 36, is hereby incorporated by
reference.
(iii) Amendment No. 2, dated July 31, 1996, to
Registrant's Restated Agreement and Declaration
of Trust, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 38, is
hereby incorporated by reference.
<PAGE>
(iv) Amendment No. 3, dated February 28, 1997, to
Registrant's Restated Agreement and Declaration
of Trust, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 40, is
hereby incorporated by
reference.
(2) Registrant's Bylaws, as amended, which were
filed as an Exhibit to Registrant's Post-
Effective Amendment No. 38, are hereby
incorporated by reference.
(3) Voting Trust Agreements - None.
(4)(i) Specimen of Share Certificate for Tax-Free
Intermediate Term Fund (formerly Limited Term
Portfolio), which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8, is
hereby incorporated by reference.
(ii) Specimen of Share Certificate for Ohio Insured
Tax-Free Fund (formerly Ohio Long Term
Portfolio), which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8, is
hereby incorporated by reference.
(5)(i) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Tax-Free
Money Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 40, is
hereby incorporated by reference.
(ii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Tax-Free
Intermediate Term Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(iii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Ohio
Insured Tax-Free Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(iv) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Ohio
Tax-Free Money Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
<PAGE>
(v) Registrant's Management Agreement with
Countrywide Investments, Inc. for the California
Tax-Free Money Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(vi) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Florida
Tax-Free Money Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(vii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Kentucky
Tax-Free Fund is filed herewith.
(6)(i) Registrant's Underwriting Agreement with
Countrywide Investments, Inc., which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(ii) Form of Underwriter's Dealer Agreement is
filed herewith.
(7) Bonus, Profit Sharing, Pension or Similar
Contracts for the benefit of Directors or
Officers - None.
(8)(i) Custody Agreement with The Fifth Third Bank, the
Custodian for 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
Kentucky Tax-Free Fund, which was filed as an
Exhibit to Registrant's Post-Effective Amendment
No. 38, is hereby incorporated by reference.
(ii) Custody Agreement with The Huntington Trust
Company, N.A., on behalf of the Florida Tax-Free
Money Fund and the Michigan Tax-Free Money Fund,
which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 36, is hereby
incorporated by reference.
(9)(i) Transfer Agency, Dividend Disbursing,
Shareholder Service and Plan Agency Agreement
with Countrywide Fund Services, Inc. is filed
herewith.
<PAGE>
(ii) Accounting and Pricing Services Agreement with
Countrywide Fund Services, Inc. is filed
herewith.
(iii) Administration Agreement between Countrywide
Investments, Inc. and Countrywide Fund Services,
Inc., which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 40, is
hereby incorporated by reference.
(iv) License Agreement with Countrywide Credit
Industries, Inc., which was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 40,
is hereby incorporated by reference.
(10) Opinion and Consent of Counsel, which was filed
as an Exhibit to Registrant's Pre- Effective
Amendment No. 1, is hereby incorporated by
reference.
(11) Consent of Independent Public Accountants is
filed herewith.
(12) Financial Statements Omitted from Item 23 -
None.
(13) Letter of Initial Stockholder, which was filed
as an Exhibit to Registrant's Pre-Effective
Amendment No. 1, is hereby incorporated by
reference.
(14) Copies of model plan used in the establishment
of any retirement plan - None.
(15)(i) Registrant's Plans of Distribution Pursuant to
Rule 12b-1, which were filed as Exhibits to
Registrant's Post-Effective Amendment No. 40,
are hereby incorporated by reference.
(ii) Form of Sales Agreement for Money Market Funds
is filed herewith.
(iii) Form of Administration Agreement with respect to
the administration of shareholder accounts is
filed herewith.
(16) Computations of each performance quotation
provided in response to Item 22, which were
filed as an Exhibit to Registrant's
Post-Effective Amendment No. 13, are hereby
incorporated by reference.
<PAGE>
(17) (i) Financial Data Schedule for each of the Tax-
Free Money Fund, the Tax-Free Intermediate
Term Fund - Class A and Class C, the Ohio
Insured Tax-Free Fund - Class A and Class C,
the Ohio Tax-Free Money Fund - Class A and
Class B, the California Tax-Free Money Fund
and the Florida Tax-Free Money Fund - Class A
and Class B is filed herewith.
(ii) Financial Data Schedule for the Kentucky Tax-
Free Money Fund, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No.
40, is hereby incorporated by reference.
(18) Amended Rule 18f-3 Plan Adopted With Respect
to the Multiple Class Distribution System is
filed herewith.
(19) Power of Attorney for John R. Delfino is filed
herewith.
Item 25. Persons Controlled by or Under Common Control with
the Registrant.
- ------- --------------------------------------------------
None.
Item 26. Number of Holders of Securities (as of September 2,
1997)
- ------- --------------------------------------------------
Title of Class Number of Record Holders
Tax-Free Money Fund 1,101
Tax-Free Intermediate Term Fund
Class A Shares 2,575
Class C Shares 363
Ohio Insured Tax-Free Fund
Class A Shares 1,539
Class C Shares 227
Ohio Tax-Free Money Fund
Class A Shares 2,733
Class B Shares 2
California Tax-Free Money Fund
Class A Shares 710
Class B Shares 0
Florida Tax-Free Money Fund
Class A Shares 186
Class B Shares 2
Kentucky Tax-Free Fund 477
<PAGE>
Item 27. Indemnification
- ------- ---------------
Article VI of the Registrant's Restated Agreement and
Declaration of Trust provides for indemnification of officers
and Trustees as follows:
Section 6.4 Indemnification of Trustees, Officers,
etc. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the
Trust's request as directors, officers or trustees of
another organization in which the Trust has any
interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which
such Covered Person may be or may have been involved
as a party or otherwise or with which such person may
be or may have been threatened, while in office or
thereafter, by reason of being or having been such a
Trustee or officer, director or trustee, and except
that no Covered Person shall be indemnified against
any liability to the Trust or its Shareholders to
which such Covered Person would otherwise be subject
by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of such covered Person's
office ("disabling conduct"). Anything herein
contained to the contrary notwithstanding, no Covered
Person shall be indemnified for any liability to the
Trust or its Shareholders to which such Covered
Person would otherwise be subject unless (1) a final
decision on the merits is made by a court or other
body before whom the proceeding was brought that the
Covered Person to be indemnified was not liable by
reason of disabling conduct or, (2) in the absence of
such a decision, a reasonable determination is made,
based upon a review of the facts, that the Covered
Person was not liable by reason of disabling conduct,
by (a) the vote of a majority of a quorum of Trustees
who are neither "interested persons" of the Company
as defined in the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
Trustees"), or (b) an independent legal counsel in a
written opinion.
<PAGE>
Section 6.5 Advances of Expenses. The Trust shall
advance attorneys' fees or other expenses incurred by
a Covered Person in defending a proceeding, upon the
undertaking by or on behalf of the Covered Person to
repay the advance unless it is ultimately determined
that such Covered Person is entitled to
indemnification, so long as one of the following
conditions is met: (i) the Covered Person shall
provide security for his undertaking, (ii) the Trust
shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of a quorum
of the disinterested non-party Trustees of the Trust,
or an independent legal counsel in a written opinion,
shall determine, based on a review of readily
available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.
Section 6.6 Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VI
shall not be exclusive of or affect any other rights
to which any such Covered Person may be entitled. As
used in this Article VI, "Covered Person" shall
include such person's heirs, executors and
administrators. Nothing contained in this article
shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on
behalf of any such person.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability
policy. The policy provides coverage to the Registrant, its
Trustees and officers, and its Adviser, among others. Coverage
under the policy includes losses by reason of any act, error,
omission, misstatement, misleading statement, neglect or
breach of duty. The Registrant may not pay for insurance which
protects the Trustees and officers against liabilities rising
from action involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of their offices.
The Advisory Agreements with Countrywide Investments,
Inc. (the "Adviser") provide that the Adviser shall not
be liable for any error of judgment or mistake of law
or for any loss suffered by the Registrant in
connection with the matters to which the Agreement
<PAGE>
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence of the Adviser in the performance of
its duties or from the reckless disregard by the Adviser of
its obligations under the Agreement. Registrant will advance
attorneys' fees or other expenses incurred by the Adviser in
defending a proceeding, upon the undertaking by or on behalf
of the Adviser to repay the advance unless it is ultimately
determined that the Adviser is entitled to indemnification.
The Underwriting Agreement provides that the Adviser (in its
capacity as underwriter), its directors, officers, employees,
shareholders and control persons shall not be liable for any
error of judgment or mistake of law or for any loss suffered
by Registrant in connection with the matters to which the
Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any
of such persons in the performance of Adviser's duties or from
the reckless disregard by any of such persons of Adviser's
obligations and duties under the Agreement. Registrant will
advance attorneys' fees or other expenses incurred by any such
person in defending a proceeding, upon the undertaking by or
on behalf of such person to repay the advance if it is
ultimately determined that such person is not entitled to
indemnification.
Item. 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
A. The Adviser is a registered investment adviser
providing investment advisory services to the
Registrant. The Adviser acts as the investment adviser
to seven series of Countrywide Investment Trust and
five series of Countrywide Strategic Trust, both of
which are registered investment companies. The Adviser
provides investment advisory services to individual and
institutional accounts and is a registered
broker-dealer.
B. The following list sets forth the business and other
connections of the directors and executive officers of the
Adviser. Unless otherwise noted with an asterisk(*), the
address of the corporations listed below is 312 Walnut Street,
Cincinnati, Ohio 45202.
*The address of each corporation is 4500 Park Granada Road,
Calabasas, California 91302.
(1) Angelo R. Mozilo - Chairman and a Director of the
Adviser.
(a) Chairman and a Trustee of Countrywide
Strategic Trust, Countrywide Investment Trust
and Countrywide Tax-Free Trust, registered
investment companies.
<PAGE>
(b) Chairman and a Director of Countrywide Financial
Services, Inc., a financial services company,
Countrywide Fund Services, Inc., a registered
transfer agent, Countrywide Servicing Exchange,*
a loan servicing broker and Countrywide Capital
Markets, Inc.,* a holding company.
(c) Vice Chairman, Director and Executive Vice
President of Countrywide Credit Industries,
Inc.,* a holding company which provides
residential mortgages and ancillary financial
products and services.
(d) A Director of Countrywide Home Loans, Inc.,* a
residential mortgage lender and CTC Foreclosure
Services Corporation,* a
foreclosure trustee.
(e) A Director of LandSafe, Inc.* and Chairman and a
director of various Landsafe subsidiaries which
provide residential mortgage title and closing
services.
(f) Chairman and CEO of Countrywide Securities
Corporation,* a registered broker-dealer.
(g) Vice Chairman of CWM Mortgage Holdings, Inc.,* a
real estate investment trust.
(2) Robert H. Leshner - President and a Director of the
Adviser.
(a) President and a Trustee of Countrywide
Strategic Trust, Countrywide Investment Trust
and Countrywide Tax-Free Trust.
(b) President and a Director of Countrywide
Financial Services, Inc.
(c) Vice Chairman and a Director of Countrywide
Fund Services, Inc.
(3) Andrew S. Bielanski - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc. and
Countrywide Agency, Inc.,* an insurance
agency.
(b) Managing Director - Marketing of Countrywide
Credit Industries, Inc. and Countrywide Home
Loans, Inc.
<PAGE>
(4) Thomas H. Boone - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc.,
Countrywide Agency, Inc., Countrywide Tax
Services Corporation,* a residential mortgage
tax service provider and Countrywide Lending
Corporation,* a lending institution.
(b) Managing Director - Chief Loan Administration
Officer of Countrywide Credit Industries,
Inc. and Countrywide Home Loans, Inc.
(c) A Director and Executive Vice President of
CWABS, Inc.,* an asset-backed securities issuer
and CWMBS, Inc.,* a mortgage-backed securities
issuer.
(d) CEO and a Director of CTC Foreclosure Services
Corporation.
(5) Marshall M. Gates - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc. and
Countrywide Agency, Inc.
(b) Managing Director - Production of Countrywide
Credit Industries, Inc. and Countrywide Home
Loans, Inc.
(c) President and a Director of Second Charter
Reinsurance Corporation,* a mortgage, property
and casualty reinsurance agency and Charter
Reinsurance Corporation,* a mortgage
reinsurance agency.
(6) John J. Goetz - Vice President and Chief Investment
Officer of the Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(7) Maryellen Peretzky - Vice President-
Administration, Human Resources and Operations of
the Adviser.
(a) Vice President-Administration, Human
Resources and Operations of Countrywide
Financial Services, Inc. and Countrywide Fund
Services, Inc.
(b) Assistant Secretary of The Tuscarora Investment
Trust, The Gannett Welsh & Kotler Funds and
Interactive Investments.
<PAGE>
(8) Sharon L. Karp - Vice President-Marketing of the
Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(9) John F. Splain - Secretary and General Counsel of the
Adviser.
(a) Vice President, Secretary and General Counsel
of Countrywide Fund Services, Inc.
(b) Secretary and General Counsel of Countrywide
Financial Services, Inc.
(c) Secretary of Countrywide Tax-Free Trust,
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.,
registered investment companies.
(d) Assistant Secretary of Schwartz Investment
Trust, The Gannett Welsh & Kotler Funds,
Interactive Investments, Dean Family of Funds
and The New York State Opportunity Funds,
registered investment companies.
(e) Assistant Secretary of Fremont Mutual Funds,
Inc. and Capitol Square Funds, registered
investment companies, until September 1997.
(f) Secretary of Leeb Personal Finance(TM)
Investment Trust, a registered investment
company, until November 1996.
(10) Robert G. Dorsey - Treasurer of the Adviser.
(a) President and Treasurer of Countrywide Fund
Services, Inc.
(b) Vice President-Finance and Treasurer of
Countrywide Financial Services, Inc.
(c) Vice President of Countrywide Tax-Free Trust,
Countrywide Investment Trust, Countrywide
Strategic Trust, Brundage, Story and Rose
Investment Trust, Markman MultiFund Trust,
PRAGMA Investment Trust, Maplewood Investment
Trust, a series company, The Thermo
Opportunity Fund, Inc., Dean Family of Funds
and The New York State Opportunity Funds.
<PAGE>
(d) Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust, The
Gannett Welsh & Kotler Funds, The Tuscarora
Investment Trust and Interactive Investments.
(e) Vice President of Capitol Square Funds and
Assistant Vice President of Fremont Mutual
Funds, Inc. until September 1997.
(f) Vice President of Leeb Personal Finance(TM)
Investment Trust until November 1996.
(11) Susan F. Flischel - Vice President-Investments of the
Adviser.
(12) Terrie A. Wiedenheft - Vice President and Controller
of the Adviser.
(a) First Vice President and Chief Financial
Officer of Countrywide Financial Services,
Inc.
(b) Vice President and Controller of Countrywide
Fund Services, Inc.
(13) Mark A. Weiss - Vice President of the Adviser.
(a) Attorney for Keating, Muething & Klekamp until
June 1997.
(14) Scott Weston - Assistant Vice President-
Investments of the Adviser.
Item 29. Principal Underwriters
- ------- ----------------------
(a) Countrywide Investments, Inc. also acts as
underwriter for Countrywide Strategic Trust,
Countrywide Investment Trust, The Milestone Funds,
Profit Funds Investment Trust and Brundage, Story
and Rose Investment Trust. Unless otherwise
indicated by an asterisk (*), the address of the
persons named below is 312 Walnut Street,
Cincinnati, Ohio 45202.
*The address is 4500 Park Granada Road, Calabasas,
California 91302.
<PAGE>
Position Position
with with
(b) Name Underwriter Registrant
* Angelo R. Mozilo Chairman and Chairman and
Director Trustee
Robert H. Leshner President President
and Director and Trustee
* Andrew S. Bielanski Director None
* Thomas H. Boone Director None
* Marshall M. Gates Director None
John J. Goetz Vice None
President and
Chief
Investment
Officer
Maryellen Peretzky Vice President- None
Administration,
Human Resources
and Operations
Sharon L. Karp Vice President- None
Marketing
John F. Splain Secretary and Secretary
General Counsel
Robert G. Dorsey Treasurer Vice
President
Susan F. Flischel Vice President- None
Investments
Terrie A. Wiedenheft Vice President None
& Controller
Mark A. Weiss Vice President None
Scott Weston Assistant Vice None
President-
Investments
(c) None
<PAGE>
Item 30. Location of Accounts and Records
- ------- --------------------------------
Accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder will
be maintained by the Registrant.
Item 31. Management Services Not Discussed in Parts A or B
- ------- -------------------------------------------------
None.
Item 32. Undertakings
- ------- ------------
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes that, if so requested, it
will furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual
report to shareholders without charge.
(d) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to trustees, officers and controlling persons of
Countrywide Tax-Free Trust pursuant to the
provisions of Massachusetts law and the Restated
Agreement and Declaration of Trust of Countrywide
Tax-Free Trust or the Bylaws of Countrywide Tax-
Free Trust, or otherwise, the Registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is
against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities
(other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or
controlling person of Countrywide Tax-Free Trust
in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer
or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the
question whether such indemnification by it is
against public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.
(e) The Registrant undertakes that, within five business
days after receipt of a written application by
shareholders holding in the aggregate at least 1% of
the shares then
<PAGE>
outstanding or shares then having a net asset value
of $25,000, whichever is less, each of whom shall
have been a shareholder for at least six months prior
to the date of application (hereinafter the
"Petitioning Shareholders"), requesting to
communicate with other shareholders with a view to
obtaining signatures to a request for a meeting for
the purpose of voting upon removal of any Trustee of
the Registrant, which application shall be
accompanied by a form of communication and request
which such Petitioning Shareholders wish to transmit,
Registrant will:
(i) provide such Petitioning Shareholders with
access to a list of the names and addresses of
all shareholders of the Registrant; or
(ii) inform such Petitioning Shareholders of the
approximate number of shareholders and the
estimated costs of mailing such
communication, and to undertake such mailing
promptly after tender by such Petitioning
Shareholders to the Registrant of the
material to be mailed and the reasonable
expenses of such mailing.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) of the Securities Act of 1933 and it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cincinnati, State of Ohio, on the 31st day of
October, 1997.
COUNTRYWIDE TAX-FREE TRUST
By: /s/ John F. Splain
-----------------------------
JOHN F. SPLAIN
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the 31st day of October, 1997.
*ANGELO R. MOZILO Chairman &
Trustee
/s/ Robert H. Leshner President &
- --------------------- Trustee
ROBERT H. LESHNER
/s/ Mark J. Seger Treasurer
- ----------------------
MARK J. SEGER
*DONALD L. BOGDON, M.D. Trustee
*JOHN R. DELFINO Trustee
OSCAR P. ROBERTSON Trustee
*JOHN F. SEYMOUR, JR. Trustee
*SEBASTIANO STERPA Trustee
By: /s/ John F. Splain
------------------
JOHN F. SPLAIN
Attorney-in-Fact*
October 31, 1997
EXHIBIT INDEX
- -------------
1. Management Agreement with Countrywide Investments, Inc. for
Kentucky Tax-Free Fund
2. Form of Underwriter's Dealer Agreement
3. Transfer Agency, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement with Countrywide Fund Services, Inc.
4. Accounting and Pricing Services Agreement with Countrywide Fund Services,
Inc.
5. Consent of Arthur Andersen LLP
6. Form of Sales Agreement for Money Market Funds
7. Form of Administration Agreement for Administration of
Shareholder Accounts
8. Financial Data Schedule for Tax-Free Money Fund
9. Financial Data Schedule for Tax-Free Intermediate Term
Fund Class A
10. Financial Data Schedule for Tax-Free Intermediate Term
Fund Class C
11. Financial Data Schedule for Ohio Insured Tax-Free Fund
Class A
12. Financial Data Schedule for Ohio Insured Tax-Free Fund
Class C
13. Financial Data Schedule for Ohio Tax-Free Money Fund -
Class A
14. Financial Data Schedule for Ohio Tax-Free Money Fund -
Class B
15. Financial Data Schedule for California Tax-Free Money Fund
16. Financial Data Schedule for Florida Tax-Free Money Fund -
Class A
17. Financial Data Schedule for Florida Tax-Free Money Fund -
Class B
18. Amended Rule 18f-3 Plan With Respect to the Multiple Class
Distribution System
19. Power of Attorney for John R. Delfino
MANAGEMENT AGREEMENT
TO: COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Countrywide Tax-Free Trust (hereinafter referred to as the "Trust")
herewith confirms its agreement with you.
The Trust has been organized to engage in the business of an investment
company. The Kentucky Tax-Free Fund (the "Fund") has been established as a
series of the Trust. You have been selected to act as the investment adviser of
the Fund and to provide certain other services, as more fully set forth below,
and you are willing to act as such investment adviser and to perform such
services under the terms and conditions hereinafter set forth. Accordingly, the
Trust agrees with you as follows upon the date of the execution of this
Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment advice as you
in your discretion deem advisable and will furnish a continuous investment
program for the Fund consistent with its investment objectives and policies. You
will determine what securities shall be purchased for the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of the Fund's
assets shall be held uninvested, subject always to the Fund's investment
objectives, policies and restrictions, as each of the same shall be from time to
time in effect, and subject further, to such policies and instructions as the
Board of Trustees (the "Board") of the Trust may from time to time establish and
supply to you copies thereof. You will advise and assist the officers of the
Trust in taking such steps as are necessary or appropriate to carry out the
decisions of the Board and the appropriate committees of the Board regarding the
conduct of the business of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay the compensation and expenses of any persons rendering any
services to the Fund who are officers, directors, stockholders or employees of
your corporation and will make available, without expense to the Fund, the
services of such of your employees as may duly be elected officers or trustees
of the Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any officers,
trustees and employees of the Trust who are not officers, directors, employees
or stockholders of your corporation will be paid by the Trust.
- 1 -
<PAGE>
You will pay all advertising and promotion expenses incurred in
connection with the sale or distribution of the Fund's shares to the extent such
expenses are not assumed by the Fund under the Trust's Plans of Distribution
Pursuant to Rule 12b-1.
The Fund will also be responsible for the payment of all other
operating expenses of the Fund, including fees and expenses incurred by the Fund
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,
shareholder service and dividend disbursing agent and accounting and pricing
agent of the Fund, expenses including clerical expenses of issue, sale,
redemption or repurchase of shares of the Fund, the fees and expenses of
trustees of the Trust who are not affiliated with you, the cost of preparing and
distributing reports and notices to shareholders, the cost of printing or
preparing prospectuses for delivery to the Fund's shareholders, the cost of
printing or preparing stock certificates or any other documents, statements or
reports to shareholders, expenses of shareholders' meetings and proxy
solicitations, 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, or any other expense not
specifically described above incurred in the performance of the Fund's
obligations. All other expenses not assumed by you herein incurred by the Fund
in connection with the organization, registration of shares and operations of
the Fund will be borne by the Fund.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments made as provided in
this Agreement, the Fund will pay you as of the last day of each month, a fee
equal to the annual rate of:
50/100 of 1% of the average value of the daily net assets of the Fund
up to $100,000,000; 45/100 of 1% of such assets from $100,000,000 to
$200,000,000; 40/100 of 1% of such assets from $200,000,000 to and
including $300,000,000; and 37.5/100 of 1% of such assets in excess of
$300,000,000.
The total fees payable during each of the first and second halves of
each fiscal year of the Trust shall not exceed the semiannual total of the daily
fee accruals requested by you during the applicable six month period. The
average value of net assets shall be determined pursuant to the applicable
provisions of the Declaration of Trust of the Trust or a resolution of the
Board, if required. If, pursuant to such provisions, the
- 2 -
<PAGE>
determination of net asset value of the Fund is suspended for any particular
business day, then for the purposes of this paragraph, the value of the net
assets of the Fund as last determined shall be deemed to be the value of the net
assets as of the close of the business day, or as of such other time as the
value of the Fund's net assets may lawfully be determined, on that day. If the
determination of the net asset value of the Fund's shares has been suspended for
a period including such month, your compensation payable at the end of such
month shall be computed on the basis of the value of the net assets of the Fund
as last determined (whether during or prior to such month).
Your compensation with respect to each additional series of the Trust
effectively registered for sale in a public offering after the date of this
Agreement shall be determined by the Board, including a majority of the Trustees
who are not "interested persons" (as defined in the Investment Company Act of
1940) of you or of the Trust, and approved pursuant to the provisions of Section
15 of the Investment Company Act of 1940.
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio securities for the
account of the Fund, it is understood that you will arrange for the placing of
all orders for the purchase and sale of portfolio securities for the Fund's
accounts with brokers or dealers selected by you, subject to review of this
selection by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and portfolio brokerage. In
the selection of such brokers or dealers and the placing of such orders, you are
directed at all times to seek for the Fund the best qualitative execution,
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.
You should generally seek favorable prices and commission rates that
are reasonable in relation to the benefits received. In seeking best qualitative
execution, you are authorized to select brokers or dealers who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which you exercise investment discretion. You are authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
you determine in good faith that the amount of the commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker
- 3 -
<PAGE>
or dealer. The determination may be viewed in terms of either a particular
transaction or your overall responsibilities with respect to the Fund and to
accounts over which you exercise investment discretion. The Trust and you
understand that, although the information may be useful to the Fund and you, it
is not possible to place a dollar value on such information. The Board shall
periodically review the commissions paid by the Fund to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits to the Fund.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best qualitative execution,
you 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.
If any occasion should arise in which you give any advice to clients of
yours concerning the shares of the Fund, you will act solely as investment
counsel for such client and not in any way on behalf of the Trust. Your services
to the Fund pursuant to this Agreement are not to be deemed to be exclusive and
it is understood that you may render investment advice, management and other
services to others.
5. LIMITATION OF LIABILITY OF ADVISER
You (including your directors, officers, shareholders, employees,
control persons and affiliates of any thereof) shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from the reckless disregard by you of your
obligations and duties under this Agreement ("disabling conduct"). However, you
will not be indemnified for any liability unless (1) a final decision is made on
the merits by a court or other body before whom the proceeding was brought that
you were not liable by reason of disabling conduct, or (2) in the absence of
such a decision, a reasonable determination is made, based upon a review of the
facts, that you were not liable by reason of disabling conduct, by (a) the vote
of a majority of a quorum of trustees who are neither "interested persons" of
the Trust as defined in the Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party trustees"), or (b) an independent legal
counsel in a written opinion. The Fund will advance attorneys' fees or other
expenses incurred by you in defending a proceeding, upon the undertaking by or
on behalf of you to repay the advance unless it is ultimately determined that
you are entitled to indemnification, so long as you meet at least one of the
following as a condition to the advance: (1) you shall provide a security for
your undertaking,
- 4 -
<PAGE>
(2) the Fund shall be insured against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of the disinterested, non-party trustees
of the Trust, or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as opposed to a full
trial- type inquiry), that there is reason to believe that you ultimately will
be found entitled to indemnification. Any person employed by you who may also be
or become an employee of the Trust shall be deemed, when acting within the scope
of his employment by the Trust, to be acting in such employment solely for the
Trust and not as your employee or agent.
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective upon its execution, shall remain in
force until February 28, 1999 and from year to year thereafter, subject to
annual approval by (i) the Board of the Trust or (ii) a vote of a majority (as
defined in the Investment Company Act of 1940) of the outstanding voting
securities of the Fund, provided that in either event continuance is also
approved by a majority of the trustees who are not "interested persons" (as
defined in the Investment Company Act of 1940) of you or of the Trust, by a vote
cast in person at a meeting called for the purpose of voting such approval.
If the shareholders of the Fund fail to approve the Agreement in the
manner set forth above, upon approval of the Board, including a majority of the
trustees who are not interested persons of you or of the Trust, you may continue
to serve or act in such capacity for the Fund for the period of time (not
exceeding one hundred and twenty days after the termination of the Agreement)
pending required approval of the Agreement, of a new agreement with you or a
different adviser or other definitive action; provided that the compensation to
be paid by the Fund to you will be equal to the lesser of your actual costs
incurred in furnishing investment advisory services to the Fund or the amount
you would have received under this Agreement.
This Agreement may, on sixty days' written notice, be terminated at any
time without the payment of any penalty, by the Board, by a vote of a majority
of the outstanding voting securities of the Fund or by you. This Agreement shall
automatically terminate in the event of its assignment.
7. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, and no amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the outstanding voting
securities of the Fund and by the Board, including a majority of the trustees
who
- 5 -
<PAGE>
are not interested persons of you or of the Trust, cast in person at a meeting
called for the purpose of voting on such approval.
8. LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Fund, as provided in the Declaration of Trust of the Trust. The execution
and delivery of this Agreement have been authorized by the trustees of the Trust
and the shareholders of the Fund and signed by the officers of the Trust, acting
as such, and neither such authorization by such trustees and shareholders nor
such execution and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Fund as provided in
the Trust's Declaration of Trust.
9. MISCELLANEOUS
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same Agreement.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
upon the date thereof.
Yours very truly,
ATTEST: COUNTRYWIDE TAX-FREE TRUST
/s/ John F. Splain /s/ Robert H. Leshner
________________________ By:___________________________
Dated: August 29, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: COUNTRYWIDE INVESTMENTS, INC.
/s/ John F. Splain By: /s/ Robert H. Leshner
___________________ ____________________________
Dated: August 29, 1997
- 6 -
Dealer #________
COUNTRYWIDE INVESTMENTS, INC.
312 WALNUT STREET
CINCINNATI, OHIO 45202
800-543-8721
513-629-2000
DEALER'S AGREEMENT
Countrywide Investments, Inc. ("Underwriter") invites you, as a
selected dealer, to participate as principal in the distribution of shares (the
"Shares") of the mutual funds set forth on Schedule A to this Agreement (the
"Funds"), of which it is the exclusive underwriter. Underwriter agrees to sell
to you, subject to any limitations imposed by the Funds, Shares issued by the
Funds and to promptly confirm each sale to you. All sales will be made according
to the following terms:
1. All offerings of any of the Shares by you must be made at the public
offering prices, and shall be subject to the conditions of offering, set forth
in the then current Prospectus of the Funds and to the terms and conditions
herein set forth, and you agree to comply with all requirements applicable to
you of all applicable laws, including federal and state securities laws, the
rules and regulations of the Securities and Exchange Commission, and the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. (the
"NASD"), including Section 24 of the Rules of Fair Practice of the NASD. You
will not offer the Shares for sale in any state or other jurisdiction where they
are not qualified for sale under the Blue Sky Laws and regulations of such state
or jurisdiction, or where you are not qualified to act as a dealer. Upon
application to Underwriter, Underwriter will inform you as to the states or
other jurisdictions in which Underwriter believes the Shares may legally be
sold.
2. (a) You will receive a discount from the public offering
price ("concession") on all Shares purchased by you from Underwriter as
indicated on Schedule A, as it may be amended by Underwriter from time to time.
(b) In all transactions in open accounts in which you are
designated as Dealer of Record, you will receive the concessions as set forth on
Schedule A. You hereby authorize Underwriter to act as your agent in connection
with all transactions in open accounts in which you are designated as Dealer of
Record. All designations as Dealer of Record, and all authorizations of
Underwriter to act as your Agent pursuant thereto, shall cease upon the
termination of this Agreement or upon the investor's instructions to transfer
his open account to another Dealer of Record. No dealer concessions will be
allowed on purchases generating less than $1.00 in dealer concessions.
(c) As the exclusive underwriter of the Shares, Underwriter
reserves the privilege of revising the discounts specified on Schedule A at any
time by written notice.
3. Concessions will be paid to you at the address of your
principal office, as indicated below in your acceptance of this Agreement.
4. Underwriter reserves the right to cancel this Agreement at any time
without notice if any Shares shall be offered for sale by you at less than the
then current public offering prices determined by, or for, the Funds.
5. All orders are subject to acceptance or rejection by Underwriter in
its sole discretion. The Underwriter reserves the right, in its discretion,
without notice, to suspend sales or withdraw the offering of Shares entirely.
6. Payment shall be made to the Funds and shall be received by its
Transfer Agent within three (3) business days after the acceptance of your order
or such shorter time as may be required by law. With respect to all Shares
ordered by you for which payment has not been received, you hereby assign and
pledge to Underwriter all of your right, title and interest in such Shares to
secure payment therefor. You appoint Underwriter as your agent to execute and
deliver all documents necessary to effectuate any of the transactions described
in this paragraph. If such payment is not received within the required time
period, Underwriter reserves the right, without notice, and at its option,
forthwith (a) to cancel the sale, (b) to sell the Shares ordered by you back to
the Funds, or (c) to assign your payment obligation, accompanied by all pledged
Shares, to any person. You agree that Underwriter may hold you responsible for
any loss, including loss of profit, suffered by the Funds, its Transfer Agent or
Underwriter, resulting from your failure to make payment within the required
time period.
<PAGE>
7. No person is authorized to make any representations concerning
Shares of the Funds except those contained in the current applicable Prospectus
and Statement of Additional Information and in sales literature issued and
furnished by Underwriter supplemental to such Prospectus. Underwriter will
furnish additional copies of the current Prospectus and Statement of Additional
Information and such sales literature and other releases and information issued
by Underwriter in reasonable quantities upon request.
8. Under this Agreement, you act as principal and are not employed by
Underwriter as broker, agent or employee. You are not authorized to act for
Underwriter nor to make any representation on its behalf; and in purchasing or
selling Shares hereunder, you rely only upon the current Prospectus and
Statement of Additional Information furnished to you by Underwriter from time to
time and upon such written representations as may hereafter be made by
Underwriter to you over its signature.
9. You appoint the transfer agent for the Funds as your agent to
execute the purchase transactions of Shares in accordance with the terms and
provisions of any account, program, plan or service established or used by your
customers and to confirm each purchase to your customers on your behalf, and you
guarantee the legal capacity of your customers purchasing such Shares and any
co-owners of such Shares.
10. You will (a) maintain all records required by law relating to
transactions in the Shares, and upon the request of Underwriter, or the request
of the Funds, promptly make such records available to Underwriter or to the
Funds as are requested, and (b) promptly notify Underwriter if you experience
any difficulty in maintaining the records required in the foregoing clause in an
accurate and complete manner. In addition, you will establish appropriate
procedures and reporting forms and schedules, approved by Underwriter and by the
Funds, to enable the parties hereto and the Funds to identify all accounts
opened and maintained by your customers.
11. Underwriter has adopted compliance standards, attached hereto as
Schedule B, as to when Class A and Class C Shares of the Dual Pricing Funds may
appropriately be sold to particular investors. You agree that all persons
associated with you will conform to such standards when selling Shares.
12. Each party hereto represents that it is presently, and, at all
times during the term of this Agreement, will be, a member in good standing of
the NASD and agrees to abide by all its Rules of Fair Practice including, but
not limited to, the following provisions:
(a) You shall not withhold placing customers' orders for any Shares so
as to profit yourself as a result of such withholding. You shall not purchase
any Shares from Underwriter other than for investment, except for the purpose of
covering purchase orders already received.
(b) All conditional orders received by Underwriter must be at a
specified definite price.
(c) If any Shares purchased by you are repurchased by the Funds (or by
Underwriter for the account of the Funds) or are tendered for redemption within
seven business days after confirmation of the original sale of such Shares (1)
you agree to forthwith refund to Underwriter the full concession allowed to you
on the original sale, such refund to be paid by Underwriter to the Funds, and
(2) Underwriter shall forthwith pay to the Funds that part of the discount
retained by Underwriter on the original sale. Notice will be given to you of any
such repurchase or redemption within ten days of the date on which the
repurchase or redemption request is made.
<PAGE>
(d) Neither Underwriter, as exclusive underwriter for the Funds, nor
you as principal, shall purchase any Shares from a record holder at a price
lower than the net asset value then quoted by, or for, the Funds. Nothing in
this sub-paragraph shall prevent you from selling Shares for the account of a
record holder to Underwriter or the Funds at the net asset value currently
quoted by, or for, the Funds and charging the investor a fair commission for
handling the transaction.
(e) You warrant on behalf of yourself and your registered
representatives and employees that any purchase of Shares at net asset value by
the same pursuant to the terms of the Prospectus of the applicable Fund is for
investment purposes only and not for purposes of resale. Shares so purchased may
be resold only to the Fund which issued them.
13. You agree that you will indemnify Underwriter, the Funds, the
Funds' transfer agent and the Funds' custodians and hold such persons harmless
from any claims or assertions relating to the lawfulness of your company's
participation in this Agreement and the transactions contemplated hereby or
relating to any activities of any persons or entities affiliated with your
company which are performed in connection with the discharge of your
responsibilities under this Agreement. If any such claims are asserted, the
indemnified parties shall have the right to engage in their own defense,
including the selection and engagement of legal counsel of their choosing, and
all costs of such defense shall be borne by you.
<PAGE>
14. This Agreement will automatically terminate in the event of its
assignment. Either party hereto may cancel this Agreement without penalty upon
ten days' written notice. This Agreement may also be terminated as to any Fund
at any time without penalty by the vote of a majority of the members of the
Board of Trustees of the terminating Fund who are not "interested persons" (as
such term is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the applicable Fund's Distribution
Expense Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 or
any agreement relating to such Plan, including this Agreement, or by a vote of a
majority of the outstanding voting securities of the terminating Fund on ten
days' written notice.
15. All communications to Underwriter should be sent to Countrywide
Investments, Inc., 312 Walnut Street, Cincinnati, Ohio 45202, or at such other
address as Underwriter may designate in writing. Any notice to you shall be duly
given if mailed or telegraphed to you at the address of your principal office,
as indicated below in your acceptance of this Agreement.
16. This Agreement supersedes any other agreement with you relating
to the offer and sale of the Shares, and relating to any other matter discussed
herein.
17. This Agreement shall be binding (i) upon placing your first order
with Underwriter for the purchase of Shares, or (ii) upon receipt by Underwriter
in Cincinnati, Ohio of a counterpart of this Agreement duly accepted and signed
by you, whichever shall occur first. This Agreement shall be construed in
accordance with the laws of the State of Ohio.
18. The undersigned, executing this Agreement on behalf of Dealer,
hereby warrants and represents that he is duly authorized to so execute this
Agreement on behalf of Dealer.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return all copies of this Agreement to the
Underwriter.
ACCEPTED BY DEALER
By:________________________________________
Authorized Signature
___________________________________________
Type or Print Name, Position
___________________________________________
Dealer Name
___________________________________________
Address
____________________________________________
Address
____________________________________________
Phone
_____________________________________________
Date
COUNTRYWIDE INVESTMENTS, INC.
By: __________________________________________________
_______________________________________________________
Date
<PAGE>
Schedule A
COUNTRYWIDE INVESTMENTS
COMMISSION SCHEDULE
Government Mortgage Fund
Intermediate Bond Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
Equity Fund - Class A
Utility Fund - Class A
Growth/Value Fund
Aggressive Growth Fund
Global Bond Fund - Class A
Ohio Insured Tax-Free Fund - Class A
Kentucky Tax-Free Fund
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
* As a percentage of offering price.
** Broker/Dealers are entitled to a commission of 75 basis points at the time
the investor purchases Class A shares at NAV in amounts totaling $1 million or
more. However, the investor is subject to a contingent deferred sales load of
75 basis points if a redemption occurs within one year of purchase.
See specific Fund prospectus for details.
Equity Fund - Class C
Utility Fund - Class C
Global Bond Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
The Funds will be offered to clients at net asset value. A commission of 1% of
the purchase amount of Class C shares will be paid to participating brokers at
the time of purchase. Purchases of Class C shares are subject to a contingent
deferred sales load, according to the following schedule:
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid quarterly beginning in
the thirteenth month.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any calendar quarter in
which the average daily balance of all accounts in Countrywide Investments
funds (including no-load money market funds) is less than $1,000,000.
FOR BROKER/DEALER USE ONLY
<PAGE>
Schedule B
POLICIES AND PROCEDURES
WITH RESPECT TO SALES
OF DUAL PRICING FUND
As certain Funds within Countrywide Investments (the "Dual Pricing
Funds") offer two classes of Shares subject to different levels of front-end
sales charges, it is important for an investor not only to choose the Fund that
best suits his investment objectives, but also to choose the sales financing
method which best suits his particular situation. To assist investors in these
decisions, we are instituting the following policy:
1. Any purchase order for $1 million or more must be for Class A
Shares.
2. Any purchase order for $100,000 but less than $1 million is
subject to approval by a registered principal of the
Underwriter, who must approve the purchase order for either
Class A Shares or Class C Shares in light of the relevant
facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold the
Shares; and
(c) any other relevant circumstances, such as the
availability of purchases under a Letter of Intent.
3. Any order to exchange Class A Shares of a Dual Pricing Fund
(or Shares of another Fund having a maximum sales load equal
to or greater than Class A Shares of the Dual Pricing Funds)
for Shares of another Dual Pricing Fund will be for Class A
Shares only. Class C Shares of a Dual Pricing Fund may be
exchanged for either Class A or Class C Shares of another Dual
Pricing Fund, provided that an exchange of Class C Shares for
Class A Shares is subject to approval by a registered
principal of Underwriter, who must approve the exchange in
light of the relevant facts and circumstances.
There are instances when one financing method may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales charge on Class A Shares may determine that
payment of such a reduced front-end sales charge is superior to payment of the
higher ongoing distribution fee applicable to Class C Shares. On the other hand,
an investor whose order would not qualify for such a discount may wish to pay a
lower sales charge and have more of his funds invested in Class C Shares. If
such an investor anticipates that he will redeem his Shares within a short
period of time, the investor may, depending on the amount of his purchase,
choose to bear higher distribution expenses than if he had purchased Class A
Shares.
In addition, investors who intend to hold their Shares for a
significantly long time may wish to purchase Class A Shares in order to avoid
the higher ongoing distribution expenses of Class C Shares.
The appropriate supervisor must ensure that all employees receiving
investor inquiries about the purchase of Shares of Dual Pricing Funds advise the
investor of the available financing methods offered by mutual funds, and the
impact of choosing one method over another. It may be appropriate for the
supervisor to discuss the purchase with the investor.
This policy is effective immediately with respect to any order for the
purchase of Shares of all Dual Pricing Funds. Questions relating to this policy
should be directed to Sharon Karp, Vice President of the Underwriter, at
513/629-2000.
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
THIS AGREEMENT effective as of February 28, 1997 by and between
COUNTRYWIDE TAX-FREE TRUST, a Massachusetts business trust (the "Trust"), and
COUNTRYWIDE FUND SERVICES, INC., an Ohio corporation (the "T/A").
WITNESSETH THAT:
WHEREAS, the Trust desires to appoint the T/A as its transfer agent,
dividend disbursing agent, shareholder service agent, plan agent and shareholder
purchase and redemption agent, and the T/A is willing to act in such capacities
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT OF TRANSFER AGENT.
The T/A is hereby appointed transfer agent for the shares of
the Trust and dividend disbursing agent for the Trust and shall also act as plan
agent, shareholder service agent and purchase and redemption agent for
shareholders of the Trust, and the T/A accepts such appointment and agrees to
act in such capacities under the terms and conditions set forth herein.
2. DOCUMENTATION.
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the
Trust authorizing the original issue of its
shares;
B. Each Registration Statement filed with the
Securities and Exchange Commission and amendments
thereof;
C. A certified copy of each amendment to the
Declaration of Trust and the By-Laws of the Trust;
D. Certified copies of each resolution of the Board
of Trustees authorizing officers to give
instructions to the T/A;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions
approving such forms;
<PAGE>
F. Such other certificates, documents or opinions
which the T/A may, in its discretion, deem
necessary or appropriate in the proper performance
of its duties;
G. Copies of all Underwriting and Dealer Agreements
in effect;
H. Copies of all Administration Agreements and
Investment Advisory Agreements in effect;
I. Copies of all documents relating to special
investment or withdrawal plans which are offered
or may be offered in the future by the Trust and
for which the T/A is to act as plan agent.
3. T/A TO RECORD SHARES.
The T/A shall record issues of shares of the Trust and shall
notify the Trust in case any proposed issue of shares by the Trust shall result
in an over-issue as defined by Section 8- 104(2) of the Uniform Commercial Code,
as provided in Article 8 of the Uniform Commercial Code, Ohio Revised Code,
paragraph 1308.01 et. seq., and in case any issue of shares would result in such
an over-issue, shall refuse to credit said shares and shall not countersign and
issue certificates for such shares. Except as provided in Article 8 of said
Uniform Commercial Code and in Section 4 of this Agreement and as specifically
agreed in writing from time to time between the T/A and the Trust, the T/A shall
have no obligation, when countersigning and issuing and/or crediting shares, to
take cognizance of any other laws relating to issue and sale of such shares.
4. T/A TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to the T/A of certificates, if any, in proper form for transfer, the
T/A shall approve such transfer and shall take all necessary steps to effectuate
the transfer as indicated in the transfer request. Upon approval of the
transfer, the T/A shall notify the Trust in writing of each such transaction and
shall make appropriate entries on the shareholder records maintained by the T/A.
5. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificate, the
Trust shall supply the T/A with a sufficient supply of blank share certificates
and from time to time shall renew such supply upon request of the T/A. Such
blank share
- 2 -
<PAGE>
certificates shall be properly signed, manually or, if authorized by the Trust,
by facsimile; and notwithstanding the death, resignation or removal of any
officers of the Trust authorized to sign share certificates, the T/A may
continue to countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust.
6. LOST OR DESTROYED CERTIFICATES.
In case of the alleged loss or destruction of any share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished an appropriate bond satisfactory to T/A and the Trust,
and issued by a surety company satisfactory to the T/A and the Trust.
7. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Trust or Countrywide Investments, Inc. as underwriter of the Trust (the
"Underwriter"), the T/A shall stamp the check or instrument with the date of
receipt, determine the amount thereof due the Trust and the Underwriter,
respectively, and shall forthwith process the same for collection. Upon receipt
of notification of receipt of funds eligible for share purchases and payment of
sales charges in accordance with the Trust's then current prospectus and
statement of additional information, the T/A shall notify the Trust, at the
close of each business day, in writing of the amounts of said funds credited to
the Trust and deposited in its account with the Custodian, and shall similarly
notify the Underwriter of the amounts of said funds credited to the Underwriter
and deposited in its account with its designated bank.
8. PURCHASE ORDERS.
Upon receipt of a check or other order for the purchase of
shares of the Trust, accompanied by sufficient information to enable the T/A to
establish a shareholder account, the T/A shall, as of the next determination of
net asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the investor,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the investor and/or dealer
of record a notice of such credit when requested to do so by the Trust.
- 3 -
<PAGE>
9. ISSUE OF SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, the T/A will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased share shall be
mailed to the investor until the cash purchase price of such shares has been
collected and credited to the account of the Trust maintained by the Custodian.
10. RETURNED CHECKS.
In the event that the T/A is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, the T/A will:
A. Give prompt notification to the Trust and the
Underwriter of the non-payment of said check;
B. In the absence of other instructions from the
Trust or the Underwriter, take such steps as may
be necessary to redeem any shares purchased on the
basis of such returned check and cause the
proceeds of such redemption plus any dividends
declared with respect to such shares to be
credited to the account of the Trust and to
request the Trust's Custodian to forward such
returned check to the person who originally
submitted the check;
C. Notify the Trust of such actions and correct the
Trust's records maintained by the T/A pursuant to
this Agreement.
11. SALES CHARGE.
In computing the number of shares to credit to the account of
a shareholder pursuant to Paragraph 8 hereof, the T/A will calculate the total
of the applicable Underwriter and dealer of record sales charges with respect to
each purchase as set forth in the Trust's current prospectus and statement of
additional information and in accordance with any notification filed with
respect to combined and accumulated purchases; the T/A will also determine the
portio of each sales charge payable by the Underwriter to the dealer of record
participating in the sale in accordance with such schedules as are from time to
time
- 4 -
<PAGE>
delivered by the Underwriter to the T/A; provided, however, the T/A shall have
no liability hereunder arising from the incorrect selection by the T/A of the
gross rate of sales charges except that this exculpation shall not apply in the
event the rate is specified by the Underwriter or the Trust and the T/A fails to
select the rate specified.
12. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish the T/A with appropriate evidence of
trustee action authorizing the declaration of dividends and other distributions.
The T/A shall establish procedures in accordance with the Trust's then current
prospectus and statement of additional information and with other authorized
actions of the Trust's Board of Trustees under which it will have available from
the Custodian of the Trust or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, the T/A shall, as agent for each shareholder
who so requests, invest the dividends and other distributions in full and
fractional shares in accordance with the Trust's then current prospectus and
statement of additional information. If an investor has elected to receive
dividends or other distributions in cash, then the T/A shall prepare checks for
approval and verification by the Trust and signature by an authorized officer or
employee of the T/A in the appropriate amount and shall mail them to the
shareholders of record at their address of record or to such other address as
the shareholder may have designated. The T/A shall, on or before the mailing
date of such checks, notify the Trust and the Custodian of the estimated amount
of cash required to pay such dividend or distribution, and the Trust shall
instruct the Custodian to make available sufficient funds therefore in the
appropriate account of the Trust. The T/A shall mail to the shareholders
periodic statements, as requested by the Trust, showing the number of full and
fractional shares and the net asset value per share of shares so credited.
When requested by the Trust, the T/A shall assist the Trust
(i) with any withholding procedures, shareholder reports and payments, and (ii)
in the preparation and filing with the Internal Revenue Service, and when
required, with the addressing and mailing to shareholders, of such returns and
information relating to dividends and distributions paid by the Trust as are
required to be so prepared, filed and mailed by applicable laws.
13. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
The T/A shall, at least annually, furnish in writing to the
Trust the names and addresses, as shown in the shareholder accounts maintained
pursuant to Paragraph 8, of all investors for
- 5 -
<PAGE>
which there are, as of the end of the calendar year, dividends, distributions or
redemptions proceeds for which checks or share certificates mailed in payment of
distributions have been returned. The T/A shall use its best efforts to contact
the shareholders affected and to follow any other written instructions received
from the Trust concerning the disposition of any such unclaimed dividends,
distributions or redemption proceeds.
14. REDEMPTIONS AND EXCHANGES.
A. The T/A shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by the T/A. Upon its approval of such redemption
transactions, the T/A, if requested by the Trust, shall mail to the investor
and/or dealer of record a confirmation showing trade date, number of full and
fractional shares redeemed, the price per share and the total redemption
proceeds. For such redemption, the T/A shall either: (a) prepare checks in the
appropriate amounts for approval and verification by the Trust and signature by
an authorized officer or employee of the T/A and mail the checks to the
appropriate person, or (b) in the event redemption proceeds are to be wired
through the Federal Reserve Wire system or by bank wire, cause such proceeds to
be wired in federal funds to the commercial bank account designated by the
investor, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by the T/A. If the T/A or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, the T/A shall promptly notify the investor and/or dealer of
record indicating the reason therefor.
B. If shares of the Trust are eligible for exchange with
shares of any other investment company, the T/A, in accordance with the then
current prospectus and statement of additional information and exchange rules of
the Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
- 6 -
<PAGE>
C. The T/A shall notify the Custodian, the Underwriter and the
Trust on each business day of the amount of cash required to meet payments made
pursuant to the provisions of this Paragraph 14, and, on the basis of such
notice, the Trust shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Trust.
D. Procedures for effecting redemption orders accepted from
investors or dealers of record by telephone or other methods shall be
established by mutual agreement between the T/A and the Trust consistent with
the then current prospectus and statement of additional information.
E. The authority of the T/A to perform its responsibilities
under Paragraph 8, Paragraph 12 and this Paragraph 14 shall be suspended upon
receipt of notification by it of the suspension of the determination of the
Trust's net asset value.
15. AUTOMATIC WITHDRAWAL PLANS.
The T/A will process automatic withdrawal orders pursuant to
the provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the trust.
Payments upon such withdrawal order shall be made by the T/A from the
appropriate account maintained by the Trust with the Custodian approximately the
last business day of each month in which a payment has been requested, and the
T/A will withdraw from a shareholder's account and present for repurchase or
redemption as many shares as shall be sufficient to make such withdrawal payment
pursuant to the provisions of the shareholder's withdrawal plan and the current
prospectus and statement of additional information of the Trust. From time to
time on new automatic withdrawal plans a check for payment date already past may
be issued upon request by the shareholder.
16. LETTERS OF INTENT.
The T/A will process such letters of intent for investing in
shares of the Trust as are provided for in the Trust's current prospectus and
statement of additional information. The T/A will make appropriate deposits to
the account of the Underwriter for the adjustment of sales charges as therein
provided and will currently report the same to the Underwriter.
- 7 -
<PAGE>
17. WIRE-ORDER PURCHASES.
The T/A will send written confirmations to the dealers of
record containing all details of the wire-order purchases placed by each such
dealer by close of business on the business day following receipt of such orders
by the T/A or the Underwriter, with copies to the Underwriter. Upon receipt of
any check drawn or endorsed to the Trust (or the T/A, as agent) or otherwise
identified as being payment of an outstanding wire- order, the T/A will stamp
said check with the date of its receipt and deposit the amount represented by
such check to the T/A's deposit accounts maintained with the Custodian. The T/A
will compute the respective portions of such deposit which represent the sales
charge and the net asset value of the shares so purchased, will cause the
Custodian to transfer federal funds in an amount equal to the net asset value of
the shares so purchased to the Trust's account at the Custodian, and will notify
the Trust and the Underwriter before noon of each business day of the total
amount deposited in the Trust's deposit accounts, and in the event that payment
for a purchase order is not received by the T/A or the Custodian on the tenth
business day following receipt of the order, prepare an NASD "notice of failure
of dealer to make payment" and forward such notification to the Underwriter.
18. OTHER PLANS.
The T/A will process such accumulation plans, group programs
and other plans or programs for investing in shares of the Trust as are now
provided for in the Trust's current prospectus and statement of additional
information and will act as plan agent for shareholders pursuant to the terms of
such plans and programs duly executed by such shareholder.
19. BOOKS AND RECORDS.
The T/A shall maintain records for each investor's account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record;
C. Number of shares held of each series, if
applicable;
D. Historical information regarding the account of
each shareholder, including dividends and
distributions distributed in cash or invested in
shares;
- 8 -
<PAGE>
E. Information with respect to the source of all
dividends and distributions allocated among
income, realized short-term gains and realized
long-term gains;
G. Information with respect to withholdings on
foreign accounts;
H. Any instructions from a shareholder including all
forms furnished by the Trust and executed by a
shareholder with respect to (i) dividend or
distribution elections and (ii) elections with
respect to payment options in connection with the
redemption of shares;
I. Any dividend address and correspondence relating
to the current maintenance of a shareholder's
account;
J. Certificate numbers and denominations for any
shareholder holding certificates;
K. Any information required in order for the T/A to
perform the calculations contemplated under this
Agreement;
L. The date and number of shares of the Trust purchased,
the date and number of shares of the Trust held, the
date and number of shares reinvested as dividends and
the date and number of shares redeemed.
All of the records prepared and maintained by the T/A pursuant
to this Paragraph 19 will be the property of the Trust. In the event this
Agreement is terminated, all records shall be delivered to the Trust or to any
person designated by the Trust at the Trust's expense, and the T/A shall be
relieved of responsibility for the preparation and maintenance of any such
records delivered to the Trust or any such person.
20. TAX RETURNS AND REPORTS.
The T/A will prepare, file with the Internal Revenue Service
and, if required, mail to shareholders such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations; and the T/A will withhold such
sums as are required to be withheld under applicable federal and state tax law,
rules and regulations.
- 9 -
<PAGE>
21. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
the T/A will also maintain such records as shall be necessary to furnish to the
Trust the following: annual shareholder meeting lists, proxy lists and mailing
materials, shareholder reports and confirmations, checks for disbursing
redemption proceeds, dividends and other distributions or expense disbursements,
portfolio printouts and general ledger printouts.
22. FORM N-SAR.
The T/A shall maintain such records within its control and as
shall be requested by the Trust to assist the Trust in fulfilling the
requirements of Form N-SAR.
23. COOPERATION WITH ACCOUNTANTS.
The T/A shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
24. SHAREHOLDER SERVICE AND CORRESPONDENCE.
The T/A will provide and maintain adequate personnel, records
and equipment to receive and answer all shareholder and dealer inquiries
relating to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders.
The T/A will answer written correspondence from shareholders
relating to their share accounts and such other written or oral inquiries as may
from time to time be mutually agreed upon, and the T/A will notify the Trust of
any correspondence or inquiries which may require an answer from the Trust.
25. PROXIES.
The T/A shall assist the Trust in the mailing of proxy cards
and other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at lest one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
- 10 -
<PAGE>
26. FEES AND CHARGES.
For performing its services under this Agreement, the Trust
shall pay the T/A a fee in accordance with the schedule attached hereto as
Schedule A and shall promptly reimburse the T/A for any out of pocket expenses
and advances which are to be paid by the Trust in accordance with Paragraph
27(b).
27. EXPENSES.
The expenses connected with the performance of this Agreement
shall be allocated between the Trust and the T/A as follows:
(a) The T/A shall furnish, at its expense and without cost to
the Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment.
(b) All costs and expenses not expressly assumed by the T/A
under Paragraph 27(a) of this Agreement shall be paid by the Trust, including,
but not limited to costs and expenses for postage, envelopes, checks, drafts,
continuous forms, reports, communications, statements and other materials,
telephone, telegraph and remote transmission lines, use of outside mailing
firms, necessary outside record storage, media for storage or records (e.g.,
microfilm, microfiche, computer tapes), printing, confirmations and any other
shareholder correspondence and any and all assessments, taxes or levies assessed
on the T/A for services provided under this Agreement. Postage for mailings of
dividends, proxies, reports and other mailings to all shareholders shall be
advanced to the T/A three business days prior to the mailing date of such
materials.
28. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
Except as otherwise provided in this Agreement and except for
the accuracy of information furnished to it by the T/A, the Trust assumes full
responsibility for the preparation, contents and distribution of each prospectus
and statement of additional information of the Trust, for complying with all
applicable requirements of the Investment Company Act of 1940 (the "Act"), the
Securities Act of 1933, as amended, and any laws, rules and regulations of
governmental authorities having jurisdiction.
- 11 -
<PAGE>
29. CONFIDENTIALITY.
The T/A agrees to treat all records and other information
relative to the Trust and its prior, present or potential shareholders
confidentially and the T/A on behalf of itself and its employees agrees to keep
confidential all such information, except (after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the T/A may be exposed to civil or
criminal contempt proceedings for failure to comply) when requested to divulge
such information by duly constituted authorities or when so requested by the
Trust.
30. REFERENCES TO THE T/A.
The Trust shall not circulate any printed matter which
contains any reference to the T/A without the prior written approval of the T/A,
excepting solely such printed matter as merely identifies the T/A as Transfer
Agent, Plan Agent, Dividend Disbursing Agent, Shareholder Service Agent and
Accounting and Pricing Services Agent. The Trust will submit printed matter
requiring approval to the T/A in draft form, allowing sufficient time for review
by the T/A and its counsel prior to any deadline for printing.
31. EQUIPMENT FAILURES.
In the event of equipment failures beyond the T/A's control,
the T/A shall take all steps necessary to minimize service interruptions but
shall have no liability with respect thereto. The T/A shall endeavor to enter
into one or more agreements making provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
32. INDEMNIFICATION OF THE T/A.
(a) The T/A may rely on information reasonably believed by it
to be accurate and reliable. Except as may otherwise be required by the Act or
the rules thereunder, neither the T/A nor its shareholders, officers, directors,
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Trust
in connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of any such persons in the performance of the duties of the T/A under this
Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of the T/A under this Agreement.
- 12 -
<PAGE>
(b) Any person, even though also a director, officer,
employee, shareholder or agent of the T/A, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the trust (other than
services or business in connection with the T/A's duties hereunder), to be
rendering such services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or one under the control or
direction of the T/A, even though paid by it.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless the T/A, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which the T/A may sustain or incur or which may be asserted
against the T/A by any person by reason of, or as a result of: (i) any action
taken or omitted to be taken by the T/A in good faith in reliance upon any
certificate, instrument, order or share certificate believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized person, upon
the oral instructions or written instructions of an authorized person of the
Trust or its own counsel; or (ii) any action taken or omitted to be taken by the
T/A in connection with its appointment in good faith in reliance upon any law,
act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed. However,
indemnification under this subparagraph shall not apply to actions or omissions
of the T/A or its directors, officers, employees, shareholders or agents in
cases of its or their own gross negligence, willful misconduct, bad faith, or
reckless disregard of its or their own duties hereunder.
33. MAINTENANCE OF INSURANCE COVERAGE.
At all times during the term of this Agreement, the T/A shall
be a named insured party on the Trust's Errors & Omissions policy and the
Trust's Fidelity Bond, both of which shall include coverage of the T/A's
officers and employees. The T/A shall pay its allocable share of the cost of
such policies in accordance with the provisions of the Act. The scope of
coverage and amount of insurance limits applicable to the Trust on such policies
shall also be made applicable to the T/A.
34. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
- 13 -
<PAGE>
35. TERMINATION.
(a) The provisions of this Agreement shall be effective upon
its execution, shall continue in effect for two years from that date and shall
continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by the T/A, (2) by vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this Agreement or interested persons (as defined in the Act) of any
such party, and (3) by vote of a majority of the Trust's Board of Trustees or a
majority of the Trust's outstanding voting securities.
(b) Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days prior written notice of such
termination specifying the date fixed therefor.
(c) Upon termination of this Agreement, the Trust shall pay to
the T/A such compensation as may be due as of the date of such termination, and
shall likewise reimburse the T/A for any out-of-pocket expenses and
disbursements reasonably incurred by the T/A to such date, and for the T/A's
costs, expenses and disbursements reasonably incurred by the T/A to such date,
and for the T/A's costs, expenses and disbursements as contemplated by this
Agreement.
(d) In the event that in connection with termination of this
Agreement a successor to any of the T/A's duties or responsibilities under this
Agreement is designated by the Trust by written notice to the T/A, the T/A
shall, promptly upon such termination and at the expense of the Trust, transfer
to such successor a certified list of the shareholders of the Trust (with name,
address and tax identification or Social Security number), a record of the
accounts of such shareholders and the status thereof, and all other relevant
books, records and other data established or maintained by the T/A under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from the T/A's cognizant
personnel in the establishment of books, records and other data by such
successor.
36. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent the T/A or any
affiliated person (as defined in the Act) of the T/A from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that the T/A expressly represents that it will undertake no
activities
- 14 -
<PAGE>
which, in its judgment, will adversely affect the performance of its obligations
to the Trust under this Agreement.
37. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
38. LIMITATION ON LIABILITY.
The term "Countrywide Tax-Free Trust" means and refers to the
trustees from time to time serving under the Trust's Declaration of Trust as the
same may subsequently thereto have been, or subsequently hereto may be, amended.
It is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the trust property of the
Trust. The execution and delivery of this Agreement have been authorized by the
trustees of the Trust and signed by an officer of the Trust, acting as such, and
neither such authorization by such trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust.
39. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
40. QUESTIONS OF INTERPRETATION.
(a) This Agreement shall be governed by the laws of the State
of Ohio.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretations thereof, if any, by the States Courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
- 15 -
<PAGE>
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
41. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
and of the T/A for this purpose shall be 312 Walnut Street, Cincinnati, Ohio
45202.
42. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
43. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
44. FORCE MAJEURE.
If the T/A shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
- 16 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
COUNTRYWIDE TAX-FREE TRUST
By /s/ Robert H. Leshner
-----------------------------
COUNTRYWIDE FUND SERVICES, INC.
By /s/ Robert G. Dorsey
------------------------------
- 17 -
<PAGE>
Schedule A
Compensation
Services Fee
As Transfer Agent and Shareholder
Servicing Agent:
Tax-Free Money Fund payable monthly at rate
of $25.00 per account per
year
Tax-Free Intermediate payable monthly at rate
Term Fund of $21.00 per account per
year
Ohio Tax-Free Money Fund payable monthly at rate
of $25.00 per account per
year
Ohio Insured Tax-Free Fund payable monthly at rate
of $21.00 per account per
year
California Tax-Free payable monthly at rate
Money Fund of $25.00 per account per
year
Florida Tax-Free payable monthly at rate
Money Fund of $25.00 per account per
year
Kentucky Tax-Free Fund payable monthly at rate
of $21.00 per account per
year
Each Fund offering a single class of shares will be subject to a minimum charge
of $1,000 per month. Each class of shares of a Fund offering multiple classes
will be subject to a minimum charge per class of $1,000 per month.
ACCOUNTING AND PRICING SERVICES AGREEMENT
THIS AGREEMENT effective as of February 28, 1997 by and between
COUNTRYWIDE TAX-FREE TRUST, a Massachusetts business trust (the "Trust") and
COUNTRYWIDE FUND SERVICES, INC., an Ohio corporation ("Countrywide").
WITNESSETH THAT:
WHEREAS, the Trust desires to hire Countrywide to provide the Trust
with certain accounting and pricing services, and Countrywide is willing to
provide such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT.
Countrywide is hereby appointed to provide the Trust with
certain accounting and pricing services, and Countrywide accepts such
appointment and agrees to provide such services under the terms and conditions
set forth herein.
2. CALCULATION OF NET ASSET VALUE.
Countrywide will calculate the net asset value of each series
of the Trust and the per share net asset value of each series of the Trust, in
accordance with the Trust's effective Registration Statement on Form N-1A under
the Securities Act of 1933, as amended, including its current prospectus and
statement of additional information (the "Registration Statement"), once daily
as of the time selected by the Trust's Board of Trustees. Countrywide will
prepare and maintain a daily valuation of all securities and other assets of the
Trust in accordance with instructions from a designated officer of the Trust or
its investment adviser and in the manner set forth in the Registration
Statement. In valuing securities of the Trust, Countrywide may contract with,
and rely upon market quotations provided by, outside services, the cost of which
shall be borne by the Trust.
3. BOOKS AND RECORDS.
Countrywide will maintain such books and records as are
necessary to enable it to perform its duties under this Agreement, and, in
addition, will prepare and maintain complete, accurate and current all records
with respect to the Trust required to be maintained by the Trust under the
Internal Revenue Code, as amended (the "Code") and under the general rules and
<PAGE>
regulations of the Investment Company Act of 1940, as amended (the "Act"), and
will preserve said records in the manner and for the periods prescribed in the
Code and such rules and regulations. The retention of such records shall be at
the expense of the Trust.
All of the records prepared and maintained by Countrywide
pursuant to this Paragraph 3 which are required to be maintained by the Trust
under the Code and the Act ("Required Records") will be the property of the
Trust. In the event this Agreement is terminated, all Required Records shall be
delivered to the Trust or to any person designated by the Trust at the Trust's
expense, and Countrywide shall be relieved of responsibility for the preparation
and maintenance of any Required Records delivered to the Trust or any such
person.
4. COOPERATION WITH ACCOUNTANTS.
Countrywide shall cooperate with the Trust's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
5. FEES AND CHARGES.
For performing its services under this Agreement, the Trust
shall pay Countrywide a fee in accordance with the schedule attached hereto as
Schedule A.
6. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
Except as otherwise provided in this Agreement and except for
the accuracy of information furnished to it by Countrywide, the Trust assumes
full responsibility for the preparation, contents and distribution of each
prospectus and statement of additional information of the Trust, for complying
with all applicable requirements of the Act, the Securities Act of 1933, as
amended, and any laws, rules and regulations of governmental authorities having
jurisdiction.
7. CONFIDENTIALITY.
Countrywide agrees to treat all records and other information
relative to the Trust and its prior, present or potential shareholders
confidentially and Countrywide on behalf of itself and its employees agrees to
keep confidential all such information, except (after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where Countrywide may be exposed to civil or
criminal contempt proceedings for failure to comply) when requested to divulge
such information by duly constituted authorities or when so requested by the
Trust.
- 2 -
<PAGE>
8. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Transfer Agent, Plan Agent, Dividend Disbursing Agent,
Shareholder Service Agent and Accounting and Pricing Services Agent. The Trust
will submit printed matter requiring approval to Countrywide in draft form,
allowing sufficient time for review by Countrywide and its counsel prior to any
deadline for printing.
9. EQUIPMENT FAILURES.
In the event of equipment failures beyond Countrywide's
control, Countrywide shall take all steps necessary to minimize service
interruptions but shall have no liability with respect thereto. Countrywide
shall endeavor to enter into one or more agreements making provision for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available.
10. INDEMNIFICATION OF COUNTRYWIDE.
(a) Countrywide may rely on information reasonably believed by
it to be accurate and reliable. Except as may otherwise be required by the Act
or the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
(b) Any person, even though also a director, officer,
employee, shareholder or agent of Countrywide, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with Countrywide's duties hereunder), to be
rendering such services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or one under the control or
direction of Countrywide, even though paid by it.
- 3 -
<PAGE>
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which Countrywide may sustain or incur or which may be asserted
against Countrywide by any person by reason of, or as a result of: (i) any
action taken or omitted to be taken by Countrywide in good faith in reliance
upon any certificate, instrument, order or stock certificate believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the oral instructions or written instructions of an authorized
person of the Trust or upon the opinion of legal counsel for the Trust or its
own counsel; or (ii) any action taken or omitted to be taken by Countrywide in
connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
11. MAINTENANCE OF INSURANCE COVERAGE.
At all times during the term of this Agreement, Countrywide
shall be a named insured party on the Trust's Errors & Omissions policy and the
Trust's Fidelity Bond, both of which shall include coverage of Countrywide's
officers and employees. Countrywide shall pay its allocable share of the cost of
such policies in accordance with the provisions of the Act. The scope of
coverage and amount of insurance limits applicable to the Trust on such policies
shall also be made applicable to Countrywide.
12. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
13. TERMINATION.
(a) The provisions of this Agreement shall be effective upon
its execution, shall continue in effect for two years from that date and shall
continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined
- 4 -
<PAGE>
in the Act) of any such party, and (3) by vote of a majority of the Trust's
Board of Trustees or a majority of the Trust's outstanding voting securities.
(b) Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor.
(c) This Agreement shall automatically terminate in the
event of its assignment.
(d) In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all Required Records and shall cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from Countrywide's cognizant personnel in the establishment of books, records
and other data by such successor.
14. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the Act) of Countrywide from providing services
for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
15. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
16. LIMITATION OF LIABILITY.
The term "Countrywide Tax-Free Trust" means and refers to the
trustees from time to time serving under the Trust's Declaration of Trust as the
same may subsequently thereto have been, or subsequently hereto may be, amended.
It is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the trust property of the
Trust. This Agreement has been authorized by the trustees of the Trust and
signed by an officer of the Trust, acting as such, and neither such
authorization by such trustees nor such execution by such officer shall be
deemed
- 5 -
<PAGE>
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Trust.
17. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
18. QUESTIONS OF INTERPRETATION.
(a) This Agreement shall be governed by the laws of the
State of Ohio.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretations thereof, if any, by the United States Courts or
in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued pursuant
to said Act. In addition, where the effect of a requirement of the Act,
reflected in any provision of this Agreement is revised by rule, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
19. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
and of Countrywide for this purpose shall be 312 Walnut Street, Cincinnati, Ohio
45202.
20. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
21. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
- 6 -
<PAGE>
22. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
COUNTRYWIDE TAX-FREE TRUST
By: /s/ Robert H. Leshner
-------------------------
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
---------------------------
- 7 -
<PAGE>
Schedule A
COMPENSATION
FOR FUND ACCOUNTING AND PORTFOLIO PRICING:
Tax-Free Money Fund
California Tax-Free Money Fund
Asset Size 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
Ohio Tax-Free Money Fund
Florida Tax-Free Money Fund
Asset Size 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
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
Asset Size 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
Kentucky Tax-Free Fund
Asset Size Monthly Fee
$ 0 - $ 50,000,000 $3,250
$ 50,000,000 - $100,000,000 $3,750
$100,000,000 - $250,000,000 $4,250
Over $250,000,000 $4,750
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated August 4, 1997 and to all references to our Firm included in or made a
part of this Post-Effective Amendment No. 41.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
October 29, 1997
Dealer #______
COUNTRYWIDE INVESTMENTS, INC.
312 WALNUT STREET
CINCINNATI, OHIO 45202
800-543-8721
513-629-2000
SALES AGREEMENT
MONEY MARKET FUNDS
Countrywide Investments is a group of investment companies, organized as Trusts,
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"). All of the Trusts have agreed to the terms hereof. The Trusts are
presently offering, or intend to offer, shares of beneficial interest (the
"Shares") in money market funds (the "Funds") to the public in accordance with
the terms and conditions contained in the Prospectuses of the Trusts. The term
"Prospectuses" as used herein refers to the prospectuses on file with the
Securities and Exchange Commission which are part of the most recent
registration statements effective from time to time under the Securities Act of
1933, as amended (the "Securities Act"). We hereby offer to appoint you to act
as a sales agent of the Trusts in connection with the offering of Shares to the
public on the following terms and conditions:
1. In all sales of the Shares to the public, you shall act as agent for the
Trust, and in no transaction shall you act as dealer for your own account.
2. As agent for the Trusts, you are hereby authorized to (i) place orders
directly with the Trusts' Transfer Agent(s) for the purchases of the Shares and
(ii) tender the Trusts' Shares to the Trusts' Transfer Agent(s) for redemption,
in each case subject to the terms and conditions set forth in the applicable
Prospectus and the operating procedures and policies established by the
applicable Trust.
3. No person is authorized to make any representations concerning the Trusts,
or the Shares, except those contained in the Prospectuses and in such printed
information as the Trusts may subsequently prepare. You are specifically
authorized to distribute the Trusts' Prospectuses and sales material received
from the Trusts or the Trusts' Underwriter. No person is authorized to
distribute any other sales material relating to the Trusts or the Funds without
the prior approval of the Trusts.
4. As agent for the Trusts, and upon the request of the Trusts, you will
undertake from time to time distribution efforts to promote the sale of the
Shares. Also, as agent for the Trusts, you will undertake shareholder servicing
activities for customers of yours who have purchased the Shares and who use your
facilities to communicate with the Trusts or to effect redemptions or additional
purchases of the Shares. As compensation for such services, you will be paid by
the appropriate Trust, to the extent permitted by the Investment Company Act and
the rules promulgated thereunder, or by the applicable Trust's Underwriter, such
fees as are set forth in Schedule A hereto. All compensation paid for services
performed by you, pursuant to the terms of this Agreement, will be paid to you
at the address of your principal office, as indicated in your confirmation and
acceptance of this Agreement.
5. You agree to comply with the provisions contained in all applicable
securities laws governing the distribution of Prospectuses to persons to whom
you offer the Shares as agent for the Trusts. You further agree to deliver,
upon the request of a Trust, copies of any amended Prospectuses to purchasers
whose Shares you are holding as record owner and to deliver to such persons
materials of the appropriate Trust. The Trusts will conduct their businesses
in accordance with the procedures set forth in, and the requirements of, the
Prospectuses, including the prompt execution of orders for the purchase and
redemption of the Shares and the servicing of their shareholder accounts.
6. You represent that you are, and will be at all times relevant hereto, a
member in good standing of the National Association of Securities Dealers, Inc.
and you further represent and warrant that you are and will be at all times
relevant hereto a broker-dealer properly registered and qualified under all
applicable federal, state and local laws to engage in the business and
transactions described in this Agreement. You agree to comply with all
requirements applicable to you of all applicable laws, including federal and
state securities laws, the Rules and Regulations of the Securities and Exchange
Commission and the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. You agree that you will not offer the Shares to persons
in any jurisdiction in which the Shares are not registered for sale and in
which you may not lawfully make such offer due to the fact that you have not
registered under, or are not exempt from, the applicable registration or
licensing requirements of such jurisdiction. You further agree that you will
maintain all records required by applicable law relating to transactions
involving purchases or redemptions of the Shares by you or your customers.
<PAGE>
7.The Trusts have each registered an indefinite number of Shares under the
Securities Act. Upon application to us, the Trusts will inform you as to the
states or other jurisdictions in which they believe a Fund's Shares have been
qualified for sale under, or are exempt from, the requirements of the respective
securities laws of such state, but the Trusts assume no responsibility or
obligation as to your right to sell any of the Shares in any jurisdiction.
8.The Trusts shall have full authority to take such action as they may deem
advisable in respect to all matters pertaining to the offering of the Shares,
including the right in their discretion, without notice, to suspend sales or
withdraw the offering of the Shares entirely with regard to one or more of the
Funds. The Trusts will promptly notify you of any such actions.
9.You will (i) maintain all records required by law relating to transactions in
the Shares and, upon request by any of the Trusts, promptly make such records
available as the Trusts may reasonably request in connection with their
operations; and (ii) promptly notify the Trusts if you experience any difficulty
in maintaining the records described in the foregoing clause in an accurate and
complete manner. In addition, you and the Trusts will establish appropriate
procedures and reporting forms and schedules to enable the parties hereto to
identify all accounts opened and maintained by your customers. At all times
during reasonable hours of the Trusts, you will have the right, upon 48 hours
prior written notice to the Trusts, to conduct appropriate audits or reviews of
such records and to confirm the reports delivered by the Trusts to you or your
customers. The cost of such audits or reviews will be borne solely by you or
your customers.
10.The Trusts shall be under no liability to you and you shall be under no
liability to the Trusts except for lack of good faith, for negligence and for
obligations expressly assumed by either party hereunder. Nothing contained in
this Agreement is intended to operate as a waiver by the Trusts or by you of
compliance with any provision of the Securities Act, the Securities Exchange Act
of 1934, the Investment Company Act or the Rules and Regulations promulgated by
the Securities and Exchange Commission under these Acts.
11.This Agreement will automatically terminate in the event of its assignment.
This Agreement may be terminated as to any Trust or by that Trust's Underwriter
or by you, without penalty, upon ten (10) days' prior written notice to the
other parties. This Agreement may also be terminated as to any Trust at any time
without penalty by the vote of a majority of the members of the Board of
Trustees of the terminating Trust who are not "interested persons" (as such term
is defined in the Investment Company Act) and who have no direct or indirect
financial interest in the applicable Trust's Distribution Expense Plan pursuant
to Rule 12b-1 under the Investment Company Act or any agreement relating to such
Plan, including this Agreement, or by a vote of a majority of the outstanding
voting securities of each series of the terminating Trust on ten days' written
notice.
12.All communications to us should be sent to Countrywide Investments, Inc. 312
Walnut Street, Cincinnati, Ohio 45202, or at such other address as we may
designate in writing. Any notice to you shall be duly given if mailed or
telegraphed to you at the address of your principal office as specified by you
below in your confirmation and acceptance of this Agreement.
13.The obligations of the Trusts under this Agreement shall not be binding upon
any of the Trustees, shareholders, nominees, officers, agents or employees of
the Trusts personally, but shall bind only the property of the Trusts, as
provided in Trust's Agreement and Declaration of Trust. The execution and
delivery of this Agreement has been authorized by the Trustees and signed by a
duly authorized officer of the Trusts acting as such, and neither the
authorization by the Trustees nor the execution and delivery of this Agreement
by such officer of the Trusts shall be deemed to have been made by any of them
individually, but shall bind only the property of the Trusts as provided in
their Agreement and Declaration of Trust.
14."Trusts" as used herein shall refer to all Trusts offering series of shares
in the no-load mutual funds presently in existence and hereafter organized as
part of Countrywide Investments unless any such Trust is specifically excluded
by a separate writing signed by an authorized officer of such Trust electing not
to be covered by this Agreement.
15.You will indemnify the Trusts and the Underwriter, transfer agent and
custodian of each Trust and hold them harmless from any claims or assertions
relating to the lawfulness of your company's participation in this Agreement and
the transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with your company which are performed in
connection with the discharge of your responsibilities under this Agreement. If
any such claims are asserted, the indemnified parties shall have the right to
engage in their own defense, including the selection and engagement of legal
counsel of their choosing and all costs of such defense shall be borne by you.
16.This Agreement supersedes any other agreement with you relating to the offer
and sale of any of the Trusts' Shares, and relating to any other matter
discussed herein.
17.This Agreement shall be binding upon receipt by the Trusts in Cincinnati,
Ohio of a counterpart hereof duly accepted and signed by you, and shall be
construed in accordance with the laws of the State of Ohio.
18.The undersigned executing this Agreement on behalf of Sales Agent, hereby
warrants and represents that he is duly authorized to so execute this Agreement
on behalf of Sales Agent.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return all copies of this Agreement to Countrywide Investments,
Inc.
ACCEPTED BY DEALER
By:_______________________________________
Authorized Signature
- -------------------------------------------
Type or Print Name, Position
- -------------------------------------------
Name
- -------------------------------------------
Address
- -------------------------------------------
Address
- -------------------------------------------
Phone
- -------------------------------------------
Date
ON BEHALF OF EACH TRUST OFFERING
SHARES IN THE MONEY MARKET FUNDS OF
COUNTRYWIDE INVESTMENTS
By:________________________________________
Authorized Officer of "Trusts"
- -------------------------------------------
Date
ON BEHALF OF THE UNDERWRITER TO THE
TRUSTS OFFERING SHARES OF MONEY
MARKET FUNDS OF COUNTRYWIDE
INVESTMENTS
By:________________________________________
Authorized Officer of Underwriter to the "Trusts"
- -------------------------------------------
Date
<PAGE>
Schedule A
12b-1 PAYMENT SCHEDULE
You will receive a trailing commission of .25% per annum (payable quarterly) of
the average balance during each calendar quarter of all accounts in the
following Countrywide Investments money market funds:
Short Term Government Income Fund
Tax-Free Money Fund
Ohio Tax-Free Money Fund
California Tax-Free Money Fund
Florida Tax-Free Money Fund
Money Market Fund
However, no trailing commission will be paid to a dealer for any calendar
quarter in which the average daily balance of all accounts in Countrywide
Investments Funds (including load funds) is less than $1,000,000.
COUNTRYWIDE INVESTMENTS, INC.
312 WALNUT STREET
CINCINNATI, OHIO 45202
800-543-8721
513-629-2000
Administration Agreement
This Agreement is made between _______________________________________
("Administrator") and Countrywide Investment Trust, Countrywide Tax-Free Trust
and Countrywide Strategic Trust (collectively the "Trusts" and individually the
"Trust"), the issuer of shares of beneficial interest ("Shares") of the mutual
funds set forth on Schedule A to this Agreement (collectively the "Funds" and
individually the "Fund"). In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Trusts hereby appoint Administrator to render or cause to be
rendered administrative support services to each Fund and its shareholders,
which services may include, without limitation: aggregating and processing
purchase and redemption requests and placing net purchase and redemption orders
with the Fund's transfer agent; answering client inquiries about the Fund and
referring to the Trusts those inquiries which the Administrator is unable to
answer; assisting clients in changing dividend options, account designations and
addresses; performing sub-accounting; establishing, maintaining and closing
shareholder accounts and records; investing client account cash balances
automatically in Shares of the Fund; providing periodic statements showing a
client's account balance, integrating such statements with those of other
transactions and balances in the client's other accounts serviced by the
Administrator and performing such other recordkeeping as is necessary for the
Fund's transfer agent to comply with all the recordkeeping requirements of the
Investment Company Act of 1940 and the regulations promulgated thereunder;
arranging for bank wires; and providing such other information and services as
the Trusts reasonably may request, to the extent the Administrator is permitted
by applicable statute, rule or regulation to provide these services.
2. Administrator shall provide such office space and equipment,
telephone facilities and personnel (which may be all or any part of the space,
equipment and facilities currently used in Administrator's business, or all or
any personnel employed by Administrator) as is necessary or beneficial for
providing information and services to shareholders of each Fund, and to assist
each Trust in servicing accounts of clients. Administrator shall transmit
promptly to clients all communications sent to it for transmittal to clients by
or on behalf of a Trust, a Fund, or a Trust's investment adviser, custodian or
transfer agent or dividend disbursing agent.
3. For each account in certain Funds for which the Administrator is to
render administrative support services, Administrator will receive a fee, as set
forth on Schedule B, equal to the normal dealer's discount from the public
offering price on the Shares purchased by such accounts. During the term of this
Agreement, each Trust or the Trust's underwriter will also pay to the
Administrator quarterly one-fourth of the annual administration fees set forth
in Schedule B hereto. Administrator shall notify the Trust if Administrator
directly charges a fee to Fund shareholders for its administrative support
services as described in this Agreement.
4. Administrator agrees to comply with the requirements of all laws
applicable to it, including but not limited to, ERISA, federal and state
securities laws and the rules and regulations promulgated thereunder.
Administrator agrees to provide services to each Trust in compliance with the
then current Prospectus and Statement of Additional Information of the Trust and
the operating procedures and policies established by the Trust, including, but
not limited to, required minimum investment and minimum account size.
5. No person is authorized to make any representations concerning a
Fund or its Shares except those contained in the current Prospectus or Statement
of Additional Information of the applicable Fund and any such information as may
be officially designated as information supplemental to the Prospectus.
Additional copies of any Prospectus and any printed information officially
designated as supplemental to such Prospectus will be supplied by the Trusts to
Administrator in reasonable quantities on request.
6. Administrator agrees that it will provide administrative support
services only to those persons who reside in any jurisdiction in which a Fund's
Shares are registered for sale and in which the Administrator may lawfully
provide such services. Upon request, the Trusts shall provide the Administrator
with a list of the states in which each Fund's Shares are registered for sale
and shall keep such list updated.
<PAGE>
7. In no transaction shall Administrator have any authority whatsoever
to act as agent for any Trust, any Fund or any person affiliated with any Trust
or Fund.
8. The Administrator agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Trust in opposition to proxies solicited by management of the
Trust, unless a court of competent jurisdiction shall have determined that the
conduct of a majority of the Board of Trustees of the Trust constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties.
This paragraph 8 will survive the term of this Agreement.
9. The Administrator shall prepare such quarterly reports for each
Trust as shall reasonably be requested by the Trust. In addition, the
Administrator will furnish the Trust or its designees with such information as
the Trust or they may reasonably request (including, without limitation,
periodic certifications confirming the provision to clients of the services
described herein), and will otherwise cooperate with the Trust and its designees
(including and without limitation, any auditors designated by the Trust), in
connection with the preparation of reports to the Trust's Board of Trustees
concerning this Agreement and the monies paid or payable by the Trust or the
Trust's underwriter pursuant hereto, as well as any other reports or filings
that may be required by law.
10. The Administrator acknowledges that any Trust may enter into
similar agreements with others without the consent of the Administrator.
11. Each Trust reserves the right, at its discretion and without
notice, to suspend the sale of Shares or withdraw the sale of Shares of any
Fund.
12. The Trust's underwriter has adopted compliance standards, attached
hereto as Schedule C, as to when Class A and Class C Shares of the Dual Pricing
Funds may appropriately be sold to particular investors. The Administrator
agrees that all persons associated with it will conform to such standards.
13. With respect to each Fund, this Agreement shall continue in effect
for one year from the date of its execution, and thereafter for successive
periods of one year if the form of this Agreement is approved as to the Fund at
least annually by the Trustees of the applicable Trust, including a majority of
the members of the Board of Trustees of the Trust who are not interested persons
("Disinterested Trustees") of the Trust and have no direct or indirect financial
interest in the operations of the Trust's Rule 12b-1 Plan ("Plan") or in any
documents related to the Plan cast in person at a meeting for that purpose. In
the event this Agreement, or any part thereof, is found invalid or is ordered
terminated by any regulatory or judicial authority, or the Administrator shall
fail to perform the shareholder servicing and administrative functions
contemplated hereby, this Agreement is terminable effective upon receipt of
notice thereof by the Administrator.
14. Notwithstanding paragraph 13, this Agreement may be
terminated with respect to any Fund as follows:
(a) at any time, without the payment of any penalty, by the
vote of a majority of the Disinterested Trustees of the applicable
Trust or by a vote of a majority of the outstanding voting securities
of the Fund on not more than thirty (30) days written notice to the
parties to this Agreement;
(b) automatically in the event of the Agreement's assignment
as defined in the Investment Company Act of 1940; or
(c) by any party to the Agreement without cause by giving the
other parties at least thirty (30) days written notice of its intention
to terminate.
15. Any termination of this Agreement shall not affect the provisions
of paragraph 18, which shall survive the termination of this Agreement and
continue to be enforceable thereafter.
16. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors.
17. This Agreement is not intended to, and shall not, create any rights
against any party hereto by any third person solely on account of this
Agreement.
<PAGE>
18. The Administrator shall provide such security as is necessary to
prevent unauthorized use of any computer hardware or software provided to it by
or on behalf of the Trusts, if any. The Administrator agrees to release,
indemnify and hold harmless each Fund, each Trust, each Trust's transfer agent,
custodian and underwriter, and their respective principals, directors, trustees,
officers, employees and agents from any and all direct or indirect liabilities
or losses resulting from requests, directions, actions or inactions of or by the
Administrator, its officers, employees or agents regarding the purchase,
redemption, transfer or registration of Shares for accounts of the
Administrator, its clients and other shareholders. Such indemnity shall also
cover any losses and liabilities incurred by and resulting from the
Administrator's performance of or failure to perform its obligations or its
breach of any representations or warranties under this Agreement. Principals of
the Administrator will be available to consult from time to time with each Trust
concerning the administration and performance of the services contemplated by
this Agreement.
19. This Agreement may be amended only by an agreement in writing
signed by the Administrator and the Trusts.
20. The obligations of each Trust under this Agreement shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of such Trust, personally, but shall bind only the property of such
Trust, as provided in such Trust's Agreement and Declaration of Trust. The
execution and delivery of this Agreement has been authorized by the Trustees and
signed by a duly authorized officer of the Trusts, acting as such, and neither
the authorization by the Trustees nor the execution and delivery by such officer
of the Trusts shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
property of the Trusts as provided in their Agreement and Declaration of Trust.
21. This Agreement does not authorize the Administrator to participate
in any activities relating to the sale or distribution of the Shares, and the
Administrator agrees that it shall not participate in such activities.
22. If any provision of this Agreement, or any covenant, obligation or
agreement contained herein, is determined by a court to be invalid or
unenforceable, the parties agree that (a) such determination shall not affect
any other provision, covenant, obligation or agreement contained herein, each of
which shall be construed and enforced to the full extent permitted by law, and
(b) such invalid or unenforceable portion shall be deemed to be modified to the
extent necessary to permit its enforcement to the maximum extent permitted by
applicable law.
23. This Agreement shall be construed in accordance with the laws
of the State of Ohio.
THIS AGREEMENT WILL BECOME EFFECTIVE UPON THE CLOSING DATE OF THE
ACQUISITION OF LESHNER FINANCIAL, INC. BY COUNTRYWIDE CREDIT INDUSTRIES, INC.
PURUSANT TO THE AGREEMENT DATED 12/10/96 FOR THE EXCHANGE OF STOCK BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, this Agreement has been executed for the Trusts and
the Administrator by their duly authorized officers, on this _____ day of
_________________, 1997.
ACCEPTED BY ADMINISTRATOR COUNTRYWIDE INVESTMENT TRUST
By: _________________________________ By: ____________________________
Authorized Signature
_____________________________________ COUNTRYWIDE TAX-FREE TRUST
Type or Print Name, Position
_____________________________________ By: ____________________________
Administrator Name
_____________________________________ COUNTRYWIDE STRATEGIC TRUST
Address
_____________________________________ By: ____________________________
Address
_____________________________________ Date: __________________________
Phone
<PAGE>
Schedule A
SCHEDULE OF MUTUAL FUNDS
Countrywide Investment Trust
* Short Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
** Global Bond Fund
Intermediate Term Government Income Fund
* Money Market Fund
Intermediate Bond Fund
Countrywide Tax-Free Trust
* Ohio Tax-Free Money Fund
* Tax-Free Money Fund
* California Tax-Free Money Fund
* Florida Tax-Free Money Fund
** Tax-Free Intermediate Term Fund
** Ohio Insured Tax-Free Fund
Kentucky Tax-Free Fund
Countrywide Strategic Trust
Government Mortgage Fund
** Equity Fund
** Utility Fund
Growth/Value Fund
Aggressive Growth Fund
* No-load Fund
** Dual Pricing Fund
<PAGE>
Schedule B
COUNTRYWIDE INVESTMENTS
COMMISSION SCHEDULE
Government Mortgage Fund
Intermediate Bond Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
Equity Fund - Class A
Utility Fund - Class A
Growth/Value Fund
Aggressive Growth Fund
Global Bond Fund - Class A
Ohio Insured Tax-Free Fund - Class A
Kentucky Tax-Free Fund
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
* As a percentage of offering price.
** Broker/Dealers are entitled to a commission of 75 basis points at the time
the investor purchases Class A shares at NAV in amounts totaling $1 million or
more. However, the investor is subject to a contingent deferred sales load of
75 basis points if a redemption occurs within one year of purchase.
See specific Fund prospectus for details.
Equity Fund - Class C
Utility Fund - Class C
Global Bond Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
The Funds will be offered to clients at net asset value. A commission of 1% of
the purchase amount of Class C shares will be paid to participating brokers at
the time of purchase. Purchases of Class C shares are subject to a contingent
deferred sales load, according to the following schedule:
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid quarterly beginning in
the thirteenth month.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any calendar quarter in
which the average daily balance of all accounts in Countrywide Investments
funds (including no-load money market funds) is less than $1,000,000.
FOR BROKER/DEALER USE ONLY
<PAGE>
Schedule C
POLICIES AND PROCEDURES
WITH RESPECT TO SALES
OF DUAL PRICING FUND
As certain Funds within Countrywide Investments (the "Dual Pricing
Funds") offer two classes of Shares subject to different levels of front-end
sales charges, it is important for an investor not only to choose the Fund that
best suits his investment objectives, but also to choose the sales financing
method which best suits his particular situation. To assist investors in these
decisions, we are instituting the following policy:
1. Any purchase order for $1 million or more must be for Class A
Shares.
2. Any purchase order for $100,000 but less than $1 million is
subject to approval by a registered principal of the
Underwriter, who must approve the purchase order for either
Class A Shares or Class C Shares in light of the relevant
facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold the
Shares; and
(c) any other relevant circumstances, such as the
availability of purchases under a Letter of Intent.
3. Any order to exchange Class A Shares of a Dual Pricing Fund
(or Shares of another Fund having a maximum sales load equal
to or greater than Class A Shares of the Dual Pricing Funds)
for Shares of another Dual Pricing Fund will be for Class A
Shares only. Class C Shares of a Dual Pricing Fund may be
exchanged for either Class A or Class C Shares of another Dual
Pricing Fund, provided that an exchange of Class C Shares for
Class A Shares is subject to approval by a registered
principal of Underwriter, who must approve the exchange in
light of the relevant facts and circumstances.
There are instances when one financing method may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales charge on Class A Shares may determine that
payment of such a reduced front-end sales charge is superior to payment of the
higher ongoing distribution fee applicable to Class C Shares. On the other hand,
an investor whose order would not qualify for such a discount may wish to pay a
lower sales charge and have more of his funds invested in Class C Shares. If
such an investor anticipates that he will redeem his Shares within a short
period of time, the investor may, depending on the amount of his purchase,
choose to bear higher distribution expenses than if he had purchased Class A
Shares.
In addition, investors who intend to hold their Shares for a
significantly long time may wish to purchase Class A Shares in order to avoid
the higher ongoing distribution expenses of Class C Shares.
The appropriate supervisor must ensure that all employees receiving
investor inquiries about the purchase of Shares of Dual Pricing Funds advise the
investor of the available financing methods offered by mutual funds, and the
impact of choosing one method over another. It may be appropriate for the
supervisor to discuss the purchase with the investor.
This policy is effective immediately with respect to any order for the
purchase of Shares of all Dual Pricing Funds. Questions relating to this policy
should be directed to Sharon Karp, Vice President of the Underwriter, at
513/629-2000.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 1
<NAME> TAX-FREE MONEY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 30,147,370
<INVESTMENTS-AT-VALUE> 30,147,370
<RECEIVABLES> 304,930
<ASSETS-OTHER> 1,290
<OTHER-ITEMS-ASSETS> 173,501
<TOTAL-ASSETS> 30,627,091
<PAYABLE-FOR-SECURITIES> 476,266
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,149
<TOTAL-LIABILITIES> 501,415
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,126,719
<SHARES-COMMON-STOCK> 30,137,162
<SHARES-COMMON-PRIOR> 25,353,881
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,043)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 30,125,676
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,145,840
<OTHER-INCOME> 0
<EXPENSES-NET> 295,213
<NET-INVESTMENT-INCOME> 850,627
<REALIZED-GAINS-CURRENT> 7
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 850,634
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 850,627
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 59,171,857
<NUMBER-OF-SHARES-REDEEMED> 55,217,113
<SHARES-REINVESTED> 828,537
<NET-CHANGE-IN-ASSETS> 4,783,288
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,050)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 149,097
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 295,213
<AVERAGE-NET-ASSETS> 29,851,586
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .029
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .029
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 21
<NAME> TAX-FREE INTERMEDIATE TERM FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 60,807,141
<INVESTMENTS-AT-VALUE> 63,124,859
<RECEIVABLES> 1,282,736
<ASSETS-OTHER> 2,896
<OTHER-ITEMS-ASSETS> 235,778
<TOTAL-ASSETS> 64,646,269
<PAYABLE-FOR-SECURITIES> 497,853
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 502,249
<TOTAL-LIABILITIES> 1,000,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,829,085
<SHARES-COMMON-STOCK> 5,313,679
<SHARES-COMMON-PRIOR> 6,238,847
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,500,636)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,317,718
<NET-ASSETS> 58,484,876
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,811,882
<OTHER-INCOME> 0
<EXPENSES-NET> 714,685
<NET-INVESTMENT-INCOME> 3,097,197
<REALIZED-GAINS-CURRENT> 120,146
<APPREC-INCREASE-CURRENT> 896,811
<NET-CHANGE-FROM-OPS> 4,114,154
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,894,253
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,150,995
<NUMBER-OF-SHARES-REDEEMED> 2,285,966
<SHARES-REINVESTED> 209,803
<NET-CHANGE-IN-ASSETS> (9,189,982)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,620,782)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 343,509
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 714,685
<AVERAGE-NET-ASSETS> 63,558,442
<PER-SHARE-NAV-BEGIN> 10.85
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> .16
<PER-SHARE-DIVIDEND> .50
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.01
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 23
<NAME> TAX-FREE INTERMEDIATE TERM FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 60,807,141
<INVESTMENTS-AT-VALUE> 63,124,859
<RECEIVABLES> 1,282,736
<ASSETS-OTHER> 2,896
<OTHER-ITEMS-ASSETS> 235,778
<TOTAL-ASSETS> 64,646,269
<PAYABLE-FOR-SECURITIES> 497,853
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 502,249
<TOTAL-LIABILITIES> 1,000,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,829,085
<SHARES-COMMON-STOCK> 468,857
<SHARES-COMMON-PRIOR> 482,869
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,500,636)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,317,718
<NET-ASSETS> 5,161,291
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,811,882
<OTHER-INCOME> 0
<EXPENSES-NET> 714,685
<NET-INVESTMENT-INCOME> 3,097,197
<REALIZED-GAINS-CURRENT> 120,146
<APPREC-INCREASE-CURRENT> 896,811
<NET-CHANGE-FROM-OPS> 4,114,154
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 202,944
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 168,900
<NUMBER-OF-SHARES-REDEEMED> 200,429
<SHARES-REINVESTED> 17,517
<NET-CHANGE-IN-ASSETS> (77,256)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,620,782)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 343,509
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 714,685
<AVERAGE-NET-ASSETS> 5,216,161
<PER-SHARE-NAV-BEGIN> 10.85
<PER-SHARE-NII> .43
<PER-SHARE-GAIN-APPREC> .16
<PER-SHARE-DIVIDEND> .43
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.01
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 31
<NAME> OHIO INSURED TAX-FREE FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 70,182,058
<INVESTMENTS-AT-VALUE> 74,882,287
<RECEIVABLES> 678,560
<ASSETS-OTHER> 3,104
<OTHER-ITEMS-ASSETS> 46,602
<TOTAL-ASSETS> 75,610,553
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 155,366
<TOTAL-LIABILITIES> 155,366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70,621,240
<SHARES-COMMON-STOCK> 5,794,738
<SHARES-COMMON-PRIOR> 6,345,325
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 133,718
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,700,229
<NET-ASSETS> 70,816,181
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,567,667
<OTHER-INCOME> 0
<EXPENSES-NET> 618,311
<NET-INVESTMENT-INCOME> 3,949,356
<REALIZED-GAINS-CURRENT> 134,212
<APPREC-INCREASE-CURRENT> 1,565,046
<NET-CHANGE-FROM-OPS> 5,648,614
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,767,741
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,158,992
<NUMBER-OF-SHARES-REDEEMED> 14,943,520
<SHARES-REINVESTED> 223,941
<NET-CHANGE-IN-ASSETS> (5,122,002)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (494)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 393,579
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 618,311
<AVERAGE-NET-ASSETS> 74,654,377
<PER-SHARE-NAV-BEGIN> 11.97
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> .25
<PER-SHARE-DIVIDEND> .61
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.22
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 33
<NAME> OHIO INSURED TAX-FREE FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 70,182,058
<INVESTMENTS-AT-VALUE> 74,882,287
<RECEIVABLES> 678,560
<ASSETS-OTHER> 3,104
<OTHER-ITEMS-ASSETS> 46,602
<TOTAL-ASSETS> 75,610,553
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 155,366
<TOTAL-LIABILITIES> 155,366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70,621,240
<SHARES-COMMON-STOCK> 379,664
<SHARES-COMMON-PRIOR> 331,937
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 133,718
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,700,229
<NET-ASSETS> 4,639,006
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,567,667
<OTHER-INCOME> 0
<EXPENSES-NET> 618,311
<NET-INVESTMENT-INCOME> 3,949,356
<REALIZED-GAINS-CURRENT> 134,212
<APPREC-INCREASE-CURRENT> 1,565,046
<NET-CHANGE-FROM-OPS> 5,648,614
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 181,615
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 135,167
<NUMBER-OF-SHARES-REDEEMED> 100,548
<SHARES-REINVESTED> 13,108
<NET-CHANGE-IN-ASSETS> 666,512
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (494)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 393,579
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 618,311
<AVERAGE-NET-ASSETS> 4,158,029
<PER-SHARE-NAV-BEGIN> 11.97
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> .25
<PER-SHARE-DIVIDEND> .53
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.22
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 61
<NAME> OHIO TAX-FREE MONEY FUND RETAIL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 262,508,765
<INVESTMENTS-AT-VALUE> 262,508,765
<RECEIVABLES> 2,111,040
<ASSETS-OTHER> 8,578
<OTHER-ITEMS-ASSETS> 112,177
<TOTAL-ASSETS> 264,740,560
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 432,904
<TOTAL-LIABILITIES> 432,904
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 264,294,705
<SHARES-COMMON-STOCK> 166,706,383
<SHARES-COMMON-PRIOR> 240,309,985
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,951
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 166,719,026
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,559,104
<OTHER-INCOME> 0
<EXPENSES-NET> 1,825,349
<NET-INVESTMENT-INCOME> 7,733,755
<REALIZED-GAINS-CURRENT> 46
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,733,801
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,297,760
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 572,337,891
<NUMBER-OF-SHARES-REDEEMED> 650,804,392
<SHARES-REINVESTED> 4,862,899
<NET-CHANGE-IN-ASSETS> (73,603,866)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 12,905
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,181,638
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,889,169
<AVERAGE-NET-ASSETS> 214,595,360
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> Countrywide Tax-Free Trust
<SERIES>
<NUMBER> 62
<NAME> OHIO TAX-FREE MONEY FUND INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 262,508,765
<INVESTMENTS-AT-VALUE> 262,508,765
<RECEIVABLES> 2,111,040
<ASSETS-OTHER> 8,578
<OTHER-ITEMS-ASSETS> 112,177
<TOTAL-ASSETS> 264,740,560
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 432,904
<TOTAL-LIABILITIES> 432,904
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 264,294,705
<SHARES-COMMON-STOCK> 97,588,320
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,951
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 97,588,630
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,559,104
<OTHER-INCOME> 0
<EXPENSES-NET> 1,825,349
<NET-INVESTMENT-INCOME> 7,733,755
<REALIZED-GAINS-CURRENT> 46
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,733,801
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,435,995
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 216,396,635
<NUMBER-OF-SHARES-REDEEMED> 118,808,315
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 97,588,630
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 12,905
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,181,638
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,889,169
<AVERAGE-NET-ASSETS> 91,231,670
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .016
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .016
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 7
<NAME> CALIFORNIA TAX-FREE MONEY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 32,408,985
<INVESTMENTS-AT-VALUE> 32,408,985
<RECEIVABLES> 517,323
<ASSETS-OTHER> 1,607
<OTHER-ITEMS-ASSETS> 287,500
<TOTAL-ASSETS> 33,215,415
<PAYABLE-FOR-SECURITIES> 1,003,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,754
<TOTAL-LIABILITIES> 1,029,104
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,189,814
<SHARES-COMMON-STOCK> 32,189,814
<SHARES-COMMON-PRIOR> 36,123,641
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,503)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 32,186,311
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,427,032
<OTHER-INCOME> 0
<EXPENSES-NET> 320,148
<NET-INVESTMENT-INCOME> 1,106,884
<REALIZED-GAINS-CURRENT> (1,923)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,104,961
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,106,884
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 166,476,608
<NUMBER-OF-SHARES-REDEEMED> 171,440,181
<SHARES-REINVESTED> 1,029,746
<NET-CHANGE-IN-ASSETS> (3,935,750)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,580)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 200,103
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 320,148
<AVERAGE-NET-ASSETS> 40,075,883
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .028
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .028
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 81
<NAME> FLORIDA TAX-FREE MONEY FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 42,907,587
<INVESTMENTS-AT-VALUE> 42,907,587
<RECEIVABLES> 349,792
<ASSETS-OTHER> 1,765
<OTHER-ITEMS-ASSETS> 175,922
<TOTAL-ASSETS> 43,435,066
<PAYABLE-FOR-SECURITIES> 1,567,623
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 84,979
<TOTAL-LIABILITIES> 1,652,602
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,783,292
<SHARES-COMMON-STOCK> 22,434,902
<SHARES-COMMON-PRIOR> 28,907,577
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (828)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 22,433,909
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,692,646
<OTHER-INCOME> 0
<EXPENSES-NET> 305,921
<NET-INVESTMENT-INCOME> 1,386,725
<REALIZED-GAINS-CURRENT> 370
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,387,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 814,499
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 57,130,891
<NUMBER-OF-SHARES-REDEEMED> 64,279,383
<SHARES-REINVESTED> 675,817
<NET-CHANGE-IN-ASSETS> (6,472,472)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,198)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 234,628
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 412,032
<AVERAGE-NET-ASSETS> 28,559,822
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .029
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .029
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 82
<NAME> FLORIDA TAX-FREE MONEY FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 42,907,587
<INVESTMENTS-AT-VALUE> 42,907,587
<RECEIVABLES> 349,792
<ASSETS-OTHER> 1,765
<OTHER-ITEMS-ASSETS> 175,922
<TOTAL-ASSETS> 43,435,066
<PAYABLE-FOR-SECURITIES> 1,567,623
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 84,979
<TOTAL-LIABILITIES> 1,652,602
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,783,292
<SHARES-COMMON-STOCK> 19,348,390
<SHARES-COMMON-PRIOR> 19,144,760
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (828)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 19,348,555
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,692,646
<OTHER-INCOME> 0
<EXPENSES-NET> 305,921
<NET-INVESTMENT-INCOME> 1,386,725
<REALIZED-GAINS-CURRENT> 370
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,387,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 572,226
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38,407,914
<NUMBER-OF-SHARES-REDEEMED> 38,204,284
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 203,797
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,198)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 234,628
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 412,032
<AVERAGE-NET-ASSETS> 18,427,991
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .031
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .031
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Amended February 28, 1997
AMENDED RULE 18f-3 PLAN ADOPTED WITH RESPECT TO THE MULTIPLE
CLASS DISTRIBUTION SYSTEM OF COUNTRYWIDE INVESTMENTS
- --------------------------------------------------------------------------------
Countrywide Investment Trust, Countrywide Tax-Free Trust and
Countrywide Strategic Trust (the "Trusts") have each adopted this Plan pursuant
to Rule 18f-3 promulgated under the Investment Company Act of 1940 (the "1940
Act"). The individual series of the Trusts which are not money market funds are
referred to collectively, in whole or in part, as the context requires, as the
"Funds." The individual series of the Trusts which are money market funds are
referred to collectively, in whole or in part, as the context requires, as the
"Money Market Funds." The Funds and the Money Market Funds are referred to
collectively, in whole or in part, as the context requires, as the "Countrywide
Funds."
Each Trust is an open-end management investment company registered
under the 1940 Act. Countrywide Investments, Inc. (the "Distributor") provides
investment advisory and management services to each of the Countrywide Funds and
acts as principal underwriter for the Countrywide Funds.
This Plan permits the Funds to issue and sell up to three classes of
shares and the Money Market Funds to issue and sell up to two classes of shares
for the purpose of establishing a multiple class distribution system (the
"Multiple Class Distribution System"). The Plan further permits the Funds to
assess a contingent deferred sales charge ("CDSC") on certain redemptions of a
class of the Funds' shares and to waive the CDSC in certain instances. These
guidelines set forth the conditions
<PAGE>
pursuant to which the Multiple Class Distribution System will operate and the
duties and responsibilities of the Trustees of each Trust with respect to the
Multiple Class Distribution System.
DESCRIPTION OF THE MULTIPLE CLASS DISTRIBUTION SYSTEM
- -----------------------------------------------------
MULTIPLE CLASS DISTRIBUTION SYSTEM FOR THE FUNDS. The Multiple Class
Distribution System enables each Fund to offer investors the option of
purchasing shares in one of three manners: (1) subject to a conventional
front-end sales load and a distribution fee not to exceed .35% of average net
assets (Class A shares); (2) subject to either no front-end sales load or a
front-end sales load which is smaller than the sales load on Class A shares, and
in addition subject to a distribution fee and service fee of up to 1% of average
net assets (Class B shares); or (3) subject to a CDSC and a distribution fee and
service fee of up to 1% of average net assets (Class C shares).
The actual creation and issuance of multiple classes of shares will be
made on a Fund-by-Fund basis, and some Funds may not in fact create or issue any
new classes of shares or may create or issue only two of the three classes of
shares described herein.
The three classes will each represent interests in the same portfolio
of investments of such Fund. The three classes will be identical except that (i)
the distribution fees payable by a Fund attributable to each class pursuant to
the distribution plans adopted by the Funds in accordance with Rule 12b-1 under
the 1940
- 2 -
<PAGE>
Act will be higher for Class B shares and Class C shares than for Class A
shares; (ii) each class may bear different Class Expenses (as defined below);
(iii) each class will vote separately as a class with respect to a Fund's Rule
12b-1 distribution plan; (iv) each class has different exchange privileges; and
(v) each class may bear a different name or designation.
Investors purchasing Class A shares will do so at net asset value plus
a front-end sales load in the traditional manner. The sales load may be subject
to reductions for larger purchases, under a combined purchase privilege, under a
right of accumulation or under a letter of intent. The sales load may be subject
to certain other reductions permitted by Section 22(d) of the 1940 Act and set
forth in the registration statement of each Trust. The public offering price for
the Class A shares will be computed in accordance with Rule 22c-1, Section 22(d)
and other relevant provisions of the 1940 Act and the rules and regulations
thereunder. Each Fund will also pay a distribution fee pursuant to the Fund's
Rule 12b-1 distribution plan at an annual rate of up to .35% of 1% of the
average daily net asset value of the Class A shares.
Investors purchasing Class B shares of a Fund will do so at either net
asset value without a front-end sales load or at net asset value plus a
front-end sales load which is less than the front-end sales load applicable to
Class A shares of such Fund. The sales load on Class B shares, if any, may be
subject to reductions for larger purchases, under a combined purchase
- 3 -
<PAGE>
privilege or under a letter of intent. The public offering price for the Class B
shares will be computed in accordance with Rule 22c-1, Section 22(d) and other
relevant provisions of the 1940 Act and the rules and regulations thereunder.
Each Fund will also pay a distribution fee pursuant to the Fund's Rule 12b-1
distribution plan at an annual rate of up to 1% of the average daily net asset
value of the Class B shares.
Investors purchasing Class C shares will do so at net asset value per
share without the imposition of a sales load at the time of purchase. Each Fund
will pay a distribution fee pursuant to the distribution plan at an annual rate
of up to 1% of the average daily net asset value of the Class C shares. In
addition, an investor's proceeds from a redemption of Class C shares made within
a specified period of time of their purchase generally will be subject to a CDSC
imposed by the Distributor. The CDSC will range from 1% to 5% (but may be higher
or lower) on shares redeemed during the first year after purchase and will be
reduced at a rate of 1% (but may be higher or lower) per year over the CDSC
period, so that redemptions of shares held after that period will not be subject
to a CDSC. The CDSC will be made subject to the conditions set forth below. The
Class C alternative is designed to permit the investor to purchase Class C
shares without the assessment of a front-end sales load and at the same time
permit the Distributor to pay financial intermediaries selling shares of each
Fund a commission on the sale of the Class C shares.
- 4 -
<PAGE>
Under the Trusts' distribution plans, the Distributor will not be
entitled to any specific percentage of the net asset value of each class of
shares of the Funds or other specific amount. As described above, each Fund will
pay a distribution fee pursuant to its distribution plan at an annual rate of up
to .35% of the average daily net assets of such Fund's Class A shares and up to
1% of the average daily net asset value of such Fund's Class B shares and Class
C shares. Under the Trusts' distribution plans, payments will be made for
expenses incurred in providing distribution-related services (including, in the
case of the Class C shares, commission expenses as described in more detail
below). Each Fund will accrue at a rate (but not in excess of the applicable
maximum percentage rate) which is reviewed by each Trust's Board of Trustees
quarterly. Such rate is intended to provide for accrual of expenses at a rate
that will not exceed the unreimbursed amounts actually expended for distribution
by a Fund. If at any time the amount accrued by a Fund would exceed the amount
of distribution expenses incurred with respect to such Fund during the fiscal
year (plus, in the case of Class C shares, prior unreimbursed commission-related
expenses), then the rate of accrual will be adjusted accordingly. In no event
will the amount paid by the Funds exceed the unreimbursed expenses previously
incurred in providing distribution-related services.
Proceeds from the distribution fee and, in the case of Class C shares,
the CDSC, will be used to compensate financial
- 5 -
<PAGE>
intermediaries with a service fee based upon a percentage of the average daily
net asset value of the shares maintained in the Funds by their customers and to
defray the expenses of the Distributor with respect to providing distribution
related services, including commissions paid on the sale of Class C shares.
MULTIPLE CLASS DISTRIBUTION SYSTEM FOR THE MONEY MARKET FUNDS. The
Multiple Class Distribution System enables each Money Market Fund to offer
investors the option of purchasing shares in one of two manners: (1) subject to
a distribution fee not to exceed .35% of average net assets (Class A, or
"Retail" shares); or (2) subject to no distribution fee with a higher minimum
initial investment requirement (Class B, or "Institutional" shares).
The actual creation and issuance of multiple classes of shares will be
made on a fund-by-fund basis, and some Money Market Funds may not in fact create
or issue any new class of shares described herein.
The two classes will each represent interests in the same portfolio of
investments of such Money Market Fund. The two classes will be identical except
that (i) Retail shares will be subject to distribution fees pursuant to the
distribution plans adopted by the Money Market Funds in accordance with Rule
12b-1 under the 1940 Act, (ii) each class may bear different Class Expenses (as
defined below); (iii) each class has exclusive voting rights with respect to
matters affecting only that class;
- 6 -
<PAGE>
and (iv) each class may bear a different name or designation.
Investors purchasing Retail shares will do so at net asset
value. Each Retail share will also pay a distribution fee pursuant to the Money
Market Fund's Rule 12b-1 distribution plan at an annual rate of up to .35% of 1%
of the average daily net asset value of the Retail shares.
Investors purchasing Institutional shares of a Money Market
Fund will do so at net asset value. Each Institutional share will not be
subject to any distribution fees.
Under the Trusts' distribution plans, the Distributor will not be
entitled to any specific percentage of the net asset value of Retail shares or
other specific amount. As described above, each class of Retail shares will pay
a distribution fee pursuant to its distribution plan at an annual rate of up to
.35% of the average daily net assets of such Money Market Fund's Retail shares.
Under the Trusts' distribution plans, payments will be made for expenses
incurred in providing distribution-related services. Retail shares will accrue
distribution expenses at a rate (but not in excess of the applicable maximum
percentage rate) which is reviewed by each Trust's Board of Trustees quarterly.
Such rate is intended to provide for accrual of expenses at a rate that will not
exceed the unreimbursed amounts actually expended for distribution by Retail
shares. If at any time the amount accrued by Retail shares would exceed the
amount of distribution expenses incurred with respect to such Retail shares
during the fiscal year, then the rate of accrual will be
- 7 -
<PAGE>
adjusted accordingly. In no event will the amount paid by Retail shares exceed
the unreimbursed expenses previously incurred in providing distribution-related
services. Proceeds from the distribution fee will be used to compensate
financial intermediaries with a service fee based upon a percentage of the
average daily net asset value of the Retail shares maintained by their customers
and to defray the expenses of the Distributor with respect to providing
distribution related services.
GENERAL. All classes of shares of each Countrywide Fund will have
identical voting, dividend, liquidation and other rights, preferences, powers,
restrictions, limitations, qualifications, designations and terms and
conditions, except for the differences mentioned above.
Under the Multiple Class Distribution System, the Board of Trustees
could determine that any of certain expenses attributable to the shares of a
particular class of shares will be borne by the class to which they were
attributable ("Class Expenses"). Class Expenses are limited to (a) transfer
agency fees identified by the Trusts as being attributable to a class of shares;
(b) printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxy statements to
current shareholders of a specific class; (c) SEC and Blue Sky registration fees
incurred by a class of shares; (d) the expenses of administrative personnel and
services as required to support the shareholders of a specific class; (e)
litigation or other legal expenses relating
- 8 -
<PAGE>
to a specific class of shares; (f) Trustees' fees or expenses incurred as a
result of issues relating to a specific class of shares; (g) accounting fees and
expenses relating to a specific class of shares; and (h) additional incremental
expenses not specifically identified above that are subsequently identified and
determined to be properly allocated to one class of shares and approved by the
Board of Trustees.
Under the Multiple Class Distribution System, certain expenses could be
attributable to more than one Countrywide Fund ("Countrywide Fund Expenses").
All such Countrywide Fund Expenses would be first allocated among Countrywide
Funds, based on the aggregate net assets of such Countrywide Funds, and then
borne on such basis by each Countrywide Fund and without regard to class.
Expenses that were attributable to a particular Countrywide Fund but not to a
particular class thereof ("Series Expenses"), would be borne by each class on
the basis of the net assets of such class in relation to the aggregate net
assets of the Countrywide Fund. In addition to distribution fees, Class Expenses
may be applied to the shares of a particular class. Any additional Class
Expenses not specifically identified above in the preceding paragraph which are
subsequently identified and determined to be properly applied to one class of
shares shall not be so applied until approved by the Board of Trustees.
Subject to the approval of the Board of Trustees, certain expenses may
be applied differently if their current application becomes no longer
appropriate. For example, if a Class Expense
- 9 -
<PAGE>
is no longer attributable to a specific class, it may be charged to the
applicable Countrywide Fund or Countrywide Funds, as appropriate. In addition,
if application of all or a portion of a particular expense to a class is
determined by the Internal Revenue Service or counsel to the Trusts to result in
a preferential dividend for which, pursuant to Section 562(c) of the Internal
Revenue Code of 1986, as amended (the "Code"), a Countrywide Fund would not be
entitled to a dividends paid deduction, all or a portion of the expense may be
treated as a Series Expense or a Countrywide Fund Expense. Similarly, if a
Countrywide Fund Expense becomes attributable to a specific Countrywide Fund it
may be treated as a Series Expense.
Because of the varying distribution fees and Class Expenses that may be
borne by each class of shares, the net income of (and dividends payable with
respect to) each class may be different from the net income of (and dividends
payable with respect to) the other classes of shares of a Countrywide Fund.
Dividends paid to holders of each class of shares in a Countrywide Fund would,
however, be declared and paid on the same days and at the same times and, except
as noted with respect to the varying distribution fees and Class Expenses would
be determined and paid in the same manner. To the extent that a Fund has
undistributed net income, the net asset value per share of each class of such
Fund's shares will vary.
Each Countrywide Fund will briefly describe the salient features of the
Multiple Class Distribution System in its prospectus. Each Countrywide Fund will
disclose in its
- 10 -
<PAGE>
prospectus the respective expenses, performance data, distribution arrangements,
services, fees, sales loads, deferred sales loads and exchange privileges
applicable to each class of shares offered through that prospectus. The
shareholder reports of each Countrywide Fund will disclose the respective
expenses and performance data applicable to each class of shares. The
shareholder reports will contain, in the statement of assets and liabilities and
statement of operations, information related to the Countrywide Fund as a whole
generally and not on a per class basis. Each Countrywide Fund's per share data,
however, will be prepared on a per class basis with respect to all classes of
shares of such Countrywide Fund. The information provided by the Distributor for
publication in any newspaper or similar listing of the Funds' net asset values
and public offering prices will separately present Class A, Class B and Class C
shares.
The Class C alternative is designed to permit the investor to purchase
Class C shares without the assessment of a front-end sales load and at the same
time permit the Distributor to pay financial intermediaries selling shares of
the Funds a commission on the sale of the Class C shares. Proceeds from the
distribution fee and the CDSC will be used to compensate financial
intermediaries with a service fee and to defray the expenses of the Distributor
with respect to providing distribution related services, including commissions
paid on the sale of Class C shares.
The CDSC will not be imposed on redemptions of shares which
- 11 -
<PAGE>
were purchased more than a specified period, up to six years (the "CDSC Period")
prior to their redemption. The CDSC will be imposed on the lesser of the
aggregate net asset value of the shares being redeemed either at the time of
purchase or redemption. No CDSC will be imposed on shares acquired through
reinvestment of income dividends or capital gains distributions. In determining
whether a CDSC is applicable, unless the shareholder otherwise specifically
directs, it will be assumed that a redemption is made first of any Class C
shares derived from reinvestment of distributions, second of Class C shares held
for a period longer than the CDSC Period, third of any class B shares in the
shareholder's account, fourth of any Class A shares in the shareholder's
account, and fifth of Class C shares held for a period not longer than the CDSC
Period.
In addition, the Funds will waive the CDSC on redemptions following the
death or disability of a shareholder as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986. The Distributor will require satisfactory proof
of death or disability before it determines to waive the CDSC. In cases of death
or disability, the CDSC may be waived where the decedent or disabled person is
either an individual shareholder or owns the shares with his or her spouse as a
joint tenant with rights of survivorship if the redemption is made within one
year of death or initial determination of disability.
Under the Multiple Class Distribution System, Class A shares and Class
B shares of a Countrywide Fund (including Retail shares and Institutional shares
of a Money Market Fund) will be
- 12 -
<PAGE>
exchangeable for (a) Class A shares of the other Funds, (b) Class B shares of
the other Funds, (c) shares of the Money Market Funds and (d) shares of any
Countrywide Fund which offers only one class of shares (provided such
Countrywide Fund does not impose a CDSC) on the basis of relative net asset
value per share, plus an amount equal to the difference, if any, between the
sales charge previously paid on the exchanged shares and sales charge payable at
the time of the exchange on the acquired shares.
Class C shares of a Fund will be exchangeable for (a) Class C shares of
the other Funds, (b) shares of the Money Market Funds and (c) shares of any Fund
which offers only one class of shares and which imposes a CDSC on the basis of
relative net asset value per share. A Fund will "tack" the period for which
original Class C shares were held onto the holding period of the acquired Class
C shares for purposes of determining what, if any, CDSC is applicable in the
event that the acquired Class C shares are redeemed following the exchange. In
the event of redemptions of shares after an exchange, an investor will be
subject to the CDSC of the Fund with the longest CDSC period and/or highest CDSC
schedule which may have been owned by him or her, resulting in the greatest CDSC
payment. The period of time that Class C shares are held in a Money Market Fund
will not count toward the CDSC holding period. The Countrywide Funds will comply
with Rule 11a-3 under the 1940 Act as to any exchanges.
LEGAL ANALYSIS
- --------------
The Board of Trustees of each Trust has determined to
- 13 -
<PAGE>
rely on Rule 18f-3 under the 1940 Act and to discontinue reliance on an Order
previously received from the Securities and Exchange Commission (the "SEC")
exempting the Countrywide Funds from the provisions of Sections 18(f), 18(g) and
18(i) of the 1940 Act to the extent that the issuance and sale of multiple
classes of shares representing interests in the same Countrywide Fund might be
deemed: (a) to result in a "senior security" within the meaning of Section
18(g); (b) prohibited by Section 18(f); and (c) to violate the equal voting
provisions of Section 18(i).
The Distributor believes that the Multiple Class Distribution System
as described herein will better enable the Countrywide Funds to meet the
competitive demands of today's financial services industry. Under the Multiple
Class Distribution System, an investor will be able to choose the method of
purchasing shares that is most beneficial given the amount of his or her
purchase, the length of time the investor expects to hold his or her shares, and
other relevant circumstances. The System permits the Countrywide Funds to
facilitate both the distribution of their securities and provide investors with
a broader choice as to the method of purchasing shares without assuming
excessive accounting and bookkeeping costs or unnecessary investment risks.
The allocation of expenses and voting rights relating to the Rule 12b-1
plans in the manner described is equitable and does not discriminate against any
group of shareholders. In addition, such arrangements should not give rise to
any conflicts of
- 14 -
<PAGE>
interest because the rights and privileges of each class of shares are
substantially identical.
The Distributor believes that the Multiple Class Distribution System
will not increase the speculative character of the shares of the Countrywide
Funds. The Multiple Class Distribution System does not involve borrowing, nor
will it affect the Countrywide Funds' existing assets or reserves, and does not
involve a complex capital structure. Nothing in the Multiple Class Distribution
System suggests that it will facilitate control by holders of any class of
shares.
The Distributor believes that the ability of the Funds to implement
the CDSC is appropriate in the public interest, consistent with the protection
of investors, and consistent with the purposes fairly intended by the policy and
provisions of the 1940 Act. The CDSC arrangement will provide shareholders the
option of having their full payment invested for them at the time of their
purchase of shares of the Funds with no deduction of a sales charge.
CONDITIONS OF OPERATING UNDER THE MULTIPLE CLASS DISTRIBUTION SYSTEM
- --------------------------------------------------------------------
The operation of the Multiple Class Distribution System shall at all
times be in accordance with Rule 18f-3 under the 1940 Act and all other
applicable laws and regulations, and in addition, shall be subject to the
following conditions:
1. Each class of shares will represent interests in the
same portfolio of investments of a Countrywide Fund, and be
- 15 -
<PAGE>
identical in all material respects, except as set forth below. The only
differences among the various classes of a Countrywide Fund will relate solely
to: (a) the impact of the disproportionate Rule 12b-1 distribution plan payments
allocated to each of the Class A shares, Class B shares or Class C shares of a
Fund; (b) the impact of the Rule 12b-1 distribution plan payments imposed on
Retail shares but not Institutional shares of a Money Market Fund; (c) Class
Expenses, which are limited to (i) transfer agency fees (including the
incremental cost of monitoring a CDSC applicable to a specific class of shares),
(ii) printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxies to current
shareholders of a specific class, (iii) SEC and Blue Sky registration fees
incurred by a class of shares, (iv) the expenses of administrative personnel and
services as required to support the shareholders of a specific class, (v)
litigation or other legal expenses relating to a specific class of shares, (vi)
Trustees' fees or expenses incurred as a result of issues relating to a specific
class of shares, and (vii) accounting fees and expenses relating to a specific
class of shares; (d) the fact that each class will vote separately as a class
with respect to the Rule 12b-1 distribution plans or any other matter affecting
only that class; (e) the different exchange privileges of the various classes of
shares; and (f) the designation of each class of shares of the Countrywide
Funds. Any additional incremental expenses not specifically identified
- 16 -
<PAGE>
above that are subsequently identified and determined to be properly allocated
to one class of shares shall not be so allocated until approved by the Board of
Trustees.
2. The Trustees of each Trust, including a majority of the Trustees who
are not interested persons of the Trust, have approved this Plan as being in the
best interests of each class individually and each Countrywide Fund as a whole.
In making this finding, the Trustees evaluated the relationship among the
classes, the allocation of expenses among the classes, potential conflicts of
interest among classes, and the level of services provided to each class and the
cost of those services.
3. Any material changes to this Plan, including but not limited to a
change in the method of determining Class Expenses that will be applied to a
class of shares, will be reviewed and approved by votes of the Board of Trustees
of each Trust, including a majority of the Trustees who are not interested
persons of the Trust.
4. On an ongoing basis, the Trustees of each of the Trusts, pursuant to
their fiduciary responsibilities under the 1940 Act and otherwise, will monitor
each Countrywide Fund for the existence of any material conflicts between the
interests of the classes of shares. The Trustees, including a majority of the
Trustees who are not interested persons of the Trust, shall take such action as
is reasonably necessary to eliminate any such conflicts that may develop. The
Distributor will be responsible for reporting any potential or existing
conflicts to the
- 17 -
<PAGE>
Trustees. If a conflict arises, the Distributor at its own cost will remedy
such conflict up to and including establishing a new registered management
investment company.
5. The Trustees of each Trust will receive quarterly and annual
Statements complying with paragraph (b)(3)(ii) of Rule 12b-1, as it may be
amended from time to time. In the Statements, only distribution expenditures
properly attributable to the sale of a class of shares will be used to support
the Rule 12b-1 fee charged to shareholders of such class of shares. Expenditures
not related to the sale of a particular class will not be presented to the
Trustees to justify any fee attributable to that class. The Statements,
including the allocations upon which they are based, will be subject to the
review and approval of the independent Trustees in the exercise of their
fiduciary duties.
6. Dividends paid by a Countrywide Fund with respect to each class of
shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day, and will be in the same amount,
except that distribution fee payments and Class Expenses relating to each
respective class of shares will be borne exclusively by that class.
7. The Countrywide Funds have established the manner in which the net
asset value of the multiple classes of shares will be determined and the manner
in which dividends and distributions will be paid. Attached hereto as Exhibit A
is a procedures memorandum and worksheets with respect to the methodology and
- 18 -
<PAGE>
procedures for calculating the net asset value and dividends and distributions
of the various classes and the proper allocation of income and expenses among
the classes.
8. The Distributor represents that it has in place, and will continue
to maintain, adequate facilities in place to ensure implementation of the
methodology and procedures for calculating the net asset value and dividends and
distributions among the various classes of shares.
9. If a Countrywide Fund offers separate classes of shares through
separate prospectuses, each such prospectus will disclose (i) that the
Countrywide Fund issues other classes, (ii) that those other classes may have
different sales charges and other expenses, which may affect performance, (iii)
a telephone number investors may call to obtain more information concerning the
other classes available to them through their sales representative, and (iv)
that investors may obtain information concerning those classes from their sales
representative or the Distributor.
10. The Distributor has adopted compliance standards as to when Class
A, Class B and Class C shares may appropriately be sold to particular investors.
The Distributor will require all persons selling shares of the Countrywide Funds
to agree to conform to such standards.
11. Each Countrywide Fund will briefly describe the salient
features of the Multiple Class Distribution System in its prospectus. Each
Countrywide Fund will disclose in its
- 19 -
<PAGE>
prospectus the respective expenses, performance data, distribution arrangements,
services, fees, sales loads, deferred sales loads and exchange privileges
applicable to each class of shares offered through that prospectus. Each
Countrywide Fund will disclose the respective expenses and performance data
applicable to each class of shares in every shareholder report. The shareholder
reports will contain, in the statement of assets and liabilities and statement
of operations, information related to the Countrywide Fund as a whole generally
and not on a per class basis. Each Countrywide Fund's per share data, however,
will be prepared on a per class basis with respect to all classes of shares of
such Countrywide Fund. The information provided by the Trusts for publication in
any newspaper or similar listing of the Funds' net asset values and public
offering prices will separately present Class A, Class B and Class C shares.
12. The Trusts will comply with the provisions of Rule 6c-10 under the
1940 Act, IC-20916 (February 23, 1995), as such rule is currently adopted and as
it may be amended.
<PAGE>
EXHIBIT A
COUNTRYWIDE INVESTMENT TRUST
COUNTRYWIDE STRATEGIC TRUST
COUNTRYWIDE TAX-FREE TRUST
MULTIPLE-CLASS FUNDS
METHODOLOGY, PROCEDURES
AND
INTERNAL ACCOUNTING CONTROLS
<PAGE>
INTRODUCTION
Countrywide Investment Trust, Countrywide Tax-Free Trust and
Countrywide Strategic Trust (the "Trusts") are Massachusetts business trusts
registered under the Investment Company Act of 1940 as open-end management
investment companies. Countrywide Investments, Inc. (the "Distributor") acts as
the investment manager to each Countrywide Fund and serves as each Countrywide
Fund's principal underwriter. The Distributor is a subsidiary of Countrywide
Financial Services, Inc. The Trusts presently offer the following series of
shares (collectively, the "Funds") representing interests in separate investment
portfolios:
Countrywide Strategic Trust Countrywide Tax-Free Trust
U.S. Government Securities Fund Tax-Free Intermediate Term Fund
Treasury Total Return Fund Ohio Insured Tax-Free Fund
*Utility Fund
*Equity Fund
Countrywide Investment Trust
Intermediate Term Government Income Fund
*Global Bond Fund
Adjustable Rate U.S. Government Securities Fund
* Periodic (non-daily) dividend Funds
Each Fund may offer multiple classes of shares as more fully described
in the Trusts' Rule 18f-3 Plan. The Multiple Class Distribution System would
enable each Fund to offer investors the option of purchasing shares in one of
three manners: (1) subject to a conventional front-end sales load and a
distribution fee not to exceed .35% of average net assets (Class A shares); (2)
subject to either no front-end sales load or to a front-end sales load which is
smaller than the sales load on Class A shares, and also subject to a
distribution fee and service fee of up to 1% of average net assets (Class B
shares); or (3) subject to a contingent deferred sales charge and a distribution
fee and service fee of up to 1% of average net assets (Class C shares). Each of
the Funds which invests primarily in domestic debt securities intends that
substantially all net investment income will be declared as a dividend daily and
paid monthly. Each of the Funds designated by an asterisk in the above chart
declares and pays net investment income at the end of each calendar quarter
(such Funds are referred to herein as "periodic dividend Funds"). Future series
of the Trusts may declare dividends daily or periodically. The Funds and any
future series of the Trusts will declare and pay substantially all net realized
gains, if any, at least annually.
The Trusts presently offer the following series of shares
(collectively, the "Money Market Funds") representing interests in separate
investment portfolios:
Countrywide Tax-Free Trust
Florida Tax-Free Money Fund
Ohio Tax-Free Money Fund
- 1 -
<PAGE>
Each Money Market Fund may offer two classes of shares as more fully
described in the Trusts' Rule 18f-3 Plan. The Multiple Class Distribution System
would enable each Money Market Fund to offer investors the option of purchasing
shares in one of two manners: (1) subject to a distribution fee not to exceed
.35% of average net assets (Retail shares); or (2) subject to no distribution
fee with a higher minimum initial investment requirement (Institutional shares).
Each of the Money Market Funds intends that substantially all net investment
income will be declared as a dividend daily and paid monthly.
Pursuant to an Accounting Services Agreement, Countrywide Fund
Services, Inc. ("CFS") maintains the Countrywide Funds' accounting records and
performs the daily calculations of each Countrywide Fund's net asset value. Thus
the procedures and internal accounting controls for the Countrywide Funds
include the participation of CFS.
The internal accounting control environment at CFS provides for minimal
risk of error. This has been accomplished through the use of competent and
well-trained employees, adequate facilities and established internal accounting
control procedures.
Additional procedures and internal accounting controls have been
designed for the multiple class funds. These procedures and internal accounting
controls have been reviewed by management of the Trusts and CFS to ensure that
the risks associated with multiple- class funds are adequately addressed.
The specific internal accounting control objectives and the related
methodology, procedures and internal accounting controls to achieve these stated
objectives are outlined below.
METHODOLOGY, PROCEDURES AND INTERNAL
ACCOUNTING CONTROLS FOR MULTIPLE-CLASS FUNDS
The three internal accounting control objectives to be achieved are:
(1) The daily net asset value for all classes of shares of
each Countrywide Fund is accurately calculated.
(2) Recorded expenses of a Countrywide Fund are properly
allocated between each class of shares.
(3) Dividend distributions are accurately calculated for each
class of shares.
1. Control Objective
The daily net asset value for all classes of shares of each Countrywide
Fund is accurately calculated.
- 2 -
<PAGE>
Methodology, Procedures and Internal Accounting Controls
--------------------------------------------------------
a. Securities of the Funds will be valued daily at their current
market value by a reputable pricing source. Security positions
will be reconciled from the Trusts' records and to custody
records and reviewed for completeness and accuracy.
b. Securities of the Money Market Funds will be valued daily on
an amortized cost basis in accordance with written procedures
adopted pursuant to Rule 2a-7 of the 1940 Act.
c. Prepaid and intangible assets will be amortized over their
estimated useful lives. These assets will be reviewed monthly
to ensure a proper presentation and amortization during the
period.
d. Investment income, realized and unrealized gains or losses
will be calculated daily from CFS's portfolio system and
reconciled to the general ledger. Yields and fluctuations in
security prices will be monitored on a daily basis by CFS
personnel. Interest and dividend receivable amounts will be
reconciled to holdings reports.
e. An estimate of all expenses for each Countrywide Fund will be
accrued daily. Daily expense accruals will be reviewed and
revised, as required, to reflect actual payments made to
vendors.
f. Capital accounts for each class of shares will be updated
based on daily share activity and reconciled to transfer
agent reported outstanding shares.
g. All balance sheet asset, liability and capital accounts
will be reconciled to subsidiary records for completeness
and accuracy.
h. For each Countrywide Fund, a pricing worksheet (see
attached example) will be prepared daily which calculates
the net asset value of settled shares by class (for the
Money Market Funds and the other daily dividend funds) or
net asset value of outstanding shares (for periodic
dividend funds) and the percentage of net asset value of
such class to the total of all classes of shares.
Investment income and joint expenses will be allocated by
class of shares according to such percentages. Realized
and unrealized gains will be allocated by class of shares
according to such percentages.
i. Prior day net assets by class will be rolled forward to
current day net assets by class of shares by adjusting for
current day income, expense and distribution activity.
(There may or may not be distribution activity in the
periodic dividend funds.) Net assets by class of shares
will then be divided by the number of outstanding shares
for each class to obtain the net asset value per share.
Net asset values will be reviewed and approved by
- 3 -
<PAGE>
supervisors.
j. Net asset values per share of the different classes of shares
for daily dividend funds should be identical except with
respect to possible differences attributable to rounding.
Differences, if any, will be investigated by the accounting
supervisor.
k. Net asset values per share of the different classes of shares
for the periodic dividend funds may be different as a result
of accumulated income between distribution dates and the
effect of class specific expenses. Other differences, if any,
will be investigated by the accounting supervisor.
2. Control Objective
Recorded expenses of a Countrywide Fund are properly allocated between
each class of shares.
Methodology, Procedures and Internal Accounting Controls
--------------------------------------------------------
a. Expenses will be classified as being either joint or class
specific on the pricing worksheet.
b. Certain expenses will be attributable to more than one
Countrywide Fund. Such expenses will be first allocated
among the Countrywide Funds, based on the aggregate net
assets of such Countrywide Funds, and then borne on such
basis by each Countrywide Fund and without regard to
class. These expenses could include, for example,
Trustees' fees and expenses, unallocated audit and legal
fees, insurance premiums, expenses relating to shareholder
reports and printing expenses. Expenses that are
attributable to a particular Countrywide Fund but not to a
particular class thereof will be borne by each class on
the basis of the net assets of such class in relation to
the aggregate net assets of the Countrywide Fund. These
expenses could include, for example, advisory fees and
custodian fees, and fees related to the preparation of
separate documents for current shareholders of a
particular Countrywide Fund.
c. Class specific expenses are those identifiable with each
individual class of shares. These expenses include 12b-1
distribution fees; transfer agent fees as identified by
CFS as being attributable to a specific class; printing
and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and
proxies to current shareholders of a particular class; SEC
and Blue Sky registration fees; the expenses of
administrative personnel and services required to support
the shareholders of a specific class; litigation or other
legal expenses relating solely to one class of shares;
Trustees' fees incurred as a result of issues relating to
one class of shares; and accounting fees and expenses
relating to a specific class of shares.
- 4 -
<PAGE>
d. Joint expenses will be allocated daily to each class of shares
based on the percentage of the net asset value of shares of
such class to the total of the net asset value of shares of
all classes of shares. Class specific expenses will be charged
to the specific class of shares. Both joint expenses and class
specific expenses are compared against expense projections.
e. The total of joint and class specific expense limits will
be reviewed to ensure that voluntary or contractual
expense limits are not exceeded. Amounts will be adjusted
to ensure that any limits are not exceeded. Expense
waivers and reimbursements will be calculated and
allocated to each class of shares based upon the pro rata
percentage of the net assets of a Countrywide Fund as of
the end of the prior day, adjusted for the previous day's
share activity.
f. Each Fund and class will accrue distribution expenses at a
rate (but not in excess of the applicable maximum
percentage rate) which will be reviewed by the Board of
Trustees on a quarterly basis. Such distribution expenses
will be calculated at an annual rate not to exceed .25%
(except that such amount is .35% for the series of
Countrywide Investment Trust) of the average daily net
assets of a Fund's Class A shares (including Retail shares
of a Money Market Fund) and not to exceed 1% of the
average daily net assets of a Fund's Class B shares and
Class C shares. Under the distribution plans, payments
will be made only for expenses incurred in providing
distribution related services. Unreimbursed distribution
expenses of the Distributor will be determined daily and
the Distributor shall not be entitled to reimbursement for
any amount with respect to any day on which there exist no
unreimbursed distribution expenses.
g. Expense accruals for both joint and class specific expenses
are reviewed each month. Based upon these reviews, adjustments
to expense accruals or expense projections are made as needed.
h. Expense ratios and yields for each class of shares will be
reviewed daily to ensure that differences in yield relate
solely to acceptable expense differentials.
i. Any change to the classification of expenses as joint or
class specific is reviewed and approved by the Board of
Trustees.
j. CFS will perform detailed expense analyses to ensure that
expenses are properly charged to each Countrywide Fund and
to each class of shares. Any expense adjustments required
- 5 -
<PAGE>
as a result of this process will be made.
3. Control Objective
Dividend distributions are accurately calculated for each class of
shares.
Methodology, Procedures and Internal Accounting Controls
---------------------------------------------------------
a. The Money Market Funds and the other daily dividend Funds
declare substantially all net investment income daily.
b. The periodic dividend Funds declare substantially all net
investment income periodically.
c. Investment income, including amortization of discount and
premium, where applicable, is recorded by each Countrywide
Fund and is allocated to each class of shares based upon its
pro rata percentage of the net assets of the Countrywide Fund
as of the end of the prior day, adjusted for the previous
day's share activity.
d. For Money Market Funds and the other daily dividend Funds,
distributable income is calculated for each class of shares on
the pricing worksheet from which daily dividends and
distributions are calculated. The dividend rates are
calculated on a settlement date basis for class shares
outstanding.
e. Each non-daily dividend Fund will determine the amount of
accumulated income available for all classes after
deduction of allocated expenses but before consideration
of any class specific expenses. This amount will be
divided by total outstanding shares for all classes
combined to arrive at a gross dividend rate for all
shares. From this gross rate, a class specific amount per
share for each class (representing the unique and
incrementally higher, if any, expenses accrued during the
period to that class divided by the shares outstanding for
that class) is subtracted. The result is the actual per
share rate available for each class in determining amounts
to distribute.
f. Realized capital gains, if any, are allocated daily to each
class based upon its relative percentage of the total net
assets of the Countrywide Fund as of the end of the prior day,
adjusted for the previous day's share activity.
g. Capital gains are distributed at least once every twelve
months with respect to each class of shares.
h. The capital gains distribution rate will be determined on
the ex-date by dividing the total realized gains of the
- 6 -
<PAGE>
Countrywide Fund to be declared as a distribution by the total
outstanding shares of the Countrywide Fund as of the record
date.
i. Capital gains dividends per share should be identical for
each class of shares within a Countrywide Fund.
Differences, if any, will be investigated and resolved.
j. Distributions are reviewed annually by CFS at fiscal year end
and as required for excise tax purposes during the fiscal year
to ensure compliance with IRS regulations and accuracy of
calculations.
There are several pervasive procedures and internal accounting controls which
impact all three of the previously mentioned objectives.
a. CFS's supervisory personnel will be involved on a daily basis
to ensure that the methodology and procedures for calculating
the net asset value and dividend distribution for each class
of shares is followed and a proper allocation of expenses
among each class of shares is performed.
b. CFS fund accountants will receive overall supervision.
Their work with regard to multiple class calculations will
be reviewed and approved by supervisors.
c. CFS's pricing worksheets will be clerically checked and
verified against corresponding computer system generated
reports.
- 7 -
<PAGE>
Sample Multiple Class Worksheet
Allocation Methodology - Value of Shares Outstanding (periodic dividend Funds)
Value of Settled Shares Outstanding (daily dividend Funds)
Fund ______________________________
Date ______________________________
Total
(T) (A) (B) (C)
1 Prior day NAV per share (unrounded)
Allocation Percentages
Complete for all Funds:
2 Shares O/S - prior day
3 Prior day shares activity
4 Adjusted shares O/S [2 + 3]
5 Adjusted net assets [4 x 1]
6 % Assets by class
For daily dividend funds complete Rows 7 - 11
For periodic (non daily) dividend funds
insert same # from Rows 2 - 6
7 Settled shares prior day
8 Prior day settled shares activity
9 Adjusted settled shares O/S [7 & 8]
10 Adjusted settled assets [9 x 1]
11 % Assets by class
Income and Expenses
12 Daily income * Expenses:
13 Management Fee*
14 12-1 Fee
15 Other Joint Expenses*
16 Direct Class Expenses
17 Daily expenses [13+14+15+16]
18 Daily Net Income [12 - 17]
19 Dividend Rate (Daily Dividend Funds Only)
[18/9]
Capital
20 Income distribution
21 Undistributed Net Income [18 - 20]
22 Capital share activity
23 Realized Gains/Losses:
24 Short-Term**
25 Long-Term**
26 Capital gain distribution
27 Unrealized appreciation/depreciation**
28 Daily net asset change
[21 + 22 + 24 + 25 + 26 + 27]
- 8 -
<PAGE>
Sample Multiple Class Worksheet
Allocation Methodology - Value of Shares Outstanding (periodic dividend Funds)
Value of Settled Shares Outstanding (daily dividend Funds)
Fund ______________________________
Date ______________________________
Total
(T) (A) (B) (C)
NAV Proof
29 Prior day net assets
30 Current day net assets [28 + 29]
31 NAV per share [30 / 4]
32 Sales Load as a percent of offering price
33 Offering Price [31 / (100% - 32)]
* - Allocated based on Line 11 percentages.
** - Allocated based on Line 6 percentages.
- 9 -
<PAGE>
MULTIPLE CLASS PRICING
FINANCIAL STATEMENT DISCLOSURE
Statement of Assets and Liabilities
- -----------------------------------
- Assets and liabilities will be disclosed in accordance
with standard reporting format.
- The following will be disclosed for each class:
Net Assets:
Class A Shares
--------------
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Unrealized appreciation (depreciation) on
investments - net
Net Assets - equivalent to $ --- per share based
on --- shares outstanding.
Class B Shares
--------------
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Unrealized appreciation (depreciation) on
investments - net
Net Assets - equivalent to $--- per share based
on --- shares outstanding.
Class C Shares
--------------
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Unrealized appreciation (depreciation) on
investments - net
Net Assets - equivalent to $--- per share based
on --- shares outstanding.
- 10 -
<PAGE>
Net Assets for Money Market Funds:
Retail Shares
--------------------------------------
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Net Assets - equivalent to $1.00 per share based on
--- shares outstanding.
Institutional Shares
--------------------------------------
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Net Assets - equivalent to $1.00 per share based on
--- shares outstanding.
Statement of Operations
- -----------------------
- Standard reporting format, except that class specific expenses
will be disclosed for each class.
Statement of Changes in Net Assets
- -----------------------------------
- Show components by each class of shares and in total as
follows:
Current Year
- -------------------------------------------------------------------------------
Total Class A Class B Class C Retail Institutional
Prior Year
- -------------------------------------------------------------------------------
Total Class A Class B Class C Retail Institutional
Selected Share Data and Ratios
- Show components by each class as follows:
Current Year
- -------------------------------------------------------------------------------
Class A Class B Class C Retail Institutional
Prior Years
- -------------------------------------------------------------------------------
Class A Class B Class C Retail Institutional
Notes to Financial Statements
- Note on share transactions will include information on
each class of shares for two years
- Notes will include additional disclosure regarding
allocation of expenses between classes.
- Notes will describe the distribution arrangements,
incorporating disclosure on any classes' 12b-1 fee
arrangements.
- 11 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE TAX-FREE TRUST, a business trust organized under the
laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside his
name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints JOHN F.
SPLAIN and SANDOR E. SAMUELS, and each of them, his attorneys for him and in
his name, place and stead, to execute and file any amended registration
statement or statements and amended prospectus or prospectuses or amendments or
supplements to any of the foregoing, hereby giving and granting to said
attorneys full power and authority to do and perform all and every act and
thing whatsoever requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he might or could do
if personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
23rd day of July, 1997.
/s/ John R. Delfino
--------------------------------
JOHN R. DELFINO
Trustee
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On the 23rd day of July, 1997, personally appeared before me, JOHN R.
DELFINO, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 23rd day of July, 1997.
/s/ C. Joy Estes
----------------------------
Notary Public
C. Joy Estes
Comm.#1011575
Notary Public-California
LOS ANGELES COUNTY
My Comm.Expires DEC 19, 1997