COUNTRYWIDE TAX-FREE TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1996
Amended August 15, 1997
Tax-Free Money Fund
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
Ohio Tax-Free Money Fund
Florida Tax-Free Money Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the applicable Fund of Countrywide
Tax-Free Trust dated November 1, 1996 and revised March 31, 1997 (except for the
Ohio Tax-Free Money Fund, which Prospectus is dated January 7, 1997 and revised
March 31, 1997). A copy of a Fund's Prospectus can be obtained by writing the
Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202-4094, or by
calling the Trust nationwide toll-free 800-543-0407, in Cincinnati 629-2050.
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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........................................................23
THE INVESTMENT ADVISER AND UNDERWRITER.......................................26
DISTRIBUTION PLANS...........................................................29
SECURITIES TRANSACTIONS......................................................31
PORTFOLIO TURNOVER...........................................................33
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE.........................34
OTHER PURCHASE INFORMATION...................................................37
TAXES........................................................................39
REDEMPTION IN KIND...........................................................41
HISTORICAL PERFORMANCE INFORMATION...........................................42
PRINCIPAL SECURITY HOLDERS.................................................. 47
CUSTODIAN....................................................................47
AUDITORS.....................................................................48
TRANSFER AGENT . ............................................................48
TAX EQUIVALENT YIELD TABLES..................................................49
ANNUAL REPORT . . . .........................................................52
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THE TRUST
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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 California Tax-Free Money Fund and the
Kentucky Tax-Free Fund is contained in separate Statements 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 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,
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the expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Class A shares are
subject to a lower minimum initial investment requirement and offer certain
shareholder services not available to Class B shares such as checkwriting
privileges and automatic investment and redemption plans. Both Class A shares
and Class C shares of the Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund represent an interest in the same assets of such Fund, have the
same rights and are identical in all material respects except that (i) Class C
shares bear the expenses of higher distribution fees; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable, including transfer agent fees attributable to a specific class of
shares, printing and postage expenses related to preparing and distributing
materials to current shareholders of a specific class, registration fees
incurred by a specific class of shares, the expenses of administrative personnel
and services required to support the shareholders of a specific class,
litigation or other legal expenses relating to a class of shares, Trustees' fees
or expenses incurred as a result of issues relating to a specific class of
shares and accounting fees and expenses relating to a specific class of shares;
and (iii) each class has exclusive voting rights with respect to matters
relating to its own distribution arrangements. The Board of Trustees may
classify and reclassify the shares of a Fund into additional classes of shares
at a future date.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of an instance where such result has occurred. In addition, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the Trustees.
The Trust Agreement also provides for the indemnification out of the Trust
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Moreover, it provides that the Trust will,
upon request, assume the defense of any claim made against any shareholder for
any act or obligation of the Trust and satisfy any judgment thereon. As a
result, and particularly because the Trust assets are readily marketable and
ordinarily substantially exceed liabilities, management believes that the risk
of shareholder liability is
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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
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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 Florida Tax-Free Money
Fund invests primarily in Florida Obligations, which are Municipal Obligations
issued by the State of Florida and its political subdivisions, agencies,
authorities and instrumentalities and other qualifying issuers, the value of
which is exempt from the Florida intangible personal property tax, which pay
interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax.
TAX-EXEMPT BONDS. Tax-exempt bonds are issued to obtain funds to
construct, repair or improve various facilities such as airports, bridges,
highways, hospitals, housing, schools, streets and water and sewer works, to pay
general operating expenses or to refinance outstanding debts. They also may be
issued to finance various private activities, including the lending of funds to
public or private institutions for construction of housing, educational or
medical facilities or the financing of privately owned or operated facilities.
The two principal classifications of tax-exempt bonds are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility.
TAX-EXEMPT NOTES. Tax-exempt notes generally are used to
provide for short-term capital needs and generally have
maturities of one year or less. Tax-exempt notes include:
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1. Tax Anticipation Notes. Tax anticipation notes are issued
to finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues, such as
income, sales, use and business taxes, and are payable from these
specific future taxes.
2. Revenue Anticipation Notes. Revenue anticipation notes are
issued in expectation of receipt of other kinds of revenue, such as
federal revenues available under the federal revenue sharing programs.
3. Bond Anticipation Notes. Bond anticipation notes are issued
to provide interim financing until long-term financing can be arranged.
In most cases, the long-term bonds then provide the money for the
repayment of the notes.
TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial paper typically
represents short-term, unsecured, negotiable promissory notes issued by a state
and its political subdivisions. These notes are issued to finance seasonal
working capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are refinanced
with long-term debt. In most cases, tax-exempt commercial paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions and is
actively traded.
WHEN-ISSUED OBLIGATIONS. Each Fund may invest in when- issued Municipal
Obligations. In connection with these investments, each Fund will direct its
Custodian to place cash, U.S. Government obligations or other liquid high-grade
debt instruments in a segregated account in an amount sufficient to make payment
for the securities to be purchased. When a segregated account is maintained
because a Fund purchases securities on a when-issued basis, the assets deposited
in the segregated account will be valued daily at market for the purpose of
determining the adequacy of the securities in the account. If the market value
of such securities declines, additional cash or securities will be placed in the
account on a daily basis so that the market value of the account will equal the
amount of the Fund's commitments to purchase securities on a when-issued basis.
To the extent funds are in a segregated account, they will not be available for
new investment or to meet redemptions. Securities purchased on a when-issued
basis and the securities held in a Fund's portfolio are subject to changes in
market value based upon changes in the level of interest rates (which will
generally result in all of those securities changing in value in the same way,
i.e, all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise). Therefore, if in order to achieve
higher returns, a Fund
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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 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
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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.
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QUALITY RATINGS OF MUNICIPAL OBLIGATIONS
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The Tax-Free Money Fund, the Ohio 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 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
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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
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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
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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
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sign to show relative standing within the major rating categories.
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
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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.
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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.
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 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
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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
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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 evidencing the obligation of a bank to pay a draft which has been
drawn on it by a customer, which instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon maturity.
The Funds will only invest in bankers' acceptances of banks having a short-term
rating of A-1 by Standard & Poor's Ratings Group or Prime-1 by Moody's Investors
Service, Inc. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Each Fund
will not invest in time deposits maturing in more than seven days if, as a
result thereof, more than 10% of the value of its net assets would be invested
in such securities and other illiquid securities.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from
one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations. Each Fund will only
invest in taxable commercial paper provided the paper is rated in one of the two
highest categories by any two NRSROs (or by any one NRSRO if the security is
rated by only that NRSRO). Each Fund may also invest in unrated commercial paper
of issuers who have outstanding unsecured debt rated Aa or better by Moody's or
AA or better by Standard & Poor's. Certain notes may have floating or variable
rates. Variable and floating rate notes with a demand notice period exceeding
seven days will be subject to each Fund's restrictions on illiquid investments
(see "Investment Limitations") unless, in the judgment of the Adviser, subject
to the direction of the Board of Trustees, such note is liquid. The Funds do not
presently intend to invest in taxable commercial paper.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Service, Inc. Among the factors considered by Moody's in
assigning ratings are the following: valuation of the management of the issuer;
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial strength of the parent company and the relationships which
exist with the issuer; and recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors are all considered in
determining whether the commercial paper is rated Prime-1 or Prime-2. Commercial
paper rated A (highest quality) by Standard & Poor's Ratings Group has the
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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
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.
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<PAGE>
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 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
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<PAGE>
provided that the Trustees determine that the fee paid to the placing broker is
reasonable and based solely upon services rendered, that the Trustees separately
consider the propriety of any fee shared by the placing broker with the
borrower, and that the fees are not used to compensate the Adviser or any
affiliated person of the Trust or an affiliated person of the Adviser or other
affiliated person. The terms of the Funds' loans must meet applicable tests
under the Internal Revenue Code and permit the 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.
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<PAGE>
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.
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.
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<PAGE>
12. Common Stocks. Each Fund will not invest in common stocks.
13. Securities Owned by Affiliates. Each Fund will not purchase or
retain the securities of any issuer if, to the Trust's knowledge, those Trustees
and officers of the Trust or of the Adviser, who individually own beneficially
more than 0.5% of 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
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<PAGE>
(1) above. The Fund will not mortgage, pledge or hypothecate more than one-third
of its assets in connection with borrowings.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of its portfolio securities (including
restricted securities), the Fund may be deemed an underwriter under certain
federal securities laws.
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.
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<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 FLORIDA TAX-FREE MONEY FUND ARE:
1. Borrowing Money. The 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. 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 the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than 10% of the value of its total assets in connection with borrowings.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of its portfolio securities (including
restricted securities), the Fund may be deemed an underwriter under certain
federal securities laws.
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
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<PAGE>
securities in which the Fund may otherwise invest would be considered to be such
commodities, contracts or investments.
7. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
a portion of an issue of tax-exempt obligations or publicly distributed bonds,
debentures or other securities.
8. Margin Purchases. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short-term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities.
9. Short Sales and Options. The Fund will not sell any securities short
or sell put and call options. This limitation is not applicable to the extent
that sales by the Fund of tax-exempt obligations with puts attached or sales by
the Fund of other securities in which the Fund may otherwise invest would be
considered to be sales of options.
10. Other Investment Companies. The Fund will not invest more than 5%
of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Concentration. The Fund will not invest more than 25% of its total
assets in a particular industry; this limitation is not applicable to
investments in tax-exempt obligations issued by governments or political
subdivisions of governments.
12. Senior Securities. The 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
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<PAGE>
company or investment trust. The Funds will not purchase securities for which
there are legal or contractual restrictions on resale or enter into a repurchase
agreement maturing in more than seven days if, as a result thereof, more than
10% of the value of a Fund's net assets would be invested in such securities.
The statements of intention in this paragraph reflect nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
INSURERS OF THE OHIO INSURED TAX-FREE FUND'S PORTFOLIO SECURITIES
- -----------------------------------------------------------------
In connection with its investments in insured long-term Ohio
Obligations, the Ohio Insured Tax-Free Fund may purchase insurance from, or
obligations insured by, one of the following recognized insurers of municipal
obligations: MBIA Insurance Corp.("MBIA"), AMBAC Indemnity Corp. ("AMBAC"),
Financial Guaranty Insurance Co. ("FGIC") or Financial Security Assurance Inc.
("FSA"). Each insurer is rated Aaa by Moody's and AAA by S&P and each insurer
maintains a statutory capital claims ratio well below the exposure limits set by
the Insurance Commissioner of New York (300:1 insurance risk exposure to every
dollar of statutory capital). While such insurance reduces the risk that
principal or interest will not be paid when due, it is not a protection against
market risks arising from other factors, such as changes in prevailing interest
rates. If the issuer defaults on payments of interest or principal, the trustee
and/or payment agent of the issuer will notify the insurer who will make payment
to the bondholders. There is no assurance that any insurance company will meet
its obligations.
MBIA has been the leader in the bond insurance market for the past
fourteen years, holding a 42% share of the market in 1995. MBIA insured
approximately $28 billion of new issue municipal bonds in 1995, as compared to
$30 billion during the previous year. Although the dollar volume of insured new
issues in the municipal market increased from 37% in 1994 to 43% in 1995,
premium levels remained very competitive. Consequently, in order to further
enhance growth prospects, insurers throughout the industry are diversifying
their products by offering other finnacial products to their exisiting client
base and by targeting both the asset-based and the international market.
Although municipal bond insurance remains the dominant component of MBIA's
written and earned premiums, the company made efforts in 1995 to capitalize on
international insurance opportunities by entering into a European joint venture
with AMBAC. MBIA is 98.4% publicly owned, with its remaining shares owned by
Aetna Casualty & Surety Company.
AMBAC is the oldest and second largest bond insurer with a 25% market
share in 1995. AMBAC's portion of the insured new issue municipal market totaled
$16.8 billion in 1995. AMBAC's management remains committed to investment grade,
zero-loss
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<PAGE>
underwriting and risk management standards. For the eighth year in a row,
AMBAC's capital charge has declined, a reflection of the company's efforts to
reposition its portfolio toward lower risk sectors. AMBAC's margin of safety
rose in 1995 to 1.4x - 1.5x, which compares favorably with S&P's minimum "AAA"
bond insurance standards of 1.25x. AMBAC is also diversifying its products and
services, which enabled it to post a 27% increase in total net par written in
1995. AMBAC is entirely owned by public shareholders.
FGIC is 99% owned by General Electric Capital Corporation and 1% owned
by Sumitomo Marine & Fire Insurance Co. Ltd. In 1995, FGIC wrote $16.7 billion
in net par municipal insurance, compared with $16.4 billion for the prior year.
This slight increase was impressive in light of the generally tight environment
in the municipal bond insurance arena. FGIC's focus is on lower-risk segments
for the municipal market, such as G.O. and water and sewer. Health care, one of
the more riskier sectors of the municipal market, represents only 5.4% of the
company's business, compared with 11.9% for the industry. FGIC's net income for
1995 was $166.9 million, compared with $179.3 million in 1994.
FSA acquired Capital Guaranty Insurance Co.("CGIC") in 1995, which
increased its market share and boosted its claims-paying resources and its
margin of safety. The cost of acquiring CGIC was largely financed with newly
issued FSA stock. In addition, FSA secured a $125 million nonrecourse line of
credit which further increased policyholder protection. The acquisition of CGIC
also enabled FSA's volume of municipal insurance to surpass its asset-backed
business. In terms of the new issue municipal market, FSA insured $4.1 billion
of new issue municipal bonds in 1995 while $2.9 billion was insured by CGIC.
Municipal net par now represents 65% of the total book of business, with asset-
backed net par exposure falling off to about 35%. The company's quality and risk
measurements are generally equal to or slightly better than most industry
averages and it also maintains a well diversified portfolio. Half of FSA's stock
is owned by U.S. West Capital Corp., 36% is publicly owned and the remaining
shares are held by Fund American Enterprises Holding Inc. and Tokio Marine and
Fire Insurance Co., Ltd.
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the
Trust and their aggregate compensation from the Trust and the funds of
Countrywide Investments (consisting of the Trust, Countrywide Investment Trust
and Countrywide Strategic Trust) for the fiscal year ended June 30, 1996. Each
Trustee who is an "interested person" of the Trust, as defined by the Investment
Company Act of 1940, is indicated by an asterisk. Each of the Trustees is also a
Trustee of Countrywide Investment Trust and Countrywide Strategic Trust.
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<PAGE>
AGGREGATE
COMPENSATION
COMPENSATION FROM
POSITION FROM COUNTRYWIDE
NAME AGE HELD TRUST INVESTMENTS
Donald L. Bodgon, MD 66 Trustee $ 0 $ 0
John R. Delfino 63 Trustee 0 0
+H. Jerome Lerner 58 Trustee 2,467 7,500
*Robert H. Leshher 57 President/Trustee 0 0
*Angelo R. Mozilo 58 Chairman/Trustee 0 0
+Oscar P. Robertson 57 Trustee 1,167 4,700
John F. Seymour, Jr. 59 Trustee 0 0
+Sebastiano Sterpa 67 Trustee 0 0
Robert G. Dorsey 40 Vice President 0 0
John F. Splain 40 Secretary 0 0
Mark J. Seger 35 Treasurer 0 0
* Mr. Leshner and Mr. Mozilo, as officers and directors of
Countrywide Investments, Inc., are each an "interested
person" of the Trust within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940.
+ 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.
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
- 24 -
<PAGE>
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.
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., 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., Capital Square Funds, The Dean
Family of Funds and The New York State Opportunity Funds and Assistant Vice
President of Williamsburg Investment Trust, Schwartz Investment Trust, Fremont
Mutual Funds, Inc., The Tuscarora Investment Trust, The Gannett Welsh & Kotler
Funds and Interactive
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<PAGE>
Investments, all of which are registered investment companies.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is 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, Fremont Mutual Funds, Inc., Capitol Square Funds, 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., Capitol Square Funds, the New York State
Opportunity Funds and the Dean Family of Funds, Assistant Treasurer of Schwartz
Investment Trust, The Tuscarora Investment Trust, The Gannett Welsh & Kotler
Funds and Interactive Investments and Assistant Secretary of Fremont Mutual
Funds, Inc.
Each Trustee, except for Messrs. Leshner and Mozilo, receives a
quarterly retainer of $1,500 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.
THE INVESTMENT ADVISER AND UNDERWRITER
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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
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$200,000,000 to $300,000,000 and .375% of such assets in excess of $300,000,000.
The total fees paid by a Fund during the first and second halves of each fiscal
year of the Trust may not exceed the semiannual total of the daily fee accruals
requested by the Adviser during the applicable six month period.
For the fiscal years ended June 30, 1996, 1995 and 1994, the Tax-Free
Money Fund paid advisory fees of $140,891, $144,305 and $162,772, respectively.
For the fiscal years ended June 30, 1996, 1995 and 1994, the Tax-Free
Intermediate Term Fund accrued advisory fees of $398,576, $472,968 and $532,184,
respectively; however, the Adviser voluntarily waived $2,768 of such fees for
the fiscal year ended June 30, 1994 in order to reduce the operating expenses of
the Fund. For the fiscal years ended June 30, 1996, 1995 and 1994, the Ohio
Insured Tax-Free Fund accrued advisory fees of $397,265, $394,825 and $419,429,
respectively; however, the Adviser reimbursed the Fund for $2,708 of Class A
expenses for the fiscal year ended June 30, 1996, voluntarily waived $14,000 of
its advisory fees and reimbursed the Fund for $5,077 of Class A expenses for the
fiscal year ended June 30, 1995 and voluntarily waived $427 of its advisory fees
for the fiscal year ended June 30, 1994 in order to reduce the operating
expenses of the Fund. For the fiscal years ended June 30, 1996, 1995 and 1994,
the Ohio Tax-Free Money Fund paid advisory fees of $1,117,233, $1,026,778 and
$1,016,929, respectively. For the fiscal years ended June 30, 1996, 1995 and
1994, the Florida Tax- Free Money Fund accrued advisory fees of $152,663,
$131,885 and $141,383, respectively; however, the Adviser voluntarily waived
$58,284, $38,141 and $65,243 of such fees for the fiscal years ended June 30,
1996, 1995 and 1994, respectively, in order to reduce the operating expenses of
the Fund.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The Adviser bears promotional expenses in
connection with the distribution of the Funds' shares to the extent that such
expenses are not assumed by the Funds under their plans of distribution (see
below). The compensation and expenses of any officer, Trustee or employee of the
Trust who is an officer, director, employee or stockholder of the Adviser are
paid by the Adviser.
By their terms, the Funds' investment advisory agreements remain in
force until February 28, 1999 and from year to year thereafter, subject to
annual approval by (a) the Board of Trustees or (b) a vote of the majority of
a Fund's outstanding voting securities; provided that in either event
continuance is also approved by a majority of the Trustees who are not
interested persons of the Trust, by a vote cast in person at a meeting called
for the purpose of voting such approval. The
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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, 1996, the aggregate underwriting commissions
on sales of the Funds' shares were $311,870 of which the Adviser paid $279,354
to unaffiliated dealers in the selling network, earned $14,509 as a
broker-dealer in the selling network and retained $18,007 in underwriting
commissions. For the fiscal year ended June 30, 1995, the aggregate underwriting
commissions on sales of the Funds' shares were $305,296 of which the Adviser
paid $274,170 to unaffiliated dealers in the selling network, earned $13,410 as
a broker-dealer in the selling network and retained $17,716 in underwriting
commissions. For the fiscal year ended June 30, 1994, the aggregate underwriting
commissions on sales of the Funds' shares were $758,606 of which the Adviser
paid $689,144 to unaffiliated dealers in the selling network, earned $33,328 as
a broker-dealer in the selling network and retained $36,134 in underwriting
commissions.
The Adviser retains the contingent deferred sales load on redemptions
of shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free
Fund which are subject to a contingent deferred sales load. For the fiscal year
ended June 30, 1996, the Adviser retained $5,802 and $349 of contingent deferred
sales loads on the redemption of Class C shares of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund, respectively.
The Funds may compensate dealers, including the Adviser and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plans" below.
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DISTRIBUTION PLANS
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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 and the
Florida Tax-Free Money Fund. Unreimbursed expenses will not be carried over from
year to year.
For the fiscal year ended June 30, 1996, the aggregate
distribution-related expenditures of the Tax-Free Money Fund ("MF"), the
Tax-Free Intermediate Term Fund ("ITF"), the Ohio Insured Tax-Free Fund ("OIF"),
the Ohio Tax-Free Money Fund ("OMF") and the Florida Tax-Free Money Fund ("FMF")
under the Class A Plan were $25,946, $115,756, $14,824, $451,624 and $8,631,
respectively. Amounts were spent as follows:
MF ITF OIF OMF FMF
Printing and mailing
of prospectuses and
reports to prospective
shareholders . . . . $1,946 $5,315 $5,009 $4,479 $3,452
Payments to broker-
dealers and others
for the sale or
retention of assets . 24,000 110,441 9,815 444,000 5,179
Other promotional
expenses . . . . . . --- --- --- 3,145 ---
------- -------- ------- -------- ------
$25,946 $115,756 $14,824 $451,624 $8,631
======= ======== ======= ======== ======
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
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.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, 1996, the aggregate distribution-related
expenditures of the Tax-Free Intermediate Term Fund ("ITF") and the Ohio Insured
Tax-Free Fund ("OIF") under the Class C Plan were $22,701 and $12,297,
respectively. Amounts were spent as follows:
ITF OIF
Printing and mailing of
prospectuses and reports
to prospective shareholders. . . . . . . $ 358 $ 288
Payments to broker-dealers and
others for the sale or
retention of assets. . . . . . . . . . . 22,343 12,009
------- -------
$22,701 $12,297
======= =======
GENERAL INFORMATION -- Agreements implementing the Plans (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plans are made in accordance with written agreements.
The continuance of the Plans and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plans or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. A Plan may be terminated at any time
by a vote of a majority of the Independent Trustees or by a vote of the holders
of a majority of the outstanding shares of a Fund or the applicable class of a
Fund. In the event a Plan is terminated in accordance with its terms, the
affected Fund (or class) will not be required to make any payments for expenses
incurred by the Adviser after the termination date. Each Implementation
Agreement terminates automatically in the event of its assignment and may be
terminated at any time by a vote of a majority of the Independent Trustees or by
a vote of the holders of a majority of the
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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 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
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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
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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 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
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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 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
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The Adviser intends to hold the portfolio securities of the Tax-Free
Money Fund, the Ohio 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
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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
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The share price (net asset value) of the shares of the Tax- Free Money
Fund, the Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund is
determined as of 12:00 noon and 4:00 p.m., Eastern time, on each day the Trust
is open for business. The share price (net asset value) and the public offering
price (net asset value plus applicable sales load) of the shares of the Tax-
Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund are determined as
of the close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time), on each day the Trust is open for business.
The Trust is open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. The Trust may also be
open for business on other days in which there is sufficient trading in a Fund's
portfolio securities that its net asset value might be materially affected. For
a description of the methods used to determine the share price and the public
offering price, see "Calculation of Share Price and Public Offering Price" in
the Prospectus.
Pursuant to Rule 2a-7 promulgated under the Investment Company Act of
1940, the Tax-Free Money Fund, the Ohio Tax-Free Money Fund 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, 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 and the Florida Tax-Free Money Fund.
Pursuant to Rule 2a-7, the Tax-Free Money Fund, the Ohio 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-
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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 or
the Florida Tax-Free Money Fund will be determined as follows, provided that the
conditions set forth below are met. The maturity of a floating rate instrument
with a demand feature (or a participation interest in such a floating rate
instrument) will be deemed to be the period of time remaining until the
principal amount owed can be recovered through demand. The maturity of a
variable rate instrument with a demand feature (or a participation interest in
such a variable rate instrument) will be deemed to be the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount owed can be recovered through demand.
The demand feature of each such instrument must entitle a Fund to
receive the principal amount of the instrument plus accrued interest, if any, at
the time of exercise and must be exercisable either (1) at any time upon no more
than thirty days' notice or (2) at specified intervals not exceeding thirteen
months and upon no more than thirty days' notice. Furthermore, the maturity of
any such instrument may only be determined as set forth above as long as the
instrument continues to receive a short-term rating in one of the two highest
categories from any two nationally recognized statistical rating organizations
("NRSROs") (or from any one NRSRO if the security is rated by only that NRSRO)
or, if not rated, is determined to be of comparable quality by the Adviser,
under the direction of the Board of Trustees. However, an instrument having a
demand feature other than an "unconditional" demand feature must have both a
short-term and a long-term rating in one of the two highest categories from any
two NRSROs (or from any one NRSRO if the security is rated by only that NRSRO)
or, if not rated, to have been determined to be of comparable quality by the
Adviser, under the direction of the Board of Trustees. An "unconditional" demand
feature is one that by its terms would be readily exercisable in the event of a
default on the underlying instrument.
The Board of Trustees has established procedures designed to stabilize,
to the extent reasonably possible, the price per share of the Tax-Free Money
Fund, the Ohio Tax-Free Money Fund 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
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percent from $1 per share and, if so, whether such deviation may result in
material dilution or is otherwise unfair to existing shareholders. In the event
the Board of Trustees determines that such a deviation exists, it will take
corrective action as it regards necessary and appropriate, including the sale of
portfolio securities prior to maturity to realize capital gains or losses or to
shorten average portfolio maturities; withholding dividends; redemptions of
shares in kind; or establishing a net asset value per share by using available
market quotations. The Board of Trustees has also established procedures
designed to ensure that each Fund complies with the quality requirements of Rule
2a-7.
While the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument, as determined by
amortized cost, is higher or lower than the price the Tax-Free Money Fund, the
Ohio Tax-Free Money Fund 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
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provided by pricing services or the Adviser may be determined without exclusive
reliance on matrixes and may take into consideration appropriate factors such as
bid prices, quoted prices, institution-size trading in similar groups of
securities, yield, quality, coupon rates, maturity, type of issue, trading
characteristics and other market data.
Since it is difficult to evaluate the likelihood of exercise or the
potential benefit of a put attached to an obligation, it is expected that such
puts will be determined to have a value of zero, regardless of whether any
direct or indirect consideration was paid.
The Board of Trustees has adopted the policy for the Tax- Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund, which may be changed
without shareholder approval, that the maturity of fixed rate or floating and
variable rate instruments with demand features will be determined as follows.
The maturity of each such fixed rate or floating rate instrument will be deemed
to be the period of time remaining until the principal amount owed can be
recovered through demand. The maturity of each such variable rate instrument
will be deemed to be the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount owed can be recovered through demand.
Taxable securities, if any, held by the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund for which market quotations are readily
available are valued at their most recent bid prices as obtained from one or
more of the major market makers for such securities. Securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees.
OTHER PURCHASE INFORMATION
- --------------------------
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of Class A
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
Class A shares of the Tax-Free Intermediate Term Fund or the Ohio Insured
Tax-Free Fund has the right to combine the cost or current net asset value
(whichever is higher) of his existing shares of the load funds distributed by
the Adviser with the amount of his current purchases in order to take advantage
of the reduced sales loads set forth in the tables in the Prospectus. The
purchaser or his dealer must notify the Transfer Agent that an investment
qualifies for a reduced sales load. The reduced load will be granted upon
confirmation of the purchaser's holdings by the Transfer Agent.
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LETTER OF INTENT. The reduced sales loads set forth in the tables in
the Prospectus may also be available to any "purchaser" (as defined in the
Prospectus) of Class A shares of the Tax-Free Intermediate Term Fund or the Ohio
Insured Tax-Free Fund who submits a Letter of Intent to the Transfer Agent. The
Letter must state an intention to invest within a thirteen month period in any
load fund distributed by the Adviser a specified amount which, if made at one
time, would qualify for a reduced sales load. A Letter of Intent may be
submitted with a purchase at the beginning of the thirteen month period or
within ninety days of the first purchase under the Letter of Intent. Upon
acceptance of this Letter, the purchaser becomes eligible for the reduced sales
load applicable to the level of investment covered by such Letter of Intent as
if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose a front-end sales load or
imposes a reduced sales load in connection with purchases of Class A shares of
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund made
under the reinvestment privilege or the purchases described in the "Reduced
Sales Load," "Purchases at Net Asset Value" or "Exchange Privilege" sections in
the Prospectus because such purchases require minimal sales effort by the
Adviser. Purchases described in the "Purchases at Net Asset Value" section may
be made for investment only, and the shares may not be resold except through
redemption by or on behalf of the Trust.
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<PAGE>
TAXES
- ------
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal and state taxes.
Each Fund has qualified and intends to qualify annually for the special
tax treatment afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; (ii) derive less than 30% of its gross income
in each taxable year from the sale or other disposition of the following assets
held for less than three months: (a) stock or securities, (b) options, futures
or forward contracts not directly related to its principal business of investing
in stock or securities; and (iii) diversify its holdings so that at the end of
each quarter of its taxable year the following two conditions are met: (a) at
least 50% of the value of the Fund's total assets is represented by cash, U.S.
Government securities, securities of other regulated investment companies and
other securities (for this purpose such other securities will qualify only if
the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
Each Fund intends to invest in sufficient obligations so that it will
qualify to pay, for federal income tax purposes, "exempt-interest dividends" (as
defined in the Internal Revenue Code) to shareholders. A Fund's dividends
payable from net tax-exempt interest earned from tax-exempt obligations will
qualify as exempt-interest dividends for federal income tax purposes if, at the
close of each quarter of the taxable year of the Fund, at least 50% of the value
of its total assets consists of tax-exempt obligations. The percentage of income
that is exempt from federal income taxes is applied uniformly to all
distributions made during each calendar year. This percentage may differ from
the actual tax-exempt percentage during any particular month.
Each Fund intends to invest primarily in obligations with interest
income exempt from federal income taxes. To the extent
- 39 -
<PAGE>
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 and the Florida Tax-Free Money Fund intends to invest
primarily in obligations the value of which is exempt from the Florida
intangible personal property tax. Distributions from net investment income and
net realized capital gains, including exempt-interest dividends, may be subject
to state taxes in other states.
Under the Internal Revenue Code, interest on indebtedness incurred or
continued to purchase or carry shares of investment companies paying
exempt-interest dividends, such as the Funds, will not be deductible by the
investor for federal income tax purposes. Shareholders should consult their tax
advisors as to the application of these provisions.
Shareholders receiving Social Security benefits may be subject to
federal income tax (and perhaps state personal income tax) on a portion of those
benefits as a result of receiving tax-exempt income (including exempt-interest
dividends distributed by the Funds). In general, the tax will apply to such
benefits only in cases where the recipient's provisional income, consisting of
adjusted gross income, tax-exempt interest income and 50% of any Social Security
benefits, exceeds a base amount ($25,000 for single individuals and $32,000 for
individuals filing a joint return). In such cases, the tax will be imposed on
the lesser of 50% of the recipient's Social Security benefits or the excess of
provisional income over the base amount. A second tier of inclusion rules for
high-income social security recipients has been added for tax years beginning
after 1993. These new rules apply to taxpayers who have provisional income over
$44,000 (married filing jointly) or $34,000 (single). For these taxpayers, the
amount of benefit subject to tax is the lesser of (1) 85% of the social security
benefit received or (2) 85% of the excess of the taxpayer's provisional income
over $44,000 (married filing jointly) or $34,000 (single) plus the smaller of
(a) $6,000 (married filing jointly) or $4,500 (single) or (b) the amount taxable
under the 50% inclusion rules described above. Shareholders receiving Social
Security benefits may wish to consult their tax advisors.
All or a portion of the sales load incurred in purchasing Class A
shares of the Tax-Free Intermediate Term Fund or shares of the Ohio Insured
Tax-Free Fund will not be included in the federal tax basis of any of such
shares sold within 90 days of their purchase (for the purpose of determining
gain or loss upon the sale of such shares) if the sales proceeds are reinvested
in 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
- 40 -
<PAGE>
so excluded from the tax basis of the shares sold will equal the amount by which
the sales load that would otherwise be applicable upon the reinvestment is
reduced. Any portion of such sales load excluded from the tax basis of the
shares sold will be added to the tax basis of the shares acquired in the
reinvestment.
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction. As of June 30, 1996, the Tax- Free Money Fund, the
Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Fund and the Florida Tax-Free Money Fund had capital loss
carryforwards for federal income tax purposes of $1,338, $1,620,782, $494, $709
and $1,198, respectively, none of which expire until at least June 30, 1999.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
- -------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
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<PAGE>
HISTORICAL PERFORMANCE INFORMATION
- -----------------------------------
Yield quotations on investments in the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund and the Florida Tax-Free Money Fund are provided on both a
current and an effective (compounded) basis. Current yields are calculated by
determining the net change in the value of a hypothetical account for a seven
calendar day period (base period) with a beginning balance of one share,
dividing by the value of the account at the beginning of the base period to
obtain the base period return, multiplying the result by (365/7) and carrying
the resulting yield figure to the nearest hundredth of one percent. Effective
yields reflect daily compounding and are calculated as follows: Effective yield
= (base period return + 1)365/7 - 1. For purposes of these calculations, no
effect is given to realized or unrealized gains or losses (the Tax-Free Money
Fund, the Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund do not
normally recognize unrealized gains and losses under the amortized cost
valuation method). The Tax-Free Money Fund's current and effective yields for
the seven days ended June 30, 1996 were 2.85% and 2.89%, respectively. The
current and effective yields for Class A shares of the Ohio Tax-Free Money Fund
for the seven days ended June 30, 1996 were 2.90% and 2.94%, respectively. The
Florida Tax-Free Money Fund's current and effective yields for the seven days
ended June 30, 1996 were 2.88% and 2.92%, respectively, for Class A shares and
3.13% and 3.18%, respectively, for Class B shares. The Tax-Free Money Fund, the
Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund may also quote a
tax- equivalent current or effective yield, computed by dividing that portion of
a Fund's current or effective yield which is tax-exempt by one minus a stated
income tax rate and adding the product to that portion, if any, of the yield
that is not tax-exempt. Based on the highest marginal federal income tax rate
for individuals (39.6%), the Tax-Free Money Fund's tax-equivalent current and
effective yields for the seven days ended June 30, 1996 were 4.72% and 4.78%,
respectively. Based on the highest combined marginal federal and Ohio income tax
rate for individuals (44.13%), the tax-equivalent current and effective yields
for Class A shares of the Ohio Tax-Free Money Fund for the seven days ended June
30, 1996 were 5.19% and 5.26%, respectively. Based on the highest marginal
federal income tax rate for individuals (39.6%), the Florida Tax-Free Money
Fund's tax-equivalent current and effective yields for the seven days ended June
30, 1996 were 4.77% and 4.83%, respectively, for Class A shares and 5.18% and
5.26%, respectively, for Class B shares.
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:
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<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, 1996
are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 year 2.42%
5 years 5.94%
10 years 5.83%
Tax-Free Intermediate Term Fund (Class C)
1 year 4.00%
Since inception (February 1, 1994) 2.57%
Ohio Insured Tax-Free Fund (Class A)
1 year .85%
5 years 6.26%
10 years 6.80%
Ohio Insured Tax-Free Fund (Class C)
1 year 4.44%
Since inception (November 1, 1993) 2.78%
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from average annual total return. A nonstandardized
quotation of total return may be 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
- 43 -
<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, 1987 5.24% 6.73%
June 30, 1988 3.88% 6.80%
June 30, 1989 5.76% 9.75%
June 30, 1990 6.35% 5.53%
June 30, 1991 7.38% 7.98%
June 30, 1992 8.78% 11.55%
June 30, 1993 10.75% 12.24%
June 30, 1994 1.70% -3.40%(1) -0.41% -4.01%(2)
June 30, 1995 6.36% 5.82% 7.75% 7.31%
June 30, 1996 4.51% 4.00% 5.05% 4.44%
(1) From date of initial public offering on February 1, 1994.
(2) From date of initial public offering on November 1, 1993.
A nonstandardized quotation may also indicate average annual compounded rates of
return without including the effect of the applicable front-end or contingent
deferred sales load or over periods other than those specified for average
annual total return. The average annual compounded rates of return for Class A
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
(excluding sales loads) for the periods ended June 30, 1996 are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 Year 4.51%
3 Years 4.17%
5 Years 6.37%
10 Years 6.04%
Since inception (September 10, 1981) 6.49%
Ohio Insured Tax-Free Fund (Class A)
1 Year 5.05%
3 Years 4.07%
5 Years 7.13%
10 Years 7.24%
Since inception (April 1, 1985) 8.16%
A nonstandardized quotation of total return will always be accompanied by the
Fund's average annual total return as described above.
From time to time, the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund may advertise their yield and tax-
- 44 -
<PAGE>
equivalent yield. A yield quotation is based on a 30-day (or one month) period
and is computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Generally, interest earned (for the purpose of "a" above) on debt obligations is
computed by reference to the yield to maturity of each obligation held based on
the market value of the obligation (including actual accrued interest) at the
close of business on the last business day prior to the start of the 30-day (or
one month) period for which yield is being calculated, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest). The yields of Class A and Class C shares of the Tax-Free Intermediate
Term Fund for June 1996 were 4.54% and 4.14%, respectively. The yields of Class
A and Class C shares of the Ohio Insured Tax-Free Fund for June 1996 were 4.91%
and 4.62%, respectively. Tax-equivalent yield is computed by dividing that
portion of a Fund's yield which is tax-exempt by one minus a stated income tax
rate and adding the product to that portion, if any, of the Fund's yield that is
not tax-exempt. Based on the highest marginal federal income tax rate for
individuals (39.6%), the tax-equivalent yields of Class A and Class C shares of
the Tax-Free Intermediate Term Fund for June 1996 were 7.52% and 6.85%,
respectively. Based on the highest combined marginal federal and Ohio income tax
rate for individuals (44.13%), the tax-equivalent yields of Class A and Class C
shares of the Ohio Insured Tax-Free Fund for June 1996 were 8.79% and 8.27%,
respectively.
The performance quotations described above are based on historical
earnings and are not intended to indicate future performance. Yield quotations
are computed separately for Class A and Class B shares of the Ohio Tax-Free
Money Fund and the Florida Tax-Free Money Fund. The yield of Class B shares is
expected to be higher than the yield of Class A shares due to the distribution
fees imposed on Class A shares. Average annual 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.
- 45 -
<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 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 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.
- 46 -
<PAGE>
PRINCIPAL SECURITY HOLDERS
- -------------------------
As of October 4, 1996, The Fifth Third Bank Trust Department, 38
Fountain Square Plaza, Cincinnati, Ohio, owned of record 19.06% of the Trust's
outstanding shares, including 36.87% of the outstanding shares of the Ohio
Tax-Free Money Fund and 17.46% of the outstanding Class A shares of the Florida
Tax-Free Money Fund. The Fifth Third Bank may be deemed to control the Ohio
Tax-Free Money Fund by virtue of the fact that it owned of record more than 25%
of the Fund's shares as of such date. As of October 4, 1996, The Huntington
Trust Company, N.A., Trust Department, 41 South High Street, Columbus, Ohio,
owned of record 37.36% of the outstanding shares of the Florida Tax-Free Money
Fund, including all of the outstanding Class B shares of the Fund. The
Huntington Trust Company, N.A. may be deemed to control the Florida Tax-Free
Money Fund by virtue of the fact that it owned of record more than 25% of the
Fund's shares as of such date. For purposes of voting on matters submitted to
shareholders, any person who owns more than 50% of the outstanding shares of a
Fund generally would be able to cast the deciding vote on such matters.
As of October 4, 1996, Carole A. Steiger and Anthony B. Ullman
Trustees, c/o Island Investor Services, 180 Royal Palm Way, Palm Beach, Florida
owned of record 9.62% of the outstanding shares of the Tax-Free Money Fund;
Olmsted Manor Skilled Nursing Center Inc., 27500 Mill Road, North Olmsted, Ohio
owned of record 7.66% of the outstanding Class C shares of the Tax-Free
Intermediate Term Fund; Deye Family Trust, Thomas E. Deye Trustee, 6975 Presidio
Court, Cincinnati, Ohio owned of record 7.22% of the outstanding Class C shares
of the Tax-Free Intermediate Term Fund; BHC Securities, Inc., 2005 Market
Street, Philadelphia, Pennsylvania owned of record 14.48% of the outstanding
shares of the Ohio Tax-Free Money Fund; Lawrence B. Taishoff, 3124 Collee Court,
Naples, Florida owned of record 11.11% of the outstanding Class A shares of the
Florida Tax-Free Money Fund; and Joseph H. Kanter, 4700 Ashwood Drive,
Cincinnati, Ohio owned of record 7.78% of the outstanding Class A shares of the
Florida Tax-Free Money Fund.
As of October 4, 1996, the Trustees and officers of the Trust as a
group owned of record and beneficially less than 1% of the outstanding shares of
the Trust and of each Fund (or Class thereof).
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has
been retained to act as Custodian for investments of the Tax-Free Money Fund,
the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the Ohio
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
- 47 -
47
<PAGE>
Fifth Third Bank receives from each Fund a base fee at the annual rate of .005%
of average net assets (subject to a minimum annual fee of $1,500 per Fund and a
maximum fee of $5,000 per Fund) plus transaction charges for each security
transaction of the Funds.
The Huntington Trust Company, N.A., 41 South High Street, Columbus,
Ohio, has been retained to act as Custodian for investments of the Florida
Tax-Free Money Fund. The Huntington Trust Company, N.A. acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties. As compensation, The Huntington Trust
Company receives a fee at the annual rate of .026% of the Fund's average net
assets.
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent
auditors for the Trust for the fiscal year ending June 30, 1997. Arthur Andersen
LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of the
Trust's financial statements and advises the Funds as to certain accounting
matters.
TRANSFER AGENT
- --------------
The Trust's transfer agent, Countrywide Fund Services, Inc. ("CFS"),
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. CFS is an affiliate of the Adviser by
reason of common ownership. CFS receives for its services as transfer agent a
fee payable monthly at an annual rate of $25 per account from each of the
Tax-Free Money Fund, the Ohio Tax-Free Money Fund 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 pays CFS a fee in accordance with the following schedule:
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<PAGE>
Asset Size of Fund Monthly Fee
$ 0 - $100,000,000 $3,250
$100,000,000 - $250,000,000 $3,750
$250,000,000 - $400,000,000 $4,250
Over $400,000,000 $4,750
The Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund each pay CFS a
fee in accordance with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $100,000,000 $4,250
$100,000,000 - $250,000,000 4,750
$250,000,000 - $400,000,000 5,250
Over $400,000,000 5,750
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund each pay
CFS a fee in accordance with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $4,250
$ 50,000,000 - $100,000,000 $4,750
$100,000,000 - $250,000,000 $5,250
Over $250,000,000 $5,750
In addition, each Fund pays all costs of external pricing services.
CFS is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, CFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. CFS supervises
the preparation of tax returns, reports to shareholders of the Funds, reports to
and filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For the
performance of these administrative services, CFS receives a fee from the
Adviser equal to .1% of the average value of each Fund's daily net assets. The
Adviser is solely responsible for the payment of these administrative fees to
CFS, and CFS has agreed to seek payment of such fees solely from the Adviser.
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.
- 49 -
<PAGE>
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.
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.
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<PAGE>
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND AND FLORIDA TAX-FREE
MONEY FUND
- --------------------------------------------------------------------------
Tax-Exempt Yield
--------------------------------------------
2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
15% 2.94% 3.53% 4.12% 4.71% 5.29% 5.88%
28% 3.47 4.17 4.86 5.56 6.25 6.94
31% 3.62 4.35 5.07 5.80 6.52 7.25
36% 3.91 4.69 5.47 6.25 7.03 7.81
39.6% 4.14 4.97 5.79 6.62 7.45 8.28
OHIO INSURED TAX-FREE FUND AND OHIO TAX-FREE MONEY FUND
- -------------------------------------------------------
Tax-Exempt Yield
Combined --------------------------------------------
Ohio and 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
18.788% 3.08% 3.69% 4.31% 4.93% 5.54% 6.16%
31.745% 3.66 4.40 5.13 5.86 6.59 7.33
35.761% 3.89 4.67 5.45 6.23 7.01 7.78
40.800% 4.22 5.07 5.91 6.76 7.60 8.45
44.130% 4.47 5.37 6.26 7.16 8.05 8.95
*Tax Brackets Combined
- ------------- Ohio and
Federal Federal
Single Joint Tax Tax
Return Return Bracket Bracket
- -------------------------------------------------------------------------------
Not over $24,650 Not Over $41,200 15% 18.788%
$24,650-$59,750 $41,200-$99,600 28% 31.745%
$59,750-$124,650 $99,600-$151,750 31% 35.761%
$124,650-$271,050 $151,750-$271,050 36% 40.800%
Over $271,050 Over $271,050 39.6% 44.130%
<PAGE>
ANNUAL REPORT
- ------------
The Funds' financial statements as of June 30, 1996 appear in the Trust's
annual report which is attached to this Statement of Additional Information.
- 52 -
<PAGE>
ANNUAL REPORT
JUNE 30, 1996
OHIO TAX-FREE
Money Fund
o
TAX-FREE
Money Fund
o
CALIFORNIA TAX-FREE
Money Fund
o
ROYAL PALM FLORIDA TAX-FREE
Money Fund
o
TAX-FREE INTERMEDIATE
Term Fund
o
OHIO INSURED
Tax-Free Fund
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
==============================================================================
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective. For
the fiscal year ended June 30, 1996, the Fund's total returns (excluding the
impact of applicable sales loads) were 4.51% and 4.00% for Class A shares and
Class C shares, respectively. The yield for the Fund's Class A shares at June
30, 1996 was 4.54%, which is equivalent to a taxable yield of 7.52%, and the
yield for the Fund's Class C shares was 4.14%, which is equivalent to a
taxable yield of 6.85%, assuming the maximum federal income tax bracket for
individuals.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income
exempt from federal income tax and Ohio personal income tax, consistent with
protection of capital. The Fund invests primarily in high and medium-quality
long-term Ohio municipal obligations which are protected by insurance
guaranteeing the payment of principal and interest in the event of a default.
For the fiscal year ended June 30, 1996, the Fund's total returns (excluding
the impact of applicable sales loads) were 5.05% and 4.44% for Class A shares
and Class C shares, respectively. The yield for the Fund's Class A shares at
June 30, 1996 was 4.91%, which is equivalent to a taxable yield of 8.79%, and
the yield for the Fund's Class C shares was 4.62%, which is equivalent to a
taxable yield of 8.27%, assuming the maximum combined federal and Ohio income
tax bracket for individuals.
Interest rates continued to decline in the second half of 1995 in response to
moderating economic growth and declining fears of inflation. Entering 1996,
interest rates were expected to remain low, aided by a slow economy. However,
this scenario changed dramatically in February as strong employment growth
indicated the economy was performing much better than expected. In the months
that followed, employment continued to surge, as did the overall economy.
Yields on bonds rose as investors anticipated a subsequent rise in the level
of inflation. Thus far, concerns about inflation have proved unwarranted.
Nevertheless, the damage had been done and interest rates at June 30, 1996
were higher by about 1% than they were at the beginning of 1996.
Performance in the municipal bond market during the first six months of the
fiscal year lagged the performance of the Treasury market. This was due
primarily to the persistent discussions regarding tax reform. The fears that
municipal income would lose its tax preference kept many investors out of the
market. As 1996 began and tax reform appeared less likely, investors began to
recognize the value of municipals compared to Treasuries. This caused
municipal bonds to outperform Treasury issues over the next six months. For
the twelve months ended June 30, 1996, the Lehman Brothers 5-Year Municipal
G.O. Bond Index returned 5.41% while the Lehman Brothers 15-Year Municipal
G.O. Bond Index returned 7.20%.
Performance of the Tax-Free Intermediate Term Fund was favorable in the first
half of the fiscal year as the average maturity was lengthened to take
advantage of declining interest rates. Conversely, the sharp reversal of
interest rates beginning in February 1996 negatively impacted the Fund's
performance versus the Lehman Brothers 5-Year Municipal G.O. Bond Index. We
have since shortened the average maturity of the Fund and continue to focus on
high quality issues which we believe will help to buffer the impact of
volatile market swings.
The Ohio Insured Tax-Free Fund performed comparably to the Lehman Brothers
15-Year Municipal G.O. Bond Index during the first six months of the fiscal
year. Again, the rise in interest rates experienced early in 1996, combined
with an average maturity slightly longer than the Index, had a detrimental
impact on the Fund's third quarter performance. Late in the fiscal year, we
initiated portfolio sales designed to generate tax losses for the Fund to
offset realized gains and, at the same time, shorten the Fund's average
maturity. This helped the Fund outperform the Index during the quarter ended
June 30, 1996.
Looking ahead, the economy appears strong as evidenced by robust second
quarter growth and employment which has continued to grow. Although there have
been some recent signs that the economy may be slowing, most notably in the
housing and manufacturing sectors, more evidence is necessary to confirm a
changing trend. As 1996 progresses, we believe that the economy will weaken
and interest rates will move lower; however, the timing of the slowdown
remains in question.
<PAGE>
APPENDIX
A representation of the graphic material contained in the Midwest Group Tax
Free Trust June 30, 1996 Annual Report is setforth below:
Comparison of the Change in Value since June 30, 1986 of a $10,000 Investment
in the Tax-Free Intermediate Term Fund* and the Lehman Brothers 5-Year Municipal
G.O. Index
<TABLE>
LEHMAN BROTHERS 5-YEAR MUNICIPAL G.O. INDEX: TAX-FREE INTERMEDIATE TERM FUND-CLASS A:
<S> <C> <C> <C> <C> <C>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/86 10,000 06/30/86 9,800
09/30/86 3.69% 10,369 09/30/86 2.14% 10,010
12/31/86 2.63% 10,642 12/31/86 2.08% 10,219
03/31/87 2.28% 10,884 03/31/87 1.47% 10,369
06/30/87 -0.92% 10,784 06/30/87 -0.54% 10,313
09/30/87 -2.06% 10,562 09/30/87 -1.38% 10,171
12/31/87 3.82% 10,966 12/31/87 2.19% 10,395
03/31/88 3.10% 11,305 03/31/88 2.35% 10,639
06/30/88 0.42% 11,353 06/30/88 0.71% 10,714
09/30/88 1.14% 11,482 09/30/88 1.14% 10,836
12/31/88 0.61% 11,552 12/31/88 1.16% 10,962
03/31/89 -0.28% 11,520 03/31/89 0.79% 11,048
06/30/89 4.70% 12,061 06/30/89 2.56% 11,331
09/30/89 1.11% 12,195 09/30/89 1.54% 11,505
12/31/89 2.99% 12,560 12/31/89 2.32% 11,773
03/31/90 0.48% 12,620 03/31/90 0.57% 11,840
06/30/90 2.24% 12,903 06/30/90 1.78% 12,050
09/30/90 1.06% 13,040 09/30/90 0.47% 12,108
12/31/90 3.32% 13,473 12/31/90 3.11% 12,483
03/31/91 2.15% 13,762 03/31/91 1.93% 12,724
06/30/91 1.75% 14,003 06/30/91 1.69% 12,939
09/30/91 3.55% 14,500 09/30/91 2.89% 13,313
12/31/91 3.35% 14,986 12/31/91 2.29% 13,619
03/31/92 -0.08% 14,974 03/31/92 0.48% 13,684
06/30/92 3.25% 15,461 06/30/92 2.87% 14,076
09/30/92 2.49% 15,846 09/30/92 2.19% 14,384
12/31/92 1.59% 16,098 12/31/92 1.98% 14,669
03/31/93 2.54% 16,507 03/31/93 3.40% 15,167
06/30/93 2.36% 16,896 06/30/93 2.78% 15,589
09/30/93 2.16% 17,261 09/30/93 3.17% 16,083
12/31/93 1.23% 17,473 12/31/93 1.19% 16,274
03/31/94 -3.15% 16,923 03/31/94 -3.37% 15,724
06/30/94 1.34% 17,150 06/30/94 0.82% 15,853
09/30/94 0.81% 17,289 09/30/94 0.57% 15,943
12/31/94 -0.33% 17,232 12/31/94 -0.91% 15,797
03/31/95 4.06% 17,931 03/31/95 4.34% 16,484
06/30/95 2.55% 18,388 06/30/95 2.29% 16,861
09/30/95 2.73% 18,890 09/30/95 2.07% 17,209
12/31/95 1.83% 19,236 12/31/95 2.43% 17,627
03/31/96 0.32% 19,299 03/31/96 -0.43% 17,552
06/30/96 0.43% 19,382 06/30/96 0.40% 17,622
</TABLE>
Past performance is not predictive of future performance.
Tax-Free Intermediate Term Fund Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 2.42% 5.94% 5.83% 6.34%
Class C 4.00% N/A N/A 2.57%
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and
fees paid by shareholders in the different classes. Fund inception was
September 10, 1981, and the initial public offering of Class C shares commenced
on February 1, 1994.
<PAGE>
Comparison of the Change in Value since June 30, 1986 of a $10,000 Investment
in the Ohio Insured Tax-Free Fund* and the Lehman Brothers 15-Year Municipal
G.O. Index
<TABLE>
LEHMAN BROTHERS 15-YEAR MUNICIPAL G.O. INDEX: OHIO INSURED TAX-FREE FUND-CLASS A:
<S> <C> <C> <C> <C> <C>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/86 10,000 06/30/86 9,600
09/30/86 6.37% 10,637 09/30/86 4.23% 10,006
12/31/86 3.60% 11,020 12/31/86 3.60% 10,366
03/31/87 2.71% 11,319 03/31/87 2.58% 10,634
06/30/87 -4.83% 10,772 06/30/87 -3.65% 10,246
09/30/87 -3.49% 10,396 09/30/87 -2.38% 10,002
12/31/87 6.64% 11,086 12/31/87 3.41% 10,343
03/31/88 3.11% 11,431 03/31/88 3.62% 10,717
06/30/88 1.98% 11,657 06/30/88 2.10% 10,943
09/30/88 2.57% 11,957 09/30/88 2.15% 11,178
12/31/88 1.94% 12,189 12/31/88 2.24% 11,428
03/31/89 0.38% 12,235 03/31/89 0.79% 11,518
06/30/89 6.32% 13,008 06/30/89 4.27% 12,010
09/30/89 -0.43% 12,953 09/30/89 -0.04% 12,005
12/31/89 4.42% 13,525 12/31/89 3.71% 12,450
03/31/90 -0.01% 13,524 03/31/90 -0.10% 12,438
06/30/90 2.29% 13,833 06/30/90 1.90% 12,673
09/30/90 -0.41% 13,777 09/30/90 0.08% 12,684
12/31/90 4.42% 14,386 12/31/90 3.97% 13,187
03/31/91 1.85% 14,652 03/31/91 1.78% 13,422
06/30/91 1.96% 14,939 06/30/91 1.96% 13,685
09/30/91 4.09% 15,550 09/30/91 3.66% 14,186
12/31/91 3.13% 16,037 12/31/91 3.19% 14,638
03/31/92 0.54% 16,123 03/31/92 -0.06% 14,630
06/30/92 3.81% 16,738 06/30/92 4.35% 15,266
09/30/92 2.86% 17,216 09/30/92 1.95% 15,563
12/31/92 2.47% 17,641 12/31/92 2.29% 15,920
03/31/93 4.24% 18,389 03/31/93 3.78% 16,522
06/30/93 3.67% 19,064 06/30/93 3.70% 17,134
09/30/93 4.17% 19,859 09/30/93 3.86% 17,795
12/31/93 1.56% 20,169 12/31/93 0.73% 17,924
03/31/94 -6.78% 18,802 03/31/94 -5.28% 16,978
06/30/94 1.42% 19,069 06/30/94 0.50% 17,063
09/30/94 0.41% 19,147 09/30/94 0.17% 17,092
12/31/94 -1.75% 18,812 12/31/94 -0.77% 16,962
03/31/95 8.41% 20,394 03/31/95 6.59% 18,080
06/30/95 2.23% 20,849 06/30/95 1.69% 18,385
09/30/95 3.65% 21,610 09/30/95 2.33% 18,814
12/31/95 4.05% 22,485 12/31/95 4.45% 19,652
03/31/96 -0.95% 22,271 03/31/96 -2.15% 19,228
06/30/96 0.35% 22,349 06/30/96 0.44% 19,313
</TABLE>
Past performance is not predictive of future performance.
Ohio Insured Tax-Free Fund Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 0.85% 6.26% 6.80% 7.76%
Class C 4.44% N/A N/A 2.78%
*The chart above represents performance of Class A shares only, which
will vary from the performance of Class C shares based on the difference in
loads and fees paid by shareholders in the different classes. Fund inception
was April 1, 1985, and the initial public offering of Class C shares commenced
on November 1, 1993.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
==========================================================================================================================
OHIO CALIFORNIA
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities:
At acquisition cost.................................... $ 239,927,043 $ 25,006,218 $ 37,663,286
=============== =============== ===============
At amortized cost...................................... $ 239,821,479 $ 24,955,523 $ 37,579,388
=============== =============== ===============
At value (Note 2)...................................... $ 239,821,479 $ 24,955,523 $ 37,579,388
Cash ..................................................... 389,643 201,132 217,437
Receivable for securities sold............................ 1,200,000 -- --
Interest receivable ...................................... 1,735,318 215,571 378,408
Other assets ............................................. 8,229 1,452 1,288
--------------- --------------- ---------------
TOTAL ASSETS......................................... 243,154,669 25,373,678 38,176,521
--------------- --------------- ---------------
LIABILITIES
Dividends payable......................................... 196,018 1,410 4,318
Payable for securities purchased.......................... 2,510,625 -- 2,017,280
Payable to affiliates (Note 4) ........................... 107,176 25,211 27,177
Other accrued expenses and liabilities ................... 17,958 4,669 5,685
--------------- --------------- ---------------
TOTAL LIABILITIES.................................... 2,831,777 31,290 2,054,460
--------------- --------------- ---------------
NET ASSETS .............................................. $ 240,322,892 $ 25,342,388 $ 36,122,061
=============== =============== ===============
Net assets consist of:
Capital shares ........................................... $ 240,309,987 $ 25,343,438 $ 36,123,641
Accumulated net realized gains (losses) from
security transactions.................................. 12,905 ( 1,050 ) ( 1,580 )
--------------- --------------- ---------------
Net assets................................................ $ 240,322,892 $ 25,342,388 $ 36,122,061
=============== =============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ............ 240,309,987 25,353,881 36,123,641
=============== =============== ===============
Net asset value, offering price and redemption price
per share (Note 2) .................................... $ 1.00 $ 1.00 $ 1.00
=============== =============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
=========================================================================================================================
OHIO CALIFORNIA
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income........................................ $ 9,278,740 $ 1,149,293 $ 1,046,105
--------------- --------------- ---------------
EXPENSES
Investment advisory fees (Note 4)...................... 1,117,233 140,891 142,143
Distribution expenses (Note 4)......................... 451,624 25,946 8,687
Accounting services fees (Note 4)...................... 45,000 39,000 39,000
Shareholder services and transfer agent fees (Note 4).. 71,194 25,208 14,237
Postage and supplies................................... 44,641 15,894 4,936
Professional fees...................................... 18,887 5,687 6,387
Insurance expense...................................... 21,136 4,054 3,615
Registration fees...................................... 6,791 8,994 1,223
Custodian fees (Note 4)................................ 7,148 3,701 4,639
Pricing expenses....................................... 5,954 2,099 3,108
Trustees' fees and expenses ........................... 3,433 3,433 3,433
Reports to shareholders ............................... 6,478 2,257 1,194
Other expenses ........................................ 13,633 1,796 1,424
--------------- --------------- ---------------
TOTAL EXPENSES ........................................... 1,813,152 278,960 234,026
Fees waived by the Adviser (Note 4) ................... -- -- ( 6,600)
--------------- --------------- ---------------
NET EXPENSES ............................................. 1,813,152 278,960 227,426
--------------- --------------- ---------------
NET INVESTMENT INCOME .................................... 7,465,588 870,333 818,679
--------------- --------------- ---------------
NET REALIZED GAINS (LOSSES) FROM
SECURITY TRANSACTIONS ................................. ( 709) ( 564) 116
--------------- --------------- ---------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ....................................... $ 7,464,879 $ 869,769 $ 818,795
=============== =============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
==================================================================================================================================
CALIFORNIA
OHIO TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ............... $7,465,588 $6,762,272 $870,333 $ 865,650 $ 818,679 $ 643,953
Net realized gains (losses) from
security transactions .............. ( 709) 8,226 ( 564) ( 774) 116 234
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets from
operations........................ 7,464,879 6,770,498 869,769 864,876 818,795 644,187
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME ......... ( 7,465,588) ( 6,764,671) ( 873,034) ( 862,949) ( 818,679) (644,370)
----------- ----------- ----------- ----------- ----------- -----------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
Proceeds from shares sold ........... 565,969,095 532,441,705 49,546,956 51,748,931 119,659,991 84,546,054
Net asset value of shares issued
in reinvestment of distributions
to shareholders.................... 4,885,920 4,449,982 839,246 814,800 753,406 572,727
Payments for shares redeemed ........ (557,137,769) ( 523,292,513) (51,732,766) (57,041,748) (103,816,208) (90,102,140)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from capital share transactions...... 13,717,246 13,599,174 (1,346,564) (4,478,017) 16,597,189 (4,983,359)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ......................... 13,716,537 13,605,001 (1,349,829) ( 4,476,090) 16,597,305 (4,983,542)
NET ASSETS:
Beginning of year................... 226,606,355 213,001,354 26,692,217 31,168,307 19,524,756 24,508,298
----------- ----------- ----------- ----------- ----------- -----------
End of year........................ $240,322,892 $226,606,355 $25,342,388 $26,692,217 $36,122,061 $19,524,756
============ ============ =========== =========== =========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME... $ -- $ -- $ -- $ 2,701 $ -- $ --
============ ============ =========== =========== =========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
===========================================================================================================================
ROYAL PALM
TAX-FREE OHIO INSURED FLORIDA
INTERMEDIATE TAX-FREE TAX-FREE
TERM FUND FUND MONEY FUND
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities:
At acquisition cost.................................... $ 71,673,021 $ 76,483,492 $ 47,075,493
=============== =============== ===============
At amortized cost...................................... $ 71,287,629 $ 76,453,032 $ 46,976,072
=============== =============== ===============
At value (Note 2) ..................................... $ 72,708,536 $ 79,588,215 $ 46,976,072
Cash ..................................................... 100,018 40,602 18,144
Receivable for capital shares sold........................ 217,106 13,090 --
Recevable for securities sold............................. -- -- 750,000
Interest receivable ...................................... 1,321,055 692,613 383,034
Other assets ............................................. 3,657 3,374 1,355
--------------- --------------- ---------------
TOTAL ASSETS........................................... 74,350,372 80,337,894 48,128,605
--------------- --------------- ---------------
LIABILITIES
Dividends payable......................................... 47,457 73,272 50,161
Payable for capital shares redeemed ...................... 326,049 299,745 --
Payable for securities purchased.......................... 995,174 -- --
Payable to affiliates (Note 4) ........................... 57,085 43,498 21,006
Other accrued expenses and liabilities.................... 11,202 10,702 6,299
--------------- --------------- ---------------
TOTAL LIABILITIES ................................... 1,436,967 427,217 77,466
--------------- --------------- ---------------
NET ASSETS .............................................. $ 72,913,405 $ 79,910,677 $ 48,051,139
=============== =============== ===============
Net assets consist of:
Capital shares ........................................... $ 73,113,280 $ 76,775,988 $ 48,052,337
Accumulated net realized losses from security
transactions ........................................ ( 1,620,782) ( 494) ( 1,198)
Net unrealized appreciation on investments................ 1,420,907 3,135,183 --
--------------- --------------- ---------------
Net assets................................................ $ 72,913,405 $ 79,910,677 $ 48,051,139
=============== =============== ===============
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares................... $ 67,674,858 $ 75,938,183 $ 28,906,381
=============== =============== ===============
Shares of beneficial interest outstanding
(unlimited number of shares
authorized, no par value) (Note 5)..................... 6,238,847 6,345,325 28,907,579
=============== =============== ===============
Net asset value and redemption price per share (Note 2) .. $ 10.85 $ 11.97 $ 1.00
=============== =============== ===============
Maximum offering price per share (Note 2) ................ $ 11.07 $ 12.47 $ 1.00
=============== =============== ===============
PRICING OF CLASS C SHARES(A)
Net assets applicable to Class C shares(A)................ $ 5,238,547 $ 3,972,494 $ 19,144,758
=============== =============== ===============
Shares of beneficial interest outstanding
(unlimited number of shares
authorized, no par value) (Note 5) .................... 482,869 331,937 19,144,758
=============== =============== ===============
Net asset value, offering price and redemption
price per share (Note 2) ............................ $ 10.85 $ 11.97 $ 1.00
=============== =============== ===============
<FN>
(A) Except for the Royal Palm Florida Tax-Free Money Fund which offers Class B shares (Note 2).
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
==========================================================================================================================
ROYAL PALM
TAX-FREE OHIO INSURED FLORIDA
INTERMEDIATE TAX-FREE TAX-FREE
TERM FUND FUND MONEY FUND
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income........................................ $ 4,390,262 $ 4,651,670 $ 1,170,195
--------------- --------------- ---------------
EXPENSES
Investment advisory fees (Note 4)...................... 398,576 397,265 152,663
Distribution expenses, Class A (Note 4)................ 115,756 14,824 8,631
Distribution expenses, Class C (Note 4) ............... 22,701 12,297 --
Shareholder services and transfer agent fees,
Class A (Note 4) .................................... 72,503 40,277 12,000
Shareholder services and transfer agent fees,
Class C (Note 4) .................................... 12,000 12,000 --
Shareholder services and transfer agent fees,
Class B (Note 4) .................................... -- -- 1,000
Accounting services fees (Note 4) ..................... 57,000 57,000 40,000
Postage and supplies................................... 60,880 29,106 6,538
, Pricing expenses....................................... 17,468 15,413 2,778
Professional fees ..................................... 8,849 9,070 6,187
Insurance expense...................................... 10,086 9,181 3,637
Custodian fees......................................... 8,584 6,967 3,166
Registration fees, Common.............................. 3,924 2,285 2,129
Registration fees, Class A............................. 4,233 661 --
Registration fees, Class C............................. 4,145 353 --
Reports to shareholders ............................... 8,618 5,199 732
Trustees' fees and expenses ........................... 3,433 3,433 3,433
Other expenses ........................................ 5,970 4,866 1,766
--------------- --------------- ---------------
TOTAL EXPENSES ........................................... 814,726 620,197 244,660
Fees waived by the Advisor (Note 4).................... -- -- ( 58,284)
Class A expenses reimbursed by the Adviser (Note 4).... -- ( 2,708) --
Class B expenses reimbursed by the Advisor (Note 4).... -- -- ( 506)
--------------- --------------- ---------------
NET EXPENSES ............................................. 814,726 617,489 185,870
--------------- --------------- ---------------
NET INVESTMENT INCOME .................................... 3,575,536 4,034,181 984,325
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ....... 418,573 637,863 --
Net change in unrealized appreciation/depreciation
on investments .................................... (378,154) (557,750) --
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ........ 40,419 80,113 --
--------------- --------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............... $ 3,615,955 $ 4,114,294 $ 984,325
=============== =============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
==================================================================================================================================
ROYAL PALM
TAX-FREE FLORIDA
INTERMEDIATE OHIO INSURED TAX-FREE
TERM FUND TAX-FREE FUND MONEY FUND
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30 JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income .................. $3,575,536 $4,323,906 $4,034,181 $4,204,284 $ 984,325 $ 821,944
Net realized gains (losses) from
security transactions ................. 418,573 (1,487,447) 637,863 (553,505) -- 2
Net change in unrealized appreciation/
depreciation on investments ........... (378,154) 2,397,778 (557,750) 2,078,922 -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets from operations 3,615,955 5,234,237 4,114,294 5,729,701 984,325 821,946
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A .... (3,370,231) (4,158,531) (3,835,050) (4,060,262) (941,390) (822,616)
From net investment income, Class C .... (205,305) (182,065) (199,131) (165,164) -- --
From net investment income, Class B .... -- -- -- -- (42,935) --
----------- ----------- ----------- ----------- ----------- -----------
Decrease in net assets from
distributions to shareholders .......... (3,575,536) (4,340,596) (4,034,181) (4,225,426) (984,325) (822,616)
----------- ----------- ----------- ----------- ----------- -----------
FROM CAPITAL SHARES
TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold .............. 15,528,848 27,134,058 149,454,410 135,489,969 51,380,671 44,740,157
Net asset value of shares
issued in reinvestment
of distributions to shareholders ...... 2,685,608 3,413,920 2,832,266 3,071,603 836,936 747,824
Payments for shares redeemed ........... (31,733,808) (56,693,107) (147,848,817) (148,483,241) (47,429,798) (47,644,429)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from Class A share transactions ........ (13,519,352) (26,145,129) 4,437,859 (9,921,669) 4,787,809 (2,156,448)
----------- ----------- ----------- ----------- ----------- -----------
CLASS C (A)
Proceeds from shares sold .............. 3,208,583 7,031,053 1,212,806 1,936,052 19,950,303 --
Net asset value of shares issued
in reinvestment of distributions
to shareholders ....................... 192,684 174,884 173,201 141,387 -- --
Payments for shares redeemed ........... (2,962,890) (5,556,496) ( 1,551,557) (650,441) (805,545) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from Class C share transactions (A) .... 438,377 1,649,441 (165,550) 1,426,998 19,144,758 --
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ......................... (13,040,556) (23,602,047) 4,352,422 (6,990,396) 23,932,567 (2,157,118)
NET ASSETS:
Beginning of year ...................... 85,953,961 109,556,008 75,558,255 82,548,651 24,118,572 26,275,690
----------- ----------- ----------- ----------- ----------- -----------
End of year ............................ $72,913,405 $85,953,961 $79,910,677 $75,558,255 $48,051,139 $24,118,572
=========== =========== =========== =========== =========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME ...... $ -- $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== =========== ===========
<FN>
(A) Except for the Royal Palm Florida Tax-Free Money Fund which offers Class B shares (Note 2).
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
===========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ----------
Net investment income........................... 0.031 0.031 0.020 0.022 0.034
---------- ---------- ---------- ---------- ----------
Distributions from net investment income ....... ( 0.031) ( 0.031) ( 0.020) ( 0.022) ( 0.034)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ==========
Total return.................................... 3.14% 3.12% 1.99% 2.19% 3.52%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $240,323 $226,606 $ 213,001 $ 221,775 $ 218,503
========== ========== ========== ========== ==========
Ratio of expenses to average net assets ........ 0.75% 0.74% 0.73% 0.74% 0.75%
Ratio of net investment income to average
net assets ............................... 3.09% 3.08% 1.97% 2.16% 3.43%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ---------
Net investment income........................... 0.031 0.030 0.021 0.024 0.036
---------- ---------- ---------- ---------- ----------
Distributions from net investment income........ ( 0.031 ) ( 0.030) ( 0.021) ( 0.024) ( 0.036)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ==========
Total return ................................... 3.15% 3.07% 2.12% 2.40% 3.63%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $25,342 $ 26,692 $ 31,168 $ 34,787 $ 50,000
========== ========== ========== ========== ==========
Ratio of expenses to average net assets......... 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to average
net assets................................ 3.09% 3.00% 2.09% 2.39% 3.55%
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ----------
Net investment income........................... 0.029 0.029 0.019 0.022 0.035
---------- ---------- ---------- ---------- ----------
Distributions from net investment income........ ( 0.029) ( 0.029) ( 0.019) ( 0.022) ( 0.035)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ==========
Total return ................................... 2.95% 2.95% 1.93% 2.26% 3.71%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $36,122 $ 19,525 $ 24,508 $ 34,487 $ 21,246
========== ========== ========== ========== ==========
Ratio of expenses to average net assets(A) .... 0.80% 0.70% 0.60% 0.56% 0.34%
Ratio of net investment income to average
net assets................................. 2.88% 2.83% 1.90% 2.22% 3.49%
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 0.82%, 0.85%, 0.86%, 0.85% and 0.89% for the years ended June 30, 1996, 1995, 1994, 1993 and 1992,
respectively (Note 4).
See accompanying notes to finacial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND - CLASS A
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 10.86 $ 10.69 $ 10.98 $ 10.42 $ 10.15
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ....................... 0.50 0.49 0.48 0.53 0.59
Net realized and unrealized gains (losses)
on investments............................. ( 0.01 ) 0.17 ( 0.29) 0.56 0.27
---------- ---------- ---------- ---------- ----------
Total from investment operations ............... 0.49 0.66 0.19 1.09 0.86
---------- ---------- ---------- ---------- ----------
Distributions from net investment income ....... ( 0.50 ) ( 0.49) ( 0.48) ( 0.53 ) ( 0.59 )
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 10.85 $ 10.86 $ 10.69 $ 10.98 $ 10.42
========== ========== ========== ========== ==========
Total return(A) ................................ 4.51% 6.36% 1.70% 10.75% 8.78%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $67,675 $ 81,140 $106,472 $ 82,168 $ 26,720
========== ========== ========== ========== ==========
Ratio of expenses to average net assets ........ 0.99% 0.99% 0.99% 0.99% 1.07%
Ratio of net investment income to average net
assets..................................... 4.52% 4.59% 4.35% 4.90% 5.75%
Portfolio turnover rate......................... 37% 32% 46% 28% 12%
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND - CLASS C
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
==========================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR ENDED JUNE 30, (FEB. 1, 1994)
THROUGH
1996 1995 JUNE 30, 1994
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................... $ 10.86 $ 10.69 $ 11.27
--------------- --------------- ---------------
Income from investment operations:
Net investment income.................................. 0.44 0.44 0.20
Net realized and unrealized gains (losses) on
investments.......................................... ( 0.01) 0.17 ( 0.58)
--------------- --------------- ---------------
Total from investment operations.......................... 0.43 0.61 ( 0.38 )
--------------- --------------- ---------------
Distributions from net investment income.................. ( 0.44 ) ( 0.44 ) ( 0.20 )
--------------- --------------- ---------------
Net asset value at end of period.......................... $ 10.85 $ 10.86 $ 10.69
=============== =============== ===============
Total return(A) .......................................... 4.00% 5.82% ( 8.28%)(C)
=============== =============== ===============
Net assets at end of period (000's)....................... $ 5,239 $ 4,814 $ 3,084
=============== =============== ===============
Ratio of expenses to average net assets(B) ............... 1.49% 1.49% 1.45% (C)
Ratio of net investment income to average net assets...... 4.02% 4.08% 3.79% (C)
Portfolio turnover rate................................... 37% 32% 46% (C)
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
(B)Absent expense reimbursements by the Adviser, the ratio of expenses to average net assets would have been 1.75%(C) for
the period ended June 30, 1994 (Note 4).
(C)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND - CLASS A
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
==========================================================================================================================
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 11.99 $ 11.74 $ 12.41 $ 11.67 $ 11.13
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ....................... 0.62 0.63 0.61 0.65 0.70
Net realized and unrealized gains (losses)
on investments............................. ( 0.02 ) 0.25 ( 0.64) 0.74 0.54
---------- ---------- ---------- ---------- ----------
Total from investment operations ............... 0.60 0.88 ( 0.03) 1.39 1.24
---------- ---------- ---------- ---------- ----------
Less distributions:
Distributions from net investment income .... ( 0.62 ) ( 0.63) ( 0.61) ( 0.65 ) ( 0.70 )
Distributions from net realized gains........ -- -- ( 0.03) -- --
---------- ---------- ---------- ---------- ----------
Total distributions ............................ ( 0.62 ) ( 0.63) ( 0.64) ( 0.65 ) ( 0.70 )
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 11.97 $ 11.99 $ 11.74 $ 12.41 $ 11.67
========== ========== ========== ========== ==========
Total return(A) ............................... 5.05% 7.75% ( 0.41%) 12.24% 11.55%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $75,938 $ 71,393 $ 79,889 $ 81,101 $ 49,288
========== ========== ========== ========== ==========
Ratio of expenses to average net assets(B) .... 0.75% 0.75% 0.75% 0.75% 0.60%
Ratio of net investment income to average
net assets................................. 5.12% 5.35% 4.94% 5.35% 6.10%
Portfolio turnover rate......................... 46% 29% 45% 15% 3%
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 0.77% and 0.77% for the years ended June 30, 1995 and 1992, respectively (Note 4).
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND - CLASS C
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
==========================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR ENDED JUNE 30, (NOV. 1, 1993)
THROUGH
1996 1995 JUNE 30, 1994
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................... $ 12.00 $ 11.74 $ 12.62
--------------- --------------- ---------------
Income from investment operations:
Net investment income.................................. 0.56 0.57 0.36
Net realized and unrealized gains (losses)
on investments....................................... ( 0.03) 0.26 ( 0.85)
--------------- --------------- ---------------
Total from investment operations.......................... 0.53 0.83 ( 0.49 )
--------------- --------------- --------------
Less distributions:
Distributions from net investment income............... ( 0.56 ) ( 0.57 ) ( 0.36 )
Distributions from net realized gains.................. -- -- ( 0.03 )
--------------- --------------- ---------------
Total distributions....................................... ( 0.56 ) ( 0.57 ) ( 0.39 )
--------------- --------------- --------------
Net asset value at end of period.......................... $ 11.97 $ 12.00 $ 11.74
=============== =============== ===============
Total return(A) .......................................... 4.44% 7.31% ( 6.05%)(C)
=============== =============== ===============
Net assets at end of period (000's)....................... $ 3,972 $ 4,165 $ 2,659
=============== =============== ===============
Ratio of expenses to average net assets(B) ............... 1.25% 1.25% 1.22% (C)
Ratio of net investment income to average net assets...... 4.62% 4.84% 4.09% (C)
Portfolio turnover rate................................... 46% 29% 45% (C)
- - -------------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 1.27% and 1.28%(C) for the periods ended June 30, 1995 and 1994, respectively (Note 4).
(C)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM FLORIDA TAX-FREE MONEY FUND - CLASS A
FINANCIAL HIGHLIGHTS
===========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===========================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR ENDED JUNE 30, (NOV. 13, 1992)
THROUGH
1996 1995 1994 JUNE 30, 1993(A)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------- ------------- ------------
Net investment income.......................... 0.032 0.031 0.021 0.016
------------ ------------- ------------- ------------
Distributions from net investment income ...... ( 0.032) ( 0.031) ( 0.021) ( 0.016)
------------ ------------- ------------- ------------
Net asset value at end of period .............. $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============= ============= ============
Total return .................................. 3.29% 3.17% 2.11% 2.49%(C)
============ ============= ============= ============
Net assets at end of period (000's) ........... $ 28,906 $ 24,119 $ 26,276 $ 21,907
============ ============= ============= ============
Ratio of expenses to average net assets(B) ... 0.61% 0.66% 0.58% 0.34%(C)
Ratio of net investment income to average
net assets............................... 3.24% 3.12% 2.10% 2.41%(C)
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)No income was earned or expenses incurred from the start of business through the date of public offering.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 0.80%, 0.80%, 0.81% and 0.94%(C) for the periods ended June 30, 1996, 1995, 1994 and 1993, respectively (Note 4).
(C)Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM FLORIDA TAX-FREE MONEY FUND - CLASS B
FINANCIAL HIGHLIGHTS
==========================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
==========================================================================================================================
PERIOD
ENDED
JUNE 30, 1996 (A)
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value at beginning of period ........................................................ $ 1.000
------------
Net investment income.......................................................................... 0.003
------------
Distributions from net investment income ...................................................... $ ( 0.003)
------------
Net asset value at end of period .............................................................. $ 1.000
============
Total return................................................................................... 3.03%(C)
============
Net assets at end of period (000's) ........................................................... $ 19,145
============
Ratio of expenses to average net assets(B) ................................................... 0.50%(C)
Ratio of net investment income to average net assets........................................... 3.03%(C)
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
(A)Represents the period from the initial public offering of Class B shares
(May 29, 1996) through June 30, 1996.
(B)Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 0.87%(C) (Note 4).
(C)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
==============================================================================
1. ORGANIZATION
Midwest Group Tax Free Trust (the Trust) is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company. The Trust was established as a Massachusetts business
trust under a Declaration of Trust dated April 13, 1981. The Declaration of
Trust, as amended, permits the Trustees to issue an unlimited number of shares
of six funds: the Ohio Tax-Free Money Fund, the Tax-Free Money Fund, the
California Tax-Free Money Fund, the Royal Palm Florida Tax-Free Money Fund,
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
(individually a Fund and collectively the Funds).
The Ohio Tax-Free Money Fund seeks the highest level of current income exempt
from federal income tax and Ohio personal income tax, consistent with
liquidity and stability of principal. The Fund invests primarily in a
portfolio of high-quality, short-term Ohio municipal obligations.
The Tax-Free Money Fund seeks the highest level of interest income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-quality, short-term municipal obligations.
The California Tax-Free Money Fund seeks the highest level of interest income
exempt from federal and California income taxes, consistent with liquidity and
stability of principal, by investing primarily in high-quality, short-term
California municipal obligations.
The Royal Palm Florida Tax-Free Money Fund seeks the highest level of interest
income exempt from federal income tax, consistent with liquidity and stability
of principal, by investing primarily in high-quality, short-term Florida
municipal obligations the value of which is exempt from the Florida intangible
personal property tax.
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income
exempt from federal income tax and Ohio personal income tax, consistent with
protection of capital. The Fund invests primarily in high and medium-quality,
long-term Ohio municipal obligations which are protected by insurance
guaranteeing the payment of principal and interest in the event of a default.
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund each
offer two classes of shares: Class A shares (sold subject to a maximum
front-end sales load of 2% for the Tax-Free Intermediate Term Fund and 4% for
the Ohio Insured Tax-Free Fund and a distribution fee of up to .25% of average
daily net assets of each Fund) and Class C shares (sold subject to a maximum
contingent deferred sales load of 1% if redeemed within a one-year period from
purchase and a distribution fee of up to 1% of average daily net assets). Each
Class A and Class C share of the Fund represents identical interests in the
Fund's investment portfolio and has the same rights, except that (i) Class C
shares bear the expenses of higher distribution fees, which is expected to
cause Class C shares to have a higher expense ratio and to pay lower dividends
than Class A shares; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable; and (iii) each
class has exclusive voting rights with respect to matters relating to its own
distribution arrangements.
<PAGE>
The Royal Palm Florida Tax-Free Money Fund offers two classes of shares: Class
A shares (Retail shares), sold subject to a distribution fee of up to .25% of
average daily net assets, and Class B shares (Institutional shares) sold
without a distribution fee. Each Retail and Institutional share of the Fund
represents identical interests in the Fund's investment portfolio and has the
same rights, except that (i) Retail shares bear the expenses of distribution
fees, which is expected to cause Retail shares to have a higher expense ratio
and to pay lower dividends than Institutional shares; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable; (iii) each class has exclusive voting rights with respect to
matters affecting only that class; and (iv) Retail shares are subject to a
lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional shares such as check writing and
automatic investment and redemption plans.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Trust's significant accounting policies:
Security valuation -- Ohio Tax-Free Money Fund, Tax-Free Money Fund,
California Tax-Free Money Fund and Royal Palm Florida Tax-Free Money Fund
securities are valued on the amortized cost basis, which approximates market.
This involves initially valuing a security at its original cost and thereafter
assuming a constant amortization to maturity of any discount or premium. This
method of valuation is expected to enable these Funds to maintain a constant
net asset value per share. The Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund are valued at market and use an independent pricing
service which generally utilizes a computerized grid matrix of tax-exempt
securities and evaluations by its staff to determine what it believes is the
fair value of the securities. On limited occasions, if the valuation provided
by the pricing service ignores certain market conditions affecting the value
of a security or the pricing service cannot provide a valuation, the fair
value of the security will be determined in good faith consistent with
procedures established by the Board of Trustees.
Share valuation -- The net asset value per share of the Ohio Tax-Free Money
Fund, the Tax-Free Money Fund, the California Tax-Free Money Fund and the
Royal Palm Florida Tax-Free Money Fund is calculated daily. Net asset value
per share is calculated for each of these Funds by dividing the total value of
a Fund's assets, less liabilities, by its number of shares outstanding. The
offering price and redemption price per share is equal to the net asset value
per share.
The net asset value per share of each of the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund is also calculated daily. Net asset value
per share is calculated for each class of a Fund by dividing the total value
of a Fund's assets attributable to that class, less liabilities attributable
to that class, by the number of shares of that class outstanding. The maximum
offering price of Class A shares of the Tax-Free Intermediate Term Fund is
equal to net asset value per share plus a sales load equal to 2.04% of the net
asset value (or 2% of the offering price). The maximum offering price of Class
A shares of the Ohio Insured Tax-Free Fund is equal to net asset value per
share plus a sales load equal to 4.17% of the net asset value (or 4% of the
offering price). The offering price of Class C shares of each Fund is equal to
the net asset value per share.
The redemption price per share of Class A shares and Class C shares of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund is equal to
the net asset value per share. However, Class C shares of each Fund are
subject to a contingent deferred sales load of 1% of the original purchase
price if redeemed within a one-year period from the date of purchase.
Investment income -- Interest income is accrued as earned. Discounts and
premiums on securities purchased are amortized in accordance with income tax
regulations which approximate generally accepted accounting principles.
<PAGE>
Distributions to shareholders -- Distributions from net investment income are
declared daily and paid on the last business day of each month. Net realized
short-term capital gains, if any, may be distributed throughout the year and
net realized long-term capital gains, if any, are distributed at least once
each year. Income distributions and capital gain distributions are determined
in accordance with income tax regulations.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Allocations between classes -- Investment income earned by the Royal Palm
Florida Tax-Free Money Fund, the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund is allocated daily to each class of shares based on the
percentage of the net asset value of settled shares of such class to the total
of the net asset value of settled shares of both classes of shares. Realized
capital gains and losses and unrealized appreciation and depreciation are
allocated daily to each class of shares based upon its proportionate share of
total net assets of the Fund. Class specific expenses are charged directly to
the class incurring the expense. Common expenses which are not attributable to
a specific class are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund
will be relieved of federal income tax on the income distributed. Accordingly,
no provision for income taxes has been made. In addition, each Fund intends to
satisfy conditions which enable it to designate the interest income generated
by its investment in municipal securities, which is exempt from federal income
tax when received by the Fund, as exempt-interest dividends upon distribution
to shareholders.
<PAGE>
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ended October 31) plus undistributed amounts from prior
years.
The following information is based upon the federal income tax cost of
portfolio investments as of June 30, 1996:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
TAX-FREE
INTERMEDIATE OHIO INSURED
TERM FUND TAX-FREE FUND
<S> <C> <C>
Gross unrealized appreciation............................................. $ 1,757,875 $ 3,422,103
Gross unrealized depreciation............................................. ( 336,968) ( 286,920)
--------------- ---------------
Net unrealized appreciation............................................... $ 1,420,907 $ 3,135,183
=============== ===============
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
The tax basis of investments for each Fund is equal to the amortized cost as
shown on the Statements of Assets and Liabilities.
As of June 30, 1996, the Ohio Tax-Free Money Fund, the Tax-Free Money Fund,
the California Tax-Free Money Fund, the Royal Palm Florida Tax-Free Money
Fund, the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
had capital loss carryforwards for federal income tax purposes of $709,
$1,338, $1,580, $1,198, $1,620,782 and $494, respectively, none of which
expire prior to June 30, 1999. These capital loss carryforwards may be
utilized in the current or future years to offset net realized capital gains
prior to distributing such gains to shareholders.
3. INVESTMENT TRANSACTIONS
For the year ended June 30, 1996, purchases and proceeds from sales and
maturities of investment securities, excluding short-term investments,
amounted to $28,765,136 and $45,159,470, respectively, for the Tax-Free
Intermediate Term Fund and $35,124,299 and $38,276,155, respectively, for the
Ohio Insured Tax-Free Fund.
<PAGE>
4. TRANSACTIONS WITH AFFILIATES
The President of the Trust is the controlling shareholder of Leshner
Financial, Inc., whose subsidiaries include Midwest Group Financial Services,
Inc. (the Adviser), the Trust's investment adviser and principal underwriter,
and MGF Service Corp. (MGF), the shareholder servicing and transfer agent and
accounting and pricing agent for the Trust.
MANAGEMENT AGREEMENT
Each Fund's investments are managed by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, each Fund pays the
Adviser a fee, computed and accrued daily and paid monthly, at an annual rate
of 0.5% of its respective average daily net assets up to $100,000,000, 0.45%
of such assets from $100,000,000 to $200,000,000, 0.4% of such assets from
$200,000,000 to $300,000,000 and 0.375% of such assets in excess of
$300,000,000.
States in which shares of the Trust are offered may impose an expense
limitation based upon net assets. The Adviser has agreed to reimburse each
Fund for expenses which exceed the most restrictive applicable expense
limitation of any state. No reimbursement was required from the Adviser with
respect to any Fund for the year ended June 30, 1996. However, in order to
reduce the operating expenses of the California Tax-Free Money Fund and the
Royal Palm Florida Tax-Free Money Fund, the Adviser voluntarily waived
advisory fees of $6,600 and $58,284, respectively, during the year ended June
30, 1996. In addition, in order to reduce the operating expenses of Class A
shares of the Ohio Insured Tax-Free Fund and Class B shares of the Royal Palm
Florida Tax-Free Money Fund, the Adviser voluntarily reimbursed $2,708 of
Class A expenses for the Ohio Insured Tax-Free Fund and $506 of Class B
expenses for the Royal Palm Florida Tax-Free Money Fund during the period.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer Agent and Shareholder Service Agreement
between the Trust and MGF, MGF maintains the records of each shareholder's
account, answers shareholders' inquiries concerning their accounts, processes
purchases and redemptions of each Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service
functions. For these services, MGF receives a monthly fee at an annual rate of
$25.00 per shareholder account from each of the Ohio Tax-Free Money Fund, the
Tax-Free Money Fund, the California Tax-Free Money Fund and the Royal Palm
Florida Tax-Free Money Fund and $21.00 per shareholder account from each of
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund,
subject to a $1,000 minimum monthly fee for each Fund or for each class of
shares of a Fund. In addition, each Fund pays out-of-pocket expenses
including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and
MGF, MGF calculates the daily net asset value per share and maintains the
financial books and records of each Fund. For these services, MGF receives a
monthly fee, based on current asset levels, of $3,750 per month from the Ohio
Tax-Free Money Fund, $3,250 per month from each of the Tax-Free Money Fund and
the California Tax-Free Money Fund, $4,250 per month from the Royal Palm
Florida Tax-Free Money Fund and $4,750 per month from each of the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund. In addition, each
Fund pays certain out-of-pocket expenses incurred by MGF in obtaining
valuations of such Fund's portfolio securities.
<PAGE>
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and the Adviser, the Adviser and
affiliates earned $9,779 and $22,737 from underwriting and broker commissions
on the sale of shares of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund, respectively, during the year ended June 30, 1996. In
addition, the Advisor collected $5,802 and $349 of contingent deferred sales
loads on the redemption of Class C shares of the Tax-Free Intermediate Term
Fund and the Ohio Insured Tax-Free Fund, respectively.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of each
Fund having one class of shares and Class A shares of each Fund having two
classes of shares may directly incur or reimburse the Adviser for expenses
related to the distribution and promotion of shares. The annual limitation for
payment of such expenses under the Class A Plan is .25% of average daily net
assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free
Fund may directly incur or reimburse the Adviser for expenses related to the
distribution and promotion of shares. The annual limitation for payment of
such expenses under the Class C Plan is 1% of average daily net assets
attributable to Class C shares.
CUSTODIAN AGREEMENTS
The Fifth Third Bank, which serves as the custodian for each Fund except for
the Royal Palm Florida Tax-Free Money Fund, was a significant shareholder of
record of the Ohio Tax-Free Money Fund as of June 30, 1996. Under the terms of
its Custodian Agreement, The Fifth Third Bank receives from each such Fund an
asset-based fee plus transaction charges for each security transaction entered
into by the Funds. Huntington Trust Company, N.A. (Huntington), which serves
as the custodian for the Royal Palm Florida Tax-Free Money Fund, was a
significant shareholder of record of such Fund as of June 30, 1996. Under the
term of its Custodian Agreement, Huntington receives from the Fund an
asset-based fee.
<PAGE>
<TABLE>
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes
in Net Assets are the result of the following capital share transactions for
the years ended June 30, 1996 and 1995:
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
TAX-FREE INTERMEDIATE OHIO INSURED
TERM FUND TAX-FREE FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C>
Shares sold.................................... 1,417,723 2,523,254 12,319,913 11,576,223
Shares issued in reinvestment of
distributions to shareholders............... 244,633 320,606 232,739 262,171
Shares redeemed................................ ( 2,894,267) ( 5,334,216) ( 12,159,274) ( 12,691,802)
------------ ------------- ------------- ------------
Net increase (decrease) in shares outstanding.. ( 1,231,911) ( 2,490,356) 393,378 ( 853,408)
Shares outstanding, beginning of year.......... 7,470,758 9,961,114 5,951,947 6,805,355
------------ ------------- ------------- ------------
Shares outstanding, end of year................ 6,238,847 7,470,758 6,345,325 5,951,947
============ ============= ============= ============
CLASS C
Shares sold.................................... 292,369 661,291 99,911 164,356
Shares issued in reinvestment of
distributions to shareholders............... 17,558 16,430 14,227 12,037
Shares redeemed................................ ( 270,313) ( 522,939) ( 129,418) ( 55,643)
------------ ------------- ------------- ------------
Net increase (decrease) in shares outstanding.. 39,614 154,782 ( 15,280) 120,750
Shares outstanding, beginning of year.......... 443,255 288,473 347,217 226,467
------------ ------------- ------------- ------------
Shares outstanding, end of year................ 482,869 443,255 331,937 347,217
============ ============= ============= ============
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Capital share transactions for the Ohio Tax-Free Money Fund, the Tax-Free
Money Fund, the California Tax-Free Money Fund and the Royal Palm Florida
Tax-Free Money Fund are identical to the dollar value of those transactions as
shown in the Statements of Changes in Net Assets.
<PAGE>
6. PORTFOLIO COMPOSITION
As of June 30, 1996, the Ohio Tax-Free Money Fund and the Ohio Insured
Tax-Free Fund were invested exclusively in debt obligations issued by the
State of Ohio and its political subdivisions, agencies, authorities and
instrumentalities and by other issuers the interest from which is exempt from
Ohio income tax. The California Tax-Free Money Fund was invested in debt
obligations issued by the State of California and its political subdivisions,
agencies, authorities and instrumentalities and by other issuers the interest
from which is exempt from California income tax. As of June 30, 1996, 77.4% of
the Royal Palm Florida Tax-Free Money Fund was invested in debt obligations
issued by the State of Florida and its political subdivisions, agencies,
authorities and instrumentalities and by other issuers the value of which is
exempt from the Florida intangible personal property tax. As of June 30, 1996,
19.5% of the portfolio securities of the Tax-Free Money Fund were concentrated
in the State of Ohio, 13.5% in the State of Minnesota and 10.2% in the State
of Florida. For information regarding portfolio composition by state for the
Tax-Free Intermediate Term Fund as of June 30, 1996, see the Fund's Portfolio
of Investments.
As diversified Funds registered under the 1940 Act, it is the policy of the
Tax-Free Money Fund and the Tax-Free Intermediate Term Fund that not more than
25% of the total assets of each such Fund be invested in securities of issuers
which individually comprise more than 5% of its total assets.
The Ohio Tax-Free Money Fund, the California Tax-Free Money Fund, the Royal
Palm Florida Tax-Free Money Fund and the Ohio Insured Tax-Free Fund are each
non-diversified Funds under the 1940 Act. Thus, investments may be
concentrated in fewer issuers than those of a diversified fund. As of June 30,
1996, neither the Ohio Tax-Free Money Fund nor the Royal Palm Florida Tax-Free
Money Fund had concentrations of investments (10% or greater) in any one
issuer. The California Tax-Free Money Fund and the Ohio Insured Tax-Free Fund
had 12.6% and 14.6% of their respective investments concentrated in the
securities of a single issuer as of June 30, 1996.
The Ohio Tax-Free Money Fund, the Tax-Free Money Fund, the California Tax-Free
Money Fund and the Royal Palm Florida Tax-Free Money Fund each invest in
municipal securities maturing in 13 months or less and having a short-term
rating in one of the top two ratings categories by at least two nationally
recognized statistical rating agencies (or by one such agency if a security is
rated by only that agency) or, if unrated, are determined by the Adviser,
under the supervision of the Board of Trustees, to be of comparable quality.
As of June 30, 1996, 46.9% of the Tax-Free Intermediate Term Fund's portfolio
securities were rated AAA/Aaa [using the higher of Standard & Poor's
Corporation (S&P) or Moody's Investors Service, Inc. (Moody's) ratings], 28.6%
were rated AA/Aa, 21.8% were rated A/A and 2.7% were not rated.
<PAGE>
As of June 30, 1996, 99.1% of the Ohio Insured Tax-Free Fund's long-term
portfolio securities were either (1) insured by an insurance policy obtained
from a recognized insurer which carries a rating of AAA by S&P or Aaa by
Moody's, (2) guaranteed as to the payment of interest and principal by an
agency or instrumentality of the U.S. Government, or (3) secured as to the
payment of interest and principal by an escrow account consisting of
obligations of the U.S. Government. Four private insurers individually insure
more than 10% of the Ohio Insured Tax-Free Fund's portfolio securities and
collectively insure 82.9% of its portfolio securities.
The concentration of investments for each Fund as of June 30, 1996, classified
by revenue source, was as follows:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
ROYAL PALM
OHIO CALIFORNIA FLORIDA TAX-FREE OHIO
TAX-FREE TAX-FREE TAX-FREE TAX-FREE INTERMEDIATE INSURED
MONEY MONEY MONEY MONEY TERM TAX-FREE
FUND FUND FUND FUND FUND FUND
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
General Obligations................. 28.6% 14.4% 11.3% 8.0% 21.8% 30.3%
Revenue Bonds:
Industrial Development/
Pollution Control............ 32.0% 42.8% 36.0% 30.6% 8.2% 15.2%
Hospital/Health Care.............. 22.7% 4.8% 2.2% 24.8% 18.0% 19.7%
Housing/Mortgage.................. 3.8% 17.8% 2.0% 19.1% 11.5% 5.5%
Utilities......................... 0.2% 3.6% 17.9% 5.6% 10.9% 18.0%
Education......................... 2.3% 3.0% 2.0% 1.9% 11.8% 3.4%
Transportation.................... -- 3.7% 4.0% 2.8% 3.9% 3.3%
Public Facilities................. -- 1.0% 4.7% 2.4% 3.6% 1.4%
Economic Development.............. 5.2% 6.4% -- -- 2.1% --
Leases............................ -- 1.2% 7.2% 1.8% 2.3% 0.7%
Special Tax....................... -- -- 4.9% 0.5% 3.9% --
Miscellaneous..................... 5.2% 1.3% 7.8% 2.5% 2.0% 2.5%
----------- ----------- ----------- ----------- ----------- -----------
Total .............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=========== =========== =========== =========== =========== ===========
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See each Fund's Portfolio of Investments for additional information on
portfolio composition.
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 31.5% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,665,000 Euclid City, OH, Various Impt. GO BANS......................... 4.250% 07/12/1996 $ 1,665,072
5,484,000 Greene Co., OH, GO............................................. 4.125 07/18/1996 5,485,568
675,000 Dayton, OH, Airport Impt. GO BANS.............................. 4.050 07/25/1996 675,063
1,667,040 Willoughby, OH, Landfill Closure GO BANS....................... 4.200 07/25/1996 1,667,355
1,450,000 Powell Village, OH, Road Impt. GO BANS......................... 4.100 08/15/1996 1,450,519
180,000 Powell Village, OH, Street Impt. GO BANS....................... 4.380 08/15/1996 180,103
2,500,000 Univ. of Cincinnati, OH, General Receipts, Ser. S.............. 4.250 08/28/1996 2,500,952
1,105,000 Lorain Co., OH, Water & Sewer Impt. GO BANS.................... 4.250 08/30/1996 1,105,261
245,000 Ohio HFA Mtg. Rev., Ser. A-1................................... 4.400 09/01/1996 245,150
1,000,000 Plain Township, OH, Fire Station Const. & Impt. BANS........... 4.390 09/17/1996 1,001,117
3,000,000 Cincinnati, OH, CSD Energy Conserv. BANS....................... 4.030 09/20/1996 3,003,437
800,000 Miamisburg, OH, Street Impt. GO BANS........................... 4.250 09/27/1996 800,462
2,260,000 Canfield, OH, LSD School Impt. GO BANS......................... 4.150 10/03/1996 2,261,115
2,000,000 Franklin Co., OH, Waterworks Sys. Impt. GO..................... 4.000 10/09/1996 2,002,033
400,000 Akron Bath Copley, OH, Rev. (Akron City Hosp. Proj.)........... 7.700 11/15/1996 405,905
2,300,000 Belmont Co., OH, Sanitary Sewer Impt. BANS..................... 4.090 11/26/1996 2,302,595
2,000,000 Euclid, OH, CSD TRANS.......................................... 3.520 12/12/1996 2,001,481
3,400,000 Loveland, OH, GO BANS.......................................... 3.875 12/12/1996 3,405,840
975,000 Marysville, OH, GO BANS........................................ 4.140 12/12/1996 976,220
1,064,490 Champaign Co., OH, GO BANS..................................... 4.750 12/17/1996 1,066,879
870,000 Highland, OH, LSD GO BANS...................................... 4.375 12/19/1996 872,086
1,432,500 Groveport-Madison, OH, LSD GO TANS............................. 3.990 12/30/1996 1,434,584
1,900,000 Erie Co., OH, Hosp. Impt. Rev. (Firelands Comm. Hosp.),
Prerefunded @101.............................................. 8.875 01/01/1997 1,967,510
675,000 Worthington, OH, CSD School Impt. GO BANS...................... 3.750 01/17/1997 675,533
500,000 Marysville, OH (Water Storage Tank Proj.) GO BANS.............. 3.880 01/31/1997 500,792
2,000,000 Toledo, OH, CSD (Energy Conservation) GO BANS.................. 4.000 01/31/1997 2,005,664
1,950,000 Marion Co., OH, GO BANS........................................ 3.600 02/13/1997 1,952,919
700,000 Ottawa Co., OH, GO BANS........................................ 3.550 02/27/1997 701,114
2,000,000 East Palestine, OH, CSD GO BANS................................ 3.500 02/28/1997 2,001,273
1,550,000 Salem, OH, CSD GO BANS......................................... 3.490 03/06/1997 1,550,708
932,000 Huron, OH, GO BANS............................................. 3.860 03/19/1997 933,666
800,000 Marysville, OH, GO BANS........................................ 3.960 03/21/1997 801,441
3,185,700 Greene Co., OH, GO............................................. 4.000 03/26/1997 3,192,455
950,000 Geneva on the Lake, OH, GO..................................... 4.100 04/03/1997 952,076
2,300,000 Ottawa Co., OH, GO BANS........................................ 3.980 04/09/1997 2,303,931
1,000,000 Trumbull Co., OH, Correctional Fac. GO BANS.................... 4.070 04/10/1997 1,002,016
1,000,000 Ashland, OH, CSD (Energy Conservation) GO BANS................. 4.150 04/15/1997 1,002,293
3,239,200 Hamilton, OH, GO BANS.......................................... 4.000 05/09/1997 3,240,442
2,300,000 Oregon, OH, GO BANS............................................ 4.050 05/29/1997 2,304,603
3,500,000 Claymont, OH, CSD GO BANS...................................... 4.000 06/04/1997 3,501,556
3,000,000 Greene Co., OH, GO............................................. 3.880 06/04/1997 3,004,278
1,040,000 Brook Park, OH, GO BANS........................................ 4.050 06/06/1997 1,042,519
2,000,000 Hudson, OH, Waterworks Impt. GO BANS........................... 4.000 06/11/1997 2,004,915
2,500,000 Mansfield, OH, CSD GO TANS..................................... 4.500 06/27/1997 2,510,620
- - ------------- ------------
$75,494,930 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $75,661,121)................................... $75,661,121
------------
<CAPTION>
OHIO TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 55.5% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,000,000 Ohio Higher Educ. Fac. Rev. (John Carroll Univ.)............... 4.125% 07/01/1996 $ 1,000,000
2,800,000 Cuyahoga Co., OH, Hosp. Impt. Rev. (Univ. Hosp. Cleveland)..... 3.750 07/01/1996 2,800,000
400,000 Franklin Co., OH, Health Sys. Rev. (St. Anthony Medical Ctr.).. 3.600 07/01/1996 400,000
3,900,000 Hamilton Co., OH, Health Sys. Rev. (Franciscan Sisters)........ 3.750 07/01/1996 3,900,000
500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1995A............... 3.750 07/01/1996 500,000
1,700,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B
(Cincinnati Gas & Elec.)..................................... 3.750 07/01/1996 1,700,000
700,000 Ohio St. PCR (Sohio Air Proj.)................................. 3.600 07/01/1996 700,000
4,320,000 Cuyahoga Co., OH, IDR (S & R Playhouse Realty)................. 3.750 07/01/1996 4,320,000
1,600,000 Delaware Co., OH, IDR (Radiation Sterilizers, Inc.)............ 3.750 07/01/1996 1,600,000
210,000 Franklin Co., OH, IDR (Boa Ltd. Proj.)......................... 3.850 07/01/1996 210,000
1,300,000 Franklin Co., OH, IDR (Jacobsen Stores)........................ 3.800 07/01/1996 1,300,000
600,000 Franklin Co., OH, IDR (Capitol South).......................... 3.800 07/01/1996 600,000
2,900,000 Muskingum Co., OH, IDR (Elder-Beerman)......................... 3.900 07/01/1996 2,900,000
500,000 Ohio St. Environ. Impt. Rev. (U.S. Steel Corp.)................ 3.800 07/01/1996 500,000
4,250,000 Cincinnati-Hamilton Co., OH, Port. Auth. Rev.
(Kaiser Agric. Chemical Co.)................................. 3.400 07/02/1996 4,250,000
245,000 Akron, OH, Sani. Sewer Sys. Rev., Ser. 1994.................... 3.450 07/03/1996 245,000
1,000,000 Butler Co., OH, IDR (Phillip Morris Co.)....................... 3.350 07/03/1996 1,000,000
1,000,000 Centerville, OH, Health Care Rev. (Bethany-Lutheran)........... 3.700 07/03/1996 1,000,000
8,100,000 Clermont Co., OH, Hosp. Fac. Rev., Ser. B (Mercy Health Sys.).. 3.500 07/03/1996 8,100,000
1,800,000 Cleveland-Cuyahoga Co., OH, Port. Auth. Rev.
(Rock & Roll Hall of Fame)................................... 3.450 07/03/1996 1,800,000
1,075,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993A
(Hospice of the Western Reserve)............................. 3.600 07/03/1996 1,075,000
1,750,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993B
(Hospice of the Western Reserve)............................. 3.600 07/03/1996 1,750,000
1,250,000 Cuyahoga Co., OH, Health Care Fac. Rev. (Benjamin Rose Inst.).. 3.500 07/03/1996 1,250,000
160,000 Cuyahoga Co., OH, IDR (Schottenstein Stores)................... 3.550 07/03/1996 160,000
2,000,000 Cuyahoga Co., OH, IDR, Ser. 1989 (Motch Corp. Proj.)........... 3.850 07/03/1996 2,000,000
970,000 Cuyahoga Co., OH, IDR (Pleasant Lake Assoc.)................... 3.600 07/03/1996 970,000
900,000 Delaware Co., OH, Indust. Rev., Ser. 1985 (MRG Limited Proj.).. 3.550 07/03/1996 900,000
2,390,000 Erie Co., OH, IDR (Toft Dairy, Inc.)........................... 3.600 07/03/1996 2,390,000
435,000 Franklin Co., OH, IDR (Columbus Dist.)......................... 3.600 07/03/1996 435,000
564,000 Franklin Co., OH, IDR, Ser. D (Kindercare)..................... 3.700 07/03/1996 564,000
1,605,000 Greene Co., OH, Healthcare Fac. Rev. (Green Oaks Proj.)........ 3.600 07/03/1996 1,605,000
900,000 Hardin Co., OH, Hosp. Impt. Rev., Ser. A
(Hardin Memorial Hosp.)..................................... 3.600 07/03/1996 900,000
375,000 Hudson Village, OH, IDR, Ser. A (Kindercare)................... 3.700 07/03/1996 375,000
1,160,000 Huron Co., OH, Ref. Rev. (Norfolk Furniture Corp.)............. 3.600 07/03/1996 1,160,000
494,000 Lorain Co., OH, IDR, Ser. C (Kindercare)....................... 3.700 07/03/1996 494,000
1,120,000 Lucas Co., OH, EDR (Glendale Meadows).......................... 3.600 07/03/1996 1,120,000
935,000 Lucas Co., OH, IDR, Ser. D (Kindercare)........................ 3.700 07/03/1996 935,000
300,000 Medina, OH, IDR (Kindercare)................................... 3.700 07/03/1996 300,000
1,100,000 Meigs Co., OH, IDR, Ser. 1985 (MRG Limited Proj.).............. 3.550 07/03/1996 1,100,000
287,000 Middletown, OH, IDR, Ser. A (Kindercare)....................... 3.700 07/03/1996 287,000
2,000,000 Montgomery Co., OH, EDR (Dayton Art Institute)................. 3.400 07/03/1996 2,000,000
935,000 Montgomery Co., OH, Healthcare Rev., Ser. A
(Dayton Area MRI Consortium)................................. 3.600 07/03/1996 935,000
340,000 Montgomery Co., OH, IDR (Kindercare)........................... 3.700 07/03/1996 340,000
1,000,000 Morrow Co., OH, IDR (Field Container Corp.).................... 3.400 07/03/1996 1,000,000
700,000 Ohio St. Air Quality Dev. Auth. Rev. (Honda of America)........ 3.700 07/03/1996 700,000
200,000 Ohio St. Water Dev. Auth. Rev. (Timken Co. Proj.).............. 3.350 07/03/1996 200,000
1,300,000 Ohio St. Environ. Impt. Rev. (Honda of America)................ 3.700 07/03/1996 1,300,000
850,000 Orrville, OH, Hosp. Fac. Rev., Ser. 1990 (Orrville Hosp.)...... 3.550 07/03/1996 850,000
200,000 Stark Co., OH, IDR, Ser. D (Kindercare)........................ 3.700 07/03/1996 200,000
2,650,000 Summit Co., OH, IDR (Bowery Assoc.)............................ 3.400 07/03/1996 2,650,000
375,000 Wadsworth, OH, IDR (Kindercare)................................ 3.700 07/03/1996 375,000
1,200,000 Wyandot Co., OH, Indust. Rev., Ser. 1985 (MRG Limited Proj.)... 3.550 07/03/1996 1,200,000
475,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Visiting Nurse Svcs. Proj.)................................. 3.500 07/04/1996 475,000
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 55.5% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,750,000 Ashland, OH, IDR (Landover Properties)......................... 3.350% 07/04/1996 $ 1,750,000
4,190,000 Ashtabula Co., OH, Hosp. Fac. Rev., Ser. 95
(Ashtabula Co. Med. Ctr. Proj.).............................. 3.400 07/04/1996 4,190,000
1,900,000 Clinton Co., OH, Hosp. Rev. (Clinton Memorial)................. 3.500 07/04/1996 1,900,000
8,000,000 Franklin Co., OH, IDR (Berwick Steel).......................... 3.550 07/04/1996 8,000,000
1,240,000 Franklin Co., OH, IDR (Ohio Girl Scouts)....................... 3.400 07/04/1996 1,240,000
400,000 Franklin Co., OH, IDR (Columbus College)....................... 3.400 07/04/1996 400,000
2,000,000 Franklin Co., OH, IDR (Alco Standard Corp.).................... 3.400 07/04/1996 2,000,000
1,350,000 Hamilton Co., OH, EDR, Ser. 1995
(Cincinnati Assoc. Performing Arts).......................... 3.400 07/04/1996 1,350,000
425,000 Lucas Co., OH, Rev. (Sunshine Children's Home)................. 3.500 07/04/1996 425,000
2,000,000 Lucas Co., OH, IDR (Ohio Citizens Bank Proj.).................. 3.500 07/04/1996 2,000,000
485,000 Lucas Co., OH, IDR (Associates Proj.).......................... 3.500 07/04/1996 485,000
2,045,000 Mahoning Co., OH, Healthcare Fac. Rev. (Copeland Oaks)......... 3.400 07/04/1996 2,045,000
1,790,000 Mahoning Co., OH, Healthcare Fac. Rev. (Ohio Heart Institute).. 3.400 07/04/1996 1,790,000
4,150,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.).......... 3.400 07/04/1996 4,150,000
3,920,000 Montgomery Co., OH, Healthcare Rev. (Comm. Blood Ctr. Proj.)... 3.400 07/04/1996 3,920,000
4,800,000 Ohio EDR, Ser. 1983 (Court St. Ctr. Assoc. Ltd. Proj.)......... 3.400 07/04/1996 4,800,000
1,265,000 Pike Co., OH, EDR (Pleasant Hill).............................. 3.400 07/04/1996 1,265,000
1,100,000 Rickenbacker, OH, Port. Auth. Rev.
(Rickenbacker Holdings, Inc.)................................ 3.400 07/04/1996 1,100,000
660,000 Summit Co., OH, IDR (Go-Jo Indust.)............................ 3.400 07/04/1996 660,000
2,435,000 Toledo-Lucas Co., OH, Port. Auth. IDR Ref., Ser. 1994.......... 3.500 07/04/1996 2,435,000
4,200,000 Toledo, OH, City Svcs. Special Assessment Notes................ 3.350 07/04/1996 4,200,000
4,690,000 Trumbull Co., OH, Hosp. Rev. (Shepherd Valley Lutheran)........ 3.400 07/04/1996 4,690,000
1,600,000 Warren Co., OH, IDR (Liquid Container)......................... 3.550 07/04/1996 1,600,000
2,650,000 Westlake, OH, IDR (Nordson Co.)................................ 3.400 07/04/1996 2,650,000
100,000 Wood Co., OH, IDR (North American Science)..................... 3.600 07/04/1996 100,000
2,125,000 Ashland Co., OH, Hosp. Fac. Rev., Ser. 1989 (Good Shepherd).... 3.800 07/05/1996 2,125,000
1,400,000 Hamilton Co., OH, IDR (ADP System)............................. 3.700 07/15/1996 1,400,000
- - ------------- ------------
$133,490,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $133,490,000).................................. $133,490,000
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 12.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$2,500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. A (Duquesne Light).. 3.650% 08/15/1996 $ 2,500,000
971,155 Citizens Federal Tax-Exempt Mtg. Bond Trust.................... 3.450 09/01/1996 971,155
680,000 Riverside, OH, EDR (Riverside Assoc. Ltd. Proj.)............... 3.550 09/01/1996 680,000
4,895,000 Cuyahoga Co., OH, IDR (Halle Office Bldg.)..................... 3.883 10/01/1996 4,895,000
175,000 Franklin Co., OH, IDR (Pan Western Life)....................... 3.900 10/01/1996 175,000
1,270,000 Miami Valley Tax-Exempt Mtg. Bond Trust........................ 4.880 10/15/1996 1,270,000
690,000 Franklin Co., OH, IDR (GSW Proj.).............................. 3.650 11/01/1996 690,000
3,300,000 Ohio HFA MFH (Lincoln Park).................................... 3.900 11/01/1996 3,300,000
125,000 Ohio Company Tax-Exempt Mtg. Bond Trust, Ser. 1................ 3.760 11/01/1996 125,000
100,000 Summit Co., OH, IDR (SGS Tool Co. II).......................... 3.700 11/01/1996 100,000
3,835,000 Richland Co., OH, IDR (Mansfield Sq. Proj.).................... 3.650 11/15/1996 3,835,000
825,000 Cuyahoga Co., OH, Healthcare Rev.
(Cleveland Neighborhood Health Svcs.)........................ 4.375 12/01/1996 825,000
570,000 Cuyahoga Co., OH, IDR (Welded Ring)............................ 3.750 12/01/1996 570,000
2,415,000 Franklin Co., OH, IDR (Leveque & Assoc. Proj.)................. 3.750 12/01/1996 2,415,000
340,000 Lucas Co., OH, EDR (Cross County Inns., Inc.).................. 4.000 12/01/1996 340,000
960,000 Scioto Co., OH, Healthcare Rev. (Hillview Retirement).......... 3.750 12/01/1996 960,000
1,115,000 Gallia Co., OH, IDR (Jackson Pike Assoc.)...................... 3.600 12/15/1996 1,115,000
3,280,000 Ohio Company Tax-Exempt Mtg. Bond Trust, Ser. 2................ 3.900 12/15/1996 3,279,203
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 12.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 810,000 Franklin Co., OH, EDR (JAL Realty)............................. 3.950% 01/15/1997 $ 810,000
1,405,000 Hamilton, OH, IDR (Continental Commercial Properties Proj.).... 3.400 02/01/1997 1,405,000
410,000 Middletown, OH, IDR (Continental Commercial Properties Proj.).. 3.450 02/01/1997 410,000
- - ------------- ------------
$ 30,671,155 TOTAL ADJUSTABLE RATE PUT BONDS
- - -------------
(Amortized Cost $30,670,358)................................... $30,670,358
------------
$239,656,085 TOTAL INVESTMENTS AT VALUE -- 99.8%
=============
(Amortized Cost $239,821,479).................................. $239,821,479
OTHER ASSETS AND LIABILITIES, NET-- 0.2% ...................... 501,413
------------
NET ASSETS-- 100.0% ........................................... $240,322,892
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 22.6% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 Greater Cleveland Regional Transit Auth. COP................... 9.100% 07/01/1996 $ 200,000
200,000 Pennsylvania St. IDA Rev., Escrowed to Maturity................ 6.300 07/01/1996 200,000
150,000 South Carolina St. Public Auth. Elec. Rev., Prerefunded @ 103.. 8.100 07/01/1996 154,500
110,000 Washington St. Pub. Power Supply Sys. Rev., Ser. 1990
(Nuclear Proj. #1), Prerefunded @ 103........................ 15.000 07/01/1996 113,300
100,000 Austin, TX, ISD GO............................................. 4.400 08/01/1996 100,045
100,000 Louisiana St. GO, Ser. A....................................... 6.400 08/01/1996 100,211
520,000 El Paso, TX, GO, Ser. 1994A.................................... 8.000 08/15/1996 522,531
200,000 Montgomery Co., AL, Waterworks & Sanit. Sewer Rev.,
Prerefunded @ 100............................................ 9.700 09/01/1996 200,000
500,000 Washington St. GO (Motor Vehicle Fuel Tax), Prerefunded @ 100.. 6.750 09/01/1996 502,430
245,000 Peoria, IL, School Dist. #150 Rev.............................. 4.600 09/15/1996 245,272
370,000 Brook Park, OH, Sewer Impt. GO BANS............................ 4.250 09/20/1996 370,157
105,000 Chicago, IL, Waterworks Rev., Prerefunded @ 101................ 6.750 11/01/1996 107,057
200,000 Greater New Orleans, LA, Expressway Rev., Prerefunded @ 103.... 7.800 11/01/1996 208,610
70,000 Connecticut St. Hsg. Fin. Auth. Refunding Rev., Ser. 1987B..... 7.900 11/15/1996 70,991
200,000 Chesapeake, VA, GO............................................. 3.750 12/01/1996 200,052
250,000 Columbia, SC, Parking Fac. Rev., Prerefunded @ 102............. 7.200 12/01/1996 258,471
300,000 Greensboro, NC, COP Pkg. Facs. Proj. Rev....................... 5.700 12/01/1996 302,070
105,000 Houston, TX, Water & Sewer Rev., Prerefunded @ 102............. 7.125 12/01/1996 108,534
200,000 Milwaukee, WI, GO.............................................. 4.100 12/01/1996 200,336
150,000 Jefferson Co., OH, School Dist. #R-001 GO...................... 4.400 12/15/1996 150,442
250,000 Broward Co., FL, GO, Ser. C.................................... 5.000 01/01/1997 251,580
525,000 Ross Co., OH, Airport Impt. GO BANS ........................... 4.540 04/25/1997 526,191
250,000 Columbus, OH, GO, Ser. 1....................................... 5.500 05/15/1997 253,430
200,000 Grand River, OK, Dam Auth., Rev................................ 6.450 06/01/1997 208,033
160,000 Mid-Prairie, IA, Comm. School Dist. GO......................... 6.750 06/01/1997 164,020
- - ------------- ------------
$ 5,660,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $5,718,263).................................... $ 5,718,263
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 48.1% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 300,000 Franklin Co., OH, Health Sys. Rev. (St. Anthony Medical Ctr.).. 3.600% 07/01/1996 $ 300,000
900,000 Harris Co., TX, Health Facs. Dev. Hosp. Rev., Ser. D
(St. Luke's Episcopal)....................................... 3.700 07/01/1996 900,000
300,000 Hillsborough Co., FL, PCR (Tampa Elec.)........................ 3.550 07/01/1996 300,000
700,000 Jacksonville, FL, PCR (Florida Power & Light).................. 3.550 07/01/1996 700,000
330,000 NCNB Pooled Tax-Exempt Rev., Ser. 1990A........................ 4.125 07/01/1996 330,000
1,000,000 New Jersey EDA & EDR (Union Avenue Assoc.)..................... 3.650 07/01/1996 1,000,000
700,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B
(Cincinnati Gas & Elec.)..................................... 3.750 07/01/1996 700,000
400,000 Pinal Co., AZ, IDA PCR (Magma Copper Co.)...................... 3.600 07/01/1996 400,000
900,000 Eddyville, IA, IDR (Heartland Lysine, Inc.).................... 3.850 07/03/1996 900,000
1,000,000 Illinois Dev. Fin. Auth. MFH Rev. (Cobbler Square Proj.)....... 3.850 07/03/1996 1,000,000
825,000 Brooklyn Park, MN, IDR (Schmidt Proj.)......................... 3.750 07/05/1996 825,000
1,000,000 District of Columbia MFH, Tyler House Trust COP, Ser. 1995A.... 3.800 07/05/1996 1,000,000
425,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)...................... 3.950 07/05/1996 425,000
575,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)...................... 3.650 07/05/1996 575,000
700,000 Marion, FL, Hsg. Fin. Auth. Rev. (Summer Trace Apts.).......... 3.600 07/05/1996 700,000
1,140,000 Redwood Falls, MN, IDR (Zytec Corp. Proj.)..................... 4.100 07/05/1996 1,140,000
<PAGE>
<CAPTION>
TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 48.1% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 400,000 St. Cloud, MN, Hsg. & Redev. Auth. (Coborn Realty Co.)......... 3.750% 07/05/1996 $ 400,000
600,000 Tamarac, FL, IDR, Ser. 1995 (Tamarac Business Ctr.)............ 3.550 07/05/1996 600,000
- - ------------- ------------
$12,195,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $12,195,000)................................... $12,195,000
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 27.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,125,000 Buckeye Tax-Exempt Mtg. Bond Trust............................. 3.800% 08/01/1996 $ 1,123,481
535,000 Milwaukee, WI, IDR (Wayne C. Oldenburg Proj.).................. 3.950 08/01/1996 535,000
330,000 Lansing, MI, EDR (LGH Office Bldg. Proj.)...................... 3.650 08/15/1996 330,000
153,845 Citizens Federal Tax-Exempt Mtg. Bond Trust.................... 3.450 09/01/1996 153,845
1,200,000 Owensboro, KY, IDR, Ser. 1985 (Dart Container)................. 3.600 09/01/1996 1,200,000
165,000 Cuyahoga Co., OH, IDR (Halle Office Bldg.)..................... 3.880 10/01/1996 165,000
230,000 Kansas City, KS, IDR (Lady Baltimore Foods).................... 4.250 10/01/1996 230,000
505,000 Romulus, MI, Econ. Dev. Corp. (Airport Realty Proj.)........... 3.700 10/01/1996 505,000
230,000 Medina Co., OH, IDR (Nationwide One Proj.)..................... 3.850 11/01/1996 229,934
560,000 Summit Co., OH, IDR (Akromold, Inc. Proj.)..................... 4.000 11/01/1996 560,000
275,000 Westlake, OH, EDR (Cross County Inns, Inc.).................... 3.750 11/01/1996 275,000
1,000,000 Westmoreland Co., PA, IDR (White Cons Indust.)................. 3.875 12/01/1996 1,000,000
735,000 Lexington-Fayette Co., KY, Urban Gov't. Rev.
(Providence Montessori)...................................... 3.900 01/01/1997 735,000
- - ------------- ------------
$ 7,043,845 TOTAL ADJUSTABLE RATE PUT BONDS
- - -------------
(Amortized Cost $7,042,260).................................... $ 7,042,260
------------
$24,898,845 TOTAL INVESTMENTS AT VALUE-- 98.5%
=============
(Amortized Cost $24,955,523)................................... $24,955,523
OTHER ASSETS AND LIABILITIES, NET-- 1.5% ...................... 386,865
------------
NET ASSETS-- 100.0% .......................................... $25,342,388
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 29.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 250,000 Orange Co., CA, Muni. Water Dist. 1992B (Allen McColloch Pipeline).......... 4.500% 07/01/1996 $ 250,000
120,000 Southern California Public Power Auth. Rev., Ser. 1986B, Prerefunded @ 102.. 7.000 07/01/1996 122,400
150,000 California Health Fac. Auth. Insured Hosp. (Childrens Hosp. San Diego)...... 4.250 07/01/1996 150,000
125,000 Southern California Public Power Auth. Rev., Ser 1986B, Prerefunded @ 102... 7.125 07/01/1996 127,500
500,000 San Mateo Co., CA, Schools Insurance Group RANS, Ser. 1995.................. 4.750 07/05/1996 500,040
500,000 Los Angeles Co., CA, Local Educ. Agy. COP TRANS, Ser. A..................... 4.750 07/05/1996 500,038
240,000 Oakland, CA, Misc. Rev. Bonds, Ser. 1988A................................... 6.800 08/01/1996 240,596
250,000 Brea & Olinda, CA, USD COP, Prerefunded @ 102............................... 7.700 08/01/1996 255,844
500,000 Sacramento, CA, School Dist. COP (Admin. Ctr. Proj.), Prerefunded @100...... 4.600 08/01/1996 500,447
100,000 Mountain View, CA, Cap. Impt. Fin. Auth. Rev. (City Hall/Community Theater). 5.100 08/01/1996 100,104
500,000 Orange Co., CA, Sanitation COP, Escrowed to Maturity........................ 12.000 08/01/1996 503,504
200,000 Fresno, CA, COP (City Hall/Golf Course), Prerefunded @ 102.................. 7.875 08/01/1996 204,642
230,000 Folsom, CA, School Facs. Proj. GO, Ser. B................................... 6.000 08/01/1996 230,542
500,000 South Coast, CA, Local Educ. Agencies Pooled TRANS.......................... 5.000 08/14/1996 500,866
135,000 La Mirada, CA, Redev. Agy. Tax Allocation, Ser. A........................... 5.625 08/15/1996 135,289
100,000 South Orange Co., CA, Pub. Fin. Auth. Special Tax Rev., Ser. 1994C.......... 4.250 08/15/1996 100,038
500,000 Victor Valley, CA, Union High School Dist. TRANS............................ 4.500 08/30/1996 500,336
250,000 San Jose, CA, COP (Convention Center Proj.), Prerefunded @ 102.............. 7.500 09/01/1996 256,494
245,000 Contra Costa Co., CA, Public Fac. Corp. COP, Escrowed to Maturity........... 7.100 09/01/1996 246,424
100,000 San Francisco, CA, City & Co. Sewer Ref. Rev................................ 5.500 10/01/1996 100,340
500,000 Santa Clara Co., CA, COP, Prerefunded @ 102................................. 8.000 10/01/1996 515,376
150,000 Sacramento, CA, Muni. Util. Dist. Elec. Rev., Ser. H, Escrowed to Maturity.. 6.100 10/01/1996 150,883
350,000 Univ. of California Hsg. Sys. Group A Rev, Prerefunded @ 102................ 7.600 11/01/1996 361,478
360,000 Univ. of California Hsg. Sys. Group A Rev., Ser. W, Prerefunded @ 102....... 7.800 11/01/1996 372,069
245,000 California Health Fac. Auth. Rev. (Stanford Univ. Hosp.), Prerefunded @ 102. 7.125 11/01/1996 252,407
300,000 California St. Public Works Dept. of Corrections Rev., Prerefunded @ 102.... 7.375 11/01/1996 309,315
100,000 Palm Springs, CA, COP (Palm Springs Public Fac. Corp.), Escrowed to Maturity 6.700 11/01/1996 101,046
400,000 Univ. of California Medical Ctr. Rev. (Satellite Medical Ctr.),
Escrowed to Maturity...................................................... 7.900 12/01/1996 407,005
100,000 California St. Dept. of Water Rev., Ser. B, Prerefunded @ 101.50............ 7.500 12/01/1996 103,042
150,000 Poway, CA, Redev. Agy. Tax Rev., Prerefunded @ 103.......................... 8.100 12/15/1996 157,460
500,000 California School Cash Reserve Program Auth. 1995 Pool Bonds, Ser. B........ 4.500 12/20/1996 501,583
2,000,000 California School Cash Reserve Program Auth. 1996 Pool Bonds, Ser. A........ 4.750 07/02/1997 2,017,280
- - ------------- ------------
$10,650,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $10,774,388)................................................ $10,774,388
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 64.9% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 400,000 Irvine Ranch, CA, Water Dist. Rev., Ser. 1985B................. 3.450% 07/01/96 $ 400,000
1,700,000 California PCR Fin. Auth. (Delano Proj.)....................... 3.750 07/01/96 1,700,000
1,300,000 California PCR Fin. Auth. (Del Marva Power & Light -
Burney Forest Proj.)......................................... 3.650 07/01/96 1,300,000
800,000 California PCR Fin. Auth. (Honey Lake Power Proj.)............. 3.750 07/01/96 800,000
1,600,000 Irvine Ranch, CA, Assess. Dist. Impt. Rev., Ser. 1989-10....... 3.300 07/01/96 1,600,000
450,000 Irvine Ranch, CA, Water Dist. Cap. Impt. Proj. Rev., Ser. 1986. 3.500 07/01/96 450,000
1,000,000 California PCR Fin. Auth., Ser. A (Ultrapower-Rocklin)......... 3.799 07/01/96 1,000,000
500,000 Irvine Ranch, CA, Water Dist. Rev.............................. 3.450 07/01/96 500,000
1,400,000 Anaheim, CA, COP Police Facs. Rev.............................. 3.100 07/03/96 1,400,000
1,500,000 California PCR Fin. Auth. (Pacific Gas & Electric)............. 3.450 07/03/96 1,500,000
1,600,000 Vacaville, CA, IDR (Leggett & Platt, Inc.)..................... 3.850 07/03/96 1,600,000
1,500,000 Los Angeles, CA, Pension Obligation Ref. Rev., Ser. 1996C...... 3.150 07/03/96 1,500,000
<PAGE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 64.9% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,900,000 San Rafael, CA, IDR, Ser. 1994 (Phoenix American, Inc.)........ 3.600% 07/03/96 $ 1,900,000
1,000,000 Santa Paula, CA, Public Fin. Auth. Rev., Ser. 1996
(Water Sys. Aquisition Proj.)................................ 3.750 07/03/96 1,000,000
1,500,000 Hanford, CA, Sewer Rev., Ser. A................................ 3.750 07/05/96 1,500,000
1,200,000 Los Angeles, CA, Dept. of Water & Power Rev.................... 3.300 07/05/96 1,200,000
1,000,000 San Bernardino Co., CA, IDR (LaQuinta Motor Inns).............. 3.400 07/05/96 1,000,000
1,000,000 San Bernardino Co., CA, Capital Impt. Proj. Rev................ 3.800 07/05/96 1,000,000
1,300,000 San Bernardino Co., CA, COP.................................... 3.600 07/05/96 1,300,000
800,000 San Francisco, CA, City & Co. Parking Auth. Rev................ 3.300 07/05/96 800,000
- - ------------- ------------
$23,450,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $23,450,000)................................... $23,450,000
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 2.4% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 855,000 California PCR Fin. Auth. (San Diego Gas & Elec.)............. 4.000% 09/01/1996 $ 855,000
- - ------------- ------------
$ 855,000 TOTAL ADJUSTABLE RATE PUT BONDS
- - -------------
(Amortized Cost $855,000)...................................... $ 855,000
------------
<PAGE>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 6.9% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,500,000 Riverside Co., CA, Transportation Sales Tax Rev................ 3.400% 07/18/1996 $ 1,500,000
1,000,000 California PCR Fin. Auth. (Pacific Gas & Elec.)................ 3.400 08/08/1996 1,000,000
- - ------------- ------------
$2,500,000 TOTAL COMMERCIAL PAPER
- - -------------
(Amortized Cost $2,500,000).................................... $ 2,500,000
------------
$37,455,000 TOTAL INVESTMENTS AT VALUE -- 104.0%
=============
(Amortized Cost $37,579,388)................................... $37,579,388
OTHER ASSETS AND LIABILITIES, NET-- (4.0)% .................... ( 1,457,327 )
------------
NET ASSETS-- 100.0% ........................................... $36,122,061
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM FLORIDA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 27.2% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100,000 Broward Co., FL, GO, Prerefunded @ 102......................... 7.400% 07/01/1996 $ 102,000
100,000 Broward Co., FL, GO, Prerefunded @ 102......................... 7.500 07/01/1996 102,000
200,000 Cape Coral, FL, Special Obligation Wastewater Assessment Rev... 4.800 07/01/1996 200,000
100,000 Ft. Lauderdale, FL, GO, Prerefunded @ 102...................... 7.600 07/01/1996 102,000
250,000 Hernando Co., FL, School Board COP............................. 5.250 07/01/1996 250,000
100,000 Miami, FL, Sewer Impt. GO ..................................... 6.600 07/01/1996 100,000
110,000 Orlando & Orange Co., FL, Expressway Auth. Rev.,
Prerefunded @ 102............................................ 7.500 07/01/1996 112,200
125,000 Brevard Co., FL, Local Option Gas Tax Rev., Ser. B............. 4.300 08/01/1996 125,046
1,000,000 Dade Co., FL, Gtd. Entitlement Rev., Escrowed to Maturity...... 9.500 08/01/1996 1,004,694
100,000 Duval Co., FL, School Dist. GO, Prerefunded @ 102.............. 7.300 08/01/1996 102,276
100,000 Duval Co., FL, School Dist. GO, Ser. 1988, Prerefunded @ 102... 7.500 08/01/1996 102,298
340,000 Pinellas Co., FL, Transportation Impt. Rev..................... 5.000 08/01/1996 340,372
330,000 New York, NY, GO, Ser. A, Escrowed to Maturity................. 7.375 08/15/1996 331,480
250,000 Univ. of Texas General Tuition Rev., Prerefunded @ 102......... 8.000 08/15/1996 256,289
400,000 Immokalee, FL, Water & Sewer Dist. Rev. BANS................... 3.650 08/30/1996 400,000
120,000 Albany-Dougherty Co., GA, Hosp. Rev. (Pheobe Putney
Memorial Hosp.).............................................. 4.000 09/01/1996 120,083
250,000 Charleston, SC, Public Impt. COP............................... 3.700 09/01/1996 250,000
680,000 Nevada St. COP................................................. 3.900 09/01/1996 680,000
110,000 Ormond Beach, FL, Water & Sewer Rev., Prerefunded @ 102........ 7.875 09/01/1996 112,891
500,000 West Volusia, FL, Hosp. Auth. Rev., Ser. B, Prerefunded @ 103.. 9.375 09/01/1996 519,608
230,000 Broward Co., FL, Airport Sys. Rev., Prerefunded @ 100.......... 10.000 10/01/1996 233,453
175,000 Jacksonville, FL, Elec. Auth. Rev., Ser. 2 1987A-1............. 6.600 10/01/1996 176,110
130,000 Lee Co., FL, Water & Sewer Rev., Prerefunded @ 102............. 6.900 10/01/1996 133,534
1,295,000 Manatee Co., FL, GO, Ser. A, Prerefunded @ 102................. 7.375 10/01/1996 1,332,397
500,000 Orange Co., FL, Health Fac. Auth. Rev., Prerefunded Muni. Certfs.,
Ser. 3, Escrowed to Maturity................................... 4.650 10/01/1996 501,159
100,000 Orlando, FL, Waste Water Sys. Rev., Ser. B, Prerefunded @ 102.. 7.500 10/01/1996 102,901
100,000 Palm Beach Co., FL, Impt. Rev., Escrowed to Maturity........... 6.900 10/01/1996 100,737
250,000 St. Petersburg, FL, Public Util. Rev........................... 5.850 10/01/1996 251,197
100,000 Tampa, FL, Rev................................................. 6.200 10/01/1996 100,565
225,000 West Palm Beach, FL, Parking Fac. Rev., Prerefunded @ 102...... 7.700 10/01/1996 231,572
150,000 Brevard Co., FL, Second Gtd. Entitlement Rev................... 4.750 11/01/1996 150,560
500,000 Florida HFA MFH Rev., Prerefunded @ 100........................ 5.500 11/01/1996 502,602
435,000 West Virginia St. Hsg. Dev. Rev................................ 6.800 11/01/1996 438,730
125,000 Cook Co., IL, GO............................................... 3.800 11/15/1996 125,015
400,000 Philadelphia, PA, Muni. Auth. Justice Lease Rev., Ser. A....... 6.150 11/15/1996 403,815
420,000 Philadelphia, PA, Muni. Auth. Justice Lease Rev., Ser. B....... 6.150 11/15/1996 424,006
145,000 Clarksville, TN, Public Bldg. Auth. Rev........................ 4.000 12/01/1996 145,276
160,000 Ohio St. Higher Educ. Fac. Comm. Rev. (Kenyon College),
Prerefunded @ 102............................................ 7.125 12/01/1996 165,592
200,000 Utah St. University Agric. & Applied Science Rev., Ser. A,
Escrowed to Maturity......................................... 6.500 12/01/1996 202,291
250,000 Champaign Co., IL, Comm. USD #116 GO........................... 7.400 12/30/1996 254,867
100,000 Wakulla Co., FL, Sales Tax Rev., Prerefunded @ 102............. 7.000 01/01/1997 103,630
175,000 Escambia Co., FL, School Board COP............................. 5.250 02/01/1997 176,436
250,000 Dallas, TX, GO................................................. 5.000 02/15/1997 251,507
580,000 Florida St. Div. Board Fin. Dept. Rev. (Sunshine Skyway)....... 9.800 06/01/1997 611,099
375,000 Florida St. Div. Board Fin. Dept. Rev. (Dept. of
Nature Preservation)......................................... 5.750 07/01/1997 381,718
250,000 Venice, FL, Util. Rev., Prerefunded @ 102...................... 6.900 07/01/1997 262,066
- - ------------- ------------
$12,885,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $13,076,072)................................... $13,076,072
------------
<PAGE>
<CAPTION>
ROYAL PALM FLORIDA TAX-FREE MONEY FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 62.6% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 900,000 Dade Co., FL, IDA PCR (Florida Power & Light).................. 3.550% 07/01/1996 $ 900,000
1,000,000 Hamilton Co., OH, Health Sys. Rev. (Franciscan Sisters)........ 3.750 07/01/1996 1,000,000
2,600,000 Hillsborough Co., FL, IDA PCR (Tampa Elec.).................... 3.550 07/01/1996 2,600,000
300,000 Jacksonville, FL, Health Fac. Auth. Rev., Ser. 1988
(River Garden)............................................... 4.200 07/01/1996 300,000
1,500,000 Jacksonville, FL, Health Fac. Auth. Rev., Ser. 1996
(Genesis Rehab. Hosp.)....................................... 3.800 07/01/1996 1,500,000
2,500,000 Jacksonville, FL, PCR (Florida Power & Light).................. 3.550 07/01/1996 2,500,000
2,200,000 Ohio Air Quality Dev. Auth. Rev., Ser. 1985B (Cincinnati
Gas & Elec.)................................................. 3.750 07/01/1996 2,200,000
200,000 Pinal Co., AZ, IDA PCR (Magma Copper Co.)...................... 3.600 07/01/1996 200,000
1,200,000 Pinellas Co., FL, Health Fac. Rev. (Pooled Hosp. Loan)......... 3.600 07/01/1996 1,200,000
1,100,000 Broward Co., FL, HFA (Lake Park Assoc. Ltd. Partnership)....... 3.450 07/03/1996 1,100,000
1,735,000 Illinois Dev. Fin. Auth. MFH Rev. (Cobbler Square Proj.)....... 3.850 07/03/1996 1,735,000
2,000,000 Orange Co., FL, IDR, Ser. 1996A (Univ. of Central Florida
Proj.)....................................................... 3.350 07/03/1996 2,000,000
800,000 Rockport, IN, PCR, Ser. B (Indiana Michigan Power Co.)......... 3.250 07/03/1996 800,000
720,000 Volusia Co., FL, Health Facs. Auth. Rev. (Pooled Hosp. Loan)... 3.700 07/03/1996 720,000
1,000,000 Boca Raton, FL, IDR (Parking Garage)........................... 3.675 07/05/1996 1,000,000
980,000 Dade Co., FL, HFA (Kendall Court Apts.)........................ 3.450 07/05/1996 980,000
1,500,000 Jacksonville, FL, Health Fac. Auth. Rev. (Faculty Practice
Assoc.)...................................................... 3.400 07/05/1996 1,500,000
1,500,000 Marion Co., FL, HFA (Paddock Pl. Proj.)........................ 3.600 07/05/1996 1,500,000
1,000,000 Marion Co., FL, HFA (Summer Trace Apts.)....................... 3.600 07/05/1996 1,000,000
1,000,000 Orlando, FL, Util. Comm. Water & Elec. Rev..................... 3.250 07/05/1996 1,000,000
1,800,000 Plant City, FL, Hosp. Rev. (South Florida Baptist Hosp.)....... 3.550 07/05/1996 1,800,000
2,500,000 Volusia Co., FL, Health Facs. Auth. Rev. (West Volusia Health). 3.350 07/05/1996 2,500,000
- - ------------- ------------
$30,035,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $30,035,000)................................... $30,035,000
------------
<PAGE>
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 4.9% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 650,000 Broomfield, CO, Rev., Ser. 1992 (Up With People Proj.)......... 4.000% 07/01/1996 $ 650,000
1,715,000 Florida HFA Rev................................................ 3.800 12/15/1996 1,715,000
- - ------------- ------------
$ 2,365,000 TOTAL ADJUSTABLE RATE PUT BONDS
- - -------------
(Amortized Cost $2,365,000).................................... $ 2,365,000
------------
<CAPTION>
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 3.1% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500,000 St. Lucie Co., FL, PCR (Florida Power & Light Proj. B)......... 3.600% 08/07/1996 $ 1,500,000
- - ------------- ------------
$ 1,500,000 TOTAL COMMERCIAL PAPER
- - -------------
(Amortized Cost $1,500,000).................................... $ 1,500,000
------------
$46,785,000 TOTAL INVESTMENTS AT VALUE -- 97.8%
=============
(Amortized Cost $46,976,072)................................... $46,976,072
OTHER ASSETS AND LIABILITIES, NET-- 2.2% ...................... 1,075,067
------------
NET ASSETS-- 100.0% ........................................... $48,051,139
============
</TABLE>
<PAGE>
<TABLE>
TAX-FREE INTERMEDIATE TERM FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALASKA -- 0.5%
$ 385,000 Alaska St. HFC Rev............................................. 7.650% 12/01/2010 $ 393,874
------------
ARIZONA -- 3.0%
300,000 Pinal Co., AZ, IDA PCR VRDN (Magma Copper Co.)................. 3.600 07/01/1996 300,000
500,000 Pima Co., AZ, USD No. 1 (Tuscon), Prerefunded @ 102............ 6.750 07/01/1998 533,610
400,000 Arizona Educ. Loan Mkt. Corp. Rev., Ser. A..................... 6.700 03/01/2000 416,948
600,000 Maricopa Co., AZ, School Dist. Rev., Ser. 1991C (Tempe Elem.).. 8.000 07/01/2004 713,664
205,000 Maricopa Co., AZ, SFM Rev., Ser. 1991.......................... 7.375 08/01/2005 216,365
------------
2,180,587
------------
CALIFORNIA -- 3.5%
800,000 Irvine, CA, Assess. Dist. Impt. Rev., VRDN, Ser. 89-10......... 3.300 07/01/1996 800,000
500,000 Santa Clara Co., CA, Hsg. Auth. ARPB (Orchard Glen Apts.)...... 5.250 11/01/1998 501,245
480,000 Sacramento Co., CA, MFH ARPB (Fairway One Apts.)............... 5.875 02/01/2003 486,461
500,000 Santa Monica, CA, Redev. Agy. Lease Rev........................ 6.000 07/01/2003 529,254
250,000 California HFA Multi-Unit Rental Rev., Ser. B.................. 6.500 08/01/2005 261,323
------------
2,578,283
------------
COLORADO -- 1.4%
1,000,000 Westminster, CO, MFH ARPB (Oasis Wexford Apts.)................ 5.350 12/01/2005 996,300
------------
FLORIDA -- 6.4%
1,200,000 Univ. of Florida Athletic Assn. Capital Impt. Rev. VRDN
(Stadium Proj.).............................................. 3.600 07/01/1996 1,200,000
800,000 Pinellas Co., FL, Health Fac. Rev. VRDN (Pooled Hosp. Loan).... 3.600 07/01/1996 800,000
200,000 Jacksonville, FL, Health Fac. Auth. Rev. VRDN, Ser. 1988
(River Garden)............................................... 4.200 07/01/1996 200,000
500,000 Florida HFA MFH ARPB, Ser. 1978B (Hampton Lakes II Proj.)...... 5.700 04/01/2001 505,025
1,000,000 Florida Board of Educ. Capital Outlay GO, Ser. A............... 5.500 05/01/2004 1,021,160
200,000 Florida St. GO................................................. 6.500 05/01/2004 202,994
750,000 Hillsborough Co., FL, Solid Waste Rev.......................... 5.500 10/01/2006 764,648
------------
4,693,827
------------
GEORGIA -- 2.1%
255,000 Atlanta, GA, Airport Extension & Impt. Rev.,
Escrowed to Maturity......................................... 7.250 01/01/1998 267,215
700,000 Fulton Co., GA, Water & Sewer Rev., Ser. 1986, Prerefunded
@ 101........................................................ 6.800 01/01/2000 753,921
500,000 Columbus, GA, Med. Ctr. Hosp. Auth. Rev........................ 6.400 08/01/2006 537,185
------------
1,558,321
------------
ILLINOIS -- 3.9%
500,000 Aurora, IL, MFH Rev., Ser. 1988 (Fox Valley)................... 7.750 09/01/1998 524,485
680,000 Illinois Educ. Fac. Auth. Rev., Ser. A (Loyola Univ.),
Prerefunded @ 102............................................ 7.125 07/01/2001 758,112
500,000 Chicago, IL, Public Bldg. Comm. Rev., Escrowed to Maturity..... 7.700 01/01/2008 523,360
1,000,000 Evergreen Park, IL, Hosp. Fac. Rev. (Little Co. Mary Hosp.).... 7.750 02/15/2009 1,065,140
------------
2,871,097
------------
INDIANA -- 2.2%
1,000,000 Indiana Bond Bank Special Prog. Rev., Ser. A1.................. 6.650 01/01/2004 1,064,740
500,000 Indiana HFA Multi-Unit Mtg. Prog. Rev., Ser. 1992A............. 6.600 01/01/2012 519,425
------------
1,584,165
------------
IOWA -- 1.7%
250,000 Iowa Student Loan Liquidity Corp. Rev.......................... 6.400 07/01/2004 262,765
420,000 Iowa HFA Rev................................................... 6.500 07/01/2006 438,346
240,000 Iowa Student Loan Liquidity Corp. Rev.......................... 6.600 07/01/2008 250,754
250,000 Cedar Rapids, IA, Hosp. Fac. Rev. (St. Luke's Methodist Hosp.). 6.000 08/15/2009 256,693
------------
1,208,558
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KENTUCKY -- 3.2%
$ 675,000 Owensboro, KY, Elec. Light & Power Rev., Prerefunded @ 102..... 10.250% 01/01/2000 $ 804,640
750,000 Kentucky St. Turnpike Auth. EDR (Revitalization Proj.)......... 5.250 07/01/2005 758,040
750,000 Kentucky St. Property & Bldg. Comm. Proj. #59 Rev.............. 5.200 05/01/2006 744,248
------------
2,306,928
------------
LOUISIANA -- 1.4%
440,000 Louisiana Public Fac. Auth. Rev. (Medical Ctr. of Louisiana)... 6.000 10/15/2003 462,026
500,000 West Ouachita Parish, LA, School Dist. GO, Ser. A.............. 6.700 03/01/2006 542,590
------------
1,004,616
------------
MARYLAND -- 1.5%
500,000 Maryland St. Health & Higher Educ. Fac. Auth. Rev.
(Univ. of Maryland Medical Sys.)............................. 6.500 07/01/2001 538,130
500,000 Maryland St. Comm. Dev. Admin. Rev............................. 8.500 04/01/2002 523,155
------------
1,061,285
------------
MASSACHUSETTS -- 4.4%
750,000 Massachusetts St. Indust. Fin. Agy. ARPB (Asahi/America, Inc.). 5.100 03/01/1999 755,348
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992A............. 6.500 09/01/2002 533,370
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992B............. 6.600 09/01/2002 534,345
1,280,000 Worcester, MA, GO.............................................. 6.000 07/01/2006 1,355,008
------------
3,178,071
------------
MICHIGAN -- 2.3%
1,000,000 Michigan St. Bldg. Auth. Rev., Ser. II......................... 6.400 10/01/2004 1,076,470
600,000 Kalamazoo, MI, Hosp. Fin. Auth. Rev., Ser. A
(Borgess Medical Ctr.)....................................... 5.000 06/01/2006 575,934
------------
1,652,404
------------
MINNESOTA -- 1.0%
700,000 Centennial, MN, ISD GO, Ser. A................................. 5.600 02/01/2002 727,839
------------
MISSISSIPPI -- 1.0%
500,000 Mississippi Higher Educ. Rev., Ser. B.......................... 6.100 07/01/2001 513,415
250,000 Hattiesburg, MS, Water & Sewer Rev............................. 4.800 08/01/2002 247,545
------------
760,960
------------
NEBRASKA -- 1.1%
47,000 Nebraska Invest. Fin. Auth. SFM Rev., Ser. A................... 8.600 05/15/1997 48,116
680,000 Nebraska Invest. Fin. Auth. Rev., Ser. 1989 (Foundation for
Educ. Fund), Escrowed to Maturity............................. 7.000 11/01/2009 734,237
------------
782,353
------------
NEVADA -- 2.2%
315,000 Washoe Co., NV, GO, Prerefunded @ 102.......................... 7.375 07/01/1999 344,790
1,000,000 Las Vegas, NV, GO, Sewer Impt. Rev............................. 6.500 10/01/2006 1,077,200
185,000 Washoe Co., NV, GO............................................. 7.375 07/01/2009 200,373
------------
1,622,363
------------
NEW YORK -- 2.6%
415,000 New York, NY, GO, Prerefunded @ 102............................ 8.000 08/01/1997 441,842
500,000 New York Local Gov't. Asst. Corp. Rev., Ser. 1991B............. 7.000 04/01/2002 549,710
85,000 New York, NY, GO............................................... 8.000 08/01/2005 89,833
810,000 New York St. Dorm. Auth. Rev. (Devereux Foundation)............ 4.850 07/01/2006 786,494
------------
1,867,879
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTH CAROLINA -- 8.0%
$ 500,000 Charlotte, NC, GO.............................................. 4.750% 02/01/2006 $ 485,355
1,065,000 Durham, NC, COP................................................ 6.375 12/01/2006 1,132,457
1,200,000 Asheville, NC, GO.............................................. 6.100 03/01/2008 1,266,072
1,000,000 Charlotte-Mecklenberg Hosp. NC, Health Care Sys. Rev........... 5.600 01/15/2009 1,005,040
980,000 Univ. of North Carolina Chapel Hill Rev. (Univ. NC Hosp.)...... 5.050 02/15/2009 924,816
1,000,000 Univ. of North Carolina Chapel Hill Rev. (Univ. NC Hosp.)...... 5.150 02/15/2010 947,380
------------
5,761,120
------------
OHIO -- 19.0%
1,400,000 Ohio Air Quality Dev. Auth. Rev., VRDN, Ser. 1985B
(Cincinnati Gas & Elec.)..................................... 3.750 07/01/1996 1,400,000
500,000 Ohio St. Bldg. Auth. Rev., Ser. A, Escrowed to Maturity........ 7.150 03/01/1999 532,870
700,000 Franklin Co., OH, Dev. & Ref. Rev., Ser. 1993
(American Chemical Soc.)..................................... 5.500 04/01/2000 700,707
500,000 Franklin Co., OH, Rev. (Online Computer Library Ctr.)......... 5.500 04/15/2000 499,750
750,000 Fairfield, OH, IDR ARPB (Skyline Chili, Inc.).................. 5.000 09/01/2000 746,048
950,000 Akron Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Summa Health Systems)....................................... 5.900 11/15/2002 990,888
270,000 Warren Co., OH, Hosp. Fac. Rev. (Otterbein Home)............... 7.000 07/01/2003 290,528
1,000,000 Ohio St. EDR Ohio Enterprise Bond Fd. (Smith Steelite Proj.)... 5.600 12/01/2003 984,480
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Episcopal Retirement Home).. 6.600 01/01/2004 532,970
825,000 Jackson, OH, Electric Sys. Mtg. Rev............................ 5.200 07/15/2004 796,686
445,000 Ohio St. EDR Ohio Enterprise Bond Fd. (Cheryl & Co.)........... 5.500 12/01/2004 471,740
625,000 Cuyahoga Co., OH, Util. Sys. Impt. & Ref. Rev., Ser. 1995B..... 5.500 08/15/2005 632,106
1,005,000 Franklin Co., OH, Health Care Fac. Rev. (First Comm. Village).. 6.000 06/01/2006 1,004,940
400,000 Painesville, OH, Elec. Rev..................................... 6.000 11/01/2006 414,828
1,000,000 Mahoning Co., OH, GO........................................... 6.600 12/01/2006 1,086,970
590,000 Ohio St. GO.................................................... 4.950 08/01/2008 567,326
800,000 West Clermont, OH, LSD GO...................................... 6.150 12/01/2008 846,248
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Bethesda Hosp.)............. 7.000 01/01/2009 513,815
750,000 Univ. of Cincinnati, OH, General Receipts, Ser. G.............. 7.000 06/01/2011 818,580
------------
13,831,480
------------
PENNSYLVANIA -- 5.0%
605,000 Chartiers Valley, PA, Comm. Dev. ARPB
(Colonial Bldg. Partners Proj.).............................. 5.625 12/01/1997 609,271
500,000 Pennsylvania St., IDR, Ser. A, Prerefunded @ 102............... 7.000 07/01/2001 555,630
1,000,000 Allegheny Co., PA, Hosp. Dev. Auth. Rev.
(Univ. of Pittsburgh Medical Ctr.)........................... 4.850 12/01/2006 944,050
1,000,000 Pennsylvania Intergovt. Coop. Auth. Rev. (City of Philadelphia) 5.200 06/15/2007 980,190
500,000 Pennsylvania Fin. Auth. Muni. Cap. Impt. Proj. Rev............. 6.600 11/01/2009 527,750
------------
3,616,891
------------
PUERTO RICO -- 0.2%
175,000 Puerto Rico Commonwealth GO, Prerefunded @ 102................. 7.125 07/01/1997 184,408
------------
SOUTH CAROLINA -- 3.2%
1,000,000 Piedmont, SC, Muni. Power Agy. Rev., Ser. A.................... 6.000 01/01/2002 1,054,020
525,000 South Carolina St. GO, Ser. A.................................. 6.000 03/01/2004 557,655
725,000 Richland-Lexington, SC, Airport Dist. Rev., Ser. 1995
(Columbia Metro.)............................................ 6.000 01/01/2008 746,881
------------
2,358,556
------------
TENNESSEE -- 1.5%
525,000 Southeast, TN, Tax-Exempt Mtg. Trust ARPB,
Ser. 1990, Mandatory Put..................................... 7.250 04/01/2003 576,214
500,000 Nashville, TN, Metro. Airport Rev., Ser. C..................... 6.625 07/01/2007 536,045
------------
1,112,259
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS -- 8.2%
$ 510,000 Pasadena, TX, IDR (Univ. Space Research Assn.)................. 6.650% 10/01/1996 $ 512,876
500,000 Texas Turnpike Auth. Rev. (Dallas N. Tollway),
Prerefunded @ 102............................................ 7.250 01/01/1999 542,210
500,000 Houston, TX, Sr. Lien Rev., Ser. A (Hotel Tax & Parking Fac.),
Prerefunded @ 100............................................ 7.000 07/01/2001 549,155
350,000 Univ. of Texas, TX, Rev., Ser. B, Prerefunded @102............. 6.750 08/15/2001 386,680
1,000,000 Texas National Research Lab. Fin. Corp. Lease Rev.,
Prerefunded @ 102............................................ 6.850 12/01/2001 1,111,800
500,000 N. Texas Higher Educ. Student Loan Rev., Ser. 1991A............ 6.875 04/01/2002 523,945
650,000 Galveston, TX, Health Fac. Rev. (Devereux Foundation).......... 4.900 11/01/2006 628,056
500,000 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS............................................... 8.150 05/15/2008 539,755
479,105 Midland, TX, HFC Rev., Ser. A2................................. 8.450 12/01/2011 511,253
650,000 Univ. of Texas, TX, Rev., Ser. B............................... 6.750 08/15/2013 701,441
------------
6,007,171
------------
UTAH -- 1.2%
870,000 Utah St. School Dist. Fin. Corp. Rev., Mandatory Redemption.... 8.375 08/15/1998 927,255
------------
VIRGINIA -- 1.4%
500,000 Chesterfield Co., VA, GO, Ser. B............................... 6.200 01/01/1999 521,995
500,000 Chesapeake, VA, GO............................................. 5.900 08/01/2005 527,285
------------
1,049,280
------------
WASHINGTON -- 5.2%
750,000 Seattle, WA, Drain & Wastewater Util. Rev., Prerefunded @ 102.. 7.000 12/01/1999 819,487
1,000,000 Seattle, WA, Muni. Metro. Sewer Rev., Prerefunded @ 102........ 6.875 01/01/2000 1,087,940
335,000 Washington St. GO, Ser. A, Prerefunded @ 100................... 6.400 03/01/2001 357,613
440,000 Port of Everett, WA, Rev....................................... 6.500 04/01/2000 441,791
1,000,000 Washington St. Motor Vehicle Fuel Tax Ref. GO.................. 6.000 09/01/2004 1,056,040
------------
3,762,871
------------
WISCONSIN -- 1.4%
505,000 Village of Dresser, WI, PCR Ref. Rev. (F & A Dairy, Inc.)...... 6.000 05/01/2000 509,215
500,000 Wisconsin Public Power System Rev., Ser. A, Prerefunded @ 102.. 7.500 07/01/2000 558,320
- - ------------- ------------
1,067,535
------------
$69,946,105 TOTAL MUNICIPAL BONDS -- 99.7%
=============
(Amortized Cost $71,287,629) .................................. $72,708,536
OTHER ASSETS AND LIABILITIES, NET-- 0.3% ...................... 204,869
------------
NET ASSETS-- 100.0% ........................................... $72,913,405
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 88.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 470,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.),
Prerefunded @ 102............................................ 7.500% 09/01/1999 $ 519,256
500,000 Montgomery Co., OH, Garbage & Refuse Rev., Ser. A,
Prerefunded @ 102............................................ 7.100 11/01/1999 547,675
500,000 Ohio St. Bldg. Auth. Local Jail Rev. , Prerefunded @ 102....... 7.350 04/01/2000 554,040
500,000 Ohio St. Higher Educ. Fac. Rev. (Ohio Northern Univ.),
Prerefunded @ 100............................................ 7.250 05/15/2000 544,525
500,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Children's Hosp.), Prerefunded @ 102........................ 7.450 11/15/2000 561,440
500,000 Franklin Co., OH, Convention Fac. Auth. Tax & Lease Rev.,
Prerefunded @ 102............................................ 7.000 12/01/2000 553,370
500,000 Fairfield Co., OH, Hosp. Fac. Rev. (Lancaster-Fairfield Hosp.),
Prerefunded @ 102............................................ 7.100 06/15/2001 558,855
250,000 Franklin Co., OH, IDR (1st Community Village Healthcare),
Prerefunded @ 101.50......................................... 10.125 08/01/2001 306,442
30,000 Clermont Co., OH, Hosp. Fac. Rev., Ser. A (Mercy Health Sys.),
Prerefunded @ 100........................................... 7.500 09/01/2001 33,685
460,000 Westerville, Minerva Park & Blendon, OH, Joint Hosp. Dist.
Rev. (St. Ann's), Prerefunded @ 102.......................... 7.100 09/15/2001 516,111
1,310,000 Cuyahoga Co., OH, Hosp. Rev. (Mt. Sinai), Prerefunded @ 102.... 6.625 11/01/2001 1,444,367
500,000 Clermont Co., OH, Sewer Sys. Rev., Ser. 1991, Prerefunded @ 102 7.100 12/01/2001 562,830
15,000 Summit Co., OH, GO, Ser. A, Prerefunded @ 100.................. 6.900 08/01/2002 16,579
40,000 Ohio St. Bldg. Auth. Rev. (Frank Lausch Proj.),
Prerefunded @ 100............................................ 10.125 04/01/2003 48,878
160,000 Ohio St. Bldg. Auth. Rev. (Columbus St. Proj.),
Prerefunded @ 100............................................ 10.125 04/01/2003 194,533
230,000 Summit Co., OH, GO, Ser. A, Prerefunded @ 100.................. 6.900 08/01/2003 256,100
290,000 Alliance, OH, CSD GO........................................... 6.900 12/01/2006 316,410
1,635,000 Montgomery Co., OH, Solid Waste Rev............................ 5.000 11/01/2007 1,594,828
500,000 Cleveland, OH, Waterworks Impt. Rev., Ser. G (First Mtg.)...... 5.500 01/01/2009 502,245
1,000,000 Franklin Co., OH, Hosp. Impt. Rev. (Holy Cross Health Sys.).... 7.625 06/01/2009 1,104,770
500,000 Mansfield, OH, Hosp. Impt. Rev. (Mansfield General)............ 6.700 12/01/2009 537,435
250,000 Ohio St. Water Dev. Auth. Ref. & Impt. Rev. (Pure Water),
Escrowed to Maturity......................................... 7.000 12/01/2009 281,370
500,000 Ohio Capital Corp. MFH Rev..................................... 7.500 01/01/2010 535,435
500,000 Hamilton, OH, Water Sys. Mtg. Rev., Ser. 1991A................. 6.400 10/15/2010 527,005
500,000 Montgomery Co., OH, Solid Waste Rev............................ 5.350 11/01/2010 488,230
500,000 Butler Co., OH, Hosp. Fac. Rev. (Middletown Regional Hosp.).... 6.750 11/15/2010 539,355
1,000,000 Canton, OH, Waterworks Sys. GO, Ser. 1995...................... 5.750 12/01/2010 1,013,330
500,000 St. Mary's, OH, Elec. Sys. Rev................................. 7.150 12/01/2010 550,845
500,000 Cleveland, OH, Waterworks Impt. Rev............................ 6.500 01/01/2011 530,100
275,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.), Escrowed to
Maturity..................................................... 9.000 06/01/2011 303,979
1,700,000 Ohio St. Water Dev. Auth. PCR.................................. 5.700 06/01/2011 1,708,143
1,500,000 Ohio St. Water Dev. Auth. PCR.................................. 5.300 06/01/2011 1,448,925
590,000 Ohio HFA SFM Rev., Ser. 1991D.................................. 7.000 09/01/2011 622,167
365,000 Bexley, OH, CSD GO............................................. 7.125 12/01/2011 426,371
500,000 Greene Co., OH, Water Sys. Rev................................. 6.850 12/01/2011 541,900
500,000 Maple Heights, OH, Various Purpose GO.......................... 7.000 12/01/2011 551,860
760,000 Springboro, OH, CSD GO......................................... 6.000 12/01/2011 799,946
500,000 Stark Co., OH, Various Purpose GO.............................. 7.050 12/01/2011 548,670
530,000 Urbana, OH, Wastewater Impt. GO................................ 7.050 12/01/2011 593,038
600,000 Westerville, OH, Water Sys. Impt. GO........................... 6.450 12/01/2011 637,992
500,000 Cleveland, OH, GO, Ser. A...................................... 6.375 07/01/2012 524,400
255,000 Summit Co., OH, GO, Ser. A..................................... 6.900 08/01/2012 272,641
500,000 Brunswick, OH, CSD GO.......................................... 6.900 12/01/2012 541,835
500,000 Ohio St. Higher Educ. Fac. Rev. (Univ. of Dayton).............. 7.250 12/01/2012 552,805
500,000 Springfield, OH, LSD GO........................................ 6.600 12/01/2012 534,865
500,000 Summit Co., OH, Various Purpose GO............................. 6.625 12/01/2012 535,445
500,000 Warrensville Heights, OH, GO................................... 6.400 12/01/2012 536,455
1,095,000 West Clermont, OH, LSD GO...................................... 6.900 12/01/2012 1,211,103
500,000 Worthington, OH, CSD GO........................................ 6.375 12/01/2012 524,825
2,500,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. D
(Children's Hosp. Medical Ctr.).............................. 5.000 05/15/2013 2,296,450
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 88.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 370,000 Ohio HFA SFM Rev., Ser. 1990D.................................. 7.500% 09/01/2013 $ 390,195
1,425,000 Butler Co., OH, Sewer Sys. Rev................................. 5.125 12/01/2013 1,338,160
500,000 Ohio St. Bldg. Auth. Rev., Ser. 1994A
(Juvenile Correctional Bldg.)................................ 6.600 10/01/2014 533,735
500,000 Mahoning Co., OH, Hosp. Impt. Rev. (YHA, Inc.)................. 7.000 10/15/2014 541,020
460,000 Bedford Heights, OH, GO........................................ 6.500 12/01/2014 488,971
290,000 Garfield Heights, OH, Various Purpose GO....................... 6.300 12/01/2014 301,438
1,250,000 Maumee, OH, Hosp. Fac. Rev., Ser. 1994 (St. Luke's Hosp. Proj.) 5.800 12/01/2014 1,241,550
290,000 Northwest, OH, LSD GO.......................................... 7.050 12/01/2014 320,322
530,000 Ottawa Co., OH, GO............................................. 5.750 12/01/2014 527,588
1,000,000 Portage Co., OH, GO............................................ 6.200 12/01/2014 1,035,660
1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.).......... 5.875 09/01/2015 999,330
550,000 Cambridge, OH, Water Sys. Mtg. Rev............................. 5.500 12/01/2015 534,638
1,750,000 Dayton, OH, Airport Rev. (James M. Cox Dayton Int'l. Airport).. 5.250 12/01/2015 1,644,440
500,000 Delaware, OH, CSD GO........................................... 5.750 12/01/2015 498,235
1,700,000 Massillon, OH, GO.............................................. 6.625 12/01/2015 1,821,754
500,000 Ohio St. Higher Educ. Fac. Rev. (Univ. of Dayton).............. 6.750 12/01/2015 539,065
1,420,000 Stow, OH, Safety Center Const., GO............................. 6.150 12/01/2015 1,463,409
1,000,000 Tuscarawas, OH, LSD GO, Ser. 1995.............................. 6.600 12/01/2015 1,076,500
500,000 Cleveland, OH, Waterworks Impt. Rev............................ 6.250 01/01/2016 512,925
750,000 Columbus-Polaris Hsg. Corp. Ohio Mtg. Rev., Prerefunded @100... 7.400 01/01/2016 840,540
500,000 Ohio St. Air Quality Dev. Auth. Rev. (Ohio Edison)............. 7.450 03/01/2016 547,185
1,000,000 Montgomery Co., OH, Hosp. Rev. (Kettering Medical Ctr.)........ 5.625 04/01/2016 976,030
405,000 Ohio HFA SFM Rev., Ser. 1990F.................................. 7.600 09/01/2016 429,191
1,085,000 Ohio HFA SFM Rev., Ser. 1991D.................................. 7.050 09/01/2016 1,140,834
500,000 Celina, OH, Wastewater Sys. Mtg. Rev........................... 6.550 11/01/2016 527,195
1,000,000 Cleveland, OH, Public Power Sys. Rev........................... 7.000 11/15/2016 1,104,420
750,000 Montgomery Co., OH, Hosp. Rev. (Miami Valley Hosp.)............ 6.250 11/15/2016 771,090
705,000 Big Walnut, OH, LSD GO (Community Library Proj.)............... 6.650 12/01/2016 756,310
590,000 Garfield Heights, OH, Various Purpose GO....................... 7.050 12/01/2016 646,687
850,000 Alliance, OH, Waterworks Sys. Rev.............................. 6.650 10/15/2017 906,245
500,000 Toledo, OH, Sewer Sys. Rev..................................... 6.350 11/15/2017 521,580
675,000 Reynoldsburg, OH, CSD GO....................................... 6.550 12/01/2017 718,963
500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1990B (Ohio Edison). 7.100 06/01/2018 542,230
500,000 Newark, OH, Water Sys. Impt. Rev............................... 6.000 12/01/2018 505,350
15,000 Ohio St. Water Dev. Auth. Ref. Rev............................. 9.375 12/01/2018 15,684
1,000,000 S. Euclid-Lyndhurst, OH, CSD GO, Ser. 1996..................... 6.400 12/01/2018 1,051,640
500,000 Seneca Co., OH, GO (Jail Fac.)................................. 6.500 12/01/2018 530,215
500,000 Franklin Co., OH, Hosp. Rev., Ser. 1991 (Mt. Carmel)........... 6.750 06/01/2019 533,075
500,000 Crawford Co., OH, GO........................................... 6.750 12/01/2019 541,630
360,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.)................ 6.250 01/15/2020 368,230
500,000 Lucas Co., OH, Hosp. Impt. Rev. (St. Vincent's Hosp.).......... 6.750 08/15/2020 539,435
1,750,000 Celina, OH, CSD GO............................................. 5.250 12/01/2020 1,625,033
1,000,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985A
(Columbus Southern Power).................................... 6.375 12/01/2020 1,037,170
200,000 Montgomery Co., OH, Hosp. Rev. (Sisters of Charity)............ 6.625 05/15/2021 211,324
1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.).......... 6.733 10/05/2021 1,058,390
20,000 Puerto Rico HFC SFM Rev., Ser. A .............................. 7.800 10/15/2021 20,599
1,220,000 Butler Co., OH, Sewer Sys. Rev................................. 5.250 12/01/2021 1,131,294
1,000,000 Kent St. Univ. General Receipts Rev............................ 6.500 05/01/2022 1,057,040
165,000 Puerto Rico HFC Rev............................................ 6.850 10/15/2023 171,092
1,000,000 Springboro, OH, Community CSD GO............................... 5.100 12/01/2023 904,420
1,000,000 Ohio St. Turnpike Rev., Ser. 1996A............................. 5.500 02/15/2026 953,630
1,000,000 Ohio St. Air Quality PCR (Penn Power).......................... 6.450 05/01/2027 1,041,670
- - ------------- ------------
$68,385,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- - -------------
(Amortized Cost $67,853,032)................................... $70,988,215
------------
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (CONTINUED)
==================================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING AND VARIABLE RATE DEMAND NOTES-- 10.8% RATE DATE VALUE
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,600,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1985B............... 3.750% 07/01/1996 $ 8,600,000
- - ------------- ------------
$ 8,600,000 TOTAL FLOATING AND VARIABLE RATE DEMAND NOTES
- - -------------
(Amortized Cost $8,600,000).................................... $ 8,600,000
------------
$76,985,000 TOTAL INVESTMENTS AT VALUE -- 99.6%
=============
(Amortized Cost $76,453,032)................................... $79,588,215
OTHER ASSETS AND LIABILITIES, NET-- 0.4% ..................... 322,462
------------
NET ASSETS-- 100.0% .......................................... $79,910,677
</TABLE>
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS
JUNE 30, 1996
==============================================================================
Variable and adjustable rate put bonds earn interest at a coupon rate which
fluctuates at specified intervals, usually daily, monthly or semi-annually.
The rates shown in the Portfolios of Investments are the coupon rates in
effect at June 30, 1996.
Put bonds may be redeemed at the discretion of the holder on specified dates
prior to maturity. Mandatory put bonds are automatically redeemed at a
specified put date unless action is taken by the holder to prevent redemption.
Bonds denoted as prerefunded are anticipated to be redeemed prior to their
scheduled maturity. The dates indicated in the Portfolios of Investments are
the stipulated prerefunded dates.
PORTFOLIO ABBREVIATIONS:
ARPB - Adjustable Rate Put Bonds
BANS - Bond Anticipation Notes
COP - Certificates of Participation
CSD - City School District
EDA - Economic Development Authority
EDR - Economic Development Revenue
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corporation
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
ISD - Independent School District
LSD - Local School District
MFH - Multi-Family Housing
MFM - Multi-Family Mortgage
PCR - Pollution Control Revenue
RANS - Revenue Anticipation Notes
SFM - Single Family Mortgage
TANS - Tax Anticipation Notes
TRANS - Tax Revenue Anticipation Notes
USD - Unified School District
VRDN - Variable Rate Demand Notes
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
==============================================================================
Logo: Arthur Andersen LLP
To the Shareholders and Board of Trustees of the Midwest Group Tax Free Trust:
We have audited the accompanying statements of assets and liabilities of the
Ohio Tax-Free Money Fund, Tax-Free Money Fund, Tax-Free Intermediate Term
Fund, Ohio Insured Tax-Free Fund, California Tax-Free Money Fund and Royal
Palm Florida Tax-Free Money Fund of the Midwest Group Tax Free Trust (a
Massachusetts business trust), including the portfolios of investments, as of
June 30, 1996, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1996, by correspondence with custodians and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
Ohio Tax-Free Money Fund, Tax-Free Money Fund, Tax-Free Intermediate Term
Fund, Ohio Insured Tax-Free Fund, California Tax-Free Money Fund and Royal
Palm Florida Tax-Free Money Fund of the Midwest Group Tax Free Trust as of
June 30, 1996, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated thereon, in
conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Cincinnati, Ohio,
August 1, 1996
<PAGE>
