SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.
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Post-Effective Amendment No. 43
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 42
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(Check appropriate box or boxes.)
COUNTRYWIDE TAX-FREE TRUST File Nos. 2-72101 and 811-3174
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312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202
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(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code:(513) 629-2000
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Robert H. Leshner, 312 Walnut Street, 21st Floor, Cincinnati, OH 45202
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on November 1, 1998 pursuant to paragraph (b)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
CROSS REFERENCE SHEET
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FORM N-1A
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ITEM SECTION IN PROSPECTUS
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1....................... Cover Page
2....................... Expense Information
3....................... Financial Highlights, Performance Information
4....................... Operation of the Funds, Investment Objectives
and Policies
5....................... Operation of the Funds, Financial Highlights
6....................... Cover Page, Operation of the Funds, Dividends and
Distributions, Taxes
7....................... How to Purchase Shares, Operation of the Funds,
Shareholder Services, Calculation of
Share Price and Public Offering Price, Exchange
Privilege, Distribution Plans, Subaccounting Services,
Application
8....................... How to Redeem Shares, Shareholder Services
9....................... None
ITEM SECTION IN STATEMENT OF ADDITIONAL
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INFORMATION
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10...................... Cover Page
11...................... Table of Contents
12...................... The Trust
13...................... Municipal Obligations, Quality Ratings of Municipal
Obligations, Definitions, Policies and Risk
Considerations, Investment Limitations, Insurers of
the Ohio Insured Tax-Free Fund, Portfolio Turnover
14...................... Trustees and Officers
15...................... Principal Security Holders
16...................... The Investment Adviser and Underwriter,
Distribution Plans, Custodian, Accountants,
Transfer Agent, Securities Transactions
17...................... Securities Transactions
18...................... The Trust
19...................... Calculation of Share Price and Public Offering Price,
Other Purchase Information, Redemption in Kind
20...................... Taxes
21...................... The Investment Adviser and Underwriter
22...................... Historical Performance Information, Tax
Equivalent Yield Tables
23...................... Annual Report
<PAGE>
PROSPECTUS
November 1, 1998
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
TAX-FREE MONEY FUND
TAX-FREE INTERMEDIATE TERM FUND
The Tax-Free Money Fund and the Tax-Free Intermediate Term Fund
(individually a "Fund" and collectively the "Funds") are two separate series of
Countrywide Tax-Free Trust.
The Tax-Free Money Fund seeks the highest level of interest income
exempt from federal income tax, consistent with protection of capital, by
investing primarily in high-quality, short-term municipal obligations.
THE TAX-FREE MONEY FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN
AMORTIZED COST BASIS. FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE
UNITED STATES GOVERNMENT OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO
ASSURANCE, THAT THE FUND WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
The Tax-Free Intermediate Term Fund seeks high current income exempt
from federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The Tax-Free Intermediate Term Fund offers two classes of shares: Class
A shares (sold subject to a maximum 2% front-end sales load and a 12b-1 fee of
up to .25% of average daily net assets) and Class C shares (sold subject to a 1%
contingent deferred sales load for a one-year period and a 12b-1 fee of up to 1%
of average daily net assets). Each Class A and Class C share of the Fund
represents identical interests in the Fund's investment portfolio and has the
same rights, except that (i) Class C shares bear the expenses of higher
distribution fees, which will cause Class C shares to have a higher expense
ratio and to pay lower dividends than those related to Class A shares; (ii)
certain other class specific expenses will be borne solely by the class to which
such expenses are attributable; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
Countrywide Investments, Inc. (the "Adviser") manages the Funds'
investments and their business affairs.
This Prospectus sets forth concisely the information about the Funds
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 1, 1998 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. A copy of the Statement of Additional Information can
be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please
contact your broker, or call us at the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
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TAX-FREE MONEY FUND
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None*
Check Redemption Processing Fee (per check):
First six checks per month None
Additional checks per month $0.25
* A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See
"How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .50%
12b-1 Fees .04%(A)
Other Expenses .38%
-----
Total Fund Operating Expenses .92%
=====
(A)The Fund may incur 12b-1 fees in an amount up to .25% of its average net
assets.
TAX-FREE INTERMEDIATE TERM FUND
Class A Class C
Shares Shares
------- --------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 2% None
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends None None
Exchange Fee None None
Redemption Fee None** None**
Check Redemption Processing Fee (per check):
First six checks per month None None
Additional checks per month $0.25 $0.25
* Purchases at net asset value of amounts totaling $1 million or more may
be subject to a contingent deferred sales load of 1% if a redemption
occurred within 12 months of purchase and a commission was paid by the
Adviser to a participating unaffiliated dealer.
** A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See
"How to Redeem Shares."
- 2 -
<PAGE>
Annual Fund Operating Expenses (as a percentage of average net assets)
Class A Class C
Shares Shares
------- --------
Management Fees .50% .50%
12b-1 Fees(A) .13% .67%
Other Expenses .36% .57%
----- -----
Total Fund Operating Expenses .99% 1.74%
===== =====
(A) Class A shares may incur 12b-1 fees in an amount up to .25% of average
net assets and Class C shares may incur 12b-1 fees in an amount up to
1.00% of average net assets. Long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales loads permitted
by the National Association of Securities Dealers.
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example Class A Class C
You would pay the following Shares, Shares,
expenses on a $1,000 invest- Tax-Free Tax-Free
ment, assuming (1) 5% annual Tax-Free Intermediate Intermediate
return and (2) redemption Money Fund Term Fund Term Fund
at the end of each time ---------- ------------ -----------
period:
1 Year $ 9 $ 30 $28
3 Years 29 51 55
5 Years 51 74 94
10 Years 113 139 205
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<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1998 and related auditors' report appear in the Statement of Additional
Information of the Funds, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
<TABLE>
TAX-FREE MONEY FUND
Per Share Data for a Share Outstanding Throughout Each Year(A)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended June 30,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value at
beginning of year.. $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
------ ------ ------- ------- ------- ------- ------- ------- ------- ------
Net investment income. 0.030 0.029 0.031 0.030 0.021 0.024 0.036 0.050 0.055 0.053
------ ------- ------- ------- ------- -------- ------ ------- ------ ------
Dividends from
net investment
income.......... (0.030) (0.029) (0.031) (0.030) (0.021) (0.024) (0.036) (0.050) (0.055) (0.053)
------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Net asset value at
end of year ...... $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
====== ====== ======= ======= ======= ======= ======= ======= ======= ======
Total return ....... 3.03% 2.89% 3.15% 3.07% 2.12% 2.40% 3.63% 5.09% 5.69% 5.48%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Net assets at end
of year (000's) .. $37,383 $30,126 $25,342 $26,692 $31,168 $34,787 $50,000 $45,210 $46,727 $83,634
======= ====== ======= ======= ======= ======= ======= ======= ======== =======
Ratio of expenses to
average net assets.. 0.92% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.97% 0.94%
Ratio of net investment
income to average
net assets........ 2.98% 2.85% 3.09% 3.00% 2.09% 2.39% 3.55% 4.98% 5.57% 5.30%
(A)All per share data for the years ended prior to June 30, 1991 has been restated to reflect a 10 for 1 share
split on February 28, 1990.
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</TABLE>
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND
<TABLE>
Per Share Data for a Share Outstanding Throughout Each Year
===================================================================================================================
CLASS A
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended June 30,
- --------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value at
beginning of year. $11.01 $10.85 $10.86 $10.69 $10.98 $10.42 $10.15 $10.05 $10.07 $10.13
------ ------ ------ ----- ------ ------- ------ ------ ------ ------
Income from
investment operations:
Net investment
income ....... 0.50 0.50 0.50 0.49 0.48 0.53 0.59 0.62 0.64 0.63
Net realized and unrealized
gains (losses)
on investments... 0.11 0.16 (0.01) 0.17 (0.29) 0.56 0.27 0.10 (0.02) (0.06)
----- ------- ------ ------ ----- ---- ----- ----- ----- -----
Total from investment
operations..... 0.61 0.66 0.49 0.66 0.19 1.09 0.86 0.72 0.62 0.57
----- ------ ------ ------ ------ ---- ---- ----- ----- -----
Dividends from net
investment income... (0.50) (0.50) (0.50) (0.49) (0.48) (0.53) (0.59) (0.62) (0.64) (0.63)
------ ------- ------ ------ ------ ----- ----- ----- ------ ------
Net asset value at
end of year ...... $11.12 $11.01 $10.85 $10.86 $10.69 $10.98 $10.42 $10.15 $10.05 $10.07
====== ====== ====== ====== ====== ====== ====== ======= ====== ======
Total return(A) .... 5.63% 6.19% 4.51% 6.36% 1.70% 10.75% 8.78% 7.38% 6.35% 5.76%
====== ======= ====== ===== ====== ====== ===== ===== ===== =====
Net assets at end of
year (000's) ..... $52,896 $58,485 $67,675 $81,140 $106,472 $82,168 $26,720 $15,638 $15,875 $17,741
======== ======= ====== ======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average
net assets(B) ..... 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 1.07% 1.13% 1.09% 1.13%
Ratio of net investment
income to average
net assets........ 4.50% 4.55% 4.52% 4.59% 4.35% 4.90% 5.75% 6.15% 6.39% 6.23%
Portfolio turnover rate 36% 30% 37% 32% 46% 28% 12% 48% 58% 82%
</TABLE>
(A)The total returns shown exclude the effect of applicable sales loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 1.08% for the
year ended June 30, 1992.
- 5 -
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND
Per Share Data for a Share Outstanding Throughout Each Period
===============================================================================
CLASS C
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Period
Ended
Year Ended June 30, June 30,
1998 1997 1996 1995 1994(A)
- ------------------------------------------------------------------------------------------
Net asset value at beginning of period..... $11.01 $10.85 $10.86 $ 10.69 $11.27
------ ------ ------- ----- ------
Income from investment operations:
Net investment income................. 0.42 0.43 0.44 0.44 0.20
Net realized and unrealized
gains (losses) on investments..... 0.11 0.16 (0.01) 0.17 (0.58)
---- ------ ----- ----- ------
Total from investment operations..... 0.53 0.59 0.43 0.61 (0.38)
----- ------ ----- ------ ------
Dividends from net investment income.... (0.42) (0.43) (0.44) (0.44) (0.20)
------ ------ ------ ------ ------
Net asset value at end of period.......... $11.12 $11.01 $10.85 $10.86 $10.69
====== ====== ====== ====== ======
Total return(B) .......................... 4.85% 5.49% 4.00% 5.82% 8.28%(D)
======= ======= ===== ======= =======
Net assets at end of period (000's)....... $4,747 $5,161 $5,239 $4,814 $3,084
====== ====== ====== ======== ========
Ratio of expenses to average net assets(C). 1.74% 1.65% 1.49% 1.49% 1.45%(D)
Ratio of net investment income to
average net assets............... 3.75% 3.89% 4.02% 4.08% 3.79%(D)
Portfolio turnover rate.............. 36% 30% 37% 32% 46%(D)
(A)Represents the period from the initial offering of Class C shares (February 1, 1994)
through June 30, 1994.
(B)The total returns shown exclude the effect of applicable sales loads.
(C)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to
average net assets would have been 1.75%(D) for the period ended June 30, 1994.
(D)Annualized.
</TABLE>
- 6 -
<PAGE>
INVESTMENT OBJECTIVES
- ---------------------
The Tax-Free Money Fund and the Tax-Free Intermediate Term Fund are two
series of Countrywide Tax-Free Trust (the "Trust"), each with its own portfolio
and investment objective(s). Neither Fund is intended to be a complete
investment program, and there is no assurance that the investment objectives of
either Fund can be achieved. Unless otherwise indicated, all investment
practices and limitations of the Funds are nonfundamental policies which may be
changed by the Board of Trustees without shareholder approval. For a discussion
of each Fund's investment practices, see "Investment Policies."
The Tax-Free Money Fund seeks the highest level of interest income
exempt from federal income tax, consistent with protection of capital. The Fund
seeks to achieve its investment objective by investing primarily in high-quality
municipal obligations determined by the Adviser, under the direction of the
Board of Trustees, to present minimal credit risks, maturing within thirteen
months or less with a dollar-weighted average maturity of 90 days or less.
The investment objective of the Tax-Free Money Fund is fundamental and
as such may not be changed without the affirmative vote of a majority of the
outstanding shares of the Fund. The term "majority" of the outstanding shares
means the lesser of (1) 67% or more of the outstanding shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented at such meeting or (2) more than 50% of
the outstanding shares of the Fund.
The Tax-Free Intermediate Term Fund seeks high current income exempt
from federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The investment objectives of the Tax-Free Intermediate Term Fund may be
changed by the Board of Trustees without shareholder approval, but only after
notification has been given to shareholders and after this Prospectus has been
revised accordingly. If there is a change in the Fund's investment objectives,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs.
- 7 -
<PAGE>
INVESTMENT POLICIES
- -------------------
The TAX-FREE MONEY FUND seeks to achieve its investment objective by
investing primarily in high-quality, short-term Municipal Obligations (described
below) determined by the Adviser, under the direction of the Board of Trustees,
to present minimal credit risks. The Fund will purchase only obligations that
enable it to employ the amortized cost method of valuation. Under the amortized
cost method of valuation, the Fund's obligations are valued at original cost
adjusted for amortization of premium or accumulation of discount, rather than
valued at market. This method should enable the Fund to maintain a stable net
asset value per share. The Fund will invest in obligations which have received a
short-term rating in one of the two highest categories by any two nationally
recognized statistical rating organizations ("NRSROs") or by any one NRSRO if
the obligation is rated by only that NRSRO. The Fund may purchase unrated
obligations determined by the Adviser to be of comparable quality to rated
obligations meeting the Fund's quality standards. These standards must be
satisfied at the time an investment is made. If an obligation ceases to meet
these standards, or if the Board of Trustees believes such obligation no longer
presents minimal credit risks, the Trustees will cause the Fund to dispose of
the obligation as soon as practicable. The Statement of Additional Information
describes ratings of the NRSROs.
The dollar-weighted average maturity of the Tax-Free Money Fund will be
90 days or less. The Fund will invest in obligations with remaining maturities
of thirteen months or less at the time of purchase.
The TAX-FREE INTERMEDIATE TERM FUND seeks to achieve its investment
objectives by investing primarily in high-grade Municipal Obligations. The Fund
invests in Municipal Obligations and other securities which are rated at the
time of purchase within the three highest grades assigned by Moody's Investors
Service, Inc. (Aaa, Aa or A), Standard & Poor's Ratings Group (AAA, AA or A) or
Fitch Investors Services, Inc. (AAA, AA or A), or unrated securities determined
by the Adviser to be of comparable quality.
It is anticipated that under normal circumstances the Tax- Free
Intermediate Term Fund will invest in Municipal Obligations with remaining
maturities of twenty years or less and that the dollar-weighted average maturity
of the Fund will be between three and ten years, although the Fund may invest in
securities of any maturity, including tax-exempt notes and commercial paper
determined by the Adviser to meet the Fund's quality standards. The Fund's
quality standards limit its investments in tax-exempt notes to those which are
rated within the three highest grades by Moody's (MIG 1, MIG 2 or MIG 3) or
Fitch (F-1+, F-1 or F-2) or
- 8 -
<PAGE>
the two highest grades by Standard & Poor's (SP-1 or SP-2) and in tax-exempt
commercial paper to those which are rated within the two highest grades by
Moody's (Prime-1 or Prime-2), Standard & Poor's (A-1 or A-2) or Fitch (Fitch-1
or Fitch-2). The Statement of Additional Information contains a description of
tax-exempt notes and commercial paper and a description of Moody's, Standard &
Poor's and Fitch ratings. If the Adviser determines that market conditions
warrant a shorter or longer dollar-weighted average maturity, the Fund's
investments will be adjusted accordingly.
It is a fundamental policy that under normal market conditions the
assets of each Fund will be invested so that at least 80% of the annual income
of each Fund will be exempt from federal income tax, including the alternative
minimum tax. This policy may not be changed without the affirmative vote of a
majority of the outstanding shares of the applicable Fund.
Each Fund may, from time to time, invest in taxable short-term,
high-quality obligations for temporary defensive purposes (subject to the
fundamental policy that under normal market conditions the assets of each Fund
will be invested so that at least 80% of annual income will be exempt from
federal income tax, including the alternative minimum tax). These include, but
are not limited to, certificates of deposit and other bank debt instruments,
commercial paper, obligations issued by the U.S. Government or any of its
agencies or instrumentalities and repurchase agreements. Interest earned from
such investments will be taxable to investors. Except for temporary defensive
purposes, the assets of each Fund will be invested so that no more than 20% of
each Fund's annual income will be subject to federal income tax. Under normal
market conditions, each Fund anticipates that not more than 5% of the value of
its net assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional Information.
Each Fund may invest in these taxable short-term obligations, for example, due
to market conditions under which Municipal Obligations are temporarily
unavailable for purchase or available only in limited amounts, or pending
investment of proceeds of sales of shares or proceeds from the sale of portfolio
securities or in anticipation of redemptions. The Funds reserve the right to
hold cash reserves as the Adviser deems necessary for temporary defensive
purposes. Although interest earned on these short-term obligations is taxable as
ordinary income for federal income tax purposes, each Fund intends to minimize
taxable income through investment, when possible, in other available securities
exempt from federal income tax, including shares of investment companies whose
dividends are tax-exempt. Each Fund may invest up to 10% of its total assets in
shares of other investment companies. Investments by a Fund in shares of other
investment companies may
- 9 -
<PAGE>
result in duplication of sales loads and advisory, administrative and
distribution fees. Each Fund will not invest more than 5% of its total assets in
securities of any single investment company and will not purchase more than 3%
of the outstanding voting securities of any investment company. The Tax-Free
Money Fund will only invest in securities of other investment companies which
hold themselves out to be money market funds.
Municipal Obligations
---------------------
Municipal Obligations are debt obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia, and their political subdivisions, agencies, authorities and
instrumentalities and other qualifying issuers which pay interest that is, in
the opinion of bond counsel to the issuer, exempt from federal income tax,
including the alternative minimum tax. For purposes of this definition,
Municipal Obligations include participation interests in Municipal Obligations
and shares of an investment company which invests its assets so that at least
80% of its annual income is exempt from federal income tax, including the
alternative minimum tax. Municipal Obligations are issued to obtain funds to
construct, repair or improve various public facilities such as airports,
bridges, highways, hospitals, housing, schools, streets and water and sewer
works, to pay general operating expenses or to refinance outstanding debts. They
also may be issued to finance various private activities, including the lending
of funds to public or private institutions for construction of housing,
educational or medical facilities or the financing of privately owned or
operated facilities. Municipal Obligations consist of tax-exempt bonds,
tax-exempt notes and tax-exempt commercial paper. The Statement of Additional
Information contains a description of tax-exempt bonds, notes and commercial
paper.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk.
Each Fund's ability to achieve its investment objective depends to a great
extent on the ability of these various issuers to meet their scheduled payments
of principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Funds may invest are tax anticipation notes
(TANs), revenue anticipation notes (RANs) and bond anticipation notes (BANs).
TANs, RANs and BANs are issued by state and local government and public
- 10 -
<PAGE>
authorities as interim financing in anticipation of tax collections, revenue
receipts or bond sales, respectively. Tax- exempt commercial paper typically
represents short-term, unsecured, negotiable promissory notes.
Each Fund may invest in any combination of general obligation bonds,
revenue bonds and industrial development bonds. Each Fund may invest more than
25% of its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, each Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, neither Fund will invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on Municipal Obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. Each Fund
will invest its assets so that no more than 20% of its annual income gives rise
to a preference item for the purpose of the alternative minimum tax and in other
investments subject to federal income tax.
Each Fund may purchase other types of Municipal Obligations which may
become available in the future, provided the obligations are consistent with the
Fund's investment objectives and policies, the Adviser believes their quality
meets the Fund's quality standards, and this Prospectus has been appropriately
revised to reflect the Fund's policies with respect to such obligations.
Risk Factors
------------
The market value of investments available to the Funds, and therefore
each Fund's yield, will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the Adviser.
The net asset value of the Tax-Free Intermediate Term Fund also will fluctuate
due to these changes. The portfolio securities held by the Funds are
- 11 -
<PAGE>
subject to price fluctuations based upon changes in the level of interest rates,
which will generally result in all those securities changing in price in the
same way, i.e., all those securities experiencing appreciation when interest
rates decline and depreciation when interest rates rise. In addition, the
financial condition of an issuer or adverse changes in general economic
conditions, or both, may impair the issuer's ability to make payments of
interest and principal.
There are additional risks associated with an investment in the
Tax-Free Intermediate Term Fund. The Fund may purchase Municipal Obligations
which are rated at the time of purchase within the three highest grades assigned
by Moody's, Standard & Poor's or Fitch. Subsequent to its purchase by the Fund,
a security may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. In the event a security's rating is reduced
below the Fund's minimum requirements, the Fund will sell the security, subject
to market conditions and the Adviser's assessment of the most opportune time for
sale. Although lower rated securities will generally provide higher yields than
higher rated securities of similar maturities, they are subject to a greater
degree of market fluctuation. The lower rating also reflects a greater
possibility that changing circumstances may impair the ability of the issuer to
make timely payments of interest and principal. In addition, Municipal
Obligations with longer maturities generally offer both higher yields and
greater exposure to market fluctuation from changes in interest rates.
Consequently, investors in the Tax-Free Intermediate Term Fund should be aware
that there is a possibility of greater fluctuation in the Fund's net asset
value.
Certain provisions in the Internal Revenue Code relating to the
issuance of Municipal Obligations may reduce the volume of Municipal Obligations
qualifying for federal tax exemptions. Shareholders should consult their tax
advisors concerning the effect of these provisions on an investment in the
Funds. Proposals that may further restrict or eliminate the income tax
exemptions for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability of
Municipal Obligations for investment by the Funds so as to adversely affect
their shareholders, the Funds would reevaluate their investment objectives and
policies and submit possible changes in the Funds' structure to shareholders for
their consideration. If legislation were enacted that would treat a type of
Municipal Obligation as taxable, each Fund would treat such security as a
permissible taxable investment within the applicable limits set forth herein.
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<PAGE>
Other Investment Techniques
----------------------------
The Funds may also engage in the following investment techniques, each
of which may involve certain risks:
PARTICIPATION INTERESTS. Each Fund may purchase participation interests
in Municipal Obligations owned by banks or other financial institutions. A
participation interest gives a Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, a Fund will have
the right to demand payment, on not more than seven days' notice, for all or any
part of its participation interest in the Municipal Obligation, plus accrued
interest. As to these instruments, the Funds intend to exercise their right to
demand payment only upon a default under the terms of the obligation, as needed
to provide liquidity to meet redemptions, or to maintain a high-quality
investment portfolio. Each Fund will not invest more than 10% of its net assets
in participation interests that do not have this demand feature and all other
illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. Each Fund may invest in
floating or variable rate Municipal Obligations. Floating rate obligations have
an interest rate which is fixed to a specified interest rate, such as a bank
prime rate, and is automatically adjusted when the specified interest rate
changes. Variable rate obligations have an interest rate which is adjusted at
specified intervals to a specified interest rate. Periodic interest rate
adjustments help stabilize the obligations' market values. Each Fund may
purchase these obligations from the issuers or may purchase participation
interests in pools of these obligations from banks or other financial
institutions. Variable and floating rate obligations usually carry demand
features that permit a Fund to sell the obligations back to the issuers or to
financial intermediaries at par value plus accrued interest upon not more than
30 days' notice at any time or prior to specific dates. Certain of these
variable rate obligations, often referred to as "adjustable rate put bonds," may
have a demand feature exercisable on specific dates once or twice each year.
Neither Fund will invest more than 10% of its net assets in floating or variable
rate obligations as to which it cannot exercise the demand feature on not more
than seven days' notice if the Adviser, under the direction of the Board of
Trustees, determines that there is no secondary market available for these
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<PAGE>
obligations and all other illiquid securities. If a Fund invests a substantial
portion of its assets in obligations with demand features permitting sale to a
limited number of entities, the inability of the entities to meet demands to
purchase the obligations could affect the Fund's liquidity. However, obligations
with demand features frequently are secured by letters of credit or comparable
guarantees that may reduce the risk that an entity would not be able to meet
such demands. In determining whether an obligation secured by a letter of credit
meets a Fund's quality standards, the Adviser will ascribe to such obligation
the same rating given to unsecured debt issued by the letter of credit provider.
In looking to the creditworthiness of a party relying on a foreign bank for
credit support, the Adviser will consider whether adequate public information
about the bank is available and whether the bank may be subject to unfavorable
political or economic developments, currency controls or other governmental
restrictions affecting its ability to honor its credit commitment.
INVERSE FLOATING OBLIGATIONS. The Tax-Free Intermediate Term Fund may
invest in securities representing interests in Municipal Obligations, known as
inverse floating obligations, which pay interest rates that vary inversely to
changes in the interest rates of specified short-term Municipal Obligations or
an index of short-term Municipal Obligations. The interest rates on inverse
floating obligations will typically decline as short-term market interest rates
increase and increase as short-term market rates decline. Such securities have
the effect of providing a degree of investment leverage, since they will
generally increase or decrease in value in response to changes in market
interest rates at a rate which is a multiple (typically two) of the rate at
which fixed-rate, long-term Municipal Obligations increase or decrease in
response to such changes. As a result, the market value of inverse floating
obligations will generally be more volatile than the market values of fixed-rate
Municipal Obligations.
WHEN-ISSUED OBLIGATIONS. Each Fund may invest in when- issued Municipal
Obligations. Obligations offered on a when- issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. A
Fund will maintain a segregated account with its Custodian of cash or liquid
securities, marked to market daily, in an amount equal to its when-issued
commitments. Because these transactions are subject to market fluctuations, a
significant commitment to when- issued purchases could result in fluctuation of
the net asset value of the Tax-Free Money Fund and greater fluctuation of the
net asset value of the Tax-Free Intermediate Term Fund. Each Fund will only make
commitments to purchase when-issued obligations with the intention of actually
acquiring the obligations and not for the purpose of investment leverage.
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<PAGE>
LENDING PORTFOLIO SECURITIES. Each Fund may make short-term loans of
its portfolio securities to banks, brokers and dealers. Lending portfolio
securities exposes a Fund to the risk that the borrower may fail to return the
loaned securities or may not be able to provide additional collateral or that a
Fund may experience delays in recovery of the loaned securities or loss of
rights in the collateral if the borrower fails financially. To minimize these
risks, the borrower must agree to maintain collateral marked to market daily, in
the form of cash and/or liquid securities, with the Funds' Custodian in an
amount at least equal to the market value of the loaned securities. Each Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by either Fund without
the affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. Each Fund may purchase Municipal
Obligations with the right to resell the obligation to the seller at a specified
price or yield within a specified period. The right to resell is commonly known
as a "put" or a "standby commitment." Each Fund may purchase Municipal
Obligations with puts attached from banks and broker-dealers. Each Fund intends
to use obligations with puts attached for liquidity purposes to ensure a ready
market for the underlying obligations at an acceptable price. Although no value
is assigned to any puts on Municipal Obligations, the price which a Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. Each
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. In addition, the value of the obligations with puts attached held by a
Fund will not exceed 10% of its net assets.
LEASE OBLIGATIONS. The Tax-Free Intermediate Term Fund may invest in
Municipal Obligations that constitute participations in lease obligations or
installment purchase contract obligations ("lease obligations") of municipal
authorities or entities. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on an annual basis. In addition to the "non-appropriation" risk, these
securities represent a relatively new type of financing that has not yet
developed the
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<PAGE>
depth of marketability associated with more conventional bonds. Although
"non-appropriation" lease obligations are secured by the leased property, the
disposition of the property in the event of foreclosure might prove difficult.
The Tax-Free Intermediate Term Fund will seek to minimize these risks by not
investing more than 10% of its net assets in lease obligations if the Adviser
determines that there is no secondary market available for these obligations and
all other illiquid securities, and by only investing in "non-appropriation"
lease obligations that meet certain criteria of the Adviser. The Fund does not
intend to invest more than an additional 5% of its net assets in municipal lease
obligations determined by the Adviser, under the direction of the Board of
Trustees, to be liquid. The Fund will only purchase unrated lease obligations
which meet the Fund's quality standards, as determined by the Adviser, under the
direction of the Board of Trustees, including an assessment of the likelihood
that the lease will not be cancelled.
SECURITIES WITH LIMITED MARKETABILITY. Each Fund may invest in the
aggregate up to 10% of its net assets in securities that are not readily
marketable, including: participation interests that are not subject to the
demand feature described above; floating and variable rate obligations as to
which the Funds cannot exercise the related demand feature described above and
as to which there is no secondary market; lease obligations for which there is
no secondary market; and repurchase agreements not terminable within seven days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or
emergency purposes, each Fund may borrow money from banks or other persons in an
amount not exceeding 10% of its total assets. Each Fund may pledge assets in
connection with borrowings but will not pledge more than 10% of its total
assets. Neither Fund will make any additional purchases of portfolio securities
while borrowings are outstanding. Borrowing magnifies the potential for gain or
loss on the portfolio securities of the Funds and, therefore, if employed,
increases the possibility of fluctuation in a Fund's net asset value. This is
the speculative factor known as leverage. To reduce the risks of borrowing, the
Funds will limit their borrowings as described above. Each Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
- ----------------------
Tax-Free Money Fund
-------------------
Your initial investment in the Tax-Free Money Fund ordinarily must be
at least $1,000. However, the minimum initial investment for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is
- 16 -
<PAGE>
$50. Shares of the Fund are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an
initial investment in the Tax-Free Money Fund by sending a check and a completed
account application form to Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made
payable to the "Tax-Free Money Fund." An account application is included in this
Prospectus.
You will be sent within five business days after the end of each month
a written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the
Tax-Free Money Fund by wire. Please telephone the Transfer Agent (Nationwide
call toll-free 800-543-0407; in Cincinnati call 629-2050) for instructions. You
should be prepared to give the name in which the account is to be established,
the address, telephone number and taxpayer identification number for the
account, and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided
you have given notice of your intention to make such investment to the Transfer
Agent by 4:00 p.m., Eastern time, on the preceding business day (or 12:00 noon,
Eastern time, on the same day of a wire investment in the case of investors
utilizing institutions that have made appropriate arrangements with the Transfer
Agent). Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
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<PAGE>
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to the Transfer Agent. Your bank may impose a
charge for sending your wire. There is presently no fee for receipt of wired
funds, but the Transfer Agent reserves the right to charge shareholders for this
service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account
by mail or by bank wire. Checks should be sent to Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the "Tax-Free Money Fund." Bank wires should be sent as outlined above. You
may also make additional investments at the Trust's offices at 312 Walnut
Street, 21st Floor, Cincinnati, Ohio 45202. Each additional purchase request
must contain the name of your account and your account number to permit proper
crediting to your account. While there is no minimum amount required for
subsequent investments, the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Tax-Free Money Fund
at the next determined net asset value on a day selected by the institution or
its customer, or when the account balance reaches a predetermined dollar amount
(e.g., $5,000).
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
Tax-Free Intermediate Term Fund
-------------------------------
Your initial investment in the Tax-Free Intermediate Term Fund
ordinarily must be at least $1,000. However, the minimum initial investment in
Class A shares for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. You may purchase additional shares through
the Open Account Program described below. You may open an account and make an
initial investment through securities dealers having a sales agreement with the
Trust's principal underwriter, Countrywide Investments, Inc. (the "Adviser").
You may also make a direct initial investment by sending a check and
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<PAGE>
a completed account application form to Countrywide Fund Services, Inc. (the
"Transfer Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be
made payable to the "Tax-Free Intermediate Term Fund." An account application is
included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of
shares of the Tax-Free Intermediate Term Fund. Certificates representing shares
are not issued. The Trust and the Adviser reserve the rights to limit the amount
of investments and to refuse to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers listed
below.
After an initial investment, all investors are considered participants
in the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Tax-Free Intermediate Term Fund over a period of
years and permits the automatic reinvestment of dividends and distributions of
the Fund in additional shares without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
The check should be made payable to the "Tax-Free Intermediate Term Fund."
Under the Open Account Program, you may also purchase shares of the
Tax-Free Intermediate Term Fund by bank wire. Please telephone the Transfer
Agent (Nationwide call toll-free 800-543- 0407; in Cincinnati call 629-2050) for
instructions. Your bank may impose a charge for sending your wire. There is
presently no fee for receipt of wired funds, but the Transfer Agent reserves the
right to charge shareholders for this service upon thirty days' prior notice to
shareholders.
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<PAGE>
Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Tax-Free Intermediate Term Fund to a current shareholder, such
broker-dealer will receive the concessions described above with respect to
additional investments by the shareholder.
Sales Load Alternatives
- -----------------------
The Tax-Free Intermediate Term Fund offers two classes of shares which
may be purchased at the election of the purchaser. The two classes of shares
each represent interests in the same portfolio of investments of the Fund, have
the same rights and are identical in all material respects except that (i) Class
C shares bear the expenses of higher distribution fees; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable, including transfer agent fees attributable to a specific class of
shares, printing and postage expenses related to preparing and distributing
materials to current shareholders of a specific class, registration fees
incurred by a specific class of shares, the expenses of administrative personnel
and services required to support the shareholders of a specific class,
litigation or other legal expenses relating to a class of shares, Trustees' fees
or expenses incurred as a result of issues relating to a specific class of
shares and accounting fees and expenses relating to a specific class of shares;
and (iii) each class has exclusive voting rights with respect to matters
relating to its own distribution arrangements. The net income attributable to
Class C shares and the dividends payable on Class C shares will be reduced by
the amount of the incremental expenses associated with the distribution fee. See
"Distribution Plans." Shares of the Tax-Free Intermediate Term Fund purchased
prior to February 1, 1994 are Class A shares.
The Fund's alternative sales arrangements permit investors to choose
the method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold his shares, the
quality and scope of the value-added services provided by financial advisers who
may work with a particular sales load structure by way of compensation for
their services, and other relevant circumstances. Investors should determine
whether under their particular circumstances it is more advantageous to incur a
front-end sales load and be subject to lower ongoing charges, as discussed
below, or to have all of the initial purchase price invested in the Fund with
the investment thereafter being subject to higher ongoing charges. A salesperson
or any other person entitled to receive any portion of a distribution fee may
receive different compensation for selling Class A or Class C shares.
- 20 -
<PAGE>
As an illustration, investors who qualify for reduced sales loads as
described below, might elect the Class A sales load alternative because similar
sales load reductions are not available for purchases under the Class C sales
load alternative. Moreover, shares acquired under the Class A sales load
alternative would be subject to lower ongoing distribution fees as described
below. Investors not qualifying for reduced initial sales loads who expect to
maintain their investment for an extended period of time might also elect the
Class A sales load alternative because over time the accumulated continuing
distribution fees on Class C shares may exceed the difference in initial sales
loads between Class A and Class C shares. Again, however, such investors must
weigh this consideration against the fact that less of their funds will be
invested initially under the Class A sales load alternative. Furthermore, the
higher ongoing distribution fees will be offset to the extent any return is
realized on the additional funds initially invested under the Class C sales load
alternative.
Some investors might determine that it would be more advantageous to
utilize the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 2% initial sales load on Class A shares who elects to reinvest dividends
in additional shares would have to hold the investment in Class A shares
approximately 2 1/2 years before the accumulated ongoing distribution fees on
the alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 2 1/2 years, the investor
might consider purchasing Class A shares. This example does not take into
account the time value of money which reduces the impact of the higher ongoing
Class C distribution fees, fluctuations in net asset value or the effect of
different performance assumptions.
In determining the most appropriate sales load alternative, investors
might wish to consider the services provided by their financial advisers and the
compensation provided to those advisers under each such alternative. Countrywide
Investments works in conjunction with many experienced and very qualified
financial advisers throughout the country that may provide valuable assistance
to investors by way of ongoing education, asset allocation programs,
personalized financial planning reviews, or other services vital to an
investor's long-term success. Countrywide Investments believes that these
value-added services can greatly benefit investors through market cycles and
will work diligently with an investor's chosen adviser. Countrywide Investments
has a financial adviser referral service available, at no cost to investors,
which can help them choose a financial adviser in their local area if they
currently do not have one.
In addition to the compensation otherwise paid to securities dealers,
the Adviser may from time to time pay from its own resources additional cash
bonuses or other incentives to selected dealers in connection with the sale of
shares of the Tax-Free Intermediate Term Fund. On some occasions, such bonuses
or incentives may be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other funds in Countrywide Investments
during a specific period of time. Such bonuses or incentives may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and other dealer-sponsored programs or events.
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<PAGE>
Class A Shares
- --------------
Class A shares of the Tax-Free Intermediate Term Fund are sold on a
continuous basis at the public offering price next determined after receipt of a
purchase order by the Trust. Purchase orders received by dealers prior to 4:00
p.m., Eastern time, on any business day and transmitted to the Adviser by 5:00
p.m., Eastern time, that day are confirmed at the public offering price
determined as of the close of the regular session of trading on the New York
Stock Exchange on that day. It is the responsibility of dealers to transmit
properly completed orders so that they will be received by the Adviser by 5:00
p.m., Eastern time. Dealers may charge a fee for effecting purchase orders.
Direct purchase orders received by the Transfer Agent by 4:00 p.m., Eastern
time, are confirmed at that day's public offering price. Direct investments
received by the Transfer Agent after 4:00 p.m., Eastern time, and orders
received from dealers after 5:00 p.m., Eastern time, are confirmed at the public
offering price next determined on the following business day.
The public offering price of Class A shares applicable to investors
whose accounts are opened after January 31, 1995 is the next determined net
asset value per share plus a sales load as shown in the following table.
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- --------- -------- ---------
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50 1.52 1.35
$250,000 but less than $500,000 1.00 1.01 .90
$500,000 but less than $1,000,000 .75 .76 .65
$1,000,000 or more None* None*
Investors whose accounts were opened prior to February 1, 1995 are subject to a
different table of sales loads as follows:
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- -------- -------- ---------
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 .75 .76 .75
$1,000,000 or more None* None*
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<PAGE>
* There is no front-end sales load on purchases of $1 million or more but
a contingent deferred sales load of 1% may apply with respect to Class
A shares if a commission was paid by the Adviser to a participating
unaffiliated dealer and the shares are redeemed within twelve months
from the date of purchase.
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made
after October 1, 1995 and subsequent purchases further increasing the size of an
account, a dealer's commission of up to 1% of the purchase amount may be paid by
the Adviser to participating unaffiliated dealers through whom such purchases
are effected. In determining a dealer's eligibility for such commission,
purchases of Class A shares of the Tax-Free Intermediate Term Fund may be
aggregated with concurrent purchases of Class A shares of other funds of
Countrywide Investments. Dealers should contact the Adviser concerning the
applicability and calculation of the dealer's commission in the case of combined
purchases. An exchange from other funds of Countrywide Investments will not
qualify for payment of the dealer's commission, unless such exchange is from a
Countrywide fund with assets as to which a dealer's commission or similar
payment has not been previously paid. Redemptions of Class A shares may result
in the imposition of a contingent deferred sales load if the dealer's commission
described in this paragraph was paid in connection with the purchase of such
shares. See "Contingent Deferred Sales Charge for Certain Purchases of Class A
Shares" below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the tables above. Purchases made in any
load fund distributed by the Adviser pursuant to a Letter of Intent may also be
eligible for the reduced sales loads. The minimum initial investment under a
Letter of Intent is $10,000. The load funds currently distributed by the Adviser
are listed in the Exchange Privilege section of this Prospectus. Shareholders
should contact the Transfer Agent for information about the Right of
Accumulation and Letter of Intent.
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<PAGE>
PURCHASES AT NET ASSET VALUE. Class A shares of the Tax-Free
Intermediate Term Fund may be purchased at net asset value by pension and
profit-sharing plans, pension funds and other company-sponsored benefit plans
that (1) have plan assets of $500,000 or more, or (2) have, at the time of
purchase, 100 or more eligible participants, or (3) certify that they project
to have annual plan purchases of $200,000 or more, or (4) are provided
administrative services by certain third-party administrators that have entered
into a special service arrangement with the Adviser relating to such plan.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase Class A
shares of the Tax-Free Intermediate Term Fund at net asset value. To the extent
permitted by regulatory authorities, a bank trust department may charge fees to
clients for whose account it purchases shares at net asset value. Federal and
state credit unions may also purchase Class A shares at net asset value.
In addition, Class A shares of the Tax-Free Intermediate Term Fund may
be purchased at net asset value by broker-dealers who have a sales agreement
with the Adviser, and their registered personnel and employees, including
members of the immediate families of such registered personnel and employees.
Clients of investment advisers may also purchase Class A shares of the
Tax-Free Intermediate Term Fund at net asset value if their investment
adviser or broker-dealer has made arrangements to permit them to do so with the
Trust. The investment adviser must notify the Transfer Agent that an
investment qualifies as a purchase at net asset value.
Associations and affinity groups and their members may purchase Class
A shares of the Tax-Free Intermediate Term Fund at net asset value provided
that management of these groups or their financial adviser has made arrangements
to permit them to do so with the Trust. Investors or their financial adviser
must notify the Transfer Agent that an investment qualifies as a purchase at net
asset value.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals, may also purchase Class A shares of the Tax-Free Intermediate
Term Fund at net asset value.
- 24 -
<PAGE>
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES.
A contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Tax-Free Intermediate Term Fund (or shares into which such Class A
shares were exchanged) purchased at net asset value in amounts totaling $1
million or more, if the dealer's commission described above was paid by the
Adviser and the shares are redeemed within twelve months from the date of
purchase. The contingent deferred sales load will be paid to the Adviser and
will be equal to 1% of the lesser of (1) the net asset value at the time of
purchase of the Class A shares being redeemed or (2) the net asset value of such
Class A shares at the time of redemption. In determining whether the contingent
deferred sales load is payable, it is assumed that shares not subject to the
contingent deferred sales load are the first redeemed followed by other shares
held for the longest period of time. The contingent deferred sales load will not
be imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. If a purchase of
Class A shares is subject to the contingent deferred sales load, the investor
will be so notified on the confirmation for such purchase.
Redemptions of such Class A shares of the Tax-Free Intermediate Term
Fund held for at least 12 months will not be subject to the contingent deferred
sales load and an exchange of such Class A shares into another fund of
Countrywide Investments is not treated as a redemption and will not trigger the
imposition of the contingent deferred sales load at the time of such exchange. A
fund will "tack" the period for which such Class A shares being exchanged were
held onto the holding period of the acquired shares for purposes of determining
if a contingent deferred sales load is applicable in the event that the acquired
shares are redeemed following the exchange; however, the period of time that the
redemption proceeds of such Class A shares are held in a money market fund will
not count toward the holding period for determining whether a contingent
deferred sales load is applicable. See "Exchange Privilege."
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and
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<PAGE>
their children under the age of 21, purchasing shares for his or their own
account; or a trustee or other fiduciary purchasing shares for a single
fiduciary account although more than one beneficiary is involved; or employees
of a common employer, provided that economies of scale are realized through
remittances from a single source and quarterly confirmation of such purchases;
or an organized group, provided that the purchases are made through a central
administration, or a single dealer, or by other means which result in economy of
sales effort or expense. Contact the Transfer Agent for additional information
concerning purchases at net asset value or at reduced sales loads.
Class C Shares
---------------
Class C shares of the Tax-Free Intermediate Term Fund are sold on a
continuous basis at the net asset value next determined after receipt of a
purchase order by the Trust. Purchase orders received by dealers prior to 4:00
p.m., Eastern time, on any business day and transmitted to the Adviser by 5:00
p.m., Eastern time, that day are confirmed at the net asset value determined as
of the close of the regular session of trading on the New York Stock Exchange on
that day. It is the responsibility of dealers to transmit properly completed
orders so that they will be received by the Adviser by 5:00 p.m., Eastern time.
Dealers may charge a fee for effecting purchase orders. Direct purchase orders
received by the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that
day's net asset value. Direct investments received by the Transfer Agent after
4:00 p.m., Eastern time, and orders received from dealers after 5:00 p.m.,
Eastern time, are confirmed at the net asset value next determined on the
following business day.
A contingent deferred sales load is imposed on Class C shares of the
Tax-Free Intermediate Term Fund if an investor redeems an amount which causes
the current value of the investor's account to fall below the total dollar
amount of purchase payments subject to the deferred sales load, except that no
such charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or to the extent the
amount redeemed is derived from increases in the value of the account above the
amount of purchase payments subject to the deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the
amount of time since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
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<PAGE>
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
------------------- --------------------
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it
is assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent
deferred sales load. Assume that an individual opens an account and purchases
1,000 shares at $10 per share and that six months later the net asset value per
share is $12 and, during such time, the investor has acquired 50 additional
shares through reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not be subject to
the load because of dividend reinvestment. With respect to the remaining 400
shares, the load is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $4,000 of the
$5,400 redemption proceeds will be charged the load. At the rate of 1%, the
contingent deferred sales load would be $40. In determining whether an amount is
available for redemption without incurring a deferred sales load, the purchase
payments made for all Class C shares of the Tax-Free Intermediate Term Fund in
the shareholder's account are aggregated, and the current value of all such
shares is aggregated.
All sales loads imposed on redemptions are paid to the Adviser. The
Adviser intends to pay a commission of 1% of the purchase amount to
participating brokers at the time the investor purchases Class C shares of the
Tax-Free Intermediate Term Fund.
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
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<PAGE>
Automatic Withdrawal Plan
-------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional Class A shares of the Tax-Free
Intermediate Term Fund while the plan is in effect are generally undesirable
because a sales load is incurred whenever purchases are made.
Direct Deposit Plans
--------------------
Shares of either Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Funds.
Automatic Investment Plan
--------------------------
You may make automatic monthly investments in either Fund from your
bank, savings and loan or other depository institution account. The minimum
initial and subsequent investments must be $50 under the plan. The Transfer
Agent pays the costs associated with these transfers, but reserves the right,
upon thirty days' written notice, to make reasonable charges for this service.
Your depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds.
InvestPlus Plan
----------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in either Fund by including your investment with your
mortgage payment. You may write one check for the total amount.
Reinvestment Privilege
----------------------
If you have redeemed shares of the Tax-Free Intermediate Term Fund, you
may reinvest all or part of the proceeds without any additional sales load. This
reinvestment must occur within ninety days of the redemption and the privilege
may only be exercised once per year.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of either Fund on each day that the Trust is open
for business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described below, less any applicable contingent deferred sales load. Payment is
normally
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<PAGE>
made within three business days after tender in such form, provided that payment
in redemption of shares purchased by check will be effected only after the check
has been collected, which may take up to fifteen days from the purchase date. To
eliminate this delay, you may purchase shares of the Funds by certified check,
government check or wire.
A contingent deferred sales load may apply to a redemption of Class C
shares of the Tax-Free Intermediate Term Fund or to a redemption of certain
Class A shares of the Fund purchased at net asset value. See "How to Purchase
Shares." A contingent deferred sales load may be imposed on a redemption of
shares of the Tax-Free Money Fund if such shares had previously been acquired in
connection with an exchange from another fund of Countrywide Investments which
imposes a contingent deferred sales load, as described in the Prospectus of such
other fund.
BY TELEPHONE. You may redeem shares having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds from your
Tax-Free Money Fund account will normally be sent by mail or by wire within one
business day (but not later than three business days) after receipt of your
telephone instructions; any redemption requests by telephone must be received
in proper form prior to 12:00 noon, Eastern time, on any business day in order
for payment by wire to be made that day.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account have been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone
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<PAGE>
instructions are genuine. If the Trust and/or the Transfer Agent do not employ
such procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions and/or tape recording telephone
instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, you will be required to request the
redemption in writing with your signature guaranteed, regardless of the value
of the shares being redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on
your account application for telephone redemptions. Proceeds of redemptions
requested by mail are mailed within three business days following receipt of
instructions in proper form.
BY CHECK. You may establish a special checking account with either
Fund for the purpose of redeeming shares by check. Checks may be made payable
to anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer
Agent, as your agent, will cause the Fund to redeem a sufficient number of full
and fractional shares in your account to cover the amount of the check. Checks
will be processed at the net asset value on the day the check is presented to
the Custodian for payment.
If the amount of a check is greater than the value of the shares held
in your account, the check will be returned. Shareholders of the Tax-Free
Intermediate Term Fund should consider potential fluctuations in the net asset
value of the Fund's shares when writing checks. A check representing a
redemption request will take precedence over any other redemption instructions
issued by a shareholder.
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of
- 30 -
<PAGE>
Countrywide Credit Industries, Inc. or any affiliated company, including members
of the immediate family of such individuals.
The Transfer Agent charges shareholders its costs for each stop payment
and each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption procedure may be
suspended or terminated at any time upon written notice by the Trust or the
Transfer Agent.
Shareholders of the Tax-Free Intermediate Term Fund should be aware
that writing a check (a redemption of shares) is a taxable event. Shares of the
Tax-Free Intermediate Term Fund for which certificates have been issued may not
be redeemed by check. Shareholders who invest in the Tax-Free Money Fund through
a cash sweep or similar program with a financial institution are not eligible
for the checkwriting privilege.
THROUGH BROKER-DEALERS. You may also redeem shares of the Tax-Free
Intermediate Term Fund by placing a wire redemption request through a securities
broker or dealer. Unaffiliated broker-dealers may impose a fee on the
shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee. The Trust reserves
the right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
If a certificate for shares of the Tax-Free Intermediate Term Fund was
issued to you, you will not be permitted to exchange shares by telephone, to
redeem shares by check or to use the automatic withdrawal plan as to those
shares. In order to redeem such shares, the certificate must be delivered to the
Transfer Agent, or the dealer in the case of a wire redemption, duly endorsed or
accompanied by a duly endorsed stock power, with
- 31 -
<PAGE>
the signature guaranteed by any of the eligible guarantor institutions outlined
above.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested including any sales load paid,
unaffected by market fluctuations) or such other minimum amount as the Trust may
determine from time to time. After notification to you of the Trust's intention
to close your account, you will be given thirty days to increase the value of
your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of either Fund and of any other fund of Countrywide Investments
may be exchanged for each other.
Shares of the Tax-Free Money Fund and Class A shares of the Tax-Free
Intermediate Term Fund which are not subject to a contingent deferred sales load
may be exchanged for Class A shares of any other fund and for shares of any
other fund which offers only one class of shares (provided such shares are not
subject to a contingent deferred sales load). A sales load will be imposed equal
to the excess, if any, of the sales load rate applicable to the shares being
acquired over the sales load rate, if any, previously paid on the shares being
exchanged.
Class C shares of the Tax-Free Intermediate Term Fund, as well as
Class A shares of the Fund subject to a contingent deferred sales load, may be
exchanged, on the basis of relative net asset value per share, for shares of any
other fund which imposes a contingent deferred sales load and for shares of any
fund which is a money market fund. A fund will "tack" the period for which the
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange. The
period of time that shares are held in a money market fund will not count toward
the holding period for determining whether a contingent deferred sales load is
applicable.
- 32 -
<PAGE>
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
You may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. If you
are unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202. An exchange will be effected at the next determined net asset value (or
offering price, if sales load is applicable) after receipt of a request by the
Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ----------------------------
All of the net investment income of each Fund is declared as
a dividend to shareholders of record on each business day of the Trust and paid
monthly. Each Fund expects to distribute any net realized long-term capital
gains at least once each year. Management will determine the timing and
frequency of the distributions of any net realized short-term capital gains.
- 33 -
<PAGE>
The Funds will, at the time dividends are paid, designate as tax-exempt the same
percentage of the distribution as the actual tax-exempt income earned during the
period covered by the distribution bore to total income earned during the
period; the percentage of the distribution which is tax-exempt may vary from
distribution to distribution.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital
gains distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed dividend checks.
An investor in the Tax-Free Intermediate Term Fund who has received in
cash any dividend or capital gains distribution may return the distribution
within thirty days of the distribution date to the Transfer Agent for
reinvestment at the net asset value next determined after its return. The
investor or his dealer must notify the Transfer Agent that a distribution is
being reinvested pursuant to this provision.
TAXES
- -----
Each Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. Each Fund also
intends to meet all IRS requirements necessary to ensure that it
- 34 -
<PAGE>
is qualified to pay "exempt-interest dividends," which means that it may pass on
to shareholders the federal tax-exempt status of its investment income.
Each Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. For federal
income tax purposes, a shareholder's proportionate share of taxable
distributions from a Fund's net investment income as well as from net realized
short-term capital gains, if any, is taxable as ordinary income. Since the
Funds' investment income is derived from interest rather than dividends, no
portion of such distributions is eligible for the dividends received deduction
available to corporations.
Distributions of net capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by each Fund to its
shareholders are taxable to the recipient shareholders as capital gains, without
regard to the length of time a shareholder has held Fund shares. The maximum
capital gains rate for individuals is 20% with respect to assets held for more
than 12 months. The maximum capital gains rate for corporate shareholders is the
same as the maximum tax rate for ordinary income.
Issuers of tax-exempt securities issued after August 31, 1986 are required
to comply with various restrictions on the use and investment of proceeds of
sales of the securities. Any failure by the issuer to comply with these
restrictions would cause interest on such securities to become taxable to the
security holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax
Reform Act of 1986, is an item of tax preference possibly subject to the
alternative minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Funds may invest in such "specified private activity bonds"
subject to the requirement that each Fund invest its assets so that at least 80%
of its annual income will be exempt from federal income tax, including the
alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Funds may be a tax preference for
corporate investors.
Redemptions and exchanges of shares of the Tax-Free Intermediate Term Fund
are taxable events on which a shareholder may realize a gain or loss. If a
shareholder buys shares of the Tax-Free Intermediate Term Fund and sells them at
a loss within six months, any loss will be disallowed for federal income tax
purposes to the extent of the exempt-interest dividends received on such shares.
Any loss realized upon the sale of shares of the
- 35 -
<PAGE>
Tax-Free Intermediate Term Fund within six months from the date of their
purchase will be treated as a long-term capital loss to the extent of amounts
treated as distributions of net realized long-term capital gains during such six
month period. In addition, shareholders should be aware that interest on
indebtedness incurred to purchase or carry shares of either Fund is not
deductible for federal income tax purposes. Shareholders receiving Social
Security benefits may be taxed on a portion of those benefits as a result of
receiving tax-exempt income.
The Funds will mail to each of their shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. Each Fund will report to its shareholders the percentage and source of
income earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax may not result in similar exemptions under the
laws of a particular state or local taxing authority.
Shareholders should consult their tax advisors about the tax effect of
distributions and withdrawals from the Funds and the use of the Automatic
Withdrawal Plan and the Exchange Privilege. The tax consequences described in
this section apply whether distributions are taken in cash or reinvested in
additional shares. The Funds may not be appropriate investments for persons who
are "substantial users" of facilities financed by industrial development bonds
or are "related persons" to such users; such persons should consult their tax
advisors before investing in the Funds.
OPERATION OF THE FUNDS
- -----------------------
The Funds are diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Funds.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Funds' investments and
their business affairs. The Adviser was organized in 1974 and is also the
investment adviser to five other series of the Trust, six series of Countrywide
Investment Trust and four series of Countrywide Strategic Trust. The Adviser is
an indirect wholly-owned subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange listed company principally engaged in the business of
residential mortgage lending. Each Fund pays the Adviser a fee equal to the
annual rate of .5% of the average value of its daily net assets up to $100
million; .45% of such assets from $100 million to $200
- 36 -
<PAGE>
million; .4% of such assets from $200 million to $300 million; and .375% of such
assets in excess of $300 million.
John J. Goetz, the Chief Investment Officer of the Adviser, is primarily
responsible for managing the portfolio of each Fund. Mr. Goetz has been employed
by the Adviser in various capacities since 1981 and has been managing each
Fund's portfolio since October 1986.
The Adviser serves as principal underwriter for the Funds and, as such, is
the exclusive agent for the distribution of shares of the Funds. The officers of
the Trust are also officers of the Adviser.
The Funds are responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Funds, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Funds may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Funds' transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Funds. The Transfer Agent receives a monthly fee from each Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist
the Adviser in providing administrative services to the Funds. In this capacity,
the Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings
- 37 -
<PAGE>
with the Securities and Exchange Commission and state securities authorities.
The Adviser (not the Funds) pays the Transfer Agent a fee for these
administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Funds as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Funds. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Funds may execute portfolio transactions through any broker or dealer and
pay brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of each Fund have equal voting rights and liquidation rights. Each
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Tax-Free Intermediate Term Fund shall vote separately on matters
relating to its plan of distribution pursuant to Rule 12b-1 (see "Distribution
Plans"). When matters are submitted to shareholders for a vote, each shareholder
is entitled to one vote for each full share owned and fractional votes for
fractional shares owned. The Trust does not normally hold annual meetings of
shareholders. The Trustees shall promptly call and give notice of a meeting of
shareholders for the purpose of voting upon the removal of any Trustee when
requested to do so in writing by shareholders holding 10% or more of the Trust's
outstanding shares. The Trust will comply with the provisions of Section 16(c)
of the Investment Company Act of 1940 in order to facilitate communications
among shareholders.
DISTRIBUTION PLANS
- ------------------
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Tax-Free Money Fund and Class A shares of the Tax-Free Intermediate
Term Fund have adopted a plan of distribution (the "Class A Plan") under which
such shares may directly incur or reimburse the Adviser for certain
distribution- related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
- 38 -
<PAGE>
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Funds; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class A Plan, the Funds may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of shares of the Funds. For
the fiscal year ended June 30, 1998, the Tax-Free Money Fund and Class A shares
of the Tax-Free Intermediate Term Fund paid $9,000 and $68,158, respectively, to
the Adviser to reimburse it for payments made to dealers and other persons who
may be advising shareholders in this regard.
The annual limitation for payment of expenses pursuant to the Class A Plan
is .25% of the Tax-Free Money Fund's average daily net assets and .25% of the
Tax-Free Intermediate Term Fund's average daily net assets allocable to Class A
shares. Unreimbursed expenditures will not be carried over from year to year. In
the event the Class A Plan is terminated by a Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Adviser after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Tax-Free Intermediate Term Fund has adopted a plan of distribution
(the "Class C Plan") which provides for two categories of payments. First, the
Class C Plan provides for the payment to the Adviser of an account maintenance
fee, in an amount equal to an annual rate of .25% of the Fund's average daily
net assets allocable to Class C shares, which may be paid to other dealers based
on the average value of such shares owned by clients of such dealers. In
addition, the Class C shares may directly incur or reimburse the Adviser in an
amount not to exceed .75% per annum of the Fund's average daily net assets
allocable to Class C shares for expenses incurred in the distribution and
promotion of the Fund's Class C shares, including payments to securities dealers
and others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional
- 39 -
<PAGE>
information and reports for recipients other than existing shareholders of the
Fund; expenses of obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Trust may, from time to time,
deem advisable; and any other expenses related to the distribution of such
shares.
Pursuant to the Class C Plan, the Tax-Free Intermediate Term Fund may make
payments to dealers and other persons, including the Adviser and its affiliates,
who may be advising investors regarding the purchase, sale or retention of Class
C shares. For the fiscal year ended June 30, 1998, Class C shares of the Tax-
Free Intermediate Term Fund paid $32,842 to the Adviser to reimburse it for
payments made to dealers and other persons who may be advising shareholders in
this regard.
Unreimbursed expenditures will not be carried over from year to year. In
the event the Class C Plan is terminated by the Tax- Free Intermediate Term Fund
in accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Adviser after the date the Class C Plan terminates.
The Adviser may make payments to dealers and other persons in an amount up to
.75% per annum of the average value of Class C shares owned by their clients, in
addition to the .25% account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Funds may also make payments to banks
or other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Funds or their shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Funds may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Funds, no preference will be shown for
such securities.
- 40 -
<PAGE>
The National Association of Securities Dealers places certain limitations
on asset-based sales charges of mutual funds. These limitations require
fund-level accounting in which all sales charges - front-end load, 12b-1 fees or
contingent deferred load - terminate when a percentage of gross sales is
reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the share price (net
asset value) of the Tax-Free Money Fund's shares is determined as of 12:00 noon
and 4:00 p.m., Eastern time. The share price of Class C shares and the public
offering price (net asset value plus applicable sales load) of Class A shares of
the Tax-Free Intermediate Term Fund are determined as of the close of the
regular session of trading on the New York Stock Exchange, currently 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in a Fund's investments that its net asset value might be materially
affected. The net asset value per share of each Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Tax-Free Money Fund's portfolio securities are valued on an amortized
cost basis. In connection with the use of the amortized cost method of
valuation, the Tax-Free Money Fund maintains a dollar-weighted average portfolio
maturity of 90 days or less, purchases only United States dollar-denominated
securities having remaining maturities of thirteen months or less and invests
only in securities determined by the Board of Trustees to meet the Fund's
quality standards and to present minimal credit risks. Other assets of the Fund
are valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general supervision
of the Board of Trustees. It is anticipated, but there is no assurance, that the
use of the amortized cost method of valuation will enable the Tax-Free Money
Fund to maintain a stable net asset value per share of $1.
Tax-exempt portfolio securities are valued for the Tax-Free Intermediate
Term Fund by an outside independent pricing service approved by the Board of
Trustees. The service generally utilizes a computerized grid matrix of
tax-exempt securities and evaluations by its staff to determine what it believes
is the fair value of the portfolio securities. The Board of Trustees believes
that timely and reliable market quotations are generally not readily available
to the Tax-Free Intermediate Term Fund for purposes of valuing tax-exempt
securities and that valuations supplied by the pricing service are more likely
to approximate
- 41 -
<PAGE>
the fair value of the tax-exempt securities. If, in the Adviser's opinion, the
valuation provided by the service does not accurately reflect the fair value of
a tax-exempt security, it will value the security at the average of the prices
quoted by at least two independent market makers. The quoted price will
represent the market maker's opinion as to the price that a willing buyer would
pay for the security. All other securities (and other assets) of the Fund for
which market quotations are not readily available are valued at their fair value
as determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. The
net asset value per share of the Tax- Free Intermediate Term Fund will fluctuate
with the value of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Tax-Free Money Fund may advertise its "current
yield" and "effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "current
yield" of the Tax-Free Money Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. In addition, the Tax-Free Money
Fund may advertise together with its "current yield" or "effective yield" a tax-
equivalent "current yield" or "effective yield" which reflects the yield which
would be required of a taxable investment at a stated income tax rate in order
to equal the Fund's "current yield" or "effective yield."
From time to time, the Tax-Free Intermediate Term Fund may advertise its
"average annual total return." The Fund may also advertise "yield." Both yield
and average annual total return figures are based on historical earnings and are
not intended to indicate future performance. Total return and yield are computed
separately for Class A and Class C shares. The yield of Class A shares is
expected to be higher than the yield of Class C shares due to the higher
distribution fees imposed on Class C shares.
The "average annual total return" of the Tax-Free Intermediate Term Fund
refers to the average annual compounded rates of return over the most recent 1,
5 and 10 year periods or, where the Fund has not been in operation for such
period, over the life of the Fund (which periods will be stated in the
advertisement) that would equate an initial amount invested at the beginning of
a
- 42 -
<PAGE>
stated period to the ending redeemable value of the investment. The calculation
of "average annual total return" assumes the reinvestment of all dividends and
distributions and, for Class A shares, the deduction of the current maximum
sales load from the initial investment. The Tax-Free Intermediate Term Fund may
also advertise total return (a "nonstandardized quotation") which is calculated
differently from "average annual total return." A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation of total return may also indicate
average annual compounded rates of return over periods other than those
specified for "average annual total return." These nonstandardized returns do
not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation of total return will always be
accompanied by the Fund's "average annual total return" as described above.
The "yield" of the Tax-Free Intermediate Term Fund is computed by dividing
the net investment income per share earned during a thirty-day (or one month)
period stated in the advertisement by the maximum public offering price per
share on the last day of the period (using the average number of shares entitled
to receive dividends). The yield formula assumes that net investment income is
earned and reinvested at a constant rate and annualized at the end of a
six-month period. In addition, the Tax-Free Intermediate Term Fund may advertise
together with its "yield" a tax-equivalent yield which reflects the yield which
would be required of a taxable investment at a stated income tax rate in order
to equal the Fund's "yield."
From time to time, the Funds may advertise their performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also compare
their performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators. In connection with a ranking, the Funds may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. Each Fund may also present its performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Adviser's view of current or past market conditions or historical trends.
- 43 -
<PAGE>
Further information about the Tax-Free Intermediate Term Fund's
performance is contained in the Trust's annual report which can be obtained by
shareholders at no charge by calling the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629-2050) or by writing to the Trust
at the address on the front of this Prospectus.
- 44 -
<PAGE>
<TABLE>
<S> <C>
Account Application (check appropriate Fund) ACCOUNT NO. ____________________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354 FOR BROKER/DEALER USE ONLY
Cincinnati, Ohio 45201-5354 Firm Name:______________________________________
[ ] Tax Free Money Fund (2) $____________________ Home Office Address:____________________________
Tax Free Intermediate Term Fund Branch Address:_________________________________
[ ] A Shares (3) $____________________ Rep Name & No.:_________________________________
[ ] C Shares (16) $____________________ Rep Signature:__________________________________
___________________________________________________________________________________________________________________
[ ] Check or draft enclosed payable to the Fund(s) designated above.
[ ] Bank Wire From: _________________________________________________________________________________________________
[ ] Exchange From: _________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
_________________________________________________________________ _________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_________________________________________________________________ Citizenship: [ ] U.S.
Name of Joint Tenant, Partner, Custodian [ ] Other ______________________
Address Phone
_________________________________________________________________ (_____)__________________________________________
Street or P.O. Box Business Phone
_________________________________________________________________ (_____)__________________________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
Occupation and Employer Name/Address __________________________________________________________________________________
Are you an associated person of an NASD member? [ ] Yes [ ] No
___________________________________________________________________________________________________________________
TAXPAYER IDENTIFICATION NUMBER _ Under penalties of perjury I certify that the Taxpayer Identification Number listed above is my
correct number. The Internal Revenue Service does not require my consent to any provision of this document other than the
certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure to
report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
___________________________________________________________________________________________________________________
<PAGE>
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[ ] Share Option _ Income distributions and capital gains distributions automatically reinvested in additional shares.
[ ] Income Option _ Income distributions and short term capital gains distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
[ ] Cash Option _ Income distributions and capital gains distributions paid in cash
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
- -----------------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number [ ][ ][ ][ ]
(PIN). You will need to use this PIN when requesting account information and placing transactions. For institutional
accounts, please use a four digit number. For retail accounts, please use the first four letters of your mother's
maiden name.
- ------------------------------------------------------------------------------------------------------------------------------------
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon receipt of
and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from our account in any
fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of automated cash
transfers to and from the account designated below. NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Please attach a voided check for the account.
Bank Account Number ____________________________________________
Bank Routing Transit Number ____________________________________
Name of Account Holder ____________________________________________________________________________
Bank Address_____________________________________________________
Checkwriting (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA) or otherwise arrange
for application of such proceeds to payment of said checks. I (we) authorize the persons whose signatures appear on the PTDA ure
card to draw checks on the PTDA and to cause the redemption of my (our) shares of the Trust. I (we) agree to be bound by the Rules
and Regulations for the Countrywide Pay Through Draft Account as such Rules and Regulations may be amended from time to time
___________________________________________________________________________________________________________________
REDUCED SALES CHARGES (TAX FREE INTERMEDIATE TERM FUND'S CLASS A SHARES ONLY)
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of eligible
load funds of Countrywide Investments.
Account Number/Name Account Number/Name
___________________________________________________________- ________________________________________________________
___________________________________________________________- ________________________________________________________
<PAGE>
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your
Letter of Intent.)
[ ] I agree to the Letter of Intent in the current Prospectus of Countrywide Tax-Free Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning ______________________
19 _______ (Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of
Countrywide Investments at least equal to (check appropriate box):
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
___________________________________________________________________________________________________________________
_______________________________________________________________- ________________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
___________________________________________________________- ________________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund(s))
The Automatic Investment Plan is available for all established accounts of Countrywide Tax-Free Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ __________per month in the Fund. (Check applicable Fund) ABA Routing Number_______________________
[ ] Tax Free Money Fund [ ] Tax Free Intermediate Term Fund FI Account Number________________________
[ ] Checking Account [ ] Savings Account
_____________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[ ] the last business day of each month
_____________________________________________________________ [ ] the 15th day of each month
City State [ ] both the 15th and last business day
X____________________________________________________________ X________________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's records.)
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account for the
Automatic Investment Plan.
<PAGE>
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment by
you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person whatsoever
arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such checks. CFS will
defend, at its own cost and expense, any action which might be brought against you by any person or persons whatsoever because of
your actions taken pursuant to the foregoing request or in any manner arising by reason of your participation in this arrangement.
CFS will refund to you any amount erroneously paid by you to the Fund on any such check if the claim for the amount of such
erroneous payment is made by you within six (6) months from the date of such erroneous payment; your participation in this
arrangement and that of the Fund may be terminated by thirty (30) days written notice from either party to the other.
____________________________________________________________________________________________________________________________
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund(s))
This is an authorization for you to withdraw $_________________ from my mutual fund account beginning the last business day of the
month of _____________________.
Please Indicate Withdrawal Schedule (Check One): Please indicate which Fund: [ ] Tax Free Money Fund
[ ] Tax Free Intermediate Term Fund
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly - Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ___ ___ _ ___ ___ ___ ___
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire
will be completed in one business day and that there is an $8.00 fee.
Please attach a voided _______________________________________________________________________________________
check for ACH or bank wire Bank Name Bank Address
_______________________________________________________________________________________
Bank ABA# Account # Account Name
[ ] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing
address below:
Name of payee_____________________________________________________________________________________________________________
Please send to: __________________________________________________________________________________________________________
Street address City State Zip
____________________________________________________________________________________________________________________________
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Tax-Free Trust (the Trust) and that
____________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take
any action for it as may be necessary or appropriate with respect to its shareholder account with the Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the Fund, to establish
or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the privileges elected
on the Application, and it is (If checkwriting privilege is not desired, please cross out the following resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the Countrywide Pay Through Draft Account (PTDA)
and that until otherwise ordered in writing, Countrywide Fund Services, Inc. is authorized to make redemptions of shares held by
the corporation or organization, and to make payment from PTDA upon and according to the check, draft, note or order of this
corporation or organization when signed by
____________________________________________________________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the payee or any other holder without inquiry as
to the circumstances of issue or the disposition or proceeds, whether drawn to the individual order or tendered in payment of
individual obligations of the persons above named or other officers of this corporation or organization or otherwise.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents
of the
____________________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of ___________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
_________________ at which a quorum was present and acting throughout, and that the same are now in full force and effect.
I further certify that the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in
accordance with the foregoing resolutions.
Name Title
________________________________________________________________ _______________________________________________________
________________________________________________________________ _______________________________________________________
________________________________________________________________ _______________________________________________________
Witness my hand and seal of the corporation or organization this________________day of_____________________________, 19_______
________________________________________________________________ _______________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be signed by
another officer.
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 45 -
<PAGE>
TABLE OF CONTENTS
Expense Information.....................................................
Financial Highlights. . . . . . ........................................
Investment Objectives...................................................
Investment Policies.....................................................
How to Purchase Shares..................................................
Shareholder Services....................................................
How to Redeem Shares....................................................
Exchange Privilege......................................................
Dividends and Distributions.............................................
Taxes...................................................................
Operation of the Funds..................................................
Distribution Plan. . . . ...............................................
Calculation of Share Price and Public Offering Price....................
Performance Information.................................................
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 46 -
<PAGE>
PROSPECTUS
November 1, 1998
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
OHIO INSURED TAX-FREE FUND
The Ohio Insured Tax-Free Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of interest income exempt
from federal income tax and Ohio personal income tax, consistent with protection
of capital. The Fund invests primarily in high and medium- quality, long-term
Ohio municipal obligations which are protected by insurance guaranteeing the
payment of principal and interest in the event of a default. Insurance does not
guarantee the value of the Fund's shares. See "Investment Objective and Policies
- - Insurance."
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MUTUAL FUNDS. SHARES OF
THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
The Fund offers two classes of shares: Class A shares (sold subject to a
maximum 4% front-end sales load and a 12b-1 fee of up to .25% of average daily
net assets) and Class C shares (sold subject to a 1% contingent deferred sales
load for a one-year period and a 12b-1 fee of up to 1% of average daily net
assets). Each Class A and Class C share of the Fund represents identical
interests in the Fund's investment portfolio and has the same rights, except
that (i) Class C shares bear the expenses of higher distribution fees, which
will cause Class C shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable; and (iii) each class has exclusive voting rights with respect to
matters relating to its own distribution arrangements.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about the Fund that
you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 1, 1998 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. A copy of the Statement of Additional Information can
be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please contact
your broker, or call us at the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION Class A Class C
- ------------------- Shares Shares
-------- --------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4% None
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends None None
Exchange Fee None None
Redemption Fee None** None**
* Purchases at net asset value of amounts totaling $1 million or more may be
subject to a contingent deferred sales load of 1% if a redemption occurred
within 12 months of purchase and a commission was paid by the Adviser to a
participating unaffiliated dealer.
** A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How to
Redeem Shares."
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Class A Class C
Shares Shares
-------- --------
Management Fees .50% .50%
12b-1 Fees(A) .03% .56%
Other Expenses .22% .44%
---- -----
Total Fund Operating Expenses .75% 1.50%
==== =====
(A) Class A shares may incur 12b-1 fees in an amount up to .25% of
average net assets and Class C shares may incur 12b-1 fees in an
amount up to 1.00% of average net assets. Long-term shareholders
may pay more than the economic equivalent of the maximum
front-end sales loads permitted by the National Association of
Securities Dealers.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example You would pay the following
expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at
the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares. . . . . .$ 47 $ 63 $ 80 $ 129
Class C Shares. . . . . .$ 25 $ 47 $ 81 $ 177
- 3 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1998 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
<TABLE>
===================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
===================================================================================================================
CLASS A
Year Ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of year. $12.22 11.97 $11.99 $11.74 $12.41 $11.67 $11.13 $10.96 $11.11 $10.85
------ ------- ------- ------ ------ ------- ------ ------ ------ ------
Income from investment
operations:
Net investment income..... 0.61 0.61 0.62 0.63 0.61 0.65 0.70 0.68 0.74 0.76
Net realized and
unrealized gains (losses)
on investments........... 0.23 0.25 (0.02) 0.25 (0.64) 0.74 0.54 0.17 (0.15) 0.26
------ ------- ------- ------ ------ ------ ----- ----- ----- ------
Total from investment
operations ............... 0.84 0.86 0.60 0.88 (0.03) 1.39 1.24 0.85 0.59 1.02
----- ----- ----- ------ ---- ----- ----- ---- ---- ----
Less distributions:
Dividends from net
investment income........... (0.61) (0.61) (0.62) (0.63) (0.61) (0.65) (0.70) (0.68) (0.74) (0.76)
Distributions from net
realized gains............ (0.08) - - - (0.03) - - - - -
------ ------ ------ ------ ------ ------ ------ ----- ----- ------
Total distributions........... (0.69) (0.61) (0.62) (0.63) (0.64) (0.65) (0.70) (0.68) (0.74) (0.76)
------ ------ ------ ------ ------ ------ ------- ------ ------ ------
Net asset value at
end of year............... $12.37 $12.22 $11.97 $11.99 $11.74 $12.41 $11.67 $11.13 $10.96 $11.11
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return(A)........... 7.03% 7.36% 5.05% 7.75% (0.41%) 12.24% 11.55% 7.98% 5.53% 9.75%
===== ===== ====== ====== ====== ====== ===== ===== ===== =====
Net assets at
end of year (000's)........ $69,289 $70,816 $75,938 $71,393 $79,889 $81,101 $49,288 $20,791 $16,928 $17,741
======= ======= ======= ======= ======= ======= ====== ======== ======= ======
Ratio of expenses to average
net assets(B)......... 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.60% 1.07% 1.02% 1.15%
Ratio of net investment
income to average
net assets............... 4.95% 5.05% 5.12% 5.35% 4.94% 5.35% 6.10% 6.14% 6.74% 6.96%
Portfolio turnover rate...... 41% 33% 46% 29% 45% 15% 3% 86% 29% 49%
(A)The total returns shown exclude the effect of applicable sales loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net
assets would have been 0.77%, 0.77% and 1.07% for the years ended June 30, 1995, 1992 and 1990, respectively.
</TABLE>
<PAGE>
<TABLE>
Per Share Data for a Share Outstanding Throughout Each Period
===================================================================================================================
CLASS C
<S> <C> <C> <C> <C> <C>
Period
Year Ended June 30, Ended
--------------------------------------------- June 30,
1998 1997 1996 1995 1994(A)
Net asset value at beginning of period.................$12.22 $ 11.97 $ 12.00 $ 11.74 $ 12.62
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................................ 0.52 0.53 0.56 0.57 0.36
Net realized and unrealized gains 0.23 0.25 (0.03) 0.26 (0.85)
(losses) on investments ------ ------ ------ ------- -------
Total from investment operations....................... 0.75 0.78 0.53 0.83 (0.49)
------ ------- -------- -------- --------
Less distributions:
Dividends from net investment income............... (0.52) (0.53) (0.56) (0.57) (0.36)
Distributions from net realized gains................(0.08) - - - (0.03)
------ ------- -------- -------- --------
Total distributions.....................................(0.60) (0.53) (0.56) (0.57) (0.39)
------ ------- --------- --------- --------
Net asset value at end of period........................$12.37 $ 12.22 $ 11.97 $ 12.00 $ 11.74
====== ======= ======= ========= ========
Total return(B) ........................................ 6.24% 6.65% 4.44% 7.31% (6.05%)(D)
====== ======= ===== ======= =======
Net assets at end of period (000's).....................$5,215 $4,639 $ 3,972 $ 4,165 $ 2,659
====== ======= ========= ======== =======
Ratio of expenses to average net assets(C) ............. 1.50% 1.42% 1.25% 1.25% 1.22% (D)
Ratio of net investment income to average net assets.... 4.20% 4.37% 4.62% 4.84% 4.09% (D)
Portfolio turnover rate................................. 41% 33% 46% 29% 45% (D)
(A) Represents the period from the initial offering of Class C shares (November 1, 1993) through June 30, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) 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%(D) for the periods ended June 30, 1995 and 1994, respectively.
(D) Annualized.
</TABLE>
- 5 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The
Fund seeks the highest level of interest income exempt from federal income tax
and Ohio personal income tax, consistent with protection of capital. The Fund is
not intended to be a complete investment program, and there is no assurance that
its investment objective can be achieved. The Fund's investment objective may be
changed by the Board of Trustees without shareholder approval, but only after
notification has been given to shareholders and after this Prospectus has been
revised accordingly. If there is a change in the Fund's investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs. Unless otherwise
indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.
The Fund seeks to achieve its investment objective by investing
primarily in investment grade, long-term Ohio Obligations (described below) that
are insured as to the timely payment of principal and interest. Under normal
market conditions, at least 65% of the value of the Fund's total assets will be
invested in Ohio Obligations which are insured as to payment of interest and
principal either by an insurance policy obtained by the issuer of the obligation
at original issuance or by an insurance policy obtained by the Fund from a
recognized insurer. In the event of a default on an insured obligation, the
insurer is required to make payments of interest and principal, when due, to the
Fund. Insurance does not guarantee the market value of the obligations or the
value of the shares of the Fund. The Fund also may own uninsured Ohio
Obligations, including obligations where the payment of interest and principal
is guaranteed by an agency or instrumentality of the U.S. Government, or where
the payment of interest and principal is secured by an escrow account consisting
of obligations of the U.S. Government. The Fund may also invest up to 20% of its
net assets in short-term Ohio Obligations which are not insured, since insurance
on these obligations is generally unavailable. For temporary defensive purposes,
the Fund may invest more than 20% of its net assets in uninsured short-term Ohio
Obligations. The Board of Trustees may terminate the practice of investing in
insured obligations if it determines that such practice is not in the best
interests of the Fund's shareholders. For a further discussion of the types of
insurance available to the Fund, see "Insurance."
- 6 -
<PAGE>
The Fund invests in Ohio Obligations and other securities which are
rated at the time of purchase within the four highest grades assigned by Moody's
Investors Service, Inc. (Aaa, Aa, A or Baa), Standard & Poor's Ratings Group
(AAA, AA, A or BBB) or Fitch Investors Services, Inc. (AAA, AA, A or BBB), or
unrated securities determined by the Adviser to be of comparable quality. While
securities in these categories are generally accepted as being of investment
grade, the fourth highest grade is considered to be a medium grade and has
speculative characteristics even though it is regarded as having adequate
capacity to pay interest and repay principal.
It is anticipated that under normal circumstances the Fund's
dollar-weighted average maturity will be more than fifteen years, although the
Fund may invest in securities of any maturity, including tax-exempt notes and
commercial paper determined by the Adviser to meet the Fund's quality standards.
The Fund's quality standards limit its investments in tax-exempt notes to those
which are rated within the three highest grades by Moody's (MIG 1, MIG 2 or MIG
3) or Fitch (F-1+, F-1 or F-2) or the two highest grades by Standard & Poor's
(SP-1 or SP-2) and in tax-exempt commercial paper to those which are rated
within the two highest grades by Moody's (Prime-1 or Prime-2), Standard & Poor's
(A-1 or A-2) or Fitch (Fitch-1 or Fitch-2). The Statement of Additional
Information contains a description of tax-exempt notes and commercial paper and
a description of Moody's, Standard & Poor's and Fitch ratings. If the Adviser
determines that the market conditions warrant a shorter dollar-weighted average
maturity, the Fund's investments will be adjusted accordingly, but not so as to
reduce the Fund's dollar-weighted average maturity below ten years.
It is a fundamental policy that under normal market conditions the
Fund's assets will be invested so that at least 80% of the annual income of the
Fund will be exempt from federal income tax, including the alternative minimum
tax, and Ohio personal income tax. This policy may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. The term
"majority" of the outstanding shares means the lesser of (1) 67% or more of the
outstanding shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented at such
meeting or (2) more than 50% of the outstanding shares of the Fund.
The Fund may, from time to time, invest in other short-term,
high-quality obligations for temporary defensive purposes (subject to the
fundamental policy that under normal market conditions the assets of the Fund
will be invested so that at least 80% of its annual income is exempt from
federal income tax,
- 7 -
<PAGE>
including the alternative minimum tax, and Ohio personal income tax). These
include, but are not limited to, obligations the interest on which is exempt
from federal, but not Ohio, income tax and taxable obligations such as
certificates of deposit and other bank debt instruments, commercial paper,
obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. Except for temporary defensive
purposes, the Fund's assets will be invested so that no more than 20% of the
Fund's annual income will be subject to federal income tax. Under normal market
conditions, the Fund anticipates that not more than 5% of the value of its net
assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional Information.
The Fund may invest in these other short-term obligations, for example, due to
market conditions under which Ohio Obligations are temporarily unavailable for
purchase or available only in limited amounts, or pending investment of proceeds
of sales of shares or proceeds from the sale of portfolio securities or in
anticipation of redemptions. The Fund reserves the right to hold cash reserves
as the Adviser deems necessary for temporary defensive purposes. Although
interest earned on these short-term obligations is taxable as ordinary income
for federal and/or Ohio income tax purposes, the Fund intends to minimize
taxable income through investment, when possible, in other available securities
exempt from federal and/or Ohio income taxes, including shares of investment
companies whose dividends are tax-exempt. The Fund may invest up to 10% of its
total assets in shares of other investment companies. Investments by the Fund in
shares of other investment companies may result in duplication of sales loads
and advisory, administrative and distribution fees. The Fund will not invest
more than 5% of its total assets in securities of any single investment company
and will not purchase more than 3% of the outstanding voting securities of any
investment company.
Ohio Obligations
----------------
Ohio Obligations are debt obligations issued by the State of Ohio and
its political subdivisions, agencies, authorities and instrumentalities and
other qualifying issuers which pay interest that is, in the opinion of bond
counsel to the issuer, exempt from both federal income tax, including the
alternative minimum tax, and Ohio personal income tax. For purposes of this
definition, Ohio Obligations include participation interests in Ohio Obligations
and shares of an investment company which invests its assets so that at least
80% of its annual income is exempt from federal income tax, including the
alternative minimum tax, and Ohio personal income tax. Ohio Obligations are
issued to obtain funds to construct, repair or improve various public facilities
such as airports, bridges, highways, hospitals,
- 8 -
<PAGE>
housing, schools, streets and water and sewer works, to pay general operating
expenses or to refinance outstanding debts. They also may be issued to finance
various private activities, including the lending of funds to public or private
institutions for construction of housing, educational or medical facilities or
the financing of privately owned or operated facilities. Ohio Obligations
consist of tax-exempt bonds, tax-exempt notes and tax-exempt commercial paper.
The Statement of Additional Information contains a description of tax-exempt
bonds, notes and commercial paper.
The two principal classifications of Ohio Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest on obligations which are not insured. Tax-exempt notes
generally are used to provide short-term capital needs and generally have
maturities of one year or less. The tax-exempt notes in which the Fund may
invest are tax anticipation notes (TANs), revenue anticipation notes (RANs) and
bond anticipation notes (BANs). TANs, RANs and BANs are issued by state and
local government and public authorities as interim financing in anticipation of
tax collections, revenue receipts or bond sales, respectively. Tax-exempt
commercial paper typically represents short-term, unsecured, negotiable
promissory notes.
The Fund may invest in any combination of general obligation bonds,
revenue bonds and industrial development bonds. The Fund may invest more than
25% of its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on municipal obligations (including
- 9 -
<PAGE>
certain industrial development bonds) which are private activity obligations, as
defined in the Internal Revenue Code, issued after August 7, 1986, while exempt
from federal income tax, is a preference item for purposes of the alternative
minimum tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest its assets so that no more than 20% of its annual income gives rise to a
preference item for the purpose of the alternative minimum tax and in other
investments subject to federal income tax.
The Fund may purchase other types of tax-exempt obligations which may
become available in the future, provided the obligations are consistent with the
Fund's investment objective and policies, the Adviser believes their quality
meets the Fund's quality standards, and this Prospectus has been appropriately
revised to reflect the Fund's policies with respect to such obligations.
Insurance
---------
Ohio Obligations purchased by the Fund may be insured by one of the
following types of insurance: new issue insurance, mutual fund insurance, or
secondary insurance.
NEW ISSUE INSURANCE. A new issue insurance policy is purchased by the
issuer or underwriter of an obligation in order to increase the credit rating of
the obligation. All premiums are paid in advance by the issuer or underwriter. A
new issue insurance policy is non-cancelable and continues in effect as long as
the obligation is outstanding and the insurer remains in business.
MUTUAL FUND INSURANCE. A mutual fund insurance policy is purchased by
the Fund from an insurance company. All premiums are paid from the Fund's
assets, thereby reducing the yield from an investment in the Fund. A mutual fund
insurance policy is non-cancelable except for non-payment of premiums and
remains in effect only as long as the Fund holds the insured obligation. In the
event the Fund sells an obligation covered by a mutual fund policy, the
insurance company is liable only for those payments of principal and interest
then due and in default. If the Fund holds a defaulted obligation, the Fund
continues to pay the insurance premium thereon but is entitled to collect
interest payments from the insurer and may collect the full amount of principal
from the insurer when the obligation becomes due. Accordingly, it is expected
that the Fund will retain in its portfolio any obligations so insured which are
in default or are in significant risk of default to avoid forfeiture of the
value
- 10 -
<PAGE>
of the insurance feature of such obligations, which would not be reflected in
the price for which the Fund could sell such obligations. In valuing such
defaulted obligations, the Fund will value the insurance in an amount equal to
the difference between the market value of the defaulted obligation and the
market value of similar obligations which are not in default. Because the Fund
must hold defaulted obligations in its portfolio, its ability in certain
circumstances to purchase other obligations with higher yields will be limited.
SECONDARY INSURANCE. A secondary insurance policy insures an obligation
for as long as it remains outstanding, regardless of the owner of such
obligation. Premiums are paid by the Fund and coverage is non-cancelable, except
for non-payment of premiums. Because secondary insurance provides continuous
coverage during the term of the obligation, it provides greater marketability of
the Fund's obligations than is allowed under a mutual fund insurance policy.
Thus, the Fund with secondary insurance may sell an obligation to a third party
as a high-rated insured security at a higher market price than would otherwise
be obtained if the obligation were insured under a mutual fund policy. Secondary
insurance also gives the Fund the option of selling a defaulted obligation
rather than compelling it to hold a defaulted security in its portfolio so that
it may continue to be afforded insurance protection.
The Fund currently intends to purchase only Ohio Obligations which are
insured by the issuer of the obligation under a new issue insurance policy. In
the event the Adviser makes a recommendation to purchase an obligation which is
not otherwise insured, the Fund may purchase such obligation and thereafter
obtain mutual fund or secondary insurance. The Fund will purchase insurance
from, or obligations insured by, MBIA Insurance Corp., AMBAC Indemnity Corp.,
Financial Guaranty Insurance Co. and Financial Security Assurance Inc. The Fund
may also purchase insurance from, or obligations insured by, other insurance
companies provided that such companies have a claims-paying ability rated AAA by
Standard and Poor's or Aaa by Moody's. There can be no assurance that any
insurer will be able to meet its obligations under an insurance policy.
Risk Factors
-------------
The market value of investments available to the Fund, and therefore
the Fund's yield and net asset value, will fluctuate due to changes in interest
rates, economic conditions, quality ratings and other factors beyond the control
of the Adviser. The Fund's portfolio securities are subject to price
fluctuations based upon changes in the level of interest rates, which will
generally result in all those securities changing in price in the
- 11 -
<PAGE>
same way, i.e., all those securities experiencing appreciation when interest
rates decline and depreciation when interest rates rise. In addition, in
instances where a security is not insured, the financial condition of an issuer
or adverse changes in general economic conditions, or both, may impair the
issuer's ability to make payments of interest and principal. There is no limit
on the percentage of a single issue of tax-exempt obligations that the Fund may
own. If the Fund holds a significant portion of the obligations of an issuer,
there may not be a readily available market for the obligations. Reduced
diversification could involve an increased risk to the Fund should an issuer of
an uninsured obligation be unable to make interest or principal payments or
should the market value of Ohio Obligations decline.
The Fund may purchase Ohio Obligations which are rated at the time of
purchase within the four highest grades assigned by Moody's, Standard & Poor's
or Fitch. Subsequent to its purchase by the Fund, a security may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. In the event a security's rating is reduced below the Fund's minimum
requirements, the Fund will sell the security, subject to market conditions and
the Adviser's assessment of the most opportune time for sale. Although lower
rated securities will generally provide higher yields than higher rated
securities of similar maturities, they are subject to a greater degree of market
fluctuation. Ohio Obligations rated Baa or BBB have speculative characteristics
and changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to pay principal and interest than is the case with
higher grade securities. In management's opinion, however, the risk involved in
investing in these Baa or BBB rated obligations will be substantially reduced by
insurance. In addition, Ohio Obligations with longer maturities generally offer
both higher yields and greater exposure to market fluctuation from changes in
interest rates. While insurance minimizes the risks to the Fund by protecting
against loss from defaults by the issuer, it does not protect against market
fluctuation. Consequently, investors in the Fund should be aware that there is a
possibility of greater fluctuation in the Fund's net asset value.
There are also risks of reduced diversification because the Fund
invests primarily in obligations of issuers within a single state. The Fund is
more likely to invest its assets in the securities of fewer issuers because of
the relatively smaller number of issuers of Ohio Obligations. The Fund's
performance is closely tied to conditions within the State of Ohio and to the
financial condition of the State and its authorities and municipalities. The
economy in the State of Ohio, once reliant upon durable goods manufacturing,
largely concentrated in motor
- 12 -
<PAGE>
vehicles and equipment, steel, rubber products and household appliances, has
diversified since the 1980's. This has brought the State's employment mix more
in line with that of the nation, although manufacturing is still above the
national average, at 20.7% of employment in 1996, versus 15.3% for the nation.
Statewide employment levels continue to increase, with total employment in 1997
up 2.4% over the prior year. Ohio's unemployment rate since 1991 has remained
below that of the nation. Although manufacturing is expected to slow in the
future, growth in nonmanufacturing output and employment, led by the financial
services, distribution and trade sectors, has contributed to greater stability.
Other key factors which have contributed to Ohio's ongoing strong economic
performance include strong export activity, a stable real estate market and a
stable banking/financial services industry. While Ohio has in the past
experienced budget shortfalls due to weak revenue results and
higher-than-budgeted human services expenditures, improved economic performance
and sound financial management have enabled the State to accumulate sizable
financial reserves. The State has posted consistently strong operating results
over the past four fiscal years. Fiscal 1997 ended with tax receipts $334.7
million ahead of estimates and total spending $727.3 million below estimates,
primarily in the human services areas of Medicaid and welfare. Combined reserves
in the general revenue fund exceeded $2.3 billion at June 30, 1997, or 13% of
the general revenue fund's $17.6 billion fiscal 1997 budget. Although revenue
obligations of the State of Ohio or its political subdivisions may be payable
from a specific project or source, there can be no assurance that future
economic and political developments and the resulting impact on state and local
governmental finances will not adversely affect the market values and
marketability of the Ohio Obligations held by the Fund or the ability of a
specific issuer to make interest or principal payments.
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may cause greater fluctuation in the
Fund's net asset value. As the Fund intends to comply with Subchapter M of the
Internal Revenue Code, it may invest up to 50% of its assets at the end of each
quarter of its fiscal year in as few as two issuers, provided that no more than
25% of the assets are invested in one issuer. With respect to the remaining 50%
of its assets at the end of each quarter, it may invest no more than 5% in one
issuer.
- 13 -
<PAGE>
Certain provisions in the Internal Revenue Code relating to the
issuance of municipal obligations may reduce the volume of municipal obligations
qualifying for federal tax exemptions. Shareholders should consult their tax
advisors concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on municipal obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of municipal
obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of municipal
obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
Other Investment Techniques
---------------------------
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests
in tax-exempt obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the tax-exempt obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the obligation,
as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating
or variable rate tax-exempt obligations. Floating rate obligations have an
interest rate which is fixed to a specified interest rate, such as a bank prime
rate, and is automatically adjusted when the specified interest rate changes.
- 14 -
<PAGE>
Variable rate obligations have an interest rate which is adjusted at specified
intervals to a specified interest rate. Periodic interest rate adjustments help
stabilize the obligations' market values. The Fund may purchase these
obligations from the issuers or may purchase participation interests in pools of
these obligations from banks or other financial institutions. Variable and
floating rate obligations usually carry demand features that permit the Fund to
sell the obligations back to the issuers or to financial intermediaries at par
value plus accrued interest upon not more than 30 days' notice at any time or
prior to specific dates. Certain of these variable rate obligations, often
referred to as "adjustable rate put bonds," may have a demand feature
exercisable on specific dates once or twice each year. The Fund will not invest
more than 10% of its net assets in floating or variable rate obligations as to
which the Fund cannot exercise the demand feature on not more than seven days'
notice if the Adviser, under the direction of the Board of Trustees, determines
that there is no secondary market available for these obligations and all other
illiquid securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
INVERSE FLOATING OBLIGATIONS. The Fund may invest in securities
representing interests in tax-exempt obligations, known as inverse floating
obligations, which pay interest rates that vary inversely to changes in the
interest rates of specified short-term tax-exempt obligations or an index of
short-term tax-exempt obligations. The interest rates on inverse floating
obligations will typically decline as short-term market interest rates increase
and increase as short-term market rates decline. Such securities have the effect
of providing a degree of investment leverage, since they will generally increase
or decrease in value in response to changes in market interest rates at a rate
which is a multiple (typically two) of the rate at which fixed-rate, long-term
tax-exempt obligations increase or
- 15 -
<PAGE>
decrease in response to such changes. As a result, the market value of inverse
floating obligations will generally be more volatile than the market values of
fixed-rate tax-exempt obligations.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued tax-exempt
obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or liquid
securities, marked to market daily, in an amount equal to its when-issued
commitments. Because these transactions are subject to market fluctuations, a
significant commitment to when- issued purchases could result in greater
fluctuation of the Fund's net asset value. The Fund will only make commitments
to purchase when-issued obligations with the intention of actually acquiring the
obligations and not for the purpose of investment leverage.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase tax-exempt
obligations with the right to resell the obligation to the seller at a specified
price or yield within a specified period. The right to resell is commonly known
as a "put" or a "standby commitment." The Fund may purchase tax-exempt
obligations with puts attached from banks and broker-dealers. The Fund intends
to use obligations with puts attached for liquidity purposes to ensure a ready
market for the underlying obligations at an acceptable price. Although no value
is assigned to any puts on tax-exempt obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present
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<PAGE>
minimal credit risks. In addition, the value of the obligations with puts
attached held by the Fund will not exceed 10% of its net assets.
LEASE OBLIGATIONS. The Fund may invest in tax-exempt obligations that
constitute participations in lease obligations or installment purchase contract
obligations ("lease obligations") of municipal authorities or entities. Although
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate and
make the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on an annual basis.
In addition to the "non-appropriation" risk, these securities represent a
relatively new type of financing that has not yet developed the depth of
marketability associated with more conventional bonds. Although
"non-appropriation" lease obligations are secured by the leased property, the
disposition of the property in the event of foreclosure might prove difficult.
The Fund will seek to minimize these risks by not investing more than 10% of its
net assets in lease obligations if the Adviser determines that there is no
secondary market available for these obligations and all other illiquid
securities, and by only investing in "non- appropriation" lease obligations that
meet certain criteria of the Adviser. The Fund does not intend to invest more
than an additional 5% of its net assets in municipal lease obligations
determined by the Adviser, under the direction of the Board of Trustees, to be
liquid. The Fund will only purchase unrated lease obligations which meet the
Fund's quality standards, as determined by the Adviser, under the direction of
the Board of Trustees, including an assessment of the likelihood that the lease
will not be cancelled.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the
aggregate up to 10% of its net assets in securities that are not readily
marketable, including: participation interests that are not subject to the
demand feature described above; floating and variable rate obligations as to
which the Fund cannot exercise the related demand feature described above and as
to which there is no secondary market; lease obligations for which there is no
secondary market; and repurchase agreements not terminable within seven days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or
emergency purposes, the Fund may borrow money from banks or other persons in
an amount not exceeding 10% of its
- 17 -
<PAGE>
total assets. The Fund may pledge assets in connection with borrowings but will
not pledge more than 10% of its total assets. The Fund will not make any
additional purchases of portfolio securities while borrowings are outstanding.
Borrowing magnifies the potential for gain or loss on the Fund's portfolio
securities and, therefore, if employed, increases the possibility of fluctuation
in its net asset value. This is the speculative factor known as leverage. To
reduce the risks of borrowing, the Fund will limit its borrowings as described
above. The Fund's policies on borrowing and pledging are fundamental policies
which may not be changed without the affirmative vote of a majority of its
outstanding shares.
PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading
as a primary means of achieving its investment objective. However, the Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. High turnover involves correspondingly greater
commission expenses and transaction costs and may result in the Fund recognizing
greater amounts of income and capital gains, which would increase the amount of
income and capital gains which the Fund must distribute to its shareholders in
order to maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
- -----------------------
Your initial investment in the Fund ordinarily must be at least $1,000.
However, the minimum initial investment in Class A shares for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is $50. You may purchase additional shares through the Open Account
Program described below. You may open an account and make an initial investment
through securities dealers having a sales agreement with the Trust's principal
underwriter, Countrywide Investments, Inc. (the "Adviser"). You may also make a
direct initial investment by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Ohio Insured
Tax-Free Fund." An account application is included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
- 18 -
<PAGE>
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone exchanges) made available to
investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers
listed below.
After an initial investment, all investors are considered participants
in the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Fund over a period of years and permits the automatic
reinvestment of dividends and distributions of the Fund in additional shares
without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
The check should be made payable to the Fund.
Under the Open Account Program, you may also purchase shares of the
Fund by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629- 2050) for instructions. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Fund to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
- 19 -
<PAGE>
Sales Load Alternatives
-----------------------
The Fund offers two classes of shares which may be purchased at the
election of the purchaser. The two classes of shares each represent interests in
the same portfolio of investments of the Fund, have the same rights and are
identical in all material respects except that (i) Class C shares bear the
expenses of higher distribution fees; (ii) certain other class specific expenses
will be borne solely by the class to which such expenses are attributable,
including transfer agent fees attributable to a specific class of shares,
printing and postage expenses related to preparing and distributing materials to
current shareholders of a specific class, registration fees incurred by a
specific class of shares, the expenses of administrative personnel and services
required to support the shareholders of a specific class, litigation or other
legal expenses relating to a class of shares, Trustees' fees or expenses
incurred as a result of issues relating to a specific class of shares and
accounting fees and expenses relating to a specific class of shares; and (iii)
each class has exclusive voting rights with respect to matters relating to its
own distribution arrangements. The net income attributable to Class C shares and
the dividends payable on Class C shares will be reduced by the amount of the
incremental expenses associated with the distribution fee. See "Distribution
Plans." Shares of the Fund purchased prior to November 1, 1993 are Class A
shares.
The Fund's alternative sales arrangements permit investors to choose
the method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold his shares, the
quality and scope of the value-added services provided by financial advisers who
may work with a particular sales load structure by way of compensation for their
services, and other relevant circumstances. Investors should determine whether
under their particular circumstances it is more advantageous to incur a
front-end sales load and be subject to lower ongoing charges, as discussed
below, or to have all of the initial purchase price invested in the Fund with
the investment thereafter being subject to higher ongoing charges. A salesperson
or any other person entitled to receive any portion of a distribution fee may
receive different compensation for selling Class A or Class C shares.
As an illustration, investors who qualify for reduced sales loads as
described below, might elect the Class A sales load alternative because similar
sales load reductions are not available for purchases under the Class C sales
load alternative. Moreover, shares acquired under the Class A sales load
alternative would be subject to lower ongoing distribution fees as described
below. Investors not qualifying for reduced initial sales loads who expect to
maintain their investment for an extended period of time might also elect the
Class A sales load alternative because over time the accumulated continuing
distribution fees on Class C shares may exceed the difference in initial sales
loads between Class A and Class C shares. Again, however, such investors must
weigh this consideration against the
- 20 -
<PAGE>
fact that less of their funds will be invested initially under the Class A sales
load alternative. Furthermore, the higher ongoing distribution fees will be
offset to the extent any return is realized on the additional funds initially
invested under the Class C sales load alternative.
Some investors might determine that it would be more advantageous to
utilize the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 4% initial sales load on Class A shares who elects to reinvest dividends
in additional shares would have to hold the investment in Class A shares
approximately 5 years before the accumulated ongoing distribution fees on the
alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 5 years, the investor might
consider purchasing Class A shares. This example does not take into account the
time value of money which reduces the impact of the higher ongoing Class C
distribution fees, fluctuations in net asset value or the effect of different
performance assumptions.
In determining the most appropriate sales load alternative, investors
might wish to consider the services provided by their financial adviser and the
compensation provided to those advisers under each such alternative. Countrywide
Investments works in conjunction with many experienced and very qualified
financial advisers throughout the country that may provide valuable assistance
to investors by way of ongoing education, asset allocation programs,
personalized financial planning reviews, or other services vital to an
investor's long-term success. Countrywide Investments believes that these
value-added services can greatly benefit investors through market cycles and
will work diligently with an investor's chosen adviser. Countrywide Investments
has a financial adviser referral service available, at no cost to investors,
which can help them choose a financial adviser in their local area if they
currently do not have one.
In addition to the compensation otherwise paid to securities dealers,
the Adviser may from time to time pay from its own resources additional cash
bonuses or other incentives to selected dealers in connection with the sale of
shares of the Fund. On some occasions, such bonuses or incentives may be
conditioned upon the sale of a specified minimum dollar amount of the shares of
the Fund and/or other funds of Countrywide Investments during a specific period
of time. Such bonuses or incentives may include financial assistance to dealers
in connection with conferences, sales or training programs for their employees,
seminars for the public, advertising, sales campaigns and other dealer-sponsored
programs or events.
Class A Shares
- --------------
Class A shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Adviser by 5:00 p.m., Eastern time, that day
are confirmed at the public offering price determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Adviser by 5:00 p.m., Eastern time. Dealers may charge a
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<PAGE>
fee for effecting purchase orders. Direct purchase orders received by the
Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's public
offering price. Direct investments received by the Transfer Agent after 4:00
p.m., Eastern time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the public offering price next determined on the
following business day.
The public offering price of Class A shares is the next determined net
asset value per share plus a sales load as shown in the following table.
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- -------- -------- ------------
Less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50 3.63 3.30
$250,000 but less than $500,000 2.50 2.56 2.30
$500,000 but less than $1,000,000 2.00 2.04 1.80
$1,000,000 or more None* None*
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of 1% may apply with respect to Class A
shares if a commission was paid by the Adviser to a participating
unaffiliated dealer and the shares are redeemed within twelve months from
the date of purchase.
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made
after October 1, 1995 and subsequent purchases further increasing the size of
the account, a dealer's commission of up to 1% of the purchase amount may be
paid by the Adviser to participating unaffiliated dealers through whom such
purchases are effected. In determining a dealer's eligibility for such
commission, purchases of Class A shares of the Fund may be aggregated with
concurrent purchases of Class A shares of other funds of Countrywide
Investments. Dealers should contact the Adviser concerning the applicability
and calculation of the dealer's commission in the case of combined purchases.
An exchange from other funds of Countrywide Investments will not qualify for
payment of the dealer's commission, unless such
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<PAGE>
exchange is from a Countrywide fund with assets as to which a dealer's
commission or similar payment has not been previously paid. Redemptions of Class
A shares may result in the imposition of a contingent deferred sales load if the
dealer's commission described in this paragraph was paid in connection with the
purchase of such shares. See "Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares" below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the table above. Purchases made in any load
fund distributed by the Adviser pursuant to a Letter of Intent may also be
eligible for the reduced sales loads. The minimum initial investment under a
Letter of Intent is $10,000. The load funds currently distributed by the Adviser
are listed in the Exchange Privilege section of this Prospectus. Shareholders
should contact the Transfer Agent for information about the Right of
Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. Class A shares of the Fund may be
purchased at net asset value by pension and profit-sharing plans, pension funds
and other company-sponsored benefit plans that (1) have plan assets of $500,000
or more, or (2) have, at the time of purchase, 100 or more eligible
participants, or (3) certify that they project to have annual plan purchases of
$200,000 or more, or (4) are provided administrative services by certain
third-party administrators that have entered into a special service arrangement
with the Adviser relating to such plan.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase Class A
shares of the Fund at net asset value. To the extent permitted by regulatory
authorities, a bank trust department may charge fees to clients for whose
account it purchases shares at net asset value. Federal and state credit unions
may also purchase Class A shares at net asset value.
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<PAGE>
In addition, Class A shares of the Fund may be purchased at net asset
value by broker-dealers who have a sales agreement with the Adviser, and their
registered personnel and employees, including members of the immediate families
of such registered personnel and employees.
Clients of investment advisers may also purchase Class A shares of the
Fund at net asset value if their investment adviser or broker-dealer has made
arrangements to permit them to do so with the Trust. The investment adviser
must notify the Transfer Agent that an investment qualifies as a purchase at net
asset value.
Associations and affinity groups and their members may purchase Class
A shares of the Fund at net asset value provided that management of these groups
or their financial adviser has made arrangements to permit them to do so with
the Trust. Investors or their financial adviser must notify the Transfer Agent
that an investment qualifies as a purchase at net asset value.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals, may also purchase Class A shares of the Fund at net asset
value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES.
A contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Fund (or shares into which such Class A shares were exchanged)
purchased at net asset value in amounts totaling $1 million or more, if the
dealer's commission described above was paid by the Adviser and the shares are
redeemed within twelve months from the date of purchase. The contingent deferred
sales load will be paid to the Adviser and will be equal to 1% of the lesser of
(1) the net asset value at the time of purchase of the Class A shares being
redeemed or (2) the net asset value of such Class A shares at the time of
redemption. In determining whether the contingent deferred sales load is
payable, it is assumed that shares not subject to the contingent deferred sales
load are the first redeemed followed by other shares held for the longest period
of time. The contingent deferred sales load will not be imposed upon shares
representing reinvested dividends or capital gains distributions, or upon
amounts representing share appreciation. If a purchase of Class A shares is
subject to the contingent deferred sales load, the investor will be so notified
on the confirmation for such purchase.
Redemptions of such Class A shares of the Fund held for at least 12
months will not be subject to the contingent deferred sales load and an exchange
of such Class A shares into another fund of Countrywide Investments is not
treated as a redemption and will not trigger the imposition of the contingent
deferred sales load at the time of such exchange. A fund will "tack" the period
for which such Class A shares being exchanged were held onto the holding period
of the acquired shares for purposes of determining if a contingent deferred
sales load is applicable in
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<PAGE>
the event that the acquired shares are redeemed following the exchange; however,
the period of time that the redemption proceeds of such Class A shares are held
in a money market fund will not count toward the holding period for determining
whether a contingent deferred sales load is applicable. See "Exchange
Privilege."
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21, purchasing shares
for his or their own account; or a trustee or other fiduciary purchasing shares
for a single fiduciary account although more than one beneficiary is involved;
or employees of a common employer, provided that economies of scale are realized
through remittances from a single source and quarterly confirmation of such
purchases; or an organized group, provided that the purchases are made through a
central administration, or a single dealer, or by other means which result in
economy of sales effort or expense. Contact the Transfer Agent for additional
information concerning purchases at net asset value or at reduced sales loads.
Class C Shares
- --------------
Class C shares of the Fund are sold on a continuous basis at the net
asset value next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Adviser by 5:00 p.m., Eastern time, that day
are confirmed at the net asset value determined as of the close of the regular
session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Adviser by 5:00 p.m., Eastern time. Dealers may charge a
fee for effecting purchase orders. Direct purchase orders received by the
Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's net asset
value. Direct investments received by the Transfer Agent after 4:00 p.m.,
Eastern time, and orders received from dealers after 5:00 p.m., Eastern time,
are confirmed at the net asset value next determined on the following business
day.
- 25 -
<PAGE>
A contingent deferred sales load is imposed on Class C shares if an
investor redeems an amount which causes the current value of the investor's
account to fall below the total dollar amount of purchase payments subject to
the deferred sales load, except that no such charge is imposed if the shares
redeemed have been acquired through the reinvestment of dividends or capital
gains distributions or to the extent the amount redeemed is derived from
increases in the value of the account above the amount of purchase payments
subject to the deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the
amount of time since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
------------------- --------------------
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it
is assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent
deferred sales load. Assume that an individual opens an account and purchases
1,000 shares at $10 per share and that six months later the net asset value per
share is $12 and, during such time, the investor has acquired 50 additional
shares through reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not be subject to
the load because of dividend reinvestment. With respect to the remaining 400
shares, the load is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $4,000 of the
$5,400 redemption proceeds will be charged the load. At the rate of 1%, the
contingent deferred sales load would be $40. In determining whether an amount is
available for redemption without incurring a deferred sales load, the purchase
payments made for all Class C shares in the shareholder's account are
aggregated, and the current value of all such shares is aggregated.
All sales loads imposed on redemptions are paid to the Adviser. The
Adviser intends to pay a commission of 1% of the purchase amount to
participating brokers at the time the investor purchases Class C shares.
- 26 -
<PAGE>
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
SHAREHOLDER SERVICES
- ---------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional Class A shares of the Fund
while the plan is in effect are generally undesirable because a sales load is
incurred whenever purchases are made.
DIRECT DEPOSIT PLANS
Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.
INVESTPLUS PLAN
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
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<PAGE>
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Fund, you may reinvest all or part
of the proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of the Fund on each day that the Trust is open
for business by sending a written request to the Transfer Agent. The request
must state the number of shares or the dollar amount to be redeemed and your
account number. The request must be signed exactly as your name appears on the
Trust's account records. If the shares to be redeemed have a value of $25,000 or
more, your signature must be guaranteed by any eligible guarantor institution,
including banks, brokers and dealers, municipal securities brokers and dealers,
government securities brokers and dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, your signature must be guaranteed
regardless of the value of the shares being redeemed.
You may also redeem shares by placing a wire redemption request through
a securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
If your instructions request a redemption by wire, the proceeds will be
wired directly to your existing account in any commercial bank or brokerage firm
in the United States as designated on your application and you will be charged
an $8 processing fee. The Trust reserves the right, upon thirty days' written
notice, to change the processing fee. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
- 28 -
<PAGE>
If a certificate for the shares was issued to you, you will not be
permitted to exchange shares by telephone or to use the automatic withdrawal
plan as to those shares. In order to redeem such shares, the certificate must be
delivered to the Transfer Agent, or the dealer in the case of a wire redemption,
duly endorsed or accompanied by a duly endorsed stock power, with the signature
guaranteed by any of the eligible guarantor institutions outlined above.
A contingent deferred sales load may apply to a redemption of Class C
shares or to a redemption of certain Class A shares purchased at net asset
value. See "How to Purchase Shares."
Shares are redeemed at their net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check, government check or wire.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege of
exchanging shares by telephone is automatically available to all shareholders.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested including any sales load paid,
unaffected by market fluctuations) or such other minimum amount as the Trust may
determine from time to time.
- 29 -
<PAGE>
After notification to you of the Trust's intention to close your account, you
will be given thirty days to increase the value of your account to the minimum
amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other.
Class A shares of the Fund which are not subject to a contingent
deferred sales load may be exchanged for Class A shares of any other fund and
for shares of any other fund which offers only one class of shares (provided
such shares are not subject to a contingent deferred sales load). A sales load
will be imposed equal to the excess, if any, of the sales load rate applicable
to the shares being acquired over the sales load rate, if any, previously paid
on the shares being exchanged.
Class C shares of the Fund, as well as Class A shares of the Fund
subject to a contingent deferred sales load, may be exchanged, on the basis of
relative net asset value per share, for shares of any other fund which imposes a
contingent deferred sales load and for shares of any fund which is a money
market fund. A fund will "tack" the period for which the shares being exchanged
were held onto the holding period of the acquired shares for purposes of
determining if a contingent deferred sales load is applicable in the event that
the acquired shares are redeemed following the exchange. The period of time that
shares are held in a money market fund will not count toward the holding period
for determining whether a contingent deferred sales load is applicable.
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
- 30 -
<PAGE>
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
You may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. If you
are unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202. An exchange will be effected at the next determined net asset value (or
offering price, if sales load is applicable) after receipt of a request by the
Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
The Fund expects to distribute any net realized long-term capital gains at least
once each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains. The Fund will, at
the time dividends are paid, designate as tax-exempt the same percentage of the
distribution as the actual tax-exempt income earned during the period covered by
the distribution bore to total income earned during the period; the
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<PAGE>
percentage of the distribution which is tax-exempt may vary from
distribution to distribution.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital
gains distributions reinvested in
additional shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed dividend checks.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty days of the
distribution date to the Transfer Agent for reinvestment at the net asset value
next determined after its return. The investor or his dealer must notify the
Transfer Agent that a distribution is being reinvested pursuant to this
provision.
TAXES
- -----
The Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified to
pay "exempt-interest dividends," which means that it may pass on to shareholders
the federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its
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<PAGE>
shareholders. For federal income tax purposes, a shareholder's proportionate
share of taxable distributions from the Fund's net investment income as well as
from net realized short-term capital gains, if any, is taxable as ordinary
income. Since the Fund's investment income is derived from interest rather than
dividends, no portion of such distributions is eligible for the dividends
received deduction available to corporations.
Distributions of net capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by the Fund to its
shareholders are taxable to the recipient shareholders as capital gains, without
regard to the length of time a shareholder has held Fund shares. The maximum
capital gains rate for individuals is 20% with respect to assets held more than
12 months. The maximum capital gains rate for corporate shareholders is the same
as the maximum tax rate for ordinary income.
Dividends received from the Fund that are exempt from federal income
tax are exempt from the Ohio personal income tax and the net income base of the
Ohio corporation franchise tax to the extent derived from interest on Ohio
Obligations. However, shares of the Fund will be included in the computation of
the Ohio corporation franchise tax on the net worth basis. Distributions
received from the Fund are generally not subject to Ohio municipal income
taxation.
Issuers of tax-exempt securities issued after August 31, 1986 are
required to comply with various restrictions on the use and investment of
proceeds of sales of the securities. Any failure by the issuer to comply with
these restrictions would cause interest on such securities to become taxable to
the security holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax
Reform Act of 1986, is an item of tax preference possibly subject to the
alternative minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest its assets so that at least 80% of its
annual income will be exempt from federal income tax, including the alternative
minimum tax, and Ohio personal income tax. The Tax Reform Act of 1986 also
created a tax preference for corporations equal to one-half of the excess of
adjusted net book income over alternative minimum taxable income. As a result,
one-half of tax-exempt interest income received from the Fund may be a tax
preference for corporate investors.
Redemptions and exchanges of shares of the Fund are taxable events on
which a shareholder may realize a gain or loss. If a
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<PAGE>
shareholder buys shares of the Fund and sells them at a loss within six months,
any loss will be disallowed for federal and Ohio income tax purposes to the
extent of the exempt-interest dividends received on such shares. Any loss
realized upon the sale of shares of the Fund within six months from the date of
their purchase will be treated as a long-term capital loss to the extent of
amounts treated as distributions of net realized long-term capital gains during
such six month period. In addition, shareholders should be aware that interest
on indebtedness incurred to purchase or carry shares of the Fund is not
deductible for federal income tax purposes. Shareholders receiving Social
Security benefits may be taxed on a portion of those benefits as a result of
receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. The Fund will report to its shareholders the percentage and source of
income earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax and Ohio personal income tax may not result in
similar exemptions under the laws of a particular state or local taxing
authority.
Shareholders should consult their tax advisors about the tax effect of
distributions and withdrawals from the Fund and the use of the Automatic
Withdrawal Plan and the Exchange Privilege. The tax consequences described in
this section apply whether distributions are taken in cash or reinvested in
additional shares. The Fund may not be an appropriate investment for persons who
are "substantial users" of facilities financed by industrial development bonds
or are "related persons" to such users; such persons should consult their tax
advisors before investing in the Fund.
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, six series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide
- 34 -
<PAGE>
Credit Industries, Inc., a New York Stock Exchange listed company principally
engaged in the business of residential mortgage lending. The Fund pays the
Adviser a fee equal to the annual rate of .5% of the average value of its daily
net assets up to $100 million; .45% of such assets from $100 million to $200
million; .4% of such assets from $200 million to $300 million; and .375% of such
assets in excess of $300 million.
John J. Goetz, the Chief Investment Officer of the Adviser, is
primarily responsible for managing the portfolio of the Fund. Mr. Goetz has been
employed by the Adviser in various capacities since 1981 and has been managing
the Fund's portfolio since October 1986.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
- 35 -
<PAGE>
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Fund shall vote separately on matters relating to its plan of
distribution pursuant to Rule 12b-1 (see "Distribution Plans"). When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional shares owned. The
Trust does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
DISTRIBUTION PLANS
- ------------------
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act
of 1940, the Fund has adopted a plan of distribution (the "Class A Plan") under
which the Class A shares may directly incur or reimburse the Adviser for certain
distribution-related expenses, including payments to securities dealers and
others who
- 36 -
<PAGE>
are engaged in the sale of such shares and who may be advising investors
regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class A Plan, the Fund may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Class A shares. For the
fiscal year ended June 30, 1998, Class A shares of the Fund paid $14,149 to the
Adviser to reimburse it for payments made to dealers and other persons who may
be advising shareholders in this regard.
The annual limitation for payment of expenses pursuant to the Class A
Plan is .25% of the Fund's average daily net assets allocable to Class A shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class A Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Adviser after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act
of 1940, the Fund has adopted a plan of distribution (the "Class C Plan") which
provides for two categories of payments. First, the Class C Plan provides for
the payment to the Adviser of an account maintenance fee, in an amount equal to
an annual rate of .25% of the Fund's average daily net assets allocable to Class
C shares, which may be paid to other dealers based on the average value of such
shares owned by clients of such dealers. In addition, the Class C shares may
directly incur or reimburse the Adviser in an amount not to exceed .75% per
annum of the Fund's average daily net assets allocable to Class C shares for
expenses incurred in the distribution and promotion of the Fund's Class C
shares, including payments to securities dealers and others who are engaged in
the sale of such shares and who may be advising investors regarding the
purchase, sale or retention of such shares; expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services not otherwise provided by the
- 37 -
<PAGE>
Transfer Agent; expenses of formulating and implementing marketing and
promotional activities, including direct mail promotions and mass media
advertising; expenses of preparing, printing and distributing sales literature
and prospectuses and statements of additional information and reports for
recipients other than existing shareholders of the Fund; expenses of obtaining
such information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class C Plan, the Fund may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Class C shares. For the
fiscal year ended June 30, 1998, Class C shares of the Fund paid $28,799 to the
Adviser to reimburse it for payments made to dealers and other persons who may
be advising shareholders in this regard.
Unreimbursed expenditures will not be carried over from year to year.
In the event the Class C Plan is terminated by the Fund in accordance with its
terms, the Fund will not be required to make any payments for expenses incurred
by the Adviser after the date the Class C Plan terminates. The Adviser may make
payments to dealers and other persons in an amount up to .75% per annum of the
average value of Class C shares owned by their clients, in addition to the .25%
account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Fund may also make payments to
banks or other financial institutions that provide shareholder services and
administer shareholder accounts. The Glass-Steagall Act prohibits banks from
engaging in the business of underwriting, selling or distributing securities.
Although the scope of this prohibition under the Glass-Steagall Act has not been
clearly defined by the courts or appropriate regulatory agencies, management of
the Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
- 38 -
<PAGE>
The National Association of Securities Dealers places certain
limitations on asset-based sales charges of mutual funds. These limitations
require fund-level accounting in which all sales charges - front-end load, 12b-1
fees or contingent deferred load - terminate when a percentage of gross sales is
reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the share price (net
asset value) of Class C shares and the public offering price (net asset value
plus applicable sales load) of Class A shares of the Fund are determined as of
the close of the regular session of trading on the New York Stock Exchange,
currently 4:00 p.m., Eastern time. The Trust is open for business on each day
the New York Stock Exchange is open for business and on any other day when there
is sufficient trading in the Fund's investments that its net asset value might
be materially affected. The net asset value per share of the Fund is calculated
by dividing the sum of the value of the securities held by the Fund plus cash or
other assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent.
Tax-exempt portfolio securities are valued for the Fund by an outside
independent pricing service approved by the Board of Trustees. The service
generally utilizes a computerized grid matrix of tax-exempt securities and
evaluations by its staff to determine what it believes is the fair value of the
portfolio securities. The Board of Trustees believes that timely and reliable
market quotations are generally not readily available to the Fund for purposes
of valuing tax-exempt securities and that valuations supplied by the pricing
service are more likely to approximate the fair value of the tax-exempt
securities. If, in the Adviser's opinion, the valuation provided by the service
does not accurately reflect the fair value of a tax-exempt security, it will
value the security at the average of the prices quoted by at least two
independent market makers. The quoted price will represent the market maker's
opinion as to the price that a willing buyer would pay for the security. All
other securities (and other assets) of the Fund for which market quotations are
not readily available are valued at their fair value as determined in good faith
in accordance with consistently applied procedures established by and under the
general supervision of the Board of Trustees. The net asset value per share of
the Fund will fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its "average annual total
return." The Fund may also advertise "yield." Both
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<PAGE>
yield and average annual total return figures are based on historical earnings
and are not intended to indicate future performance. Total return and yield are
computed separately for Class A and Class C shares. The yield of Class A shares
is expected to be higher than the yield of Class C shares due to the higher
distribution fees imposed on Class C shares.
The "average annual total return" of the Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which periods will be stated in the advertisement) that would equate
an initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and, for
Class A shares, the deduction of the current maximum sales load from the initial
investment. The Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from "average annual total return."
A nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized quotation of
total return may also indicate average annual compounded rates of return over
periods other than those specified for "average annual total return." These
nonstandardized returns do not include the effect of the applicable sales load
which, if included, would reduce total return. A nonstandardized quotation of
total return will always be accompanied by the Fund's "average annual total
return" as described above.
The "yield" of the Fund is computed by dividing the net investment
income per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period. In addition,
the Fund may advertise together with its "yield" a tax-equivalent yield which
reflects the yield which would be required of a taxable investment at a stated
income tax rate in order to equal the Fund's "yield."
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also
- 40 -
<PAGE>
compare its performance to that of other selected mutual funds, averages of the
other mutual funds within its category as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Fund may also present its performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Adviser's view of current or past market conditions or historical trends.
Further information about the Fund's performance is contained in the
Trust's annual report which can be obtained by shareholders at no charge by
calling the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629- 2050) or by writing to the Trust at the address on the
front of this Prospectus.
- 41 -
<PAGE>
<TABLE>
<S> <C>
Account Application ACCOUNT NO. ____________________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354 FOR BROKER/DEALER USE ONLY
Cincinnati, Ohio 45201-5354 Firm Name:______________________________________
Ohio Insured Tax-Free Fund Home Office Address:____________________________
Branch Address:_________________________________
[ ] A Shares (9) Rep Name & No.:_________________________________
[ ] C Shares (14) Rep Signature:__________________________________
___________________________________________________________________________________________________________________
Initial Investment of $___________________ ($1,000 Minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________________________________________________________
[ ] Exchange From: _________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax l.D.#
_________________________________________________________________ _________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_________________________________________________________________ Citizenship: [ ] U.S.
Name of Joint Tenant, Partner, Custodian [ ] Other ______________________
Address Phone
_________________________________________________________________ (_____)__________________________________________
Street or P.O. Box Business Phone
_________________________________________________________________ (_____)__________________________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
Occupation and Employer Name/Address __________________________________________________________________________________
Are you an associated person of an NASD member? [ ] Yes [ ] No
___________________________________________________________________________________________________________________
TAXPAYER IDENTIFICATION NUMBER _ Under penalties of perjury I certify that the Taxpayer Identification Number listed above is my
correct number. The Internal Revenue Service does not require my consent to any provision of this document other than the
certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure to
report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
___________________________________________________________________________________________________________________
<PAGE>
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[ ] Share Option - Income distributions and capital gains distributions automatically reinvested in additional shares.
[ ] Income Option - Income distributions and short term capital gains distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
[ ] Cash Option - Income distributions and capital gains distributions paid in cash.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
__________________________________________________________________________________________________________________________
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of eligible
load funds of Countrywide Investments.
Account Number/Name Account Number/Name
___________________________________________________________- ________________________________________________________
___________________________________________________________- ________________________________________________________
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your Letter of Intent.)
[ ] I agree to the Letter of Intent in the current Prospectus of Countrywide Tax-Free Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning ______________________ 19 __
(Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of COuntrywide Investments at
least equal to (check appropriate box):
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
____________________________________________________________________________________________________________________________
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number [ ] [ ] [ ][ ]
(PIN). You will need to use this PIN when requesting account information and placing transactions. For institutional
accounts, please use a four digit number. For retail accounts, please use the first four letters of your mother's
maiden name.
______________________________________________________________________________________________________________________________
SIGNATURES
By signature below each investor certifies that he has received a copy of the Funds' current Prospectus, that he is of legal age,
and that he has full authority and legal capacity for himself or the organization named below, to make this investment and to use
the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares whether
by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of the Fund
for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance with any
of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself
and his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the performance
of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or expense in acting
on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund Services, Inc.,
or both, will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust and/or Countrywide
Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape recording telephone instructions.
_______________________________________________________________- ________________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
___________________________________________________________- ________________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Tax-Free Trust. There is no charge
for this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per
month. For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00.
Though a continuous program of 12 monthly investments is recommended, the Plan may be discontinued
by the shareholder at any time.
Please invest $ _________________per month in the Fund. ABA Routing Number________
FI Account Number__________
[ ] Savings Account
_____________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
_____________________________________________________________ [ ] the last business day
City State [ ] 15th and last business day
X____________________________________________________________ X________________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's records.)
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account for the
Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees: CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any
person whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your participation
in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if the claim for the
amount of such erroneous payment is made by you within six (6) months from the date of such erroneous payment; your
participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
____________________________________________________________________________________________________________________________
<PAGE>
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________________ from my mutual fund account beginning the last business day of the
month of _____________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly - Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: __ __ - __ __ __ __ __ __
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided _______________________________________________________________________________________
check for ACH or bank wire Bank Name Bank Address
_______________________________________________________________________________________
Bank ABA# Account # Account Name
[ ] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of payee_____________________________________________________________________________________________________________
Please send to: __________________________________________________________________________________________________________
Street address City State Zip
____________________________________________________________________________________________________________________________
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Tax-Free Trust (the Trust) and that
_____________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it
is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to appoint
Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series of the
Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the
privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of the
____________________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of ___________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
_______________ at which a quorum was present and acting throughout, and that the same are now in full force and effect.
I further certify that the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in
accordance with the foregoing resolutions.
Name Title
________________________________________________________________ _______________________________________________________
________________________________________________________________ _______________________________________________________
________________________________________________________________ _______________________________________________________
Witness my hand and seal of the corporation or organization this________________day of_____________________________, 19_______
________________________________________________________________ _______________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be signed by
another officer.
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 42 -
<PAGE>
TABLE OF CONTENTS
Expense Information....................................................
Financial Highlights. . . . . .........................................
Investment Objective and Policies......................................
How to Purchase Shares.................................................
Shareholder Services...................................................
How to Redeem Shares...................................................
Exchange Privilege.....................................................
Dividends and Distributions............................................
Taxes..................................................................
Operation of the Fund..................................................
Distribution Plans . . . ..............................................
Calculation of Share Price and Public Offering Price...................
Performance Information................................................
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 43 -
<PAGE>
PROSPECTUS
November 1, 1998
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
OHIO TAX-FREE MONEY FUND
RETAIL SHARES
The Ohio Tax-Free Money Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of current income exempt
from federal income tax and Ohio personal income tax, consistent with liquidity
and stability of principal. The Fund invests primarily in a portfolio of
high-quality, short-term Ohio municipal obligations.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS.
FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT
OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
The Fund offers two classes of shares: Class A shares ("Retail Shares"),
sold subject to a 12b-1 fee of up to .25% of average daily net assets, and Class
B shares ("Institutional Shares"), sold without a 12b-1 fee. Each Retail and
Institutional Share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Retail Shares bear
the expenses of distribution fees, which will cause Retail Shares to have a
higher expense ratio and to pay lower dividends than Institutional Shares; (ii)
certain class specific expenses will be borne solely by the class to which such
expenses are attributable; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Retail Shares are subject
to a lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional Shares such as checkwriting and
automatic investment and redemption plans.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about Retail Shares
that you should know before investing. Please retain this Prospectus for future
reference. Institutional Shares are offered in a separate prospectus and
additional information about Institutional Shares may be obtained by calling one
of the numbers listed below. A Statement of Additional Information dated
November 1, 1998 has been filed with the Securities and Exchange Commission and
is hereby incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling one of the
numbers listed below.
For information or assistance in opening an account, please contact your
broker, or call us at the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- 2 -
<PAGE>
EXPENSE INFORMATION
- -------------------
RETAIL SHARES
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None*
Check Redemption Processing Fee (per check):
First six checks per month None
Additional checks per month $0.25
* A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How
to Redeem Shares."
Annual Operating Expenses (as a percentage of average net assets)
Management Fees After Waivers .43%(A)
12b-1 Fees .22%(B)
Other Expenses .10%
----
Total Operating Expenses After Waivers .75%(C)
====
(A) Absent waivers of management fees, such fees would have been .44%.
(B) Retail Shares may incur 12b-1 fees in an amount up to .25% of
average net assets.
(C) Absent waivers of management fees, total operating expenses would have
been .76%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in Retail Shares will bear directly
or indirectly. The percentages expressing annual operating expenses are based on
amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example 1 Year 3 Years 5 Years 10 Years
------- ------ ------- ------- --------
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $ 8 $ 24 $ 42 $ 93
- 3 -
<PAGE>
FINANCIAL HIGHLIGHTS
- ---------------------
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1998 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
<TABLE>
Per Share Data for a Share Outstanding Throughout Each Period
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
From
Sept. 1,
Year Ended June 30, 1988
-------------------------------------------------------------------------------- through
June 30,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
-------------------------------------------------------------------------------------------
Net asset value at beginning of
period.................... $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
------ ------ ------- ------- ------- ------- ------- ------- ------- ------
Net investment income....... 0.030 0.030 0.031 0.031 0.020 0.022 0.034 0.048 0.055 0.047
------ ------ ------- ------- ------- ------- ------ ------- ------- -------
Dividends from net
investment income ........ (0.030) (0.030) (0.031) (0.031) (0.020) (0.022) (0.034) (0.048) (0.055) (0.047)
------ ------ ------ ------ ------- ------ ------- ------- ------ ------
Net asset value at
end of period ......... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $ 1.000 $ 1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return............. 3.07% 2.99% 3.14% 3.12% 1.99% 2.19% 3.52% 4.99% 5.62% 5.77%(B)
====== ====== ===== ====== ====== ===== ====== ====== ====== ========
Net assets at end
of period (000's)........ $205,316 $166,719 $240,323 $226,606 $213,001 $221,775 $218,503 $204,034 $124,145 $78,241
======== ======== ======= ======= ======= ======= ======= ====== ========= ========
Ratio of expenses to
average net assets(A) ... 0.75% 0.75% 0.75% 0.74% 0.73% 0.74% 0.75% 0.77% 0.75% 0.71%(B)
Ratio of net investment income
to average net assets...... 3.02% 2.93% 3.09% 3.08% 1.97% 2.16% 3.43% 4.80% 5.47% 5.64%(B)
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net assets would have been 0.76%, 0.77% and 0.85%(B)
for the periods ended June 30, 1998, 1997 and 1989, respectively.
(B) Annualized.
</TABLE>
- 4 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The
Fund seeks the highest level of current income exempt from federal income tax
and Ohio personal income tax, consistent with liquidity and stability of
principal. The Fund is not intended to be a complete investment program, and
there is no assurance that its investment objective can be achieved. The Fund's
investment objective may be changed by the Board of Trustees without shareholder
approval, but only after notification has been given to shareholders and after
this Prospectus has been revised accordingly. If there is a change in the Fund's
investment objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Fund are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
The Fund seeks to achieve its investment objective by investing
primarily in high-quality, short-term Ohio Obligations (described below)
determined by the Adviser, under the direction of the Board of Trustees, to
present minimal credit risks. The Fund will purchase only obligations that
enable it to employ the amortized cost method of valuation. Under the amortized
cost method of valuation, the Fund's obligations are valued at original cost
adjusted for amortization of premium or accumulation of discount, rather than
valued at market. This method should enable the Fund to maintain a stable net
asset value per share. The Fund will invest in obligations which have received a
short-term rating in one of the two highest categories by any two nationally
recognized statistical rating organizations ("NRSROs") or by any one NRSRO if
the obligation is rated by only that NRSRO. The Fund may purchase unrated
obligations determined by the Adviser to be of comparable quality to rated
obligations meeting the Fund's quality standards. These standards must be
satisfied at the time an investment is made. If an obligation ceases to meet
these standards, or if the Board of Trustees believes such obligation no longer
presents minimal credit risks, the Trustees will cause the Fund to dispose of
the obligation as soon as practicable. The Statement of Additional Information
describes ratings of the NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less.
The Fund will invest in obligations with remaining maturities of thirteen months
or less at the time of purchase.
- 5 -
<PAGE>
It is a fundamental policy that under normal market conditions the Fund
will invest at least 80% of the value of its net assets in short-term
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax, and Ohio personal income tax. This policy may not
be changed without the affirmative vote of a majority of the outstanding shares
of the Fund. The term "majority" of the outstanding shares means the lesser of
(1) 67% or more of the outstanding shares of the Fund present at a meeting, if
the holders of more than 50% of the outstanding shares of the Fund are present
or represented at such meeting or (2) more than 50% of the outstanding shares of
the Fund.
The Fund may, from time to time, invest in other short-term,
high-quality obligations for temporary defensive purposes (subject to the
fundamental policy that under normal market conditions the Fund will invest at
least 80% of its net assets in obligations the interest on which is exempt from
federal income tax, including the alternative minimum tax, and Ohio personal
income tax). These include, but are not limited to, obligations the interest on
which is exempt from federal, but not Ohio, income tax and taxable obligations
such as certificates of deposit and other bank debt instruments, commercial
paper, obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. Except for temporary defensive
purposes, at no time will more than 20% of the value of the Fund's net assets be
invested in taxable obligations. Under normal market conditions, the Fund
anticipates that not more than 5% of the value of its net assets will be
invested in any one type of taxable obligation. Taxable obligations are more
fully described in the Statement of Additional Information. The Fund may invest
in these other short-term obligations, for example, due to market conditions
under which Ohio Obligations are temporarily unavailable for purchase or
available only in limited amounts, or pending investment of proceeds of sales of
shares or proceeds from the sale of portfolio securities or in anticipation of
redemptions. The Fund reserves the right to hold cash reserves as the Adviser
deems necessary for temporary defensive purposes. Although interest earned on
these short-term obligations is taxable as ordinary income for federal and/or
Ohio income tax purposes, the Fund intends to minimize taxable income through
investment, when possible, in other available securities exempt from federal
and/or Ohio income taxes, including shares of investment companies whose
dividends are tax-exempt. The Fund may invest up to 10% of its total assets in
shares of other investment companies. Investments by the Fund in shares of other
investment companies may result in duplication of advisory, administrative and
distribution fees. The Fund will not invest more than 5% of its total assets in
securities of any single investment company
- 6 -
<PAGE>
and will not purchase more than 3% of the outstanding voting securities of any
investment company. The Fund will only invest in securities of other investment
companies which hold themselves out to be money market funds.
Ohio Obligations
-----------------
Ohio Obligations are debt obligations issued by the State of Ohio and
its political subdivisions, agencies, authorities and instrumentalities and
other qualifying issuers which pay interest that is, in the opinion of bond
counsel to the issuer, exempt from both federal income tax, including the
alternative minimum tax, and Ohio personal income tax. For purposes of this
definition, Ohio Obligations include participation interests in Ohio Obligations
and shares of an investment company which invests at least 80% of its net assets
in obligations the interest on which is exempt from federal income tax,
including the alternative minimum tax, and Ohio personal income tax. Ohio
Obligations are issued to obtain funds to construct, repair or improve various
public facilities such as airports, bridges, highways, hospitals, housing,
schools, streets and water and sewer works, to pay general operating expenses or
to refinance outstanding debts. They also may be issued to finance various
private activities, including the lending of funds to public or private
institutions for construction of housing, educational or medical facilities or
the financing of privately owned or operated facilities. Ohio Obligations
consist of tax-exempt bonds, tax-exempt notes and tax-exempt commercial paper.
The Statement of Additional Information contains a description of tax-exempt
bonds, notes and commercial paper.
The two principal classifications of Ohio Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax- exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
- 7 -
<PAGE>
The Fund may invest in any combination of general obligation bonds,
revenue bonds and industrial development bonds. The Fund may invest more than
25% of its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on municipal obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest no more than 20% of its net assets in obligations the interest from which
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
The Fund may purchase other types of tax-exempt obligations which may
become available in the future, provided the obligations are consistent with the
Fund's investment objective and policies, the Adviser believes their quality
meets the Fund's quality standards, and this Prospectus has been appropriately
revised to reflect the Fund's policies with respect to such obligations.
Risk Factors
------------
The Fund's yield will fluctuate due to changes in interest rates,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. In addition, the financial condition of an issuer or adverse changes in
general economic conditions, or both, may impair the issuer's ability to make
payments of interest and principal. There is no limit on the percentage of a
single issue of tax-exempt obligations that the Fund may own. If the Fund holds
a significant portion of the obligations of an issuer, there may not be a
readily available market for the obligations. Reduced diversification could
- 8 -
<PAGE>
involve an increased risk to the Fund should an issuer be unable to make
interest or principal payments or should the market value of Ohio Obligations
decline.
There are also risks of reduced diversification because the Fund
invests primarily in obligations of issuers within a single state. The Fund is
more likely to invest its assets in the securities of fewer issuers because of
the relatively smaller number of issuers of Ohio Obligations. The Fund's
performance is closely tied to conditions within the State of Ohio and to the
financial condition of the State and its authorities and municipalities. The
economy in the State of Ohio, once reliant upon durable goods manufacturing,
largely concentrated in motor vehicles and equipment, steel, rubber products and
household appliances, has diversified since the 1980's. This has brought the
State's employment mix more in line with that of the nation, although
manufacturing is still above the national average, at 20.7% of employment in
1996, versus 15.3% for the nation. Statewide employment levels continue to
increase, with total employment in 1997 up 2.4% over the prior year. Ohio's
unemployment rate since 1991 has remained below that of the nation. Although
manufacturing is expected to slow in the future, growth in nonmanufacturing
output and employment, led by the financial services, distribution and trade
sectors, has contributed to greater stability. Other key factors which have
contributed to Ohio's ongoing strong economic performance include strong export
activity, a stable real estate market and a stable banking/financial services
industry. While Ohio has in the past experienced budget shortfalls due to weak
revenue results and higher-than-budgeted human services expenditures, improved
economic performance and sound financial management have enabled the State to
accumulate sizable financial reserves. The State has posted consistently strong
operating results over the past four fiscal years. Fiscal 1997 ended with tax
receipts $334.7 million ahead of estimates and total spending $727.3 million
below estimates, primarily in the human services areas of Medicaid and welfare.
Combined reserves in the general revenue fund exceeded $2.3 billion at June 30,
1997, or 13% of the general revenue fund's $17.6 billion fiscal 1997 budget.
Although revenue obligations of the State of Ohio or its political subdivisions
may be payable from a specific project or source, there can be no assurance that
future economic and political developments and the resulting impact on state and
local governmental finances will not adversely affect the market values and
marketability of the Ohio Obligations held by the Fund or the ability of a
specific issuer to make interest or principal payments.
- 9 -
<PAGE>
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may increase the possibility of
fluctuation in the Fund's net asset value. As the Fund intends to comply with
Subchapter M of the Internal Revenue Code, it may invest up to 50% of its assets
at the end of each quarter of its fiscal year in as few as two issuers, provided
that no more than 25% of the assets are invested in one issuer. With respect to
the remaining 50% of its assets at the end of each quarter, it may invest no
more than 5% in one issuer.
Certain provisions in the Internal Revenue Code relating to the
issuance of municipal obligations may reduce the volume of municipal obligations
qualifying for federal tax exemptions. Shareholders should consult their tax
advisors concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on municipal obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of municipal
obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of municipal
obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
Other Investment Techniques
- ---------------------------
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests
in tax-exempt obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the tax-exempt obligation, plus
accrued interest. As to these instruments, the Fund intends to
- 10 -
<PAGE>
exercise its right to demand payment only upon a default under the terms of the
obligation, as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating
or variable rate tax-exempt obligations. Floating rate obligations have an
interest rate which is fixed to a specified interest rate, such as a bank prime
rate, and is automatically adjusted when the specified interest rate changes.
Variable rate obligations have an interest rate which is adjusted at specified
intervals to a specified interest rate. Periodic interest rate adjustments help
stabilize the obligations' market values. The Fund may purchase these
obligations from the issuers or may purchase participation interests in pools of
these obligations from banks or other financial institutions. Variable and
floating rate obligations usually carry demand features that permit the Fund to
sell the obligations back to the issuers or to financial intermediaries at par
value plus accrued interest upon not more than 30 days' notice at any time or
prior to specific dates. Certain of these variable rate obligations, often
referred to as "adjustable rate put bonds," may have a demand feature
exercisable on specific dates once or twice each year. The Fund will not invest
more than 10% of its net assets in floating or variable rate obligations as to
which the Fund cannot exercise the demand feature on not more than seven days'
notice if the Adviser, under the direction of the Board of Trustees, determines
that there is no secondary market available for these obligations and all other
illiquid securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued
tax-exempt obligations. Obligations offered on a when-issued basis are settled
by delivery and payment after the date of the
- 11 -
<PAGE>
transaction, usually within 15 to 45 days. The Fund will maintain a segregated
account with its Custodian of cash or liquid securities, marked to market daily,
in an amount equal to its when-issued commitments. Because these transactions
are subject to market fluctuations, a significant commitment to when- issued
purchases could result in fluctuation of the Fund's net asset value. The Fund
will only make commitments to purchase when-issued obligations with the
intention of actually acquiring the obligations and not for the purpose of
investment leverage.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase tax-exempt
obligations with the right to resell the obligation to the seller at a specified
price or yield within a specified period. The right to resell is commonly known
as a "put" or a "standby commitment." The Fund may purchase tax-exempt
obligations with puts attached from banks and broker-dealers. The Fund intends
to use obligations with puts attached for liquidity purposes to ensure a ready
market for the underlying obligations at an acceptable price. Although no value
is assigned to any puts on tax-exempt obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. In addition, the value of the obligations with puts attached held by the
Fund will not exceed 10% of its net assets.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the
aggregate up to 10% of its net assets in securities that are not readily
marketable, including: participation interests that are not subject to the
demand feature described above;
- 12 -
<PAGE>
floating and variable rate obligations as to which the Fund cannot exercise the
related demand feature described above and as to which there is no secondary
market; and repurchase agreements not terminable within seven days.
BORROWING AND PLEDGING. The Fund may borrow money from banks (provided
there is 300% asset coverage) or from banks or other persons for temporary
purposes (in an amount not exceeding 5% of its total assets). The Fund will not
make any borrowing which would cause its outstanding borrowings to exceed
one-third of the value of its total assets. The Fund may pledge assets in
connection with borrowings but will not pledge more than one-third of its total
assets. The Fund will not make any additional purchases of portfolio securities
if outstanding borrowings exceed 5% of the value of its total assets. Borrowing
magnifies the potential for gain or loss on the Fund's portfolio securities and,
therefore, if employed, increases the possibility of fluctuation in its net
asset value. This is the speculative factor known as leverage. The Fund's
policies on borrowing and pledging are fundamental policies which may not be
changed without the affirmative vote of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in Retail Shares of the Fund ordinarily must be
at least $1,000. However, the minimum initial investment for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is $50. Shares of the Fund are sold on a continuous basis at the
net asset value next determined after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an
initial investment in the Fund by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Ohio Tax-Free Money Fund." An account application is included in this
Prospectus.
You will be sent within five business days after the end of each month
a written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
- 13 -
<PAGE>
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund
by wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629- 2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided
you have given notice of your intention to make such investment to the Transfer
Agent by 4:00 p.m., Eastern time, on the preceding business day (or 12:00 noon,
Eastern time, on the same day of a wire investment in the case of investors
utilizing institutions that have made appropriate arrangements with the Transfer
Agent). Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to the Transfer Agent. Your bank may impose a
charge for sending your wire. There is presently no fee for receipt of wired
funds, but the Transfer Agent reserves the right to charge shareholders for this
service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account
by mail or by bank wire. Checks should be sent to Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the Fund. Bank wires should be sent as outlined above. You may also make
additional investments at the Trust's offices at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202. Each additional purchase request must contain the name
of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
- 14 -
<PAGE>
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
-------------------------
If the Retail Shares in your account have a value of at least $5,000,
you may elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
Direct Deposit Plans
--------------------
Retail Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in Retail Shares of the Fund
from your bank, savings and loan or other depository institution account. The
minimum initial and subsequent investments must be $50 under the plan. The
Transfer Agent pays the costs associated with these transfers, but reserves the
right, upon thirty days' written notice, to make reasonable charges for this
service. Your depository institution may impose its own charge for debiting your
account which would reduce your return from an investment in the Fund.
InvestPlus Plan
---------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
-15-
<PAGE>
HOW TO REDEEM SHARES
- --------------------
You may redeem Retail Shares of the Fund on each day that the Trust is
open for business. You will receive the net asset value per share next
determined after receipt by the Transfer Agent of a proper redemption request in
the form described below. Payment is normally made within three business days
after tender in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been collected,
which may take up to fifteen days from the purchase date. To eliminate this
delay, you may purchase shares of the Fund by certified check, government check
or wire.
A contingent deferred sales load may be imposed on a redemption of
shares of the Fund if such shares had previously been acquired in connection
with an exchange from another fund of Countrywide Investments which imposes a
contingent deferred sales load, as described in the Prospectus of such other
fund.
BY TELEPHONE. You may redeem shares having a value of less than
$25,000 by telephone. The proceeds will be sent by mail to the address
designated on your account or wired directly to your existing account in any
commercial bank or brokerage firm in the United States as designated on your
application. To redeem by telephone, call the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629-2050). The redemption proceeds
will normally be sent by mail or by wire within one business day (but not later
than three business days) after receipt of your telephone instructions. Any
redemption requests by telephone must be received in proper form prior to 12:00
noon, Eastern time, on any business day in order for payment by wire to be made
that day.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account have been changed within the previous 30 days.
-16-
<PAGE>
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, you will be required to request the
redemption in writing with your signature guaranteed, regardless of the value
of the shares being redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on
your account application for telephone redemptions. Proceeds of redemptions
requested by mail are normally mailed within three business days following
receipt of instructions in proper form.
BY CHECK. You may establish a special checking account with the Fund
for the purpose of redeeming Retail Shares by check. Checks may be made payable
to anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer
Agent, as your agent, will cause the Fund to redeem a sufficient number of full
and fractional shares in your account to cover the amount of the check.
If the amount of a check is greater than the value of the shares held
in your account, the check will be returned. A check representing a redemption
request will take precedence over any other redemption instructions issued by a
shareholder.
- 17 -
<PAGE>
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals.
The Transfer Agent charges shareholders its costs for each stop payment
and each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption procedure may be
suspended or terminated at any time upon written notice by the Trust or the
Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar
program with a financial institution are not eligible for the checkwriting
privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee. The Trust reserves
the right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested, unaffected by market fluctuations) or
such other minimum amount as the Trust may determine from time to time. After
notification to you of
- 18 -
<PAGE>
the Trust's intention to close your account, you will be given thirty days to
increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- -------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other. A sales load will be imposed equal to the excess,
if any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggresssive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor,
- 19 -
<PAGE>
Cincinnati, Ohio 45202. An exchange will be effected at the next determined net
asset value (or offering price, if sales load is applicable) after receipt of a
request by the Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to shareholders. An exchange results in a
sale of fund shares, which may cause you to recognize a capital gain or loss.
Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
Dividends are automatically reinvested in additional shares of the Fund (the
Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option. No interest will accrue on amounts represented by
uncashed distribution checks.
TAXES
- -----
The Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The Fund also intends
to meet all IRS requirements necessary to ensure that it is
- 20 -
<PAGE>
qualified to pay "exempt-interest dividends," which means that it may pass on to
shareholders the federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment income
and any net realized capital gains to its shareholders. For federal income tax
purposes, a shareholder's proportionate share of taxable distributions from the
Fund's net investment income as well as from net realized short-term capital
gains, if any, is taxable as ordinary income. Since the Fund's investment income
is derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
Dividends received from the Fund that are exempt from federal income tax are
exempt from the Ohio personal income tax and the net income base of the Ohio
corporation franchise tax to the extent derived from interest on Ohio
Obligations. However, shares of the Fund will be included in the computation of
the Ohio corporation franchise tax on the net worth basis. Distributions
received from the Fund are generally not subject to Ohio municipal income
taxation.
Issuers of tax-exempt securities issued after August 31, 1986 are required to
comply with various restrictions on the use and investment of proceeds of sales
of the securities. Any failure by the issuer to comply with these restrictions
would cause interest on such securities to become taxable to the security
holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax Reform
Act of 1986, is an item of tax preference possibly subject to the alternative
minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Shareholders receiving Social Security benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income.
- 21 -
<PAGE>
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
The Fund will report to its shareholders the percentage and source of income
earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax and Ohio personal income tax may not result in
similar exemptions under the laws of a particular state or local taxing
authority.
The tax consequences described in this section apply whether distributions are
taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, six series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. The officers of the
Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees
- 22 -
<PAGE>
and commissions, legal, auditing and accounting expenses, expenses of
registering shares under federal and state securities laws, insurance expenses,
taxes or governmental fees, fees and expenses of the custodian, transfer agent
and accounting and pricing agent of the Fund, fees and expenses of members of
the Board of Trustees who are not interested persons of the Trust, the cost of
preparing and distributing prospectuses, statements, reports and other documents
to shareholders, expenses of shareholders' meetings and proxy solicitations, and
such extraordinary or non-recurring expenses as may arise, including litigation
to which the Fund may be a party and indemnification of the Trust's officers and
Trustees with respect thereto. Retail Shares are also responsible for the
payment of expenses related to the distribution of such shares (see
"Distribution Plan").
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities Dealers,
Inc., and subject to its objective of seeking best execution of portfolio
transactions, the Adviser may give consideration to sales of shares of the Fund
as a factor in the selection of brokers and dealers to execute portfolio
transactions of the Fund. Subject to the requirements of the Investment Company
Act of 1940 and procedures adopted by the Board of Trustees, the Fund may
execute portfolio transactions through any broker or dealer and pay brokerage
commissions to a broker (i) which is an affiliated person of the Trust, or (ii)
which is an affiliated person of such person, or (iii) an affiliated person of
which is an affiliated person of the Trust or the Adviser.
- 23 -
<PAGE>
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. Retail Shares of the Fund
shall vote separately on matters relating to the plan of distribution pursuant
to Rule 12b-1 (see "Distribution Plan"). When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.
The Fifth Third Bank Trust Department, 38 Fountain Square Plaza, Cincinnati,
Ohio, may be deemed to control the Fund by virtue of the fact that it owns of
record more than 25% of the Fund's shares as of the date of this Prospectus. BHC
Securities Inc., 2005 Market Street, Philadelphia Pennsylvania, may be deemed to
control Retail Shares of the Fund by virtue of the fact that it owns of record
more than 25% of such shares as of the date of this Prospectus.
DISTRIBUTION PLAN
- ------------------
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, Retail Shares
of the Fund have adopted a plan of distribution (the "Class A Plan") under which
such shares may directly incur or reimburse the Adviser for certain
distribution- related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
- 24 -
<PAGE>
Pursuant to the Class A Plan, Retail Shares may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Retail Shares of the
Fund. For the fiscal year ended June 30, 1998, Retail Shares of the Fund paid
$425,979 to the Adviser to reimburse it for payments made to dealers and other
persons who may be advising shareholders in this regard.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.25% of the average daily net assets allocable to Retail Shares. Unreimbursed
expenditures will not be carried over from year to year. In the event the Class
A Plan is terminated by the Fund in accordance with its terms, the Fund will not
be required to make any payments for expenses incurred by the Adviser after the
date the Class A Plan terminates.
Pursuant to the Class A Plan, the Fund may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
CALCULATION OF SHARE PRICE
- ---------------------------
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund
- 25 -
<PAGE>
is calculated by dividing the sum of the value of the securities held by the
Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund, rounded
to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
- -----------------------
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. In
addition, the Fund may advertise together with its "current yield" or "effective
yield" a tax equivalent "current yield" or "effective yield" which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's "current yield" or "effective yield." Yields
are computed separately for Retail and Institutional Shares. The yield of
Institutional Shares is expected to be higher than the yield of Retail Shares
due to the distribution fees imposed on Retail Shares.
- 26 -
<PAGE>
Account Application Account No. 07 - ____________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354 FOR BROKER/DEALER USE ONLY
Firm Name: __________________________
OHIO TAX-FREE MONEY FUND Home Office Address:_________________
(RETAIL SHARES) Branch Address:______________________
Rep Name & No. ______________________
________________________________________________________________________________
Initial Investment of $___________________________ ($1,000 minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________________
[ ] Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
<TABLE>
<S> <C> <C>
Account Name S.S.#/Tax I.D.#
_____________________________________________________________ ____________________________
Name of Individual, Corporation, Organization, or Minor, etc. In case of custodial account
please list minor's S.S.#
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian Citizenship: [ ] U.S.
[ ] Other _______
Address Phone
___________________________________________________________________ ( ) _________________________
Street or P.O. Box Business Phone
___________________________________________________________________ ( ) _________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
- -------------------------------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER - Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this
document other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I
am not subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a
failure to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have
mailed or delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social
Security Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
[ ] Reinvest all distributions
[ ] Pay all distributions in cash
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon receipt of and
in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from my (our) account in
any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank. Please attach a voided check for the account.
Bank Account Number ____________________________________________Bank Routing Transit Number___________________________________
Name of Account Holder_________________________________________________________________________________________________________
Bank Name __________________________________________________Bank Address________________________________________________
City State
[ ] CHECKWRITING (A signature card must be completed)
... to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA) or
otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons whose signatures
appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our) shares of the Trust. I
(we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft Account as such Rules and
Regulations may be amended from time to time.
- ------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number [ ] [ ] [ ][ ]
(PIN). You will need to use this PIN when requesting account information and placing transactions. For institutional
accounts, please use a four digit number. For retail accounts, please use the first four letters of your mother's
maiden name.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the Funds' current Prospectus, that he is of legal age,
and that he has full authority and legal capacity for himself or the organization named below, to make this investment and to use
the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares whether
by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of the Fund
for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance with any
of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself
and his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the performance
of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or expense in acting
on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund Services, Inc.,
or both, will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust and/or Countrywide
Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape recording telephone instructions.
______________________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
__________________________________________________
_______________________________________________________________ Date
Title of Corporate Officer, Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each
joint owner shall have full authority to act on behalf of the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Tax-Free Trust. There is no
charge for this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00
per month. For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00.
Though a continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any
time.
Please invest $ __________per month in the Fund.
ABA Routing Number_______________________
FI Account Number________________________
[ ] Checking Account [ ] Savings Account
________________________________________________
Name of Financial Institution (FI)
_________________________________________________
City State
Please make my automatic investment on:
[ ] the last business day of each month
[ ] the 15th day of each month
[ ] both the 15th and last business day
X________________________________________________________________________
Signature of Depositor EXACTLY as it appears on FI Records)
X_________________________________________________________________________
(Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign
exactly as signature appears on your FI's records.)
Please attach a voided check from your checking account or a voided deposit/
withdrawal slip from your savings account for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect,
by which amounts, determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by CFS,
CFS hereby agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the
payment by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any
person whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any
such amount. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or
persons whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund if the claim
for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous payment;
your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
- ------------------------------------------------------------------------------------------------------------------------
<PAGE>
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________________ from my account beginning the last business day of
the month of _____________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly - Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________.
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ____ ____ _ ____ ____ ____
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as
indicated below. I understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the
wire will be completed in one business day and that there is an $8.00 fee.
Please attach a voided _______________________________________________________________________________________
check for ACH or bank wire Bank Name Bank Address
_______________________________________________________________________________________
Bank ABA# Account # Account Name
[ ] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address
below:
Name of payee_____________________________________________________________________________________________________________
Please send to:__________________________________________________________________________________________________________
Street address City State Zip
- ------------------------------------------------------------------------------------------------------------------------
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Tax-Free Trust (the Trust) and
that
- ------------------------------------------------------------------------------------------------------------------------
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to
take any ction for it as may be necessary or appropriate with respect to its shareholder account with the Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate
to appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the Fund,
to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the privileges
elected on the Application, and it is (If checkwriting privilege is not desired, please cross out the following resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the Countrywide Pay Through Draft Account (PTDA)
and that until otherwise ordered in writing, Countrywide Fund Services, Inc. is authorized to make redemptions of shares held by the
corporation or organization, and to make payment from PTDA upon and according to the check, draft, note or order of this corporation
or organization when signed by
- ------------------------------------------------------------------------------------------------------------------------
and to receive the same when so signed to the credit of, or payment to, the payee or any other holder without inquiry as
to the circumstances of issue or the disposition or proceeds, whether drawn to the individual order or tendered in payment of
individual obligations of the persons above named or other officers of this corporation or organization or otherwise.
<PAGE>
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
- -------------------------------------------------------------------------------
(Name of Organization)
incorporated or formed under the laws of_______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on _________________
at which a quorum was present and acting throughout, and that the same are
now in full force and effect.
I further certify that the following is (are) duly elected officer(s) of the
corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
- --------------------------------------- ----------------------
- --------------------------------------- ----------------------
- --------------------------------------- ----------------------
Witness my hand and seal of the corporation or organization this________________
day of_____________________________, 19_______
- ----------------------------------- -------------------------------------
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bodgon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
<PAGE>
TABLE OF CONTENTS
Expense Information..............................................
Financial Highlights . . . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies................................
How to Purchase Shares...........................................
Shareholder Services.............................................
How to Redeem Shares.............................................
Exchange Privilege...............................................
Dividends and Distributions......................................
Taxes............................................................
Operation of the Fund............................................
Distribution Plan. . . . ........................................
Calculation of Share Price.......................................
Performance Information..........................................
- ----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1998
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
OHIO TAX-FREE MONEY FUND
INSTITUTIONAL SHARES
The Ohio Tax-Free Money Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of current income exempt
from federal income tax and Ohio personal income tax, consistent with liquidity
and stability of principal. The Fund invests primarily in a portfolio of
high-quality, short-term Ohio municipal obligations.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS.
FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT
OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
The Fund offers two classes of shares: Class A shares ("Retail Shares"),
sold subject to a 12b-1 fee of up to .25% of average daily net assets, and Class
B shares ("Institutional Shares"), sold without a 12b-1 fee. Each Retail and
Institutional Share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Retail Shares bear
the expenses of distribution fees, which will cause Retail Shares to have a
higher expense ratio and to pay lower dividends than Institutional Shares; (ii)
certain class specific expenses will be borne solely by the class to which such
expenses are attributable; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Retail Shares are subject
to a lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional Shares such as checkwriting and
automatic investment and redemption plans.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about Institutional
Shares that you should know before investing. Please retain this Prospectus for
future reference. Retail Shares are offered in a separate prospectus and
additional information about Retail Shares may be obtained by calling one of the
numbers listed below. A Statement of Additional Information dated November 1,
1998 has been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the above number.
For information or assistance in opening an account, please contact your
broker, or call us at the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- 2 -
<PAGE>
EXPENSE INFORMATION
- -------------------
INSTITUTIONAL SHARES
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None
Annual Operating Expenses (as a percentage of average net assets)
Management Fees After Waivers .43%(A)
12b-1 Fees None
Other Expenses After Reimbursements .07%(B)
-------
Total Operating Expenses After
Waivers and Expense Reimbursements .50%(C)
========
(A) Absent waivers of management fees, such fees would have been .44%.
(B) Absent expense reimbursements by the Adviser, other expenses would
have been .08%.
(C) Absent waivers of management fees and expense reimbursements by the
Adviser, total operating expenses would have been .52%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in Institutional Shares will bear
directly or indirectly. The percentages expressing annual operating expenses are
based on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return
and (2) redemption at the end
of each time period: $ 5 $ 16 $ 28 $ 63
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<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1998 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
Per Share Data for a Share Outstanding Throughout Each Period
Year Period
Ended Ended
June 30, June 30,
1998 1997(A)
------- --------
Net asset value at beginning of period ........................$1.000 $1.000
------ ------
Net investment income ..........................................0.033 0.016
----- -----
Dividends from net investment income....................... (0.033) (0.016)
------- -------
Net asset value at end of period...............................$1.000 $1.000
====== ======
Total return....................................................3.33% 3.31%(C)
===== ======
Net assets at end of period (000's)........................... $115,266 $97,589
======== =======
Ratio of expenses to average net assets(B)......................0.50% .50%(C)
Ratio of net investment income to
average net assets..............................................3.27% 3.28%(C)
(A) Represents the period from the initial public offering of
Institutional shares (January 7, 1997) through June 30, 1997.
(B) Absent fee waivers and/or expense reimbursements by the Adviser,
the ratio of expenses to average net assets would have been 0.52%
and 0.56%(C) for the periods ended June 30, 1998 and 1997,
respectively.
(C) Annualized.
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The
Fund seeks the highest level of current income exempt from federal income tax
and Ohio personal income tax, consistent with liquidity and stability of
principal. The Fund is not intended to be a complete investment program, and
there is no assurance that its investment objective can be achieved. The Fund's
investment objective may be changed by the Board of Trustees without shareholder
approval, but only after notification has been given to shareholders and after
this Prospectus has been revised accordingly. If there is a change in the Fund's
investment objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Fund are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
The Fund seeks to achieve its investment objective by investing
primarily in high-quality, short-term Ohio Obligations (described below)
determined by the Adviser, under the direction of the Board of Trustees, to
present minimal credit risks. The Fund will purchase only obligations that
enable it to employ the amortized cost method of valuation. Under the amortized
cost method of valuation, the Fund's obligations are valued at original cost
adjusted for amortization of premium or accumulation of discount, rather than
valued at market. This method should enable the Fund to maintain a stable net
asset value per share. The Fund will invest in obligations which have received a
short-term rating in one of the two highest categories by any two nationally
recognized statistical rating organizations ("NRSROs") or by any one NRSRO if
the obligation is rated by only that NRSRO. The Fund may purchase unrated
obligations determined by the Adviser to be of comparable quality to rated
obligations meeting the Fund's quality standards. These standards must be
satisfied at the time an investment is made. If an obligation ceases to meet
these standards, or if the Board of Trustees believes such obligation no longer
presents minimal credit risks, the Trustees will cause the Fund to dispose of
the obligation as soon as practicable. The Statement of Additional Information
describes ratings of the NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less.
The Fund will invest in obligations with remaining maturities of thirteen months
or less at the time of purchase.
It is a fundamental policy that under normal market conditions the Fund
will invest at least 80% of the value of its net assets in short-term
obligations the interest on which is
- 4 -
<PAGE>
exempt from federal income tax, including the alternative minimum tax, and Ohio
personal income tax. This policy may not be changed without the affirmative vote
of a majority of the outstanding shares of the Fund. The term "majority" of the
outstanding shares means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund.
The Fund may, from time to time, invest in other short-term,
high-quality obligations for temporary defensive purposes (subject to the
fundamental policy that under normal market conditions the Fund will invest at
least 80% of its net assets in obligations the interest on which is exempt from
federal income tax, including the alternative minimum tax, and Ohio personal
income tax). These include, but are not limited to, obligations the interest on
which is exempt from federal, but not Ohio, income tax and taxable obligations
such as certificates of deposit and other bank debt instruments, commercial
paper, obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. Except for temporary defensive
purposes, at no time will more than 20% of the value of the Fund's net assets be
invested in taxable obligations. Under normal market conditions, the Fund
anticipates that not more than 5% of the value of its net assets will be
invested in any one type of taxable obligation. Taxable obligations are more
fully described in the Statement of Additional Information. The Fund may invest
in these other short-term obligations, for example, due to market conditions
under which Ohio Obligations are temporarily unavailable for purchase or
available only in limited amounts, or pending investment of proceeds of sales of
shares or proceeds from the sale of portfolio securities or in anticipation of
redemptions. The Fund reserves the right to hold cash reserves as the Adviser
deems necessary for temporary defensive purposes. Although interest earned on
these short-term obligations is taxable as ordinary income for federal and/or
Ohio income tax purposes, the Fund intends to minimize taxable income through
investment, when possible, in other available securities exempt from federal
and/or Ohio income taxes, including shares of investment companies whose
dividends are tax-exempt. The Fund may invest up to 10% of its total assets in
shares of other investment companies. Investments by the Fund in shares of other
investment companies may result in duplication of advisory and administrative
fees. The Fund will not invest more than 5% of its total assets in securities of
any single investment company and will not purchase more than 3% of the
outstanding voting
- 5 -
<PAGE>
securities of any investment company. The Fund will only invest in securities of
other investment companies which hold themselves out to be money market funds.
Ohio Obligations
----------------
Ohio Obligations are debt obligations issued by the State of Ohio and
its political subdivisions, agencies, authorities and instrumentalities and
other qualifying issuers which pay interest that is, in the opinion of bond
counsel to the issuer, exempt from both federal income tax, including the
alternative minimum tax, and Ohio personal income tax. For purposes of this
definition, Ohio Obligations include participation interests in Ohio Obligations
and shares of an investment company which invests at least 80% of its net assets
in obligations the interest on which is exempt from federal income tax,
including the alternative minimum tax, and Ohio personal income tax. Ohio
Obligations are issued to obtain funds to construct, repair or improve various
public facilities such as airports, bridges, highways, hospitals, housing,
schools, streets and water and sewer works, to pay general operating expenses or
to refinance outstanding debts. They also may be issued to finance various
private activities, including the lending of funds to public or private
institutions for construction of housing, educational or medical facilities or
the financing of privately owned or operated facilities. Ohio Obligations
consist of tax-exempt bonds, tax-exempt notes and tax-exempt commercial paper.
The Statement of Additional Information contains a description of tax-exempt
bonds, notes and commercial paper.
The two principal classifications of Ohio Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax- exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
- 6 -
<PAGE>
The Fund may invest in any combination of general obligation bonds,
revenue bonds and industrial development bonds. The Fund may invest more than
25% of its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on municipal obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest no more than 20% of its net assets in obligations the interest from which
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
The Fund may purchase other types of tax-exempt obligations which may
become available in the future, provided the obligations are consistent with the
Fund's investment objective and policies, the Adviser believes their quality
meets the Fund's quality standards, and this Prospectus has been appropriately
revised to reflect the Fund's policies with respect to such obligations.
Risk Factors
------------
The Fund's yield will fluctuate due to changes in interest rates,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. In addition, the financial condition of an issuer or adverse changes in
general economic conditions, or both, may impair the issuer's ability to make
payments of interest and principal. There is no limit on the percentage of a
single issue of tax-exempt obligations that the Fund may own. If the Fund holds
a significant portion of the obligations of an issuer, there may not be a
readily available market for the obligations. Reduced diversification could
- 7 -
<PAGE>
involve an increased risk to the Fund should an issuer be unable to make
interest or principal payments or should the market value of Ohio Obligations
decline.
There are also risks of reduced diversification because the Fund
invests primarily in obligations of issuers within a single state. The Fund is
more likely to invest its assets in the securities of fewer issuers because of
the relatively smaller number of issuers of Ohio Obligations. The Fund's
performance is closely tied to conditions within the State of Ohio and to the
financial condition of the State and its authorities and municipalities. The
economy in the State of Ohio, once reliant upon durable goods manufacturing,
largely concentrated in motor vehicles and equipment, steel, rubber products and
household appliances, has diversified since the 1980's. This has brought the
State's employment mix more in line with that of the nation, although
manufacturing is still above the national average, at 20.7% of employment in
1996, versus 15.3% for the nation. Statewide employment levels continue to
increase, with total employment in 1997 up 2.4% over the prior year. Ohio's
unemployment rate since 1991 has remained below that of the nation. Although
manufacturing is expected to slow in the future, growth in nonmanufacturing
output and employment, led by the financial services, distribution and trade
sectors, has contributed to greater stability. Other key factors which have
contributed to Ohio's ongoing strong economic performance include strong export
activity, a stable real estate market and a stable banking/financial services
industry. While Ohio has in the past experienced budget shortfalls due to weak
revenue results and higher-than-budgeted human services expenditures, improved
economic performance and sound financial management have enabled the State to
accumulate sizable financial reserves. The State has posted consistently strong
operating results over the past four fiscal years. Fiscal 1997 ended with tax
receipts $334.7 million ahead of estimates and total spending $727.3 million
below estimates, primarily in the human services areas of Medicaid and welfare.
Combined reserves in the general revenue fund exceeded $2.3 billion at June 30,
1997, or 13% of the general revenue fund's $17.6 billion fiscal 1997 budget.
Although revenue obligations of the State of Ohio or its political subdivisions
may be payable from a specific project or source, there can be no assurance that
future economic and political developments and the resulting impact on state and
local governmental finances will not adversely affect the market values and
marketability of the Ohio Obligations held by the Fund or the ability of a
specific issuer to make interest or principal payments.
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may increase the possibility of
fluctuation in
- 8 -
<PAGE>
the Fund's net asset value. As the Fund intends to comply with Subchapter M of
the Internal Revenue Code, it may invest up to 50% of its assets at the end of
each quarter of its fiscal year in as few as two issuers, provided that no more
than 25% of the assets are invested in one issuer. With respect to the remaining
50% of its assets at the end of each quarter, it may invest no more than 5% in
one issuer.
Certain provisions in the Internal Revenue Code relating to the
issuance of municipal obligations may reduce the volume of municipal obligations
qualifying for federal tax exemptions. Shareholders should consult their tax
advisors concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on municipal obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of municipal
obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of municipal
obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
Other Investment Techniques
- ---------------------------
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests
in tax-exempt obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the tax-exempt obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the obligation,
as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net
- 9 -
<PAGE>
assets in participation interests that do not have this demand feature and all
other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating
or variable rate tax-exempt obligations. Floating rate obligations have an
interest rate which is fixed to a specified interest rate, such as a bank prime
rate, and is automatically adjusted when the specified interest rate changes.
Variable rate obligations have an interest rate which is adjusted at specified
intervals to a specified interest rate. Periodic interest rate adjustments help
stabilize the obligations' market values. The Fund may purchase these
obligations from the issuers or may purchase participation interests in pools of
these obligations from banks or other financial institutions. Variable and
floating rate obligations usually carry demand features that permit the Fund to
sell the obligations back to the issuers or to financial intermediaries at par
value plus accrued interest upon not more than 30 days' notice at any time or
prior to specific dates. Certain of these variable rate obligations, often
referred to as "adjustable rate put bonds," may have a demand feature
exercisable on specific dates once or twice each year. The Fund will not invest
more than 10% of its net assets in floating or variable rate obligations as to
which the Fund cannot exercise the demand feature on not more than seven days'
notice if the Adviser, under the direction of the Board of Trustees, determines
that there is no secondary market available for these obligations and all other
illiquid securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when- issued tax-exempt
obligations. Obligations offered on a when- issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or
- 10 -
<PAGE>
liquid securities, marked to market daily, in an amount equal to its when-issued
commitments. Because these transactions are subject to market fluctuations, a
significant commitment to when- issued purchases could result in fluctuation of
the Fund's net asset value. The Fund will only make commitments to purchase
when-issued obligations with the intention of actually acquiring the obligations
and not for the purpose of investment leverage.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase tax-exempt
obligations with the right to resell the obligation to the seller at a specified
price or yield within a specified period. The right to resell is commonly known
as a "put" or a "standby commitment." The Fund may purchase tax-exempt
obligations with puts attached from banks and broker-dealers. The Fund intends
to use obligations with puts attached for liquidity purposes to ensure a ready
market for the underlying obligations at an acceptable price. Although no value
is assigned to any puts on tax-exempt obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. In addition, the value of the obligations with puts attached held by the
Fund will not exceed 10% of its net assets.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the
aggregate up to 10% of its net assets in securities that are not readily
marketable, including: participation interests that are not subject to the
demand feature described above; floating and variable rate obligations as to
which the Fund
- 11 -
<PAGE>
cannot exercise the related demand feature described above and as to which there
is no secondary market; and repurchase agreements not terminable within seven
days.
BORROWING AND PLEDGING. The Fund may borrow money from banks (provided
there is 300% asset coverage) or from banks or other persons for temporary
purposes (in an amount not exceeding 5% of its total assets). The Fund will not
make any borrowing which would cause its outstanding borrowings to exceed
one-third of the value of its total assets. The Fund may pledge assets in
connection with borrowings but will not pledge more than one-third of its total
assets. The Fund will not make any additional purchases of portfolio securities
if outstanding borrowings exceed 5% of the value of its total assets. Borrowing
magnifies the potential for gain or loss on the Fund's portfolio securities and,
therefore, if employed, increases the possibility of fluctuation in its net
asset value. This is the speculative factor known as leverage. The Fund's
policies on borrowing and pledging are fundamental policies which may not be
changed without the affirmative vote of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in Institutional Shares of the Fund ordinarily
must be at least $1,000,000. Shares are sold on a continuous basis at the net
asset value next determined after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an
initial investment in the Fund by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Ohio Tax-Free Money Fund." An account application is included in this
Prospectus.
You will be sent within five business days after the end of each month
a written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others,
- 12 -
<PAGE>
losses resulting from unauthorized shareholder transactions) relating to the
various services (for example, telephone redemptions and exchanges) made
available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund
by wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629- 2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided
you have given notice of your intention to make such investment to the Transfer
Agent by 12:00 noon, Eastern time, on that day. Your investment will be made at
the net asset value next determined after your wire is received together with
the account information indicated above. If the Trust does not receive timely
and complete account information, there may be a delay in the investment of your
money and any accrual of dividends. To make your initial wire purchase, you are
required to mail a completed account application to the Transfer Agent. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account
by mail or by bank wire. Checks should be sent to Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the Fund. Bank wires should be sent as outlined above. You may also make
additional investments at the Trust's offices at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202. Each additional purchase request must contain the name
of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
- 13 -
<PAGE>
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
HOW TO REDEEM SHARES
- --------------------
You may redeem Institutional Shares of the Fund on each day that the
Trust is open for business. You will receive the net asset value per share next
determined after receipt by the Transfer Agent of a proper redemption request in
the form described below. Payment is normally made within three business days
after tender in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been collected,
which may take up to fifteen days from the purchase date. To eliminate this
delay, you may purchase shares of the Fund by certified check, government check
or wire.
A contingent deferred sales load may be imposed on a redemption of
shares of the Fund if such shares had previously been acquired in connection
with an exchange from another fund of Countrywide Investments which imposes a
contingent deferred sales load, as described in the Prospectus of such other
fund.
BY TELEPHONE. You may redeem shares having a value of less than
$25,000 by telephone. The proceeds will be sent by mail to the address
designated on your account or wired directly to your existing account in any
commercial bank or brokerage firm in the United States as designated on yo ur
application. To redeem by telephone, call the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629-2050). The redemption proceeds
will normally be sent by mail or by wire within one business day (but not later
than three business days) after receipt of your telephone instructions. Any
redemption requests by telephone must be received in proper form prior to
12:00 noon, Eastern time, on any business day in order for payment by wire to be
made that day.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
-14-
<PAGE>
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account have been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, you will be required to request the
redemption in writing with your signature guaranteed, regardless of the value
of the shares being redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions
requested by mail are normally mailed within three business days following
receipt of instructions in proper form.
ADDITIONAL REDEMPTION INFORMATION. There is currently no charge for
processing wire redemptions. However, the Trust reserves the right, upon thirty
days' written notice, to make reasonable charges for wire redemptions. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
- 15 -
<PAGE>
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than $1,000,000 (based on actual amounts invested,
unaffected by market fluctuations) or such other minimum amount as the Trust may
determine from time to time. After notification to you of the Trust's intention
to close your account, you will be given thirty days to increase the value of
your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other. A sales load will be imposed equal to the excess,
if any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
- 16 -
<PAGE>
Countrywide Investment Trust
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
You may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. If you
are unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202. An exchange will be effected at the next determined net asset value (or
offering price, if sales load is applicable) after receipt of a request by the
Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
SUBACCOUNTING SERVICES
- ----------------------
Institutions are encouraged to open single master accounts. However,
certain institutions may wish to use the Transfer Agent's subaccounting system
to minimize their internal recordkeeping requirements. The Transfer Agent may
charge a subaccounting fee based on the level of services rendered. Institutions
holding Fund shares in a fiduciary, agency, custodial or similar capacity may
charge or pass through subaccounting fees as part of, or in addition to, normal
trust or agency account fees. This Prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fee charged for those services and any
restrictions and limitations imposed.
- 17 -
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
- ----------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
Dividends are automatically reinvested in additional shares of the Fund
(the Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option. No interest will accrue on amounts represented by
uncashed distribution checks.
TAXES
- ------
The Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified to
pay "exempt-interest dividends," which means that it may pass on to shareholders
the federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. For federal
income tax purposes, a shareholder's proportionate share of taxable
distributions from the Fund's net investment income as well as from net realized
short-term capital gains, if any, is taxable as ordinary income. Since the
Fund's investment income is derived from interest rather than dividends, no
portion of such distributions is eligible for the dividends received deduction
available to corporations.
- 18 -
<PAGE>
Dividends received from the Fund that are exempt from federal income
tax are exempt from the Ohio personal income tax and the net income base of the
Ohio corporation franchise tax to the extent derived from interest on Ohio
Obligations. However, shares of the Fund will be included in the computation of
the Ohio corporation franchise tax on the net worth basis. Distributions
received from the Fund are generally not subject to Ohio municipal income
taxation.
Issuers of tax-exempt securities issued after August 31, 1986 are
required to comply with various restrictions on the use and investment of
proceeds of sales of the securities. Any failure by the issuer to comply with
these restrictions would cause interest on such securities to become taxable to
the security holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax
Reform Act of 1986, is an item of tax preference possibly subject to the
alternative minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Shareholders receiving Social Security benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. The Fund will report to its shareholders the percentage and source of
income earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax and Ohio personal income tax may not result in
similar exemptions under the laws of a particular state or local taxing
authority.
The tax consequences described in this section apply whether
distributions are taken in cash or reinvested in additional shares. The Fund may
not be an appropriate investment for persons who are "substantial users" of
facilities financed by industrial development bonds or are "related persons" to
such users; such persons should consult their tax advisors before investing in
the Fund.
- 19 -
<PAGE>
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, six series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, insurance expenses, taxes or governmental fees, fees and expenses of the
custodian, transfer agent and accounting and pricing agent of the Fund, fees and
expenses of members of the Board of Trustees who are not interested persons of
the Trust, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or non-recurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Trust's officers and Trustees with respect thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
- 20 -
<PAGE>
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Fund shall vote separately on matters relating to its own
distribution arrangements. When matters are submitted to shareholders for a
vote, each shareholder is entitled to one vote for each full share owned and
fractional votes for fractional shares owned. The Trust does not normally hold
annual meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon the removal
of any Trustee when requested to do so in writing by shareholders holding 10% or
more of the Trust's outstanding shares. The Trust will comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 in order to
facilitate communications among shareholders.
The Fifth Third Bank Trust Department, 38 Fountain Square Plaza,
Cincinnati, Ohio, may be deemed to control the Fund by virtue of the fact that
it owns of record more than 25% of the Fund's shares as of the date of this
Prospectus.
- 21 -
<PAGE>
CALCULATION OF SHARE PRICE
- --------------------------
On each day that the Trust is open for business, the share price (net
asset value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis.
In connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
- -----------------------
From time to time the Fund may advertise its "current yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "current yield" of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment. In addition, the Fund may advertise together with its "current
yield" or "effective yield" a tax equivalent "current yield" or "effective
yield" which reflects the yield which would be required of a taxable investment
at a stated income tax rate in order to equal the Fund's "current yield" or
"effective yield." Yields are computed separately for Institutional and Retail
Shares. The yield of Institutional Shares is expected to be higher than the
yield of Retail Shares due to the distribution fees imposed on Retail Shares.
- 22 -
<PAGE>
Account Application
OHIO TAX-FREE MONEY FUND
(Institutional Shares)
ACCOUNT NO. 04 - ________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________________
Home Office Address:___________________________
Branch Address:________________________________
Rep Name & No._________________________________
Initial Investment of $___________________________ ($500,000 Minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________
[ ] Exchange From: __________________________________________________
(Fund Name) (Fund Account Number)
Account Name
_________________________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc.
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian
Address
___________________________________________________________________
Street or P.O. Box
____________________________________________________________________
City State Zip
S.S.#/Tax I.D.#
________________________________________________________
(In case of custodial account please list minor's S.S.#)
Citizenship: ___ U.S. Phone
___ Other ( )______________________
Business Phone
( )______________________
Home Phone
<PAGE>
<TABLE>
<S> <C> <C> <C>
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
- --------------------------------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER - Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I
am not subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a
failure to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have
mailed or delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social
Security Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[ ] Share Option - Income distributions and capital gains distributions automatically reinvested in additional shares.
[ ] Cash Option - Income distributions and capital gains distributions paid in cash.
- --------------------------------------------------------------------------------------------------------------------------
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon receipt of and
in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from my (our) account in
any fund in Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the used of
automated cash transfers to and from the account designated below. NOTE: For wire redemptions, the indicated bank should be a
commercial bank. Please attach a voided check for the account.
Bank Account Number ____________________________________________Bank Routing Transit Number________________________________
Name of Account Holder _____________________________________________________________________________________________________
Bank Name ______________________________________________________Bank Address________________________________________________
City State
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number [ ] [ ] [ ][ ]
(PIN). You will need to use this PIN when requesting account information and placing transactions. For institutional
accounts, please use a four digit number. For retail accounts, please use the first four letters of your mother's
maiden name.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal age,
and that he has full authority and legal capacity for himself or the organization named below, to make this investment and to use
the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares whether
by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of the Fund
for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance with any
of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself
and his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the performance
of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or expense in acting
on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund Services, Inc.,
or both, will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust and/or Countrywide
Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape recording telephone instructions.
- -------------------------------------------------------------
Signature of Individual Owner, Corporate Officer, Trustee, etc.
- --------------------------------------------------------------
Signature of Joint Owner, if Any
- ---------------------------------------------------------------
Title of Corporate Officer, Trustee, etc.
- ---------------------------------------------------------------
Date
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each
joint owner shall have full authority to act on behalf of the account.
<PAGE>
___________________________________________________________________________________________________________________
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Tax-Free Trust (the Trust) and
that
_____________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to
take any action for it as may be necessary or appropriate with respect to its shareholder account with the Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate
to appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the Fund, to
establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the privileges
elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering
documents of the
______________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of
__________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and
held on _________________ at which a quorum was present and acting throughout, and that the same are now in full force and
effect.
I further certify that the following is (are) duly elected officer(s) of the corporation or organization, authorized to
act in accordance with the foregoing resolutions.
Name Title
_______________________________ _______________________________
________________________________ ________________________________
_________________________________ __________________________________
Witness my hand and seal of the corporation or organization this________________day of_____________________________,
19_______
________________________________________________
*Secretary-Clerk
__________________________________________________
Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
<PAGE>
TABLE OF CONTENTS
Expense Information........................................................
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies..........................................
How to Purchase Shares.....................................................
How to Redeem Shares.......................................................
Exchange Privilege.........................................................
Subaccounting Services . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions................................................
Taxes......................................................................
Operation of the Fund......................................................
Calculation of Share Price.................................................
Performance Information....................................................
- ----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1998
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
CALIFORNIA TAX-FREE MONEY FUND
The California Tax-Free Money Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of current income exempt
from federal and California income taxes, consistent with liquidity and
stability of principal, by investing primarily in high-quality, short-term
California municipal obligations.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS.
FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT
OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about the Fund
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 1, 1998 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. A copy of the Statement of Additional Information can
be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please contact
your broker, or call us at the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- 1 -
<PAGE>
EXPENSE INFORMATION
- -------------------
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None*
Check Redemption Processing Fee (per check):
First six checks per month None
Additional checks per month $0.25
* A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How
to Redeem Shares."
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees .50%
12b-1 Fees .05%(A)
Other Expenses .22%
----
Total Fund Operating Expenses .77%
====
(A) The Fund may incur 12b-1 fees in an amount up to .25% of its average
net assets.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example 1 Year 3 Years 5 Years 10 Years
------- ------ ------- ------- --------
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $8 $25 $43 $95
- 2 -
<PAGE>
FINANCIAL HIGHLIGHTS
- ---------------------
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1998 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM DATE
OF PUBLIC
OFFERING
(JULY 25,
1989)
THROUGH
YEAR ENDED JUNE 30, JUNE
--------------------------------------------------------------------- 30,
1998 1997 1996 1995 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------
Net asset value at
beginning of period..............$1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------- ------ ------ -------
Net investment income...............0.029 0.028 0.029 0.029 0.019 0.022 0.035 0.046 0.053
----- ----- ----- ----- ------ ----- ----- ----- ------
Dividends from net
investment income................(0.029) (0.028) (0.029) (0.029) (0.019) (0.022) (0.035) (0.046) (0.053)
------- ------- ------- ------- ------- ------ ------- ------- -------
Net asset value at end
of period........................$1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== =======
Total return........................ 2.94% 2.81% 2.95% 2.95% 1.93% 2.26% 3.71% 4.70% 5.79%(B)
===== ===== ===== ===== ===== ===== ====== ====== ========
Net assets at end
of period (000's)................$41,013 $32,186 $36,122 $19,525 $24,508 $34,487 $21,246 $13,524 $12,205
======= ======= ======= ======= ======= ======= ======= ======= ========
Ratio of expenses to
average net assets(A).............. 0.77% 0.80% 0.80% 0.70% 0.60% 0.56% 0.34% 0.40% 0.08%(B)
Ratio of net investment
income to average net
assets............................. 2.89% 2.76% 2.88% 2.83% 1.90% 2.22% 3.49% 4.56% 5.65%(B)
- ---------------------------------------------------------------------------------------------------------------------
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net
assets would have been 0.82%, 0.85%, 0.86%, 0.85%, 0.89%, 1.01% and 1.15%(B) for the periods ended June 30,
1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively.
(B) Annualized.
</TABLE>
- 3 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The
Fund seeks the highest level of interest income exempt from federal and
California income taxes, consistent with liquidity and stability of principal.
The Fund seeks to achieve its investment objective by investing primarily in
high-quality, short-term California Obligations determined by the Adviser, under
the direction of the Board of Trustees, to present minimal credit risks.
California Obligations are debt obligations issued by the State of California
and its political subdivisions, agencies, authorities and instrumentalities and
other qualifying issuers which pay interest that is, in the opinion of bond
counsel to the issuer, exempt from both federal income tax, including the
alternative minimum tax, and California income tax. To the extent acceptable
California Obligations are at any time unavailable for investment by the Fund,
the Fund will invest, for temporary defensive purposes, primarily in other debt
securities, the interest from which is, in the opinion of bond counsel to the
issuer, exempt from federal, but not California, income tax.
The Fund is not intended to be a complete investment program, and there
is no assurance that its investment objective can be achieved. The Fund's
investment objective is fundamental and as such may not be changed without the
affirmative vote of a majority of its outstanding shares. The term "majority" of
the outstanding shares means the lesser of (1) 67% or more of the outstanding
shares of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund. Unless otherwise indicated,
all investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
Municipal Obligations
---------------------
Debt securities, the interest from which is, in the opinion of bond
counsel to the issuer, exempt from federal income tax ("Municipal Obligations")
generally include debt obligations issued to obtain funds to construct, repair
or improve various public facilities such as airports, bridges, highways,
hospitals, housing, schools, streets and water and sewer works, to pay general
operating expenses or to refinance outstanding debts. They also may be issued to
finance various private activities, including the lending of funds to public or
private institutions for construction of housing, educational or medical
facilities or the financing of privately owned or operated facilities. Municipal
Obligations consist of tax-exempt bonds, tax-exempt notes and tax-exempt
commercial paper. The Statement of Additional Information contains a description
of tax-exempt bonds, notes and commercial paper.
- 4 -
<PAGE>
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax- exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
Basic Investment Policies
-------------------------
It is a fundamental policy that under normal market conditions the Fund
will invest at least 80% of the value of its net assets in short-term
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. This policy may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. Under
normal market conditions, at least 65% of the value of the Fund's total assets
will be invested in California Obligations and the remainder may be invested in
obligations that are not California Obligations and therefore are subject to
California income tax (see "Taxes"). When the Fund has adopted a temporary
defensive position (including circumstances when acceptable California
Obligations are unavailable for investment by the Fund), the Fund may invest
more than 35% of its total assets in obligations that are not exempt from
California income tax.
The Fund seeks to achieve its investment objective by investing in
high-quality, short-term Municipal Obligations determined by the Adviser, under
the direction of the Board of Trustees, to present minimal credit risks. The
Fund will purchase only obligations that enable it to employ the amortized cost
method of valuation. Under the amortized cost method of valuation, the Fund's
obligations are valued at original cost adjusted for amortization of premium or
accumulation of discount, rather than valued at market. This method should
enable the Fund to maintain a stable net asset value per share. The Fund will
invest in obligations which have received a short-term rating in
- 5 -
<PAGE>
one of the two highest categories by any two nationally recognized statistical
rating organizations ("NRSROs") or by any one NRSRO if the obligation is rated
by only that NRSRO. The Fund may purchase unrated obligations determined by the
Adviser to be of comparable quality to rated obligations meeting the Fund's
quality standards. These standards must be satisfied at the time an investment
is made. If an obligation ceases to meet these standards, or if the Board of
Trustees believes such obligation no longer presents minimal credit risks, the
Trustees will cause the Fund to dispose of the obligation as soon as
practicable. The Statement of Additional Information describes ratings of the
NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less.
The Fund will invest in obligations with remaining maturities of thirteen months
or less at the time of purchase.
The Fund may invest in any combination of general obligation bonds,
revenue bonds and industrial development bonds. The Fund may invest more than
25% of its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on Municipal Obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest no more than 20% of its net assets in obligations the interest from which
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
The Fund may, from time to time, invest in taxable short-term,
high-quality obligations (subject to the fundamental policy that under normal
market conditions the Fund will invest at least
- 6 -
<PAGE>
80% of its net assets in obligations the interest on which is exempt from
federal income tax, including the alternative minimum tax). These include, but
are not limited to, certificates of deposit and other bank debt instruments,
commercial paper, obligations issued by the U.S. Government or any of its
agencies or instrumentalities and repurchase agreements. Interest earned from
such investments will be taxable to investors. Except for temporary defensive
purposes, at no time will more than 20% of the value of the Fund's net assets be
invested in taxable obligations. Under normal market conditions, the Fund
anticipates that not more than 5% of the value of its net assets will be
invested in any one type of taxable obligation. Taxable obligations are more
fully described in the Statement of Additional Information.
Risk Factors
-------------
The Fund's yield will fluctuate due to changes in interest rates,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. In addition, the financial condition of an issuer or adverse changes in
general economic conditions, or both, may impair the issuer's ability to make
payments of interest and principal. There is no limit on the percentage of a
single issue of Municipal Obligations that the Fund may own. If the Fund holds a
significant portion of the obligations of an issuer, there may not be a readily
available market for the obligations. Reduced diversification could involve an
increased risk to the Fund should an issuer be unable to make interest or
principal payments or should the market value of Municipal Obligations decline.
There are also risks of reduced diversification because the Fund
invests primarily in obligations of issuers within a single state. The Fund is
more likely to invest its assets in the securities of fewer issuers because of
the relatively smaller number of issuers of California Obligations. The Fund's
performance is closely tied to conditions within the State of California and to
the financial condition of the State and its authorities and municipalities. The
nationwide recession of the early 1990s severely affected several key industries
in California's economy, such as defense, aerospace and high technology.
However, gains in the export, entertainment, tourism and computer services
sectors have helped drive the recent recovery. The state's economy remains very
broad-based as manufacturing represents just 15% of state employment, with
services representing 31% and trade at 23%. Although California's job growth
rate now outpaces the nation, unemployment remains above the national level.
However, the long-term decline in wealth levels relative to the nation appears
to have stabilized, as personal income growth in 1998 was 7.2%.
- 7 -
<PAGE>
The economic upturn has led to improved state finances, after the 1990s
recession caused deficits in the general fund balances. Increased liquidity has
eliminated the need to borrow externally across fiscal years for cash flow
purposes. In the past, overly optimistic assumptions have caused extremely large
variances from budget. However, more conservative budgeting and economic gains
have allowed positive or close to break-even operating results since 1995,
gradually moving the state's unreserved general fund balance deficit to a
positive accumulated surplus at fiscal year-end 1998 of $521 million or 1% of
expenditures. The 1999 budget reflects reasonable economic and expenditure
assumptions and grants both tax-cuts and additional spending. Nevertheless, the
state's cash position remains poor, due to the need to carry the school loans,
although other internally borrowable funds have grown enough in recent years to
substantially reduce the size of the state's external note borrowing. The
state's future budgets will be challenged by school enrollment growth,
Proposition 98 mandates, prison funding required by new mandatory sentencing
laws, social services needs and a two-thirds legislative requirement for budget
passage. These impediments will offset some of the economic benefits of the
state's recovery. In addition, political pressures have made it difficult to
maintain substantial fund balances. On October 2, 1998, Moody's Investors
Service, Inc. upgraded California's general obligation debt rating from A1 to
Aa3. The upgrade reflects the state's continuing economic recovery, coupled with
a number of actions taken in the recent legislative budget session to improve
the state's credit condition, including the rebuilding of cash and budget
reserves. Although no issuers of California Obligations are currently in default
on their payments of interest and principal, the occurrence of a default could
adversely affect the market values and marketability of all California
Obligations and, consequently, the net asset value of the Fund.
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may increase the possibility of
fluctuation in the Fund's net asset value. As the Fund intends to comply with
Subchapter M of the Internal Revenue Code, it may invest up to 50% of its assets
at the end of each quarter of its fiscal year in as few as two issuers, provided
that no more than 25% of the assets are invested in one issuer. With respect to
the remaining 50% of its assets at the end of each quarter, it may invest no
more than 5% in one issuer.
- 8 -
<PAGE>
Certain provisions in the Internal Revenue Code relating to the
issuance of Municipal Obligations may reduce the volume of Municipal Obligations
qualifying for federal tax exemptions. Shareholders should consult their tax
advisors concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on Municipal Obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
Other Investment Techniques
----------------------------
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests
in Municipal Obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating
or variable rate Municipal Obligations. Floating rate obligations have an
interest rate which is fixed to a specified interest rate, such as a bank prime
rate, and is automatically adjusted when the specified interest rate changes.
- 9 -
<PAGE>
Variable rate obligations have an interest rate which is adjusted at specified
intervals to a specified interest rate. Periodic interest rate adjustments help
stabilize the obligations' market values. The Fund may purchase these
obligations from the issuers or may purchase participation interests in pools of
these obligations from banks or other financial institutions. Variable and
floating rate obligations usually carry demand features that permit the Fund to
sell the obligations back to the issuers or to financial intermediaries at par
value plus accrued interest upon not more than 30 days' notice at any time or
prior to specific dates. Certain of these variable rate obligations, often
referred to as "adjustable rate put bonds," may have a demand feature
exercisable on specific dates once or twice each year. The Fund will not invest
more than 10% of its net assets in floating or variable rate obligations as to
which the Fund cannot exercise the demand feature on not more than seven days'
notice if the Adviser, under the direction of the Board of Trustees, determines
that there is no secondary market available for these obligations and all other
illiquid securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued Municipal
Obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or liquid
securities, marked to market daily, in an amount equal to its when-issued
commitments. Because these transactions are subject to market fluctuations, a
significant commitment to when- issued purchases could result in fluctuation of
the Fund's net asset value. The Fund will only make commitments to purchase
when-issued obligations with the intention of actually acquiring the obligations
and not for the purpose of investment leverage. No additional when-issued
commitments will be made if more than 20% of the Fund's net assets would be so
committed.
- 10 -
<PAGE>
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase Municipal
Obligations with the right to resell the obligation to the seller at a specified
price or yield within a specified period. The right to resell is commonly known
as a "put" or a "standby commitment." The Fund may purchase Municipal
Obligations with puts attached from banks and broker-dealers. The Fund intends
to use obligations with puts attached for liquidity purposes to ensure a ready
market for the underlying obligations at an acceptable price. Although no value
is assigned to any puts on Municipal Obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the
aggregate up to 10% of its net assets in securities that are not readily
marketable, including: participation interests that are not subject to the
demand feature described above; floating and variable rate obligations as to
which the Fund cannot exercise the related demand feature described above and as
to which there is no secondary market; and repurchase agreements not terminable
within seven days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or
emergency purposes, the Fund may borrow money from banks in an amount not
exceeding 10% of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than 10% of its total assets. The Fund will
not make any additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total
- 11 -
<PAGE>
assets. Borrowing magnifies the potential for gain or loss on the Fund's
portfolio securities and, therefore, if employed, increases the possibility of
fluctuation in its net asset value. This is the speculative factor known as
leverage. To reduce the risks of borrowing, the Fund will limit its borrowings
as described above. The Fund's policies on borrowing and pledging are
fundamental policies which may not be changed without the affirmative vote of a
majority of its outstanding shares.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at least $1,000.
However, the minimum initial investment for employees, shareholders and
customers of Countrywide Credit Industries, Inc. or any affiliated company,
including members of the immediate family of such individuals, is $50. Shares of
the Fund are sold on a continuous basis at the net asset value next determined
after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an
initial investment in the Fund by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"California Tax-Free Money Fund." An account application is included in this
Prospectus.
You will be sent within five business days after the end of each month
a written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares of the Fund are not issued. The Trust and the Adviser
reserve the rights to limit the amount of investments and to refuse to sell to
any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
- 12 -
<PAGE>
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund
by wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629- 2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided
you have given notice of your intention to make such investment to the Transfer
Agent by 4:00 p.m., Eastern time, on the preceding business day (or 12:00 noon,
Eastern time, on the same day of a wire investment in the case of investors
utilizing institutions that have made appropriate arrangements with the Transfer
Agent). Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to the Transfer Agent. Your bank may impose a
charge for sending your wire. There is presently no fee for receipt of wired
funds, but the Transfer Agent reserves the right to charge shareholders for this
service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account
by mail or by bank wire. Checks should be sent to Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the Fund. Bank wires should be sent as outlined above. You may also make
additional investments at the Trust's offices at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202. Each additional purchase request must contain the name
of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between
- 13 -
<PAGE>
the customer and the participating institution with regard to the services
provided, the fees charged for these services and any restrictions and
limitations imposed.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
DIRECT DEPOSIT PLANS
Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.
INVESTPLUS PLAN
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of the Fund on each day that the Trust is open
for business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
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check will be effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this delay, you may
purchase shares of the Fund by certified check, government check or wire.
A contingent deferred sales load may be imposed on a redemption of
shares of the Fund if such shares had previously been acquired in connection
with an exchange from another fund of Countrywide Investments which imposes a
contingent deferred sales load, as described in the Prospectus of such other
fund.
BY TELEPHONE. You may redeem shares having a value of less than
$25,000 by telephone. The proceeds will be sent by mail to the address
designated on your account or wired directly to your existing account in any
commercial bank or brokerage firm in the United States as designated on your
application. To redeem by telephone, call the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629-2050). The redemption proceeds
will normally be sent by mail or by wire within one business day (but not later
than three business days) after receipt of your telephone instructions. Any
redemption requests by telephone must be received in proper form prior to 12:00
noon, Eastern time, on any business day in order for payment by wire to be made
that day.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account have been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification
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<PAGE>
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent. The request must state the
number of shares to be redeemed and your account number. The request must be
signed exactly as your name appears on the Trust's account records. If the
shares to be redeemed have a value of $25,000 or more, your signature must be
guaranteed by any of the eligible guarantor institutions outlined above. If the
name(s) or the address on your account has been changed within 30 days of your
redemption request, you will be required to request the redemption in writing
with your signature guaranteed, regardless of the value of the shares being
redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on
your account application for telephone redemptions. Proceeds of redemptions
requested by mail are normally mailed within three business days following
receipt of instructions in proper form.
BY CHECK. You may establish a special checking account with the Fund
for the purpose of redeeming shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer
Agent, as your agent, will cause the Fund to redeem a sufficient number of full
and fractional shares in your account to cover the amount of the check.
If the amount of a check is greater than the value of the shares held
in your account, the check will be returned. A check representing a redemption
request will take precedence over any other redemption instructions issued by a
shareholder.
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals.
The Transfer Agent charges shareholders its costs for each stop payment
and each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your
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account by redemption of shares in your account. The check redemption procedure
may be suspended or terminated at any time upon written notice by the Trust or
the Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar
program with a financial institution are not eligible for the checkwriting
privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee. The Trust reserves
the right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested, unaffected by market fluctuations) or
such other minimum amount as the Trust may determine from time to time. After
notification to you of the Trust's intention to close your account, you will be
given thirty days to increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- -------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other. A sales load will be imposed equal to the excess,
if any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
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<PAGE>
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Intermediate Bond Fund
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to shareholders. An exchange results in a
sale of fund shares, which may cause you to recognize a capital gain or loss.
Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term
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capital gains. Although the Fund does not expect to realize any long-term
capital gains, if the Fund does realize such gains it will distribute them at
least once each year. The Fund will, at the time dividends are paid, designate
as tax-exempt the same percentage of the distribution as the actual tax-exempt
income earned during the period covered by the distribution bore to total income
earned during the period; the percentage of the distribution which is tax-exempt
may vary from distribution to distribution.
Dividends are automatically reinvested in additional shares of the Fund (the
Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option. No interest will accrue on amounts represented by
uncashed distribution checks.
TAXES
- -----
The Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The Fund also intends
to meet all IRS requirements necessary to ensure that it is qualified to pay
"exempt-interest dividends," which means that it may pass on to shareholders the
federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment income
and any net realized capital gains to its shareholders. Except for dividends
from taxable investments, the Fund anticipates that substantially all dividends
paid by the Fund will not be subject to California state income tax. For federal
income tax purposes, a shareholder's proportionate share of taxable
distributions from the Fund's net investment income as well as from net realized
short-term capital gains, if any, is taxable as ordinary income. Since the
Fund's investment income is derived from interest rather than dividends, no
portion of such distributions is eligible for the dividends received deduction
available to corporations.
Issuers of tax-exempt securities issued after August 31, 1986 are required to
comply with various restrictions on the use and investment of proceeds of sales
of the securities. Any failure by the issuer to comply with these restrictions
would cause interest on such securities to become taxable to the security
holders as of the date the securities were issued.
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<PAGE>
Interest on "specified private activity bonds," as defined by the Tax Reform
Act of 1986, is an item of tax preference possibly subject to the alternative
minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Shareholders receiving Social Security benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
The Fund will report to its shareholders the percentage and source of income
earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax and California state income tax may not result
in similar exemptions under the laws of a particular state or local taxing
authority.
The tax consequences described in this section apply whether distributions are
taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, six series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is
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<PAGE>
an indirect wholly-owned subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange listed company principally engaged in the business of
residential mortgage lending. The Fund pays the Adviser a fee equal to the
annual rate of .5% of the average value of its daily net assets up to $100
million; .45% of such assets from $100 million to $200 million; .4% of such
assets from $200 million to $300 million; and .375% of such assets in excess of
$300 million.
The Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. The officers of the
Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the
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<PAGE>
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The
Adviser (not the Fund) pays the Transfer Agent a fee for these administrative
services.
Consistent with the rules of the National Association of Securities Dealers,
Inc., and subject to its objective of seeking best execution of portfolio
transactions, the Adviser may give consideration to sales of shares of the Fund
as a factor in the selection of brokers and dealers to execute portfolio
transactions of the Fund. Subject to the requirements of the Investment Company
Act of 1940 and procedures adopted by the Board of Trustees, the Fund may
execute portfolio transactions through any broker or dealer and pay brokerage
commissions to a broker (i) which is an affiliated person of the Trust, or (ii)
which is an affiliated person of such person, or (iii) an affiliated person of
which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. When matters are submitted
to shareholders for a vote, each shareholder is entitled to one vote for each
full share owned and fractional votes for fractional shares owned. The Trust
does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
DISTRIBUTION PLAN
- ------------------
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund has
adopted a plan of distribution (the "Plan") under which the Fund may directly
incur or reimburse the Adviser for certain distribution-related expenses,
including payments to securities dealers and others who are engaged in the sale
of shares of the Fund and who may be advising investors regarding the purchase,
sale or retention of Fund shares; expenses of maintaining personnel who engage
in or support distribution of shares or who render shareholder support services
not otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Fund;
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<PAGE>
expenses of obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to time, deem
advisable; and any other expenses related to the distribution of the Fund's
shares.
Pursuant to the Plan, the Fund may make payments to dealers and other persons,
including the Adviser and its affiliates, who may be advising investors
regarding the purchase, sale or retention of shares of the Fund. For the fiscal
year ended June 30, 1998, the Fund paid $15,000 to the Adviser to reimburse it
for payments made to dealers and other persons who may be advising shareholders
in this regard.
The annual limitation for payment of expenses pursuant to the Plan is .25% of
the Fund's average daily net assets. Unreimbursed expenditures will not be
carried over from year to year. In the event the Plan is terminated by the Fund
in accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Adviser after the date the Plan terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
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<PAGE>
CALCULATION OF SHARE PRICE
- --------------------------
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
- -----------------------
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. In
addition, the Fund may advertise together with its "current yield" or "effective
yield" a tax equivalent "current yield" or "effective yield" which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's "current yield" or "effective yield."
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<PAGE>
<TABLE>
<S> <C>
Account Application ACCOUNT NO. 24-_______________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354 FOR BROKER/DEALER USE ONLY
Cincinnati, Ohio 45201-5354 Firm Name:______________________________________
CALIFORNIA TAX-FREE MONEY FUND HOME OFFICE ADDRESS:____________________________
BRANCH ADDRESS:_________________________________
Rep Name & No.:_________________________________
_________________________________________________________________________________________________________________________________
Initial Investment of $___________________________
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________________________________________________________
[ ] Exchange From: _________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________ _______________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_________________________________________________________________ Citizenship: [ ] U.S.
Name of Joint Tenant, Partner, Custodian [ ] Other _____________________
Address Phone
___________________________________________________________________ ( )____________________________________
Street or P.O. Box Business Phone
___________________________________________________________________ ( )____________________________________
City State Zip Home Phone
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
- -------------------------------------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER - Under penalties of perjury I certify that the Taxpayer Identification Number listed above is my
correct number. The Internal Revenue Service does not require my consent to any provision of this document other than the
certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
[ ] Reinvest all distributions
[ ] Pay all distributions in cash [ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
<PAGE>
- -------------------------------------------------------------------------------------------------------------------
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon receipt of
and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from my (our) account in
any fund of Countrywide Investements (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the used of automated
cash transfers to and from the account designated below. NOTE: For wire redemptions, the indicated bank should be a
commercial bank. Please attach a voided check for the account.
Bank Account Number ____________________________________________Bank Routing Transit Number ________________________________
Name of Account Holder _____________________________________________________________________________________________________
Bank Name ______________________________________________________Bank Address________________________________________________
City State
[ ] CHECKWRITING (A signature card must be completed)
... to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA) or otherwise
arrange for application of such proceeds to payment of said checks. I (we) authorize the persons whose signatures appear on
the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our) shares of the Trust. I (we) agree
to be bound by the Rules and Regulations for the Countrywide Pay Through Draft Account as such Rules and Regulations may
be amended from time to time
- -------------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number [ ][ ][ ][ ]
(PIN). You will need to use this PIN when requesting account information and placing transactions. For institutional
accounts, please use a four digit number. For retail accounts, please use the first four letters of your mother's
maiden name.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares
of the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself
and his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the performance
of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or expense
in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund
Services, Inc., or both, will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust
and/or Countrywide Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions.
- ---------------------------------------------------------------- --------------------------------------------------------
Signature of Individual Owner, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
- ---------------------------------------------------------------- --------------------------------------------------------
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each
joint owner shall have full authority to act on behalf of the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Tax-Free Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per
month. For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ __________per month in the California Tax-Free Money Fund. ABA Routing Number_______________________
FI Account Number________________________
[ ] Checking Account [ ] Savings Account
- -------------------------------------------------------------------------
Name of Financial Institution (FI) Please make my automatic investment on:
[ ] the last business day of each month
_________________________________________________________________________ [ ] the 15th day of each month
City State [ ] both the 15th and last business day
X________________________________________________________________________ X_______________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign
exactly as signature appears on your FI's records.)
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account for the
Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous payment;
your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from either
party to the other.
___________________________________________________________________________________________________________________________________
<PAGE>
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________________ from my account beginning the last business day of
the month of _____________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ____ ____ _ ____ ____ ____ ____
____ ____ _ ____
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated
below. I understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire
will be completed in one business day and that there is an $8.00 fee.
Please attach a voided _______________________________________________________________________________________
check for ACH or bank wire Bank Name Bank Address
________________________________________________________________________________________
Bank ABA# Account # Account Name
[ ] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address
below:
Name of payee_____________________________________________________________________________________________________________
Please send to: __________________________________________________________________________________________________________
Street address City State Zip
- ----------------------------------------------------------------------------------------------------------------------------
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Tax-Free Trust (the Trust) and that
_________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the Fund, to
establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the privileges
elected on the Application, and it is (If checkwriting privilege is not desired, please cross out the following resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the Countrywide Pay Through Draft Account (PTDA) and
that until otherwise ordered in writing, Countrywide Fund Services, Inc. is authorized to make redemptions of shares held by the
corporation or organization, and to make payment from PTDA upon and according to the check, draft, note or order of this
corporation or organization when signed by
____________________________________________________________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the payee or any other holder without inquiry as to the
circumstances of issue or the disposition or proceeds, whether drawn to the individual order or tendered in payment of
individual obligations of the persons above named or other officers of this corporation or organization or otherwise.
<PAGE>
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of
the
- ----------------------------------------------------------------------------------------------------------------------------
(Name of Organization)
incorporated or formed under the laws of ___________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
_________________ at which a quorum was present and acting throughout, and that the same are now in full force and effect.
I further certify that the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in
accordance with the foregoing resolutions.
Name Title
- ---------------------------------------------------------------- ------------------------------------------------
- ---------------------------------------------------------------- ------------------------------------------------
- ---------------------------------------------------------------- ------------------------------------------------
Witness my hand and seal of the corporation or organization this________________day of_____________________________, 19_______
- ---------------------------------------------------------------- ------------------------------------------------
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be signed
by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bodgon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
<PAGE>
TABLE OF CONTENTS
Expense Information..................................................
Financial Highlights ................................................
Investment Objective and Policies....................................
How to Purchase Shares...............................................
Shareholder Services.................................................
How to Redeem Shares.................................................
Exchange Privilege...................................................
Dividends and Distributions..........................................
Taxes................................................................
Operation of the Fund................................................
Distribution Plan. . . . ............................................
Calculation of Share Price...........................................
Performance Information..............................................
- ----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1998
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnat, Ohio 45202-4094
800-543-0407
FLORIDA TAX-FREE MONEY FUND
RETAIL SHARES
-----------------------------
The Florida Tax-Free Money Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of interest income exempt
from federal income tax, consistent with liquidity and stability of principal,
by investing primarily in high-quality, short-term Florida municipal obligations
the value of which is exempt from the Florida intangible personal property tax.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS.
FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT
OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
The Fund offers two classes of shares: Class A shares ("Retail Shares"),
sold subject to a 12b-1 fee of up to .25% of average daily net assets, and Class
B shares ("Institutional Shares"), sold without a 12b-1 fee. Each Retail and
Institutional Share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Retail Shares bear
the expenses of distribution fees, which will cause Retail Shares to have a
higher expense ratio and to pay lower dividends than Institutional Shares; (ii)
certain class specific expenses will be borne solely by the class to which such
expenses are attributable; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Retail Shares are subject
to a lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional Shares such as checkwriting and
automatic investment and redemption plans.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about Retail Shares
that you should know before investing. Please retain this Prospectus for future
reference. Institutional Shares are offered in a separate prospectus and
additional information about Institutional Shares may be obtained by calling one
of the numbers listed below. A Statement of Additional Information dated
November 1, 1998 has been filed with the Securities and Exchange Commission and
is hereby incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling the above
number.
For further information or assistance in opening an account, please contact
your broker, or call us at the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- 2 -
<PAGE>
EXPENSE INFORMATION
RETAIL SHARES
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None*
Check Redemption Processing Fee (per check):
First six checks per month None
Additional checks per month $0.25
* A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How
to Redeem Shares."
Annual Operating Expenses (as a percentage of average net assets)
Management Fees After Waivers .30%(A)
12b-1 Fees .20%(B)
Other Expenses .25%
----
Total Operating Expenses After Waivers .75%(C)
====
(A) Absent waivers of management fees, such fees would have been .50%.
(B) Retail Shares may incur 12b-1 fees in an amount up to .25% of
average net assets.
(C) Absent waivers of management fees, total operating expenses would have
been .95%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in Retail Shares will bear directly
or indirectly. The percentages expressing annual operating expenses are based on
amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) redemption at the end
of each time period: $ 8 $ 24 $42 $ 93
- 2 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1998 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Period
Ended
Year Ended June 30, June 30,
-------------------------------------------------------
1998 1997 1996 1995 1994 1993(A)
---- ---- ---- ---- ---- -----
Net asset value at beginning
of period................................................$1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------
Net investment income.......................................0.030 0.029 0.032 0.031 0.021 0.016
----- ----- ----- ----- ----- -----
Dividends from net
investment income.................................... (0.030) (0.029) (0.032) (0.031) (0.021) (0.016)
------- ------- ------- ------- ------- -------
Net asset value at end of
period...................................................$1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ======
Total return................................................3.03% 2.90% 3.29% 3.17% 2.11% 2.49%(C)
===== ===== ===== ===== ===== ======
Net assets at end of period
(000's)..................................................$14,368 $22,434 $28,906 $24,119 $26,276 $21,907
======= ======= ======= ======= ======= =======
Ratio of expenses to average
net assets(B).............................................0.75% 0.75% 0.61% 0.66% 0.58% 0.34%(C)
Ratio of net investment income
to average net assets.....................................2.98% 2.85% 3.24% 3.12% 2.10% 2.41%(C)
(A)Represents the period from the initial public offering of Retail shares (November 13, 1992) through June 30, 1993.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets
would have been 0.95%, 0.94%, 0.80%, 0.80%, 0.81% and 0.94% (C) for the periods ended June 30, 1998, 1997, 1996, 1995,
1994 and 1993, respectively.
(C)Annualized.
</TABLE>
- 3 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The Fund
seeks the highest level of interest income exempt from federal income tax,
consistent with liquidity and stability of principal. The Fund seeks to achieve
its investment objective by investing primarily in high-quality, short-term
Florida Obligations determined by the Adviser, under the direction of the Board
of Trustees, to present minimal credit risks. Florida Obligations are debt
obligations issued by the State of Florida and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax, including the alternative minimum tax, and the value of
which is exempt from the Florida intangible personal property tax. To the extent
acceptable Florida Obligations are at any time unavailable for investment by the
Fund, the Fund will invest, for temporary defensive purposes, primarily in other
debt securities, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from federal income tax, but which are not Florida
Obligations.
The Fund is not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved. The Fund's investment
objective is fundamental and as such may not be changed without the affirmative
vote of a majority of its outstanding shares. The term "majority" of the
outstanding shares means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund. Unless otherwise indicated,
all investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
Municipal Obligations
---------------------
Debt securities, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from federal income tax ("Municipal Obligations") generally
include debt obligations issued to obtain funds to construct, repair or improve
various public facilities such as airports, bridges, highways, hospitals,
housing, schools, streets and water and sewer works, to pay general operating
expenses or to refinance outstanding debts. They also may be issued to finance
various private activities, including the lending of funds to public or private
institutions for construction of housing, educational or medical facilities or
the financing of privately owned or operated facilities. Municipal Obligations
consist of tax-exempt bonds, tax-exempt
- 4 -
<PAGE>
notes and tax-exempt commercial paper. The Statement of Additional Information
contains a description of tax-exempt bonds, notes and commercial paper.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax- exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
Basic Investment Policies
-------------------------
It is a fundamental policy that under normal market conditions the Fund will
invest at least 80% of the value of its net assets in short-term obligations the
interest on which is exempt from federal income tax, including the alternative
minimum tax. This policy may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. Under normal market conditions,
at least 65% of the value of the Fund's total assets will be invested in Florida
Obligations and the remainder may be invested in obligations that are not
Florida Obligations. When the Fund has adopted a temporary defensive position
(including circumstances when acceptable Florida Obligations are unavailable for
investment by the Fund), the Fund may invest more than 35% of its total assets
in obligations that are not Florida Obligations.
The Fund seeks to achieve its investment objective by investing in
high-quality, short-term Municipal Obligations determined by the Adviser, under
the direction of the Board of Trustees, to present minimal credit risks. The
Fund will purchase only obligations that enable it to employ the amortized cost
method of valuation. Under the amortized cost method of valuation, the Fund's
obligations are valued at original cost adjusted for amortization of premium or
accumulation of discount,
- 5 -
<PAGE>
rather than valued at market. This method should enable the Fund to maintain a
stable net asset value per share. The Fund will invest in obligations which have
received a short-term rating in one of the two highest categories by any two
nationally recognized statistical rating organizations ("NRSROs") or by any one
NRSRO if the obligation is rated by only that NRSRO. The Fund may purchase
unrated obligations determined by the Adviser to be of comparable quality to
rated obligations meeting the Fund's quality standards. These standards must be
satisfied at the time an investment is made. If an obligation ceases to meet
these standards, or if the Board of Trustees believes such obligation no longer
presents minimal credit risks, the Trustees will cause the Fund to dispose of
the obligation as soon as practicable. The Statement of Additional Information
describes ratings of the NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less. The Fund
will invest in obligations with remaining maturities of thirteen months or less
at the time of purchase.
The Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. The Fund may invest more than 25% of its
assets in tax-exempt obligations issued by municipal governments or political
subdivisions of governments within a particular segment of the bond market, such
as housing agency bonds, hospital revenue bonds or airport bonds. It is possible
that economic, business or political developments or other changes affecting one
bond may also affect other bonds in the same segment in the same manner, thereby
potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of its total
assets in industrial development bonds which, although issued by industrial
development authorities, may be backed only by the assets and revenues of the
nongovernmental users. However, the Fund will not invest more than 25% of its
assets in securities backed by nongovernmental users which are in the same
industry. Interest on Municipal Obligations (including certain industrial
development bonds) which are private activity obligations, as defined in the
Internal Revenue Code, issued after August 7, 1986, while exempt from federal
income tax, is a preference item for purposes of the alternative minimum tax.
Where a regulated investment company receives such interest, a proportionate
share of any exempt-interest dividend paid by the investment company will be
treated as such a preference item to shareholders. The Fund will invest no more
than 20% of its net assets in obligations the interest from which gives rise to
a preference item for the purpose of the alternative minimum tax and in other
investments subject to federal income tax.
- 6 -
<PAGE>
The Fund may, from time to time, invest in taxable short-term, high-quality
obligations (subject to the fundamental policy that under normal market
conditions the Fund will invest at least 80% of its net assets in obligations
the interest on which is exempt from federal income tax, including the
alternative minimum tax). These include, but are not limited to, certificates of
deposit and other bank debt instruments, commercial paper, obligations issued by
the U.S. Government or any of its agencies or instrumentalities and repurchase
agreements. Interest earned from such investments will be taxable to investors.
Except for temporary defensive purposes, at no time will more than 20% of the
value of the Fund's net assets be invested in taxable obligations. Under normal
market conditions, the Fund anticipates that not more than 5% of the value of
its net assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional Information.
Risk Factors
------------
The Fund's yield will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the Adviser.
In addition, the financial condition of an issuer or adverse changes in general
economic conditions, or both, may impair the issuer's ability to make payments
of interest and principal. There is no limit on the percentage of a single issue
of Municipal Obligations that the Fund may own. If the Fund holds a significant
portion of the obligations of an issuer, there may not be a readily available
market for the obligations. Reduced diversification could involve an increased
risk to the Fund should an issuer be unable to make interest or principal
payments or should the market value of Municipal Obligations decline.
There are also risks of reduced diversification because the Fund invests
primarily in obligations of issuers within a single state. The Fund is more
likely to invest its assets in the securities of fewer issuers because of the
relatively smaller number of issuers of Florida Obligations. The Fund's
performance is closely tied to conditions within the State of Florida and to the
financial condition of the State and its authorities and municipalities. Under
current law, the State of Florida is required to maintain a balanced budget such
that current expenses are met from current revenues. Florida does not currently
impose a tax on personal income but does impose taxes on corporate income
derived from activities within the state. In addition, Florida imposes an ad
valorem tax on intangible personal property as well as sales and use taxes.
These taxes are the principal source of funds to meet state expenses, including
repayment of, and interest on, obligations backed solely by the full faith and
credit of the state, without recourse to any specific project.
- 7 -
<PAGE>
Florida has been among the fastest growing states as a result of migration
to Florida from other areas of the United States and from foreign countries. Its
population in 1997 represents an increase of 50% from 1980 levels, ranking the
state fourth in the nation. Florida's per capita income is on par with national
averages and is 11% above regional levels, reflecting healthy growth since the
early 1990s recession. During recent years, strong growth in Florida's services,
construction and trade sectors contributed to a 10% increase in total employment
between 1993 and 1997. These sectors now account for more than 64% of the
state's work force and will be the state's primary growth sectors in the future.
The largest components of Florida's service-based economy consist of health and
business services which should remain strong growth areas, given the state's
demographics. Growth in the services, construction and trade sectors has
diversified the state's overall economy, which at one time was dominated by the
citrus and tourism industries. The tourism industry, which supports many of the
state's employment sectors, continues to be somewhat cyclical. The state
continues to have a relatively narrow tax base, with 71% of revenues derived
from the 6% sales and use tax. The state's income structure is more dependent on
property income (dividends, income and rent) and transfer payments (social
security and pension benefits) due to the significant retirement age population.
Despite this reliance on a cyclical revenue source, Florida has managed its
overall financial program well. The state has generated operating surpluses in
recent years, while maintaining tax levels and funding growth-related service
requirements. Its budget stabilization reserve reached record levels at June 30,
1998. In December 1996, it was reported that Miami, Florida was facing a budget
shortfall of $68 million. As a result, Miami's debt ratings were reduced to
"junk" bond status by both Standard & Poor's and Moody's Investors Service, Inc.
Florida's governor appointed an oversight panel to assist Miami in recovering
from its financial crisis, and all expenses and debts for at least five years
must be approved by the panel. On May 6, 1998, Standard & Poor's increased its
ratings of Miami's general obligation bonds to "BB" as a result of efforts by
city officials to return financial stability to Miami. Although no issuers of
Florida Obligations are currently in default on their payments of interest and
principal, the occurrence of a default could adversely affect the market values
and marketability of all Florida Obligations and, consequently, the net asset
value of the Fund.
The Fund is a non-diversified fund under the Investment Company Act of 1940.
Thus, its investments may be more concentrated in fewer issuers than those of a
diversified fund. This concentration may increase the possibility of fluctuation
in the Fund's net asset value. As the Fund intends to comply with Subchapter M
of the Internal Revenue Code, it may invest up to 50% of its assets at the end
of each quarter of its fiscal year
- 8 -
<PAGE>
in as few as two issuers, provided that no more than 25% of the assets are
invested in one issuer. With respect to the remaining 50% of its assets at the
end of each quarter, it may invest no more than 5% in one issuer.
Certain provisions in the Internal Revenue Code relating to the issuance of
Municipal Obligations may reduce the volume of Municipal Obligations qualifying
for federal tax exemptions. Shareholders should consult their tax advisors
concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on Municipal Obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
Other Investment Techniques
---------------------------
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
Municipal Obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests that do not have this demand feature and
all other illiquid securities.
- 9 -
<PAGE>
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating or
variable rate Municipal Obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at specified intervals
to a specified interest rate. Periodic interest rate adjustments help stabilize
the obligations' market values. The Fund may purchase these obligations from the
issuers or may purchase participation interests in pools of these obligations
from banks or other financial institutions. Variable and floating rate
obligations usually carry demand features that permit the Fund to sell the
obligations back to the issuers or to financial intermediaries at par value plus
accrued interest upon not more than 30 days' notice at any time or prior to
specific dates. Certain of these variable rate obligations, often referred to as
"adjustable rate put bonds," may have a demand feature exercisable on specific
dates once or twice each year. The Fund will not invest more than 10% of its net
assets in floating or variable rate obligations as to which the Fund cannot
exercise the demand feature on not more than seven days' notice if the Adviser,
under the direction of the Board of Trustees, determines that there is no
secondary market available for these obligations and all other illiquid
securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued Municipal
Obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or liquid
securities, marked to market daily, in an amount equal to its when-issued
commitments. Because these transactions are subject to market fluctuations, a
significant commitment to when- issued purchases could result in fluctuation of
the Fund's net asset value. The Fund will only make commitments to purchase
- 10 -
<PAGE>
when-issued obligations with the intention of actually acquiring the obligations
and not for the purpose of investment leverage. No additional when-issued
commitments will be made if more than 20% of the Fund's net assets would be so
committed.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase Municipal Obligations
with the right to resell the obligation to the seller at a specified price or
yield within a specified period. The right to resell is commonly known as a
"put" or a "standby commitment." The Fund may purchase Municipal Obligations
with puts attached from banks and broker-dealers. The Fund intends to use
obligations with puts attached for liquidity purposes to ensure a ready market
for the underlying obligations at an acceptable price. Although no value is
assigned to any puts on Municipal Obligations, the price which the Fund pays for
the obligations may be higher than the price of similar obligations without puts
attached. The purchase of obligations with puts attached involves the risk that
the seller may not be able to repurchase the underlying obligation. The Fund
intends to purchase such obligations only from sellers deemed by the Adviser,
under the direction of the Board of Trustees, to present minimal credit risks.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the aggregate up
to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to the demand feature
described above; floating and variable rate obligations as to which the Fund
cannot exercise the related demand feature described above and as to which there
is no secondary market; and repurchase agreements not terminable within seven
days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, the Fund may borrow money from banks in an amount not exceeding 10% of
its total assets. The Fund may pledge assets in connection with borrowings but
will
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<PAGE>
not pledge more than 10% of its total assets. The Fund will not make any
additional purchases of portfolio securities if outstanding borrowings exceed 5%
of the value of its total assets. Borrowing magnifies the potential for gain or
loss on the Fund's portfolio securities and, therefore, if employed, increases
the possibility of fluctuation in its net asset value. This is the speculative
factor known as leverage. To reduce the risks of borrowing, the Fund will limit
its borrowings as described above. The Fund's policies on borrowing and pledging
are fundamental policies which may not be changed without the affirmative vote
of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in Retail Shares of the Fund ordinarily must be at
least $1,000. However, the minimum initial investment for employees,
shareholders and customers of Countrywide Credit Industries, Inc. or any
affiliated company, including members of the immediate family of such
individuals, is $50. Shares of the Fund are sold on a continuous basis at the
net asset value next determined after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Florida Tax-
Free Money Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from
- 12 -
<PAGE>
unauthorized shareholder transactions) relating to the various services (for
example, telephone redemptions and exchanges and check redemptions) made
available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by wire.
Please telephone the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for instructions. You should be prepared to give the
name in which the account is to be established, the address, telephone number
and taxpayer identification number for the account, and the name of the bank
which will wire the money.
You may receive a dividend on the day of your wire investment provided you
have given notice of your intention to make such investment to the Transfer
Agent by 4:00 p.m., Eastern time, on the preceding business day (or 12:00 noon,
Eastern time, on the same day of a wire investment in the case of investors
utilizing institutions that have made appropriate arrangements with the Transfer
Agent). Your investment will be made at the net asset value next determined
after your wire is received together with the account information indicated
above. If the Trust does not receive timely and complete account information,
there may be a delay in the investment of your money and any accrual of
dividends. To make your initial wire purchase, you are required to mail a
completed account application to the Transfer Agent. Your bank may impose a
charge for sending your wire. There is presently no fee for receipt of wired
funds, but the Transfer Agent reserves the right to charge shareholders for this
service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to Countrywide Fund Services, Inc.,
P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
Fund. Bank wires should be sent as outlined above. You may also make additional
investments at the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati,
Ohio 45202. Each additional purchase request must contain the name of your
account and your account number to permit proper crediting to your account.
While there is no minimum amount required for subsequent investments, the Trust
reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected
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<PAGE>
by the institution or its customer, or when the account balance reaches a
predetermined dollar amount (e.g., $5,000).
Participating institutions are responsible for prompt transmission of orders
relating to the program. Institutions participating in this program may charge
their customers fees for services relating to the program which would reduce the
customers' yield from an investment in the Fund. This Prospectus should,
therefore, be read together with any agreement between the customer and the
participating institution with regard to the services provided, the fees charged
for these services and any restrictions and limitations imposed.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
-------------------------
If the Retail Shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
Direct Deposit Plans
---------------------
Retail Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
Automatic Investment Plan
--------------------------
You may make automatic monthly investments in Retail Shares of the Fund from
your bank, savings and loan or other depository institution account. The minimum
initial and subsequent investments must be $50 under the plan. The Transfer
Agent pays the costs associated with these transfers, but reserves the right,
upon thirty days' written notice, to make reasonable charges for this service.
Your depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Fund.
InvestPlus Plan
---------------
If you are a Countrywide Home Loans mortgage holder, you may make monthly
investments in the Fund by including your investment with your mortgage payment.
You may write one check for the total amount.
- 14 -
<PAGE>
HOW TO REDEEM SHARES
- --------------------
You may redeem Retail Shares of the Fund on each day that the Trust is open
for business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
check will be effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this delay, you may
purchase shares of the Fund by certified check, government check or wire.
A contingent deferred sales load may be imposed on a redemption of shares of
the Fund if such shares had previously been acquired in connection with an
exchange from another fund of Countrywide Investments which imposes a contingent
deferred sales load, as described in the Prospectus of such other fund.
BY TELEPHONE. You may redeem shares having a value of less than $25,000 by
telephone. The proceeds will be sent by mail to the address designated on your
account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within one business day (but not later than
three business days) after receipt of your telephone instructions. Any
redemption requests by telephone must be received in proper form prior to 12:00
noon, Eastern time, on any business day in order for payment by wire to be made
that day.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account have been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any
- 15 -
<PAGE>
loss, damage, cost or expense in acting on such telephone instructions. The
affected shareholders will bear the risk of any such loss. The Trust or the
Transfer Agent, or both, will employ reasonable procedures to determine that
telephone instructions are genuine. If the Trust and/or the Transfer Agent do
not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring
forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape recording
telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares to be redeemed and your account number. The request must be signed
exactly as your name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be guaranteed by
any of the eligible guarantor institutions outlined above. If the name(s) or
the address on your account has been changed within 30 days of your redemption
request, you will be required to request the redemption in writing with your
signature guaranteed, regardless of the value of the shares being redeemed.
Written redemption requests may also direct that the proceeds be deposited
directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
BY CHECK. You may establish a special checking account with the Fund for the
purpose of redeeming Retail Shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer Agent, as
your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check.
If the amount of a check is greater than the value of the shares held in your
account, the check will be returned. A check representing a redemption request
will take precedence over any other redemption instructions issued by a
shareholder.
As long as no more than six check redemptions are effected in your account in
any month, there will be no charge for the check redemption privilege. After six
check redemptions are effected in your account in a month, the Transfer Agent
will charge you $.25 for each additional check redemption effected that month.
However, there is no charge for any check redemptions effected by
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<PAGE>
employees, shareholders and customers of Countrywide Credit Industries, Inc. or
any affiliated company, including members of the immediate family of such
individuals.
The Transfer Agent charges shareholders its costs for each stop payment and
each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption procedure may be
suspended or terminated at any time upon written notice by the Trust or the
Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar program
with a financial institution are not eligible for the checkwriting privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a redemption
by wire, you will be charged an $8 processing fee. The Trust reserves the right,
upon thirty days' written notice, to change the processing fee. All charges will
be deducted from your account by redemption of shares in your account. Your bank
or brokerage firm may also impose a charge for processing the wire. In the event
that wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an Automated
Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than the minimum amount required by the Trust for your account
(based on actual amounts invested, unaffected by market fluctuations) or such
other minimum amount as the Trust may determine from time to time. After
notification to you of the Trust's intention to close your account, you will be
given thirty days to increase the value of your account to the minimum amount.
- 17 -
<PAGE>
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other. A sales load will be imposed equal to the excess, if
any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently offered to
the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
- 18 -
<PAGE>
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to shareholders. An exchange results in a
sale of fund shares, which may cause you to recognize a capital gain or loss.
Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
Dividends are automatically reinvested in additional shares of the Fund (the
Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option. No interest will accrue on amounts represented by
uncashed distribution checks.
TAXES
- -----
The Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The Fund also intends
to meet all IRS requirements necessary to ensure that it is qualified to pay
"exempt-interest dividends," which means that it may pass on to shareholders the
federal tax-exempt status of its investment income.
- 19 -
<PAGE>
The Fund intends to distribute substantially all of its net investment income
and any net realized capital gains to its shareholders. For federal income tax
purposes, a shareholder's proportionate share of taxable distributions from the
Fund's net investment income as well as from net realized short-term capital
gains, if any, is taxable as ordinary income. Since the Fund's investment income
is derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
Florida does not impose an income tax on individuals but does have a corporate
income tax. For purposes of the Florida income tax, corporate shareholders are
generally subject to tax on all distributions of the Fund. Florida imposes an
intangible personal property tax on shares of the Fund owned by a Florida
resident on January 1 of each year unless such shares qualify for an exemption
from that tax. Shares of the Fund owned by a Florida resident will be exempt
from the intangible personal property tax so long as the portion of the Fund's
portfolio which is not invested in direct U.S. Government obligations is at
least 95% invested in Florida Obligations which are exempt from that tax. The
Fund will attempt to ensure that at least 95% of the Fund's portfolio on January
1 of each year consists of Florida Obligations exempt from the Florida
intangible personal property tax.
Issuers of tax-exempt securities issued after August 31, 1986 are required to
comply with various restrictions on the use and investment of proceeds of sales
of the securities. Any failure by the issuer to comply with these restrictions
would cause interest on such securities to become taxable to the security
holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax Reform
Act of 1986, is an item of tax preference possibly subject to the alternative
minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Shareholders receiving Social Security benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income.
- 20 -
<PAGE>
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
The Fund will report to its shareholders the percentage and source of income
earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax may not result in similar exemptions under the
laws of a particular state or local taxing authority.
The tax consequences described in this section apply whether distributions are
taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, six series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. The officers of the
Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees
- 21 -
<PAGE>
and commissions, legal, auditing and accounting expenses, expenses of
registering shares under federal and state securities laws, insurance expenses,
taxes or governmental fees, fees and expenses of the custodian, transfer agent
and accounting and pricing agent of the Fund, fees and expenses of members of
the Board of Trustees who are not interested persons of the Trust, the cost of
preparing and distributing prospectuses, statements, reports and other documents
to shareholders, expenses of shareholders' meetings and proxy solicitations, and
such extraordinary or non-recurring expenses as may arise, including litigation
to which the Fund may be a party and indemnification of the Trust's officers and
Trustees with respect thereto. Retail Shares are also responsible for the
payment of expenses related to the distribution of such shares (see
"Distribution Plan").
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities Dealers,
Inc., and subject to its objective of seeking best execution of portfolio
transactions, the Adviser may give consideration to sales of shares of the Fund
as a factor in the selection of brokers and dealers to execute portfolio
transactions of the Fund. Subject to the requirements of the Investment Company
Act of 1940 and procedures adopted by the Board of Trustees, the Fund may
execute portfolio transactions through any broker or dealer and pay brokerage
commissions to a broker (i) which is an affiliated person of the Trust, or (ii)
- 22 -
<PAGE>
which is an affiliated person of such person, or (iii) an affiliated person of
which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. Retail Shares of the Fund
shall vote separately on matters relating to the plan of distribution pursuant
to Rule 12b-1 (see "Distribution Plan"). When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.
The Huntington Trust Company, N.A., 41 South High Street, Columbus, Ohio, and
Bode Finn Limited Partnership, P.O. Box 83250, Columbus, Ohio, may each be
deemed to control the Fund by virtue of the fact that each owns of record more
than 25% of the Fund's shares as of the date of this Prospectus.
DISTRIBUTION PLAN
- -----------------
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, Retail Shares
of the Fund have adopted a plan of distribution (the "Class A Plan") under which
such shares may directly incur or reimburse the Adviser for certain
distribution- related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
- 23 -
<PAGE>
Pursuant to the Class A Plan, Retail Shares may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Retail Shares of the
Fund. For the fiscal year ended June 30, 1998, Retail Shares of the Fund paid
$37,114 to the Adviser to reimburse it for payments made to dealers and other
persons who may be advising shareholders in this regard.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.25% of the average daily net assets allocable to Retail Shares. Unreimbursed
expenditures will not be carried over from year to year. In the event the Class
A Plan is terminated by the Fund in accordance with its terms, the Fund will not
be required to make any payments for expenses incurred by the Adviser after the
date the Class A Plan terminates.
Pursuant to the Class A Plan, the Fund may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
CALCULATION OF SHARE PRICE
- ---------------------------
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities
- 24 -
<PAGE>
held by the Fund plus cash or other assets minus all liabilities (including
estimated accrued expenses) by the total number of shares outstanding of the
Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
- -----------------------
From time to time the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. In
addition, the Fund may advertise together with its "current yield" or "effective
yield" a tax equivalent "current yield" or "effective yield" which reflects the
yield which would be required of a taxable investment at a stated income tax
rate in order to equal the Fund's "current yield" or "effective yield." Yields
are computed separately for Retail and Institutional Shares. The yield of
Institutional Shares is expected to be higher than the yield of Retail Shares
due to the distribution fees imposed on Retail Shares.
- 25 -
<PAGE>
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
FLORIDA TAX-FREE MONEY FUND
(RETAIL SHARES)
FOR BROKER/DEALER USE ONLY
Firm Name:________________________________________
Home Office Address:______________________________
Branch Address:___________________________________
Rep Name & No.____________________________________
______________________________________________________________________________
Initial Investment of $___________________________ ($1,000 minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________________
[ ] Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
Account Name
_____________________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc.
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian
Address
___________________________________________________________________
Street or P.O. Box
___________________________________________________________________
City State Zip
S.S.#/Tax I.D.#
________________________________________________________
(In case of custodial account please list minor's S.S.#)
Citizenship: ___ U.S.
___ Other____________________
Phone
( )_________________________________
Business Phone
( )___________________________________
Home Phone
<PAGE>
<TABLE>
<S> <C> <C>
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
____________________________________________________________________________________________________________________
TAXPAYER IDENTIFICATION NUMBER - Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this
document other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I
am not subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a
failure to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have
mailed or delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social
Security Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
[ ] Reinvest all distributions
[ ] Pay all distributions in cash
- -------------------------------------------------------------------------------------------------------------------
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon receipt of and
in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from my (our) account in
any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below. NOTE: For wire redemptions, the indicated bank should be a
commercial bank. Please attach a voided check for the account.
Bank Account Number ____________________________________________Bank Routing Transit Number___________________________________
Name of Account Holder_________________________________________________________________________________________________________
Bank Name __________________________________________________Bank Address________________________________________________
City State
[ ] CHECKWRITING (A signature card must be completed)
... to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA) or
otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons whose signatures
appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our) shares of the Trust. I
(we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft Account as such Rules and
Regulations may be amended from time to time.
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number [ ][ ][ ][ ]
(PIN). You will need to use this PIN when requesting account information and placing transactions. For institutional
accounts, please use a four digit number. For retail accounts, please use the first four letters of your mother's
maiden name.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal age,
and that he has full authority and legal capacity for himself or the organization named below, to make this investment and to use
the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares whether
by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of the Fund
for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance with any
of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself
and his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the performance
of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or expense in acting
on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund Services, Inc.,
or both, will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust and/or Countrywide
Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape recording telephone instructions.
<PAGE>
______________________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc. Signature of Joint Owner, if Any
__________________________________________________
_______________________________________________________________ Date
Title of Corporate Officer, Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each
joint owner shall have full authority to act on behalf of the account.
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Tax-Free Trust. There is no
charge for this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00
per month. For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00.
Though a continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any
time.
Please invest $ __________per month in the Fund.
ABA Routing Number_______________________
FI Account Number________________________
[ ] Checking Account [ ] Savings Account
________________________________________________
Name of Financial Institution (FI)
_________________________________________________
City State
Please make my automatic investment on:
[ ] the last business day of each month
[ ] the 15th day of each month
[ ] both the 15th and last business day
X________________________________________________________________________
Signature of Depositor EXACTLY as it appears on FI Records)
X_________________________________________________________________________
(Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign
exactly as signature appears on your FI's records.)
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account for the
Automatic Investment Plan.
<PAGE>
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the
payment by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any
person whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any
such amount. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or
persons whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund if the claim
for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous payment;
your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
- ------------------------------------------------------------------------------------------------------------------------
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________________ from my account beginning the last business day of
the month of _____________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly _ Withdrawals will be made on the last business day of each month.
[ ] Quarterly _ Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually _ Please make withdrawals on the last business day of the month of:____________________.
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ____ ____ _ ____ ____ ____
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as
indicated below. I understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the
wire will be completed in one business day and that there is an $8.00 fee.
<PAGE>
Please attach a voided _______________________________________________________________________________________
check for ACH or bank wire Bank Name Bank Address
_______________________________________________________________________________________
Bank ABA# Account # Account Name
[ ] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address
below:
Name of payee_____________________________________________________________________________________________________________
Please send to:__________________________________________________________________________________________________________
Street address City State Zip
- ------------------------------------------------------------------------------------------------------------------------
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Tax-Free Trust (the Trust) and
that
______________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to
take any ction for it as may be necessary or appropriate with respect to its shareholder account with the Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate
to appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the Fund,
to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the privileges
elected on the Application, and it is (If checkwriting privilege is not desired, please cross out the following resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the Countrywide Pay Through Draft Account (PTDA)
and that until otherwise ordered in writing, Countrywide Fund Services, Inc. is authorized to make redemptions of shares held by the
corporation or organization, and to make payment from PTDA upon and according to the check, draft, note or order of this corporation
or organization when signed by
______________________________________________________________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the payee or any other holder without inquiry as
to the circumstances of issue or the disposition or proceeds, whether drawn to the individual order or tendered in payment of
individual obligations of the persons above named or other officers of this corporation or organization or otherwise.
<PAGE>
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
_______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of_______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on _________________
at which a quorum was present and acting throughout, and that the same are
now in full force and effect.
I further certify that the following is (are) duly elected officer(s) of the
corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
- --------------------------------------- ----------------------
- --------------------------------------- ----------------------
- --------------------------------------- ----------------------
Witness my hand and seal of the corporation or organization this________________
day of_____________________________, 19_______
___________________________________ _____________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
<PAGE>
TABLE OF CONTENTS
Expense Information.............................................
Financial Highlights . . . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies...............................
How to Purchase Shares..........................................
Shareholder Services............................................
How to Redeem Shares............................................
Exchange Privilege..............................................
Dividends and Distributions.....................................
Taxes...........................................................
Operation of the Fund...........................................
Distribution Plan. . . . .......................................
Calculation of Share Price......................................
Performance Information.........................................
- ----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1998
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
FLORIDA TAX-FREE MONEY FUND
INSTITUTIONAL SHARES
----------------------------
The Florida Tax-Free Money Fund (the "Fund"), a separate series of
Countrywide Tax-Free Trust, seeks the highest level of interest income exempt
from federal income tax, consistent with liquidity and stability of principal,
by investing primarily in high-quality, short-term Florida municipal obligations
the value of which is exempt from the Florida intangible personal property tax.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS.
FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT
OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
The Fund offers two classes of shares: Class A shares ("Retail Shares"),
sold subject to a 12b-1 fee of up to .25% of average daily net assets, and Class
B shares ("Institutional Shares"), sold without a 12b-1 fee. Each Retail and
Institutional Share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Retail Shares bear
the expenses of distribution fees, which will cause Retail Shares to have a
higher expense ratio and to pay lower dividends than Institutional Shares; (ii)
certain class specific expenses will be borne solely by the class to which such
expenses are attributable; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and (iv) Retail Shares are subject
to a lower minimum initial investment requirement and offer certain shareholder
services not available to Institutional Shares such as checkwriting and
automatic investment and redemption plans.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's investments
and its business affairs.
This Prospectus sets forth concisely the information about Institutional
Shares that you should know before investing. Please retain this Prospectus
for future reference. Retail Shares are offered in a separate prospectus
and additional information about Retail Shares may be obtained by calling one
of the numbers listed below. A Statement of Additional Information dated
November 1, 1998 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by calling
the above number.
For further information or assistance in opening an account, please contact your
broker, or call us at the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
- -------------------
INSTITUTIONAL SHARES
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None
Annual Operating Expenses (as a percentage of average net assets)
Management Fees After Waivers .30%(A)
12b-1 Fees None
Other Expenses After Reimbursements .20% (B)
Total Operating Expenses After Waivers --------
and Expense Reimbursements .50%(C)
========
(A) Absent waivers of management fees, such fees would have been .50%.
(B) Absent expense reimbursements by the Adviser, other expenses would
have been .21%.
(C) Absent waivers of management fees and expense reimbursements by the
Adviser, total operating expenses would have been .71%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in Institutional Shares will bear
directly or indirectly. The percentages expressing annual operating expenses are
based on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return
and (2) redemption at the end
of each time period: $ 5 $ 16 $ 28 $ 63
- 2 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of June
30, 1998 and related auditors' report appear in the Statement of Additional
Information of the Fund, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
Per Share Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Period
Ended
Year Ended June 30, June 30,
------------------- --------
1998 1997 1996(A)
Net asset value at beginning of period....................$1.000 $1.000 $1.000
------ ------ ------
Net investment income .....................................0.032 0.031 0.003
----- ----- -----
Dividends from net investment income .....................(0.032) (0.031) (0.003)
------- ------- -------
Net asset value at end of period..........................$1.000 $1.000 $1.000
====== ====== ======
Total return...............................................3.28% 3.16% 3.03%(C)
===== ===== =====
Net assets at end of period (000's)........................$49,159 $19,349 $19,145
======= ======= =======
Ratio of net expenses to average
net assets(B)............................................. 0.50% 0.50% 0.50%(C)
Ratio of net investment income to
average net assets......................................... 3.23% 3.11% 3.03%(C)
(A) Represents the period from the initial public offering of Institutional shares
(May 29, 1996) through June 30, 1996.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses
to average net assets would have been 0.71%, 0.79% and 0.87%(C) for the periods
ended June 30, 1998, 1997 and 1996, respectively.
(C) Annualized.
</TABLE>
- 3 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The Fund
seeks the highest level of interest income exempt from federal income tax,
consistent with liquidity and stability of principal. The Fund seeks to achieve
its investment objective by investing primarily in high-quality, short-term
Florida Obligations determined by the Adviser, under the direction of the Board
of Trustees, to present minimal credit risks. Florida Obligations are debt
obligations issued by the State of Florida and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax, including the alternative minimum tax, and the value of
which is exempt from the Florida intangible personal property tax. To the extent
acceptable Florida Obligations are at any time unavailable for investment by the
Fund, the Fund will invest, for temporary defensive purposes, primarily in other
debt securities, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from federal income tax, but which are not Florida
Obligations.
The Fund is not intended to be a complete investment program, and there is
no assurance that its investment objective can be achieved. The Fund's
investment objective is fundamental and as such may not be changed without the
affirmative vote of a majority of its outstanding shares. The term "majority" of
the outstanding shares means the lesser of (1) 67% or more of the outstanding
shares of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund. Unless otherwise indicated,
all investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
Municipal Obligations
---------------------
Debt securities, the interest from which is, in the opinion of bond
counsel to the issuer, exempt from federal income tax ("Municipal Obligations")
generally include debt obligations issued to obtain funds to construct, repair
or improve various public facilities such as airports, bridges, highways,
hospitals, housing, schools, streets and water and sewer works, to pay general
operating expenses or to refinance outstanding debts. They also may be issued to
finance various private activities, including the lending of funds to public or
private institutions for construction of housing, educational or medical
facilities or the financing of privately owned or operated facilities. Municipal
Obligations consist of tax-exempt bonds, tax-exempt
- 4 -
<PAGE>
notes and tax-exempt commercial paper. The Statement of Additional Information
contains a description of tax-exempt bonds, notes and commercial paper.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility, and therefore investments in these bonds have more potential risk. The
Fund's ability to achieve its investment objective depends to a great extent on
the ability of these various issuers to meet their scheduled payments of
principal and interest. Tax-exempt notes generally are used to provide
short-term capital needs and generally have maturities of one year or less. The
tax-exempt notes in which the Fund may invest are tax anticipation notes (TANs),
revenue anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs
and BANs are issued by state and local government and public authorities as
interim financing in anticipation of tax collections, revenue receipts or bond
sales, respectively. Tax- exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes.
Basic Investment Policies
-------------------------
It is a fundamental policy that under normal market conditions the Fund
will invest at least 80% of the value of its net assets in short-term
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. This policy may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. Under
normal market conditions, at least 65% of the value of the Fund's total assets
will be invested in Florida Obligations and the remainder may be invested in
obligations that are not Florida Obligations. When the Fund has adopted a
temporary defensive position (including circumstances when acceptable Florida
Obligations are unavailable for investment by the Fund), the Fund may invest
more than 35% of its total assets in obligations that are not Florida
Obligations.
The Fund seeks to achieve its investment objective by investing in
high-quality, short-term Municipal Obligations determined by the Adviser, under
the direction of the Board of Trustees, to present minimal credit risks. The
Fund will purchase only obligations that enable it to employ the amortized cost
method of valuation. Under the amortized cost method of valuation, the Fund's
obligations are valued at original cost adjusted for amortization of premium or
accumulation of discount,
- 5 -
<PAGE>
rather than valued at market. This method should enable the Fund to maintain a
stable net asset value per share. The Fund will invest in obligations which have
received a short-term rating in one of the two highest categories by any two
nationally recognized statistical rating organizations ("NRSROs") or by any one
NRSRO if the obligation is rated by only that NRSRO. The Fund may purchase
unrated obligations determined by the Adviser to be of comparable quality to
rated obligations meeting the Fund's quality standards. These standards must be
satisfied at the time an investment is made. If an obligation ceases to meet
these standards, or if the Board of Trustees believes such obligation no longer
presents minimal credit risks, the Trustees will cause the Fund to dispose of
the obligation as soon as practicable. The Statement of Additional Information
describes ratings of the NRSROs.
The Fund's dollar-weighted average maturity will be 90 days or less. The
Fund will invest in obligations with remaining maturities of thirteen months or
less at the time of purchase.
The Fund may invest in any combination of general obligation bonds,
revenue bonds and industrial development bonds. The Fund may invest more than
25% of its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on Municipal Obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest no more than 20% of its net assets in obligations the interest from which
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
- 6 -
<PAGE>
The Fund may, from time to time, invest in taxable short-term,
high-quality obligations (subject to the fundamental policy that under normal
market conditions the Fund will invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax). These include, but are not limited to,
certificates of deposit and other bank debt instruments, commercial paper,
obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. Interest earned from such
investments will be taxable to investors. Except for temporary defensive
purposes, at no time will more than 20% of the value of the Fund's net assets be
invested in taxable obligations. Under normal market conditions, the Fund
anticipates that not more than 5% of the value of its net assets will be
invested in any one type of taxable obligation. Taxable obligations are more
fully described in the Statement of Additional Information.
Risk Factors
------------
The Fund's yield will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the Adviser.
In addition, the financial condition of an issuer or adverse changes in general
economic conditions, or both, may impair the issuer's ability to make payments
of interest and principal. There is no limit on the percentage of a single issue
of Municipal Obligations that the Fund may own. If the Fund holds a significant
portion of the obligations of an issuer, there may not be a readily available
market for the obligations. Reduced diversification could involve an increased
risk to the Fund should an issuer be unable to make interest or principal
payments or should the market value of Municipal Obligations decline.
There are also risks of reduced diversification because the Fund invests
primarily in obligations of issuers within a single state. The Fund is more
likely to invest its assets in the securities of fewer issuers because of the
relatively smaller number of issuers of Florida Obligations. The Fund's
performance is closely tied to conditions within the State of Florida and to the
financial condition of the State and its authorities and municipalities. Under
current law, the State of Florida is required to maintain a balanced budget such
that current expenses are met from current revenues. Florida does not currently
impose a tax on personal income but does impose taxes on corporate income
derived from activities within the State. In addition, Florida imposes an ad
valorem tax on intangible personal property as well as sales and use taxes.
These taxes are the principal source of funds to meet State expenses, including
repayment of, and interest on, obligations backed solely by the full faith and
credit of the State, without recourse to any specific project.
- 7 -
<PAGE>
Florida has been among the fastest growing states as a result of migration
to Florida from other areas of the United States and from foreign countries. Its
population in 1997 represents an increase of 50% from 1980 levels, ranking the
state fourth in the nation. Florida's per capita income is on par with national
averages and is 11% above regional levels, reflecting healthy growth since the
early 1990s recession. During recent years, strong growth in Florida's services,
construction and trade sectors contributed to a 10% increase in total employment
between 1993 and 1997. These sectors now account for more than 64% of the
state's work force and will be the state's primary growth sectors in the future.
The largest components of Florida's service-based economy consist of health and
business services which should remain strong growth areas, given the state's
demographics. Growth in the services, construction and trade sectors has
diversified the state's overall economy, which at one time was dominated by the
citrus and tourism industries. The tourism industry, which supports many of the
state's employment sectors, continues to be somewhat cyclical. The state
continues to have a relatively narrow tax base, with 71% of revenues derived
from the 6% sales and use tax. The state's income structure is more dependent on
property income (dividends, income and rent) and transfer payments (social
security and pension benefits) due to the significant retirement age population.
Despite this reliance on a cyclical revenue source, Florida has managed its
overall financial program well. The state has generated operating surpluses in
recent years, while maintaining tax levels and funding growth-related service
requirements. Its budget stabilization reserve reached record levels at June 30,
1998. In December 1996, it was reported that Miami, Florida was facing a budget
shortfall of $68 million. As a result, Miami's debt ratings were reduced to
"junk" bond status by both Standard & Poor's and Moody's Investors Service, Inc.
Florida's governor appointed an oversight panel to assist Miami in recovering
from its financial crisis, and all expenses and debts for at least five years
must be approved by the panel. On May 6, 1998, Standard & Poor's increased its
ratings of Miami's general obligation bonds to "BB" as a result of efforts by
city officials to return financial stability to Miami. Although no issuers of
Florida Obligations are currently in default on their payments of interest and
principal, the occurrence of a default could adversely affect the market values
and marketability of all Florida Obligations and, consequently, the net asset
value of the Fund.
- 8 -
<PAGE>
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may increase the possibility of
fluctuation in the Fund's net asset value. As the Fund intends to comply with
Subchapter M of the Internal Revenue Code, it may invest up to 50% of its assets
at the end of each quarter of its fiscal year in as few as two issuers, provided
that no more than 25% of the assets are invested in one issuer. With respect to
the remaining 50% of its assets at the end of each quarter, it may invest no
more than 5% in one issuer.
Certain provisions in the Internal Revenue Code relating to the issuance
of Municipal Obligations may reduce the volume of Municipal Obligations
qualifying for federal tax exemptions. Shareholders should consult their tax
advisors concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on Municipal Obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
Other Investment Techniques
---------------------------
The Fund may also engage in the following investment techniques, each of
which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
Municipal Obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under
- 9 -
<PAGE>
the terms of the Municipal Obligation, as needed to provide liquidity to meet
redemptions, or to maintain a high-quality investment portfolio. The Fund will
not invest more than 10% of its net assets in participation interests that do
not have this demand feature and all other illiquid securities.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating or
variable rate Municipal Obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at specified intervals
to a specified interest rate. Periodic interest rate adjustments help stabilize
the obligations' market values. The Fund may purchase these obligations from the
issuers or may purchase participation interests in pools of these obligations
from banks or other financial institutions. Variable and floating rate
obligations usually carry demand features that permit the Fund to sell the
obligations back to the issuers or to financial intermediaries at par value plus
accrued interest upon not more than 30 days' notice at any time or prior to
specific dates. Certain of these variable rate obligations, often referred to as
"adjustable rate put bonds," may have a demand feature exercisable on specific
dates once or twice each year. The Fund will not invest more than 10% of its net
assets in floating or variable rate obligations as to which the Fund cannot
exercise the demand feature on not more than seven days' notice if the Adviser,
under the direction of the Board of Trustees, determines that there is no
secondary market available for these obligations and all other illiquid
securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
- 10 -
<PAGE>
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued Municipal
Obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. The
Fund will maintain a segregated account with its Custodian of cash or liquid
securities, marked to market daily, in an amount equal to its when-issued
commitments. Because these transactions are subject to market fluctuations, a
significant commitment to when- issued purchases could result in fluctuation of
the Fund's net asset value. The Fund will only make commitments to purchase
when-issued obligations with the intention of actually acquiring the obligations
and not for the purpose of investment leverage. No additional when-issued
commitments will be made if more than 20% of the Fund's net assets would be so
committed.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase Municipal
Obligations with the right to resell the obligation to the seller at a specified
price or yield within a specified period. The right to resell is commonly known
as a "put" or a "standby commitment." The Fund may purchase Municipal
Obligations with puts attached from banks and broker-dealers. The Fund intends
to use obligations with puts attached for liquidity purposes to ensure a ready
market for the underlying obligations at an acceptable price. Although no value
is assigned to any puts on Municipal Obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks.
- 11 -
<PAGE>
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the
aggregate up to 10% of its net assets in securities that are not readily
marketable, including: participation interests that are not subject to the
demand feature described above; floating and variable rate obligations as to
which the Fund cannot exercise the related demand feature described above and as
to which there is no secondary market; and repurchase agreements not terminable
within seven days.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or
emergency purposes, the Fund may borrow money from banks in an amount not
exceeding 10% of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than 10% of its total assets. The Fund will
not make any additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total assets. Borrowing magnifies the
potential for gain or loss on the Fund's portfolio securities and, therefore, if
employed, increases the possibility of fluctuation in its net asset value. This
is the speculative factor known as leverage. To reduce the risks of borrowing,
the Fund will limit its borrowings as described above. The Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in Institutional Shares of the Fund ordinarily
must be at least $100,000. Shares are sold on a continuous basis at the net
asset value next determined after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Florida Tax-
Free Money Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
- 12 -
<PAGE>
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges) made
available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by
wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629- 2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided you
have given notice of your intention to make such investment to the Transfer
Agent by 12:00 noon, Eastern time, on that day. Your investment will be made at
the net asset value next determined after your wire is received together with
the account information indicated above. If the Trust does not receive timely
and complete account information, there may be a delay in the investment of your
money and any accrual of dividends. To make your initial wire purchase, you are
required to mail a completed account application to the Transfer Agent. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to Countrywide Fund Services, Inc.,
P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
Fund. Bank wires should be sent as outlined above. You may also make additional
investments at the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati,
Ohio 45202. Each additional purchase request must contain the name of your
account and your account number to permit proper crediting to your account.
While there is no minimum amount required for subsequent investments, the Trust
reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
- 13 -
<PAGE>
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
HOW TO REDEEM SHARES
- ---------------------
You may redeem Institutional Shares of the Fund on each day that the Trust
is open for business. You will receive the net asset value per share next
determined after receipt by the Transfer Agent of a proper redemption request in
the form described below. Payment is normally made within three business days
after tender in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been collected,
which may take up to fifteen days from the purchase date. To eliminate this
delay, you may purchase shares of the Fund by certified check, government check
or wire.
A contingent deferred sales load may be imposed on a redemption of shares
of the Fund if such shares had previously been acquired in connection with an
exchange from another fund of Countrywide Investments which imposes a contingent
deferred sales load, as described in the Prospectus of such other fund.
BY TELEPHONE. You may redeem shares having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within one business day (but not later than
three business days) after receipt of your telephone instructions. Any
redemption requests by telephone must be received in proper form prior to
12:00 noon, Eastern time, on any business day in order for payment by wire to be
made that day.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account have been changed within the previous 30 days.
- 14 -
<PAGE>
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending
a written request to the Transfer Agent. The request must state the number of
shares to be redeemed and your account number. The request must be signed
exactly as your name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be guaranteed by
any of the eligible guarantor institutions outlined above. If the name(s) or
the address on your account has been changed within 30 days of your redemption
request, you will be required to request the redemption in writing with your
signature guaranteed, regardless of the value of the shares being redeemed.
Written redemption requests may also direct that the proceeds be deposited
directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
ADDITIONAL REDEMPTION INFORMATION. There is currently no charge for
processing wire redemptions. However, the Trust reserves the right, upon thirty
days' written notice, to make reasonable charges for wire redemptions. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
- 15 -
<PAGE>
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $100,000 (based on actual amounts invested, unaffected by
market fluctuations) or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other. A sales load will be imposed equal to the excess, if
any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently offered
to the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund Short Term Government Income Fund
Institutional Government Income
Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
- 16 -
<PAGE>
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
SUBACCOUNTING SERVICES
- ----------------------
Institutions are encouraged to open single master accounts. However,
certain institutions may wish to use the Transfer Agent's subaccounting system
to minimize their internal recordkeeping requirements. The Transfer Agent may
charge a subaccounting fee based on the level of services rendered. Institutions
holding Fund shares in a fiduciary, agency, custodial or similar capacity may
charge or pass through subaccounting fees as part of, or in addition to, normal
trust or agency account fees. This Prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fee charged for those services and any
restrictions and limitations imposed.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year. The Fund will, at the time dividends
are paid, designate as tax-exempt the same percentage of the distribution as the
actual tax-exempt income earned during the period covered by the distribution
bore to total income earned during the period; the percentage of the
distribution which is tax-exempt may vary from distribution to distribution.
- 17 -
<PAGE>
Dividends are automatically reinvested in additional shares of the Fund
(the Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option. No interest will accrue on amounts represented by
uncashed distribution checks.
TAXES
- ------
The Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified to
pay "exempt-interest dividends," which means that it may pass on to shareholders
the federal tax-exempt status of its investment income.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. For federal
income tax purposes, a shareholder's proportionate share of taxable
distributions from the Fund's net investment income as well as from net realized
short-term capital gains, if any, is taxable as ordinary income. Since the
Fund's investment income is derived from interest rather than dividends, no
portion of such distributions is eligible for the dividends received deduction
available to corporations.
Florida does not impose an income tax on individuals but does have a
corporate income tax. For purposes of the Florida income tax, corporate
shareholders are generally subject to tax on all distributions of the Fund.
Florida imposes an intangible personal property tax on shares of the Fund owned
by a Florida resident on January 1 of each year unless such shares qualify for
an exemption from that tax. Shares of the Fund owned by a Florida resident will
be exempt from the intangible personal property tax so long as the portion of
the Fund's portfolio which is not invested in direct U.S. Government obligations
is at least 95% invested in Florida Obligations which are exempt from that tax.
The Fund will attempt to ensure that at least 95% of the Fund's portfolio on
January 1 of each year consists of Florida Obligations exempt from the Florida
intangible personal property tax.
- 18 -
<PAGE>
Issuers of tax-exempt securities issued after August 31, 1986 are required
to comply with various restrictions on the use and investment of proceeds of
sales of the securities. Any failure by the issuer to comply with these
restrictions would cause interest on such securities to become taxable to the
security holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax
Reform Act of 1986, is an item of tax preference possibly subject to the
alternative minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income tax, including
the alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Fund may be a tax preference for
corporate investors.
Shareholders should be aware that interest on indebtedness incurred to
purchase or carry shares of the Fund is not deductible for federal income tax
purposes. Shareholders receiving Social Security benefits may be taxed on a
portion of those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
The Fund will report to its shareholders the percentage and source of income
earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax may not result in similar exemptions under the
laws of a particular state or local taxing authority.
The tax consequences described in this section apply whether distributions
are taken in cash or reinvested in additional shares. The Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users;
such persons should consult their tax advisors before investing in the Fund.
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
- 19 -
<PAGE>
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, six series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
The Adviser serves as principal underwriter for the Fund and, as such, is
the exclusive agent for the distribution of shares of the Fund. The officers of
the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, insurance expenses, taxes or governmental fees, fees and expenses of the
custodian, transfer agent and accounting and pricing agent of the Fund, fees and
expenses of members of the Board of Trustees who are not interested persons of
the Trust, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or non-recurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Trust's officers and Trustees with respect thereto.
The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent"), an indirect wholly-owned subsidiary of Countrywide Credit Industries,
Inc., P.O. Box 5354, Cincinnati, Ohio, to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist
the Adviser in providing administrative services to the Fund. In this capacity,
the Transfer Agent
- 20 -
<PAGE>
supplies executive, administrative and regulatory services, supervises the
preparation of tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the Securities and Exchange
Commission and state securities authorities. The Adviser (not the Fund) pays the
Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Fund shall vote separately on matters relating to its own
distribution arrangements. When matters are submitted to shareholders for a
vote, each shareholder is entitled to one vote for each full share owned and
fractional votes for fractional shares owned. The Trust does not normally hold
annual meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon the removal
of any Trustee when requested to do so in writing by shareholders holding 10% or
more of the Trust's outstanding shares. The Trust will comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 in order to
facilitate communications among shareholders.
The Huntington Trust Company, N.A., 41 South High Street, Columbus, Ohio,
and Bode Finn Limited Partnership, P.O. Box 83250, Columbus, Ohio, may each be
deemed to control the Fund by virtue of the fact that each owns of record more
than 25% of the Fund's shares as of the date of this Prospectus. Wachovia
Investments, Inc., P.O. Box 110, Winston Salem, North Carolina may be deemed to
control Institutional Shares of the Fund by virtue of the fact that it owns of
record more than 25% of such shares as of the date of this Prospectus.
- 21 -
<PAGE>
CALCULATION OF SHARE PRICE
- --------------------------
On each day that the Trust is open for business, the share price (net
asset value) of the Fund's shares is determined as of 12:00 noon and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
- -----------------------
From time to time the Fund may advertise its "current yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "current yield" of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment. In addition, the Fund may advertise together with its "current
yield" or "effective yield" a tax equivalent "current yield" or "effective
yield" which reflects the yield which would be required of a taxable investment
at a stated income tax rate in order to equal the Fund's "current yield" or
"effective yield." Yields are computed separately for Institutional and Retail
Shares. The yield of Institutional Shares is expected to be higher than the
yield of Retail Shares due to the distribution fees imposed on Retail Shares.
- 22 -
<PAGE>
Account Application
FLORIDA TAX-FREE MONEY FUND
(Institutional Shares)
ACCOUNT NO. 6 - ________________
(For Fund Use Only)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________________
Home Office Address:___________________________
Branch Address:________________________________
Rep Name & No._________________________________
Initial Investment of $___________________________ ($100,000 Minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From: _________________________________________________
[ ] Exchange From: __________________________________________________
(Fund Name) (Fund Account Number)
Account Name
_________________________________________________________________
Name of Individual, Corporation, Organization, or Minor, etc.
_________________________________________________________________
Name of Joint Tenant, Partner, Custodian
Address
___________________________________________________________________
Street or P.O. Box
____________________________________________________________________
City State Zip
S.S.#/Tax I.D.#
________________________________________________________
(In case of custodial account please list minor's S.S.#)
Citizenship: ___ U.S. Phone
___ Other ( )______________________
Business Phone
( )______________________
Home Phone
<PAGE>
<TABLE>
<S> <C> <C> <C>
Check Appropriate Box: [ ] Individual [ ] Joint Tenant (Right of survivorship presumed) [ ] Partnership
[ ] Corporation [ ] Trust [ ] Custodial [ ] Non-Profit [ ] Other
- --------------------------------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER - Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I
am not subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a
failure to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have
mailed or delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social
Security Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[ ] Share Option - Income distributions and capital gains distributions automatically reinvested in additional shares.
[ ] Cash Option - Income distributions and capital gains distributions paid in cash.
- -------------------------------------------------------------------------------------------------------------------
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon receipt of and
in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from my (our) account in
any fund in Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the used of
automated cash transfers to and from the account designated below. NOTE: For wire redemptions, the indicated bank should be a
commercial bank. Please attach a voided check for the account.
Bank Account Number ____________________________________________Bank Routing Transit Number________________________________
Name of Account Holder _____________________________________________________________________________________________________
Bank Name ______________________________________________________Bank Address________________________________________________
City State
_________________________________________________________________________________________________________________________________
<PAGE>
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number [ ][ ][ ][ ]
(PIN). You will need to use this PIN when requesting account information and placing transactions. For institutional
accounts, please use a four digit number. For retail accounts, please use the first four letters of your mother's
maiden name.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the Funds' current Prospectus, that he is of legal age,
and that he has full authority and legal capacity for himself or the organization named below, to make this investment and to use
the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares whether
by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of the Fund
for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance with any
of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself
and his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the performance
of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or expense in acting
on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund Services, Inc.,
or both, will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust and/or Countrywide
Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape recording telephone instructions.
- -------------------------------------------------------------
Signature of Individual Owner, Corporate Officer, Trustee, etc.
- --------------------------------------------------------------
Signature of Joint Owner, if Any
- ---------------------------------------------------------------
Title of Corporate Officer, Trustee, etc.
- ---------------------------------------------------------------
Date
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each
joint owner shall have full authority to act on behalf of the account.
- -----------------------------------------------------------------------------
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Tax-Free Trust (the Trust) and
that
- ------------------------------------------------------------------------------------------------------------------------
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to
take any action for it as may be necessary or appropriate with respect to its shareholder account with the Fund, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate
to appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the Fund, to
establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement the privileges
elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering
documents of the
- ------------------------------------------------------------------------------------------------------------------------
(Name of Organization)
incorporated or formed under the laws of
- ---------------------------------------------------------------------------------------------------------------------------
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and
held on _________________ at which a quorum was present and acting throughout, and that the same are now in full force and
effect.
I further certify that the following is (are) duly elected officer(s) of the corporation or organization, authorized to
act in accordance with the foregoing resolutions.
Name Title
- ------------------------------ ------------------------------------
- ------------------------------ ------------------------------------
- ------------------------------ -------------------------------------
Witness my hand and seal of the corporation or organization this________________day of_____________________________,
19_______
- ------------------------------------------------
*Secretary-Clerk
- -------------------------------------------------
Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
<PAGE>
TABLE OF CONTENTS
Expense Information.....................................................
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies.......................................
How to Purchase Shares..................................................
How to Redeem Shares....................................................
Exchange Privilege......................................................
Subaccounting Services . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions.............................................
Taxes...................................................................
Operation of the Fund...................................................
Calculation of Share Price..............................................
Performance Information.................................................
- ----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
November 1, 1998
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
KENTUCKY TAX-FREE FUND
The Kentucky Tax-Free Fund (the "Fund"), a separate series of Countrywide
Tax-Free Trust, seeks the highest level of interest income exempt from federal
and Kentucky income taxes, consistent with protection of capital. The Fund
invests primarily in high and medium-quality Kentucky municipal obligations.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MUTUAL FUNDS. SHARES OF
THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
Pursuant to an Agreement and Plan of Reorganization dated May 31,
1997, the Fund, on August 29, 1997, succeeded to the assets and liabilities of
another mutual fund of the same name (the "Predecessor Fund"), which was an
investment series of Trans Adviser Funds, Inc. The investment objective,
policies and restrictions of the Fund and the Predecessor Fund are substantially
identical.
This Prospectus sets forth concisely the information about the Fund that
you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 1, 1998 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling the above
number.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- 1 -
<PAGE>
EXPENSE INFORMATION
Shareholder Transaction Expenses
- ---------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4%
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None*
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None**
* Purchases at net asset value of amounts totaling $1 million or more may be
subject to a contingent deferred sales load of 1% if a redemption occurred
within 12 months of purchase and a commission was paid by the Adviser to a
participating unaffiliated dealer.
** A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How to
Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
- ------------------------------
Management Fees After Waivers .00%(A)
12b-1 Fees .07%(B)
Other Expenses After Reimbursements .42%(C)
-----
Total Fund Operating Expenses After Waivers
and Expense Reimbursements .49%(D)
======
(A) Absent waivers of management fees, such fees would have been .50%.
(B) The Fund may incur 12b-1 fees in an amount up to .25% of its average
net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
(C) Absent expense reimbursements by the Adviser, other expenses
would have been .98%.
(D) Absent waivers of management fees and expense reimbursements by
the Adviser, total operating expenses would have been 1.55%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred by the Fund during the most recent fiscal year. The Adviser
will, until at least August 31, 1999, waive fees and reimburse expenses to the
extent necessary to limit total operating expenses to .82% of the Fund's average
net assets. THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$ 45 $ 55 $ 66 $ 99
- 2 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following audited financial information for the Fund for the fiscal
periods ended August 31, 1997 and thereafter has been audited by Arthur Andersen
LLP, independent auditors, and should be read in conjunction with the financial
statements. The audited financial information for the fiscal period ended August
31, 1996 was audited by other independent accountants. The financial statements
as of June 30, 1998 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
Per Share Data for a Share Outstanding Throughout Each Period
<TABLE>
==========================================================================================================
Ten Months Year Period
Ended Ended Ended
June 30, August 31, August 31,
1998(A) 1997 1996(B)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 10.26 $ 10.06 $ 10.00
-------------- --------------- ---------------
Income from investment operations:
Net investment income................................ 0.41 0.44 0.51(C)
Net realized and unrealized gains on investments..... 0.20 0.28 0.06
-------------- --------------- ---------------
Total from investment operations........................ 0.61 0.72 0.57
-------------- --------------- ---------------
Less distributions:
Dividends from net investment income................. ( 0.41) ( 0.44 ) ( 0.51 )
Distributions in excess of net investment income..... -- ( 0.08 ) --
-------------- --------------- ---------------
Total distributions..................................... ( 0.41) ( 0.52 ) ( 0.51 )
-------------- --------------- ---------------
Net asset value at end of period........................ $ 10.46 $ 10.26 $ 10.06
============== =============== ===============
Total return(D) ........................................ 7.29%(F) 7.36% 5.80%
============== =============== ===============
Net assets at end of period (000's)..................... $ 7,330 $ 8,438 $ 15,840
============== =============== ===============
Ratio of expenses to average net assets(E) ............. 0.49%(F) 0.85% 0.82%(F)
Ratio of net investment income to average net assets.... 4.75%(F) 4.35% 5.30%(F)
Portfolio turnover rate................................. 61%(F) 0% 145%
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end,
subsequent to August 31, 1997, was changed to June 30.
(B) Represents the period from the commencement of operations (September 27, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratio of expenses to average net assets would have been
1.55%(F), 1.78% and 1.65%(F) for the periods ended June 30, 1998 and August 31, 1997 and 1996, respectively.
(F) Annualized.
</TABLE>
- 3 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Tax-Free Trust (the "Trust"). The
Fund seeks the highest level of interest income exempt from federal and Kentucky
income taxes, consistent with protection of capital. The Fund is not intended to
be a complete investment program, and there is no assurance that its investment
objective can be achieved. The Fund's investment objective is fundamental and as
such may not be changed without the affirmative vote of a majority of its
outstanding shares. The term "majority" of the outstanding shares means the
lesser of (1) 67% or more of the outstanding shares of the Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented at such meeting or (2) more than 50% of the
outstanding shares of the Fund. Unless otherwise indicated, all investment
practices and limitations of the Fund are nonfundamental policies which may be
changed by the Board of Trustees without shareholder approval.
The Fund seeks to achieve its investment objective by investing
primarily in investment grade Kentucky Obligations (described below) of any
maturity. Under normal market conditions, at least 65% of the value of the
Fund's total assets will be invested in Kentucky Obligations and the remainder
may be invested in obligations that are not Kentucky Obligations. When the Fund
has adopted a temporary defensive position (including circumstances when
acceptable Kentucky Obligations are unavailable for investment by the Fund), the
Fund may invest more than 35% of its total assets in obligations that are not
Kentucky Obligations.
The Fund invests in Kentucky Obligations and other securities which are
rated at the time of purchase within the four highest grades assigned by Moody's
Investors Service, Inc. (Aaa, Aa, A or Baa), Standard & Poor's Ratings Group
(AAA, AA, A or BBB) or Fitch Investors Services, Inc. (AAA, AA, A or BBB), or
unrated securities determined by the Adviser to be of comparable quality. While
securities in these categories are generally accepted as being of investment
grade, the fourth highest grade is considered to be a medium grade and has
speculative characteristics even though it is regarded as having adequate
capacity to pay interest and repay principal.
The Fund may invest in securities of any maturity, including tax-exempt
bonds, notes and commercial paper determined by the Adviser to meet the Fund's
quality standards. The Fund's quality standards limit its investments in
tax-exempt notes to those which are rated within the three highest grades by
Moody's (MIG 1, MIG 2 or MIG 3) or Fitch (F-1+, F-1 or F-2) or the two highest
grades by Standard & Poor's (SP-1 or SP-2) and in tax-exempt
- 4 -
<PAGE>
commercial paper to those which are rated within the two highest grades by
Moody's (Prime-1 or Prime-2), Standard & Poor's (A-1 or A-2) or Fitch (Fitch-1
or Fitch-2). The Statement of Additional Information contains a description of
tax-exempt notes and commercial paper and a description of Moody's, Standard &
Poor's and Fitch ratings.
It is a fundamental policy that under normal market conditions the
Fund's assets will be invested so that at least 80% of the annual income of the
Fund will be exempt from federal income tax, including the alternative minimum
tax, and Kentucky income tax. This policy may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. The term
"majority" of the outstanding shares means the lesser of (1) 67% or more of the
outstanding shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented at such
meeting or (2) more than 50% of the outstanding shares of the Fund.
The Fund may, from time to time, invest in other short-term,
high-quality obligations for temporary defensive purposes (subject to the
fundamental policy that under normal market conditions the assets of the Fund
will be invested so that at least 80% of its annual income is exempt from
federal income tax, including the alternative minimum tax, and Kentucky income
tax). These include, but are not limited to, obligations the interest on which
is exempt from federal, but not Kentucky, income tax and taxable obligations
such as obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. Except for temporary defensive
purposes, the Fund's assets will be invested so that no more than 20% of the
Fund's annual income will be subject to federal income tax. Under normal market
conditions, the Fund anticipates that not more than 5% of the value of its net
assets will be invested in any one type of taxable obligation. Taxable
obligations are more fully described in the Statement of Additional Information.
The Fund may invest in these other short-term obligations, for example, due to
market conditions under which Kentucky Obligations are temporarily unavailable
for purchase or available only in limited amounts, or pending investment of
proceeds of sales of shares or proceeds from the sale of portfolio securities or
in anticipation of redemptions. Although interest earned on these short-term
obligations is taxable as ordinary income for federal and/or Kentucky tax
purposes, the Fund intends to minimize taxable income through investment, when
possible, in other available securities exempt from federal income tax and/or
Kentucky income taxes, including shares of investment companies whose dividends
are tax-exempt. The Fund may invest up to 10% of its total assets in shares of
other investment companies.
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<PAGE>
Investments by the Fund in shares of other investment companies may result in
duplication of sales loads and advisory, administrative and distribution fees.
The Fund will not invest more than 5% of its total assets in securities of any
single investment company and will not purchase more than 3% of the outstanding
voting securities of any investment company. The Fund reserves the right to hold
cash reserves for temporary defensive purposes and to vary its dollar-weighted
average portfolio maturity, as the Adviser deems necessary.
Although the Fund has no current intention of doing so, the Fund may
buy and sell futures contracts relating to indices on municipal bonds and to
U.S. Government securities. The Fund may also write and purchase put and call
options on futures. Futures and options may be used to attempt to hedge against
changes in the market price of the Fund's municipal obligations caused by
interest rate fluctuations. Futures and options also may provide a hedge against
increases in the cost of securities the Fund intends to purchase.
Kentucky Obligations
--------------------
Kentucky Obligations are debt obligations issued by the Commonwealth of
Kentucky and its political subdivisions, agencies, authorities and
instrumentalities and other qualifying issuers which pay interest that is, in
the opinion of bond counsel to the issuer, exempt from federal income tax,
including the alternative minimum tax and Kentucky personal income tax. For
purposes of this definition, Kentucky Obligations include participation
interests in Kentucky Obligations and shares of an investment company which
invests its assets so that at least 80% of its annual income is exempt from
federal income tax, including the alternative minimum tax and Kentucky personal
income tax. Kentucky Obligations are issued to obtain funds to construct, repair
or improve various public facilities such as airports, bridges, highways,
hospitals, housing, schools, streets and water and sewer works, to pay general
operating expenses or to refinance outstanding debts. They also may be issued to
finance various private activities, including the lending of funds to public or
private institutions for construction of housing, educational or medical
facilities or the financing of privately owned or operated facilities. Kentucky
Obligations consist of tax-exempt bonds, tax-exempt notes and tax-exempt
commercial paper. The Statement of Additional Information contains a description
of tax-exempt bonds, notes and commercial paper.
The two principal classifications of Kentucky Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project,
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<PAGE>
facility or tax. Industrial development revenue bonds are a specific type of
revenue bond backed by the credit of the private user of the facility, and
therefore investments in these bonds have more potential risk. The Fund's
ability to achieve its investment objective depends to a great extent on the
ability of these various issuers to meet their scheduled payments of principal
and interest. Tax-exempt notes generally are used to provide short-term capital
needs and generally have maturities of one year or less. The tax-exempt notes in
which the Fund may invest are tax anticipation notes (TANs), revenue
anticipation notes (RANs) and bond anticipation notes (BANs). TANs, RANs and
BANs are issued by state and local government and public authorities as interim
financing in anticipation of tax collections, revenue receipts or bond sales,
respectively. Tax- exempt commercial paper typically represents short-term,
unsecured, negotiable promissory notes.
The Fund may invest in any combination of general obligation bonds,
revenue bonds and industrial development bonds. The Fund may invest more than
25% of its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the nongovernmental users. However, the Fund will not invest more
than 25% of its assets in securities backed by nongovernmental users which are
in the same industry. Interest on municipal obligations (including certain
industrial development bonds) which are private activity obligations, as defined
in the Internal Revenue Code, issued after August 7, 1986, while exempt from
federal income tax, is a preference item for purposes of the alternative minimum
tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company will be treated as such a preference item to shareholders. The Fund will
invest its assets so that no more than 20% of its annual income gives rise to a
preference item for the purpose of the alternative minimum tax and in other
investments subject to federal income tax.
The Fund may purchase other types of tax-exempt obligations which may
become available in the future, provided the obligations are consistent with the
Fund's investment objective
- 7 -
<PAGE>
and policies, the Adviser believes their quality meets the Fund's quality
standards, and this Prospectus has been appropriately revised to reflect the
Fund's policies with respect to such obligations.
Risk Factors
------------
The market value of investments available to the Fund, and therefore
the Fund's yield and net asset value, will fluctuate due to changes in interest
rates, economic conditions, quality ratings and other factors beyond the control
of the Adviser. The Fund's portfolio securities are subject to price
fluctuations based upon changes in the level of interest rates, which will
generally result in all those securities changing in price in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise. In addition, the financial condition
of an issuer or adverse changes in general economic conditions, or both, may
impair the issuer's ability to make payments of interest and principal. There is
no limit on the percentage of a single issue of tax-exempt obligations that the
Fund may own. If the Fund holds a significant portion of the obligations of an
issuer, there may not be a readily available market for the obligations. Reduced
diversification could involve an increased risk to the Fund should an issuer be
unable to make interest or principal payments or should the market value of
Kentucky Obligations decline.
The Fund may purchase Kentucky Obligations which are rated at the time
of purchase within the four highest grades assigned by Moody's, Standard &
Poor's or Fitch. Subsequent to its purchase by the Fund, a security may cease to
be rated or its rating may be reduced below the minimum required for purchase by
the Fund. In the event a security's rating is reduced below the Fund's minimum
requirements, the Fund will sell the security, subject to market conditions and
the Adviser's assessment of the most opportune time for sale. Although lower
rated securities will generally provide higher yields than higher rated
securities of similar maturities, they are subject to a greater degree of market
fluctuation. Kentucky Obligations rated Baa or BBB have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to pay principal and interest than is
the case with higher grade securities. In addition, Kentucky Obligations with
longer maturities generally offer both higher yields and greater exposure to
market fluctuation from changes in interest rates. Consequently, investors in
the Fund should be aware that there is a possibility of greater fluctuation in
the Fund's net asset value.
- 8 -
<PAGE>
There are also risks of reduced diversification because the Fund
invests primarily in obligations of issuers within a single state. The Fund is
more likely to invest its assets in the securities of fewer issuers because of
the relatively smaller number of issuers of Kentucky Obligations. The Fund's
performance is closely tied to conditions within the Commonwealth of Kentucky
and to the financial condition of the Commonwealth and its authorities and
municipalities. The economy in the Commonwealth of Kentucky, once dominated by
coal mining, tobacco and heavy manufacturing industries, is diversifying into a
more modern manufacturing and service-oriented base. Kentucky's manufacturing
sector is heavily reliant on transportation equipment, but also includes
industrial machinery, consumer appliances and apparel. Its service sector
consists of air transportation, health and business services and retail trade.
Kentucky's manufacturing and service sectors have both grown steadily, with much
of the economic development occurring in the "Golden Triangle" bounded by
Cincinnati, Louisville and Lexington. Development in other regions of Kentucky
has not prospered as well and may lag statewide development efforts. The
Commonwealth has been successful in attracting new businesses through its low
cost structure, high quality of life and probusiness regulatory environment. Yet
despite improvement in its education system resulting from sweeping educational
reform in 1990, the Commonwealth will be challenged by growing educational
demands facing its workforce. To address this problem, Kentucky's legislature
passed a bill in 1997 to appropriate money towards improving its post-secondary
education in order to enhance job opportunities. In recent fiscal years,
effective budgetary management has enabled Kentucky to reverse a trend of poor
financial performance which had deteriorated year-end balances through fiscal
1993. A reversal in the negative trend began in fiscal 1994 and has carried
forward through fiscal 1998, enabling the Commonwealth to establish a budgetary
reserve which is expected to be maintained through fiscal 1999. General fund
receipts for fiscal 1998 are estimated to be 4.1% above the 1997 level and the
Commonwealth expects to have cash surpluses of $316.5 million at the end of
fiscal 1998. During the past seven years, Kentucky's growth in both employment
and personal income has outpaced that of the nation; however, major structural
weaknesses exist within Kentucky's economic base, creating vulnerabilities given
rapid technological change. Although revenue obligations of the Commonwealth of
Kentucky or its political subdivisions may be payable from a specific project or
source, there can be no assurance that future economic and political
developments and the resulting impact on state and local governmental finances
will not adversely affect the market values and marketability of the Kentucky
Obligations held by the Fund or the ability of a specific issuer to make
interest or principal payments.
- 9 -
<PAGE>
The Fund is a non-diversified fund under the Investment Company Act of
1940. Thus, its investments may be more concentrated in fewer issuers than those
of a diversified fund. This concentration may cause greater fluctuation in the
Fund's net asset value. As the Fund intends to comply with Subchapter M of the
Internal Revenue Code, it may invest up to 50% of its assets at the end of each
quarter of its fiscal year in as few as two issuers, provided that no more than
25% of the assets are invested in one issuer. With respect to the remaining 50%
of its assets at the end of each quarter, it may invest no more than 5% in one
issuer.
Certain provisions in the Internal Revenue Code relating to the
issuance of municipal obligations may reduce the volume of municipal obligations
qualifying for federal tax exemptions. Shareholders should consult their tax
advisors concerning the effect of these provisions on an investment in the Fund.
Proposals that may further restrict or eliminate the income tax exemptions for
interest on municipal obligations may be introduced in the future. If any such
proposal were enacted that would reduce the availability of municipal
obligations for investment by the Fund so as to adversely affect its
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of municipal
obligation as taxable, the Fund would treat such security as a permissible
taxable investment within the applicable limits set forth herein.
Other Investment Techniques
---------------------------
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
PARTICIPATION INTERESTS. The Fund may purchase participation interests
in tax-exempt obligations owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in the obligation in
the proportion that the Fund's participation interest bears to the principal
amount of the obligation and provides that the holder may demand repurchase
within a specified period. Participation interests frequently are backed by
irrevocable letters of credit or a guarantee of a bank. Participation interests
will be purchased only if, in the opinion of counsel to the issuer, interest
income on the participation interests will be tax-exempt when distributed as
dividends to shareholders. For certain participation interests, the Fund will
have the right to demand payment, on not more than seven days' notice, for all
or any part of its participation interest in the tax-exempt obligation, plus
accrued interest. As to these instruments, the Fund intends to
- 10 -
<PAGE>
exercise its right to demand payment only upon a default under the terms of the
obligation, as needed to provide liquidity to meet redemptions, or to maintain a
high-quality investment portfolio. The Fund will not invest more than 10% of its
net assets in participation interests.
FLOATING AND VARIABLE RATE OBLIGATIONS. The Fund may invest in floating
or variable rate tax-exempt obligations. Floating rate obligations have an
interest rate which is fixed to a specified interest rate, such as a bank prime
rate, and is automatically adjusted when the specified interest rate changes.
Variable rate obligations have an interest rate which is adjusted at specified
intervals to a specified interest rate. Periodic interest rate adjustments help
stabilize the obligations' market values. The Fund may purchase these
obligations from the issuers or may purchase participation interests in pools of
these obligations from banks or other financial institutions. Variable and
floating rate obligations usually carry demand features that permit the Fund to
sell the obligations back to the issuers or to financial intermediaries at par
value plus accrued interest upon not more than 30 days' notice at any time or
prior to specific dates. Certain of these variable rate obligations, often
referred to as "adjustable rate put bonds," may have a demand feature
exercisable on specific dates once or twice each year. The Fund will not invest
more than 15% of its net assets in floating or variable rate obligations as to
which the Fund cannot exercise the demand feature on not more than seven days'
notice if the Adviser, under the direction of the Board of Trustees, determines
that there is no secondary market available for these obligations and all other
illiquid securities. If the Fund invests a substantial portion of its assets in
obligations with demand features permitting sale to a limited number of
entities, the inability of the entities to meet demands to purchase the
obligations could affect the Fund's liquidity. However, obligations with demand
features frequently are secured by letters of credit or comparable guarantees
that may reduce the risk that an entity would not be able to meet such demands.
In determining whether an obligation secured by a letter of credit meets the
Fund's quality standards, the Adviser will ascribe to such obligation the same
rating given to unsecured debt issued by the letter of credit provider. In
looking to the creditworthiness of a party relying on a foreign bank for credit
support, the Adviser will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls or other governmental restrictions
affecting its ability to honor its credit commitment.
WHEN-ISSUED OBLIGATIONS. The Fund may invest in when-issued
tax-exempt obligations. Obligations offered on a when-issued
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<PAGE>
basis are settled by delivery and payment after the date of the transaction,
usually within 15 to 45 days. The Fund will maintain a segregated account with
its Custodian of cash or liquid securities, marked to market daily, in an amount
equal to its when-issued commitments. Because these transactions are subject to
market fluctuations, a significant commitment to when- issued purchases could
result in greater fluctuation of the Fund's net asset value. The Fund will only
make commitments to purchase when-issued obligations with the intention of
actually acquiring the obligations and not for the purpose of investment
leverage. Under normal market conditions, the Fund will not invest more than 25%
of its net assets in when-issued obligations.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than one-third of its
net assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
OBLIGATIONS WITH PUTS ATTACHED. The Fund may purchase tax-exempt
obligations with the right to resell the obligation to the seller at a specified
price or yield within a specified period. The right to resell is commonly known
as a "put" or a "standby commitment." The Fund may purchase tax-exempt
obligations with puts attached from banks and broker-dealers. The Fund intends
to use obligations with puts attached for liquidity purposes to ensure a ready
market for the underlying obligations at an acceptable price. Although no value
is assigned to any puts on tax-exempt obligations, the price which the Fund pays
for the obligations may be higher than the price of similar obligations without
puts attached. The purchase of obligations with puts attached involves the risk
that the seller may not be able to repurchase the underlying obligation. The
Fund intends to purchase such obligations only from sellers deemed by the
Adviser, under the direction of the Board of Trustees, to present minimal credit
risks. In addition, the value of the obligations with puts attached held by the
Fund will not exceed 10% of its net assets.
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<PAGE>
LEASE OBLIGATIONS. The Fund may invest in tax-exempt obligations that
constitute participations in lease obligations or installment purchase contract
obligations ("lease obligations") of municipal authorities or entities. Although
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate and
make the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on an annual basis.
In addition to the "non-appropriation" risk, these securities represent a
relatively new type of financing that has not yet developed the depth of
marketability associated with more conventional bonds. Although
"non-appropriation" lease obligations are secured by the leased property, the
disposition of the property in the event of foreclosure might prove difficult.
The Fund will seek to minimize these risks by not investing more than 15% of its
net assets in lease obligations if the Adviser determines that there is no
secondary market available for these obligations and all other illiquid
securities, and by only investing in "non- appropriation" lease obligations that
meet certain criteria of the Adviser. The Fund does not intend to invest more
than an additional 5% of its net assets in municipal lease obligations
determined by the Adviser, under the direction of the Board of Trustees, to be
liquid. The Fund will only purchase unrated lease obligations which meet the
Fund's quality standards, as determined by the Adviser, under the direction of
the Board of Trustees, including an assessment of the likelihood that the lease
will not be cancelled.
SECURITIES WITH LIMITED MARKETABILITY. The Fund may invest in the
aggregate up to 15% of its net assets in securities that are not readily
marketable, including: participation interests that are not subject to the
demand feature described above; floating and variable rate obligations as to
which the Fund cannot exercise the related demand feature described above and as
to which there is no secondary market; lease obligations for which there is no
secondary market; repurchase agreements not terminable within seven days; and
all other illiquid securities.
BORROWING AND PLEDGING. The Fund may borrow money from banks (provided
there is 300% asset coverage) or from banks or other persons for temporary
purposes (in an amount not exceeding 5% of its total assets). The Fund will not
make any borrowing which would cause its outstanding borrowings to exceed
one-third of the value of its total assets. The Fund may pledge assets in
connection with borrowings but will not pledge more than one-third of its total
assets. The Fund will not make any additional
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<PAGE>
purchases of portfolio securities if outstanding borrowings exceed 5% of the
value of its total assets. Borrowing magnifies the potential for gain or loss on
the Fund's portfolio securities and, therefore, if employed, increases the
possibility of fluctuation in its net asset value. This is the speculative
factor known as leverage. The Fund's policies on borrowing and pledging are
fundamental policies which may not be changed without the affirmative vote of a
majority of its outstanding shares.
FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may also enter into
contracts for the future delivery of securities and futures contracts based on a
specific security, class of securities or an index, purchase or sell options on
any such futures contracts and engage in related closing transactions. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index.
The Fund may enter into futures contracts in an effort to hedge against
market risks and in anticipation of future purchases or sales of securities. For
example, when interest rates are expected to rise or market values of portfolio
securities are expected to fall, the Fund can seek to offset a decline in the
value of its portfolio securities by entering into futures contract
transactions. When interest rates are expected to fall or market values are
expected to rise, the Fund, through the purchase of such contracts, can attempt
to secure better rates or prices than might later be available in the market
when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will give
the Fund the right (but not the obligation), for a specified price, to sell or
to repurchase the underlying futures contract, upon exercise of the option, at
any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed 5% of the Fund's total assets (other
than in connection with bona fide hedging purposes), and the value of securities
that are the subject of such futures and options (both for receipt and delivery)
may not exceed one-third of the market value of the Fund's total assets.
Futures transactions involve brokerage costs and require the Fund to
segregate assets to cover contracts that would require it to purchase
securities. The Fund may lose the expected benefit of futures transactions if
interest rates or securities prices move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the
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<PAGE>
value of the Fund's futures positions may not prove to be perfectly or even
highly correlated with the value of its portfolio securities, limiting the
Fund's ability to hedge effectively against interest rate and/or market risk and
giving rise to additional risks. There is no assurance of liquidity in the
secondary market for purposes of closing out futures positions.
PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading
as a primary means of achieving its investment objective. However, the Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. High turnover involves correspondingly greater
commission expenses and transaction costs and may result in the Fund recognizing
greater amounts of income and capital gains, which would increase the amount of
income and capital gains which the Fund must distribute to its shareholders in
order to maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at least $1,000.
However, the minimum initial investment for employees, shareholders and
customers of Countrywide Credit Industries, Inc. or any affiliated company,
including members of the immediate family of such individuals, is $50. You may
purchase additional shares through the Open Account Program described below. You
may open an account and make an initial investment through securities dealers
having a sales agreement with the Trust's principal underwriter, Countrywide
Investments, Inc. (the "Adviser"). You may also make a direct initial investment
by sending a check and a completed account application form to Countrywide Fund
Services, Inc. (the "Transfer Agent"), P.O. Box 5354, Cincinnati, Ohio
45201-5354. Checks should be made payable to the "Kentucky Tax-Free Fund." An
account application is included in this Prospectus.
Shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Adviser by 5:00 p.m., Eastern time, that day
are confirmed at the public offering price determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Adviser by 5:00 p.m., Eastern time. Dealers may charge a
fee for effecting
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<PAGE>
purchase orders. Direct purchase orders received by the Transfer Agent by 4:00
p.m., Eastern time, are confirmed at that day's public offering price. Direct
investments received by the Transfer Agent after 4:00 p.m., Eastern time, and
orders received from dealers after 5:00 p.m., Eastern time, are confirmed at the
public offering price next determined on the following business day.
The public offering price of shares is the next determined net asset
value per share plus a sales load as shown in the following table.
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- --------------------- ------- --------- -------
Less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50 3.63 3.30
$250,000 but less than $500,000 2.50 2.56 2.30
$500,000 but less than $1,000,000 2.00 2.04 1.80
$1,000,000 or more None* None*
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of 1% may apply if a commission was paid by
the Adviser to a participating unaffiliated dealer and the shares are
redeemed within twelve months from the date of purchase.
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of $1,000,000 or more and subsequent purchases
further increasing the size of the account, a dealer's commission of up to 1% of
the purchase amount may be paid by the Adviser to participating unaffiliated
dealers through whom such purchases are effected. In determining a dealer's
eligibility for such commission, purchases of shares of the Fund may be
aggregated with concurrent purchases of shares of other funds of
Countrywide Investments. Dealers should contact the Adviser concerning the
pplicability and calculation of the dealer's commission in the case of combined
purchases. An exchange from other funds of Countrywide Investments will not
qualify for payment of the dealer's commission, unless such exchange is from a
Countrywide fund with assets as to which a dealer's commission
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<PAGE>
or similar payment has not been previously paid. Redemptions of shares may
result in the imposition of a contingent deferred sales load if the dealer's
commission described in this paragraph was paid in connection with the purchase
of such shares. See "Contingent Deferred Sales Load for Certain Purchases of
Shares" below.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers listed
below.
After an initial investment, all investors are considered participants
in the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Fund over a period of years and permits the automatic
reinvestment of dividends and distributions of the Fund in additional shares
without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
The check should be made payable to the Fund.
Under the Open Account Program, you may also purchase shares of the
Fund by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629- 2050) for instructions. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Fund to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing 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
- 17 -
<PAGE>
loads set forth in the table above. Purchases made in any load fund distributed
by the Adviser pursuant to a Letter of Intent may also be eligible for the
reduced sales loads. The minimum initial investment under a Letter of Intent is
$10,000. The load funds currently distributed by the Adviser are listed in the
Exchange Privilege section of this Prospectus. Shareholders should contact the
Transfer Agent for information about the Right of Accumulation and Letter of
Intent.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at
net asset value by pension and profit-sharing plans, pension funds and other
company-sponsored benefit plans that (1) have plan assets of $500,000 or more,
or (2) have, at the time of purchase, 100 or more eligible participants, or (3)
certify that they project to have annual plan purchases of $200,000 or more, or
(4) are provided administrative services by certain third-party administrators
that have entered into a special service arrangement with the Adviser relating
to such plan.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase shares of
the Fund at net asset value. To the extent permitted by regulatory authorities,
a bank trust department may charge fees to clients for whose account it
purchases shares at net asset value. Federal and state credit unions may also
purchase shares at net asset value.
In addition, shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Adviser, and their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees.
Clients of investment advisers may also purchase shares of the Fund
at net asset value if their investment adviser or broker-dealer has made
arrangements to permit them to do so with the Trust. The investment adviser
must notify the Transfer Agent that an investment qualifies as a purchase at
net asset value.
Associations and affinity groups and their members may purchase shares of
the Fund at net asset value provided that management of these groups or their
financial adviser has made arrangements to permit them to do so with the Trust.
Investors or their financial adviser must notify the Transfer Agent that an
investment qualifies as a purchase at net asset value.
- 18 -
<PAGE>
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals, may also purchase shares of the Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF SHARES. A
contingent deferred sales load is imposed upon certain redemptions of shares of
the Fund (or shares into which such shares were exchanged) purchased at net
asset value in amounts totaling $1 million or more, if the dealer's commission
described above was paid by the Adviser and the shares are redeemed within
twelve months from the date of purchase. The contingent deferred sales load will
be paid to the Adviser and will be equal to 1% of the lesser of (1) the net
asset value at the time of purchase of the shares being redeemed or (2) the net
asset value of such shares at the time of redemption. In determining whether the
contingent deferred sales load is payable, it is assumed that shares not subject
to the contingent deferred sales load are the first redeemed followed by other
shares held for the longest period of time. The contingent deferred sales load
will not be imposed upon shares representing reinvested dividends or capital
gains distributions, or upon amounts representing share appreciation. If a
purchase of shares is subject to the contingent deferred sales load, the
investor will be so notified on the confirmation for such purchase.
Redemptions of such shares of the Fund held for at least 12 months will
not be subject to the contingent deferred sales load and an exchange of such
shares into another fund of Countrywide Investments is not treated as a
redemption and will not trigger the imposition of the contingent deferred sales
load at the time of such exchange. A fund will "tack" the period for which such
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange; however,
the period of time that the redemption proceeds of such shares are held in a
money market fund will not count toward the holding period for determining
whether a contingent deferred sales load is applicable. See "Exchange
Privilege."
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
- 19 -
<PAGE>
ADDITIONAL INFORMATION. For purposes of determining the initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21, purchasing shares
for his or their own account; or a trustee or other fiduciary purchasing shares
for a single fiduciary account although more than one beneficiary is involved;
or employees of a common employer, provided that economies of scale are realized
through remittances from a single source and quarterly confirmation of such
purchases; or an organized group, provided that the purchases are made through a
central administration, or a single dealer, or by other means which result in
economy of sales effort or expense. Contact the Transfer Agent for additional
information concerning purchases at net asset value or at reduced sales loads.
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone exchanges) made available to
investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
-------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional shares of the Fund while the
plan is in effect are generally undesirable because a sales load is incurred
whenever purchases are made.
- 20 -
<PAGE>
Direct Deposit Plans
--------------------
Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.
InvestPlus Plan
---------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
Reinvestment Privilege
----------------------
If you have redeemed shares of the Fund, you may reinvest all or part
of the proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of the Fund on each day that the Trust is open
for business by sending a written request to the Transfer Agent. The request
must state the number of shares or the dollar amount to be redeemed and your
account number. The request must be signed exactly as your name appears on the
Trust's account records. If the shares to be redeemed have a value of $25,000 or
more, your signature must be guaranteed by any eligible guarantor institution,
including banks, brokers and dealers, municipal securities brokers and dealers,
government securities brokers and dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, your signature must be guaranteed
regardless of the value of the shares being redeemed.
You may also redeem shares by placing a wire redemption request through
a securities broker or dealer. Unaffiliated
- 21 -
<PAGE>
broker-dealers may impose a fee on the shareholder for this service. You will
receive the net asset value per share next determined after receipt by the Trust
or its agent of your wire redemption request. It is the responsibility of
broker-dealers to properly transmit wire redemption orders.
If your instructions request a redemption by wire, the proceeds will be
wired directly to your existing account in any commercial bank or brokerage firm
in the United States as designated on your application and you will be charged
an $8 processing fee. The Trust reserves the right, upon thirty days' written
notice, to change the processing fee. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
A contingent deferred sales load may apply to a redemption
of certain shares purchased at net asset value. See "How to Purchase Shares."
Shares are redeemed at their net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment is
made within three business days after tender in such form, provided that payment
in redemption of shares purchased by check will be effected only after the check
has been collected, which may take up to fifteen days from the purchase date. To
eliminate this delay, you may purchase shares of the Fund by certified check,
government check or wire.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege of
exchanging shares by telephone is automatically available to all shareholders.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification
- 22 -
<PAGE>
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested including any sales load paid,
unaffected by market fluctuations), or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other.
Shares of the Fund which are not subject to a contingent deferred sales
load may be exchanged for Class A shares of any other fund and for shares of any
other fund which offers only one class of shares (provided such shares are not
subject to a contingent deferred sales load). A sales load will be imposed equal
to the excess, if any, of the sales load rate applicable to the shares being
acquired over the sales load rate, if any, previously paid on the shares being
exchanged.
Shares of the Fund subject to a contingent deferred sales load may be
exchanged, on the basis of relative net asset value per share, for shares of any
other fund which imposes a contingent deferred sales load and for shares of any
fund which is a money market fund. A fund will "tack" the period for which the
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange. The
period of time that shares are held in a money market fund will not count toward
the holding period for determining whether a contingent deferred sales load is
applicable.
- 23 -
<PAGE>
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Intermediate Bond Fund
You may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. If you
are unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202. An exchange will be effected at the next determined net asset value (or
offering price, if sales load is applicable) after receipt of a request by the
Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
The Fund expects to distribute any net realized long-term capital gains at least
once each year. Management will determine the timing and frequency of the
- 24 -
<PAGE>
distributions of any net realized short-term capital gains. The Fund will, at
the time dividends are paid, designate as tax-exempt the same percentage of the
distribution as the actual tax-exempt income earned during the period covered by
the distribution bore to total income earned during the period; the percentage
of the distribution which is tax-exempt may vary from distribution to
distribution.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional shares.
Income Option - income distributions and short-term
capital gains distributions paid in cash;
long-term capital gains distributions
reinvested in additional shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed distribution checks.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty days of the
distribution date to the Transfer Agent for reinvestment at the net asset value
next determined after its return. The investor or his dealer must notify the
Transfer Agent that a distribution is being reinvested pursuant to this
provision.
TAXES
- -----
The Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified to
pay "exempt-interest dividends," which means that it
- 25 -
<PAGE>
may pass on to shareholders the federal tax-exempt status of its
investment income.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. For federal
income tax purposes, a shareholder's proportionate share of taxable
distributions from the Fund's net investment income as well as from net realized
short-term capital gains, if any, is taxable as ordinary income. Since the
Fund's investment income is derived from interest rather than dividends, no
portion of such distributions is eligible for the dividends received deduction
available to corporations.
Distributions of net capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by the Fund to its
shareholders are taxable to the recipient shareholders as capital gains, without
regard to the length of time a shareholder has held Fund shares. The maximum
capital gains rate for individuals is 20% with respect to assets held more than
12 months. The maximum capital gains rate for corporate shareholders is the same
as the maximum tax rate for ordinary income.
Shareholders of the Fund who are individuals residing in Kentucky or
corporations with their corporate domicile in Kentucky will not be subject to
Kentucky income tax on distributions with respect to their shares in the Fund to
the extent that such distributions are attributable to interest on Kentucky
Obligations. Under Kentucky income tax law, short-term capital gains
distributions to Kentucky residents and corporations domiciled in Kentucky are
generally not exempt from Kentucky income tax unless the statute authorizing the
issuance of the particular obligations involved expressly exempts such gains.
Kentucky taxes long-term capital gains distributions to Kentucky residents and
corporations domiciled in Kentucky at its ordinary individual and corporate
income tax rates. Depending on the level and nature of its activities within
Kentucky, all or a portion of the shares of the Fund held by corporations will
be deemed to constitute capital employed in Kentucky for purposes of the
Kentucky corporate license tax. To the extent that the Fund's holdings consist
of Kentucky Obligations and the balance consists of obligations of the U.S.
Government or any of its agencies or instrumentalities, shares of the Fund will
be exempt from the Kentucky intangible property tax. Distributions received from
the Fund by individuals are generally not subject to Kentucky municipal income
taxation; however, many local governments in Kentucky impose taxes on the net
profits of businesses operating within their local jurisdiction.
- 26 -
<PAGE>
Issuers of tax-exempt securities issued after August 31, 1986 are
required to comply with various restrictions on the use and investment of
proceeds of sales of the securities. Any failure by the issuer to comply with
these restrictions would cause interest on such securities to become taxable to
the security holders as of the date the securities were issued.
Interest on "specified private activity bonds," as defined by the Tax
Reform Act of 1986, is an item of tax preference possibly subject to the
alternative minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Fund may invest in such "specified private activity bonds"
subject to the requirement that it invest its assets so that at least 80% of its
annual income will be exempt from federal income tax, including the alternative
minimum tax, and Kentucky personal income tax. The Tax Reform Act of 1986 also
created a tax preference for corporations equal to one-half of the excess of
adjusted net book income over alternative minimum taxable income. As a result,
one-half of tax-exempt interest income received from the Fund may be a tax
preference for corporate investors.
Redemptions and exchanges of shares of the Fund are taxable events on
which a shareholder may realize a gain or loss. If a shareholder buys shares of
the Fund and sells them at a loss within six months, any loss will be disallowed
for federal and Kentucky income tax purposes to the extent of the
exempt-interest dividends received on such shares. Any loss realized upon the
sale of shares of the Fund within six months from the date of their purchase
will be treated as a long-term capital loss to the extent of amounts treated as
distributions of net realized long-term capital gains during such six month
period. In addition, shareholders should be aware that interest on indebtedness
incurred to purchase or carry shares of the Fund is not deductible for federal
income tax purposes. Shareholders receiving Social Security benefits may be
taxed on a portion of those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. The Fund will report to its shareholders the percentage and source of
income earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax and Kentucky personal income tax may not
result in similar exemptions under the laws of a particular state or local
taxing authority.
Shareholders should consult their tax advisors about the tax effect of
distributions and withdrawals from the Fund and the use of the Automatic
Withdrawal Plan and the Exchange Privilege. The tax consequences described in
this section apply whether distributions are taken in cash or reinvested in
additional
- 27 -
<PAGE>
shares. The Fund may not be an appropriate investment for persons who are
"substantial users" of facilities financed by industrial development bonds or
are "related persons" to such users; such persons should consult their tax
advisors before investing in the Fund.
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Tax-Free Trust, an
open-end management investment company organized as a Massachusetts business
trust on April 13, 1981. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, six series of Countrywide Investment
Trust and four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $100 million; .45% of
such assets from $100 million to $200 million; .4% of such assets from $200
million to $300 million; and .375% of such assets in excess of $300 million.
John J. Goetz, the Chief Investment Officer of the Adviser, is
primarily responsible for managing the portfolio of the Fund. Mr. Goetz has been
employed by the Adviser in various capacities since 1981 and has been managing
the Fund's portfolio since September 1997.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and
- 28 -
<PAGE>
expenses of members of the Board of Trustees who are not interested persons of
the Trust, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or non-recurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Trust's officers and Trustees with respect thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. When matters are
- 29 -
<PAGE>
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional shares owned. The
Trust does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
DISTRIBUTION PLAN
- -----------------
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
has adopted a plan of distribution (the "Plan") under which the Fund may
directly incur or reimburse the Adviser for certain distribution-related
expenses, including payments to securities dealers and others who are engaged in
the sale of shares of the Fund and who may be advising investors regarding the
purchase, sale or retention of Fund shares; expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services not otherwise provided by the Transfer Agent; expenses of
formulating and implementing marketing and promotional activities, including
direct mail promotions and mass media advertising; expenses of preparing,
printing and distributing sales literature and prospectuses and statements of
additional information and reports for recipients other than existing
shareholders of the Fund; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable; and any other expenses related to the
distribution of the Fund's shares.
The annual limitation for payment of expenses pursuant to the Plan is
.25% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein
- 30 -
<PAGE>
and banks and financial institutions may be required to register as dealers
pursuant to state law. If a bank were prohibited from continuing to perform all
or a part of such services, management of the Trust believes that there would be
no material impact on the Fund or its shareholders. Banks may charge their
customers fees for offering these services to the extent permitted by applicable
regulatory authorities, and the overall return to those shareholders availing
themselves of the bank services will be lower than to those shareholders who do
not. The Fund may from time to time purchase securities issued by banks which
provide such services; however, in selecting investments for the Fund, no
preference will be shown for such securities.
The National Association of Securities Dealers places certain
limitations on asset-based sales charges of mutual funds. These limitations
require fund-level accounting in which all sales charges - front-end load, 12b-1
fees or contingent deferred load - terminate when a percentage of gross sales is
reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (net asset value plus applicable sales load) of the shares of the Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange, currently 4:00 p.m., Eastern time. The Trust is open for
business on each day the New York Stock Exchange is open for business and on any
other day when there is sufficient trading in the Fund's investments that its
net asset value might be materially affected. The net asset value per share of
the Fund is calculated by dividing the sum of the value of the securities held
by the Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund, rounded
to the nearest cent.
Tax-exempt portfolio securities are valued for the Fund by an outside
independent pricing service approved by the Board of Trustees. The service
generally utilizes a computerized grid matrix of tax-exempt securities and
evaluations by its staff to determine what it believes is the fair value of the
portfolio securities. The Board of Trustees believes that timely and reliable
market quotations are generally not readily available to the Fund for purposes
of valuing tax-exempt securities and that valuations supplied by the pricing
service are more likely to approximate the fair value of the tax-exempt
securities. If, in the Adviser's opinion, the valuation provided by the service
does not accurately reflect the fair value of a tax-exempt security, it will
value the security at the average of the prices quoted by at least two
independent market makers. The quoted price will represent the market maker's
opinion as to the price that a
- 31 -
<PAGE>
willing buyer would pay for the security. All other securities (and other
assets) of the Fund for which market quotations are not readily available are
valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general supervision
of the Board of Trustees. The net asset value per share of the Fund will
fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its "average annual total
return." The Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance.
The "average annual total return" of the Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which periods will be stated in the advertisement) that would equate
an initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and the
deduction of the current maximum sales load from the initial investment. The
Fund may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. A nonstandardized quotation of total return may
also indicate average annual compounded rates of return over periods other than
those specified for "average annual total return." These nonstandardized returns
do not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation of total return will always be
accompanied by the Fund's "average annual total return" as described above.
The "yield" of the Fund is computed by dividing the net investment
income per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period. In addition,
the Fund may advertise together with its "yield" a tax-equivalent yield which
reflects the yield which would be required of a taxable investment at a stated
income tax rate in order to equal the Fund's "yield."
- 32 -
<PAGE>
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within its category as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Fund may also present its performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Adviser's view of current or past market conditions or historical trends.
Further information about the Fund's performance is contained in its
annual report which can be obtained by shareholders at no charge by calling the
Transfer Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call
629-2050) or by writing to the Trust at the address on the front of this
Prospectus.
- 33 -
<PAGE>
ACCOUNT NO. 94-__________________
Account Application (For Fund Use Only)
Kentucky Tax-Free Fund FOR BROKER/DEALER USE ONLY
Firm Name:___________________________
Home Office Address: ________________
Branch Address: ____________________
Rep Name & No.: _____________________
Please mail account application to: Rep Signature: ______________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
<TABLE>
<S> <C> <C> <C>
========================================================================================================================
Initial Investment of $_______________________
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From:
______________________________________________________________________________________________________________
[ ] Exchange From:
______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial
account please list
minor's S.S.#)
___________________________________________________________________________________________________ Citizenship:[] U.S.
Name of Joint Tenant, Partner, Custodian []Other
Address Phone
___________________________________________________________________________________________________ ( )_______________
Street or P.O. Box Business Phone
___________________________________________________________________________________________________ ( )_______________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer Name/Address________________________________________________________________________________________
Are you an associated person of an NASD member? [ ] Yes [ ] No
<PAGE>
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
=======================================================================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[ ] Share Option -- Income distributions and capital gains distributions automatically reinvested in additional
shares.
[ ] Income Option -- Income distributions and short term capital gains distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
[ ] Cash Option -- Income distributions and capital gains distributions paid in cash.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
========================================================================================================================
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of
eligible load funds of Countrywide Investments.
Account Number/Name Account Number/Name
_______________________________________________________ ______________________________________________________
_______________________________________________________ ______________________________________________________
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your Letter of Intent.)
[ ] I agree to the Letter of Intent in the current Prospectus of Countrywide Tax-Free Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning ____________________ 19
(Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of Countrywide Investments
at least equal to (check appropriate box):
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
========================================================================================================================
<PAGE>
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number [ ][ ][ ][ ]
(PIN). You will need to use this PIN when requesting account information and placing transactions. For institutional
accounts, please use a four digit number. For retail accounts, please use the first four letters of your mother's
maiden name.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself and
his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Tax-Free Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the performance of
the acts instructed herein provided that such entities have exercised due care to determine that the instructions are genuine.
___________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Signature of Joint Owner, if Any
Trustee, etc.
________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
==================================================================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Tax-Free Trust. There is no charge for this
service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________ per month in the Fund.
ABA Routing Number______________________________
FI Account Number________________________________
[] Checking Account [] Savings Account
_____________________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
______________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X_____________________________________________________________________ X_______________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
<PAGE>
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account
for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly -- Withdrawals will be made on the last business day of each month.
[ ] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
<PAGE>
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countywide account number:_ _-- _ _ _ _--_
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided check for ACH or bank wire_________________________________________________________________________
Bank Name Bank Address
________________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[ ] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of payee___________________________________________________________________________________________________________________
Please send to:_________________________________________________________________________________________________________________
Street address City State Zip
=================================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Tax-Free Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
<PAGE>
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of
the
_______________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of__________________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
at which a quorum was present and acting throughout, and that the same are now in full force and effect. I further certify that
the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
___________________________________________________ _________________________________________________________
___________________________________________________ _________________________________________________________
___________________________________________________ _______________________________________________________
Witness my hand and seal of the corporation or organization this_______________________day of______________________, 19_______
___________________________________________________ _________________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be
signed by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L.Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 34 -
<PAGE>
TABLE OF CONTENTS
Expense Information................................................
Financial Highlights...............................................
Investment Objective and Policies..................................
How to Purchase Shares.............................................
Shareholder Services...............................................
How to Redeem Shares...............................................
Exchange Privilege.................................................
Dividends and Distributions........................................
Taxes..............................................................
Operation of the Fund..............................................
Distribution Plan . . . ...........................................
Calculation of Share Price and Public Offering Price...............
Performance Information............................................
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 35 -
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1998
Tax-Free Money Fund
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
Ohio Tax-Free Money Fund
California Tax-Free Money Fund
Florida Tax-Free Money Fund
Kentucky Tax-Free 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, 1998. A copy of a Fund's Prospectus can be
obtained by writing the Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202-4094, or by calling the Trust nationwide toll-free 800-543-0407, in
Cincinnati 629-2050.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS PAGE
THE TRUST................................................................... 3
MUNICIPAL OBLIGATIONS....................................................... 5
QUALITY RATINGS OF MUNICIPAL OBLIGATIONS.................................... 9
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS...............................13
INVESTMENT LIMITATIONS......................................................19
INSURERS OF THE OHIO INSURED TAX-FREE FUND'S PORTFOLIO SECURITIES.......... 27
TRUSTEES AND OFFICERS.......................................................29
THE INVESTMENT ADVISER AND UNDERWRITER......................................32
DISTRIBUTION PLANS..........................................................35
SECURITIES TRANSACTIONS.....................................................38
PORTFOLIO TURNOVER..........................................................40
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE........................40
OTHER PURCHASE INFORMATION..................................................44
TAXES.......................................................................46
REDEMPTION IN KIND..........................................................49
HISTORICAL PERFORMANCE INFORMATION..........................................49
PRINCIPAL SECURITY HOLDERS................................................. 55
CUSTODIAN...................................................................56
AUDITORS....................................................................57
TRANSFER AGENT . ...........................................................57
TAX EQUIVALENT YIELD TABLES.................................................59
ANNUAL REPORT . . . ........................................................61
- 2 -
<PAGE>
THE TRUST
- ---------
Countrywide Tax-Free Trust (the "Trust"), formerly Midwest Group Tax
Free Trust, was organized as a Massachusetts business trust on April 13, 1981.
The Trust currently offers seven series of shares to investors: the Tax-Free
Money Fund, the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund,
the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund, the Florida
Tax-Free Money Fund and the Kentucky Tax-Free Fund (referred to individually as
a "Fund" and collectively as the "Funds"). Each Fund has its own investment
objective(s) and policies.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997,
the Kentucky Tax-Free Fund, on August 29, 1997, succeeded to the assets and
liabilities of another mutual fund of the same name (the "Predecessor Fund"),
which was an investment series of Trans Adviser Funds, Inc. The investment
objective, policies and restrictions of the Kentucky Tax-Free Fund and its
Predecessor Fund are substantially identical and the financial data and
information in this Statement of Additional Information with respect to the
Kentucky Tax-Free Fund for periods ended prior to September 1, 1997 relates to
the Predecessor Fund.
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
- 3 -
<PAGE>
by the class to which such expenses are attributable, including transfer agent
fees attributable to a specific class of shares, printing and postage expenses
related to preparing and distributing materials to current shareholders of a
specific class, registration fees incurred by a specific class of shares, the
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; (iii) each class has exclusive voting 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
- 4 -
<PAGE>
held personally liable for the obligations of the Trust. Moreover, it provides
that the Trust will, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. As a result, and particularly because the Trust assets are readily
marketable and ordinarily substantially exceed liabilities, management believes
that the risk of shareholder liability is slight and limited to circumstances in
which the Trust itself would be unable to meet its obligations. Management
believes that, in view of the above, the risk of personal liability is remote.
MUNICIPAL OBLIGATIONS
- ---------------------
Each Fund invests primarily in Municipal Obligations. Municipal
Obligations are debt obligations issued by a state and its political
subdivisions, agencies, authorities and instrumentalities and other qualifying
issuers which pay interest that is, in the opinion of bond counsel to the
issuer, exempt from federal income tax. Municipal Obligations include tax-exempt
bonds, notes and commercial paper. The Ohio Insured Tax- Free Fund and the Ohio
Tax-Free Money Fund invest primarily in Ohio Obligations, which are Municipal
Obligations issued by the State of Ohio and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
both federal income tax and Ohio personal income tax. The California Tax-Free
Money Fund invests primarily in California Obligations, which are Municipal
Obligations issued by the State of California and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
both federal income tax and California income tax. The Florida Tax-Free Money
Fund invests primarily in Florida Obligations, which are Municipal Obligations
issued by the State of Florida and its political subdivisions, agencies,
authorities and instrumentalities and other qualifying issuers, the value of
which is exempt from the Florida intangible personal property tax, which pay
interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax. The Kentucky Tax-Free Fund invests primarily in Kentucky
Obligations, which are Municipal Obligations issued by the State of Kentucky 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, Kentucky personal income
tax and the Kentucky intangible property 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
- 5 -
<PAGE>
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:
1. Tax Anticipation Notes. Tax anticipation notes are issued
to finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues, such as
income, sales, use and business taxes, and are payable from these
specific future taxes.
2. Revenue Anticipation Notes. Revenue anticipation notes are
issued in expectation of receipt of other kinds of revenue, such as
federal revenues available under the federal revenue sharing programs.
3. Bond Anticipation Notes. Bond anticipation notes are issued
to provide interim financing until long-term financing can be arranged.
In most cases, the long-term bonds then provide the money for the
repayment of the notes.
TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial paper typically
represents short-term, unsecured, negotiable promissory notes issued by a state
and its political subdivisions. These notes are issued to finance seasonal
working capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are refinanced
with long-term debt. In most cases, tax-exempt commercial paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions and is
actively traded.
WHEN-ISSUED OBLIGATIONS. Each Fund may invest in when- issued Municipal
Obligations. In connection with these investments, each Fund will direct its
Custodian to place cash or liquid securities in a segregated account in an
amount sufficient to make payment for the securities to be purchased. When a
segregated account is maintained because a Fund purchases securities on a
when-issued basis, the assets deposited in the
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segregated account will be valued daily at market for the purpose of determining
the adequacy of the securities in the account. If the market value of such
securities declines, additional cash or securities will be placed in the account
on a daily basis so that the market value of the account will equal the amount
of the Fund's commitments to purchase securities on a when-issued basis. To the
extent funds are in a segregated account, they will not be available for new
investment or to meet redemptions. Securities purchased on a when-issued basis
and the securities held in a Fund's portfolio are subject to changes in market
value based upon changes in the level of interest rates (which will generally
result in all of those securities changing in value in the same way, i.e, all
those securities experiencing appreciation when interest rates decline and
depreciation when interest rates rise). Therefore, if in order to achieve higher
returns, a Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a 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
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negotiated yield at which the instruments were purchased by the Fund.
Participation interests will be purchased only if, in the opinion of counsel of
the issuer, interest income on the interests will be tax-exempt when distributed
as dividends to shareholders.
Banks and financial institutions are subject to extensive governmental
regulations which may limit the amounts and types of loans and other financial
commitments that may be made and interest rates and fees which may be charged.
The profitability of banks and financial institutions is largely dependent upon
the availability and cost of capital funds to finance lending operations under
prevailing money market conditions. General economic conditions also play an
important part in the operations of these entities and exposure to credit losses
arising from 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, the Ohio
Insured Tax-Free Fund and the Kentucky 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.
Each of the Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund will not invest more than 10% of its net assets in lease
obligations (and the Kentucky Tax-Free Fund will not invest more than 15% 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. The Funds do not intend to invest more than an additional 5% of
their net assets in municipal lease obligations
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determined by the Adviser, under the direction of the Board of Trustees, to be
liquid. In determining the liquidity of such obligations, the Adviser will
consider such factors as (1) the frequency of trades and quotes for the
obligation; (2) the number of dealers willing to purchase or sell the security
and the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the security; and (4) the nature of the
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer.
QUALITY RATINGS OF MUNICIPAL OBLIGATIONS
- -----------------------------------------
The Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California
Tax-Free Money Fund and the Florida Tax-Free Money Fund may invest in Municipal
Obligations only if rated at the time of purchase within the two highest grades
assigned by any two nationally recognized statistical rating organizations
("NRSROs") (or by any one NRSRO if the obligation is rated by only that NRSRO).
The NRSROs which may rate the obligations of the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund include Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group ("S&P") or Fitch Investors Services, Inc. ("Fitch").
The Tax-Free Intermediate Term Fund may invest in Municipal Obligations
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 and the Kentucky Tax-Free
Fund may invest in Municipal Obligations 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, the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free
Fund may also invest in tax-exempt notes and commercial paper determined by the
Adviser to meet the Funds' quality standards. In making this determination, the
Adviser will consider the ratings assigned by the NRSROs for those obligations.
Moody's Ratings
----------------
1. TAX-EXEMPT BONDS. The four highest ratings of Moody's for tax-exempt
bonds are Aaa, Aa, A and Baa. Bonds rated Aaa are judged by Moody's to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issuers. Bonds
rated Aa are judged to be of high quality by all standards. Together with the
Aaa group, they comprise what are generally known as high-
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grade bonds. Moody's says that Aa bonds are rated lower than the best bonds
because margins of protection or other elements make long term risks appear
somewhat larger than Aaa bonds. Moody's describes bonds rated A as possessing
many favorable investment attributes and as upper medium grade obligations.
Factors giving security to principal and interest of A rated bonds are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future. Bonds which are rated by Moody's in the
fourth highest rating (Baa) are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Those obligations in the A and
Baa group which Moody's believes possess the strongest investment attributes are
designated by the symbol A 1 and Baa 1.
2. TAX-EXEMPT NOTES. Moody's highest rating for tax-exempt notes is
MIG-1. Moody's says that notes rated MIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
Notes bearing the MIG-2 designation are of high quality, with margins of
protection ample although not so large as in the MIG-1 group. Notes bearing the
designation MIG-3 are of favorable quality, with all security elements accounted
for but lacking the undeniable strength of the preceding grades. Market access
for refinancing, in particular, is likely to be less well established.
3. TAX-EXEMPT COMMERCIAL PAPER. The rating Prime-1 is the highest
tax-exempt commercial paper rating assigned by Moody's. Issuers rated Prime-1
are judged to be of the best quality. Their short-term debt obligations carry
the smallest degree of investment risk. Margins of support for current
indebtedness are large or stable with cash flow and asset protection well
assured. Current liquidity provides ample coverage of near-term liabilities and
unused alternative financing arrangements are generally available. While
protective elements may change over the intermediate or long term, such changes
are most unlikely to impair the fundamentally strong position of short-term
obligations. Issuers rated Prime-2 have a strong capacity for repayment of
short-term obligations.
S&P Ratings
-----------
1. TAX-EXEMPT BONDS. The four highest ratings of S&P for tax-exempt
bonds are AAA, AA, A and BBB. Bonds rated AAA have the highest rating assigned
by S&P to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
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Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in a small degree. Bonds rated A
have a strong capacity to pay interest and repay principal although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than bonds in higher rated categories. Bonds which are rated
by S&P in the fourth highest rating (BBB) are regarded as having an adequate
capacity to pay interest and repay principal and are considered "investment
grade." Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for bonds in higher
rated categories. The ratings for tax-exempt bonds may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
2. TAX-EXEMPT NOTES. Tax-exempt note ratings are generally given by S&P
to notes that mature in three years or less. Notes rated SP-1 have very strong
or strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics will be given a plus designation. Notes
rated SP-2 have satisfactory capacity to pay principal and interest.
3. TAX-EXEMPT COMMERCIAL PAPER. The ratings A-1+ and A-1 are the
highest tax-exempt commercial paper ratings assigned by S&P. These designations
indicate the degree of safety regarding timely payment is either overwhelming
(A-1+) or very strong (A- 1). Capacity for timely payment on issues rated A-2 is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated A-1.
Fitch Ratings
-------------
1. TAX-EXEMPT BONDS. The four highest ratings of Fitch for tax-exempt
bonds are AAA, AA, A and BBB. Bonds rated AAA are regarded by Fitch as being of
the highest quality, with the obligor having an extraordinary ability to pay
interest and repay principal which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are regarded by Fitch as high quality
obligations. The obligor's ability to pay interest and repay principal, while
very strong, is somewhat less than for AAA rated bonds, and more subject to
possible change over the term of the issue. Bonds rated A are regarded by Fitch
as being of good quality. The obligor's ability to pay interest and repay
principal is strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings. Bonds rated BBB are
regarded by Fitch as being of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are
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more likely to weaken this ability than bonds with higher ratings. Fitch ratings
may be modified by the addition of a plus (+) or minus (-) sign.
2. TAX-EXEMPT NOTES. The ratings F-1+, F-1 and F-2 are the highest
ratings assigned by Fitch for tax-exempt notes. Notes assigned the F-1+ rating
are regarded by Fitch as having the strongest degree of assurance for timely
payment. Notes assigned the F-1 rating reflect an assurance for timely payment
only slightly less than the strongest issues. Notes assigned the F-2 rating have
a degree of assurance for timely payment with a lesser margin of safety than
higher-rated notes.
3. TAX-EXEMPT COMMERCIAL PAPER. Commercial paper rated Fitch-1 is
regarded as having the strongest degree of assurance for timely payment. Issues
assigned the Fitch-2 rating reflect an assurance of timely payment only slightly
less in degree than the strongest issues.
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, 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.
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DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and investment
policies described in the Prospectuses (see "Investment Objectives and
Policies") appears below:
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or of banks or institutions the accounts of which are insured by
the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable certificates
evidencing the indebtedness of a commercial bank to repay funds deposited with
it for a definite period of time (usually from fourteen days to one year) at a
stated or variable interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been drawn on it by
a customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. The Funds will
only invest in bankers' acceptances of banks having a short-term rating of A-1
by S&P or Prime-1 by Moody's. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Each Fund will not invest in time deposits maturing in more than
seven days if, as a result thereof, more than 10% (or 15%, with respect to the
Kentucky Tax-Free Fund) 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 S&P. Certain notes may have floating or variable rates. Variable
and floating rate notes with a demand notice period exceeding seven days will be
subject to each Fund's restrictions on illiquid investments (see "Investment
Limitations") unless, in the judgment of the Adviser, subject to the direction
of the Board of Trustees, such note is liquid. The Funds do not presently intend
to invest in taxable commercial paper.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's. Among the factors considered by Moody's in assigning ratings are the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity;
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amount and quality of long-term debt; trend of earnings over a period of 10
years; financial strength of the parent company and the relationships which
exist with the issuer; and recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors are all considered in
determining whether the commercial paper is rated Prime-1 or Prime-2. Commercial
paper rated A (highest quality) by S&P has the following characteristics:
liquidity ratios are adequate to meet cash requirements; long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed; the
issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances; typically, the issuer's 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% (or 15%, with respect
to the Kentucky Tax-Free Fund) 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
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exceeding one day, the seller will agree that the value of the underlying
security, including accrued interest, will at all times equal or exceed the
value of the repurchase agreement. The collateral securing the seller's
obligation must consist of either certificates of deposit, eligible bankers'
acceptances or securities which are issued or guaranteed by the United States
Government or its agencies. The collateral will be held by the Custodian or in
the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Fund to the seller subject to the
repurchase agreement and is therefore subject to that Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the 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 delays 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
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of the letter. Such terms and the issuing bank must be satisfactory to the Fund.
The Funds receive amounts equal to the interest on loaned securities and also
receive one or more of (a) negotiated loan fees, (b) interest on securities used
as collateral, or (c) interest on short-term debt securities purchased with such
collateral; either type of interest may be shared with the borrower. The Funds
may also pay fees to placing brokers as well as custodian and administrative
fees in connection with loans. Fees may only be paid to a placing broker
provided that the Trustees determine that the fee paid to the placing broker is
reasonable and based solely upon services rendered, that the Trustees separately
consider the propriety of any fee shared by the placing broker with the
borrower, and that the fees are not used to compensate the Adviser or any
affiliated person of the Trust or an affiliated person of the Adviser or other
affiliated person. The terms of the Funds' loans must meet applicable tests
under the Internal Revenue Code and permit the Funds to reacquire loaned
securities on five days' notice or in time to vote on any important matter.
TRANSACTIONS IN OPTIONS AND FUTURES. The Adviser may engage in the
use of the options and futures strategies for the Kentucky Tax-Free Fund
described below.
o FUTURES CONTRACTS: The Kentucky Tax-Free Fund may enter into
Municipal Bond Index Futures and U.S. Government Securities Futures (referred to
herein as "futures contracts") described below, which are contracts for the
future delivery of fixed-income securities. Municipal Bond Index Futures
currently are based on a long-term municipal bond index developed by the Chicago
Board of Trade ("CBT") and The Bond Buyer. U.S. Government Securities Futures
are futures contracts based on long-term Treasury bonds, Treasury notes, GNMA
Certificates and three-month Treasury bills. In this context, a futures contract
is an agreement by the Fund to buy or sell fixed-income securities at a
specified date and price. No payment is made for securities when the Fund buys a
futures contract and no securities are delivered when the Fund sells a futures
contract. Instead, the Fund makes a deposit called an "initial margin" equal to
a percentage of the contract's value. Payment or delivery is made when the
contract expires. Futures contracts will be used only as a hedge against
anticipated interest rate changes and for other transactions permitted to
entities exempt from the definition of the term commodity pool operator. The
Fund will not enter into a futures contract if immediately thereafter the sum of
the then aggregate futures market prices of financial or other instruments
required to be delivered under open futures contract sales and the aggregate
futures market prices of financial instruments required to be delivered under
open futures contract purchases would exceed one-third of the value of its total
assets. The Fund will not enter into a futures contract if immediately
thereafter more than 5% of the
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fair market value of its assets would be committed to initial margins.
The Municipal Bond Index is comprised of forty tax-exempt municipal revenue
and general obligation bonds. Each bond included in the Municipal Bond Index
must be rated A or higher by Moody's, S&P or Fitch and must have a remaining
maturity of nineteen years or more. Twice a month, new issues satisfying the
eligibility requirements are added to, and an equal number of old issues are
deleted from, the Municipal Bond Index. The value of the Municipal Bond Index is
computed daily according to a formula based on the price of each bond in the
Municipal Bond Index, as evaluated by six dealer-to-dealer brokers. A Municipal
Bond Index Futures contract is traded only on the CBT. Like other contract
markets, the CBT assures performance under futures contracts through a clearing
corporation, a nonprofit organization managed by the exchange membership which
is also responsible for handling daily accounting of deposits or withdrawals of
margin.
U.S. Government Securities Futures which may be purchased by
the Kentucky Tax-Free Fund include Treasury Bonds, Notes and Bills. U.S.
Government Securities Futures have traded longer than Municipal Bond Index
Futures, therefore the depth and liquidity available in the trading market is
generally greater for U.S. Government Securities Futures.
o WRITING COVERED CALL OPTIONS: The Kentucky Tax-Free Fund may write
covered call options on futures contracts to earn premium income, to assure a
definite price for a security it has considered selling, or to close out options
previously purchased. A call option gives the holder (buyer) the right to
purchase a futures contract at a specified price (the exercise price) at any
time until a certain date (the expiration date). A call option is "covered" if
the Fund owns the underlying security subject to the call option at all times
during the option period. A covered call writer is required to deposit in escrow
the underlying security in accordance with the rules of the exchanges on which
the option is traded and the appropriate clearing agency.
The writing of covered call options is a conservative investment technique
which the Adviser believes involves relatively little risk. However, there is no
assurance that a closing transaction can be effected at a favorable price.
During the option period, the covered call writer has, in return for the premium
received, given up the opportunity for capital appreciation above the exercise
price should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security decline.
o WRITING COVERED PUT OPTIONS: The Kentucky Tax-Free Fund may write
covered put options on futures contracts to assure a definite price for a
security if it is considering acquiring
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the security at a lower price than the current market price or to close out
options previously purchased. A put option gives the holder of the option the
right to sell, and the writer has the obligation to buy, the underlying security
at the exercise price at any time during the option period. The operation of put
options in other respects is substantially identical to that of call options.
When the Fund writes a covered put option, it maintains in a segregated account
with its Custodian cash or liquid debt obligations in an amount not less than
the exercise price at all times while the put option is outstanding.
The risks involved in writing put options include the risk that a
closing transaction cannot be effected at a favorable price and the possibility
that the price of the underlying security may fall below the exercise price, in
which case the Fund may be required to purchase the underlying security at a
higher price than the market price of the security at the time the option is
exercised.
o PURCHASING OPTIONS ON FUTURES CONTRACTS: The Kentucky Tax-Free Fund
may purchase put and call options on futures contracts. The purchase of put
options on futures contracts hedges the Fund's portfolio against the risk of
rising interest rates. The purchase of call options on futures contracts is a
means of obtaining temporary exposure to market appreciation at limited risk and
is a hedge against a market advance when the Fund is not fully invested.
Assuming that any decline in the securities being hedged is accompanied by a
rise in interest rates, the purchase of options on the futures contracts may
generate gains which can partially offset any decline in the value of the Fund's
portfolio securities which have been hedged. However, if after the Fund
purchases an option on a futures contract, the value of the securities being
hedged moves in the opposite direction from that contemplated, the Fund will
tend to experience losses in the form of premiums on such options which would
partially offset gains the Fund would have.
The Kentucky Tax-Free Fund may purchase put and call options on futures
contracts which are traded on a national exchange or board of trade and sell
such options to terminate an existing position. Options on futures contracts
give the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase or sell a
security, at a specified exercise price at any time during the period of the
option.
The holder of an option on a futures contract may terminate his
position by selling an option of the same series. There is no guarantee that
such closing transactions can be effected. In addition to the risks which apply
to all options transactions, there are several special risks relating to options
on futures contracts. The ability to establish and close out positions on
- 18 -
<PAGE>
such options is subject to the maintenance of a liquid secondary market.
Compared to the use of futures contracts, the purchase of options on futures
contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options, plus transaction costs.
o OPTIONS TRANSACTIONS GENERALLY: Option transactions in which the
Kentucky Tax-Free Fund may engage involve the specific risks described above as
well as the following risks: the writer of an option may be assigned an exercise
at any time during the option period; disruptions in the markets for underlying
instruments could result in losses for options investors; imperfect or no
correlation between the option and the securities being hedged; the insolvency
of a broker could present risks for the broker's customers; and market imposed
restrictions may prohibit the exercise of certain options. In addition, the
option activities of the Fund may affect its portfolio turnover rate and the
amount of brokerage commissions paid by the Fund. The success of the Fund in
using the option strategies described above depends, among other things, on the
Adviser's ability to predict the direction and volatility of price movements in
the options, futures contracts and securities markets and the Adviser's ability
to select the proper time, type and duration of the options.
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.
- 19 -
<PAGE>
THE LIMITATIONS APPLICABLE TO THE TAX-FREE MONEY FUND, THE TAX-FREE
INTERMEDIATE TERM FUND AND THE OHIO INSURED TAX-FREE FUND ARE:
1. Borrowing Money. Each Fund will not borrow money or pledge, mortgage
or hypothecate its assets, except as a temporary measure for extraordinary or
emergency purposes and then only in amounts not in excess of 10% of the value of
its total assets. A Fund will not make any additional purchases of portfolio
securities while borrowings are outstanding.
2. Underwriting. Each Fund will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), a
Fund may be deemed an underwriter under certain federal securities laws.
3. Illiquid Investments. Each Fund will not purchase securities for
which there are legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 10% of the value of the total assets of the Fund would be invested in
such securities.
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
- 20 -
<PAGE>
by the State of Ohio and its political subdivisions and duly constituted
authorities and corporations. This limitation is not applicable to privately
issued Municipal Obligations.
9. Investing for Control. Each Fund will not invest in companies for
the purpose of exercising control.
10. Other Investment Companies. Each Fund will not invest more than 10%
of its total assets in the securities of other investment companies and then
only for temporary purposes in companies whose dividends are tax-exempt or
invest more than 5% of its total assets in the securities of any investment
company. Each Fund will not purchase more than 3% of the outstanding voting
stock of any investment company.
11. Margin Purchases. Each Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short-term credit obtained by a Fund for the clearance of purchases and sales or
redemption of securities.
12. Common Stocks. Each Fund will not invest in common stocks.
13. Securities Owned by Affiliates. Each Fund will not purchase or
retain the securities of any issuer if, to the Trust's knowledge, those Trustees
and officers of the Trust or of the Adviser, who individually own beneficially
more than 0.5% of 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.
- 21 -
<PAGE>
THE LIMITATIONS APPLICABLE TO THE OHIO TAX-FREE MONEY FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that, when made, such temporary borrowings are
in an amount not exceeding 5% of the Fund's total assets. The Fund also will not
make any borrowing which would cause outstanding borrowings to exceed one-third
of the value of its total assets. The Fund will not make any additional
purchases of portfolio securities if outstanding borrowings exceed 5% of the
value of its total assets.
2. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by it
except as may be necessary in connection with borrowings described in limitation
(1) above. The Fund will not mortgage, pledge or hypothecate more than one-third
of its assets in connection with borrowings.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of its portfolio securities (including
restricted securities), the Fund may be deemed an underwriter under certain
federal securities laws.
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.
- 22 -
<PAGE>
8. Margin Purchases. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short-term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities.
9. Short Sales and Options. The Fund will not sell any securities short
or sell put and call options. This limitation is not applicable to the extent
that sales by the Fund of tax-exempt obligations with puts attached or sales by
the Fund of other securities in which the Fund may otherwise invest would be
considered to be sales of options.
10. Other Investment Companies. The Fund will not invest more than 5%
of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Concentration. The Fund will not invest more than 25% of its total
assets in a particular industry; this limitation is not applicable to
investments in tax-exempt obligations issued by the U.S. Government, its
territories and possessions, the District of Columbia and their respective
agencies and instrumentalities or any state and its political subdivisions,
agencies, authorities and instrumentalities. The Fund may invest more than 25%
of its total assets in tax-exempt obligations in a particular segment of the
bond market.
THE LIMITATIONS APPLICABLE TO THE CALIFORNIA TAX-FREE MONEY FUND AND
THE FLORIDA TAX-FREE MONEY FUND ARE:
1. Borrowing Money. Each Fund will not borrow money, except from a bank
for temporary purposes only, provided that, when made, such temporary borrowings
are in an amount not exceeding 10% of its total assets. Each Fund will not make
any additional purchases of portfolio securities if outstanding borrowings
exceed 5% of the value of its total assets.
2. Pledging. Each Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. Each Fund will not mortgage, pledge or hypothecate more
than 10% of the value of its total assets in connection with borrowings.
3. Underwriting. Each Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of its portfolio securities (including
restricted securities), a Fund may be deemed an underwriter under certain
federal securities laws.
- 23 -
<PAGE>
4. Illiquid Investments. Each Fund will not invest more than 10% of its
net assets in securities for which there are legal or contractual restrictions
on resale, repurchase agreements maturing in more than seven days and other
illiquid securities.
5. Real Estate. Each Fund will not purchase, hold or deal in real
estate. This limitation is not applicable to investments in securities which are
secured by or represent interests in real estate.
6. Commodities. Each Fund will not purchase, hold or deal in
commodities or commodities futures contracts, or invest in oil, gas or other
mineral explorative or development programs. This limitation is not applicable
to the extent that the tax-exempt obligations, U.S. Government obligations and
other securities in which the Funds may otherwise invest would be considered to
be such commodities, contracts or investments.
7. Loans. Each Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
a portion of an issue of tax-exempt obligations or publicly distributed bonds,
debentures or other securities.
8. Margin Purchases. Each Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short-term credit obtained by the Funds for the clearance of purchases and sales
or redemption of securities.
9. Short Sales and Options. Each Fund will not sell any securities
short or sell put and call options. This limitation is not applicable to the
extent that sales by a Fund of tax-exempt obligations with puts attached or
sales by a Fund of other securities in which a Fund may otherwise invest would
be considered to be sales of options.
10. Other Investment Companies. Each Fund will not invest more than 5%
of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Concentration. Each Fund will not invest more than 25% of its total
assets in a particular industry; this limitation is not applicable to
investments in tax-exempt obligations issued by governments or political
subdivisions of governments.
12. Senior Securities. Each Fund will not issue or sell any class of
senior security as defined by the Investment Company Act of 1940 except to the
extent that notes evidencing temporary borrowings or the purchase of securities
on a when-issued basis might be deemed as such.
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<PAGE>
THE LIMITATIONS APPLICABLE TO THE KENTUCKY TAX-FREE 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.
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 one-third of its assets in connection with borrowings.
3. Underwriting. The 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), the
Fund may be deemed an underwriter under certain federal securities laws.
4. Real Estate. The 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. The Fund will not purchase hold or deal in
commodities and will not invest in oil, gas or other mineral explorative or
development programs.
6. Loans. The Fund will not make loans to other persons if, as a
result, more than one-third of the value of the Fund's total assets would be
subject to such loans. This limitation does not apply to (a) the purchase of a
portion of an issue of debt securities in accordance with the Fund's investment
objective, policies and limitations or (b) engaging in repurchase transactions.
7. Options. The Fund will not purchase or sell puts, calls, options or
straddles except as described in the Prospectus and Statement of Additional
Information.
8. 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.
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<PAGE>
9. Senior Securities. The Fund will not issue or sell any senior security
as defined by the Investment Company Act of 1940 except insofar as any borrowing
that the Fund may engage in may be deemed to be an issuance of a senior
security.
THE KENTUCKY TAX-FREE FUND HAS ALSO ADOPTED THE FOLLOWING NONFUNDAMENTAL
INVESTMENT LIMITATIONS WHICH MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
1. Illiquid Investments. The 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 15% of the value of the Fund's net assets would be invested in such
securities.
2. 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 the value of its total assets in securities of other investment
companies.
3. 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 or margin payments in connection with futures contracts
or options on futures contracts.
4. Short Sales. The Fund will not make short sales of securities,
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities short.
With respect to the percentages adopted by the Trust as maximum
limitations on the Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.
The Trust has never pledged, mortgaged or hypothecated the assets of
any Fund, and the Trust presently intends to continue this policy. The Trust has
never acquired, nor does it presently intend to acquire, securities issued by
any other investment company or investment trust. The Funds will not purchase
securities for which there are legal or contractual restrictions on resale or
enter into a repurchase agreement maturing in more than seven days if, as a
result thereof, more than 10% (or 15%, with respect to the Kentucky Tax-Free
Fund) 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.
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<PAGE>
INSURERS OF THE OHIO INSURED TAX-FREE FUND'S PORTFOLIO SECURITIES
- -----------------------------------------------------------------
In connection with its investments in insured long-term Ohio
Obligations, the Ohio Insured Tax-Free Fund may purchase insurance from, or
obligations insured by, one of the following recognized insurers of municipal
obligations: MBIA Insurance Corp.("MBIA"), AMBAC Assurance 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 municipal bond insurance market for the
past sixteen years, holding a 42% share of the market in 1997. MBIA's volume of
new issue municipal bonds increased to approximately $44 billion in 1997, as
compared to $37 billion during the previous year. While premium levels in the
municipal market continue to be very competitive, insurers throughout the
industry are diversifying their products by targeting both the asset-based and
the international markets. Although municipal bond insurance remains the
dominant component of MBIA's written and earned premiums, the company further
expanded its asset-backed business in 1998 with the acquisition of CapMAC
Holdings Inc. MBIA's efforts to capitalize on international insurance
opportunities began in 1995 when it entered into a European joint venture with
AMBAC and expanded further in 1998 with the opening of an office in Japan.
MBIA's international business volume as of December 31, 1997 represents 2.3% of
its total insured portfolio. MBIA continues to successfully position itself for
continued growth and diversification without a material negative impact on its
overall consolidated risk profile. MBIA is 98.4% publicly owned, with its
remaining shares owned by Aetna Casualty & Surety Company.
AMBAC is the oldest and second largest bond insurer. AMBAC held a 24%
share of the municipal bond market in 1997, down from 29% the previous year, as
management was not willing to follow downward pricing trends to maintain its
share of the market. AMBAC has historically taken a very conservative approach
to the bond insurance business, beyond simply underwriting, to a zero- loss
philosophy. Management remains committed to investment- grade underwriting and
risk management, not only for its bond insurance business, but for all of its
products. AMBAC's
- 27 -
<PAGE>
disciplined underwriting continues to produce a high-quality book of business
with a very low insured portfolio risk profile and a high margin of safety. As
with other insurers, product diversification has been a cornerstone of the AMBAC
strategic plan. The AMBAC and MBIA joint venture in Europe has made a material
contribution to the overall business success of AMBAC's specialized finance
division and AMBAC's entry into the asset-based insurance sector now accounts
for 35% of its net par written. AMBAC is entirely owned by public shareholders.
FGIC is 99% owned by General Electric Capital Services and 1% owned by
Sumitomo Marine & Fire Insurance Co. Ltd. FGIC remains committed to
investment-grade, zero-loss underwriting and risk management standards. This has
resulted in a high-quality book of insured business. FGIC employs a conservative
underwriting strategy in terms of its target markets, focusing on the low-risk
sectors of the municipal market such as general obligations, tax-backed, water,
sewer and transportation sectors. Although the company posted a 49.7% increase
in net par written in 1997, net premiums written only rose 12.7%. The lower
growth rate of net premiums written compared to net par written is the result of
pricing declines in FGIC's targeted sectors, which represent the most
competitively priced sectors. Without pressure from its parent to provide ever
increasing returns, FGIC has little incentive to expand into the riskier sectors
of the municipal market and therefore continues to focus on the lower- risk
sectors that provide stable earnings.
FSA continues to expand its presence in the municipal bond market with
a 15% market share in 1997, up from a 5% market share in 1995. While FSA's roots
are in the asset-based insurance sector, it no longer is the perennial market
share leader in this market, although it remains a major player. From a total
portfolio perspective, municipal insurance in force has surpassed the insured
asset-backed portfolio. Municipal net par now represents 63% of the total par
book of business with asset- backed net exposure declining to about 37%. The
company's quality and risk management measurements are generally equal to or
slightly better than most industry averages and it continues to predominately
seek investment-grade underwriting. FSA's capital adequacy margin of safety,
currently in the 1.5x - 1.6x range is above the industry average of 1.3x - 1.4x
and management has indicated that it intends for the near-term to maintain its
current margin of safety. Notwithstanding its underwriting conservatism, FSA's
earnings measurements have exhibited recent improvement due to increased
municipal bond market share, lower capital charges and economy of scale
improvements. During the year ended December 31, 1997, net premiums written by
FSA increased 43%.
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<PAGE>
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the
Trust, their compensation from the Trust and their aggregate compensation from
the Countrywide complex of mutual funds (consisting of the Trust, Countrywide
Investment Trust and Countrywide Strategic Trust) for the fiscal year ended June
30, 1998. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk. Each of the
Trustees is also a Trustee of Countrywide Investment Trust and Countrywide
Strategic Trust.
AGGREGATE
COMPENSATION
COMPENSATION FROM
POSITION FROM COUNTRYWIDE
NAME AGE HELD TRUST COMPLEX
- --------------------- --- -------- ------------ ---------
Donald L. Bodgon, MD 67 Trustee $ 4,000 $ 12,000
+H. Jerome Lerner 60 Trustee 4,000 12,000
*Robert H. Leshner 59 President/Trustee 0 0
Howard J. Levine 62 Trustee 0 0
*Angelo R. Mozilo 59 Chairman/Trustee 0 0
Fred A. Rappoport 51 Trustee 2,000 6,000
+Oscar P. Robertson 59 Trustee 4,000 12,000
John F. Seymour, Jr. 60 Trustee 3,500 10,500
+Sebastiano Sterpa 69 Trustee 4,000 12,000
Robert G. Dorsey 41 Vice President 0 0
Maryellen Peretzky 46 Vice President 0 0
William E. Hortz 40 Vice President 0 0
John F. Splain 42 Secretary 0 0
Mark J. Seger 36 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., 1551 Hillcrest, 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.
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). He is also a director of Slush Puppy Inc. (a
manufacturer of frozen beverages) and Peerless Manufacturing (a manufacturer of
bakery equipment).
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<PAGE>
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., Countrywide Fund Services, Inc. and CW Fund Distributors,
Inc.). He is Vice Chairman and a director of Countrywide Fund Services, Inc. (a
registered transfer agent) and CW Fund Distributors, Inc. (a registered
broker-dealer) and President and a Trustee of Countrywide Strategic Trust and
Countrywide Investment Trust, registered investment companies.
HOWARD J. LEVINE, 26901 Agoura Road, Calabasas Hills, California is
President of ARCS Commercial Mortgage Co., L.P. Until 1995, he was President of
ARCS Mortgage, Inc.
ANGELO R. MOZILO, 4500 Park Granada Boulevard, Calabasas, California is
Vice Chairman, Director and Chief Executive Officer 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), CCM Municipal Services, Inc. (a tax lien
purchaser), Countrywide Field Services Corporation (foreclosure property
maintenance), Countrywide Tax Services Corporation (mortgage tax services) and
LandSafe, Inc. (the parent company of various LandSafe entities which provide
property appraisals, credit reporting services, title insurance and/or closing
services for residential mortgages). He is Chairman and a director of
Countrywide Financial Services, Inc., Countrywide Investments, Inc., Countrywide
Fund Services, Inc., CW Fund Distributors, Inc., Countrywide Servicing Exchange
(a loan servicing broker), Countrywide Lending Corporation, Countrywide Capital
Markets, Inc., (parent company), LandSafe Servicing, Inc. (a property surveyor)
and various LandSafe subsidiaries and is Chairman and Chief Executive Officer of
Countrywide Securities Corporation (a registered broker-dealer). He is also Vice
Chairman of CWM Mortgage Holdings, Inc. (a real estate investment trust).
FRED A. RAPPOPORT, 830 Birchwood Drive, Los Angeles, California is
Chairman of The Fred Rappoport Company (a broadcasting and entertainment
company).
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
Corporation (a non-profit affordable housing company). He is a director and a
consultant for Orange Coast Title Insurance Co. and is also a director of Irvine
Apartment Communities (a REIT) and Inco Homes (a home builder). Until
January 1, 1995, he was the Executive Director of the California Housing Finance
Agency. He is a former U.S. Senator, State
- 30 -
<PAGE>
Senator, California State Legislator and Mayor of Anaheim, California.
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. and CW Fund Distributors, Inc.,
First Vice President - Finance and Treasurer of Countrywide Financial Services,
Inc. and First Vice President 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,
Maplewood Investment Trust, a series company, The Thermo Opportunity Fund, Inc.,
The Dean Family of Funds, The New York State Opportunity Funds, the Wells Family
of Real Estate Funds, the Lake Shore Family of Funds, Boyar Value Fund, Inc.,
Bowes Investment Trust, Profit Funds Investment Trust, Atalanta/Sosnoff
Investment Trust and UC Investment Trust and Assistant Vice President of
Williamsburg Investment Trust, Schwartz Investment Trust, The Tuscarora
Investment Trust, The Gannett Welsh & Kotler Funds, Firsthand Funds, the
Westport Funds, Albemarle Investment Trust and The James Advantage Funds, all of
which are registered investment companies.
MARYELLEN PERETZKY, 312 Walnut Street, Cincinnati, Ohio is Senior Vice
President and Chief Operating Officer of Countrywide Investments, Inc. and
Senior Vice President and Chief Administrative Officer of Countrywide Financial
Services, Inc. She is also Senior Vice President-Administration of Countrywide
Fund Services, Inc. and CW Fund Distributors, Inc.
WILLIAM E. HORTZ, 312 Walnut Street, Cincinnati, Ohio is Executive Vice
President and Director of Sales of Countrywide Investments, Inc. and Countrywide
Financial Services, Inc. From 1996 until 1998, he was President of Peregrine
Asset Management (an investment adviser). From 1991 until 1996, he was Regional
Director of Neuberger & Berman Management (an investment adviser).
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is First Vice
President, Secretary and General Counsel of Countrywide Fund Services, Inc.,
CW Fund Distributors, Inc., 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, Maplewood Investment Trust, a series company, The Thermo Opportunity
Fund, Inc., the Lake Shore Family
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<PAGE>
of Funds, the Wells Family of Real Estate Funds, Boyar Value Fund, Inc. and
Profit Funds Investment Trust and Assistant Secretary of Schwartz Investment
Trust, The Gannett Welsh & Kotler Funds, Firsthand Funds, the New York State
Opportunity Funds, the Dean Family of Funds, the Westport Funds, Bowes
Investment Trust, Atalanta/Sosnoff Investment Trust, Albemarle Investment Trust,
The James Advantage Funds and UC Investment Trust.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio
is First Vice President and Chief Operating Officer of Countrywide Fund
Services, Inc. and CW Fund Distributors, Inc. He is also Treasurer of
Countrywide Strategic Trust, Countrywide Investment Trust, Brundage, Story and
Rose Investment Trust, Williamsburg Investment Trust, Markman MultiFund Trust,
Maplewood Investment Trust, a series company, The Thermo Opportunity Fund, Inc.,
the New York State Opportunity Funds, the Dean Family of Funds, the Wells Family
of Real Estate Funds, Bowes Investment Trust, Profit Funds Investment Trust, the
Lake Shore Family of Funds, Albemarle Investment Trust, Atalanta/Sosnoff
Investment Trust and UC Investment Trust and Assistant Treasurer of Schwartz
Investment Trust, The Tuscarora Investment Trust, The Gannett Welsh & Kotler
Funds, Firsthand Funds, the Westport Funds, Boyar Value Fund, Inc. and The James
Advantage Funds.
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
- --------------------------------------
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 are 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
- 32 -
<PAGE>
$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, 1998, 1997 and 1996, the Tax-Free
Money Fund paid advisory fees of $150,790, $149,097 and $140,891, respectively.
For the fiscal years ended June 30, 1998, 1997 and 1996, the Tax-Free
Intermediate Term Fund paid advisory fees of $302,947, $343,509 and $398,576,
respectively. For the fiscal years ended June 30, 1998, 1997 and 1996, the Ohio
Insured Tax-Free Fund paid advisory fees of $378,345, $393,579 and $397,265,
respectively; however, the Adviser voluntarily reimbursed the Fund for $948 and
$2,708 of Class A expenses for the fiscal years ended June 30, 1998 and 1996,
respectively, in order to reduce the operating expenses of the Fund. For the
fiscal years ended June 30, 1998, 1997 and 1996, the Ohio Tax- Free Money Fund
accrued advisory fees of $1,421,029, $1,181,638 and $1,117,233, respectively;
however, the Adviser voluntarily waived $46,680 and $54,672 of its fees and
reimbursed the Fund for $7,979 and $9,148 of Class B expenses for the fiscal
years ended June 30, 1998 and 1997, respectively, in order to reduce the
operating expenses of the Fund. For the fiscal years ended June 30, 1998, 1997
and 1996, the California Tax-Free Money Fund accrued advisory fees of $210,813,
$200,103 and $142,143, respectively; however, the Adviser voluntarily waived
$6,600 of its fees for the fiscal year ended June 30, 1996 in order to reduce
the operating expenses of the Fund. For the fiscal years ended June 30, 1998,
1997 and 1996, the Florida Tax-Free Money Fund accrued advisory fees of
$276,608, $234,628 and $152,663, respectively; however, the Adviser voluntarily
waived $107,645, $87,852 and $58,284 of its fees for the fiscal years ended June
30, 1998, 1997 and 1996, respectively, and reimbursed the Fund for $7,114 and
$18,259 of Class B expenses for the fiscal years ended June 30, 1998 and 1997,
respectively, in order to reduce the operating expenses of the Fund. For the
fiscal period ended June 30, 1998, the Kentucky Tax-Free Fund accrued advisory
fees of $32,172; however, the Adviser voluntarily waived all of its fees and
reimbursed the Fund for $36,336 of other expenses in order to reduce the
operating expenses of the Fund. Prior to August 29, 1997, the investment adviser
of the Predecessor Fund was Trans Financial Bank, N.A. (the "Predecessor
Adviser"). For the fiscal periods ended August 31, 1997 and 1996, the
Predecessor Fund accrued advisory fees of $47,946 and $63,051, respectively;
however, the Predecessor Adviser voluntarily waived all of its fees and
reimbursed the Predecessor Fund for $64,639 and $57,829 of other expenses for
the fiscal periods ended August 31, 1997 and 1996, respectively, in order to
reduce the operating expenses of the Predecessor Fund.
- 33 -
<PAGE>
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The Adviser bears promotional expenses in
connection with the distribution of the Funds' shares to the extent that such
expenses are not assumed by the Funds under their plans of distribution (see
below). The compensation and expenses of any officer, Trustee or employee of the
Trust who is an officer, director or employee of the Adviser are paid by the
Adviser.
By their terms, the Funds' investment advisory agreements remain in
force until February 28, 1999 and from year to year thereafter, subject to
annual approval by (a) the Board of Trustees or (b) a vote of the majority of a
Fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Trustees who are not interested persons of
the Trust, by a vote cast in person at a meeting called for the purpose of
voting such approval. The Funds' investment advisory agreements may be
terminated at any time, on sixty days' written notice, without the payment of
any penalty, by the Board of Trustees, by a vote of the majority of a Fund's
outstanding voting securities, or by the Adviser. The investment advisory
agreements automatically terminate in the event of their assignment, as defined
by the Investment Company Act of 1940 and the rules thereunder.
The Adviser is also the principal underwriter of the Funds and, as
such, the exclusive agent for distribution of shares of the Funds. The Adviser
is obligated to sell the shares on a best efforts basis only against purchase
orders for the shares. Shares of each Fund are offered to the public on a
continuous basis.
The Adviser currently allows concessions to dealers who sell shares of
the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the
Kentucky 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, 1998, the
aggregate underwriting commissions on sales of the Funds' shares were $141,856
of which the Adviser paid $124,248 to unaffiliated broker-dealers in the selling
network, earned $7,484 as a broker-dealer in the selling network and retained
$10,124 in underwriting commissions. For the fiscal year ended June 30, 1997,
the aggregate underwriting commissions on sales of the Funds' shares were
$190,011 of which the Adviser paid $170,321 to unaffiliated broker-dealers in
the selling network,
- 34 -
<PAGE>
earned $5,456 as a broker-dealer in the selling network and retained $14,234 in
underwriting commissions. For the fiscal year ended June 30, 1996, the aggregate
underwriting commissions on sales of the Funds' shares were $311,870 of which
the Adviser paid $279,354 to unaffiliated dealers in the selling network, earned
$14,509 as a broker-dealer in the selling network and retained $18,007 in
underwriting commissions.
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, 1998, the Adviser retained $6,430 and $5,587 of contingent
deferred sales loads on the redemption of Class C shares of the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund, respectively. For the
fiscal year ended June 30, 1997, the Adviser retained $5,958 and $1,441 of
contingent deferred sales loads on the redemption of Class C shares of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund,
respectively. For the fiscal year ended June 30, 1996, the Adviser retained
$5,802 and $349 of contingent deferred sales loads on the redemption of Class C
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free
Fund, respectively.
The Funds may compensate dealers, including the Adviser and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plans" below.
DISTRIBUTION PLANS
- -------------------
CLASS A PLAN -- As stated in the Prospectus, the Funds have adopted a
plan of distribution (the "Class A Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 which permits each Fund to pay for expenses
incurred in the distribution and promotion of the Funds' shares, including but
not limited to, the printing of prospectuses, statements of additional
information and reports used for sales purposes, advertisements, expenses of
preparation and printing of sales literature, promotion, marketing and sales
expenses, and other distribution-related expenses, including any distribution
fees paid to securities dealers or other firms who have executed a distribution
or service agreement with the Adviser. The Class A Plan expressly limits payment
of the distribution expenses listed above in any fiscal year to a maximum of
.25% of the average daily net assets of the Tax-Free Money Fund and the Kentucky
Tax-Free Fund and .25% of the average daily net assets of the Class A shares of
the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund. Unreimbursed expenses will not be carried over from year to year.
- 35 -
<PAGE>
For the fiscal year ended June 30, 1998, the aggregate
distribution-related expenditures of the Tax-Free Money Fund ("MF"), the
Tax-Free Intermediate Term Fund ("ITF"), the Ohio Insured Tax-Free Fund ("OIF"),
the Ohio Tax-Free Money Fund ("OMF"), the California Tax-Free Money Fund
("CMF"), the Florida Tax-Free Money Fund ("FMF") and the Kentucky Tax-Free Fund
("KY") under the Class A Plan were $10,767, $71,805, $18,754, $435,722, $19,803,
$39,096 and $4,776, respectively. Amounts were spent as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
MF ITF OIF OMF CMF FMF KY
-- --- --- --- --- --- --
Printing and mailing
of prospectuses and
reports to prospective
shareholders . . . . $ 1,767 $ 3,647 $ 4,605 $ 5,283 $ 4,803 $ 1,982 $4,776
Payments to broker-
dealers and others
for the sale or
retention of assets . 9,000 68,158 14,149 425,979 15,000 37,114 ---
Other promotional
expenses . . . . . . --- --- --- 4,460 --- --- ---
-------- ------- ------- ---------- --------- ---------- ---------
$10,767 $ 71,805 $18,754 $435,722 $19,803 $39,096 $4,776
======= ======== ======= ======== ======= ======= ======
</TABLE>
CLASS C PLAN (Tax-Free Intermediate Term Fund and Ohio Insured Tax-Free
Fund) -- The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
have also adopted a plan of distribution (the "Class C Plan") with respect to
the Class C shares of such Funds. The Class C Plan provides for two categories
of payments. First, the Class C Plan provides for the payment to the Adviser of
an account maintenance fee, in an amount equal to an annual rate of .25% of the
average daily net assets of the Class C shares, which may be paid to other
dealers based on the average value of Class C shares owned by clients of such
dealers. In addition, a Fund may pay up to an additional .75% per annum of the
daily net assets of the Class C shares for expenses incurred in the distribution
and promotion of the shares, including prospectus costs for prospective
shareholders, costs of responding to prospective shareholder inquiries, payments
to brokers and dealers for selling and assisting in the distribution of Class C
shares, costs of advertising and promotion and any other expenses related to the
distribution of the Class C shares. Unreimbursed expenditures will not be
carried over from year to year. The Funds may make payments to dealers and other
persons in an amount up to .75% per annum of the average value of Class C shares
owned by their clients, in addition to the .25% account maintenance fee
described above.
For the fiscal year ended June 30, 1998, 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 $33,170
and $29,140, respectively. Amounts were spent as follows:
- 36 -
<PAGE>
ITF OIF
Printing and mailing of
prospectuses and reports
to prospective shareholders. . . . . . $ 328 $ 341
Payments to broker-dealers and
others for the sale or
retention of assets. . . . . . . . . . 32,842 28,799
------- -------
$33,170 $29,140
======= =======
GENERAL INFORMATION -- Agreements implementing the Plans (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plans are made in accordance with written agreements.
The continuance of the Plans and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plans or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. A Plan may be terminated at any time
by a vote of a majority of the Independent Trustees or by a vote of the holders
of a majority of the outstanding shares of a Fund or the applicable class of a
Fund. In the event a Plan is terminated in accordance with its terms, the
affected Fund (or class) will not be required to make any payments for expenses
incurred by the Adviser after the termination date. Each Implementation
Agreement terminates automatically in the event of its assignment and may be
terminated at any time by a vote of a majority of the Independent Trustees or by
a vote of the holders of a majority of the outstanding shares of a Fund (or the
applicable class) on not more than 60 days' written notice to any other party to
the Implementation Agreement. The Plans may not be amended to increase
materially the amount to be spent for distribution without shareholder approval.
All material amendments to the Plans must be approved by a vote of the Trust's
Board of Trustees and by a vote of the Independent Trustees.
In approving the Plans, the Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties as Trustees, that
there is a reasonable likelihood that the Plans will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plans should assist in the growth of
the Funds which will benefit the Funds and their shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plans will be renewed only if the
- 37 -
<PAGE>
Trustees make a similar determination for each subsequent year of the Plans.
There can be no assurance that the benefits anticipated from the expenditure of
the Funds' assets for distribution will be realized. While the Plans are in
effect, all amounts spent by the Funds pursuant to the Plans and the purposes
for which such expenditures were made must be reported quarterly to the Board of
Trustees for its review. Distribution expenses attributable to the sale of more
than one class of shares of a Fund will be allocated at least annually to each
class of shares based upon the ratio in which the sales of each class of shares
bears to the sales of all the shares of such Fund. In addition, the selection
and nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
Angelo R. Mozilo and Robert H. Leshner, as interested persons of the
Trust, may be deemed to have a financial interest in the operation of the Plans
and the Implementation Agreements.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer. Because the portfolio securities of the Funds are
generally traded on a net basis and transactions in such securities do not
normally involve brokerage commissions, the cost of portfolio securities
transactions of the Funds will consist primarily of dealer or underwriter
spreads. No brokerage commissions have been paid by the Funds or the Predecessor
Fund 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
- 38 -
<PAGE>
commission another broker would charge if the Adviser determines in good faith
that the commission is reasonable in relation to the value of the brokerage and
research services provided. The determination may be viewed in terms of a
particular transaction or the Adviser's overall responsibilities with respect to
the Funds and to accounts over which it exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Adviser and other affiliates
of the Trust or the Adviser may effect securities transactions which are
executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. No Fund will effect any
brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Funds do not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Adviser nor
affiliates of the Trust or the Adviser will receive reciprocal brokerage
business as a result of the brokerage business transacted by the Funds with
other brokers.
CODE OF ETHICS. The Trust and the Adviser have each adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act of 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
- 39 -
<PAGE>
sale, by any Fund. The substantive restrictions applicable to investment
personnel of the Adviser include a ban on acquiring any securities in an initial
public offering and a prohibition from profiting on short-term trading in
securities. Furthermore, the Code provides for trading "blackout periods" which
prohibit trading by investment personnel of the Adviser within periods of
trading by the Funds in the same (or equivalent) security.
PORTFOLIO TURNOVER
- ------------------
The Adviser intends to hold the portfolio securities of the Tax-Free
Money Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and
the Florida Tax-Free Money Fund to maturity and to limit portfolio turnover to
the extent possible. Nevertheless, changes in a Fund's portfolio will be made
promptly when determined to be advisable by reason of developments not foreseen
at the time of the original investment decision, and usually without reference
to the length of time a security has been held.
The Tax-Free Intermediate Term Fund, the Ohio Insured Tax- Free Fund
and the Kentucky Tax-Free Fund do not intend to purchase securities for short
term trading; however, a security may be sold in anticipation of a market
decline, or purchased in anticipation of a market rise and later sold.
Securities will be purchased and sold in response to the Adviser's evaluation of
an issuer's ability to meet its debt obligations in the future. A security may
be sold and another purchased when, in the opinion of the Adviser, a favorable
yield spread exists between specific issues or different market sectors.
A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. The Adviser anticipates that the portfolio turnover rate for each Fund
normally will not exceed 100%. A 100% turnover rate would occur if all of a
Fund's portfolio securities were replaced once within a one year period.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
The share price (net asset value) of the shares of the Tax- Free Money
Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the
Florida Tax-Free Money Fund is determined as of 12:00 noon and 4:00 p.m.,
Eastern time, on each day the Trust is open for business. The share price (net
asset value) and the public offering price (net asset value plus applicable
sales load) of the shares of the Tax-Free Intermediate Term Fund, the Ohio
Insured Tax-Free Fund and the Kentucky 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.,
- 40 -
<PAGE>
Eastern time), on each day the Trust is open for business. The Trust is open for
business on every day except Saturdays, Sundays and the following holidays: New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas. The Trust may also
be open for business on other days in which there is sufficient trading in a
Fund's portfolio securities that its net asset value might be materially
affected. For a description of the methods used to determine the share price and
the public offering price, see "Calculation of Share Price and Public Offering
Price" in the Prospectus.
Pursuant to Rule 2a-7 promulgated under the Investment Company Act of
1940, the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California
Tax-Free Money Fund and the Florida Tax-Free Money Fund each value their
portfolio securities on an amortized cost basis. The use of the amortized cost
method of valuation involves valuing an instrument at its cost and, thereafter,
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. Under the amortized cost method of valuation, neither the amount
of daily income nor the net asset value of the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund or the Florida Tax-Free
Money Fund is affected by any unrealized appreciation or depreciation of the
portfolio. The Board of Trustees has determined in good faith that utilization
of amortized cost is appropriate and represents the fair value of the portfolio
securities of the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund.
Pursuant to Rule 2a-7, the Tax-Free Money Fund, the Ohio Tax-Free Money
Fund, the California Tax-Free Money Fund and the Florida Tax-Free Money Fund
each maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only securities having remaining maturities of thirteen months or less
and invest only in United States dollar-denominated securities determined by the
Board of Trustees to be of high quality and to present minimal credit risks. If
a security ceases to be an eligible security, or if the Board of Trustees
believes such security no longer presents minimal credit risks, the Trustees
will cause the Fund to dispose of the security as soon as possible.
The maturity of a floating or variable rate instrument subject to a
demand feature held by the Tax-Free Money Fund, the Ohio Tax-Free Money Fund,
the California Tax-Free Money Fund or the Florida Tax-Free Money Fund will be
determined as follows, provided that the conditions set forth below are met. The
maturity of a long-term 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.
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<PAGE>
The maturity of a short-term floating rate instrument with a demand feature (or
a participation interest in such a floating rate instrument) will be one day.
The maturity of a long-term 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 maturity of a short-term variable rate instrument with a
demand feature (or a participation interest in such a variable rate instrument)
will be deemed to be the earlier of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount owed can be recovered through demand.
The demand feature of each such instrument must entitle a Fund to
receive the principal amount of the instrument plus accrued interest, if any, at
the time of exercise and must be exercisable either (1) at any time upon no more
than thirty days' notice or (2) at specified intervals not exceeding thirteen
months and upon no more than thirty days' notice. Furthermore, the maturity of
any such instrument may only be determined as set forth above as long as the
instrument continues to receive a short-term rating in one of the two highest
categories from any two nationally recognized statistical rating organizations
("NRSROs") (or from any one NRSRO if the security is rated by only that NRSRO)
or, if not rated, is determined to be of comparable quality by the Adviser,
under the direction of the Board of Trustees. However, an instrument having a
demand feature other than an "unconditional" demand feature must have both a
short-term and a long-term rating in one of the two highest categories from any
two NRSROs (or from any one NRSRO if the security is rated by only that NRSRO)
or, if not rated, to have been determined to be of comparable quality by the
Adviser, under the direction of the Board of Trustees. An "unconditional" demand
feature is one that by its terms would be readily exercisable in the event of a
default on the underlying instrument.
The Board of Trustees has established procedures designed to stabilize,
to the extent reasonably possible, the price per share of the Tax-Free Money
Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the
Florida Tax-Free Money Fund as computed for the purpose of sales and redemptions
at $1 per share. The procedures include review of each Fund's portfolio holdings
by the Board of Trustees to determine whether a Fund's net asset value
calculated by using available market quotations deviates more than one-half of
one percent from $1 per share and, if so, whether such deviation may result in
material dilution or is otherwise unfair to existing shareholders. In the event
the Board of Trustees determines that such a deviation exists, it will take
corrective action as it regards necessary
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<PAGE>
and appropriate, including the sale of portfolio securities prior to maturity to
realize capital gains or losses or to shorten average portfolio maturities;
withholding dividends; redemptions of shares in kind; or establishing a net
asset value per share by using available market quotations. The Board of
Trustees has also established procedures designed to ensure that each Fund
complies with the quality requirements of Rule 2a-7.
While the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument, as determined by
amortized cost, is higher or lower than the price the Tax-Free Money Fund, the
Ohio Tax-Free Money Fund, the California Tax-Free Money Fund or the Florida
Tax-Free Money Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on shares of each Fund may tend to be
higher than a like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its portfolio securities. Thus, if the use of amortized cost
by a Fund resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in the Fund would be able to obtain a somewhat higher yield
than would result from investment in a fund utilizing solely market values and
existing investors would receive less investment income. The converse would
apply in a period of rising interest rates.
Tax-exempt portfolio securities are valued for the Tax-Free
Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the Kentucky 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, the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free
Fund by pricing services will only be used when such use and the methods
employed have been approved by the Board of Trustees. Valuations provided by
pricing services or the Adviser may be determined without exclusive reliance on
matrixes and may take into consideration appropriate factors such as bid prices,
quoted prices, institution-size trading in similar groups
- 43 -
<PAGE>
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, the Ohio Insured Tax-Free Fund and the Kentucky 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, the Ohio Insured Tax-Free Fund and the Kentucky 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
and shares of the Kentucky 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 and the Ohio Insured
Tax-Free Fund or shares of the Kentucky 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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<PAGE>
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 and the
Ohio Insured Tax-Free Fund or shares of the Kentucky 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 or
purchases of shares of the Kentucky 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.
- 45 -
<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; and (ii) 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 possible, the Ohio
Insured Tax-Free Fund and the Ohio Tax-Free Money Fund intend to invest
primarily in obligations the income from which is exempt from Ohio personal
income tax, the California Tax-Free Money Fund intends to invest primarily in
obligations the income from which is exempt from California
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<PAGE>
income tax, 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 and the Kentucky Tax- Free Fund intends to invest primarily in
obligations the income from which is exempt from Kentucky income tax and the
Kentucky intangible 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 each of the Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund or shares of the Kentucky Tax-Free Fund will not be included in
the federal tax basis of any of such shares sold within 90 days of their
purchase (for the purpose of determining gain or loss upon the sale of such
shares) if the sales proceeds are reinvested in any other fund of Countrywide
Investments and a sales load that would otherwise apply to the reinvestment is
reduced or eliminated because the sales proceeds were reinvested in the funds of
Countrywide Investments. The portion of the sales load so excluded from the tax
basis of the shares sold will equal the amount by which the sales load that
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<PAGE>
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, 1998, the Tax- Free Intermediate Term
Fund had capital loss carryforwards for federal income tax purposes of $996,209,
none of which expire prior to June 30, 1999.
Investments by the Kentucky Tax-Free Fund in certain options, futures
contracts and options on futures contracts are "section 1256 contracts." Any
gains or losses on section 1256 contracts are generally considered 60% long-term
and 40% short-term capital gains or losses ("60/40"). Section 1256 contracts
held by the Fund at the end of each taxable year are treated for federal income
tax purposes as being sold on such date for their fair market value. The
resultant paper gains or losses are also treated as 60/40 gains or losses. When
the section 1256 contract is subsequently disposed of, the actual gain or loss
will be adjusted by the amount of any preceding year-end gain or loss.
Certain hedging transactions undertaken by the Kentucky Tax- Free Fund
may result in "straddles" for federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by the Fund. In addition,
losses realized by the Fund on positions that are part of a straddle may be
deferred, rather than being taken into account in calculating taxable income for
the taxable year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences of hedging transactions to the Fund are not entirely clear. The
hedging transactions may increase the amount of short-term capital gain realized
by the Fund which is taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available under the Internal
Revenue Code of 1986 which are applicable to straddles. If the Fund makes any of
the elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the elections made. The rules applicable under certain of the
elections operate to accelerate the recognition of gains or losses from the
affected straddle positions. Because application of the straddle rules may
affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle positions, the amount
which must be distributed to shareholders, and which will be taxed to
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<PAGE>
shareholders as ordinary income or long-term capital gain in any year, may be
increased or decreased substantially as compared to a fund that did not engage
in such hedging transactions.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
- ------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
Yield quotations on investments in the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund are provided on both a current and an effective (compounded) basis.
Current yields are calculated by determining the net change in the value of a
hypothetical account for a seven calendar day period (base period) with a
beginning balance of one share, dividing by the value of the account at the
beginning of the base period to obtain the base period return, multiplying the
result by (365/7) and carrying the resulting yield figure to the nearest
hundredth of one percent. Effective yields reflect daily compounding and 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
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<PAGE>
Money Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and
the Florida Tax-Free Money Fund do not normally recognize unrealized gains and
losses under the amortized cost valuation method). The Tax-Free Money Fund's
current and effective yields for the seven days ended June 30, 1998 were 3.04%
and 3.09%, respectively. The Ohio Tax-Free Money Fund's current and effective
yields for the seven days ended June 30, 1998 were 3.02% and 3.07%,
respectively, for Class A shares and 3.27% and 3.32%, respectively, for Class B
shares. The California Tax-Free Money Fund's current and effective yields for
the seven days ended June 30, 1998 were 3.12% and 3.17%, respectively. The
Florida Tax-Free Money Fund's current and effective yields for the seven days
ended June 30, 1998 were 3.00% and 3.04%, respectively, for Class A shares and
3.26% and 3.31%, respectively, for Class B shares. The Tax-Free Money Fund, the
Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida
Tax-Free Money Fund may also quote a tax- equivalent current or effective yield,
computed by dividing that portion of a Fund's current or effective yield which
is tax-exempt by one minus a stated income tax rate and adding the product to
that portion, if any, of the yield that is not tax-exempt. Based on the highest
marginal federal income tax rate for individuals (39.6%), the Tax-Free Money
Fund's tax-equivalent current and effective yields for the seven days ended June
30, 1998 were 5.03% and 5.12%, respectively. Based on the highest combined
marginal federal and Ohio income tax rate for individuals (44.13%), the Ohio
Tax-Free Money Fund's tax- equivalent current and effective yields for the seven
days ended June 30, 1998 were 5.41% and 5.49%, respectively, for Class A shares
and 5.85% and 5.94%, respectively, for Class B shares. Based on the highest
combined marginal federal and California income tax rate for individuals
(45.22%), the California Tax-Free Money Fund's tax-equivalent current and
effective yields for the seven days ended June 30, 1998 were 5.70% and 5.79%,
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, 1998 were 4.97% and
5.03%, respectively, for Class A shares and 5.40% and 5.48%, respectively, for
Class B shares.
From time to time, the Tax-Free Intermediate Term Fund, the Ohio
Insured Tax-Free Fund and the Kentucky 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. 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, the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free Fund for the
periods ended June 30, 1998 are as follows:
TAX-FREE INTERMEDIATE TERM FUND (CLASS A)
1 year 3.52%
5 years 4.44%
10 years 6.10%
TAX-FREE INTERMEDIATE TERM FUND (CLASS C)
1 year 4.85%
Since inception (February 1, 1994) 3.74%
OHIO INSURED TAX-FREE FUND (CLASS A)
1 year 2.75%
5 years 4.45%
10 years 6.89%
OHIO INSURED TAX-FREE FUND (CLASS C)
1 year 6.24%
Since inception (November 1, 1993) 4.33%
KENTUCKY TAX-FREE FUND
1 year 3.17%
Since inception (September 27, 1995) 5.40%
The Tax-Free Intermediate Term Fund, the Ohio Insured Tax- Free Fund
and the Kentucky 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
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<PAGE>
the applicable front-end sales load (or contingent deferred sales load for the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund) which, if
included, would reduce total return. The total returns of the Tax-Free
Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free
Fund as calculated in this manner for each of the last ten fiscal years (or
since inception) are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ohio Ohio
Tax-Free Tax-Free Insured Insured
Intermediate Intermediate Tax-Free Tax-Free Kentucky
Term Fund Term Fund Fund Fund Tax-Free
Class A Class C Class A Class C Fund
Period Ended ------------ ------------ --------- -------- ---------
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% 6.97%(3)
June 30, 1997 6.19% 5.49% 7.36% 6.65% 7.89%
June 30, 1998 5.63% 4.85% 7.03% 6.24% 7.46%
</TABLE>
(1) From date of initial public offering on February 1, 1994.
(2) From date of initial public offering on November 1, 1993.
(3) From date of initial public offering on September 27, 1995.
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
and shares of the Kentucky Tax-Free Fund (excluding sales loads) for the periods
ended June 30, 1998 are as follows:
TAX-FREE INTERMEDIATE TERM FUND (CLASS A)
1 Year 5.63%
3 Years 5.44%
5 Years 4.86%
10 Years 6.32%
Since inception (September 10, 1981) 6.42%
OHIO INSURED TAX-FREE FUND (CLASS A)
1 Year 7.03%
3 Years 6.47%
5 Years 5.31%
10 Years 7.33%
Since inception (April 1, 1985) 8.01%
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<PAGE>
KENTUCKY TAX-FREE FUND
1 Year 7.46%
Since inception (September 27, 1995) 6.97%
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, the Ohio
Insured Tax-Free Fund and the Kentucky Tax-Free Fund may advertise their yield
and tax-equivalent yield. A yield quotation is based on a 30-day (or one month)
period and is computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of the
period, according to the following formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Generally, interest earned (for the purpose of "a" above) on debt obligations is
computed by reference to the yield to maturity of each obligation held based on
the market value of the obligation (including actual accrued interest) at the
close of business on the last business day prior to the start of the 30-day (or
one month) period for which yield is being calculated, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest). The yields of Class A and Class C shares of the Tax-Free Intermediate
Term Fund for June 1998 were 4.10% and 3.44%, respectively. The yields of Class
A and Class C shares of the Ohio Insured Tax-Free Fund for June 1998 were 4.53%
and 3.97%, respectively. The yield of the Kentucky Tax-Free Fund for June 1998
was 5.32%. 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 1998 were 6.79% and 5.70%, 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 1998 were 8.11% and 7.11%, respectively.
Based on the highest combined marginal federal and Kentucky income tax rate for
individuals (43.22%), the Kentucky Tax-Free Fund's tax- equivalent yield for
June 1998 was 9.37%.
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<PAGE>
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.
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:
IBC's Money Fund Report provides a comparative analysis of performance
for various categories of money market funds. The Tax-Free Money Fund may
compare performance rankings with money market funds appearing in the Tax-Free
Stockbroker & General Purpose Funds category. In addition, the Ohio Tax-Free
Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free Money
Fund may compare performance rankings with money market funds appearing in the
Tax-Free State Specific Stockbroker & General Purpose Funds categories.
Lipper Fixed Income Fund Performance Analysis measures total return and
average current yield for the mutual fund industry and ranks individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Tax-Free Money Fund may provide
comparative performance information appearing in the Tax-Exempt Money Market
Funds category, the Ohio Tax-Free Money Fund may provide comparative performance
information appearing in the Ohio Tax- Exempt Money Market Funds category, the
California Tax-Free Money Fund may provide comparative performance information
appearing in the California Tax-Exempt Money Market Funds category and the
Florida Tax-Free Money Fund may provide comparative performance information
appearing in the Other States Tax-Exempt Money Market Funds category. The
Tax-Free Intermediate Term Fund may provide comparative performance information
appearing in the Intermediate (5-10 year) Municipal Debt Funds category, the
Ohio Insured Tax- Free Fund may provide comparative performance information
- 54 -
<PAGE>
appearing in the Ohio Municipal Debt Funds category and the Kentucky Tax-Free
Fund may provide comparative performance information appearing in the Kentucky
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.
PRINCIPAL SECURITY HOLDERS
- --------------------------
As of October 2, 1998, The Fifth Third Bank Trust Department, 38
Fountain Square Plaza, Cincinnati, Ohio, owned of record 26.47% of the Trust's
outstanding shares, including 96.96% of the outstanding Class B shares of the
Ohio Tax-Free Money Fund and 14.31% of the outstanding Class B shares of the
Florida Tax- Free Money Fund. The Fifth Third Bank may be deemed to control the
Trust and the Ohio Tax-Free Money Fund by virtue of the fact that it owned of
record more than 25% of such shares as of such date. As of October 2, 1998, The
Huntington Trust Company, N.A., Trust Department, 41 South High Street,
Columbus, Ohio, owned of record 52.46% of the outstanding Class B shares of the
Florida Tax-Free Money Fund. The Huntington Trust Company, N.A. may be deemed to
control the Florida Tax-Free Money Fund by virtue of the fact that it owned of
record more than 25% of the Fund's shares as of such date. As of October 2,
1998, BHC Securities, Inc., 2005 Market Street, Philadelphia, Pennsylvania owned
of record 32.72% of the outstanding Class A shares of the Ohio Tax- Free Money
Fund and 5.23% of the outstanding Class C shares of the Ohio Insured Tax-Free
Fund. BHC Securities, Inc. may be deemed to control the Class A shares of the
Ohio Tax-Free Money Fund by virtue of the fact that it owned of record more than
25% of such shares as of such date. As of October 2, 1998, Wachovia Investments,
Inc., P.O. Box 110, Winston Salem, North Carolina owned of record 54.56% of the
outstanding Class A shares of the Florida Tax-Free Money Fund. Wachovia
Investments, Inc. may be deemed to control the Class A shares of the Florida
Tax-Free Money Fund by virtue of the fact that it owned of record more than 25%
of such shares on such date. As of October 2, 1998, Bode Finn Limited
Partnership, P.O. Box 83250, Columbus, Ohio owned of record 33.23% of the
outstanding Class B shares of the Florida Tax-Free Money Fund. Bode Finn Limited
Partnership 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 such shares on such date.
For purposes of voting on matters submitted to shareholders, any person who owns
more than 50% of the
- 55 -
<PAGE>
outstanding shares of a Fund generally would be able to cast the deciding vote
on such matters.
As of October 2, 1998, Charles S. Lazerwitz Revocable Trust, 8252
Virginia Street, Merrillville, Indiana owned of record 9.22% of the outstanding
shares of the Tax-Free Money Fund; Merrill Lynch, Pierce, Fenner & Smith
Incorporated, For the Sole Benefit of Its Customers, 4800 Deer Lake Drive East,
Jacksonville, Florida owned of record 6.03% of the outstanding Class A shares of
the Tax-Free Intermediate Term Fund; Deborah L. Lontor, 584 Lindford Drive, Bay
Village, Ohio owned of record 13.10% of the outstanding Class C shares of the
Tax-Free Intermediate Term Fund; Everen Clearing Corp. FBO a customer, 111 East
Kilbourn Avenue, Milwaukee, Wisconsin owned of record 7.13% of the outstanding
Class C shares of the Tax-Free Intermediate Term Fund; PaineWebber FBO Leland
Brubaker Trustee, 4229 Westleton Court, Columbus, Ohio owned of record 6.07% of
the outstanding Class C shares of the Ohio Insured Tax-Free Fund; Jerry Bach,
9055 Shawnee Run Road, Cincinnati, Ohio owned of record 7.17% of the outstanding
Class A shares of the Ohio Tax-Free Money Fund; Bear Stearns & Co. FBO its
customers, One Metrotech Center North, Brooklyn, New York owned of record 9.60%
and 8.57% of the outstanding shares of the California Tax-Free Money Fund;
Joseph H. Kanter, 7759 Montgomery Road, Cincinnati, Ohio owned of record 8.22%
of the outstanding Class A shares of the Florida Tax-Free Money Fund; Milton R.
Psaty Trustee, The Milton Psaty Revocable Living Trust, 2580 S. Ocean Boulevard,
Palm Beach, Florida owned of record 6.42% of the outstanding Class A shares of
the Florida Tax-Free Money Fund; Lawrence B. Taishoff, c/o Highpoint General
Contracting Inc., 4420 Mercantile Avenue, Naples, Florida owned of record 5.08%
of the outstanding Class A shares of the Florida Tax-Free Money Fund.
As of October 2, 1998, the Trustees and officers of the Trust as a
group owned of record and beneficially 1.11% of the outstanding shares of the
Tax-Free Money Fund. As of the same date, the Trustees and officers owned of
record or beneficially less than 1% of the outstanding shares of the Trust and
of each other Fund.
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has
been retained to act as Custodian for investments of the Tax-Free Money Fund,
the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Kentucky
Tax-Free Fund. The Fifth Third Bank acts as each Fund's depository, safekeeps
its portfolio securities, collects all income and other payments with respect
thereto, disburses funds as instructed and maintains records in connection with
its duties. As compensation, The Fifth Third Bank receives from each Fund a base
fee at the annual rate of .005% of average net assets (subject to a minimum
annual fee of $1,500 per Fund and a maximum fee of $5,000 per Fund) plus
transaction charges for each security transaction of the Funds.
- 56 -
<PAGE>
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, 1999. Arthur Andersen
LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of the
Trust's financial statements and advises the Funds as to certain accounting
matters.
TRANSFER AGENT
- --------------
The Trust's transfer agent, Countrywide Fund Services, Inc. ("CFS"),
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. CFS is an affiliate of the Adviser by
reason of common ownership. CFS receives for its services as transfer agent a
fee payable monthly at an annual rate of $25 per account from each of the
Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money
Fund and the Florida Tax-Free Money Fund and $21 per account from each of the
Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the Kentucky
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, the California Tax-Free Money Fund and the Kentucky Tax-Free Fund each pay
CFS a fee in accordance with the following schedule:
- 57 -
<PAGE>
Asset Size of Fund Monthly Fee
------------------ -----------
$ 0 - $ 50,000,000 $2,500
$ 50,000,000 - $100,000,000 $3,000
$100,000,000 - $200,000,000 $3,500
$200,000,000 - $300,000,000 $4,000
Over $300,000,000 $5,000*
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 each pay CFS a fee in
accordance with the following schedule:
Asset Size of Fund Monthly Fee
------------------ -----------
$ 0 - $ 50,000,000 $3,500
$ 50,000,000 - $100,000,000 $4,000
$100,000,000 - $200,000,000 $4,500
$200,000,000 - $300,000,000 $5,000
Over $300,000,000 $6,000*
* Subject to an additional fee of .001% of average daily net assets in excess
of $300 million.
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. 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.
- 58 -
<PAGE>
TAX EQUIVALENT YIELD TABLES
- ---------------------------
The tax equivalent yield tables illustrate approximately the yield an
individual investor must earn on taxable investments to equal a tax-exempt yield
in various income tax brackets.
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND AND FLORIDA TAX-FREE
MONEY FUND TABLE. The table on the following page shows the approximate taxable
yields for individuals that are equivalent to tax-exempt yields under marginal
federal 1998 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 1998 income tax rates. Where more than one state bracket falls within a
federal bracket, the highest state tax bracket has been combined with the
federal bracket. The combined marginal state and federal tax brackets shown
reflect the fact that state income tax payments are currently deductible for
federal tax purposes.
CALIFORNIA TAX-FREE MONEY FUND TABLE. The table on the following page
shows the approximate taxable yields for individuals that are equivalent to
tax-exempt yields under combined marginal federal and California 1998 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.
KENTUCKY TAX-FREE 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 Kentucky 1998 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 $124,500 (single return) or $186,800 (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 $124,500. The tax equivalent yield tables have not
been adjusted to reflect the impact of these adjustments to taxable income.
- 59 -
<PAGE>
<TABLE>
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND
AND FLORIDA TAX-FREE MONEY FUND
<S> <C> <C> <C> <C> <C> <C>
Tax-Exempt Yield
--------------------------------------------
3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
15% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47
28% 4.17 4.86 5.56 6.25 6.94 7.64
31% 4.35 5.07 5.80 6.52 7.25 7.97
36% 4.69 5.47 6.25 7.03 7.81 8.59
39.6% 4.97 5.79 6.62 7.45 8.28 9.11
OHIO INSURED TAX-FREE FUND
OHIO TAX-FREE MONEY FUND
Tax-Exempt Yield
Combined --------------------------------------------
Ohio and 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
18.788% 3.69% 4.31% 4.93% 5.54% 6.16% 6.77
31.745% 4.40 5.13 5.86 6.59 7.33 8.06
35.761% 4.67 5.45 6.23 7.01 7.78 8.56
40.800% 5.07 5.91 6.76 7.60 8.45 9.29
44.130% 5.37 6.26 7.16 8.05 8.95 9.84
CALIFORNIA TAX-FREE MONEY FUND
Tax-Exempt Yield
Combined --------------------------------------------
California and 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
20.100% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88
34.696% 4.59 5.36 6.13 6.89 7.66 8.42
37.417% 4.79 5.59 6.39 7.19 7.99 8.79
41.952% 5.17 6.03 6.89 7.75 8.61 9.47
45.217% 5.48 6.39 7.30 8.21 9.13 10.04
KENTUCKY TAX-FREE MONEY FUND
Tax-Exempt Yield
Combined --------------------------------------------
Kentucky and 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
20.100% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88
32.320% 4.43 5.17 5.91 6.65 7.39 8.13
35.140% 4.63 5.40 6.17 6.94 7.71 8.48
39.840% 4.99 5.82 6.65 7.48 8.31 9.14
43.224% 5.28 6.16 7.05 7.93 8.81 9.69
*Tax Brackets Combined Combined Combined
- ------------- Ohio and California and Kentucky and
Federal Federal Federal Federal
Single Joint Tax Tax Tax Tax
Return Return Bracket Bracket Bracket Bracket
- ---------------------------------------------------------------------------------------------------------------
Not over $25,350 Not Over $42,350 15% 18.788% 20.100% 20.100%
$25,350-$61,400 $42,350-$102,300 28% 31.745% 34.696% 32.320%
$61,400-$128,100 $102,300-$155,950 31% 35.761% 37.417% 35.140%
$128,100-$278,450 $155,950-$278,450 36% 40.800% 41.952% 39.840%
Over $278,450 Over $278,450 39.6% 44.130% 45.217% 43.224%
</TABLE>
<PAGE>
ANNUAL REPORT
- -------------
The Funds' financial statements as of June 30, 1998 appear in the Trust's
annual report which is attached to this Statement of Additional Information.
- 61 -
<PAGE>
ANNUAL REPORT
JUNE 30, 1998
TAX-FREE
MONEY FUND
CALIFORNIA TAX-FREE
MONEY FUND
OHIO TAX-FREE
MONEY FUND
FLORIDA TAX-FREE
MONEY FUND
TAX-FREE INTERMEDIATE
TERM FUND
OHIO INSURED
TAX-FREE FUND
KENTUCKY TAX-FREE
FUND
- 62 -
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
Overview
The performance of the domestic economy over the twelve months ended June 30,
1998 has been nothing short of remarkable. Economic growth continued at an above
trend pace with little or no signs of inflation. In fact, inflation, as measured
by the Consumer Price Index, declined from an annual rate of 2.3% on June 30,
1997 to 1.7% a year later. Employment growth, rising incomes and a very strong
stock market buoyed consumer confidence and led to the tremendous growth
experienced over the past year. After a rocky start, the performance of the bond
market was impressive as well. During the summer of 1997, bond yields
experienced somewhat of a roller coaster ride as investor focus shifted from the
low level of inflation to the robust domestic economy. However, in the months
that followed, the focus of investors shifted again to the financial crisis
unfolding in Asia. Bond investors became concerned that weakness in the Asian
economies would negatively impact our domestic economy and, in turn, allow
interest rates to move lower. This remained the dominant theme for the balance
of the fiscal year.
In the Treasury market, yields declined with the 30-year Treasury bond reaching
a near record low of 5.62% on June 30,1998. Yields on short and
intermediate-term Treasuries did not decline as much, however, as the
realization that the Federal Reserve would not lower interest rates provided a
floor for yields on short and intermediate-term Treasuries. Performance in the
municipal market lagged that of the Treasury market for much of the fiscal year.
Low interest rates and healthy financial positions spurred municipalities to
issue a near record amount of new debt. This burdensome new-issue supply caused
municipal bonds to underperform relative to Treasuries.
Tax-Free Intermediate Term Fund
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal 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, 1998, the Fund's total returns (excluding the impact of
applicable sales loads) were 5.63% and 4.85% for Class A shares and Class C
shares, respectively. The Lehman Brothers 5-Year Municipal G.O. Bond Index
returned 6.35% during the same period.
The Tax-Free Intermediate Term Fund performed comparably to the Lehman Brothers
5-Year Municipal G.O. Bond Index after giving consideration to associated
operating expenses of the Fund. Our focus in this Fund remains unchanged: to
provide high tax-free income while minimizing principal volatility. Given the
relative steepness of the municipal yield curve, we have recently been buying in
the ten to fifteen year maturity range where the investor is being compensated
for the additional risk.
<PAGE>
Ohio Insured Tax-Free Fund
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, 1998, the Fund's total returns (excluding the impact of
applicable sales loads) were 7.03% and 6.24% for Class A shares and Class C
shares, respectively. The Lehman Brothers 15-Year Municipal G.O. Bond Index
returned 9.64% during the same period.
Performance of the Fund lagged the performance of the Lehman Brothers 15-Year
Municipal G.O. Bond Index during the first half of the fiscal year as the
general decline in interest rates, combined with the Fund's shorter maturity and
duration, hampered our ability to keep pace. In the second half of the fiscal
year, we selectively sold short-term prerefunded issues and invested the
proceeds in securities with maturities of twenty to twenty-five years and good
call protection. While this swap generated long-term capital gains in the Fund,
we felt it was necessary for two reasons. First, the issues that were sold had
realized most of their upside price potential and would only decline in price as
they approached maturity. Second, we felt the need to restructure the maturity
and duration characteristics of the portfolio in an effort to keep pace with its
benchmark on a total return basis. Going forward, we will continue to look for
those issues which, we believe, will provide the best combination of yield and
total return.
Kentucky Tax-Free Fund
The Kentucky Tax-Free Fund seeks the highest level of interest income exempt
from federal and Kentucky income taxes, consistent with the protection of
capital. The Fund invests primarily in high and medium-quality Kentucky
municipal obligations. For the ten months ended June 30, 1998, the Fund's total
return (excluding the impact of applicable sales loads) was 6.05%, as compared
to 6.72% for the Lehman Brothers Municipal Bond Index during the same period.
In September 1997, we acquired the Kentucky Tax-Free Fund and assumed portfolio
management responsibility. At that time, the Fund was managed to maximize
liquidity and, as a result, had a weighted-average maturity comparable to that
of intermediate-term funds. After researching the market, we determined that a
long-term maturity structure would allow us to be more competitive with the
other Kentucky tax-free funds in the marketplace. During the first four months
of the fiscal period, we underperformed the Lehman Brothers Municipal Bond Index
due to the relatively short average maturity of the portfolio. In late 1997, we
began to extend the weighted-average maturity of the Fund to bring it more in
line with its benchmark and our peers. This enhanced the performance of the Fund
during the last six months of the period. We will continue to extend the average
maturity of the Fund by seeking issues with maturities of twenty to twenty-five
years and good call protection.
Outlook
Our outlook for the remainder of the year is constructive for the bond market.
With the exception of a larger trade deficit, there has been little impact on
the U.S. economy from the Asian financial crisis. Consumer demand, which has
been one of the main drivers of economic growth, remains strong. However, if the
stock market should falter, consumers will be less willing to spend more than
they are earning. A slowdown in consumption would likely reduce economic
activity, allowing interest rates to move lower. In addition, given that
municipals have lagged the Treasury market for much of the year, we believe that
municipal bonds offer investors added value as a fixed-income investment
alternative.
<PAGE>
A Representation of the Graphic Material Contained in the June 30, 1998 Annual
Report for Countrywide Tax-Free Trust is set forth below:
Comparison of the Change in Value since June 30, 1988 of a $10,000 Investment
in the Tax-Free Intermediate Term Fund* and the Lehman Brothers 5-Year
Municipal G.O. Bond Index
LEHMAN BROTHERS 5-YEAR MUNICIPAL G.O. TAX-FREE INTERMEDIATE TERM FUND:
BOND INDEX:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/88 10,000 06/30/88 9,800
09/30/88 1.14% 10,114 09/30/88 1.14% 9,911
12/31/88 0.61% 10,176 12/31/88 1.16% 10,027
03/31/89 -0.28% 10,147 03/31/89 0.79% 10,106
06/30/89 4.70% 10,624 06/30/89 2.56% 10,364
09/30/89 1.11% 10,742 09/30/89 1.54% 10,524
12/31/89 2.99% 11,063 12/31/89 2.32% 10,769
03/31/90 0.48% 11,116 03/31/90 0.57% 10,830
06/30/90 2.24% 11,365 06/30/90 1.78% 11,023
09/30/90 1.06% 11,486 09/30/90 0.47% 11,075
12/31/90 3.32% 11,867 12/31/90 3.11% 11,419
03/31/91 2.15% 12,122 03/31/91 1.93% 11,638
06/30/91 1.75% 12,334 06/30/91 1.69% 11,836
09/30/91 3.55% 12,772 09/30/91 2.89% 12,178
12/31/91 3.35% 13,200 12/31/91 2.29% 12,457
03/31/92 -0.08% 13,190 03/31/92 0.48% 12,516
06/30/92 3.25% 13,618 06/30/92 2.87% 12,875
09/30/92 2.49% 13,957 09/30/92 2.19% 13,157
12/31/92 1.59% 14,179 12/31/92 1.98% 13,417
03/31/93 2.54% 14,539 03/31/93 3.40% 13,874
06/30/93 2.36% 14,883 06/30/93 2.78% 14,259
09/30/93 2.16% 15,204 09/30/93 3.17% 14,711
12/31/93 1.23% 15,391 12/31/93 1.19% 14,885
03/31/94 -3.15% 14,906 03/31/94 -3.37% 14,383
06/30/94 1.34% 15,106 06/30/94 0.82% 14,501
09/30/94 0.81% 15,228 09/30/94 0.57% 14,583
12/31/94 -0.33% 15,178 12/31/94 -0.91% 14,450
03/31/95 4.06% 15,794 03/31/95 4.35% 15,077
06/30/95 2.55% 16,197 06/30/95 2.29% 15,422
09/30/95 2.73% 16,639 09/30/95 2.07% 15,741
12/31/95 1.83% 16,944 12/31/95 2.43% 16,123
03/31/96 0.32% 16,999 03/31/96 -0.43% 16,054
06/30/96 0.43% 17,072 06/30/96 0.40% 16,119
09/30/96 1.63% 17,350 09/30/96 1.60% 16,377
12/31/96 2.18% 17,728 12/31/96 2.26% 16,747
03/31/97 -0.16% 17,700 03/31/97 -0.15% 16,722
06/30/97 2.49% 18,141 06/30/97 2.36% 17,116
09/30/97 2.19% 18,539 09/30/97 1.87% 17,435
12/31/97 1.84% 18,880 12/31/97 1.69% 17,729
03/31/98 1.17% 19,101 03/31/98 0.84% 17,878
06/30/98 1.01% 19,294 06/30/98 1.13% 18,080
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. Fund inception was September 10,
1981, and the initial public offering of Class C shares commenced on February 1,
1994.
Tax-Free Intermediate Term Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 3.52% 4.44% 6.10% 6.29%
Class C 4.85% --- --- 3.74%
Past performance is not predictive of future performance.
<PAGE>
Comparison of the Change in Value since June 30, 1988 of a $10,000 Investment
in the Ohio Insured Tax-Free Fund* and the Lehman Brothers 15-Year Municipal
G.O. Bond Index
LEHMAN BROTHERS 15-YEAR MUNICIPAL
G.O. BOND INDEX: OHIO INSURED TAX-FREE FUND:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/88 10,000 06/30/88 9,600
09/30/88 2.57% 10,257 09/30/88 2.15% 9,806
12/31/88 1.94% 10,456 12/31/88 2.24% 10,026
03/31/89 0.38% 10,496 03/31/89 0.79% 10,104
06/30/89 6.32% 11,159 06/30/89 4.27% 10,536
09/30/89 -0.43% 11,111 09/30/89 -0.04% 10,532
12/31/89 4.42% 11,602 12/31/89 3.71% 10,923
03/31/90 -0.01% 11,601 03/31/90 -0.10% 10,912
06/30/90 2.29% 11,867 06/30/90 1.90% 11,118
09/30/90 -0.41% 11,818 09/30/90 0.08% 11,127
12/31/90 4.42% 12,340 12/31/90 3.97% 11,569
03/31/91 1.85% 12,569 03/31/91 1.78% 11,775
06/30/91 1.96% 12,815 06/30/91 1.96% 12,006
09/30/91 4.09% 13,339 09/30/91 3.67% 12,446
12/31/91 3.13% 13,757 12/31/91 3.19% 12,842
03/31/92 0.54% 13,831 03/31/92 -0.06% 12,835
06/30/92 3.81% 14,358 06/30/92 4.35% 13,393
09/30/92 2.86% 14,769 09/30/92 1.95% 13,654
12/31/92 2.47% 15,133 12/31/92 2.29% 13,967
03/31/93 4.24% 15,775 03/31/93 3.78% 14,495
06/30/93 3.67% 16,354 06/30/93 3.70% 15,032
09/30/93 4.17% 17,036 09/30/93 3.86% 15,611
12/31/93 1.56% 17,302 12/31/93 0.73% 15,725
03/31/94 -6.78% 16,129 03/31/94 -5.28% 14,894
06/30/94 1.42% 16,358 06/30/94 0.50% 14,969
09/30/94 0.41% 16,425 09/30/94 0.17% 14,995
12/31/94 -1.75% 16,137 12/31/94 -0.77% 14,880
03/31/95 8.41% 17,494 03/31/95 6.59% 15,861
06/30/95 2.23% 17,885 06/30/95 1.69% 16,129
09/30/95 3.65% 18,537 09/30/95 2.33% 16,506
12/31/95 4.05% 19,288 12/31/95 4.45% 17,241
03/31/96 -0.95% 19,105 03/31/96 -2.15% 16,869
06/30/96 0.35% 19,172 06/30/96 0.44% 16,944
09/30/96 2.40% 19,632 09/30/96 2.38% 17,346
12/31/96 3.03% 20,227 12/31/96 2.44% 17,770
03/31/97 -0.07% 20,213 03/31/97 -0.81% 17,625
06/30/97 4.18% 21,057 06/30/97 3.21% 18,190
09/30/97 3.43% 21,780 09/30/97 2.42% 18,631
12/31/97 2.83% 22,396 12/31/97 2.24% 19,049
03/31/98 1.32% 22,692 03/31/98 0.89% 19,218
06/30/98 1.76% 23,091 06/30/98 1.31% 19,469
Ohio Insured Tax-Free Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 2.75% 4.45% 6.89% 7.68%
Class C 6.24% --- --- 4.33%
*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.
Past performance is not predictive of future performance.
<PAGE>
Comparison of the Change in Value Since Inception (September 27, 1995) of
a $10,000 Investment in the Kentucky Tax-Free Fund and the Lehman Brothers
Municipal Bond Index
LEHMAN BROTHERS MUNICIPAL
BOND INDEX: (w/ reinvested divds) KENTUCKY TAX-FREE FUND:
MONTHLY MONTHLY
DATE RETURN BALANCE DATE RETURN BALANCE
09/27/95 10,000 09/27/95 9,600
10/31/95 1.45% 10,145 10/31/95 2.42% 9,832
11/30/95 1.66% 10,313 11/30/95 1.90% 10,019
12/31/95 0.96% 10,412 12/31/95 1.23% 10,142
01/31/96 0.76% 10,492 01/31/96 0.65% 10,208
02/29/96 -0.68% 10,420 02/29/96 -0.73% 10,133
03/31/96 -1.28% 10,287 03/31/96 -1.20% 10,011
04/30/96 -0.28% 10,258 04/30/96 -0.17% 9,994
05/31/96 -0.04% 10,254 05/31/96 -0.01% 9,992
06/30/96 1.09% 10,366 06/30/96 -0.18% 9,974
07/31/96 0.91% 10,460 07/31/96 1.66% 10,140
08/31/96 -0.02% 10,458 08/31/96 0.17% 10,157
09/30/96 1.40% 10,604 09/30/96 1.00% 10,259
10/31/96 1.13% 10,724 10/31/96 0.94% 10,355
11/30/96 1.83% 10,920 11/30/96 1.53% 10,514
12/31/96 -0.42% 10,875 12/31/96 -0.34% 10,478
01/31/97 0.19% 10,895 01/31/97 0.26% 10,505
02/28/97 0.92% 10,995 02/28/97 0.89% 10,598
03/31/97 -1.33% 10,849 03/31/97 -0.75% 10,518
04/30/97 0.84% 10,940 04/30/97 0.53% 10,574
05/31/97 1.50% 11,104 05/31/97 1.03% 10,684
06/30/97 1.07% 11,223 06/30/97 0.72% 10,761
07/31/97 2.77% 11,534 07/31/97 1.90% 10,965
08/31/97 -0.94% 11,426 08/31/97 -0.55% 10,904
09/30/97 1.19% 11,562 09/30/97 1.13% 11,027
12/31/97 2.71% 11,875 12/31/97 2.06% 11,254
03/31/98 1.15% 12,012 03/31/98 1.02% 11,368
06/30/98 1.52% 12,194 06/30/98 1.72% 11,564
Kentucky Tax-Free Fund
Average Annual Total Returns
1 Year Since Inception
3.17% 5.40%
Past performance is not predictive of future performance.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998
======================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment securities:
At acquisition cost ................................... $36,750,235 $40,814,685
=========== ===========
At amortized cost ..................................... $36,707,536 $40,697,653
=========== ===========
At market value (Note 2) .............................. $36,707,536 $40,697,653
Cash ..................................................... 325,444 105,757
Interest receivable ...................................... 309,049 503,229
Receivable for securities sold ........................... 500,000 --
Other assets ............................................. 8,908 2,348
----------- -----------
TOTAL ASSETS ........................................ 37,850,937 41,308,987
----------- -----------
LIABILITIES
Dividends payable ........................................ 954 5,230
Payable for securities purchased ......................... 438,641 264,008
Payable to affiliates (Note 4) ........................... 23,780 23,446
Other accrued expenses and liabilities ................... 4,119 3,471
----------- -----------
TOTAL LIABILITIES ................................... 467,494 296,155
----------- -----------
NET ASSETS ............................................... $37,383,443 $41,012,832
=========== ===========
Net assets consist of:
Paid-in capital .......................................... $37,384,479 $41,014,335
Accumulated net realized losses from security transactions ( 1,036 ) ( 1,503 )
----------- -----------
Net assets ............................................... $37,383,443 $41,012,832
=========== ===========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) ... 37,394,922 41,014,335
=========== ===========
Net asset value, offering price and redemption price
per share (Note 2) ..................................... $ 1.00 $ 1.00
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998
<CAPTION>
=======================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment securities:
At acquisition cost .................................................. $322,702,801 $ 68,259,809
============ ============
At amortized cost .................................................... $322,516,570 $ 68,180,277
============ ============
At market value (Note 2) ............................................. $322,516,570 $ 68,180,277
Cash .................................................................... -- 73,888
Interest receivable ..................................................... 2,701,856 489,684
Other assets ............................................................ 13,706 2,925
------------ ------------
TOTAL ASSETS ......................................................... 325,232,132 68,746,774
------------ ------------
LIABILITIES
Bank overdraft .......................................................... 49,333 --
Dividends payable ....................................................... 314,897 81,525
Payable for securities purchased ........................................ 4,103,340 5,102,873
Payable to affiliates (Note 4) .......................................... 161,437 27,839
Other accrued expenses and liabilities .................................. 20,614 7,841
------------ ------------
TOTAL LIABILITIES .................................................. 4,649,621 5,220,078
------------ ------------
NET ASSETS .............................................................. $320,582,511 $ 63,526,696
============ ============
Net assets consist of:
Paid-in capital ......................................................... $320,568,987 $ 63,504,408
Accumulated net realized gains from security transactions ............... 13,524 22,288
------------ ------------
Net assets .............................................................. $320,582,511 $ 63,526,696
============ ============
PRICING OF RETAIL SHARES
Net assets applicable to Retail shares .................................. $205,316,016 $ 14,367,574
============ ============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 205,302,700 14,363,852
============ ============
Net asset value, offering price and redemption price per share (Note 2) . $ 1.00 $ 1.00
============ ============
PRICING OF INSTITUTIONAL SHARES
Net assets applicable to Institutional shares ........................... $115,266,495 $ 49,159,122
============ ============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 115,266,287 49,140,556
============ ============
Net asset value, offering price and redemption price per share (Note 2) . $ 1.00 $ 1.00
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998
<CAPTION>
=====================================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment securities:
At acquisition cost .................................................. $55,640,628 $67,563,484
=========== ===========
At amortized cost .................................................... $55,269,289 $67,480,117
============ ===========
At market value (Note 2) ............................................. $57,707,503 $72,161,280
Cash .................................................................... 196,257 21,861
Interest receivable ..................................................... 1,007,671 642,409
Receivable for capital shares sold ...................................... 57,052 246,525
Receivable for securities sold .......................................... 486,250 3,287,142
Other assets ............................................................ 13,430 4,090
----------- -----------
TOTAL ASSETS ......................................................... 59,468,163 76,363,307
----------- -----------
LIABILITIES
Dividends payable ....................................................... 39,217 74,833
Payable for capital shares redeemed ..................................... 262,082 24,084
Payable for securities purchased ........................................ 1,472,824 1,706,334
Payable to affiliates (Note 4) .......................................... 43,229 45,207
Other accrued expenses and liabilities .................................. 7,824 9,005
----------- -----------
TOTAL LIABILITIES .................................................... 1,825,176 1,859,463
----------- -----------
NET ASSETS .............................................................. $57,642,987 $74,503,844
=========== ===========
Net assets consist of:
Paid-in capital ......................................................... $56,200,982 $68,581,109
Accumulated net realized gains (losses) from security transactions ...... ( 996,209 ) 1,241,572
Net unrealized appreciation on investments .............................. 2,438,214 4,681,163
----------- -----------
Net assets .............................................................. $57,642,987 $74,503,844
=========== ===========
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares ................................. $52,896,431 $69,289,212
=========== ===========
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 4,757,501 5,599,945
=========== ===========
Net asset value and redemption price per share (Note 2) ................. $ 11.12 $ 12.37
=========== ===========
Maximum offering price per share (Note 2) ............................... $ 11.35 $ 12.89
=========== ===========
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares ................................. $ 4,746,556 $ 5,214,632
=========== ===========
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 426,820 421,552
=========== ===========
Net asset value, offering price and redemption price per share (Note 2) . $ 11.12 $ 12.37
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
<CAPTION>
======================================================================
KENTUCKY
TAX-FREE
FUND
- ----------------------------------------------------------------------
<S> <C>
ASSETS
Investment securities:
At acquisition cost .................................. $7,400,843
==========
At amortized cost .................................... $7,363,205
==========
At market value (Note 2) ............................. $7,506,941
Cash .................................................... 39,027
Interest receivable ..................................... 131,806
Receivable from affiliates (Note 4) ..................... 1,527
Organization costs, net (Note 2) ........................ 14,288
Other assets ............................................ 667
----------
TOTAL ASSETS ......................................... 7,694,256
----------
LIABILITIES
Dividends payable ....................................... 15,160
Payable for securities purchased ........................ 344,806
Other accrued expenses and liabilities .................. 4,460
----------
TOTAL LIABILITIES .................................... 364,426
----------
NET ASSETS .............................................. $7,329,830
==========
Net assets consist of:
Paid-in capital ......................................... $7,072,889
Accumulated net realized gains from security transactions 113,205
Net unrealized appreciation on investments .............. 143,736
----------
Net assets .............................................. $7,329,830
==========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) .. 700,507
==========
Net asset value and redemption price per share (Note 2) . $ 10.46
==========
Maximum offering price per share (Note 2) ............... $ 10.90
==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1998
<CAPTION>
==================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ..................................... $1,176,743 $1,546,509
---------- ----------
EXPENSES
Investment advisory fees (Note 4) ................... 150,790 210,813
Accounting services fees (Note 4) ................... 34,500 34,500
Transfer agent and shareholder services fees (Note 4) 29,891 25,510
Distribution expenses (Note 4) ...................... 10,767 19,803
Postage and supplies ................................ 19,032 7,693
Professional fees ................................... 7,379 8,179
Registration fees ................................... 8,777 2,151
Trustees' fees and expenses ......................... 4,835 4,835
Insurance expense ................................... 3,212 4,138
Pricing expenses .................................... 2,987 2,697
Custodian fees ...................................... 1,890 3,681
Reports to shareholders ............................. 2,085 1,970
Other expenses ...................................... 1,107 767
---------- ----------
TOTAL EXPENSES ......................................... 277,252 326,737
---------- ----------
NET INVESTMENT INCOME .................................. 899,491 1,219,772
---------- ----------
NET REALIZED GAINS FROM SECURITY TRANSACTIONS .......... 7 2,000
---------- ----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............. $ 899,498 $1,221,772
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1998
<CAPTION>
==================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ................................................... $12,057,007 $ 2,062,394
----------- -----------
EXPENSES
Investment advisory fees (Note 4) ................................. 1,421,029 276,608
Distribution expenses, Retail class (Note 4) ...................... 435,722 39,096
Accounting services fees (Note 4) ................................. 69,223 48,500
Transfer agent and shareholder services fees, Retail class (Note 4) 73,358 12,000
Transfer agent and shareholder services fees,
Institutional class (Note 4) ...................................... 12,000 12,000
Postage and supplies .............................................. 53,096 10,520
Professional fees ................................................. 24,679 9,679
Insurance expense ................................................. 18,808 5,239
Custodian fees (Note 4) ........................................... 5,731 14,395
Pricing expenses .................................................. 7,609 3,886
Trustees' fees and expenses ....................................... 4,835 4,835
Registration fees ................................................. 7,530 1,034
Reports to shareholders ........................................... 4,928 487
Other expenses .................................................... 12,887 2,341
----------- -----------
TOTAL EXPENSES ....................................................... 2,151,435 440,620
Fees waived by the Adviser (Note 4) ............................... ( 46,680 ) ( 107,645 )
Institutional class expenses reimbursed by the Adviser (Note 4) ... ( 7,979 ) ( 7,114 )
----------- -----------
NET EXPENSES ......................................................... 2,096,776 325,861
----------- -----------
NET INVESTMENT INCOME ................................................ 9,960,231 1,736,533
----------- -----------
NET REALIZED GAINS FROM SECURITY TRANSACTIONS ........................ 573 23,116
----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........................... $ 9,960,804 $ 1,759,649
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1998
<CAPTION>
================================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ................................................. $ 3,326,159 $ 4,313,747
----------- -----------
EXPENSES
Investment advisory fees (Note 4) ............................... 302,947 378,345
Distribution expenses, Class A (Note 4) ......................... 71,805 18,754
Distribution expenses, Class C (Note 4) ......................... 33,170 29,140
Transfer agent and shareholder services fees, Class A (Note 4) .. 59,018 34,859
Transfer agent and shareholder services fees, Class C (Note 4) .. 12,000 12,000
Accounting services fees (Note 4) ............................... 52,500 52,500
Postage and supplies ............................................ 46,573 25,209
Pricing expenses ................................................ 12,659 15,165
Professional fees ............................................... 9,679 10,679
Registration fees, Common ....................................... 1,768 192
Registration fees, Class A ...................................... 6,093 3,344
Registration fees, Class C ...................................... 4,279 1,905
Insurance expense ............................................... 5,752 6,566
Custodian fees .................................................. 4,823 6,017
Trustees' fees and expenses ..................................... 4,835 4,835
Reports to shareholders ......................................... 5,266 3,265
Other expenses .................................................. 3,885 4,600
----------- -----------
TOTAL EXPENSES ..................................................... 637,052 607,375
Class A expenses reimbursed by the Adviser (Note 4) ............. -- (948)
----------- -----------
NET EXPENSES ....................................................... 637,052 606,427
----------- -----------
NET INVESTMENT INCOME .............................................. 2,689,107 3,707,320
----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ................... 504,427 1,576,938
Net change in unrealized appreciation/depreciation on investments 120,496 (19,066)
----------- -----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ................... 624,923 1,557,872
----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ......................... $ 3,314,030 $ 5,265,192
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
For the Periods Ended June 30, 1998 and August 31, 1997
<CAPTION>
=========================================================================================
KENTUCKY TAX-FREE FUND
Ten Months Year
Ended Ended
June 30, August 31,
1998(A) 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ................................................ $337,659 $626,947
-------- --------
EXPENSES
Investment advisory fees (Note 4) .............................. 32,172 47,946
Accounting services fees (Note 4) .............................. 28,000 36,000
Transfer agent fees (Note 4) ................................... 9,830 29,221
Professional fees .............................................. 5,821 25,286
Shareholder services fees (Note 4) ............................. -- 29,966
Administration fees (Note 4) ................................... -- 24,866
Amortization of organization costs (Note 2) .................... 5,296 6,351
Pricing expenses ............................................... 3,330 6,443
Custodian fees ................................................. 2,839 2,150
Distribution expenses (Note 4) ................................. 4,776 --
Trustees' fees and expenses .................................... 3,562 1,193
Reports to shareholders ........................................ 592 2,199
Postage and supplies ........................................... 2,279 --
Insurance expense .............................................. 716 1,367
Registration fees .............................................. 149 238
Other expenses ................................................. 454 1,623
-------- --------
TOTAL EXPENSES .................................................... 99,816 214,849
Fees waived and expenses reimbursed (Note 4) ................... ( 68,508 )( 112,585)
-------- --------
NET EXPENSES ...................................................... 31,308 102,264
-------- --------
NET INVESTMENT INCOME ............................................. 306,351 524,683
-------- --------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ................... 109,080 6,913
Net change in unrealized appreciation/depreciation on investments 51,636 351,842
-------- --------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS .................. 160,716 358,755
-------- --------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........................ $467,067 $883,438
======== ========
(A) Effective as of the close of business on August 29, 1997, the Kentucky Tax-Free Fund was reorganized
and the fiscal year-end of the Fund, subsequent to August 31, 1997, was changed to June 30 (Note 7).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
<CAPTION>
=============================================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ................. $ 899,491 $ 850,627 $ 1,219,772 $ 1,106,884
Net realized gains (losses) from
security transactions ............... 7 7 2,000 (1,923)
------------- ------------- ------------- -------------
Net increase in net assets from operations 899,498 850,634 1,221,772 1,104,961
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............ (899,491) (850,627) (1,219,772) (1,106,884)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
Proceeds from shares sold ............. 63,515,504 59,171,857 178,294,681 166,476,608
Net asset value of shares issued in
reinvestment of distributions
to shareholders ................... 884,700 828,537 1,138,976 1,029,746
Payments for shares redeemed .......... (57,142,444) (55,217,113) (170,609,136) (171,440,181)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
from capital share transactions ....... 7,257,760 4,783,281 8,824,521 (3,933,827)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ......................... 7,257,767 4,783,288 8,826,521 (3,935,750)
NET ASSETS:
Beginning of year ..................... 30,125,676 25,342,388 32,186,311 36,122,061
------------- ------------- ------------- -------------
End of year ........................... $ 37,383,443 $ 30,125,676 $ 41,012,832 $ 32,186,311
============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
<CAPTION>
===================================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ....................... $ 9,960,231 $ 7,733,755 $ 1,736,533 $ 1,386,725
Net realized gains from security transactions 573 46 23,116 370
------------- ------------- ------------- -------------
Net increase in net assets from operations ..... 9,960,804 7,733,801 1,759,649 1,387,095
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Retail .......... (6,053,491) (6,297,760) (586,926) (814,499)
From net investment income, Institutional ... (3,906,740) (1,435,995) (1,149,607) (572,226)
------------- ------------- ------------- -------------
Decrease in net assets from distributions to
shareholders ................................ (9,960,231) (7,733,755) (1,736,533) (1,386,725)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
RETAIL
Proceeds from shares sold ................... 443,151,458 572,337,891 27,490,101 57,130,891
Net asset value of shares issued in
reinvestment of distributions
to shareholders ........................... 5,971,760 4,862,899 577,444 675,817
Payments for shares redeemed ................ (410,526,902) (650,804,392) (36,138,595) (64,279,383)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
from Retail share transactions .............. 38,596,316 (73,603,602) (8,071,050) (6,472,675)
------------- ------------- ------------- -------------
INSTITUTIONAL
Proceeds from shares sold ................... 303,525,174 216,396,635 129,691,125 38,407,914
Net asset value of shares issued in
reinvestment of distributions
to shareholders ........................... 1,880 -- 106,367 --
Payments for shares redeemed ................ (285,849,088) (118,808,315) (100,005,326) (38,204,284)
------------- ------------- ------------- -------------
Net increase in net assets
from Institutional share transactions ....... 17,677,966 97,588,320 29,792,166 203,630
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS .............................. 56,274,855 23,984,764 21,744,232 (6,268,675)
NET ASSETS:
Beginning of year ........................... 264,307,656 240,322,892 41,782,464 48,051,139
------------- ------------- ------------- -------------
End of year ................................. $ 320,582,511 $ 264,307,656 $ 63,526,696 $ 41,782,464
============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
<CAPTION>
===============================================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ................... $ 2,689,107 $ 3,097,197 $ 3,707,320 $ 3,949,356
Net realized gains from security
transactions .......................... 504,427 120,146 1,576,938 134,212
Net change in unrealized appreciation/
depreciation on investments ........... 120,496 896,811 (19,066) 1,565,046
------------- ------------- ------------- -------------
Net increase in net assets from operations . 3,314,030 4,114,154 5,265,192 5,648,614
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ..... (2,502,901) (2,894,253) (3,489,518) (3,767,741)
From net investment income, Class C ..... (186,206) (202,944) (217,802) (181,615)
From net realized gains, Class A ........ -- -- (434,273) --
From net realized gains, Class C ........ -- -- (34,811) --
------------- ------------- ------------- -------------
Decrease in net assets from distributions to
shareholders ............................ (2,689,107) (3,097,197) (4,176,404) (3,949,356)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold ............... 12,407,637 12,588,991 140,842,715 171,413,856
Net asset value of shares issued in
reinvestment of distributions
to shareholders ....................... 2,009,499 2,298,321 2,921,236 2,840,761
Payments for shares redeemed ............ (20,581,067) (25,016,687) (146,316,005) (180,995,415)
------------- ------------- ------------- -------------
Net decrease in net assets
from Class A share transactions ......... (6,163,931) (10,129,375) (2,552,054) (6,740,798)
------------- ------------- ------------- -------------
CLASS C
Proceeds from shares sold ............... 1,781,236 1,847,102 2,551,977 1,641,830
Net asset value of shares issued in
reinvestment of distributions
to shareholders ....................... 173,075 191,889 209,923 159,120
Payments for shares redeemed ............ (2,418,483) (2,193,811) (2,249,977) (1,214,900)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
from Class C share transactions ......... (464,172) (154,820) 511,923 586,050
------------- ------------- ------------- -------------
TOTAL DECREASE IN NET ASSETS ............... (6,003,180) (9,267,238) (951,343) (4,455,490)
NET ASSETS:
Beginning of year ....................... 63,646,167 72,913,405 75,455,187 79,910,677
------------- ------------- ------------- -------------
End of year ............................. $ 57,642,987 $ 63,646,167 $ 74,503,844 $ 75,455,187
============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended June 30, 1998 and August 31, 1997 and 1996
<CAPTION>
====================================================================================================
KENTUCKY TAX-FREE FUND
Ten Months Year Period
Ended Ended Ended
June 30, August 31, August 31,
1998(A) 1997 1996(B)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income ............................ $ 306,351 $ 524,683 $ 714,832
Net realized gains (losses) from
security transactions .......................... 109,080 6,913 (2,788)
Net change in unrealized appreciation/depreciation
on investments ................................. 51,636 351,842 (259,742)
------------ ------------ ------------
Net increase in net assets from operations .......... 467,067 883,438 452,302
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ....................... (306,351) (524,683) (828,883)
Distributions in excess of net investment income . -- (100,598) --
------------ ------------ ------------
Decrease in net assets from distributions
to shareholders ................................... (306,351) (625,281) (828,883)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold ........................ 458,492 1,302,552 28,751,437
Net asset value of shares issued in
reinvestment of distributions to shareholders .. 157,294 303,297 559,139
Payments for shares redeemed ..................... (1,884,304) (9,266,863) (13,093,506)
------------ ------------ ------------
Net increase (decrease) in net assets from
capital share transactions ........................ (1,268,518) (7,661,014) 16,217,070
------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............. (1,107,802) (7,402,857) 15,840,489
NET ASSETS:
Beginning of period .............................. 8,437,632 15,840,489 --
------------ ------------ ------------
End of period .................................... $ 7,329,830 $ 8,437,632 $ 15,840,489
============ ============ ============
(A) Effective as the close of business on August 29, 1997, the Kentucky Tax-Free Fund was reorganized
and the fiscal year-end of the Fund, subsequent to August 31, 1997, was changed to June 30 (Note 7).
(B) Represents the period from the commencement of operations (September 27, 1995) through August 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
=============================================================================================================
Year Ended June 30,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- ---------- --------- ----------
Net investment income........................... 0.030 0.029 0.031 0.030 0.021
---------- --------- ---------- --------- ----------
Dividends from net investment income............ (0.030) (0.029) (0.031) (0.030) (0.021)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ==========
Total return ................................... 3.03% 2.89% 3.15% 3.07% 2.12%
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $ 37,383 $ 30,126 $ 25,342 $ 26,692 $31,168
========== ========= ========== ========= ==========
Ratio of expenses to average net assets......... 0.92% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to average
net assets................................... 2.98% 2.85% 3.09% 3.00% 2.09%
</TABLE>
<PAGE>
<TABLE>
CALIFORNIA TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
=============================================================================================================
Year Ended June 30,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<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 0.028 0.029 0.029 0.019
---------- --------- ---------- --------- ----------
Dividends from net investment income............ (0.029) (0.028) (0.029) (0.029) (0.019)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ==========
Total return ................................... 2.94% 2.81% 2.95% 2.95% 1.93%
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $ 41,013 $ 32,186 $ 36,122 $ 19,525 $24,508
========== ========= ========== ========= ==========
Ratio of expenses to average net assets(A) .... 0.77% 0.80% 0.80% 0.70% 0.60%
Ratio of net investment income to average
net assets.................................... 2.89% 2.76% 2.88% 2.83% 1.90%
(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% and 0.86% for the years ended June 30, 1996, 1995 and 1994, respectively.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OHIO TAX-FREE MONEY FUND - RETAIL
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
============================================================================================================
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- ---------- --------- ----------
Net investment income........................... 0.030 0.030 0.031 0.031 0.020
---------- --------- ---------- --------- ----------
Dividends from net investment income ........... (0.030) (0.030) (0.031) (0.031) (0.020)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ==========
Total return.................................... 3.07% 2.99% 3.14% 3.12% 1.99%
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $205,316 $166,719 $240,323 $226,606 $213,001
========== ========= ========== ========= ==========
Ratio of expenses to average net assets(A) ..... 0.75% 0.75% 0.75% 0.74% 0.73%
Ratio of net investment income to average
net assets.................................... 3.02% 2.93% 3.09% 3.08% 1.97%
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net assets would have been 0.76% and 0.77%
for the years ended June 30, 1998 and 1997, respectively (Note 4).
</TABLE>
<PAGE>
<TABLE>
OHIO TAX-FREE MONEY FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
<CAPTION>
==================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
==================================================================================
Year Period
Ended Ended
June 30, June 30,
1998 1997(A)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period ............. $ 1.000 $ 1.000
------------ -----------
Net investment income .............................. 0.033 0.016
------------ -----------
Dividends from net investment income ............... (0.033) (0.016)
------------ -----------
Net asset value at end of period ................... $ 1.000 $ 1.000
============ ===========
Total return ....................................... 3.33% 3.31%(C)
============ ===========
Net assets at end of period (000's) ................ $ 115,266 $ 97,589
============ ===========
Ratio of expenses to average net assets(B) ......... 0.50% 0.50%(C)
Ratio of net investment income to average net assets 3.27% 3.28%(C)
(A) Represents the period from the initial public offering of Institutional shares (January 7, 1997) through June 30, 1997.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets
would have been 0.52% and 0.56%(C) for the periods ended June 30, 1998 and 1997, respectively (Note 4).
(C) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FLORIDA TAX-FREE MONEY FUND - RETAIL
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
============================================================================================================
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ........... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- ---------- --------- ---------
Net investment income........................... 0.030 0.029 0.032 0.031 0.021
---------- --------- ---------- --------- ---------
Dividends from net investment income ........... (0.030) ( 0.029) ( 0.032) ( 0.031 ) (0.021)
---------- --------- ---------- --------- ---------
Net asset value at end of year ................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= =========
Total return ................................... 3.03% 2.90% 3.29% 3.17% 2.11%
========== ========= ========== ========= =========
Net assets at end of year (000's) .............. $ 14,368 $ 22,434 $ 28,906 $ 24,119 $26,276
========== ========= ========== ========= =========
Ratio of expenses to average net assets(B) .... 0.75% 0.75% 0.61% 0.66% 0.58%
Ratio of net investment income to average
net assets.................................... 2.98% 2.85% 3.24% 3.12% 2.10%
(A) Represents the period from the initial public offering of Retail shares (November 13, 1992) through June 30, 1993.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would
have been 0.95%, 0.94%, 0.80%, 0.80% and 0.81% for the years ended June 30, 1998, 1997, 1996, 1995 and 1994,
respectively (Note 4).
</TABLE>
<PAGE>
<TABLE>
FLORIDA TAX-FREE MONEY FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
============================================================================================================
Period
Year Ended June 30, Ended
June 30,
1998 1997 1996(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period ................. $ 1.000 $ 1.000 $ 1.000
-------------- --------------- ---------------
Net investment income................................... 0.032 0.031 0.003
-------------- --------------- ---------------
Dividends from net investment income ................... (0.032) (0.031) (0.003)
-------------- --------------- ---------------
Net asset value at end of period ....................... $ 1.000 $ 1.000 $ 1.000
============== =============== ===============
Total return............................................ 3.28% 3.16% 3.03%(C)
============== =============== ===============
Net assets at end of period (000's) .................... $ 49,159 $ 19,349 $ 19,145
============== =============== ===============
Ratio of net expenses to average net assets(B) ........ 0.50% 0.50% 0.50%(C)
Ratio of net investment income to average net assets.... 3.23% 3.11% 3.03%(C)
(A) Represents the period from the initial public offering of Institutional shares (May 29, 1996) through June 30, 1996.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 0.71%, 0.79% and 0.87%(C) for the periods ended June 30, 1998, 1997 and 1996, respectively (Note 4).
(C) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
TAX-FREE INTERMEDIATE TERM FUND - CLASS A
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
============================================================================================================
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 11.01 $ 10.85 $ 10.86 $ 10.69 $ 10.98
---------- --------- ---------- --------- ---------
Income from investment operations:
Net investment income ....................... 0.50 0.50 0.50 0.49 0.48
Net realized and unrealized gains (losses)
on investments............................. 0.11 0.16 (0.01) 0.17 (0.29)
---------- --------- ---------- --------- ----------
Total from investment operations ............... 0.61 0.66 0.49 0.66 0.19
---------- --------- ---------- --------- ----------
Dividends from net investment income ........... (0.50) (0.50) (0.50) (0.49) (0.48)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
========== ========= ========== ========= ==========
Total return(A) ................................ 5.63% 6.19% 4.51% 6.36% 1.70%
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $ 52,896 $ 58,485 $ 67,675 $ 81,140 $106,472
========== ========= ========== ========= ==========
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 asset..................................... 4.50% 4.55% 4.52% 4.59% 4.35%
Portfolio turnover rate......................... 36% 30% 37% 32% 46%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
TAX-FREE INTERMEDIATE TERM FUND - CLASS C
FINANCIAL HIGHLIGHTS
<CAPTION>
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
=============================================================================================================
Period
Year Ended June 30, Ended
June 30,
1998 1997 1996 1995 1994(A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 11.01 $ 10.85 $ 10.86 $ 10.69 $ 11.27
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.42 0.43 0.44 0.44 0.20
Net realized and unrealized gains (losses)
on investments............................. 0.11 0.16 ( 0.01) 0.17 ( 0.58 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 0.53 0.59 0.43 0.61 ( 0.38 )
---------- --------- ---------- --------- ----------
Dividends from net investment income............ ( 0.42) ( 0.43) ( 0.44) ( 0.44 ) ( 0.20 )
---------- --------- ---------- --------- ----------
Net asset value at end of period................ $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
========== ========= ========== ========= ==========
Total return(B) ................................ 4.85% 5.49% 4.00% 5.82% ( 8.28%)(D)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 4,747 $ 5,161 $ 5,239 $ 4,814 $ 3,084
========== ========= ========== ========= ==========
Ratio of expenses to average net assets(C) ..... 1.74% 1.65% 1.49% 1.49% 1.45%(D)
Ratio of net investment income to average
net assets.................................... 3.75% 3.89% 4.02% 4.08% 3.79%(D)
Portfolio turnover rate......................... 36% 30% 37% 32% 46%(D)
(A) Represents the period from the initial public offering of Class C shares (February 1, 1994) through June 30, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 1.75%(D) for the period ended June 30, 1994.
(D) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OHIO INSURED TAX-FREE FUND - CLASS A
FINANCIAL HIGHLIGHTS
<CAPTION>
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
=============================================================================================================
Year Ended June 30,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 12.22 $ 11.97 $ 11.99 $ 11.74 $ 12.41
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income ....................... 0.61 0.61 0.62 0.63 0.61
Net realized and unrealized gains (losses)
on investments............................. 0.23 0.25 ( 0.02) 0.25 ( 0.64 )
---------- --------- ---------- --------- ----------
Total from investment operations ............... 0.84 0.86 0.60 0.88 ( 0.03 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income ........ ( 0.61) ( 0.61) ( 0.62) ( 0.63 ) ( 0.61 )
Distributions from net realized gains........ ( 0.08) -- -- -- ( 0.03 )
---------- --------- ---------- --------- ----------
Total distributions ............................ ( 0.69) ( 0.61) ( 0.62) ( 0.63 ) ( 0.64 )
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 12.37 $ 12.22 $ 11.97 $ 11.99 $ 11.74
========== ========= ========== ========= ==========
Total return(A) ............................... 7.03% 7.36% 5.05% 7.75% ( 0.41% )
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $ 69,289 $ 70,816 $ 75,938 $ 71,393 $79,889
========== ========= ========== ========= ==========
Ratio of expenses to average net assets(B) .... 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to average
net assets.................................... 4.95% 5.05% 5.12% 5.35% 4.94%
Portfolio turnover rate......................... 41% 33% 46% 29% 45%
(A) Total returns shown exclude 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% for the year ended June 30, 1995.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OHIO INSURED TAX-FREE FUND - CLASS C
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
============================================================================================================
Period
Year Ended June 30, Ended
June 30,
1998 1997 1996 1995 1994(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 12.22 $ 11.97 $ 12.00 $ 11.74 $12.62
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.52 0.53 0.56 0.57 0.36
Net realized and unrealized gains (losses)
on investments............................. 0.23 0.25 ( 0.03) 0.26 ( 0.85 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 0.75 0.78 0.53 0.83 ( 0.49 )
---------- --------- ---------- -------- ----------
Less distributions:
Dividends from net investment income......... ( 0.52) ( 0.53) ( 0.56) ( 0.57 ) ( 0.36 )
Distributions from net realized gains........ ( 0.08) -- -- -- ( 0.03 )
---------- --------- ---------- --------- ----------
Total distributions............................. ( 0.60) ( 0.53) ( 0.56) ( 0.57 ) ( 0.39 )
---------- --------- --------- --------- ----------
Net asset value at end of period................ $ 12.37 $ 12.22 $ 11.97 $ 12.00 $11.74
========== ========= ========== ========= ==========
Total return(B) ................................ 6.24% 6.65% 4.44% 7.31% ( 6.05%)(D)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 5,215 $ 4,639 $ 3,972 $ 4,165 $ 2,659
========== ========= ========= ========= =========
Ratio of expenses to average net assets(C) ..... 1.50% 1.42% 1.25% 1.25% 1.22% (D)
Ratio of net investment income to average
net assets.................................... 4.20% 4.37% 4.62% 4.84% 4.09% (D)
Portfolio turnover rate......................... 41% 33% 46% 29% 45% (D)
(A) Represents the period from the initial public offering of Class C shares (November 1, 1993) through June 30, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) 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%(D) for the periods ended June 30, 1995 and 1994, respectively.
(D) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
KENTUCKY TAX-FREE FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
==========================================================================================================
Per Share Data For a Share Outstanding Throughout Each Period
==========================================================================================================
Ten Months Year Period
Ended Ended Ended
June 30, August 31, August 31,
1998(A) 1997 1996(B)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 10.26 $ 10.06 $ 10.00
-------------- --------------- ---------------
Income from investment operations:
Net investment income................................ 0.41 0.44 0.51(C)
Net realized and unrealized gains on investments..... 0.20 0.28 0.06
-------------- --------------- ---------------
Total from investment operations........................ 0.61 0.72 0.57
-------------- --------------- ---------------
Less distributions:
Dividends from net investment income................. ( 0.41) ( 0.44 ) ( 0.51 )
Distributions in excess of net investment income..... -- ( 0.08 ) --
-------------- --------------- ---------------
Total distributions..................................... ( 0.41) ( 0.52 ) ( 0.51 )
-------------- --------------- ---------------
Net asset value at end of period........................ $ 10.46 $ 10.26 $ 10.06
============== =============== ===============
Total return(D) ........................................ 7.29%(F) 7.36% 5.80%
============== =============== ===============
Net assets at end of period (000's)..................... $ 7,330 $ 8,438 $ 15,840
============== =============== ===============
Ratio of expenses to average net assets(E) ............. 0.49%(F) 0.85% 0.82%(F)
Ratio of net investment income to average net assets.... 4.75%(F) 4.35% 5.30%(F)
Portfolio turnover rate................................. 61%(F) 0% 145%
(A) Effective as of the close of business on August 29, 1997, the Kentucky Tax-Free Fund was reorganized and the
fiscal year-end of the Fund, subsequent to August 31, 1997, was changed to June 30 (Note 7).
(B) Represents the period from the commencement of operations (September 27, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratio of expenses to average net assets would have been
1.55%(F), 1.78% and 1.65%(F) for the periods ended June 30, 1998 and August 31, 1997 and 1996, respectively (Note 4).
(F) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
================================================================================
1. Organization
The Tax-Free Money Fund, the California Tax-Free Money Fund, the Ohio Tax-Free
Money Fund, the Florida Tax-Free Money Fund, the Tax-Free Intermediate Term
Fund, the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free Fund
(collectively, the Funds) are each a separate series of shares of Countrywide
Tax-Free Trust (the Trust). The Trust is registered under the Investment Company
Act of 1940 (the 1940 Act) as an open-end management investment company. The
Trust was established as a Massachusetts business trust under a Declaration of
Trust dated April 13, 1981. The Declaration of Trust, as amended, permits the
Trustees to issue an unlimited number of shares of each Fund. The Kentucky
Tax-Free Fund was originally organized as a series of Trans Adviser Funds, Inc.
(Note 7).
The Tax-Free Money Fund seeks the highest level of interest income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-quality, short-term municipal obligations.
The California Tax-Free Money Fund seeks the highest level of interest income
exempt from federal and California income taxes, consistent with liquidity and
stability of principal, by investing primarily in high-quality, short-term
California municipal obligations.
The Ohio Tax-Free Money Fund seeks the highest level of current income exempt
from federal income tax and Ohio personal income tax, consistent with liquidity
and stability of principal. The Fund invests primarily in a portfolio of
high-quality, short-term Ohio municipal obligations.
The Florida Tax-Free Money Fund seeks the highest level of interest income
exempt from federal income tax, consistent with liquidity and stability of
principal, by investing primarily in high-quality, short-term Florida municipal
obligations the value of which is exempt from the Florida intangible personal
property tax.
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income exempt
from federal income tax and Ohio personal income tax, consistent with protection
of capital. The Fund invests primarily in high and medium-quality, long-term
Ohio municipal obligations which are protected by insurance guaranteeing the
payment of principal and interest in the event of a default.
The Kentucky Tax-Free Fund seeks the highest level of interest income exempt
from federal and Kentucky income taxes, consistent with protection of capital.
The Fund invests primarily in high and medium-quality Kentucky municipal
obligations.
<PAGE>
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund each
offer two classes of shares: Class A shares (sold subject to a maximum front-end
sales load of 2% for the Tax-Free Intermediate Term Fund and 4% for the Ohio
Insured Tax-Free Fund and a distribution fee of up to 0.25% of average daily net
assets of each Fund) and Class C shares (sold subject to a maximum contingent
deferred sales load of 1% for a one-year period and a distribution fee of up to
1% of average daily net assets of each Fund). Each Class A and Class C share of
the Fund represents identical interests in the Fund's investment portfolio and
has the same rights, except that (i) Class C shares bear the expenses of higher
distribution fees, which will cause Class C shares to have a higher expense
ratio and to pay lower dividends than those related to Class A shares; (ii)
certain other class specific expenses will be borne solely by the class to which
such expenses are attributable; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements.
The Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund each offer two
classes of shares: Retail shares (sold subject to a distribution fee of up to
0.25% of average daily net assets of each Fund) and Institutional shares (sold
without a distribution fee). Each Retail and Institutional share of the Fund
represents identical interests in the Fund's investment portfolio and has the
same rights, except that (i) Retail shares bear the expenses of distribution
fees, which will cause Retail shares to have a higher expense ratio and to pay
lower dividends than those related to Institutional shares; (ii) certain other
class specific expenses will be borne solely by the class to which such expenses
are attributable; (iii) each class has exclusive voting rights with respect to
matters affecting only that class; and (iv) Retail shares are subject to a lower
minimum initial investment requirement and offer certain shareholder services
not available to Institutional shares such as checkwriting and automatic
investment and redemption plans.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
2. Significant Accounting Policies
The periods ended June 30, 1998, referred to within the Notes to Financial
Statements, represent the year then ended, except for the Kentucky Tax-Free Fund
which represents the ten months then ended. The following is a summary of the
Trust's significant accounting policies:
Security valuation -- Tax-Free Money Fund, California Tax-Free Money Fund, Ohio
Tax-Free Money Fund and Florida Tax-Free Money Fund securities are valued on an
amortized cost basis, which approximates market. This involves initially valuing
a security at its original cost and thereafter assuming a constant amortization
to maturity of any discount or premium. This method of valuation is expected to
enable these Funds to maintain a constant net asset value per share. Tax-Free
Intermediate Term Fund, Ohio Insured Tax-Free Fund and Kentucky Tax-Free Fund
securities are valued at market using an independent pricing service which
generally utilizes a computerized grid matrix of tax-exempt securities and
evaluations by its staff to determine what it believes is the fair value of the
securities. On limited occasions, if the valuation provided by the pricing
service ignores certain market conditions affecting the value of a security or
the pricing service cannot provide a valuation, the fair value of the security
will be determined in good faith consistent with procedures established by the
Board of Trustees.
Share valuation -- The net asset value per share of the Tax-Free Money Fund, the
California Tax-Free Money Fund and the Kentucky Tax-Free Fund is calculated
daily by dividing the total value of a Fund's assets, less liabilities, by its
number of shares outstanding. The net asset value per share of each class of
shares of the Ohio Tax-Free Money Fund, the Florida Tax-Free Money Fund, the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund is also
calculated daily by dividing the total value of a Fund's assets attributable to
that class, less liabilities attributable to that class, by the number of shares
of that class outstanding.
The offering price per share of the Tax-Free Money Fund, the California Tax-Free
Money Fund, the Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund is
equal to the net asset value per share. 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 and shares of the Kentucky 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.
<PAGE>
The redemption price per share of each Fund, including each class of shares with
respect to the Ohio Tax-Free Money Fund, the Florida Tax-Free Money Fund, the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund, is equal to
net asset value per share. However, Class C shares of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund are subject to a contingent
deferred sales load of 1% of the original purchase price if redeemed within a
one-year period from the date of purchase.
Investment income -- Interest income is accrued as earned. Discounts and
premiums on securities purchased are amortized in accordance with income tax
regulations which approximate generally accepted accounting principles.
Distributions to shareholders -- Dividends from net investment income are
declared daily and paid on the last business day of each month. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income distributions and capital gain distributions are determined in
accordance with income tax regulations.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Allocations between classes -- Investment income earned by the Ohio Tax-Free
Money Fund, the Florida Tax-Free Money Fund, the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund is allocated daily to each class of shares
based on the percentage of the net asset value of settled shares of such class
to the total of the net asset value of settled shares of both classes of shares.
Realized capital gains and losses and unrealized appreciation and depreciation
are allocated daily to each class of shares based upon its proportionate share
of total net assets of the Fund. Class specific expenses are charged directly to
the class incurring the expense. Common expenses which are not attributable to a
specific class are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Organization costs -- Costs incurred by the Kentucky Tax-Free Fund in connection
with the organization and registration of shares, net of certain expenses, have
been capitalized and are being amortized on a straight-line basis over a five
year period beginning with the Fund's commencement of operations.
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 income 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.
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, 1998:
<TABLE>
<CAPTION>
Tax-Free Ohio Insured Kentucky
Intermediate Tax-Free Tax-Free
Term Fund Fund Fund
<S> <C> <C> <C>
Gross unrealized appreciation........................... $ 2,440,258 $ 4,683,745 $ 144,927
Gross unrealized depreciation........................... (2,044) (2,582) (1,191)
-------------- --------------- ---------------
Net unrealized appreciation............................. $ 2,438,214 $ 4,681,163 $ 143,736
============== =============== ===============
</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, 1998, the Tax-Free Intermediate Term Fund had capital loss
carryforwards for federal income tax purposes of $996,209, none of which expire
prior to June 30, 1999. These capital loss carryforwards may be utilized in
future years to offset net realized capital gains prior to distribution to
shareholders.
<PAGE>
3. Investment Transactions
Investment transactions (excluding short-term investments) were as follows for
the period ended June 30, 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Tax-Free Ohio Insured Kentucky
Intermediate Tax-Free Tax-Free
Term Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases of investment securities...................... $ 20,968,625 $ 29,736,635 $ 3,887,513
============== ============== =============
Proceeds from sales and maturities of
investment securities................................. $ 26,989,988 $ 34,424,889 $ 4,688,048
============== ============== =============
</TABLE>
4. Transactions with Affiliates
The Chairman and the President of the Trust are also officers of Countrywide
Financial Services, Inc., whose subsidiaries include Countrywide Investments,
Inc. (the Adviser), the Trust's investment adviser and principal underwriter,
and Countrywide Fund Services, Inc. (CFS), the Trust's transfer agent,
shareholder service agent and accounting services agent. Countrywide Financial
Services, Inc. is a wholly-owned subsidiary of Countrywide Credit Industries,
Inc., a New York Stock Exchange listed company principally engaged in the
business of residential mortgage lending.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
MANAGEMENT AGREEMENT
Each Fund's investments are managed by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, each Fund pays the Adviser
a fee, computed and accrued daily and paid monthly, at an annual rate of 0.5% of
its respective average daily net assets up to $100 million, 0.45% of such net
assets from $100 million to $200 million, 0.4% of such net assets from $200
million to $300 million and 0.375% of such net assets in excess of $300 million.
In order to voluntarily reduce operating expenses during the periods ended June
30, 1998, the Adviser waived $46,680 of its investment advisory fees and
reimbursed $7,979 of Institutional expenses for the Ohio Tax-Free Money Fund,
waived $107,645 of its investment advisory fees and reimbursed $7,114 of
Institutional expenses for the Florida Tax-Free Money Fund, reimbursed $948 of
Class A expenses for the Ohio Insured Tax-Free Fund and waived its investment
advisory fees of $32,172 and reimbursed $36,336 of other operating expenses for
the Kentucky Tax-Free Fund.
The Adviser has agreed, until at least August 31, 1999, to waive fees and
reimburse expenses to the extent necessary to limit total operating expenses to
0.82% for the Kentucky Tax-Free Fund.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and CFS, CFS maintains the records for
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, CFS receives a monthly fee at an annual
rate of $25.00 per shareholder account from each of the Tax-Free Money Fund, the
California Tax-Free Money Fund, the Ohio Tax-Free Money Fund and the Florida
Tax-Free Money Fund and $21.00 per shareholder account from each of the Tax-Free
Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free
Fund, subject to a $1,000 minimum monthly fee for each Fund, or for each class
of shares of a Fund, as applicable. In addition, each Fund pays out-of-pocket
expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and CFS,
CFS calculates the daily net asset value per share and maintains the financial
books and records of each Fund. For these services, CFS receives a monthly fee,
based on current net assets, of $2,500 per month from each of the Tax-Free Money
Fund, the California Tax-Free Money Fund and the Kentucky Tax-Free Fund, $6,000
per month from the Ohio Tax-Free Money Fund and $4,000 per month from each of
the Florida Tax-Free Money Fund, the Tax-Free Intermediate Term Fund and the
Ohio Insured Tax-Free Fund. In addition, each Fund is subject to an additional
charge of 0.001% of its respective average daily net assets in excess of $300
million, and each Fund pays certain out-of-pocket expenses incurred by CFS in
obtaining valuations of such Fund's portfolio securities.
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as exclusive
agent for distribution of the Funds' shares. Under the terms of the Underwriting
Agreement between the Trust and the Adviser, the Adviser earned $3,650, $8,177
and $5,781 from underwriting and broker commissions on the sale of shares of the
Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the Kentucky
Tax-Free Fund, respectively, during the periods ended June 30, 1998. In
addition, the Adviser collected $6,430 and $5,587 of contingent deferred sales
loads on the redemption of Class C shares of the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund, respectively.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of each
Fund having one class of shares and Class A shares of each Fund having two
classes of shares may directly incur or reimburse the Adviser for expenses
related to the distribution and promotion of shares. The annual limitation for
payment of such expenses under the Class A Plan is 0.25% of average daily net
assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
may directly incur or reimburse the Adviser for expenses related to the
distribution and promotion of shares. The annual limitation for payment of such
expenses under the Class C Plan is 1% of average daily net assets attributable
to Class C shares.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
CUSTODIAN AGREEMENTS
The Fifth Third Bank, which serves as the custodian for each Fund except for the
Florida Tax-Free Money Fund, was a significant shareholder of record of the Ohio
Tax-Free Money Fund as of June 30, 1998. Under the terms of its Custodian
Agreement, The Fifth Third Bank receives from each such Fund an asset-based fee
plus transaction charges for each security transaction entered into by the
Funds. Huntington Trust Company, N.A. (Huntington), which serves as the
custodian for the Florida Tax-Free Money Fund, was a significant shareholder of
record of such Fund as of June 30, 1998. Under the terms of its Custodian
Agreement, Huntington receives from the Fund an asset-based fee.
PRIOR AFFILIATE AGREEMENTS
Prior to August 30, 1997, the investment adviser of the Kentucky Tax-Free Fund
was Trans Financial Bank, N.A.; Forum Financial Corp. served as the transfer
agent and dividend disbursing agent and performed portfolio accounting services;
Forum Financial Services, Inc. acted as distributor of the Fund's shares; and
Forum Administrative Services, LLC supervised the administration of all aspects
of the Fund's operations. Contractual amounts paid by the Fund for the
performance of these services are reflected in the Fund's Statement of
Operations for the year ended August 31, 1997. As of June 30, 1998, Trans
Financial Bank, N.A. was a significant shareholder of record of the Kentucky
Tax-Free Fund.
<PAGE>
5. Capital Share Transactions
Capital share transactions for the Tax-Free Money Fund, the California Tax-Free
Money Fund, the Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund are
identical to the dollar value of those transactions as shown in the Statements
of Changes in Net Assets. Proceeds and payments on capital shares as shown in
the Statements of Changes in Net Assets for the Tax-Free Intermediate Term Fund,
the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free Fund are the result of
the following capital share transactions for the periods shown:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Tax-Free Intermediate Ohio Insured
Term Fund Tax-Free Fund
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .................................... 1,116,388 1,150,995 11,401,093 14,158,992
Shares issued in reinvestment of
distributions to shareholders ............... 180,589 209,803 236,258 233,941
Shares redeemed ................................ (1,853,155) (2,285,966) (11,832,144) (14,943,520)
----------- ----------- ----------- -----------
Net decrease in shares outstanding ............. (556,178) (925,168) (194,793) ( 550,587 )
Shares outstanding, beginning of year .......... 5,313,679 6,238,847 5,794,738 6,345,325
----------- ----------- ----------- -----------
Shares outstanding, end of year ................ 4,757,501 5,313,679 5,599,945 5,794,738
=========== =========== =========== ===========
CLASS C
Shares sold .................................... 160,180 168,900 206,187 135,167
Shares issued in reinvestment of
distributions to shareholders ............... 15,574 17,517 16,990 13,108
Shares redeemed ................................ (217,791) (200,429) ( 181,289 ) ( 100,548 )
----------- ----------- ----------- -----------
Net increase (decrease) in shares outstanding .. (42,037) (14,012) 41,888 47,727
Shares outstanding, beginning of year .......... 468,857 482,869 379,664 331,937
----------- ----------- ----------- -----------
Shares outstanding, end of year ................ 426,820 468,857 421,552 379,664
=========== =========== =========== ===========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Kentucky Tax-Free Fund
Ten Months Year Period
Ended Ended Ended
June 30, Aug. 31, Aug. 31,
1998 1997 1996(A)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares sold .................................. 43,967 127,642 2,814,888
Shares issued in reinvestment of distributions
to shareholders ............................ 15,102 29,744 57,538
Shares redeemed .............................. (181,304) ( 909,256 ) (1,297,814)
--------- --------- ---------
Net increase (decrease) in shares outstanding (122,235) ( 751,870 ) 1,574,612
Shares outstanding, beginning of period ...... 822,742 1,574,612 --
--------- --------- ---------
Shares outstanding, end of period ............ 700,507 822,742 1,574,612
========= ========= =========
</TABLE>
(A) Represents the period from the commencement of operations (September 27,
1995) through August 31, 1996.
6. Portfolio Composition
As of June 30, 1998, the Ohio Tax-Free Money Fund and the Ohio Insured Tax-Free
Fund were invested exclusively in debt obligations issued by the State of Ohio
and its political subdivisions, agencies, authorities and instrumentalities and
by other issuers the interest from which is exempt from Ohio personal income
tax. The California Tax-Free Money Fund was invested exclusively in debt
obligations issued by the State of California and its political subdivisions,
agencies, authorities and instrumentalities and by other issuers the interest
from which is exempt from California income tax. The Florida Tax-Free Money Fund
was 65.9% 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. The Kentucky Tax-Free Fund was invested exclusively in debt
obligations issued by the State of Kentucky and its political subdivisions,
agencies, authorities and instrumentalities and by other issuers the interest
from which is exempt from Kentucky income tax. As of June 30, 1998, 22.8% of the
portfolio securities of the Tax-Free Money Fund were concentrated in the State
of Ohio, 12.9% in the State of Kentucky and 10.0% in the State of Texas. For
information regarding portfolio composition by state for the Tax-Free
Intermediate Term Fund, see the Fund's Portfolio of Investments.
The Ohio Insured Tax-Free Fund and the Kentucky 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, 1998, the
Kentucky Tax-Free Fund had concentrations of investments (10% or greater) in two
issuers which collectively totaled 23.2%. No other Funds had concentrations of
investments in any one issuer.
The Tax-Free Money Fund, the California Tax-Free Money Fund, the Ohio Tax-Free
Money Fund and the Florida Tax-Free Money Fund each invest in municipal
securities maturing in 13 months or less and having a short-term rating in one
of the top two ratings categories by at least two nationally recognized
statistical rating agencies (or by one such agency if a security is rated by
only that agency) or, if unrated, are determined by the Adviser, under the
supervision of the Board of Trustees, to be of comparable quality.
As of June 30, 1998, 42.1% 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], 28.2% were rated
AA/Aa, 26.3% were rated A/A and 3.4% were not rated. For the Kentucky Tax-Free
Fund's portfolio securities, 41.0% were rated AAA/Aaa, 10.2% were rated AA/Aa,
20.4% were rated A/A, and 25.7% were rated BBB/Baa, and 2.7% were not rated.
As of June 30, 1998, 92.9% of the Ohio Insured Tax-Free Fund's long-term
portfolio securities were either (1) insured by an insurance policy obtained
from a recognized insurer which carries a rating of AAA by S&P or Aaa by
Moody's, (2) guaranteed as to the payment of interest and principal by an agency
or instrumentality of the U.S. Government or (3) secured as to the payment of
interest and principal by an escrow account consisting of obligations of the
U.S. Government. Three private insurers individually insure more than 10% of the
Ohio Insured Tax-Free Fund's portfolio securities and collectively insure 72.3%
of its portfolio securities.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
The concentration of investments for each Fund as of June 30, 1998, classified
by revenue source, was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
California Ohio Florida Tax-Free Ohio
Tax-Free Tax-Free Tax-Free Tax-Free Intermediate Insured Kentucky
Money Money Money Money Term Tax-Free Tax-Free
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
General Obligations............................ 12.5% 14.7% 28.5% 14.5% 20.8% 42.9% --
Revenue Bonds:
Industrial Development/Pollution Control..... 38.1% 31.7% 24.2% 12.4% 8.2% 4.5% 10.7%
Hospital/Health Care......................... 15.9% 4.6% 27.4% 29.0% 12.7% 20.6% 10.6%
Housing/Mortgage............................. 9.3% 5.7% 2.8% 15.6% 11.5% 5.0% 7.1%
Utilities.................................... 6.9% 21.3% 3.4% 5.2% 4.2% 14.4% 7.6%
Education.................................... 6.3% 4.7% 4.5% 8.4% 21.2% 4.3% 11.0%
Transportation............................... 4.6% 2.3% -- 1.3% 6.9% 2.8% 15.7%
Public Facilities............................ 1.4% 1.5% 3.5% 0.2% 1.8% 1.7% 19.2%
Economic Development......................... 5.0% 4.8% 3.5% 5.6% 3.1% -- 12.6%
Leases....................................... -- 4.0% -- 0.5% 2.9% -- 5.5%
Special Tax.................................. -- 1.3% 0.3% 0.5% 3.7% 2.7% --
Miscellaneous................................ -- 3.4% 1.9% 6.8% 3.0% 1.1% --
------- ------- ------- ------- ------ ------ -------
Total ......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= ====== ====== =======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
7. Agreement and Plan of Reorganization
The Kentucky Tax-Free Fund was originally organized as a series of Trans Adviser
Funds, Inc. (Trans Adviser), an open-end management investment company
incorporated under the laws of the State of Maryland. Pursuant to an Agreement
and Plan of Reorganization dated May 31, 1997, the Fund, on August 29, 1997,
succeeded to the assets and liabilities of a series of Trans Adviser with the
same name (the Predecessor Fund). The investment objectives, policies and
restrictions of the Fund and its Predecessor Fund are substantially identical.
For federal income tax purposes, the reorganization of the Kentucky Tax-Free
Fund qualifies as a tax-free reorganization with no tax consequences to the
Fund, its Predecessor Fund or their shareholders. In connection with the
reorganization, the fiscal year-end of the Fund, subsequent to August 31, 1997,
has been changed from August 31 to June 30.
8. Federal Tax Information for Shareholders (Unaudited)
In accordance with federal tax requirements, each Fund designates its respective
dividends paid from net investment income during the periods ended June 30, 1998
as "exempt-interest dividends". On November 28, 1997, the Ohio Insured Tax-Free
Fund paid a short-term capital gain distribution of $0.0240 per share and a
long-term capital gain distribution of $0.0550, of which $0.0253 was designated
as 28% rate gains. As required by federal regulations, shareholders will receive
notification of their portion of a Fund's taxable capital gain distributions, if
any, paid during the 1998 calendar year early in 1999.
<PAGE>
<TABLE>
TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 21.8% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 750,000 Goodman, WI, Sanitation Dist. No. 1 Sys. Rev. BANS.......... 4.100% 12/01/1998 $ 750,000
500,000 Pima Co., AZ, USD No.1 (Tucson), Prerefunded @ 102.......... 6.750 07/01/1998 510,000
200,000 Arizona St. Highway Trans. Rev., Ser. A..................... 5.700 07/01/1998 200,000
635,000 Los Alamos Co., NM, Income Utility Rev., Ser. A............. 4.800 07/01/1998 635,000
110,000 University of New Mexico, Valencia Co. Branch Comm.
College, GO................................................ 4.500 08/01/1998 110,061
100,000 Ohio St., GO................................................ 3.850 08/01/1998 100,000
500,000 Mesquite, TX, ISD GO, Ser. A................................ 7.250 08/15/1998 502,014
130,000 New York St. Medical Care Fac. Rev., Escrowed to Maturity... 7.250 08/15/1998 130,538
370,000 Charlotte, NC, COP, Ser. D (Equipment Acq. Proj.)........... 4.050 09/01/1998 370,180
245,000 Pace, FL, Ppty. Fin. Auth. Util. Sys. Rev................... 4.000 09/01/1998 245,000
110,000 Philadelphia, PA, Parking Auth. Rev., Prerefunded @ 102..... 7.250 09/01/1998 112,825
250,000 Alabama St. Municipal Elec. Auth. Power Supply Rev., Ser. A. 6.000 09/01/1998 250,937
150,000 Ohio St. IDR, Ser. 1997 (Bomaine Corp. Proj.)............... 4.300 11/01/1998 150,000
110,000 Okanogan Co., WA, GO........................................ 3.800 12/01/1998 110,000
1,000,000 Merrimack Co., NH, TANS..................................... 3.780 12/30/1998 1,000,146
500,000 Chesterfield Co., VA, GO, Ser. B............................ 6.200 01/01/1999 505,765
600,000 Massillion, OH, GO BANS..................................... 4.550 01/15/1999 602,034
641,600 American Municipal Power Sys. Impt. BANS (Village
of Milan Proj.)............................................ 3.950 01/22/1999 641,600
435,000 Collin Co., TX, Comm. College Dist. Rev..................... 4.500 02/01/1999 436,684
459,000 St. Mary's, OH, CSD, GO BANS................................ 3.990 02/23/1999 459,399
315,000 Washoe Co., NV, GO, Prerefunded @ 102....................... 7.375 07/01/1999 331,275
- -------------- ------------
$ 8,110,600 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $8,153,458)................................. $ 8,153,458
------------
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 900,000 Eddyville, IA, IDR (Heartland Lysine, Inc.)................. 3.800% 07/01/1998 $ 900,000
1,500,000 Montgomery Co., OH, Ser. 1998A (Miami Valley Hosp.)......... 4.000 07/01/1998 1,500,000
500,000 Hopewell, VA, IDR (Hadson Power)............................ 4.050 07/01/1998 500,000
600,000 Idaho Health Fac. Auth. Rev., Ser. 1995 (St. Luke's Reg.
Medical Cntr.)............................................. 3.750 07/01/1998 600,000
1,550,000 Kentucky Econ. Dev. Fin. Auth. Rev., Ser. 1995 (Sisters
of Charity Nazareth)....................................... 3.800 07/01/1998 1,550,000
500,000 Arapahoe Co., CO, Rev., Ser. 1997 (Denver Jet Cntr. Proj.).. 3.900 07/01/1998 500,000
1,000,000 Ohio St. Air Qual. Dev. Auth. Rev., Ser. 1995A.............. 3.800 07/01/1998 1,000,000
1,000,000 Cuyahoga Co., OH, Hosp. Impt. Rev., Ser. 1997D (Cleveland
Clinic Foundation)......................................... 4.000 07/01/1998 1,000,000
700,000 Pinal, Co., AZ, IDA PCR (Magma Copper Co.).................. 3.900 07/01/1998 700,000
900,000 Pinellas Co., FL, Health Fac. Rev. (Pooled Hosp. Loan)...... 3.900 07/01/1998 900,000
1,800,000 Trinity River, TX, Ser. 1997 (ADP Proj.).................... 4.000 07/01/1998 1,800,000
1,000,000 Hamilton Co., OH, Health System Rev. (Franciscan Sisters)... 4.750 07/01/1998 1,000,000
1,000,000 Chicago, IL, O'Hare International Airport, Ser. B
(American Airlines)........................................ 4.000 07/01/1998 1,000,000
1,000,000 Illinois Dev. Fin. Auth. MFH Rev. (Cobbler Square Proj.).... 4.250 07/01/1998 1,000,000
400,000 Montebello, CA, COP, Ser. 1997 (Montebello Public
Impt. Corp.)............................................... 3.950 07/01/1998 400,000
200,000 Kentucky EDR, Hosp. Facs. Rev., Ser. D (Health Alliance).... 3.550 07/01/1998 200,000
330,000 Coppell, TX, IDR (Minyards Prop., Inc.)..................... 3.900 07/01/1998 330,000
335,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)................... 4.050 07/02/1998 335,000
70,000 St. Cloud, MN, Hsg. & Redev. Auth. Rev. (Coborn Realty Co.). 3.800 07/02/1998 70,000
1,000,000 District of Columbia MFH, Tyler House Trust COP,
Ser. 1995A................................................. 3.850 07/02/1998 1,000,000
675,000 Brooklyn Park, MN, IDR (Schmidt Proj.)...................... 3.800 07/02/1998 675,000
1,500,000 Athens-Clarke Co., GA, IDR (Nakanishi Corp. Proj.).......... 4.125 07/02/1998 1,500,000
<PAGE>
<CAPTION>
TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,200,000 Indiana St. Dev. Fin. Auth. Rev. (Lutheran H.S. Proj.)...... 3.700% 07/02/1998 $ 1,200,000
1,315,000 Mankato, MN, IDR, Ser. 1998 (Sacco Family Proj.)............ 3.950 07/02/1998 1,315,000
525,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)................... 3.800 07/02/1998 525,000
- -------------- ------------
$ 21,500,000 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
- --------------
(Amortized Cost $21,500,000)................................ $21,500,000
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 18.9% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 735,000 Buckeye Tax-Exempt Mtg. Bond Trust.......................... 4.050% 08/01/1998 $ 733,481
570,000 Fort Mitchell, KY, Indust. Bldg. Rev.
(Grandview/Hemmer Proj.)................................... 4.000 08/01/1998 570,000
605,000 Corpus Christi, TX, IDR (Tex-Air Investment Co. Proj.)...... 3.900 08/01/1998 605,000
290,000 Lansing, MI, EDR (LGH Office Bldg. Proj.)................... 3.700 08/15/1998 290,000
1,200,000 Owensboro, KY, IDR, Ser. 1985 (Dart Container).............. 3.750 09/01/1998 1,200,000
106,000 Citizens Federal Tax-Exempt Mtg. Bond Trust................. 3.850 09/01/1998 106,000
150,000 Cuyahoga Co., OH, IDR (Halle Office Bldg.).................. 4.015 10/01/1998 150,000
500,000 Santa Clara Co., CA, Hsg. Auth. Rev. (Orchard
Glen Apartments)........................................... 5.250 11/01/1998 500,000
180,000 Medina Co., OH, IDR (Nationwide One Proj.).................. 3.950 11/01/1998 179,948
1,000,000 Westmoreland Co., PA, IDR (White Cons Indust.).............. 4.010 12/01/1998 1,000,000
540,000 Henderson Co., KY, River Port Auth. IDR
(David Joseph Proj.)....................................... 3.700 01/01/1999 539,649
500,000 Colorado Health Fac. Auth. Rev., Ser. 1998A................. 3.700 01/15/1999 500,000
680,000 Lexington-Fayette Co., KY, Urban Govt. Rev.
(Providence Montessori).................................... 4.125 07/01/1999 680,000
- -------------- ------------
$ 7,056,000 TOTAL ADJUSTABLE RATE PUT BONDS
- --------------
(Amortized Cost $7,054,078)................................. $ 7,054,078
------------
$ 36,666,600 TOTAL INVESTMENT SECURITIES-- 98.2%
==============
(Amortized Cost $36,707,536)................................ $36,707,536
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.8% ............... 675,907
------------
NET ASSETS-- 100.0% ........................................ $37,383,443
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
CALIFORNIA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
<CAPTION>
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 37.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 150,000 Brawley, CA, Wastewater Treatment Fac. Rev., COP............ 3.800% 07/01/1998 $ 150,000
460,000 Shasta, CA, Joint Powers Fin. Auth. Landfill Rev.,
Ser. 1997A................................................. 3.850 07/01/1998 460,000
500,000 Los Angeles Co., CA, Transportation Sales Tax Rev., Ser. A.. 5.200 07/01/1998 500,000
160,000 Los Angeles Co., CA, Transportation Comm. Sales Tax
Rev., Ser. A............................................... 7.200 07/01/1998 163,200
110,000 San Mateo Co., CA, Joint Powers Fin. Auth. Lease Rev........ 3.700 07/15/1998 110,000
1,000,000 Santa Cruz Co., CA, Office of Educ. TRANS................... 4.500 07/30/1998 1,000,460
1,000,000 Butte Co., CA, Office of Educ. TRANS........................ 4.500 07/31/1998 1,000,487
430,000 Calaveras, CA, USD, GO...................................... 3.600 08/01/1998 430,000
100,000 San Jose Redev. Agcy., Tax Alloc. (Merged Area Proj.)....... 4.200 08/01/1998 100,032
250,000 Pasadena, CA, Comm. Dev., Tax Alloc. (Downtown
Redev. Proj.).............................................. 4.750 08/01/1998 250,185
1,000,000 South Coast Air Quality Mgmt. Dist. Bldg. Corp.,
CA, Rev., Prerefunded @ 102................................ 7.800 08/01/1998 1,024,803
500,000 California St. Dept. of Veteran Affairs, Home
Purchase Rev., Ser. A...................................... 8.300 08/01/1998 511,782
1,000,000 Oxnard, CA, School Dist. TRANS.............................. 4.500 08/13/1998 1,000,734
235,000 Northern CA, Power Agcy. Rev................................ 6.125 08/15/1998 235,657
200,000 Los Angeles Co., CA, Public Works Fin. Auth. Rev............ 4.000 09/01/1998 200,090
400,000 Modesto, CA, Irrigation Dist. Fin. Auth. Water Proj.
Rev., Ser. 1998D........................................... 4.250 09/01/1998 400,467
265,000 Montebello, CA, Comm. Redev. Agcy., Tax Alloc., Ser. A..... 4.500 09/01/1998 265,305
300,000 California St. GO........................................... 5.400 09/01/1998 300,766
1,200,000 Simi Valley, CA, Public Fin. Auth. Rev., Prerefunded @ 102.. 7.000 09/01/1998 1,230,193
635,000 California St. GO........................................... 4.700 10/01/1998 636,706
190,000 Virgin Islands, Public Fin. Auth. Rev., Ser. B.............. 6.900 10/01/1998 191,538
1,000,000 California St. GO Veterans Bonds, Ser. A-Q.................. 8.750 10/01/1998 1,012,074
205,000 California St. GO, Veterans Bonds, Ser. A-S................. 11.000 10/01/1998 208,631
215,000 Sacramento, CA, COP, Prerefunded @ 100...................... 6.500 11/01/1998 217,126
750,000 University of California, COP, UCLA Central
Chiller/Congeneration Fac. ................................ 10.750 11/01/1998 767,349
175,000 Rubidoux, CA, Community Service Dist. COP (Water Sys.
Impt. Proj.)............................................... 3.500 12/01/1998 174,834
100,000 California St. Dept. of Veteran Affairs, Home
Purchase Rev., Ser. B...................................... 3.850 12/01/1998 100,000
205,000 San Ramon, CA, Public Fin. Auth., Tax Alloc................. 3.600 02/01/1999 205,000
270,000 Big Bear Lake, CA, COP (Big Bear Lake Impt. Agcy.).......... 6.000 02/01/1999 273,226
500,000 Los Angeles, CA, Wastewater Sys. Rev., Ser. A,
Prerefunded @ 102.......................................... 7.000 02/01/1999 519,835
330,000 Los Angeles, CA, Wastewater Sys. Rev., Ser. A,
Prerefunded @ 102.......................................... 7.100 02/01/1999 342,715
285,000 Madera Co., CA, COP (Valley Childrens Hosp.)................ 3.600 03/15/1999 285,000
200,000 California Fin. Auth. Solid Waste Disposal Rev.,
Ser. 1998C (City Fibers, Inc.)............................. 4.000 04/01/1999 200,000
250,000 San Diego Co., CA, Regional Transportation Comm.
Sales Tax Rev., Ser. A..................................... 5.000 04/01/1999 252,366
100,000 San Diego, CA, Sewer Rev., Ser. A........................... 4.000 05/15/1999 100,125
100,000 California St. GO, Ser. B-J................................. 4.125 06/01/1999 100,118
160,000 California St. University Trust COP......................... 6.000 06/01/1999 163,139
255,000 Napa Valley, CA, USD, GO.................................... 7.000 08/01/1999 263,711
- -------------- ------------
$ 15,185,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS.........
- --------------
(Amortized Cost $15,347,653)................................ $15,347,653
------------
<PAGE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 56.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,000,000 California Higher Educ. Loan Auth. Student Loan Rev......... 3.500% 07/01/1998 $ 1,000,000
1,600,000 Vacaville, CA, IDA, IDR (Leggett & Platt, Inc.)............. 3.650 07/01/1998 1,600,000
1,500,000 Dinuba, CA, Fin. Auth. Rev., Ser. 1996A (Wastewater
Treatment Plant Proj.)..................................... 3.950 07/01/1998 1,500,000
400,000 Newport Beach, CA, Rev., Ser. C (Hoag Memorial Hosp.)....... 3.600 07/01/1998 400,000
1,400,000 San Rafael, CA, IDR, Ser. 1984 (Phoenix American, Inc.)..... 3.700 07/01/1998 1,400,000
2,900,000 Santa Paula, CA, Public Fin. Auth. Rev., Ser. 1996
(Water Sys. Acquisition Proj.)............................. 4.300 07/01/1998 2,900,000
1,500,000 Ontario, CA, Rev., Ser. A (Redev. Agcy. Hsg. Fin.).......... 4.250 07/01/1998 1,500,000
600,000 Montebello, CA, COP, Ser. 1997 (Montebello Public
Impt. Corp.)............................................... 3.950 07/01/1998 600,000
1,200,000 Newport Beach, CA, Rev., Ser. A (Hoag Memorial Hosp.)....... 3.600 07/01/1998 1,200,000
1,000,000 San Bernardino Co., CA, Capital Impt.
Refinancing Proj. Rev. .................................... 3.900 07/02/1998 1,000,000
1,150,000 Alameda Co., CA, IDR, Ser. A (Tool Family Partnership)...... 3.500 07/02/1998 1,150,000
1,300,000 San Bernardino Co., CA, COP................................. 3.600 07/02/1998 1,300,000
900,000 San Bernardino, CA, IDR (LaQuinta Motor Inns)............... 3.650 07/02/1998 900,000
1,500,000 Hanford, CA, Sewer Rev., Ser. A............................. 3.900 07/02/1998 1,500,000
2,000,000 Alameda Co., CA, IDR (Dicon Fiberoptics, Inc., Proj. A)..... 3.500 07/02/1998 2,000,000
3,200,000 California PCR Fin. Auth., Ser. 1983 (Southdown, Inc.)...... 3.800 07/15/1998 3,200,000
- -------------- ------------
$ 23,150,000 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
- --------------
(Amortized Cost $23,150,000)................................ $23,150,000
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 2.9% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,200,000 Huntington Park, CA, Redev. Agcy. Rev. (Huntington
Park Personal Storage II).................................. 3.800% 08/01/1998 $ 1,200,000
- -------------- ------------
(Amortized Cost $1,200,000)
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 2.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,000,000 San Diego, CA, IDR (SDG&E).................................. 3.550% 07/14/1998 $ 1,000,000
- -------------- ------------
(Amortized Cost $1,000,000)
$ 40,535,000 TOTAL INVESTMENT SECURITIES-- 99.2%
==============
(Amortized Cost $40,697,653)................................ $40,697,653
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.8% ............... 315,179
------------
NET ASSETS-- 100.0% ........................................ $41,012,832
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
OHIO TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 33.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 500,000 Ohio St. Higher Educ. Fac. Comm. Rev.
(Western Reserve Univ.).................................... 4.750% 07/01/1998 $ 500,000
925,000 Seneca Co., OH, Human Fac. GO BANS.......................... 4.120 07/09/1998 925,054
700,000 Marysville, OH, Road Realignment GO BANS.................... 4.060 07/15/1998 700,069
2,000,000 Plain Township, OH, Fire Station GO BANS.................... 4.330 07/15/1998 2,000,438
893,000 Reynoldsburg City, OH, Cap. Fac. GO BANS, Ser. 1998......... 4.150 07/15/1998 893,135
1,000,000 Springboro City, OH, Water Sys. Impt. GO BANS, Ser. 1998.... 4.050 07/28/1998 1,000,219
2,226,000 Wood Co., OH, Sheriff's Dept. Impt. GO BANS, Ser. 1997...... 4.250 07/31/1998 2,226,615
1,000,000 Euclid City, OH, Various Purpose GO BANS.................... 4.120 07/31/1998 1,000,134
2,000,000 Ohio St. GO................................................. 3.850 08/01/1998 2,000,073
250,000 Ohio St. GO................................................. 4.000 08/01/1998 250,054
1,000,000 Ohio St. GO................................................. 5.500 08/01/1998 1,001,476
270,000 Ohio St., Infrastructure GO................................. 3.800 08/01/1998 270,014
1,000,000 Pickerington, OH, LSD School Impt. GO BANS, Ser. 1998....... 4.070 08/03/1998 1,000,393
1,400,000 Wadsworth, OH, CSD School Impt. GO BANS, Ser. 1998.......... 4.230 08/04/1998 1,400,554
1,000,000 Wadsworth, OH, CSD School Impt. GO BANS..................... 4.375 08/04/1998 1,000,431
1,060,000 Mason-Deerfield Joint Fire Dist. GO BANS, Ser. 1997......... 4.260 08/05/1998 1,060,254
2,440,000 Ottawa Co., OH, Regional Water Sys. Impt. GO BANS........... 4.125 08/06/1998 2,440,578
1,055,000 Marysville, OH, Downtown Sidewalk GO BANS................... 4.220 09/03/1998 1,055,481
207,000 Plain, OH, LSD School Impt. GO BANS......................... 4.310 09/03/1998 207,067
890,000 Marysville, OH, Various Purpose GO BANS..................... 4.160 09/03/1998 890,390
1,000,000 Wilmington, OH, CSD School Impt. GO BANS.................... 4.300 09/08/1998 1,001,113
1,180,000 Loveland, OH, Real Estate Acq. GO BANS...................... 4.110 09/10/1998 1,180,464
250,000 Columbus, OH, GO, Ser. 2.................................... 4.350 09/15/1998 250,329
4,075,000 Mayfield Village, OH, Various Purpose GO BANS............... 4.125 09/29/1998 4,077,107
1,200,000 Rural Lorain, OH, Water Auth. Rev., Prerefunded @ 102....... 7.700 10/01/1998 1,235,107
900,000 Salem, OH, CSD Energy Conserv. GO BANS, Ser. 1997........... 4.130 10/01/1998 900,390
1,050,000 Ohio St. Bldg. Auth. Rev., Ser. C........................... 7.100 10/01/1998 1,058,367
2,000,000 Ontario, OH, LSD School Impt. GO BANS....................... 4.375 10/07/1998 2,003,340
1,000,000 Lake Co., OH, Various Purpose GO BANS....................... 4.070 10/08/1998 1,000,442
1,580,000 Streetsboro City, OH, Various Purpose GO BANS............... 4.150 10/09/1998 1,580,623
2,030,000 Jackson Co., OH, Correction Fac. GO BANS, Ser. 1997........ 4.330 10/15/1998 2,031,884
1,000,000 Hamilton, OH, Elec. Sys. Rev., Ser. B, Prerefunded @ 102.... 8.000 10/15/1998 1,032,011
500,000 Columbus, OH, Water Sys. Rev................................ 5.500 11/01/1998 502,929
1,000,000 Ohio St. Public Fac. Rev., Ser. II-B........................ 4.500 11/01/1998 1,002,597
500,000 Ohio St. Higher Educ. Fac. Comm. Rev. (Xavier
Univ. Proj.), Prerefunded @ 100............................ 7.200 11/01/1998 505,927
500,000 Lima, OH, River Corridor Land Acq. GO BANS.................. 4.250 11/10/1998 500,435
500,000 Cuyahoga Co., OH, Hosp. Rev. (Cleveland Clinic Foundation).. 5.250 11/15/1998 502,819
1,155,000 Marysville, OH, Various Purpose GO BANS..................... 4.220 11/19/1998 1,156,157
3,500,000 Hamilton, OH, Real Estate Acq. GO BANS...................... 4.850 11/19/1998 3,503,227
2,000,000 Summit Co., OH, Various Purpose GO BANS, Ser. 1997B......... 4.875 11/19/1998 2,007,996
1,425,000 Marion Co., OH, Correctional Fac. GO BANS................... 4.100 11/23/1998 1,426,195
1,190,500 Fort Recovery, OH, LSD School Construction GO BANS.......... 4.230 11/24/1998 1,192,721
600,000 Gahanna-Jefferson, OH, CSD GO BANS.......................... 4.500 12/01/1998 601,937
500,000 Kettering, OH, Recreation Center GO......................... 4.300 12/01/1998 501,421
1,580,000 Toledo, OH, Various Purpose GO, Ser. A...................... 3.850 12/01/1998 1,580,000
730,000 Toledo, OH, Various Purpose GO, Ser. B...................... 3.850 12/01/1998 730,293
1,135,000 Olentangy, OH, LSD School Impt. GO BANS..................... 3.900 12/01/1998 1,135,898
300,000 Adams Co., OH, Valley LSD School Impt. GO BANS.............. 4.550 12/01/1998 300,968
640,000 Muskingum Co., OH, Brandywine Blvd. Extension GO BANS....... 4.350 12/02/1998 640,778
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 33.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,200,000 Muskingum Co., OH, Juvenile Detention GO BANS............... 4.100% 12/03/1998 $ 1,202,079
900,000 Hudson City, OH, Various Purpose GO BANS.................... 4.125 12/10/1998 900,826
2,900,000 Geauga Co., OH, Park Dist. GO............................... 4.080 12/10/1998 2,900,981
840,000 Maple Heights, OH, CSD GO TRANS, Ser. 1998.................. 4.000 12/11/1998 840,728
885,000 Painesville City, OH, Various Purpose GO BANS............... 4.140 12/16/1998 885,937
710,000 Wood Co., OH, Regional Water & Sewer GO BANS................ 4.100 01/22/1999 710,570
850,000 Marysville, OH, Various Purpose GO BANS..................... 4.070 01/28/1999 851,276
3,239,377 Toledo, OH, CSD Energy Conserv. GO BANS..................... 4.000 01/29/1999 3,242,999
600,000 North Ridgeville City, OH, Waterworks Sys. Impt. GO BANS.... 4.200 02/03/1999 600,857
1,190,000 Marion Co., OH, Human Services Bldg. Impt. GO BANS.......... 4.100 02/10/1999 1,192,108
1,200,000 South Euclid-Lyndhurst, OH, CSD Energy Conserv. GO.......... 3.980 02/11/1999 1,201,636
1,000,000 Mason, OH, CSD GO BANS, Ser. 1998A.......................... 4.020 02/18/1999 1,002,575
2,000,000 Van Wert Co., OH, Jail Construction GO BANS................. 3.930 02/18/1999 2,001,589
950,000 Ottawa Co., OH, Port Auth. Fac. GO BANS.................... 3.980 02/23/1999 951,662
1,130,000 Akron, OH, Waterworks Rev................................... 3.650 03/01/1999 1,130,000
500,000 Ohio St. Bldg. Auth. Rev., Ser. A........................... 7.150 03/01/1999 511,060
1,050,000 Salem, OH, CSD School Impt. GO BANS, Ser. 1998.............. 3.900 03/04/1999 1,051,362
3,960,000 American Municipal Power, OH, Rev. BANS (City of
Wadsworth Proj.)........................................... 3.850 03/17/1999 3,960,000
300,000 New Knoxville, OH, LSD School Impt. GO BANS................. 4.070 03/25/1999 300,463
1,800,000 American Municipal Power, OH, Rev. BANS (Lodi Village Proj.) 3.875 03/25/1999 1,800,000
1,266,000 Crestline Village, OH, Capital Facilities GO BANS, Ser. 1998 4.250 04/07/1999 1,267,865
900,000 Allen Co., OH, Bath Township Ditch GO BANS.................. 4.100 04/13/1999 902,037
3,300,000 Hebron Village, OH, Sanitary Sewer Sys., Ser. 1998.......... 4.580 04/15/1999 3,314,503
1,000,000 Ohio St. Pub. Fac., Higher Educ. Rev., Ser. II-A............ 4.750 05/01/1999 1,008,499
1,250,000 Marysville, OH, Various Purpose GO BANS..................... 4.160 05/06/1999 1,252,639
1,150,000 Ross Co., OH, Bldg. Acq. GO BANS............................ 4.000 05/19/1999 1,150,000
2,000,000 Summit Co., OH, Various Purpose GO BANS, Ser. 1998A......... 4.500 06/03/1999 2,013,462
1,000,000 Norwalk City, OH, Street Impt. GO BANS (Downtown
Rental Proj.).............................................. 4.000 06/10/1999 1,001,536
2,500,000 Hamilton City, OH, Various Purpose GO BANS, Ser. 1998....... 3.750 06/11/1999 2,500,000
2,400,000 Obetz Village, OH, Street Impt. GO BANS..................... 4.170 06/15/1999 2,403,736
1,870,000 St. Mary's City, OH, Sanitation Impt. GO BANS............... 4.200 06/15/1999 1,875,160
1,100,000 Van Wert City, OH, Sewer Sys. Impt. GO BANS................. 4.150 06/17/1999 1,103,054
410,000 Parma, OH, CSD School Impt. GO BANS......................... 3.850 06/24/1999 410,000
1,640,000 Clark Co., OH, Various Purpose GO BANS...................... 4.150 06/24/1999 1,645,420
2,100,000 American Municipal Power, OH, Rev. BANS
(Montpelier Village Proj.)................................. 3.950 07/15/1999 2,100,000
- -------------- ------------
$107,926,877 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $108,152,523)............................... $108,152,523
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 50,000 Franklin Co., OH, IDR (Columbus Dist.)...................... 3.700% 07/01/1998 $ 50,000
2,200,000 Cuyahoga Co., OH, Educ. Fac. Rev., Ser. 1998 (United
Cerebral Palsy Assoc.)..................................... 3.650 07/01/1998 2,200,000
4,100,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. 1997B
(Health Alliance of Greater Cincinnati)..................... 3.550 07/01/1998 4,100,000
3,500,000 Summit, OH, Civic Fac. Rev., Ser. 1997 (YMCA Proj.)......... 3.650 07/01/1998 3,500,000
965,000 Centerville, OH, Health Care Rev. (Bethany Memorial)........ 3.600 07/01/1998 965,000
3,000,000 Cuyahoga Co., OH, Hosp. Rev., Ser. 1997C
(Cleveland Clinic Foundation).............................. 3.550 07/01/1998 3,000,000
1,700,000 Lorain Co., OH, IDR (EMH Med. Ctr. Proj.)................... 3.600 07/01/1998 1,700,000
1,000,000 Butler Co., OH, IDR (Phillip Morris Co.).................... 3.600 07/01/1998 1,000,000
1,375,000 Greene Co., OH, Health Care Fac. Rev. (Green Oaks Proj.).... 3.650 07/01/1998 1,375,000
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 2,320,000 Erie Co., OH, IDR (Toft Dairy, Inc.)........................ 3.650% 07/01/1998 $ 2,320,000
750,000 Orrville, OH, Hosp. Fac. Rev., Ser. 1990 (Orrville Hosp.)... 3.650 07/01/1998 750,000
2,700,000 Hamilton Co., OH, Health Alliance, Ser. F................... 3.550 07/01/1998 2,700,000
3,000,000 Clinton Co., OH, Hosp. Rev. (Ohio Hospital Cap., Inc.)...... 3.650 07/01/1998 3,000,000
2,000,000 Montgomery Co., OH, EDR Rev. (Dayton Art Institute)......... 3.550 07/01/1998 2,000,000
500,000 Ohio St. Environmental Impt. Rev. (U.S. Steel Corp.)........ 3.850 07/01/1998 500,000
2,900,000 Muskingum Co., OH, IDR (Elder-Beerman)...................... 3.850 07/01/1998 2,900,000
4,045,000 Cuyahoga Co., OH, IDR (S & R Playhouse Realty).............. 3.900 07/01/1998 4,045,000
1,865,000 Franklin Co., OH, IDR (Capitol South)....................... 3.950 07/01/1998 1,865,000
2,200,000 Delaware Co., OH, IDR (Radiation Sterilizers, Inc.)......... 3.900 07/01/1998 2,200,000
1,000,000 Cuyahoga Co., OH, Hosp. Rev., Ser. 1997D (Cleveland
Clinic Foundation)......................................... 4.000 07/01/1998 1,000,000
375,000 Franklin Co., OH, IDR (BOA Ltd. Proj.)...................... 4.000 07/01/1998 375,000
1,000,000 Wyandot Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.)............ 3.600 07/01/1998 1,000,000
800,000 Cincinnati & Hamilton Co., OH, Port. Auth. EDR
(Kenwood Office Assoc. Proj.).............................. 3.700 07/01/1998 800,000
1,700,000 Montgomery Co., OH, Rev., Ser. 1998A (Miami Valley Hospital) 4.000 07/01/1998 1,700,000
14,500,000 Hamilton Co., OH, Health Sys. Rev. (Franciscan Sisters)..... 4.750 07/01/1998 14,500,000
5,600,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1995A
(Cincinnati Gas & Elect.).................................. 3.800 07/01/1998 5,600,000
900,000 Lucas Co., OH, EDR (Glendale Meadows)....................... 3.650 07/01/1998 900,000
905,000 Cuyahoga Co., OH, IDR (Pleasant Lake Assoc.)................ 3.650 07/01/1998 905,000
2,170,000 Summit Co., OH, IDR (Bowery Assoc.)......................... 3.600 07/01/1998 2,170,000
1,000,000 Meigs Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.).............. 3.600 07/01/1998 1,000,000
494,000 Lorain Co., OH, IDR, Ser. C (Kindercare).................... 3.700 07/01/1998 494,000
300,000 Medina, OH, IDR (Kindercare)................................ 3.700 07/01/1998 300,000
1,000,000 Delaware Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.)........... 3.600 07/01/1998 1,000,000
375,000 Hudson Village, OH, IDR, Ser. A (Kindercare)................ 3.700 07/01/1998 375,000
965,000 Huron Co., OH, Rev. (Norwalk Furniture Corp.)............... 3.650 07/01/1998 965,000
670,000 Montgomery Co., OH, Health Care Rev., Ser. A
(Dayton Area MRI Consortium)............................... 3.650 07/01/1998 670,000
200,000 Ohio St. Water Dev. Auth. Rev. (Timken Co. Proj.)........... 3.600 07/01/1998 200,000
775,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993A
(Hospice of the Western Reserve)............................ 3.650 07/01/1998 775,000
900,000 Cuyahoga Co., OH, Health Care Fac. Rev. (Benjamin
Rose Inst.)................................................ 3.600 07/01/1998 900,000
340,000 Montgomery Co., OH, IDR (Kindercare)........................ 3.700 07/01/1998 340,000
437,000 Stark Co., OH, IDR, Ser. D (Kindercare)..................... 3.700 07/01/1998 437,000
935,000 Lucas Co., OH, IDR, Ser. D (Kindercare)..................... 3.700 07/01/1998 935,000
564,000 Franklin Co., OH, IDR, Ser. D (Kindercare).................. 3.700 07/01/1998 564,000
2,160,000 Defiance Co., OH, IDR (Isaac Property Proj.)................ 3.650 07/01/1998 2,160,000
1,000,000 Morrow Co., OH, IDR (Field Container Corp.)................. 3.550 07/01/1998 1,000,000
1,000,000 Toledo, OH, City Serv., Special Assessment.................. 3.550 07/01/1998 1,000,000
287,000 Middletown, OH, IDR, Ser. A (Kindercare).................... 3.700 07/01/1998 287,000
1,300,000 Franklin Co., OH, IDR (Jacobsen Stores)..................... 3.950 07/01/1998 1,300,000
375,000 Wadsworth, OH, IDR (Kindercare)............................. 3.700 07/01/1998 375,000
1,750,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993B
(Hospice of the Western Reserve)........................... 3.650 07/01/1998 1,750,000
2,690,000 Hancock Co., OH, MFM Rev., Ser. A (Crystal Glen Apts.
Proj. Phase II)............................................ 3.600 07/02/1998 2,690,000
4,485,000 Trumbull Co., OH, Health Care Fac. Rev. (Shepherd of
the Valley)................................................ 3.600 07/02/1998 4,485,000
770,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.)....... 3.600 07/02/1998 770,000
770,000 Marion Co., OH, Hosp. Impt. Rev., Ser. 1992
(Pooled Lease Proj.)....................................... 3.600 07/02/1998 770,000
4,000,000 Montgomery Co., OH, Ltd. Oblig. Rev., Ser. 1996
(St. Vincent De Paul Proj.)................................ 3.750 07/02/1998 4,000,000
3,500,000 Lima, OH, Hosp. Fac. & Impt. Rev., Ser. 1996
(Lima Memorial Hosp.)...................................... 3.600 07/02/1998 3,500,000
1,610,000 Mahoning Co., OH, Health Care Fac. Rev.
(Ohio Heart Institute)..................................... 3.600 07/02/1998 1,610,000
3,200,000 Butler Co., OH, Hosp. Fac. Rev., Ser. 1998A
(Berkeley Square Retirement Cntr. Proj.).................... 3.650 07/02/1998 3,200,000
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 750,000 Pike Co., OH, EDR (Pleasant Hill)........................... 3.600% 07/02/1998 $ 750,000
450,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Visiting Nurse Svcs. Proj.)............................... 3.600 07/02/1998 450,000
1,252,900 Hamilton Co., OH, EDR, Ser. 1995 (Cincinnati Assoc.
for the Performing Arts)................................... 3.650 07/02/1998 1,252,900
350,000 Lucas Co., OH, Rev. (Sunshine Children's Home).............. 3.600 07/02/1998 350,000
3,700,000 Ashtabula Co., OH, Hosp. Fac. Rev., Ser. 1995
(Ashtabula Co. Med. Ctr. Proj.)............................ 3.600 07/02/1998 3,700,000
1,445,000 Village of Andover, OH, Health Care Rev., Ser. 1996
(D&M Realty Proj.)......................................... 3.600 07/02/1998 1,445,000
405,000 Lucas Co., OH, IDR (S.A. Associates Proj.).................. 3.700 07/02/1998 405,000
565,000 Summit Co., OH, IDR (Go-Jo Indust., Inc. Proj.)............. 3.600 07/02/1998 565,000
100,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.)....... 3.600 07/02/1998 100,000
1,180,000 Franklin Co., OH, IDR (Ohio Girl Scouts).................... 3.600 07/02/1998 1,180,000
1,560,000 Allen Co., OH, Health Care Fac. Rev. (Mennonite
Memorial Home Proj.)....................................... 3.500 07/02/1998 1,560,000
1,900,000 Summit Co., OH, Health Care Fac. Rev., Ser. 1997
(Evant, Inc. Proj.)........................................ 3.600 07/02/1998 1,900,000
2,000,000 Franklin Co., OH, IDR (Alco Standard Corp.)................. 3.650 07/02/1998 2,000,000
1,700,000 Clinton Co., OH, Hosp. Rev. (Clinton Memorial Hosp.)........ 3.600 07/02/1998 1,700,000
5,630,000 Sharonville, OH, IDR (Duke Realty Proj.).................... 3.600 07/02/1998 5,630,000
5,000,000 Hamilton Co., OH, Fac. Rev., Ser. 1997A (Episcopal
Retirement Homes).......................................... 3.650 07/02/1998 5,000,000
1,600,000 Warren Co., OH, IDR (Liquid Container Proj.)................ 3.600 07/02/1998 1,600,000
3,740,000 Montgomery Co., OH, Health Care Rev. (Comm.
Blood Ctr. Proj.).......................................... 3.600 07/02/1998 3,740,000
8,000,000 Franklin Co., OH, IDR (Berwick Steel)....................... 4.250 07/02/1998 8,000,000
1,000,000 Franklin Co., OH, Hosp. Rev. (U.S. Health Corp.)............ 3.550 07/02/1998 1,000,000
4,600,000 Ohio St. Higher Educ. Fac. Rev. (Pooled Fin.)............... 3.600 07/02/1998 4,600,000
400,000 Franklin Co., OH, IDR (Columbus College).................... 3.600 07/02/1998 400,000
4,800,000 Ohio St. EDR, Ser. 1983 (Court St. Ctr. Assoc. Ltd. Proj.).. 3.600 07/02/1998 4,800,000
900,000 Rickenbacker, OH, Port. Auth. Rev. (Rickenbacker
Holdings, Inc.)............................................ 3.600 07/02/1998 900,000
1,750,000 Westlake, OH, IDR (Nordson Co.)............................. 3.500 07/02/1998 1,750,000
5,000,000 Ohio St. Higher Educ. Fac. Comm. Rev. (Pooled Fin.)......... 3.600 07/02/1998 5,000,000
2,000,000 Cuyahoga Co., OH, IDR, Ser. 1989 (Motch Corp. Proj.)........ 3.750 07/02/1998 2,000,000
5,800,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. 1997A
(Children's Hosp. Med. Ctr................................. 3.600 07/02/1998 5,800,000
1,955,000 Mahoning Co., OH, Health Care Fac. Rev. (Copeland Oaks)..... 3.600 07/02/1998 1,955,000
1,975,000 Ashland Co., OH, Hosp. Fac. Rev., Ser. 1989
(Good Shepherd Home)....................................... 4.000 07/03/1998 1,975,000
600,000 Ohio St. Higher Educ. Fac. Rev., (John Carroll University).. 4.250 07/06/1998 600,000
4,250,000 Cincinnati & Hamilton Co., OH, Port. Auth. Rev.
(Kaiser Agric. Chemical Co.)............................... 3.350 07/07/1998 4,250,000
1,400,000 Hamilton Co., OH, IDR (ADP System).......................... 3.700 07/15/1998 1,400,000
- -------------- ------------
$184,729,900 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
- --------------
(Amortized Cost $184,729,900)............................... $184,729,900
------------
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 9.2% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 2,500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. A
(Duquesne Light)........................................... 3.950% 07/10/1998 $ 2,500,000
1,215,000 Hamilton, OH, IDR (Continental Commercial Ppty.)............ 3.850 08/01/1998 1,215,000
1,000,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. A
(Ohio Edison Proj.)........................................ 4.350 08/01/1998 1,000,371
884,000 Citizens Federal Tax-Exempt Mtg. Bond Trust................. 3.850 09/01/1998 884,000
2,520,000 Perry Co., OH, Nursing Fac. Rev., Ser. 1996
(New Lexington Health Corp. Proj.)......................... 4.000 09/01/1998 2,520,000
640,000 Riverside, OH, Econ. Dev. Rev. (Riverside Assoc. Ltd. Proj.) 3.800 09/01/1998 640,000
4,915,000 Cuyahoga Co., OH, IDR (Halle Office Building)............... 4.015 10/01/1998 4,915,000
165,000 Franklin Co., OH, IDR (Pan Western Life).................... 3.650 10/01/1998 165,000
1,210,000 Miami Valley Tax-Exempt Mtg. Bond Trust..................... 4.880 10/15/1998 1,210,000
1,410,000 Clermont Co., OH, EDR (John Q. Hammons Proj.)............... 3.800 11/01/1998 1,410,000
615,000 Franklin Co., OH, IDR (GSW Proj.)........................... 3.750 11/01/1998 615,000
3,125,000 Ohio St. HFA MFH (Lincoln Park)............................. 3.850 11/01/1998 3,125,000
3,570,000 Richland Co., OH, IDR (Mansfield Sq. Proj.)................. 3.850 11/15/1998 3,570,000
585,000 Cuyahoga Co., OH, Health Care Rev........................... 3.950 12/01/1998 585,000
2,290,000 Franklin Co., OH, IDR (Leveque & Assoc. Proj.).............. 3.800 12/01/1998 2,290,000
905,000 Scioto Co., OH, Health Care Rev. Bonds (Hillview Retirement) 3.800 12/01/1998 905,000
1,000,000 Gallia Co., OH, IDR (Jackson Pike Assoc.)................... 3.700 12/15/1998 1,000,000
1,085,000 Ohio Company Tax-Exempt Mtg. Bond Trust, Ser. 2............. 3.900 12/15/1998 1,084,776
- -------------- ------------
$ 29,634,000 TOTAL ADJUSTABLE RATE PUT BONDS
- --------------
(Amortized Cost $29,634,147)................................ $29,634,147
------------
$322,290,777 TOTAL INVESTMENT SECURITIES -- 100.6%
==============
(Amortized Cost $322,516,570)............................... $322,516,570
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.6)% ............. (1,934,059)
------------
NET ASSETS-- 100.0% ........................................ $320,582,511
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
FLORIDA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 33.9% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 250,000 Puerto Rico Elec. Power Auth. Rev., Ser. O.................. 6.300% 07/01/1998 $ 250,000
200,000 Florida School Board Assoc. Lease Rev. (Orange Co. Proj.)... 6.800 07/01/1998 200,000
140,000 Florida St. GO.............................................. 7.000 07/01/1998 140,000
100,000 Parker, AZ, Street & Highway Rev. Proj. 1997, Ser. A........ 9.000 07/01/1998 100,000
155,000 Florida St. GO, Prerefunded @ 102........................... 7.000 07/01/1998 158,100
1,150,000 Dade Co., FL, GO, Ser. 1.................................... 6.750 07/01/1998 1,150,000
100,000 Brevard Co., FL, School Dist. COP, Ser. A................... 5.110 07/01/1998 100,000
150,000 Florida St. Div. Board Fin. Rev. (Dept. of Natural Resources) 4.300 07/01/1998 150,000
500,000 Seattle, WA, GO, Prerefunded @ 100.......................... 7.200 07/01/1998 500,000
100,000 Broward Co., FL, School Board COP........................... 6.750 07/01/1998 102,812
335,000 Clay Co., FL, School Board Master Lease Program COP......... 4.200 07/01/1998 335,000
300,000 Westfield, IN, High School Bldg. Corp. Rev., Ser. 1998...... 3.600 07/05/1998 300,000
435,000 Lawrence Twp., IN, School Bldg. Corp. Rev................... 3.750 07/05/1998 435,000
385,000 East Chicago, IN, Multi-School Bldg. Rev., Ser. 1998........ 4.000 07/15/1998 385,020
280,000 Lakeland, NY, Central School Dist. GO....................... 6.000 07/15/1998 280,244
835,000 Miami-Dade Co., FL, School Boards COP, Ser. A............... 4.250 08/01/1998 835,084
100,000 Lee Co., FL, School Board COP, Ser. A....................... 4.750 08/01/1998 100,074
500,000 Palm Beach Co., FL, School Board COP, Ser. A................ 4.150 08/01/1998 500,138
150,000 Indian Trail, FL, Water Control Dist. Impt. Rev............. 4.100 08/01/1998 150,043
100,000 Dade Co., FL, School Dist. GO............................... 6.400 08/01/1998 100,206
500,000 Dade Co., FL, School Dist. GO............................... 6.000 08/01/1998 500,941
250,000 Dade Co., FL, School Board COP (G. Holmes Braddock
High School)............................................... 4.375 08/01/1998 250,097
500,000 Seminole Co., FL, School Dist. GO........................... 5.400 08/01/1998 500,672
325,000 Dallas, TX, Tax Increment Fin. Reinvest. Zone, Tax Alloc.... 5.600 08/15/1998 325,656
200,000 Indian River Co., FL, Water & Sewer Rev., Ser. B............ 4.400 09/01/1998 200,180
1,000,000 Yakima Co., WA, BANS........................................ 4.125 09/01/1998 1,000,588
500,000 Aurora, IL, MFH Rev., Ser. 1988 (Fox Valley)................ 7.750 09/01/1998 502,424
150,000 Miami, FL, Spec. Rev........................................ 4.500 09/01/1998 150,160
360,000 Port St. Lucie, FL, Sales Tax Rev........................... 3.500 09/01/1998 360,000
100,000 Hollywood, FL, Water & Sewer Rev............................ 6.000 10/01/1998 100,507
100,000 Broward Co., FL, Airport Sales Rev., Ser. C................. 4.100 10/01/1998 100,060
250,000 Dade Co., FL, Aviation Rev., Ser. A......................... 5.150 10/01/1998 250,827
150,000 Dade Co., FL, Seaport Rev................................... 4.000 10/01/1998 150,090
200,000 Tallahassee, FL, Municipal Elec. Rev., Ser. A............... 4.900 10/01/1998 200,414
250,000 Destin, FL, Capital Impt. Rev., Prerefunded @ 102........... 7.100 10/01/1998 260,127
100,000 Jacksonville, FL, Elec. Auth. Rev........................... 9.750 10/01/1998 101,478
600,000 Indiana St. Univ., IN, Student Fees Rev., Ser. H............ 3.900 10/01/1998 600,140
425,000 Lake Superior St. Univ., MI, Rev............................ 4.500 11/15/1998 426,172
230,000 Clinton Co., IN, Jail Bldg. Corp. Rev....................... 3.900 11/15/1998 230,000
1,339,000 South Bay, FL, Subordinate Water & Sewer Rev. BANS,
Ser. 1998.................................................. 4.350 12/01/1998 1,340,864
320,000 Virginia Beach, VA, Dev. Auth. Lease Rev., Social Svcs. Fac. 4.300 12/01/1998 320,915
230,000 Grand Co., CO, School Dist. East Grand #2................... 3.700 12/01/1998 230,000
300,000 Sycamore, OH, Comm. School Dist. School Impt. GO, Ser. 1998. 3.700 12/01/1998 300,000
2,000,000 Merrimack Co., NH, TANS..................................... 3.780 12/30/1998 2,000,291
185,000 Escambia Co., FL, Utilities Auth. Rev., Ser. 1998A.......... 3.600 01/01/1999 185,000
1,000,000 Florida St. Board of Educ. Cap. Outlay GO, Ser. A........... 4.500 01/01/1999 1,003,160
500,000 Texas Turnpike Auth. Rev. (N. Dallas Tollway),
Prerefunded @ 102.......................................... 7.250 01/01/1999 523,462
<PAGE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 33.9% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 300,000 West Palm Beach, FL, GO, Prerefunded @ 102.................. 6.000% 03/01/1999 $ 310,237
360,000 Dade Co., FL, School Board COP, Ser. A...................... 4.300 05/01/1999 361,394
2,500,000 Port St. Joe, FL, Cap. Impt. Rev. BANS, Ser. 1998........... 4.350 07/01/1999 2,507,700
- -------------- ------------
$ 21,489,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $21,565,277)................................ $21,565,277
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 62.6% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,900,000 Broward Co., FL, HFA MFH (Margate Investment Proj.)......... 3.600% 07/01/1998 $ 1,900,000
1,000,000 Eustis, FL, Multi-Purpose Rev............................... 3.600 07/01/1998 1,000,000
3,800,000 Pinellas Co., FL, Health Fac. Auth. Rev. (Pooled Hosp. Loan) 3.900 07/01/1998 3,800,000
500,000 Pinal Co., AZ, IDA PCR (Magma Copper Co.)................... 3.900 07/01/1998 500,000
1,000,000 Palm Beach Co., FL, Water & Sewer Rev....................... 4.450 07/01/1998 1,000,000
3,800,000 Kentucky Econ. Dev. Fin. Auth., Ser. 1995 (Sisters
of Charity Nazareth)....................................... 3.800 07/01/1998 3,800,000
2,600,000 Jacksonville, FL, Health Fac. Auth. Rev., Ser. 1996
(Genesis Rehab. Hosp.)..................................... 4.000 07/01/1998 2,600,000
1,000,000 Hillsborough Co., FL, IDA PCR (Tampa Elec.)................. 4.100 07/01/1998 1,000,000
1,500,000 Trinity River, TX, IDR, Ser. 1997 (ADP Proj.)............... 4.000 07/01/1998 1,500,000
2,000,000 Orange Co., FL, IDR, Ser. 1997 (Univ. of Central Florida
Foundation Proj.).......................................... 3.600 07/01/1998 2,000,000
1,000,000 St. Petersburg, FL, HFA Rev., Ser. 1997 (Menorah
Manor Project)............................................. 3.550 07/01/1998 1,000,000
1,305,000 Florida HFA MFH, Ser. EEE (Carlton Arms II Proj.)........... 3.650 07/01/1998 1,305,000
1,735,000 Illinois Dev. Fin. Auth., MFH Rev. (Cobbler Square Proj.)... 4.250 07/01/1998 1,735,000
300,000 Indiana HFA, Ser. 1991 (Capital Access Pool)................ 3.600 07/01/1998 300,000
1,000,000 Indiana Health Fac. Fin. Auth. Rev. (Capital Access Pool)... 3.600 07/01/1998 1,000,000
1,300,000 Manatee Co., FL, HFA MFH Rev. (Harbour Proj. B)............. 3.600 07/01/1998 1,300,000
2,000,000 Boca Raton, FL, IDR (Parking Garage)........................ 3.875 07/02/1998 2,000,000
3,500,000 Iowa Financing Auth. Rev. (Burlington Medical Center)....... 3.650 07/02/1998 3,500,000
1,750,000 Harvard, IL, Health Care Fac. Rev., Ser. 1998............... 3.550 07/02/1998 1,750,000
1,600,000 Plant City, FL, Hosp. Rev. (South Florida Baptist Hosp.).... 3.600 07/02/1998 1,600,000
1,500,000 Marion Co., FL, HFA (Summer Trace Apts.).................... 3.600 07/02/1998 1,500,000
1,500,000 Marion Co., FL, HFA (Paddock Place Proj.)................... 3.600 07/02/1998 1,500,000
1,300,000 Jacksonville, FL, Health Fac. Rev. (Faculty Practice Assoc.) 3.650 07/02/1998 1,300,000
875,000 Volusia Co., FL, HFA MFH Rev., Ser. H (Sun Pointe Apts.).... 3.450 07/07/1998 875,000
- -------------- ------------
$ 39,765,000 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
- --------------
(Amortized Cost $39,765,000)................................ $39,765,000
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 2.3% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,000,000 Putnam Co., FL, Dev. Auth. PCR, Ser. 1984D (Seminole
Elec. Coop.)............................................... 3.650% 12/15/1998 $ 1,000,000
450,000 Wheat Ridge, CO, IDR, Ser. 1984 (Pearse Electronics Proj.).. 4.180 06/01/1999 450,000
- -------------- ------------
$ 1,450,000 TOTAL ADJUSTABLE RATE PUT BONDS
- --------------
(Amortized Cost $1,450,000)................................. $ 1,450,000
------------
<PAGE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 8.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,500,000 St. Lucie Co., FL, Rev...................................... 3.650% 07/07/1998 $ 1,500,000
1,400,000 Orange Co., FL, Health Fac. Auth. Rev....................... 3.750 07/08/1998 1,400,000
2,500,000 Orange Co., FL, Health Fac. Auth. Rev....................... 3.600 07/09/1998 2,500,000
- -------------- ------------
$ 5,400,000 TOTAL COMMERCIAL PAPER
- --------------
(Amortized Cost $5,400,000)................................. $ 5,400,000
------------
$ 68,104,000 TOTAL INVESTMENT SECURITIES-- 107.3%
- --------------
(Amortized Cost $68,180,277)................................ $68,180,277
LIABILITIES IN EXCESS OF OTHER ASSETS-- (7.3)% ............. ( 4,653,581 )
------------
NET ASSETS-- 100.00% ....................................... $63,526,696
=============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
TAX-FREE INTERMEDIATE TERM FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
==============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
ARIZONA -- 2.7%
$ 400,000 Arizona Educ. Loan Mkt. Corp. Rev., Ser. A.................. 6.700% 03/01/2000 $ 415,496
600,000 Maricopa Co., AZ, School Dist. Rev., Ser. 1991C (Tempe Elem.) 8.000 07/01/2004 716,706
300,000 Tucson, AZ, Water Dist. Rev................................. 9.750 07/01/2010 439,422
------------
1,571,624
------------
CALIFORNIA -- 3.2%
600,000 Alameda Co., CA, IDR (Dicon Fiberoptics, Inc. Proj)......... 3.500 07/02/1998 600,000
460,000 Sacramento Co., CA, MFH ARPB (Fairway One Apts.)............ 5.875 02/01/2003 463,100
500,000 Santa Monica, CA, Redev. Agy. Lease Rev..................... 6.000 07/01/2003 540,230
250,000 California HFA Multi-Unit Rental Rev., Ser. B............... 6.500 08/01/2005 264,820
------------
1,868,150
------------
COLORADO -- 0.5%
300,000 Highland Ranch, CO, Metro Dist. GO, Ser. A.................. 5.000 12/01/2010 299,439
------------
FLORIDA -- 13.3%
500,000 Florida HFA MFH ARPB, Ser. 1978B (Hampton Lakes II Proj.)... 5.700 04/01/2001 505,910
200,000 Florida St. GO.............................................. 6.500 05/01/2004 202,836
1,000,000 Jacksonville, FL, Excise Tax Rev., Ser. B................... 5.400 10/01/2006 1,036,760
750,000 Hillsborough Co., FL, Solid Waste Rev....................... 5.500 10/01/2006 802,455
455,000 Pensacola, FL, Airport Rev., Ser. 1997B..................... 5.400 10/01/2007 484,261
1,000,000 Pasco Co., FL, HFA MFH Rev., Ser. 1997B (Cypress
Trail Apt. Proj.).......................................... 5.500 06/01/2008 1,041,070
1,345,000 Florida HFA MFA Sr. Lien, Ser. I-1.......................... 6.100 01/01/2009 1,399,109
1,000,000 Halifax Hosp. Medical Ctr., FL, Health Care Fac. Rev.,
Ser. 1998A................................................. 4.800 04/01/2010 985,630
365,000 Halifax Hosp. Medical Ctr., FL, Health Care Fac. Rev.,
Ser. 1998A................................................. 5.000 04/01/2011 363,609
455,000 Tampa, FL, Health Sys. Rev., Ser. A-1 (Catholic Health East) 5.250 11/15/2011 472,618
365,000 Halifax Hosp. Medical Ctr., FL, Health Care Fac. Rev.,
Ser. 1998A................................................. 5.000 04/01/2012 360,332
------------
7,654,590
------------
ILLINOIS -- 3.5%
1,000,000 Illinois HFA Rev. (Northwestern Medical Fac. Foundation).... 5.000 11/15/2012 995,890
1,000,000 Chicago, IL, Park Dist. GO, Ser. A.......................... 5.250 11/15/2012 1,024,050
------------
2,019,940
------------
INDIANA -- 8.7%
3,185,000 Purdue University, IN, COP, Prerefunded @ 102............... 6.250 07/01/2001 3,439,609
1,000,000 Indiana Bond Bank Special Prog. Rev., Ser. A-1.............. 6.650 01/01/2004 1,073,670
500,000 Indiana HFA Multi-Unit Mtg. Prog. Rev., Ser. 1992A.......... 6.600 01/01/2012 531,155
------------
5,044,434
------------
IOWA -- 2.1%
250,000 Iowa Student Loan Liquidity Corp. Rev....................... 6.400 07/01/2004 269,563
365,000 Iowa HFA Rev................................................ 6.500 07/01/2006 386,396
240,000 Iowa Student Loan Liquidity Corp. Rev....................... 6.600 07/01/2008 255,909
250,000 Cedar Rapids, IA, Hosp. Fac. Rev. (St. Luke's
Methodist Hosp.)........................................... 6.000 08/15/2009 273,125
------------
1,184,993
------------
KENTUCKY -- 3.1%
250,000 Kentucky EDR, Ser. 1995 (Sisters of Charity of Nazareth
Hlth. Sys.)................................................ 3.800 07/01/1998 250,000
675,000 Owensboro, KY, Elec. Light & Power Rev., Prerefunded @ 102.. 10.250 01/01/2000 749,453
750,000 Kentucky St. Turnpike Auth. EDR (Revitalization Proj.)...... 5.250 07/01/2005 791,760
------------
1,791,213
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
LOUISIANA -- 1.7%
$ 440,000 Louisiana Public Fac. Auth. Rev. (Medical Ctr. of Louisiana) 6.000% 10/15/2003 $ 469,528
500,000 West Ouachita Parish, LA, School Dist. GO, Ser. A........... 6.700 03/01/2006 542,330
------------
1,011,858
------------
MASSACHUSETTS -- 4.0%
750,000 Massachusetts St. Indust. Fin. Agy. ARPB
(Asahi/America, Inc.)...................................... 5.100 03/01/1999 756,495
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992B.......... 6.600 09/01/2002 542,500
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992A.......... 6.500 09/01/2002 540,610
450,000 Massachusetts St. Indust. Fin. Agy. Rev., Ser. 1997
(Hudner Assoc.)............................................ 5.000 01/01/2008 460,597
------------
2,300,202
------------
MICHIGAN -- 2.7%
1,000,000 Michigan St. Bldg. Auth. Rev., Ser. II...................... 6.400 10/01/2004 1,085,540
475,000 Battle Creek, MI, EDR Rev. (Kellogg Co Proj.)............... 5.125 02/01/2009 488,347
------------
1,573,887
------------
MISSISSIPPI -- 2.7%
500,000 Mississippi Higher Educ. Rev., Ser. B....................... 6.100 07/01/2001 521,525
1,000,000 Rankin Co., MS, School Dist. GO............................. 5.250 02/01/2010 1,052,320
------------
1,573,845
------------
NEBRASKA -- 1.1%
620,000 Nebraska Invest. Fin. Auth. Rev., Ser. 1989 (Foundation
for Educ. Fund), Escrowed to Maturity...................... 7.000 11/01/2009 635,984
------------
NEVADA -- 2.2%
1,000,000 Las Vegas, NV, GO, Sewer Impt. Rev., Prerefunded @ 102...... 6.500 04/01/2002 1,098,320
185,000 Washoe Co., NV, GO.......................................... 7.375 07/01/2009 195,160
------------
1,293,480
------------
NEW YORK -- 3.6%
500,000 New York Local Govt. Asst. Corp. Rev., Ser. 1991B........... 7.000 04/01/2002 545,325
1,300,000 New York St. Twy Auth. Local Hwy. & Impt. Rev............... 5.500 04/01/2006 1,390,337
------------
1,935,662
------------
NORTH CAROLINA -- 2.0%
1,065,000 Durham, NC, COP, Prerefunded @ 102.......................... 6.375 12/01/2001 1,163,289
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
OHIO -- 20.0%
$ 700,000 Franklin Co., OH, Rev., Ser. 1993 (American Chemical Soc.).. 5.500% 04/01/2000 $ 715,890
500,000 Franklin Co., OH, Rev. (Online Computer Library Ctr.)....... 5.500 04/15/2000 513,545
670,000 Fairfield, OH, IDR ARPB (Skyline Chili, Inc.)............... 5.000 09/01/2000 670,663
270,000 Warren Co., OH, Hosp. Fac. Rev. (Otterbein Home)............ 7.000 07/01/2003 296,209
1,105,000 Ohio St. EDR Ohio Enterprise Bond Fd. (Smith Steelite Proj.) 5.600 12/01/2003 1,165,554
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Episcopal
Retirement Home)........................................... 6.600 01/01/2004 541,675
360,000 Ohio St. EDR Ohio Enterprise Bond Fd. (Cheryl & Co.)........ 5.500 12/01/2004 382,957
1,000,000 Ohio St. Special Obligation Elem. & Secondary Educ.
Fac. Rev. ................................................. 5.000 12/01/2004 1,039,440
1,005,000 Franklin Co., OH, Health Care Fac. Rev. (First
Comm. Village)............................................. 6.000 06/01/2006 1,066,144
400,000 Painesville, OH, Elec. Rev.................................. 6.000 11/01/2006 429,964
530,000 Toledo, OH, GO.............................................. 6.000 12/01/2006 589,106
840,000 Kent State University General Receipts Rev.................. 6.000 05/01/2007 934,206
500,000 Ohio St. IDR, Ser. 1997 (Bomaine Corporation Proj.)......... 5.500 11/01/2007 506,090
749,067 Columbus, OH, Special Assessment GO......................... 5.050 04/15/2008 759,764
800,000 West Clermont, OH, LSD GO................................... 6.150 12/01/2008 884,040
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Bethesda Hosp.).......... 7.000 01/01/2009 507,545
500,000 Jefferson Co., OH, County Jail Construction GO.............. 4.900 12/01/2011 505,975
------------
11,508,767
------------
PENNSYLVANIA -- 4.6%
500,000 Pennsylvania St., IDR, Ser. A, Prerefunded @ 102............ 7.000 07/01/2001 550,625
500,000 Pennsylvania St., Higher Educ. Fac. Auth. Rev., Ser. A
(Univ. of Pennsylvania Health Serv.)........................ 6.000 01/01/2006 548,645
500,000 Pennsylvania Fin. Auth. Muni. Cap. Impt. Proj. Rev.......... 6.600 11/01/2009 553,895
1,000,000 Montgomery Co., PA, GO...................................... 4.600 10/15/2011 985,470
------------
2,638,635
------------
SOUTH CAROLINA -- 2.3%
525,000 South Carolina St. GO, Ser. A............................... 6.000 03/01/2004 560,238
725,000 Richland-Lexington, SC, Airport Dist. Rev., Ser. 1995
(Columbia Metro.).......................................... 6.000 01/01/2008 782,333
------------
1,342,571
------------
SOUTH DAKOTA -- 1.0%
510,000 South Dakota Student Loan Assistance Corp. Rev., Ser. A..... 7.600 08/01/2004 569,277
------------
TENNESSEE -- 2.0%
525,000 Southeast, TN, Tax-Exempt Mtg. Trust ARPB, Ser. 1990........ 7.250 04/01/2003 588,494
500,000 Nashville, TN, Metro. Airport Rev., Ser. C.................. 6.625 07/01/2007 543,590
------------
1,132,084
------------
TEXAS -- 7.2%
500,000 Houston, TX, Sr. Lien Rev., Ser. A (Hotel
Tax & Parking Fac.), Prerefunded @ 100..................... 7.000 07/01/2001 541,750
350,000 Univ. of Texas, TX, Rev., Ser. B, Prerefunded @102.......... 6.750 08/15/2001 384,174
1,000,000 Texas National Research Lab. Fin. Corp. Lease Rev.,
Prerefunded @ 102.......................................... 6.850 12/01/2001 1,107,390
50,000 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS, Prerefunded @ 102.......................... 7.950 05/15/2002 55,400
500,000 N. Texas Higher Educ. Student Loan Rev., Ser. 1991A......... 6.875 04/01/2002 529,395
450,000 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS............................................. 7.950 05/15/2008 493,232
321,908 Midland, TX, HFC Rev., Ser. A-2............................. 8.450 12/01/2011 350,063
650,000 Univ. of Texas, TX, Rev., Ser. B............................ 6.750 08/15/2013 708,240
------------
4,169,644
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
UTAH -- 1.5%
$ 870,000 Utah St. School Dist. Fin. Corp. Rev., Mandatory Redemption. 8.375% 02/15/2002 $ 872,958
------------
VIRGINIA -- 1.2%
700,000 Virginia St. Resource Auth. Sys. Rev........................ 4.875 05/01/2013 694,484
------------
WASHINGTON -- 2.5%
335,000 Washington St. GO, Ser. A, Prerefunded @ 100................ 6.400 03/01/2001 354,966
1,000,000 Washington St. Motor Vehicle Fuel Tax GO.................... 6.000 09/01/2004 1,074,550
------------
1,429,516
------------
WISCONSIN -- 0.7%
430,000 Wisconsin St. Health and Educ. Fac. Auth. Rev. (Agnesian
Healthcare, Inc.).......................................... 4.900 07/01/2011 426,977
- -------------- ------------
$ 54,465,975 TOTAL MUNICIPAL BONDS-- 100.1%
==============
(Amortized Cost $55,269,289)................................ $57,707,503
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.1)% ............. (64,516)
------------
NET ASSETS-- 100.0% ........................................ $57,642,987
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
OHIO INSURED TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
==============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 95.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
$ 200,000 Montgomery Co., OH, Hosp. Rev. (Sisters of Charity),
Prerefunded @ 102.......................................... 6.625% 05/15/2001 $ 216,486
250,000 Franklin Co., OH, IDR (1st Comm. Village Healthcare),
Crossover Refunded @ 101.5.................................. 10.125 08/01/2001 295,818
30,000 Clermont Co., OH, Hosp. Fac. Rev., Ser. A (Mercy
Health Sys.), Prerefunded @ 100............................ 7.500 09/01/2001 33,047
460,000 Westerville, Minerva Park & Blendon, OH, Joint Hosp.
Dist. Rev. (St. Ann's), Prerefunded @ 102.................. 7.100 09/15/2001 509,864
1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.),
Prerefunded @ 102.......................................... 6.730 09/25/2001 1,098,820
850,000 Alliance, OH, Waterworks Sys. Rev., Prerefunded @ 102....... 6.650 10/15/2001 933,682
500,000 Clermont Co., OH, Sewer Sys. Rev., Ser. 1991,
Prerefunded @ 102.......................................... 7.100 12/01/2001 557,450
5,000 Cleveland, OH, Waterworks Impt. Rev., Ser. 1992B (First Mtg.),
Prerefunded @ 102........................................... 6.500 01/01/2002 5,480
1,000,000 Kent St. Univ. General Receipts Rev., Prerefunded @ 102..... 6.500 05/01/2002 1,101,820
500,000 Franklin Co., OH, Hosp. Rev., Ser. 1991 (Mt. Carmel),
Prerefunded @ 102.......................................... 6.750 06/01/2002 555,455
500,000 Mahoning Co., OH, Hosp. Impt. Rev. (YHA, Inc.),
Prerefunded @ 100.......................................... 7.000 10/15/2002 555,450
675,000 Reynoldsburg, OH, CSD GO, Prerefunded @102.................. 6.550 12/01/2002 752,774
145,000 Ohio St. Bldg. Auth. Rev. (Columbus St. Proj.),
Prerefunded @ 100.......................................... 10.125 04/01/2003 172,775
35,000 Ohio St. Bldg. Auth. Rev. (Frank Lausch Proj.),
Prerefunded @ 100.......................................... 10.125 04/01/2003 41,704
230,000 Summit Co., OH, GO, Ser. A, Prerefunded @ 100............... 6.900 08/01/2003 258,589
290,000 Alliance, OH, CSD GO........................................ 6.900 12/01/2006 321,288
500,000 Mansfield, OH, Hosp. Impt. Rev. (Mansfield General)......... 6.700 12/01/2009 546,575
250,000 Ohio St. Water Dev. Auth. & Impt. Rev., Ser. I,
Escrowed to Maturity....................................... 7.000 12/01/2009 293,158
500,000 Ohio Capital Corp. MFH Rev., Ser. 1990A..................... 7.500 01/01/2010 527,555
500,000 Hamilton, OH, Water Sys. Mtg. Rev., Ser. 1991A.............. 6.400 10/15/2010 542,330
500,000 Butler Co., OH, Hosp. Fac. Rev. (Middletown Regional Hosp.). 6.750 11/15/2010 547,730
1,000,000 Canton, OH, Waterworks Sys. GO, Ser. 1995................... 5.750 12/01/2010 1,086,490
495,000 Cleveland, OH, Waterworks Impt Rev., Ser. F (First Mtg.).... 6.500 01/01/2011 537,580
255,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.),
Escrowed to Maturity....................................... 9.000 06/01/2011 326,576
450,000 Ohio HFA SFM Rev., Ser. 1991D............................... 7.000 09/01/2011 476,784
500,000 Greene Co., OH, Water Sys. Rev.............................. 6.850 12/01/2011 549,440
365,000 Bexley, OH, CSD GO.......................................... 7.125 12/01/2011 454,002
600,000 Westerville, OH, Water Sys. Impt. GO........................ 6.450 12/01/2011 660,828
530,000 Urbana, OH, Wastewater Impt. GO............................. 7.050 12/01/2011 595,482
500,000 Maple Heights, OH, Various Purpose GO....................... 7.000 12/01/2011 556,545
500,000 Cleveland, OH, GO, Ser. A................................... 6.375 07/01/2012 550,295
255,000 Summit Co., OH, GO, Ser. A.................................. 6.900 08/01/2012 278,740
500,000 Worthington, OH, CSD GO..................................... 6.375 12/01/2012 543,890
500,000 Strongsville, OH, CSD GO.................................... 5.375 12/01/2012 532,875
500,000 Summit Co., OH, Various Purpose GO.......................... 6.625 12/01/2012 545,895
95,000 Ohio St. Higher Educ. Fac. Comm. Rev........................ 7.250 12/01/2012 103,268
500,000 Warrensville Heights, OH, GO................................ 6.400 12/01/2012 548,270
1,095,000 West Clermont, OH, LSD GO................................... 6.900 12/01/2012 1,271,886
500,000 Brunswick, OH, CSD GO....................................... 6.900 12/01/2012 550,225
290,000 Ohio HFA SFM Rev., Ser. 1990D............................... 7.500 09/01/2013 305,126
1,000,000 Lorain Co., OH, Hosp. Rev. (Catholic Health Care Partners).. 5.625 09/01/2014 1,062,610
500,000 Ohio St. Bldg. Auth Rev., Ser. 1994A (Juvenille
Correctional Bldg.)........................................ 6.600 10/01/2014 564,495
460,000 Bedford Heights, OH, GO..................................... 6.500 12/01/2014 517,969
290,000 Garfield Heights, OH, Various Purpose GO.................... 6.300 12/01/2014 323,341
530,000 Ottawa Co., OH, GO.......................................... 5.750 12/01/2014 568,605
1,000,000 Portage Co., OH, GO......................................... 6.200 12/01/2014 1,109,450
290,000 Northwest, OH, LSD GO....................................... 7.050 12/01/2014 320,502
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 95.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.)....... 5.875% 09/01/2015 $ 1,059,510
600,000 Toledo-Lucas Co., OH, Convention Ctr. Rev................... 5.700 10/01/2015 641,568
400,000 Warren, OH, Waterworks Rev.................................. 5.500 11/01/2015 427,788
1,420,000 Stow, OH, Safety Center Const. GO........................... 6.150 12/01/2015 1,558,194
1,000,000 Tuscarawas Valley, OH, LSD GO, Ser. 1995.................... 6.600 12/01/2015 1,142,820
1,700,000 Massillon, OH, GO........................................... 6.625 12/01/2015 1,945,446
500,000 Ohio St. Higher Educ. Fac. Rev. (Univ. of Dayton)........... 6.750 12/01/2015 555,805
500,000 Delaware, OH, CSD GO........................................ 5.750 12/01/2015 530,425
1,000,000 Buckeye Valley, OH, LSD GO.................................. 6.850 12/01/2015 1,227,460
750,000 Columbus-Polaris Hsg. Corp. Ohio Mtg. Rev.,
Prerefunded @ 10........................................... 7.400 01/01/2016 870,795
500,000 Cleveland, OH, Waterworks Impt. Rev., Ser. F (First Mtg.)... 6.250 01/01/2016 538,990
500,000 Ohio St. Air Quality Dev. Rev., Ser. A (Ohio Edison)........ 7.450 03/01/2016 534,300
316,000 Ohio HFA SFM Rev., Ser. 1990F............................... 7.600 09/01/2016 334,581
846,000 Ohio HFA SFM Rev., Ser. 1991D............................... 7.050 09/01/2016 895,034
500,000 Celina, OH, Wastewater Sys. Mtg. Rev........................ 6.550 11/01/2016 539,565
1,000,000 Cleveland, OH, Public Power Sys. Rev., Ser. 1............... 7.000 11/15/2016 1,152,810
750,000 Montgomery Co., OH, Hosp. Rev. (Miami Valley Hosp.)......... 6.250 11/15/2016 815,145
590,000 Garfield Heights, OH, Various Purpose GO.................... 7.050 12/01/2016 639,513
1,000,000 Greater Cleveland, OH, Regional Transit Auth. GO............ 5.650 12/01/2016 1,055,150
815,000 Butler Co., OH, GO.......................................... 5.750 12/01/2016 869,263
2,250,000 North Olmsted, OH, GO....................................... 5.000 12/01/2016 2,236,522
1,260,000 Cleveland, OH, Airport Sys. Rev., Ser. C.................... 5.125 01/01/2017 1,260,542
800,000 Ohio St. Bldg. Auth. Rev. (Adult Correctional Bldg.)........ 5.600 04/01/2017 839,632
750,000 Butler Co., OH, Transportation Impt. Dist., Ser. A.......... 5.125 04/01/2017 748,688
1,000,000 Lorain Co., OH, Hosp. Rev................................... 5.625 09/01/2017 1,052,040
500,000 Toledo, OH, Sewer Sys. Rev.................................. 6.350 11/15/2017 558,565
1,000,000 Mason, OH, CSD GO........................................... 5.300 12/01/2017 1,025,040
755,000 Dayton, OH, GO.............................................. 5.000 12/01/2017 747,563
1,330,000 Ohio St. Univ. COP (Agriculture Tech. Inst.)................ 5.050 12/01/2017 1,307,643
1,000,000 Rocky River, OH, CSD GO, Ser. 1998.......................... 5.375 12/01/2017 1,051,310
1,000,000 Hamilton Co., OH, Sewer Sys. Impt. Rev., Ser. A............. 5.000 12/01/2017 990,150
1,400,000 Cuyahoga Co., OH, Util. Sys. Impt. Rev. (Medical
Center Proj.).............................................. 5.125 02/15/2018 1,390,494
1,660,000 Franklin Co., OH, Hosp. Rev. (Holy Cross Health Sys.)....... 5.000 06/01/2018 1,625,090
500,000 Ohio St. Air Quality Dev. Rev., Ser. 1990B (Ohio Edison).... 7.100 06/01/2018 534,625
1,265,000 Defiance, OH, Waterworks Sys. GO............................ 5.650 12/01/2018 1,339,369
1,000,000 Hamilton Co., OH, Sales Tax Rev. (Football Stadium Proj.)... 5.000 12/01/2018 984,870
1,000,000 S. Euclid-Lyndhurst, OH, CSD GO, Ser. 1996.................. 6.400 12/01/2018 1,135,060
500,000 Seneca Co., OH, GO (Jail Fac.).............................. 6.500 12/01/2018 550,835
500,000 Newark, OH, Water Sys. Impt. Rev............................ 6.000 12/01/2018 544,560
1,000,000 Little Miami, OH, LSD GO.................................... 5.000 12/01/2018 986,100
500,000 Crawford Co., OH, GO........................................ 6.750 12/01/2019 569,915
1,000,000 Butler Co., OH, Sales Tax Rev............................... 5.000 12/15/2019 981,910
360,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.)............. 6.250 01/15/2020 387,047
1,000,000 Alliance, OH, Waterworks Sys. Rev........................... 5.000 11/15/2020 977,550
1,210,000 Greene Co., OH, Sewer Sys. Rev.............................. 5.125 12/01/2020 1,205,789
1,000,000 Ohio St. Air Quality Dev. Rev., Ser. 1985A (Columbus
Southern Power)............................................ 6.375 12/01/2020 1,086,150
15,000 Puerto Rico, HFC SFM Rev., Ser. A........................... 7.800 10/15/2021 15,310
1,750,000 Cuyahoga Co., OH, Hosp. Rev., Ser. I (Walker Center)........ 5.000 01/01/2023 1,699,460
1,000,000 Ohio St. Air Quality Dev. Rev. (Penn Power)................. 6.450 05/01/2027 1,086,270
- -------------- ------------
$ 66,412,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $66,380,117)................................ $71,061,280
------------
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 1.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,100,000 Hamilton Co., OH, Waterworks Sys. Rev. (Health Alliance).... 3.550% 07/01/1998 $ 1,100,000
- -------------- ------------
(Amortized Cost $1,100,000)
$ 67,512,000 TOTAL INVESTMENT SECURITIES-- 96.9%
==============
(Amortized Cost $67,480,117)................................ $72,161,280
OTHER ASSETS IN EXCESS OF LIABILITIES-- 3.1% ............... 2,342,564
------------
NET ASSETS-- 100.0% ........................................ $74,503,844
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
KENTUCKY TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 101.0% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 90,000 Jefferson Co., KY, Capital Proj. Corp. Rev., Ser. A......... 0.000% 08/15/1999 $ 85,606
200,000 Owensboro, KY, Electric Light & Power Rev.,
Prerefunded @ 102.......................................... 10.250 01/01/2000 222,060
200,000 Mt. Sterling, KY, Lease Rev., Kentucky League of Cities..... 5.625 03/01/2003 210,398
615,000 Kentucky St. Turnpike Auth. Resource Recovery Road Rev.,
Escrowed to Maturity....................................... 6.125 07/01/2007 659,784
50,000 Lexington-Fayette Urban Co., KY, Airport Corp.,
First Mtg. Rev. ........................................... 7.750 04/01/2008 51,493
450,000 Ashland, KY, PCR (Ashland Oil, Inc.)........................ 7.375 07/01/2009 479,331
275,000 Kentucky St.Turnpike Auth. Resource Recovery Road Rev.,
Ser. A..................................................... 6.000 07/01/2009 275,508
370,000 Kentucky St. EDR, Ser. A (South Central Nursing)............ 6.000 07/01/2011 403,581
250,000 Kentucky Higher Educ. Student Loan Rev., Ser. D............. 7.100 12/01/2011 269,457
200,000 Univ. of Louisville, KY, Rev., Ser. H....................... 5.875 05/01/2012 213,974
400,000 Kentucky St. EDA Hosp. Sys. Rfdg. and Impt. Rev.
(Appalachian Reg. Healthcare).............................. 5.800 10/01/2012 416,508
725,000 Boone Co., KY, Public Properties Corp. Sewer Sys. Rev....... 5.150 12/01/2012 733,497
305,000 Fern Creek, KY, Fire Protection Dist. Hldg. Co. Rev.
(Fire Station No. 2)....................................... 5.750 01/15/2014 316,017
350,000 Richmond, KY, Water, Gas & Sewer Rev., Ser. A.............. 5.000 07/01/2015 349,206
350,000 Kentucky St. EDA, Ser. 1998A (Catholic Health).............. 5.000 12/01/2018 342,535
200,000 Kentucky Area Dev. Dist. Fin. Trust Lease Prog. Rev.
(Calloway Fire)............................................ 5.600 12/01/2018 202,856
295,000 Ashland, KY, Solid Waste Rev. (Ashland Oil, Inc. Proj.)..... 7.200 10/01/2020 321,674
350,000 Lexington-Fayette Co., KY, Proj. Rev.
(University of Kentucky Alumni Assn., Inc.)................ 5.000 11/01/2020 343,511
260,000 Greater Kentucky Hsg Assistance Corp. Mtg. Rev., Ser. A
(FHA, Osage, Sec. 8)....................................... 5.350 07/01/2022 260,081
270,000 Greater Kentucky Hsg Assistance Corp. Mtg. Rev., Ser. A..... 6.250 07/01/2022 275,759
350,000 Kenton Co., KY, Public Properties Corp. Rev., Ser. A........ 5.000 03/01/2023 339,360
400,000 Kentucky St. EDR Fin. Auth. Health Care Fac. Rev., Ser. 1998
(Christian Church Homes).................................... 5.375 11/15/2023 393,712
250,000 Louisville & Jefferson Co., KY, Regional Airport Auth.
Sys. Rev., Ser. A.......................................... 5.000 07/01/2025 241,033
- -------------- ------------
$ 7,205,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $7,263,205)................................. $ 7,406,941
------------
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 1.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 100,000 Kentucky St. EDR, Ser. 1995 (Sisters of Charity of
Nazareth Hlth. Sys.)....................................... 3.800% 07/01/1998 $ 100,000
- -------------- ------------
(Amortized Cost $100,000)
$ 7,305,000 TOTAL INVESTMENT SECURITIES-- 102.4%
==============
(Amortized Cost $7,363,205)................................. $ 7,506,941
LIABILITIES IN EXCESS OF OTHER ASSETS-- (2.4)% ............. ( 177,111 )
------------
NET ASSETS-- 100.0% ........................................ $ 7,329,830
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS
June 30, 1998
================================================================================
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, 1998.
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.
<TABLE>
<CAPTION>
PORTFOLIO ABBREVIATIONS:
<S> <C>
ARPB - Adjustable Rate Put Bonds ISD - Independent School District
BANS - Bond Anticipation Notes LSD - Local School District
COP - Certificates of Participation MFH - Multi-Family Housing
CSD - City School District MFM - Multi-Family Mortgage
EDA - Economic Development Authority PCR - Pollution Control Revenue
EDR - Economic Development Revenue RANS - Revenue Anticipation Notes
GO - General Obligation SFM - Single Family Mortgage
HFA - Housing Finance Authority/Agency TANS - Tax Anticipation Notes
HFC - Housing Finance Corporation TRANS - Tax Revenue Anticipation Notes
IDA - Industrial Development Authority/Agency USD - Unified School District
IDR - Industrial Development Revenue VRDN - Variable Rate Demand Notes
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
LOGO: ARTHUR ANDERSEN LLP
To the Shareholders and Board of Trustees of Countrywide Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments of Countrywide Tax-Free Trust (comprising,
respectively, the Tax-Free Money Fund, California Tax-Free Money Fund, Ohio
Tax-Free Money Fund, Florida Tax-Free Money Fund, Tax-Free Intermediate Term
Fund, Ohio Insured Tax-Free Fund and Kentucky Tax-Free Fund) (a Massachusetts
business trust) as of June 30, 1998, and (i) for the Tax-Free Money Fund,
California Tax-Free Money Fund, Ohio Tax-Free Money Fund, Florida Tax-Free Money
Fund, Tax-Free Intermediate Term Fund, Ohio Insured Tax-Free Fund the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years then ended and the financial highlights for
the periods indicated thereon and (ii) for the Kentucky Tax-Free Fund the
related statements of operations, statements of changes in net assets and the
financial highlights for the ten-month period ended June 30, 1998 and the year
ended August 31, 1997. 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. The financial statements and financial highlights for the Kentucky
Tax-Free Fund for the period ended August 31, 1996 were audited by other
auditors whose report dated October 18, 1996, expressed an unqualified opinion
on those financial statements and financial highlights.
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, 1998, 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 audited by us
and referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Countrywide Tax-Free
Trust as of June 30, 1998, the results of their operations for the year then
ended, the changes in their net assets for each of the two years then ended, and
the financial highlights for the periods referred above, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
August 7, 1998
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a)(i) Financial Statements included in Part A:
Financial Highlights
(ii) Financial Statements included in Part B:
Statements of Assets and Liabilities, June 30,
1998
Statements of Operations For the Year Ended
June 30, 1998; Statements of Operations for the
Periods Ended June 30, 1998 and August 31, 1997
Statements of Changes in Net Assets for the
Years Ended June 30, 1998 and 1997; Statements
of Changes in Net Assets for the Periods Ended
June 30, 1998 and August 31, 1997 and 1996
Financial Highlights
Notes to Financial Statements, June 30, 1998
Portfolio of Investments, June 30, 1998
(b) Exhibits:
(1)(i) Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 36, is hereby incorporated by
reference.
(ii) Amendment No. 1, dated May 25, 1994, to
Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 36, is hereby incorporated by
reference.
(iii) Amendment No. 2, dated July 31, 1996, to
Registrant's Restated Agreement and Declaration
of Trust, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 38, is
hereby incorporated by reference.
<PAGE>
(iv) Amendment No. 3, dated February 28, 1997, to
Registrant's Restated Agreement and Declaration
of Trust, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 40, is
hereby incorporated by reference.
(2) Registrant's Bylaws, as amended, which were
filed as an Exhibit to Registrant's Post-
Effective Amendment No. 38, are hereby
incorporated by reference.
(3) Voting Trust Agreements - None.
(4)(i) Specimen of Share Certificate for Tax-Free
Intermediate Term Fund (formerly Limited Term
Portfolio), which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8, is
hereby incorporated by reference.
(ii) Specimen of Share Certificate for Ohio Insured
Tax-Free Fund (formerly Ohio Long Term
Portfolio), which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8, is
hereby incorporated by reference.
(5)(i) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Tax-Free
Money Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 40, is
hereby incorporated by reference.
(ii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Tax-Free
Intermediate Term Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(iii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Ohio
Insured Tax-Free Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(iv) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Ohio
Tax-Free Money Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(v) Registrant's Management Agreement with
Countrywide Investments, Inc. for the California
Tax-Free Money Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
<PAGE>
(vi) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Florida
Tax-Free Money Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(vii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Kentucky
Tax-Free Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 41, is
hereby incorporated by reference.
(6)(i) Registrant's Underwriting Agreement with
Countrywide Investments, Inc., which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 40, is hereby incorporated by
reference.
(ii) Form of Underwriter's Dealer Agreement is filed
herewith.
(7) Bonus, Profit Sharing, Pension or Similar
Contracts for the benefit of Directors or
Officers - None.
(8)(i) Custody Agreement with The Fifth Third Bank, the
Custodian for the Tax-Free Money Fund, the
Tax-Free Intermediate Term Fund, the Ohio
Insured Tax-Free Fund, the Ohio Tax-Free Money
Fund, the California Tax-Free Money Fund and the
Kentucky Tax-Free Fund, which was filed as an
Exhibit to Registrant's Post-Effective Amendment
No. 38, is hereby incorporated by reference.
(ii) Custody Agreement with The Huntington Trust
Company, N.A., the Custodian for the Florida
Tax-Free Money Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 36, is hereby incorporated
by reference.
(9)(i) Transfer Agency, Dividend Disbursing,
Shareholder Service and Plan Agency Agreement
with Countrywide Fund Services, Inc., which was
filed as an Exhibit to Registrant's Post-
Effective Amendment No. 41, is hereby
incorporated by reference.
(ii) Accounting and Pricing Services Agreement with
Countrywide Fund Services, Inc., which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 42, is hereby incorporated by
reference.
(iii) Administration Agreement between Countrywide
Investments, Inc. and Countrywide Fund Services,
Inc., which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 42, is
hereby incorporated by reference.
(iv) License Agreement with Countrywide Credit
Industries, Inc., which was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 40,
is hereby incorporated by reference.
<PAGE>
(10) Opinion and Consent of Counsel, which was filed
as an Exhibit to Registrant's Pre-Effective
Amendment No. 1, is hereby incorporated by
reference.
(11) Consent of Independent Public Accountants is
filed herewith.
(12) Financial Statements Omitted from Item 23 -
None.
(13) Letter of Initial Stockholder, which was filed
as an Exhibit to Registrant's Pre-Effective
Amendment No. 1, is hereby incorporated by
reference.
(14) Copies of model plan used in the establishment
of any retirement plan - None.
(15)(i) Registrant's Plans of Distribution Pursuant to
Rule 12b-1, which were filed as Exhibits to
Registrant's Post-Effective Amendment No. 40,
are hereby incorporated by reference.
(ii) Form of Sales Agreement for Money Market Funds,
which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 41, is hereby
incorporated by reference.
(iii) Form of Administration Agreement with respect to
the administration of shareholder accounts,
which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 41, is hereby
incorporated by reference.
(16) Computations of each performance quotation
provided in response to Item 22, which were
filed as an Exhibit to Registrant's
Post-Effective Amendment No. 13, are hereby
incorporated by reference.
(17) (i) Financial Data Schedule for the Tax-Free Money
Fund is filed herewith.
(ii) Financial Data Schedule for the Tax-Free
Intermediate Term Fund Class A is filed
herewith.
(iii) Financial Data Schedule for the Tax-Free
Intermediate Term Fund Class C is filed
herewith.
(iv) Financial Data Schedule for the Ohio Insured
Tax-Free Fund Class A is filed herewith.
(v) Financial Data Schedule for the Ohio Insured
Tax-Free Fund Class C is filed herewith.
(vi) Financial Data Schedule for the Ohio Tax-Free
Money Fund Class A is filed herewith.
(vii) Financial Data Schedule for the Ohio Tax-Free
Money Fund Class B is filed herewith.
(viii) Financial Data Schedule for the California Tax-
Free Money Fund is filed herewith.
<PAGE>
(ix) Financial Data Schedule for the Florida Tax-Free
Money Fund Class A is filed herewith.
(x) Financial Data Schedule for the Florida Tax-
Free Money Fund Class B is filed herewith.
(xi) Financial Data Schedule for the Kentucky Tax-
Free Fund is filed herewith.
(18) Amended Rule 18f-3 Plan Adopted With Respect
to the Multiple Class Distribution System, which
was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 41, is hereby
incorporated by reference.
Item 25. Persons Controlled by or Under Common Control with
the Registrant.
- ------- --------------------------------------------------
None.
Item 26. Number of Holders of Securities (as of August 12,
1998)
- ------- --------------------------------------------------
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Tax-Free Money Fund 1,107
Tax-Free Intermediate Term Fund
Class A Shares 2,314
Class C Shares 343
Ohio Insured Tax-Free Fund
Class A Shares 1,403
Class C Shares 374
Ohio Tax-Free Money Fund
Class A Shares 2,747
Class B Shares 3
California Tax-Free Money Fund 796
Florida Tax-Free Money Fund
Class A Shares 101
Class B Shares 4
Kentucky Tax-Free Fund 170
<PAGE>
Item 27. Indemnification
- ------- ---------------
Article VI of the Registrant's Restated Agreement and
Declaration of Trust provides for indemnification of officers
and Trustees as follows:
Section 6.4 Indemnification of Trustees, Officers,
etc. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the
Trust's request as directors, officers or trustees of
another organization in which the Trust has any
interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which
such Covered Person may be or may have been involved
as a party or otherwise or with which such person may
be or may have been threatened, while in office or
thereafter, by reason of being or having been such a
Trustee or officer, director or trustee, and except
that no Covered Person shall be indemnified against
any liability to the Trust or its Shareholders to
which such Covered Person would otherwise be subject
by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of such covered Person's
office ("disabling conduct"). Anything herein
contained to the contrary notwithstanding, no Covered
Person shall be indemnified for any liability to the
Trust or its Shareholders to which such Covered
Person would otherwise be subject unless (1) a final
decision on the merits is made by a court or other
body before whom the proceeding was brought that the
Covered Person to be indemnified was not liable by
reason of disabling conduct or, (2) in the absence of
such a decision, a reasonable determination is made,
based upon a review of the facts, that the Covered
Person was not liable by reason of disabling conduct,
by (a) the vote of a majority of a quorum of Trustees
who are neither "interested persons" of the Company
as defined in the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
Trustees"), or (b) an independent legal counsel in a
written opinion.
<PAGE>
Section 6.5 Advances of Expenses. The Trust shall
advance attorneys' fees or other expenses incurred by
a Covered Person in defending a proceeding, upon the
undertaking by or on behalf of the Covered Person to
repay the advance unless it is ultimately determined
that such Covered Person is entitled to
indemnification, so long as one of the following
conditions is met: (i) the Covered Person shall
provide security for his undertaking, (ii) the Trust
shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of a quorum
of the disinterested non-party Trustees of the Trust,
or an independent legal counsel in a written opinion,
shall determine, based on a review of readily
available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.
Section 6.6 Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VI
shall not be exclusive of or affect any other rights
to which any such Covered Person may be entitled. As
used in this Article VI, "Covered Person" shall
include such person's heirs, executors and
administrators. Nothing contained in this article
shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on
behalf of any such person.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability
policy. The policy provides coverage to the Registrant, its
Trustees and officers, and its Adviser, among others. Coverage
under the policy includes losses by reason of any act, error,
omission, misstatement, misleading statement, neglect or
breach of duty. The Registrant may not pay for insurance which
protects the Trustees and officers against liabilities rising
from action involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of their offices.
The Advisory Agreements with Countrywide Investments, Inc.
(the "Adviser") provide that the Adviser shall not be liable
for any error of judgment or mistake of law of for any loss
suffered by the Registrant in connection with the matters to
which the Agreement
<PAGE>
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence of the Adviser in the performance of
its duties or from the reckless disregard by the Adviser of
its obligations under the Agreement. Registrant will advance
attorneys' fees or other expenses incurred by the Adviser in
defending a proceeding, upon the undertaking by or on behalf
of the Adviser to repay the advance unless it is ultimately
determined that the Adviser is entitled to indemnification.
The Underwriting Agreement provides that the Adviser (in its
capacity as underwriter), its directors, officers, employees,
shareholders and control persons shall not be liable for any
error of judgment or mistake of law or for any loss suffered
by Registrant in connection with the matters to which the
Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any
of such persons in the performance of Adviser's duties or from
the reckless disregard by any of such persons of Adviser's
obligations and duties under the Agreement. Registrant will
advance attorneys' fees or other expenses incurred by any such
person in defending a proceeding, upon the undertaking by or
on behalf of such person to repay the advance if it is
ultimately determined that such person is not entitled to
indemnification.
Item. 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
A. The Adviser is a registered investment adviser providing
investment advisory services to the Registrant. The Adviser
acts as the investment adviser to six series of Countrywide
Investment Trust and four series of Countrywide Strategic
Trust, both of which are registered investment companies. The
Adviser provides investment advisory services to individual
and institutional accounts and is a registered broker-dealer.
B. The following list sets forth the business and other
connections of the directors and executive officers of the
Adviser. Unless otherwise noted with an asterisk(*), the
address of the corporations listed below is 312 Walnut Street,
Cincinnati, Ohio 45202.
*The address of each corporation is 4500 Park Granada Road,
Calabasas, California 91302.
(1) Angelo R. Mozilo - Chairman and a Director of the
Adviser.
(a) Chairman and a Trustee of Countrywide
Strategic Trust, Countrywide Investment Trust
and Countrywide Tax-Free Trust, registered
investment companies.
(b) Chairman and a Director of Countrywide
Financial Services, Inc., a financial
services company, Countrywide Fund Services,
Inc., a registered transfer agent,
CW Fund Distributors, Inc., a registered broker-
dealer, Countrywide Servicing Exchange,* a loan
servicing broker, Countrywide Capital
Markets, Inc.,* a holding company and Countrywide
Securities Corporation*, a registered broker-
dealer.
(c) Vice Chairman, Director and Chief Executive
Officer of Countrywide Credit Industries,
Inc.,* a holding company which provides
residential mortgages and ancillary
financial products and services.
<PAGE>
(d) A Director of Countrywide Home Loans, Inc.,*
a residential mortgage lender, CTC Foreclosure
Services Corporation,* a foreclosure trustee,
CCM Municipal Services, Inc.,* a tax lien
purchaser and Countrywide Field Services
Corporation*, a foreclosure property maintenance
provider.
(e) A Director of LandSafe, Inc.* and Chairman
and a director of various Landsafe
subsidiaries which provide residential
mortgage title and closing services.
(2) Robert H. Leshner - President and a Director of the
Adviser.
(a) President and a Trustee of Countrywide
Strategic Trust, Countrywide Investment Trust
and Countrywide Tax-Free Trust.
(b) President and a Director of Countrywide
Financial Services, Inc.
(c) Vice Chairman and a Director of Countrywide
Fund Services, Inc. and CW Fund Distributors, Inc.
(3) Andrew S. Bielanski - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc., CW Fund
Distributors, Inc., Countrywide Agency,
Inc.* and Countrywide Insurance Services, Inc.,*
insurance agencies.
(b) Managing Director - Marketing of Countrywide
Credit Industries, Inc.* and Countrywide Home
Loans, Inc.*
(4) Thomas H. Boone - A Director of the Adviser.
(a) A Director of Countrywide Financial
Services, Inc., Countrywide Fund Services,
Inc., CW Fund Distributors, Inc., Countrywide
Agency, Inc.,* Countrywide Tax Services
Corporation,* a residential mortgage tax service
provider, Countrywide Lending Corporation,* a
lending institution, Countrywide Insurance Agency
of Massachusetts*, and Countrywide Insurance
Services, Inc.*
(b) Managing Director - Portfolio Services of
Countrywide Credit Industries, Inc.* and
Managing Director - Chief Loan Administration
Officer of Countrywide Home Loans, Inc.*
<PAGE>
(c) A Director and Executive Vice President of
CWABS, Inc.,* an asset-backed securities
issuer and CWMBS, Inc.,* a mortgage-backed
securities issuer.
(d) CEO and a Director of CTC Foreclosure
Services Corporation*.
(e) Chairman and Chief Executive Officer of
Countrywide Field Services Corporation*.
(f) Chairman and Director of Countrywide Realty
Partners, Inc.,* a real estate marketing firm.
(5) Marshall M. Gates - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc., CW Fund
Distributors, Inc., Countrywide Agency, Inc.* and
Countrywide Insurance Services, Inc.*
(b) Managing Director - Developing Markets of
Countrywide Credit Industries, Inc.* and
Countrywide Home Loans, Inc.*
(c) President and a Director of Second Charter
Reinsurance Corporation,* a mortgage,
property and casualty reinsurance agency and
Charter Reinsurance Corporation,* a mortgage
reinsurance agency.
(d) Chief Operating Officer and Director of Landsafe,
Inc.* and various LandSafe subsidiaries.
(6) William E. Hortz - Executive Vice President and Director
of Sales of the Adviser.
(a) Executive Vice President and Director of Sales of
Countrywide Financial Services, Inc.
(b) Vice President of Countrywide Investment Trust,
Countrywide Tax-Free Trust and Countrywide
Strategic Trust.
(c) President of Peregrine Asset Management (USA),
(4 Embarcadero Center, San Francisco, California,
94111), an investment adviser, until 1998.
(7) Maryellen Peretzky - Senior Vice President and Chief
Operating Officer of the Adviser.
(a) Senior Vice President-Administration of
Countrywide Financial Services, Inc.,
Countrywide Fund Services, Inc. and CW Fund
Distributors, Inc.
(b) Vice President of Countrywide Strategic Trust,
Countrywide Investment Trust and Countrywide Tax-
Free Trust; Assistant Secretary of The Gannett
Welsh & Kotler Funds, Firsthand Funds and the Dean
Family of Funds.
<PAGE>
(8) John J. Goetz - First Vice President and Chief
Investment Officer- Tax-Free Fixed Income of the Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(9) Susan F. Flischel - First Vice President and Chief
Investment Officer - Equity of the Adviser
(10) Margaret D. Weinblatt - First Vice President and
Chief Investment Officer - Taxable Fixed Income and
Pension of the Adviser
(a) President and Chief Investment Officer of
Copernicus Asset Management, Ltd. (730 Fifth
Avenue, 9th Floor, New York, New York), an
investment adviser, until 1998.
(11) Sharon L. Karp - First Vice President - Marketing of
the Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(12) John F. Splain - First Vice President, Secretary and
General Counsel of the Adviser.
(a) First Vice President, Secretary and General
Counsel of Countrywide Fund Services, Inc.,
CW Fund Distributors, Inc. and Countrywide
Financial Services, Inc.
(b) Secretary of Countrywide Tax-Free Trust,
Countrywide Investment Trust, Countrywide
Strategic Trust, Brundage, Story and Rose
Investment Trust, Williamsburg Investment
Trust, Markman MultiFund Trust, The Tuscarora
Investment Trust, Maplewood Investment Trust,
The Thermo Opportunity Fund, Inc., the
Wells Family of Real Estate Funds, the Boyar
Value Fund and Profit Funds Investment Trust,
registered investment companies.
(c) Assistant Secretary of Schwartz Investment
Trust, The Gannett Welsh & Kotler Funds,
Firsthand Funds, Dean Family of Funds,
The New York State Opportunity Funds,
The Westport Funds, Lake Shore Family of Funds,
Bowes Investment Trust, Albermarle Investment
Trust, Atalanta/Sosnoff Investment Trust, The
James Advantage Funds and UC Investment Trust,
registered investment companies.
(d) Secretary of PRAGMA Investment Trust, a registered
investment company, until January 1998.
(e) Assistant Secretary of Fremont Mutual Funds,
Inc. and Capitol Square Funds, registered
investment companies, until September 1997.
<PAGE>
(13) Robert G. Dorsey - First Vice President and Treasurer of
the Adviser.
(a) President and Treasurer of Countrywide Fund
Services, Inc. and CW Fund Distributors, Inc.
(b) First Vice President-Finance and Treasurer of
Countrywide Financial Services, Inc.
(c) Vice President of Countrywide Tax-Free Trust,
Countrywide Investment Trust, Countrywide
Strategic Trust, Brundage, Story and Rose
Investment Trust, Markman MultiFund Trust,
Maplewood Investment Trust, The Thermo
Opportunity Fund, Inc., Dean Family of Funds,
The New York State Opportunity Funds, Wells Family
of Real Estate Funds, Lake Shore Family of Funds,
Boyar Value Fund, Profit Funds Investment
Trust, Bowes Investment Trust, Atalanta/Sosnoff
Investment Trust and UC Investment Trust
(d) Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust,
The Gannett Welsh & Kotler Funds, The
Tuscarora Investment Trust, Firsthand Funds,
The Westport Funds, Albermarle Investment Trust
and The James Advantage Funds.
(e) Vice President of PRAGMA Investment Trust until
January 1998.
(f) Vice President of Capitol Square Funds and
Assistant Vice President of Fremont Mutual
Funds, Inc. until September 1997.
(14) Terrie A. Wiedenheft - First Vice President and
Chief Financial Officer of the Adviser.
(a) First Vice President and Chief Financial
Officer of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc. and
CW Fund Distributors, Inc.
(15) Scott Weston - Assistant Vice President-Investments of
the Adviser.
(16) Michele M. Hawkins - Assistant Vice President - Compliance
of the Adviser.
(17) Timothy M. Roesch - Assistant Vice President -Systems
Manager of the Adviser.
<PAGE>
Item 29. Principal Underwriters
- ------- ----------------------
(a) Countrywide Investments, Inc. also acts as
underwriter for Countrywide Strategic Trust and
Countrywide Investment Trust. Unless otherwise
indicated by an asterisk (*), the address of the
persons named below is 312 Walnut Street,
Cincinnati, Ohio 45202.
*The address is 4500 Park Granada Road, Calabasas,
California 91302.
Position Position
with with
(b) Name Underwriter Registrant
--------------------------------------------------------
Angelo R. Mozilo Chairman and Chairman/
Director Trustee
Robert H. Leshner President President
and Director and Trustee
* Andrew S. Bielanski Director None
* Thomas H. Boone Director None
* Marshall M. Gates Director None
John J. Goetz First Vice None
President and
Chief
Investment
Officer-Tax-Free
Fixed Income
Maryellen Peretzky Senior Vice Vice
President- President
Chief Operating
Officer
William E. Hortz Executive Vice Vice
President and President
Director of Sales
Sharon L. Karp First Vice None
President-
Marketing
John F. Splain First Vice President,Secretary
Secretary and
General Counsel
Robert G. Dorsey First Vice President Vice
and Treasurer President
Susan F. Flischel First Vice None
President and
Chief Investment
Officer-Equity
<PAGE>
Margaret D. Weinblatt First Vice None
President and Chief
Investment Officer-
Taxable Fixed Income
& Pension
Terrie A. Wiedenheft First Vice None
President &
Chief Financial
Officer
Scott Weston Assistant Vice None
President-
Investments
Michele M. Hawkins Assistant Vice None
President-Compliance
Timothy M. Roesch Assistant Vice None
President-Systems
Manager
(c) None
Item 30. Location of Accounts and Records
- ------- --------------------------------
Accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder will
be maintained by the Registrant.
Item 31. Management Services Not Discussed in Parts A or B
- ------- -------------------------------------------------
None.
Item 32. Undertakings
- ------- ------------
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes that, if so requested, it
will furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual
report to shareholders without charge.
<PAGE>
(d) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to trustees, officers and controlling persons of
Countrywide Tax-Free Trust pursuant to the
provisions of Massachusetts law and the Restated
Agreement and Declaration of Trust of Countrywide
Tax-Free Trust or the Bylaws of Countrywide Tax-
Free Trust, or otherwise, the Registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is
against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities
(other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or
controlling person of Countrywide Tax-Free Trust
in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer
or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the
question whether such indemnification by it is
against public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.
(e) The Registrant undertakes that, within five business
days after receipt of a written application by
shareholders holding in the aggregate at least 1% of
the shares then outstanding or shares then having a
net asset value of $25,000, whichever is less, each
of whom shall have been a shareholder for at least
six months prior to the date of application
(hereinafter the "Petitioning Shareholders"),
requesting to communicate with other shareholders
with a view to obtaining signatures to a request for
a meeting for the purpose of voting upon removal of
any Trustee of the Registrant, which application
shall be accompanied by a form of communication and
request which such Petitioning Shareholders wish to
transmit, Registrant will:
(i) provide such Petitioning Shareholders with
access to a list of the names and addresses of
all shareholders of the Registrant; or
(ii) inform such Petitioning Shareholders of the
approximate number of shareholders and the
estimated costs of mailing such
communication, and to undertake such mailing
promptly after tender by such Petitioning
Shareholders to the Registrant of the
material to be mailed and the reasonable
expenses of such mailing.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) of the Securities Act of 1933 and it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cincinnati, State of Ohio, on the 30th day of
October, 1998.
COUNTRYWIDE TAX-FREE TRUST
By: /s/ John F. Splain
-----------------------------
JOHN F. SPLAIN
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the 30th day of October, 1998.
*ANGELO R. MOZILO Chairman and Trustee
/s/ Robert H. Leshner President and Trustee
- ---------------------
ROBERT H. LESHNER
/s/ Mark J. Seger Treasurer
- ----------------------
MARK J. SEGER
*DONALD L. BOGDON, M.D. Trustee
*H. JEROME LERNER Trustee
*HOWARD J. LEVINE Trustee
*FRED A. RAPPOPORT Trustee
*OSCAR P. ROBERTSON Trustee
*JOHN F. SEYMOUR, JR. Trustee
*SEBASTIANO STERPA Trustee
By: /s/ John F. Splain
------------------
JOHN F. SPLAIN
Attorney-in-Fact*
October 30, 1998
EXHIBIT INDEX
- -------------
1. Form of Underwriter's Dealer Agreement
2. Consent of Arthur Andersen LLP
3. Financial Data Schedule for Tax-Free Money Fund
4. Financial Data Schedule for Tax-Free Intermediate Term Fund Class A
5. Financial Data Schedule for Tax-Free Intermediate Term Fund Class C
6. Financial Data Schedule for Ohio Insured Tax-Free Fund Class A
7. Financial Data Schedule for Ohio Insured Tax-Free Fund Class C
8. Financial Data Schedule for Ohio Tax-Free Money Fund Class A
9. Financial Data Schedule for Ohio Tax-Free Money Fund Class B
10. Financial Data Schedule for California Tax-Free Money Fund
11. Financial Data Schedule for Florida Tax-Free Money Fund Class A
12. Financial Data Schedule for Florida Tax-Free Money Fund Class B
13. Financial Data Schedule for Kentucky Tax-Free Fund
14. Power of Attorney for Fred A. Rappoport
15. Power of Attorney for Howard J. Levine
Dealer #________
COUNTRYWIDE INVESTMENTS, INC.
312 WALNUT STREET
CINCINNATI, OHIO 45202
800-543-8721
513-629-2000
DEALER'S AGREEMENT
Countrywide Investments, Inc. ("Underwriter") invites you, as a
selected dealer, to participate as principal in the distribution of shares (the
"Shares") of the mutual funds set forth on Schedule A to this Agreement (the
"Funds"), of which it is the exclusive underwriter. Underwriter agrees to sell
to you, subject to any limitations imposed by the Funds, Shares issued by the
Funds and to promptly confirm each sale to you. All sales will be made according
to the following terms:
1. All offerings of any of the Shares by you must be made at the public
offering prices, and shall be subject to the conditions of offering, set forth
in the then current Prospectus of the Funds and to the terms and conditions
herein set forth, and you agree to comply with all requirements applicable to
you of all applicable laws, including federal and state securities laws, the
rules and regulations of the Securities and Exchange Commission, and the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. (the
"NASD"), including Section 24 of the Rules of Fair Practice of the NASD. You
will not offer the Shares for sale in any state or other jurisdiction where they
are not qualified for sale under the Blue Sky Laws and regulations of such state
or jurisdiction, or where you are not qualified to act as a dealer. Upon
application to Underwriter, Underwriter will inform you as to the states or
other jurisdictions in which Underwriter believes the Shares may legally be
sold.
2. (a) You will receive a discount from the public offering
price ("concession") on all Shares purchased by you from Underwriter as
indicated on Schedule A, as it may be amended by Underwriter from time to time.
(b) In all transactions in open accounts in which you are
designated as Dealer of Record, you will receive the concessions as set forth on
Schedule A. You hereby authorize Underwriter to act as your agent in connection
with all transactions in open accounts in which you are designated as Dealer of
Record. All designations as Dealer of Record, and all authorizations of
Underwriter to act as your Agent pursuant thereto, shall cease upon the
termination of this Agreement or upon the investor's instructions to transfer
his open account to another Dealer of Record. No dealer concessions will be
allowed on purchases generating less than $1.00 in dealer concessions.
(c) As the exclusive underwriter of the Shares, Underwriter
reserves the privilege of revising the discounts specified on Schedule A at any
time by written notice.
3. Concessions will be paid to you at the address of your
principal office, as indicated below in your acceptance of this Agreement.
<PAGE>
4. Underwriter reserves the right to cancel this Agreement at any time
without notice if any Shares shall be offered for sale by you at less than the
then current public offering prices determined by, or for, the Funds.
5. All orders are subject to acceptance or rejection by Underwriter in
its sole discretion. The Underwriter reserves the right, in its discretion,
without notice, to suspend sales or withdraw the offering of Shares entirely.
6. Payment shall be made to the Funds and shall be received by its
Transfer Agent within three (3) business days after the acceptance of your order
or such shorter time as may be required by law. With respect to all Shares
ordered by you for which payment has not been received, you hereby assign and
pledge to Underwriter all of your right, title and interest in such Shares to
secure payment therefor. You appoint Underwriter as your agent to execute and
deliver all documents necessary to effectuate any of the transactions described
in this paragraph. If such payment is not received within the required time
period, Underwriter reserves the right, without notice, and at its option,
forthwith (a) to cancel the sale, (b) to sell the Shares ordered by you back to
the Funds, or (c) to assign your payment obligation, accompanied by all pledged
Shares, to any person. You agree that Underwriter may hold you responsible for
any loss, including loss of profit, suffered by the Funds, its Transfer Agent or
Underwriter, resulting from your failure to make payment within the required
time period.
7. No person is authorized to make any representations concerning
Shares of the Funds except those contained in the current applicable Prospectus
and Statement of Additional Information and in sales literature issued and
furnished by Underwriter supplemental to such Prospectus. Underwriter will
furnish additional copies of the current Prospectus and Statement of Additional
Information and such sales literature and other releases and information issued
by Underwriter in reasonable quantities upon request.
8. Under this Agreement, you act as principal and are not employed by
Underwriter as broker, agent or employee. You are not authorized to act for
Underwriter nor to make any representation on its behalf; and in purchasing or
selling Shares hereunder, you rely only upon the current Prospectus and
Statement of Additional Information furnished to you by Underwriter from time to
time and upon such written representations as may hereafter be made by
Underwriter to you over its signature.
9. You appoint the transfer agent for the Funds as your agent to
execute the purchase transactions of Shares in accordance with the terms and
provisions of any account, program, plan or service established or used by your
customers and to confirm each purchase to your customers on your behalf, and you
guarantee the legal capacity of your customers purchasing such Shares and any
co-owners of such Shares.
<PAGE>
10. You will (a) maintain all records required by law relating to
transactions in the Shares, and upon the request of Underwriter, or the request
of the Funds, promptly make such records available to Underwriter or to the
Funds as are requested, and (b) promptly notify Underwriter if you experience
any difficulty in maintaining the records required in the foregoing clause in an
accurate and complete manner. In addition, you will establish appropriate
procedures and reporting forms and schedules, approved by Underwriter and by the
Funds, to enable the parties hereto and the Funds to identify all accounts
opened and maintained by your customers.
11. Underwriter has adopted compliance standards, attached hereto as
Schedule B, as to when Class A and Class C Shares of the Dual Pricing Funds may
appropriately be sold to particular investors. You agree that all persons
associated with you will conform to such standards when selling Shares.
12. Each party hereto represents that it is presently, and, at all
times during the term of this Agreement, will be, a member in good standing of
the NASD and agrees to abide by all its Rules of Fair Practice including, but
not limited to, the following provisions:
(a) You shall not withhold placing customers' orders for any Shares so
as to profit yourself as a result of such withholding. You shall not purchase
any Shares from Underwriter other than for investment, except for the purpose of
covering purchase orders already received.
(b) All conditional orders received by Underwriter must be at a
specified definite price.
(c) If any Shares purchased by you are repurchased by the Funds (or by
Underwriter for the account of the Funds) or are tendered for redemption within
seven business days after confirmation of the original sale of such Shares (1)
you agree to forthwith refund to Underwriter the full concession allowed to you
on the original sale, such refund to be paid by Underwriter to the Funds, and
(2) Underwriter shall forthwith pay to the Funds that part of the discount
retained by Underwriter on the original sale. Notice will be given to you of any
such repurchase or redemption within ten days of the date on which the
repurchase or redemption request is made.
<PAGE>
(d) Neither Underwriter, as exclusive underwriter for the Funds, nor
you as principal, shall purchase any Shares from a record holder at a price
lower than the net asset value then quoted by, or for, the Funds. Nothing in
this sub-paragraph shall prevent you from selling Shares for the account of a
record holder to Underwriter or the Funds at the net asset value currently
quoted by, or for, the Funds and charging the investor a fair commission for
handling the transaction.
(e) You warrant on behalf of yourself and your registered
representatives and employees that any purchase of Shares at net asset value by
the same pursuant to the terms of the Prospectus of the applicable Fund is for
investment purposes only and not for purposes of resale. Shares so purchased may
be resold only to the Fund which issued them.
13. You agree that you will indemnify Underwriter, the Funds, the
Funds' transfer agent and the Funds' custodians and hold such persons harmless
from any claims or assertions relating to the lawfulness of your company's
participation in this Agreement and the transactions contemplated hereby or
relating to any activities of any persons or entities affiliated with your
company which are performed in connection with the discharge of your
responsibilities under this Agreement. If any such claims are asserted, the
indemnified parties shall have the right to engage in their own defense,
including the selection and engagement of legal counsel of their choosing, and
all costs of such defense shall be borne by you.
<PAGE>
14. This Agreement will automatically terminate in the event of its
assignment. Either party hereto may cancel this Agreement without penalty upon
ten days' written notice. This Agreement may also be terminated as to any Fund
at any time without penalty by the vote of a majority of the members of the
Board of Trustees of the terminating Fund who are not "interested persons" (as
such term is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the applicable Fund's Distribution
Expense Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 or
any agreement relating to such Plan, including this Agreement, or by a vote of a
majority of the outstanding voting securities of the terminating Fund on ten
days' written notice.
15. All communications to Underwriter should be sent to Countrywide
Investments, Inc., 312 Walnut Street, Cincinnati, Ohio 45202, or at such other
address as Underwriter may designate in writing. Any notice to you shall be duly
given if mailed or telegraphed to you at the address of your principal office,
as indicated below in your acceptance of this Agreement.
16. This Agreement supersedes any other agreement with you relating
to the offer and sale of the Shares, and relating to any other matter discussed
herein.
17. This Agreement shall be binding (i) upon placing your first order
with Underwriter for the purchase of Shares, or (ii) upon receipt by Underwriter
in Cincinnati, Ohio of a counterpart of this Agreement duly accepted and signed
by you, whichever shall occur first. This Agreement shall be construed in
accordance with the laws of the State of Ohio.
18. The undersigned, executing this Agreement on behalf of Dealer,
hereby warrants and represents that he is duly authorized to so execute this
Agreement on behalf of Dealer.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return all copies of this Agreement to the
Underwriter.
ACCEPTED BY DEALER
By:________________________________________
Authorized Signature
___________________________________________
Type or Print Name, Position
___________________________________________
Dealer Name
___________________________________________
Address
____________________________________________
Address
____________________________________________
Phone
_____________________________________________
Date
COUNTRYWIDE INVESTMENTS, INC.
By: __________________________________________________
_______________________________________________________
Date
<PAGE>
Schedule A
COUNTRYWIDE INVESTMENTS
COMMISSION SCHEDULE
Intermediate Bond Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
- -----------------------------------------------------------------
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
Equity Fund - Class A
Utility Fund - Class A
Growth/Value Fund
Aggressive Growth Fund
Ohio Insured Tax-Free Fund - Class A
Kentucky Tax-Free Fund
- ---------------------------------------------------------------
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
*As a percentage of offering price.
** Broker/Dealers are entitled to a commission of 75 basis points at the time
the investor purchases Class A shares at NAV in amounts totaling $1 million or
more. However, the investor is subject to a contingent deferred sales load of
75 basis points if a redemption occurs within one year of purchase.
See specific Fund prospectus for details.
<PAGE>
Equity Fund - Class C
Utility Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
The Funds will be offered to clients at net asset value. A commission of 1% of
the purchase amount of Class C shares will be paid to participating brokers at
the time of purchase. Purchases of Class C shares are subject to a contingent
deferred sales load, according to the following schedule:
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
-------------------- --------------------
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid quarterly beginning in
the thirteenth month.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any calendar quarter in
which the average daily balance of all accounts in Countrywide Investments
funds (including no-load money market funds) is less than $1,000,000.
FOR BROKER/DEALER USE ONLY
<PAGE>
Schedule B
POLICIES AND PROCEDURES
WITH RESPECT TO SALES
OF DUAL PRICING FUND
As certain Funds within Countrywide Investments (the "Dual Pricing
Funds") offer two classes of Shares subject to different levels of front-end
sales charges, it is important for an investor not only to choose the Fund that
best suits his investment objectives, but also to choose the sales financing
method which best suits his particular situation. To assist investors in these
decisions, we are instituting the following policy:
1. Any purchase order for $1 million or more must be for Class A
Shares.
2. Any purchase order for $100,000 but less than $1 million is
subject to approval by a registered principal of the
Underwriter, who must approve the purchase order for either
Class A Shares or Class C Shares in light of the relevant
facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold the
Shares; and
(c) any other relevant circumstances, such as the
availability of purchases under a Letter of Intent.
3. Any order to exchange Class A Shares of a Dual Pricing Fund
(or Shares of another Fund having a maximum sales load equal
to or greater than Class A Shares of the Dual Pricing Funds)
for Shares of another Dual Pricing Fund will be for Class A
Shares only. Class C Shares of a Dual Pricing Fund may be
exchanged for either Class A or Class C Shares of another Dual
Pricing Fund, provided that an exchange of Class C Shares for
Class A Shares is subject to approval by a registered
principal of Underwriter, who must approve the exchange in
light of the relevant facts and circumstances.
There are instances when one financing method may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales charge on Class A Shares may determine that
payment of such a reduced front-end sales charge is superior to payment of the
higher ongoing distribution fee applicable to Class C Shares. On the other hand,
an investor whose order would not qualify for such a discount may wish to pay a
lower sales charge and have more of his funds invested in Class C Shares. If
such an investor anticipates that he will redeem his Shares within a short
period of time, the investor may, depending on the amount of his purchase,
choose to bear higher distribution expenses than if he had purchased Class A
Shares.
<PAGE>
In addition, investors who intend to hold their Shares for a
significantly long time may wish to purchase Class A Shares in order to avoid
the higher ongoing distribution expenses of Class C Shares.
The appropriate supervisor must ensure that all employees receiving
investor inquiries about the purchase of Shares of Dual Pricing Funds advise the
investor of the available financing methods offered by mutual funds, and the
impact of choosing one method over another. It may be appropriate for the
supervisor to discuss the purchase with the investor.
This policy is effective immediately with respect to any order for the
purchase of Shares of all Dual Pricing Funds. Questions relating to this policy
should be directed to Sharon Karp, Vice President of the Underwriter, at
513/629-2000.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------
As independent public accountants, we hereby consent to the use of our
report dated August 7, 1998 and to all references to our Firm included
in or made a part of this Post-Effective Amendment No. 43.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
October 29, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> COUNTRYWIDE TAX FREE TRUST
<SERIES>
<NUMBER> 1
<NAME> TAX-FREE MONEY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 36,707,536
<INVESTMENTS-AT-VALUE> 36,707,536
<RECEIVABLES> 809,049
<ASSETS-OTHER> 325,444
<OTHER-ITEMS-ASSETS> 8,908
<TOTAL-ASSETS> 37,850,937
<PAYABLE-FOR-SECURITIES> 438,641
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,853
<TOTAL-LIABILITIES> 467,494
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,384,479
<SHARES-COMMON-STOCK> 37,394,922
<SHARES-COMMON-PRIOR> 30,137,162
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,036)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 37,383,443
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,176,743
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<NAME> FLORIDA TAX-FREE MONEY FUND INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 68,180,277
<INVESTMENTS-AT-VALUE> 68,180,277
<RECEIVABLES> 489,684
<ASSETS-OTHER> 73,888
<OTHER-ITEMS-ASSETS> 2,925
<TOTAL-ASSETS> 68,746,774
<PAYABLE-FOR-SECURITIES> 5,102,873
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,205
<TOTAL-LIABILITIES> 5,220,078
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63,504,408
<SHARES-COMMON-STOCK> 49,140,556
<SHARES-COMMON-PRIOR> 19,348,390
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22,288
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 49,159,122
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,062,394
<OTHER-INCOME> 0
<EXPENSES-NET> 325,861
<NET-INVESTMENT-INCOME> 1,736,533
<REALIZED-GAINS-CURRENT> 23,116
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,759,649
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,149,607
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 129,691,125
<NUMBER-OF-SHARES-REDEEMED> 100,005,326
<SHARES-REINVESTED> 106,367
<NET-CHANGE-IN-ASSETS> 29,810,567
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (828)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 276,608
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 440,620
<AVERAGE-NET-ASSETS> 35,620,529
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .032
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .032
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352667
<NAME> Countrywide Tax-Free Trust
<SERIES>
<NUMBER> 9
<NAME> KENTUCKY TAX-FREE FUND
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 7,363,205
<INVESTMENTS-AT-VALUE> 7,506,941
<RECEIVABLES> 133,333
<ASSETS-OTHER> 39,027
<OTHER-ITEMS-ASSETS> 14,955
<TOTAL-ASSETS> 7,694,256
<PAYABLE-FOR-SECURITIES> 344,806
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19,620
<TOTAL-LIABILITIES> 364,426
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,072,889
<SHARES-COMMON-STOCK> 700,507
<SHARES-COMMON-PRIOR> 822,742
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 113,205
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 143,736
<NET-ASSETS> 7,329,830
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 337,659
<OTHER-INCOME> 0
<EXPENSES-NET> 31,308
<NET-INVESTMENT-INCOME> 306,351
<REALIZED-GAINS-CURRENT> 109,080
<APPREC-INCREASE-CURRENT> 51,636
<NET-CHANGE-FROM-OPS> 467,067
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 306,351
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,967
<NUMBER-OF-SHARES-REDEEMED> 181,304
<SHARES-REINVESTED> 15,102
<NET-CHANGE-IN-ASSETS> (1,107,802)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,125
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 99,816
<AVERAGE-NET-ASSETS> 7,775,272
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .20
<PER-SHARE-DIVIDEND> .41
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.46
<EXPENSE-RATIO> .49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE TAX-FREE TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints JOHN F.
SPLAIN and SANDOR E. SAMUELS, and each of them, his attorneys for him and in his
name, place and stead, to execute and file any amended registration statement or
statements and amended prospectus or prospectuses or amendments or supplements
to any of the foregoing, hereby giving and granting to said attorneys full power
and authority to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 26th
day of February, 1998.
/s/ Fred A. Rappoport
--------------------------------
FRED A. RAPPOPORT
Trustee
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On the 26th day of February, 1998, personally appeared before me, FRED
A. RAPPOPORT, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 26 day of February, 1998.
/s/ Scott C. Hendrickson
-----------------------------
Notary Public
Scott C. Hendrickson
Commission #1140043
Notary Public - California
Los Angeles County
My Comm. Expires May 16, 2001
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE TAX-FREE TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints JOHN F.
SPLAIN and SANDOR E. SAMUELS, and each of them, his attorneys for him and in his
name, place and stead, to execute and file any amended registration statement or
statements and amended prospectus or prospectuses or amendments or supplements
to any of the foregoing, hereby giving and granting to said attorneys full power
and authority to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th
day of August, 1998.
/s/ Howard J. Levine
--------------------------------
HOWARD J. LEVINE
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 18th day of August, 1998, personally appeared before me, HOWARD
J. LEVINE, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 18th day of August, 1998.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002