Tax-Exempt
Prospectus
Tax-Free Money Fund
Tax-Free
Intermediate Term Fund
November 1, 1998
(Revised August 1, 1999)
[logo]COUNTRYWIDE
INVESTMENTS
<PAGE>
PROSPECTUS
November 1, 1998
(Revised August 1, 1999)
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.
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.
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.
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TABLE OF CONTENTS
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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...................................................
For further information or assistance in opening an account, please contact
your broker, or call us at 800-543-0407.
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.
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EXPENSE INFORMATION
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TAX-FREE MONEY FUND
-------------------
Shareholder Transaction Expenses
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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) 4.75% 1.25%
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None* 1.00%
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."
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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
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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:
Class A Class C
Shares, Shares,
Tax-Free Tax-Free
Tax-Free Intermediate Intermediate
Money Fund Term Fund Term Fund
---------- --------- ---------
1 Year $ 9 $ 57 $ 40
3 Years 29 78 67
5 Years 51 100 106
10 Years 113 163 215
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FINANCIAL HIGHLIGHTS
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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.
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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>
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TAX-FREE INTERMEDIATE TERM FUND
<TABLE>
Per Share Data for a Share Outstanding Throughout Each Year
===================================================================================================================
CLASS A
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended June 30,
- --------------------------------------------------------------------------------------------------------------------
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%
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(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.
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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>
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<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.
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<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
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<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
- 10 -
<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
- 11 -
<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
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<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
- 14 -
<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.
- 15 -
<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
- 16 -
<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
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<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 right
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,
- 18 -
<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 right 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.
- 20 -
<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 higher
front-end sales load and be subject to lower ongoing charges, as discussed
below, or to have more of the initial purchase price invested in the Fund with
the
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<PAGE>
investment thereafter being subject to higher ongoing charges. A salesperson or
any other person entitled to receive any portion of a distribution fee may
receive different compensation for selling Class A or Class C shares.
As an illustration, investors who qualify for reduced sales loads as
described below, might elect the Class A sales load alternative because similar
sales load reductions are not available for purchases under the Class C sales
load alternative. Moreover, shares acquired under the Class A sales load
alternative would be subject to lower ongoing distribution fees as described
below. Investors not qualifying for reduced initial sales loads who expect to
maintain their investment for an extended period of time might also elect the
Class A sales load alternative because over time the accumulated continuing
distribution fees on Class C shares may exceed the difference in initial sales
loads between Class A and Class C shares. Again, however, such investors must
weigh this consideration against the fact that less of their funds will be
invested initially under the Class A sales load alternative. Furthermore, the
higher ongoing distribution fees will be offset to the extent any return is
realized on the additional funds initially invested under the Class C sales load
alternative.
Some investors might determine that it would be more advantageous to
utilize the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 4.75% 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 4 1/4 years before the 1.25% initial sales load and 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 4 1/4 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,
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<PAGE>
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 financial
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.
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 July 31, 1999 is the next determined net asset value
per share plus a sales load as shown in the following table.
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<PAGE>
Dealer
Sales Load as % of: Reallowance
------------------ as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- ----- -------- -----
Less than $50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $100,000 4.50% 4.72% 3.75%
$100,000 but less than $250,000 3.50% 3.63% 2.75%
$250,000 but less than $500,000 2.95% 3.04% 2.25%
$500,000 but less than $1,000,000 2.25% 2.31% 1.75%
$1,000,000 or more None* None*
Investors whose accounts were opened prior to August 1, 1999 and after
January 31, 1995 are subject to a different table of sales loads as follows:
Dealer
Sales Load as % of: Reallowance
------------------ 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
Sales Load as % of: Reallowance
------------------ 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*
* 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.
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<PAGE>
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, participating unaffiliated dealers will receive first year compensation
of up to 1% of the purchase amount from the Adviser. 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.
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
- 25 -
<PAGE>
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 purchase Class A shares of the Tax-Free Intermediate Term
Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Tax-Free Intermediate Term Fund (or shares into which such Class A
shares were exchanged) purchased at net asset value in amounts totaling $1
million or more, if the dealer's commission described above was paid by the
Adviser and the shares are redeemed within twelve months from the date of
purchase. The contingent deferred sales load will be paid to the Adviser and
will be equal to 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
- 26 -
<PAGE>
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 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.
- 27 -
<PAGE>
Class C Shares
--------------
Class C 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. The public offering price of Class C shares is the
next determined net asset value per share plus a 1.25% front-end sales load.
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.
A contingent deferred sales load is imposed on Class C shares of the
Tax-Free Intermediate Term Fund if an investor redeems an amount which causes
the current value of the investor's account to fall below the total dollar
amount of purchase payments subject to the deferred sales load, except that no
such charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or to the extent the
amount redeemed is derived from increases in the value of the account above the
amount of purchase payments subject to the deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the
amount of time since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
---------------- ----------
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it is
assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
- 28 -
<PAGE>
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 2% 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.
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 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
- 29 -
<PAGE>
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 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
- 30 -
<PAGE>
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) and the address on the
account has 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.
- 31 -
<PAGE>
BY MAIL. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares or the dollar amount to be redeemed and your account number. The request
must be signed exactly as your name appears on the Trust's account records. If
the shares to be redeemed have a value of $25,000 or more, your signature must
be guaranteed by any of the eligible guarantor institutions outlined above. 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 account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by mail
are mailed within three business days following receipt of instructions in
proper form.
BY CHECK. You may establish a special checking account with either Fund for
the purpose of redeeming shares by check. Checks may be made payable to anyone
for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer Agent,
as your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check. Checks will
be processed at the net asset value on the day the check is presented to the
Custodian for payment.
If the amount of a check is greater than the value of the shares held in
your account, the check will be returned. Shareholders of the Tax-Free
Intermediate Term Fund should consider potential fluctuations in the net asset
value of the Fund's shares when writing checks. A check representing a
redemption request will take precedence over any other redemption instructions
issued by a shareholder.
As long as no more than six check redemptions are effected in your account
in any month, there will be no charge for the check redemption privilege. After
six check redemptions are effected in your account in a month, the Transfer
Agent will charge you $.25 for each additional check redemption effected that
month. However, there is no charge for any check redemptions effected by
employees, shareholders and customers of Countrywide Credit Industries, Inc. or
any affiliated company, including members of the immediate family of such
individuals.
- 32 -
<PAGE>
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 the signature guaranteed by any
of the eligible guarantor institutions outlined above.
- 33 -
<PAGE>
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than 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).
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.
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.
- 34 -
<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
----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
Adjustable Rate U.S. Government
Securities Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
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. 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.
- 35 -
<PAGE>
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains distributions
reinvested in additional shares.
Income Option - income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
Cash Option - income distributions and capital gains distributions paid
in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed dividend checks.
An investor in the Tax-Free Intermediate Term Fund who has received in cash
any dividend or capital gains distribution may return the distribution within
thirty days of the distribution date to the Transfer Agent for reinvestment at
the net asset value next determined after its return. The investor or his dealer
must notify the Transfer Agent that a distribution is being reinvested pursuant
to this provision.
TAXES
- -----
Each Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. Each Fund also
intends to meet all IRS requirements necessary to ensure that it is qualified to
pay "exempt-interest dividends," which means that it may pass on to shareholders
the federal tax-exempt status of its investment income.
Each Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. For federal
income tax purposes, a shareholder's
- 36 -
<PAGE>
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 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
- 37 -
<PAGE>
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 four 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 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.
- 38 -
<PAGE>
The Adviser serves as principal underwriter for the Funds and, as such, is
the exclusive agent for the distribution of shares of the Funds. 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 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
- 39 -
<PAGE>
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Funds may execute portfolio transactions through any broker or dealer and
pay brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of each Fund have equal voting rights and liquidation rights. Each
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Tax-Free Intermediate Term Fund shall vote separately on matters
relating to its plan of distribution pursuant to Rule 12b-1 (see "Distribution
Plans"). When matters are submitted to shareholders for a vote, each shareholder
is entitled to one vote for each full share owned and fractional votes for
fractional shares owned. The Trust does not normally hold annual meetings of
shareholders. The Trustees shall promptly call and give notice of a meeting of
shareholders for the purpose of voting upon the removal of any Trustee when
requested to do so in writing by shareholders holding 10% or more of the Trust's
outstanding shares. The Trust will comply with the provisions of Section 16(c)
of the Investment Company Act of 1940 in order to facilitate communications
among shareholders.
DISTRIBUTION PLANS
- ------------------
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Tax-Free Money Fund and Class A shares of the Tax-Free Intermediate
Term Fund have adopted a plan of distribution (the "Class A Plan") under which
such shares may directly incur or reimburse the Adviser for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Funds; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
- 40 -
<PAGE>
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 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.
- 41 -
<PAGE>
Pursuant to the Class C Plan, the Tax-Free Intermediate Term Fund may make
payments to dealers and other persons, including the Adviser and its affiliates,
who may be advising investors regarding the purchase, sale or retention of Class
C shares. For the fiscal year ended June 30, 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.
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.
- 42 -
<PAGE>
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 public offering price (net asset value plus
applicable sales load) of Class A and Class C shares of the Tax-Free
Intermediate Term 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 a Fund's
investments that its net asset value might be materially affected. The net asset
value per share of each Fund is calculated by dividing the sum of the value of
the securities held by the Fund plus cash or other assets minus all liabilities
(including estimated accrued expenses) by the total number of shares outstanding
of the Fund, rounded to the nearest cent.
The Tax-Free Money Fund's portfolio securities are valued on an amortized
cost basis. In connection with the use of the amortized cost method of
valuation, the Tax-Free Money Fund maintains a dollar-weighted average portfolio
maturity of 90 days or less, purchases only United States dollar-denominated
securities having remaining maturities of thirteen months or less and invests
only in securities determined by the Board of Trustees to meet the Fund's
quality standards and to present minimal credit risks. Other assets of the Fund
are valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general supervision
of the Board of Trustees. It is anticipated, but there is no assurance, that the
use of the amortized cost method of valuation will enable the Tax-Free Money
Fund to maintain a stable net asset value per share of $1.
Tax-exempt portfolio securities are valued for the Tax-Free Intermediate
Term Fund by an outside independent pricing service approved by the Board of
Trustees. The service generally utilizes a computerized grid matrix of
tax-exempt securities and evaluations by its staff to determine what it believes
is the fair value of the portfolio securities. The Board of Trustees believes
that timely and reliable market quotations are generally not readily available
to the Tax-Free Intermediate Term Fund for purposes of valuing tax-exempt
securities and that valuations supplied by the pricing service are more likely
to approximate the fair value of the tax-exempt securities. If, in the Adviser's
opinion, the valuation provided by the service does not accurately reflect the
fair value of a tax-exempt security, it will value the security at the average
of the prices quoted by at least two independent market makers. The quoted price
will represent the market maker's opinion as to the price that a
- 43 -
<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 Tax-Free
Intermediate Term Fund will fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Tax-Free Money Fund may advertise its "current
yield" and "effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "current
yield" of the Tax-Free Money Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. In addition, the Tax-Free Money
Fund may advertise together with its "current yield" or "effective yield" a
tax-equivalent "current yield" or "effective yield" which reflects the yield
which would be required of a taxable investment at a stated income tax rate in
order to equal the Fund's "current yield" or "effective yield."
From time to time, the Tax-Free Intermediate Term Fund may advertise its
"average annual total return." The Fund may also advertise "yield." Both yield
and average annual total return figures are based on historical earnings and are
not intended to indicate future performance. Total return and yield are computed
separately for Class A and Class C shares. The yield of Class A shares is
expected to be higher than the yield of Class C shares due to the higher
distribution fees imposed on Class C shares.
The "average annual total return" of the Tax-Free Intermediate Term Fund
refers to the average annual compounded rates of return over the most recent 1,
5 and 10 year periods or, where the Fund has not been in operation for such
period, over the life of the Fund (which periods will be stated in the
advertisement) that would equate an initial amount invested at the beginning of
a stated period to the ending redeemable value of the investment. The
calculation of "average annual total return" assumes the reinvestment of all
dividends and distributions and 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
- 44 -
<PAGE>
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.
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.
- 45 -
<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-A Shares (3) $________________ Branch Address:_________________________________
[ ] Tax-Free Intermediate Term $________________ Rep Name & No.:_________________________________
Fund-C Shares (16) Rep Signature:__________________________________
___________________________________________________________________________________________________________________
Initial Investment of $_____________
[ ] 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
___________________________________________________________________________________________________________________
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 (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):
[ ] $50,000 [ ] $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.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND TIN CERTIFICATION
I certify that I have full right and power, and legal capacity to purchase shares of the Funds and affirm that I have received a
current prospectus and understand the investment objectives and policies stated therein. 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. I certify under the penalities of perjury that (1) the Social
Security Number or Tax Identification Number shown is correct and (2) I am not subject to backup withholding. The certifications
in this paragraph are required from all non-exempt persons to prevent backup withholding of 31% of all taxable distributions and
gross redemption proceeds under the federal income tax law. 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 here if you are subject to
backup withholding). [ ]
___________________________________ __________________________________
Applicant Date Joint Applicant Date
___________________________________ ___________________________________
Other Authorized Signatory Date Other Authorized Signatory Date
NOTE: Corporations, trusts and other organizations must provide a copy of the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AUTHORIZATION - FOR USE BY CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER INSTITUTIONS
Please retain a copy of this document for your files. Any modification of the information contained in this section will
require an Amendment to this Application Form.
[ ] New Application [ ] Amendment to previous Application dated ________ Account No. _______________
Name of Registered Owner ________________________________________________________________________________
The following named person(s) are currently authorized signatories of the Registered Owner. Any ____ of them is/are authorized
under the applicable governing document to act with full power to sell, assign or transfer securities of Countrywide Tax-Free
Trust for the Registered Owner and to execute and deliver any instrument necessary to effectuate the authority hereby conferred:
Name Title Signature
___________________ ____________________ ___________________
___________________ ____________________ ___________________
___________________ ____________________ ___________________
COUNTRYWIDE TAX-FREE TRUST, or any agent of the Trust may, without inquiry, rely upon the instruction of any person(s)
purporting to be an authorized person named above, or in any Amendment received by the Trust or its agent. The Trust
and its Agent shall not be liable for any claims, expenses or losses resulting from having acted upon any instruction reasonably
believed to be genuine.
- --------------------------------------------------------------------------------------------------------------------------------
<PAGE>
SPECIAL INSTRUCTIONS
REDEMPTION INSTRUCTIONS
I understand that the telephone redemption privilege is automatically available to me unless I indicate otherwise below.
(See the prospectus for limitations on this option.)
[ ] I do not wish to have the telephone redemption privilege on my account.
REDEMPTION OPTIONS
[ ] Please mail redemption proceeds to the name and address of record.
[ ] Please wire redemptions to the commercial bank account indicated below (subject to a minimum wire transfer of $1,000 and an
$8.00 fee. For wire redemptions please attach a voided check from the account below).
[ ] Checkwriting - Call 1-800-543-0407 for checkwriting application and signature card.
AUTOMATIC INVESTMENT (For Automatic Investment please attach a voided check from the account below.)
Please purchase shares of the Fund by withdrawing from the commercial bank account below, per the instructions below:
Amount $_________(minimum $50)
______________________________ is hereby authorized to charge to my account the bank draft amount here indicated. I
understand the payment of this draft is subject to all provisions of the contract as stated on my
bank account signature card.
Please make my automatice investment on:
[ ] the last business day of each month [ ] the 15th day of each month [ ] both the 15th and last business day
_________________________________________________________________
(Signature as your name appears on the bank account to be drafted)
Name as it appears on the account __________________________________________________
Commerical bank account #___________________________________________________________
ABA Routing #_______________________________________________________________________
City, State and Zip in which bank is located _______________________________________
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
____________________________________________________________________________________________________________________________
</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
[logo]COUNTRYWIDE
INVESTMENTS
312 Walnut Street
Cincinnati, Ohio 45202
www.countrywideinvestments.com
(C)1999 Countrywide Investments, Inc. Trade/Service marks are the property of
Countrywide Credit Industries, Inc. and/or its subsidiaries.
- 46 -
<PAGE>
Tax-Exempt
PROSPECTUS
Ohio Insured
Tax-Free Fund
November 1, 1998
(Revised August 1, 1999)
[logo] COUNTRYWIDE
INVESTMENTS
<PAGE>
PROSPECTUS
November 1, 1998
(Revised August 1, 1999)
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.
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>
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.
- 2 -
<PAGE>
EXPENSE INFORMATION Class A Class C
Shares Shares
------ ------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75% 1.25%
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None* 1.00%
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. . . . . . $55 $70 $87 $136
Class C Shares. . . . . . $38 $59 $93 $189
- 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 governments 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 non-manufacturing 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 value 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
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<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 right to limit the amount of investments and to refuse to
sell to any person.
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<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.
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 higher
front-end sales load and be subject to lower ongoing charges, as discussed
below, or to have more 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
- 20 -
<PAGE>
sales loads who expect to maintain their investment for an extended period of
time might also elect the Class A sales load alternative because over time the
accumulated continuing distribution fees on Class C shares may exceed the
difference in initial sales loads between Class A and Class C shares. Again,
however, such investors must weigh this consideration against the fact that less
of their funds will be invested initially under the Class A sales load
alternative. Furthermore, the higher ongoing distribution fees will be offset to
the extent any return is realized on the additional funds initially invested
under the Class C sales load alternative.
Some investors might determine that it would be more advantageous to
utilize the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 4.75% 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 4 1/3 years before the 1.25% initial sales load and 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 4 1/3 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 financial 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.
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<PAGE>
In addition to the compensation otherwise paid to securities dealers, the
Adviser may from time to time pay from its own resources additional cash bonuses
or other incentives to selected dealers in connection with the sale of shares of
the Fund. On some occasions, such bonuses or incentives may be conditioned upon
the sale of a specified minimum dollar amount of the shares of the Fund and/or
other funds of Countrywide Investments during a specific period of time. Such
bonuses or incentives may include financial assistance to dealers in connection
with conferences, sales or training programs for their employees, seminars for
the public, advertising, sales campaigns and other dealer-sponsored programs or
events.
Class A Shares
- --------------
Class A shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Adviser by 5:00 p.m., Eastern time, that day
are confirmed at the public offering price determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Adviser by 5:00 p.m., Eastern time. Dealers may charge a
fee for effecting purchase orders. Direct purchase orders received by the
Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's public
offering price. Direct investments received by the Transfer Agent after 4:00
p.m., Eastern time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the public offering price next determined on the
following business day.
The public offering price of Class A shares applicable to investors whose
accounts are opened after July 31, 1999 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
Price Invested Price
------- -------- --------
Less than $50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $100,000 4.50% 4.72% 3.75%
$100,000 but less than $250,000 3.50% 3.63% 2.75%
$250,000 but less than $500,000 2.95% 3.04% 2.25%
$500,000 but less than $1,000,000 2.25% 2.31% 1.75%
$1,000,000 or more None* None*
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<PAGE>
Investors whose accounts were opened prior to August 1, 1999 are subject to
a different table of sales loads as follows:
Dealer
Sales Load as % of: Reallowance
------------------ 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, participating unaffiliated dealers will receive first year compensation
of up to 1% of the purchase amount from the Adviser. In determining a dealer's
eligibility for such commission, purchases of Class A shares of the Fund may be
aggregated with concurrent purchases of Class A shares of other funds of
Countrywide Investments. Dealers should contact the Adviser concerning the
applicability and calculation of the dealer's commission in the case of combined
purchases. An exchange from other funds of Countrywide Investments will not
qualify for payment of the dealer's commission, unless such exchange is from a
Countrywide fund with assets as to which a dealer's commission or similar
payment has not been previously paid. Redemptions of Class A shares may result
in the imposition of a contingent deferred sales load if the dealer's commission
described in this paragraph was paid in connection with the purchase of such
shares. See "Contingent Deferred Sales Charge for Certain Purchases of Class A
Shares" below.
- 23 -
<PAGE>
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the tables above. Purchases made in any
load fund distributed by the Adviser pursuant to a Letter of Intent may also be
eligible for the reduced sales loads. The minimum initial investment under a
Letter of Intent is $10,000. The load funds currently distributed by the Adviser
are listed in the Exchange Privilege section of this Prospectus. Shareholders
should contact the Transfer Agent for information about the Right of
Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. 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 C shares
of the Fund at net asset value. To the extent permitted by regulatory
authorities, a bank trust department may charge fees to clients for whose
account it purchases shares at net asset value. Federal and state credit unions
may also purchase Class A shares at net asset value.
In addition, Class A shares of the Fund may be purchased at net asset value
by broker-dealers who have a sales agreement with the Adviser, and their
registered personnel and employees, including members of the immediate families
of such registered personnel and employees.
Clients of investment advisers 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.
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<PAGE>
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 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 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
- 25 -
<PAGE>
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 public
offering price next determined after receipt of a purchase order by the Trust.
The public offering price of Class C shares is the next determined net asset
value per share plus a 1.25% front-end sales load. 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.
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
- 26 -
<PAGE>
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 2% of the purchase amount to participating
brokers at the time the investor purchases Class C shares.
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
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<PAGE>
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 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.
Reinvestment Privilege
----------------------
If you have redeemed shares of the Fund, you may reinvest all or part of
the proceeds without any additional sales load.
- 28 -
<PAGE>
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. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described below, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check, government check or wire.
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."
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 three business days after receipt of your telephone
instructions.
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 has been changed within the previous 30 days.
- 29 -
<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.
THROUGH BROKER-DEALERS. 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.
ADDITIONAL REDEMPTION INFORMATION. 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
- 30 -
<PAGE>
firm may also impose a charge for processing the wire. In the event that wire
transfer of funds is impossible or impractical, the redemption proceeds will be
sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
If a certificate for the shares was issued to you, you will not be
permitted to redeem or 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.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than the minimum amount required by the Trust for your account
(based on actual amounts invested including any sales load paid, unaffected by
market fluctuations), or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other.
Class A shares of the Fund which are not subject to a contingent deferred
sales load may be exchanged for Class A shares of any other fund and for shares
of any other fund which offers only one class of shares (provided such shares
are not subject to a contingent deferred sales load).
- 31 -
<PAGE>
Class C shares of the Fund, as well as Class A shares of the Fund subject
to a contingent deferred sales load, may be exchanged, on the basis of relative
net asset value per share, for shares of any other fund which imposes a
contingent deferred sales load and for shares of any fund which is a money
market fund. A fund will "tack" the period for which the shares being exchanged
were held onto the holding period of the acquired shares for purposes of
determining if a contingent deferred sales load is applicable in the event that
the acquired shares are redeemed following the exchange. The period of time that
shares are held in a money market fund will not count toward the holding period
for determining whether a contingent deferred sales load is applicable.
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
----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
Adjustable Rate U.S. Government
Securities Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
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
- 32 -
<PAGE>
for sale in your state of residence and are subject to the applicable minimum
initial investment requirements. The exchange privilege may be modified or
terminated by the Board of Trustees upon 60 days' prior notice to shareholders.
An exchange results in a sale of fund shares, which may cause you to recognize a
capital gain or loss. Before making an exchange, contact the Transfer Agent to
obtain a current prospectus for any of the other funds of Countrywide
Investments and more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly. The
Fund expects to distribute any net realized long-term capital gains at least
once each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains. The Fund will, at
the time dividends are paid, designate as tax-exempt the same percentage of the
distribution as the actual tax-exempt income earned during the period covered by
the distribution bore to total income earned during the period; the percentage
of the distribution which is tax-exempt may vary from distribution to
distribution.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains distributions
reinvested in additional shares.
Income Option - income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
Cash Option - income distributions and capital gains distributions paid
in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will
- 33 -
<PAGE>
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 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.
- 34 -
<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 Ohio personal income tax. The Tax Reform Act of 1986 also
created a tax preference for corporations equal to one-half of the excess of
adjusted net book income over alternative minimum taxable income. As a result,
one-half of tax-exempt interest income received from the Fund may be a tax
preference for corporate investors.
Redemptions and exchanges of shares of the Fund are taxable events on which
a shareholder may realize a gain or loss. If a shareholder buys shares of the
Fund and sells them at a loss within six months, any loss will be disallowed for
federal and Ohio income tax purposes to the extent of the exempt-interest
dividends received on such shares. Any loss realized upon the sale of shares of
the Fund within six months from the date of their purchase will be treated as a
long-term capital loss to the extent of amounts treated as distributions of net
realized long-term capital gains during such six month period. In addition,
shareholders should be aware that interest on indebtedness incurred to purchase
or carry shares of the Fund is not deductible for federal income tax purposes.
Shareholders receiving Social Security benefits may be taxed on a portion of
those benefits as a result of receiving tax-exempt income.
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
The Fund will report to its shareholders the percentage and source of income
earned on tax-exempt obligations held by it during the preceding year. An
exemption from federal income tax and Ohio personal income tax may not result in
similar exemptions under the laws of a particular state or local taxing
authority.
Shareholders should consult their tax advisors about the tax effect of
distributions and withdrawals from the Fund and the use of the Automatic
Withdrawal Plan and the Exchange Privilege. The tax consequences described in
this section apply whether distributions are taken in cash or reinvested in
additional
- 35 -
<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 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. 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
- 36 -
<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. Each class of
- 37 -
<PAGE>
shares of the Fund shall vote separately on matters relating to its plan of
distribution pursuant to Rule 12b-1 (see "Distribution Plans"). When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional shares owned. The
Trust does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
DISTRIBUTION PLANS
- ------------------
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Fund has adopted a plan of distribution (the "Class A Plan") under
which the Class A shares may directly incur or reimburse the Adviser for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class A Plan, the Fund may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Class A shares. For the
fiscal year ended June 30, 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
- 38 -
<PAGE>
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 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
- 39 -
<PAGE>
of underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Trust believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Trust believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
The National Association of Securities Dealers 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 Class A and Class C 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
- 40 -
<PAGE>
valuations supplied by the pricing service are more likely to approximate the
fair value of the tax-exempt securities. If, in the Adviser's opinion, the
valuation provided by the service does not accurately reflect the fair value of
a tax-exempt security, it will value the security at the average of the prices
quoted by at least two independent market makers. The quoted price will
represent the market maker's opinion as to the price that a willing buyer would
pay for the security. All other securities (and other assets) of the Fund for
which market quotations are not readily available are valued at their fair value
as determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. The
net asset value per share of the Fund will fluctuate with the value of the
securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its "average annual total
return." The Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance. Total return and yield are computed separately for
Class A and Class C shares. The yield of Class A shares is expected to be higher
than the yield of Class C shares due to the higher distribution fees imposed on
Class C shares.
The "average annual total return" of the Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and 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.
- 41 -
<PAGE>
The "yield" of the Fund is computed by dividing the net investment income
per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period. In addition,
the Fund may advertise together with its "yield" a tax-equivalent yield which
reflects the yield which would be required of a taxable investment at a stated
income tax rate in order to equal the Fund's "yield."
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK,
BARRON'S, FORTUNE or MORNINGSTAR MUTUAL FUND VALUES. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within its category as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Fund may also present its performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Adviser's view of current or past market conditions or historical trends.
Further information about the Fund's performance is contained in the
Trust's annual report which can be obtained by shareholders at no charge by
calling the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629- 2050) or by writing to the Trust at the address on the
front of this Prospectus.
- 42 -
<PAGE>
<TABLE>
<S> <C>
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 $_____________
[ ] 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
___________________________________________________________________________________________________________________
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 (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):
[ ] $50,000 [ ] $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.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND TIN CERTIFICATION
I certify that I have full right and power, and legal capacity to purchase shares of the Funds and affirm that I have received a
current prospectus and understand the investment objectives and policies stated therein. 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. I certify under the penalities of perjury that (1) the Social
Security Number or Tax Identification Number shown is correct and (2) I am not subject to backup withholding. The certifications
in this paragraph are required from all non-exempt persons to prevent backup withholding of 31% of all taxable distributions and
gross redemption proceeds under the federal income tax law. 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 here if you are subject to
backup withholding.) [ ]
___________________________________ __________________________________
Applicant Date Joint Applicant Date
___________________________________ ___________________________________
Other Authorized Signatory Date Other Authorized Signatory Date
NOTE: Corporations, trusts and other organizations must provide a copy of the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AUTHORIZATION - FOR USE BY CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER INSTITUTIONS
Please retain a copy of this document for your files. Any modification of the information contained in this section will
require an Amendment to this Application Form.
[ ] New Application [ ] Amendment to previous Application dated ________ Account No. _______________
Name of Registered Owner ________________________________________________________________________________
The following named person(s) are currently authorized signatories of the Registered Owner. Any ____ of them is/are authorized
under the applicable governing document to act with full power to sell, assign or transfer securities of Countrywide Tax-Free
Trust for the Registered Owner and to execute and deliver any instrument necessary to effectuate the authority hereby conferred:
Name Title Signature
___________________ ____________________ ___________________
___________________ ____________________ ___________________
___________________ ____________________ ___________________
COUNTRYWIDE TAX-FREE TRUST, or any agent of the Trust may, without inquiry, rely upon the instruction of any person(s)
purporting to be an authorized person named above, or in any Amendment received by the Trust or its agent. The Trust
and its Agent shall not be liable for any claims, expenses or losses resulting from having acted upon any instruction reasonably
believed to be genuine.
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------------
SPECIAL INSTRUCTIONS
REDEMPTION INSTRUCTIONS
I understand that the telephone redemption privilege is automatically available to me unless I indicate otherwise below.
(See the prospectus for limitations on this option.)
[ ] I do not wish to have the telephone redemption privilege on my account.
REDEMPTION OPTIONS
[ ] Please mail redemption proceeds to the name and address of record.
[ ] Please wire redemptions to the commercial bank account indicated below (subject to a minimum wire transfer of $1,000 and an
$8.00 fee. For wire redemptions please attach a voided check from the account below).
[ ] Checkwriting - Call 1-800-543-0407 for checkwriting application and signature card.
AUTOMATIC INVESTMENT (For Automatic Investment please attach a voided check from the account below.)
Please purchase shares of the Ohio Insured Tax-Free Fund by withdrawing from the commercial bank account below, per the
instructions below:
Amount $_________(minimum $50)
______________________________ is hereby authorized to charge to my account the bank draft amount here indicated. I
understand the payment of this draft is subject to all provisions of the contract as stated on my
bank account signature card.
Please make my automatice investment on:
[ ] the last business day of each month [ ] the 15th day of each month [ ] both the 15th and last business day
_________________________________________________________________
(Signature as your name appears on the bank account to be drafted)
Name as it appears on the account __________________________________________________
Commerical bank account #___________________________________________________________
ABA Routing #_______________________________________________________________________
City, State and Zip in which bank is located _______________________________________
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment by
you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous payment;
your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from either
party to the other.
- ---------------------------------------------------------------------------------------------------------------------------------
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________________ from my mutual fund account beginning the last business day of the
month of _____________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly - Withdrawals will be made on the last business day of each month.
[ ] Quarterly - Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually - Please make withdrawals on the last business day of the month of:____________________
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number: ___ ___ _ ___ ___ ___ ___
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
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
____________________________________________________________________________________________________________________________
</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
[logo] COUNTRYWIDE
- ------------------
Investments
312 Walnut Street
Cincinnati, Ohio 45202
www.countrywideinvestments.com
(C)1999 Countrywide Investments, Inc. Trade/Service marks are the property of
Countrywide Credit Industries, Inc. and/or its subsidiaries.
- 43 -
