COUNTRYWIDE TAX-FREE TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1998
Amended August 19, 1999
Tax-Free Money Fund
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
Ohio Tax-Free Money Fund
California Tax-Free Money Fund
Florida Tax-Free Money Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the applicable Fund of Countrywide
Tax-Free Trust dated November 1, 1998. A copy of a Fund's Prospectus can be
obtained by writing the Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202-4094, or by calling the Trust nationwide toll-free 800-543-0407, in
Cincinnati 629-2050.
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STATEMENT OF ADDITIONAL INFORMATION
Countrywide Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS PAGE
THE TRUST.................................................................... 3
MUNICIPAL OBLIGATIONS........................................................ 5
QUALITY RATINGS OF MUNICIPAL OBLIGATIONS..................................... 8
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS................................12
INVESTMENT LIMITATIONS.......................................................16
INSURERS OF THE OHIO INSURED TAX-FREE FUND'S PORTFOLIO SECURITIES........... 22
TRUSTEES AND OFFICERS........................................................24
THE INVESTMENT ADVISER AND UNDERWRITER.......................................26
DISTRIBUTION PLANS...........................................................29
SECURITIES TRANSACTIONS......................................................32
PORTFOLIO TURNOVER...........................................................34
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE.........................34
OTHER PURCHASE INFORMATION...................................................38
TAXES........................................................................39
REDEMPTION IN KIND...........................................................42
HISTORICAL PERFORMANCE INFORMATION...........................................42
PRINCIPAL SECURITY HOLDERS.................................................. 47
CUSTODIAN....................................................................49
AUDITORS.....................................................................49
TRANSFER AGENT . ............................................................49
TAX EQUIVALENT YIELD TABLES..................................................51
ANNUAL REPORT . . . .........................................................52
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THE TRUST
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Countrywide Tax-Free Trust (the "Trust"), formerly Midwest Group Tax
Free Trust, was organized as a Massachusetts business trust on April 13, 1981.
The Trust currently offers six series of shares to investors: the Tax-Free Money
Fund, the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the
Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida
Tax-Free Money Fund (referred to individually as a "Fund" and collectively as
the "Funds"). Each Fund has its own investment objective(s) and policies.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
Both Class A (Retail) shares and Class B (Institutional) shares of the
Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund represent an
interest in the same assets of such Fund, have the same rights and are identical
in all material respects except that (i) Class A shares bear the expenses of
distribution fees; (ii) certain class specific expenses will be borne solely by
the class to which such expenses are attributable, including transfer agent fees
attributable to a specific class of shares, printing and postage expenses
related to preparing and distributing materials to current shareholders of a
specific class, registration fees incurred by a specific class of shares, the
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; (iii) each class has exclusive voting rights with
respect to matters affecting only that class; and
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(iv) Class A shares are subject to a lower minimum initial investment
requirement and offer certain shareholder services not available to Class B
shares such as checkwriting privileges and automatic investment and redemption
plans.
Both Class A shares and Class C shares of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund represent an interest in the same
assets of such Fund, have the same rights and are identical in all material
respects except that (i) Class C shares bear the expenses of higher distribution
fees; (ii) certain other class specific expenses will be borne solely by the
class to which such expenses are attributable, including transfer agent fees
attributable to a specific class of shares, printing and postage expenses
related to preparing and distributing materials to current shareholders of a
specific class, registration fees incurred by a specific class of shares, the
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements.
The Board of Trustees may classify and reclassify the shares of a Fund
into additional classes of shares at a future date.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of an instance where such result has occurred. In addition, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the Trustees.
The Trust Agreement also provides for the indemnification out of the Trust
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Moreover, it provides that the Trust will,
upon request, assume the defense of any claim made against any shareholder for
any act or obligation of the Trust and satisfy any judgment thereon. As a
result, and particularly because the Trust assets are readily marketable and
ordinarily substantially exceed liabilities, management believes that the risk
of shareholder liability is slight and limited to circumstances in which the
Trust itself would be unable to meet its obligations. Management believes that,
in view of the above, the risk of personal liability is remote.
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MUNICIPAL OBLIGATIONS
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Each Fund invests primarily in Municipal Obligations. Municipal
Obligations are debt obligations issued by a state and its political
subdivisions, agencies, authorities and instrumentalities and other qualifying
issuers which pay interest that is, in the opinion of bond counsel to the
issuer, exempt from federal income tax. Municipal Obligations include tax-exempt
bonds, notes and commercial paper. The Ohio Insured Tax- Free Fund and the Ohio
Tax-Free Money Fund invest primarily in Ohio Obligations, which are Municipal
Obligations issued by the State of Ohio and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
both federal income tax and Ohio personal income tax. The California Tax-Free
Money Fund invests primarily in California Obligations, which are Municipal
Obligations issued by the State of California and its political subdivisions,
agencies, authorities and instrumentalities and other qualifying issuers which
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
both federal income tax and California income tax. The Florida Tax-Free Money
Fund invests primarily in Florida Obligations, which are Municipal Obligations
issued by the State of Florida and its political subdivisions, agencies,
authorities and instrumentalities and other qualifying issuers, the value of
which is exempt from the Florida intangible personal property tax, which pay
interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax.
TAX-EXEMPT BONDS. Tax-exempt bonds are issued to obtain funds to
construct, repair or improve various facilities such as airports, bridges,
highways, hospitals, housing, schools, streets and water and sewer works, to pay
general operating expenses or to refinance outstanding debts. They also may be
issued to finance various private activities, including the lending of funds to
public or private institutions for construction of housing, educational or
medical facilities or the financing of privately owned or operated facilities.
The two principal classifications of tax-exempt bonds are "general
obligation" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private user of the
facility.
TAX-EXEMPT NOTES. Tax-exempt notes generally are used to provide for
short-term capital needs and generally have maturities of one year or less.
Tax-exempt notes include:
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1. TAX ANTICIPATION NOTES. Tax anticipation notes are issued
to finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues, such as
income, sales, use and business taxes, and are payable from these
specific future taxes.
2. REVENUE ANTICIPATION NOTES. Revenue anticipation notes are
issued in expectation of receipt of other kinds of revenue, such as
federal revenues available under the federal revenue sharing programs.
3. BOND ANTICIPATION NOTES. Bond anticipation notes are issued
to provide interim financing until long-term financing can be arranged.
In most cases, the long-term bonds then provide the money for the
repayment of the notes.
TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial paper typically
represents short-term, unsecured, negotiable promissory notes issued by a state
and its political subdivisions. These notes are issued to finance seasonal
working capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are refinanced
with long-term debt. In most cases, tax-exempt commercial paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions and is
actively traded.
WHEN-ISSUED OBLIGATIONS. Each Fund may invest in when- issued Municipal
Obligations. In connection with these investments, each Fund will direct its
Custodian to place cash or liquid securities in a segregated account in an
amount sufficient to make payment for the securities to be purchased. When a
segregated account is maintained because a Fund purchases securities on a
when-issued basis, the assets deposited in the segregated account will be valued
daily at market for the purpose of determining the adequacy of the securities in
the account. If the market value of such securities declines, additional cash or
securities will be placed in the account on a daily basis so that the market
value of the account will equal the amount of the Fund's commitments to purchase
securities on a when-issued basis. To the extent funds are in a segregated
account, they will not be available for new investment or to meet redemptions.
Securities purchased on a when-issued basis and the securities held in a Fund's
portfolio are subject to changes in market value based upon changes in the level
of interest rates (which will generally result in all of those securities
changing in value in the same way, i.e, all those securities experiencing
appreciation when interest rates decline and depreciation when interest rates
rise). Therefore, if in order to achieve higher returns, a Fund remains
substantially fully invested at the same time that it has
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purchased securities on a when-issued basis, there will be a possibility that
the market value of the Fund's assets will have greater fluctuation. The
purchase of securities on a when-issued basis may involve a risk of loss if the
broker-dealer selling the securities fails to deliver after the value of the
securities has risen.
When the time comes for a Fund to make payment for securities purchased
on a when-issued basis, the Fund will do so by using then-available cash flow,
by sale of the securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the securities purchased on a when-issued basis themselves (which may
have a market value greater or less than the Fund's payment obligation).
Although a Fund will only make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, the
Funds may sell these obligations before the settlement date if it is deemed
advisable by the Adviser as a matter of investment strategy. Sales of securities
for these purposes carry a greater potential for the realization of capital
gains and losses, which are not exempt from federal income taxes.
PARTICIPATION INTERESTS. Each Fund may invest in participation
interests in Municipal Obligations. A Fund will have the right to sell the
interest back to the bank or other financial institution and draw on the letter
of credit on demand, generally on seven days' notice, for all or any part of the
Fund's participation interest in the par value of the Municipal Obligation plus
accrued interest. Each Fund intends to exercise the demand on the letter of
credit only under the following circumstances: (1) default of any of the terms
of the documents of the Municipal Obligation, (2) as needed to provide liquidity
in order to meet redemptions, or (3) to maintain a high quality investment
portfolio. The bank or financial institution will retain a service and letter of
credit fee and a fee for issuing the repurchase commitment in an amount equal to
the excess of the interest paid by the issuer on the Municipal Obligations over
the negotiated yield at which the instruments were purchased by the Fund.
Participation interests will be purchased only if, in the opinion of counsel of
the issuer, interest income on the interests will be tax-exempt when distributed
as dividends to shareholders.
Banks and financial institutions are subject to extensive governmental
regulations which may limit the amounts and types of loans and other financial
commitments that may be made and interest rates and fees which may be charged.
The profitability of banks and financial institutions is largely dependent upon
the availability and cost of capital funds to finance lending operations under
prevailing money market conditions. General economic conditions also play an
important part in the operations
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of these entities and exposure to credit losses arising from possible financial
difficulties of borrowers may affect the ability of a bank or financial
institution to meet its obligations with respect to a participation interest.
LEASE OBLIGATIONS. The Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund may invest in Municipal Obligations that constitute
participation in lease obligations or installment purchase contract obligations
(hereinafter collectively called "lease obligations") of municipal authorities
or entities. Lease obligations provide a premium interest rate, which along with
the regular amortization of the principal, may make them attractive for a
portion of the assets of the Funds. As described in the Prospectus, certain of
these lease obligations contain "non-appropriation" clauses, and the Trust will
seek to minimize the special risks associated with such securities by only
investing in "non-appropriation" lease obligations where (1) the nature of the
leased equipment or property is such that its ownership or use is essential to a
governmental function of the municipality, (2) the lease payments will commence
amortization of principal at an early date resulting in an average life of seven
years or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if the lease payments are not appropriated, (4) the lease
obligor has maintained good market acceptability in the past, (5) the investment
is of a size that will be attractive to institutional investors, and (6) the
underlying leased equipment has elements of portability and/or use that enhance
its marketability in the event foreclosure on the underlying equipment were ever
required.
Each of the Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund will not invest more than 10% of its net assets in lease
obligations if the Adviser determines that there is no secondary market
available for these obligations and all other illiquid securities. The Funds do
not intend to invest more than an additional 5% of their net assets in municipal
lease obligations determined by the Adviser, under the direction of the Board of
Trustees, to be liquid. In determining the liquidity of such obligations, the
Adviser will consider such factors as (1) the frequency of trades and quotes for
the obligation; (2) the number of dealers willing to purchase or sell the
security and the number of other potential buyers; (3) the willingness of
dealers to undertake to make a market in the security; and (4) the nature of the
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer.
QUALITY RATINGS OF MUNICIPAL OBLIGATIONS
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The Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California
Tax-Free Money Fund and the Florida Tax-Free Money Fund may invest in Municipal
Obligations only if rated at the
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time of purchase within the two highest grades assigned by any two nationally
recognized statistical rating organizations ("NRSROs") (or by any one NRSRO if
the obligation is rated by only that NRSRO). The NRSROs which may rate the
obligations of the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund include
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group
("S&P") or Fitch Investors Services, Inc. ("Fitch").
The Tax-Free Intermediate Term Fund may invest in Municipal Obligations
rated at the time of purchase within the three highest grades assigned by
Moody's, S&P or Fitch. The Ohio Insured Tax-Free Fund may invest in Municipal
Obligations rated at the time of purchase within the four highest grades
assigned by Moody's, S&P or Fitch. The Tax-Free Intermediate Term Fund and the
Ohio Insured Tax-Free Fund may also invest in tax-exempt notes and commercial
paper determined by the Adviser to meet the Funds' quality standards. In making
this determination, the Adviser will consider the ratings assigned by the NRSROs
for those obligations.
Moody's Ratings
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1. TAX-EXEMPT BONDS. The four highest ratings of Moody's for tax-exempt
bonds are Aaa, Aa, A and Baa. Bonds rated Aaa are judged by Moody's to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issuers. Bonds
rated Aa are judged to be of high quality by all standards. Together with the
Aaa group, they comprise what are generally known as high-grade bonds. Moody's
says that Aa bonds are rated lower than the best bonds because margins of
protection or other elements make long term risks appear somewhat larger than
Aaa bonds. Moody's describes bonds rated A as possessing many favorable
investment attributes and as upper medium grade obligations. Factors giving
security to principal and interest of A rated bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Bonds which are rated by Moody's in the fourth highest rating (Baa)
are considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Those obligations in the A and Baa group which Moody's
believes possess the strongest investment attributes are designated by the
symbol A 1 and Baa 1.
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2. TAX-EXEMPT NOTES. Moody's highest rating for tax-exempt notes is
MIG-1. Moody's says that notes rated MIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
Notes bearing the MIG-2 designation are of high quality, with margins of
protection ample although not so large as in the MIG-1 group. Notes bearing the
designation MIG-3 are of favorable quality, with all security elements accounted
for but lacking the undeniable strength of the preceding grades. Market access
for refinancing, in particular, is likely to be less well established.
3. TAX-EXEMPT COMMERCIAL PAPER. The rating Prime-1 is the highest
tax-exempt commercial paper rating assigned by Moody's. Issuers rated Prime-1
are judged to be of the best quality. Their short-term debt obligations carry
the smallest degree of investment risk. Margins of support for current
indebtedness are large or stable with cash flow and asset protection well
assured. Current liquidity provides ample coverage of near-term liabilities and
unused alternative financing arrangements are generally available. While
protective elements may change over the intermediate or long term, such changes
are most unlikely to impair the fundamentally strong position of short-term
obligations. Issuers rated Prime-2 have a strong capacity for repayment of
short-term obligations.
S&P Ratings
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1. TAX-EXEMPT BONDS. The four highest ratings of S&P for tax-exempt
bonds are AAA, AA, A and BBB. Bonds rated AAA have the highest rating assigned
by S&P to a debt obligation. Capacity to pay interest and repay principal is
extremely strong. Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in a small degree.
Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
Bonds which are rated by S&P in the fourth highest rating (BBB) are regarded as
having an adequate capacity to pay interest and repay principal and are
considered "investment grade." Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal than
for bonds in higher rated categories. The ratings for tax-exempt bonds may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
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2. TAX-EXEMPT NOTES. Tax-exempt note ratings are generally given by S&P
to notes that mature in three years or less. Notes rated SP-1 have very strong
or strong capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics will be given a plus designation. Notes
rated SP-2 have satisfactory capacity to pay principal and interest.
3. TAX-EXEMPT COMMERCIAL PAPER. The ratings A-1+ and A-1 are the
highest tax-exempt commercial paper ratings assigned by S&P. These designations
indicate the degree of safety regarding timely payment is either overwhelming
(A-1+) or very strong (A- 1). Capacity for timely payment on issues rated A-2 is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated A-1.
Fitch Ratings
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1. TAX-EXEMPT BONDS. The four highest ratings of Fitch for tax-exempt
bonds are AAA, AA, A and BBB. Bonds rated AAA are regarded by Fitch as being of
the highest quality, with the obligor having an extraordinary ability to pay
interest and repay principal which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are regarded by Fitch as high quality
obligations. The obligor's ability to pay interest and repay principal, while
very strong, is somewhat less than for AAA rated bonds, and more subject to
possible change over the term of the issue. Bonds rated A are regarded by Fitch
as being of good quality. The obligor's ability to pay interest and repay
principal is strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings. Bonds rated BBB are
regarded by Fitch as being of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to weaken this
ability than bonds with higher ratings. Fitch ratings may be modified by the
addition of a plus (+) or minus (-) sign.
2. TAX-EXEMPT NOTES. The ratings F-1+, F-1 and F-2 are the highest
ratings assigned by Fitch for tax-exempt notes. Notes assigned the F-1+ rating
are regarded by Fitch as having the strongest degree of assurance for timely
payment. Notes assigned the F-1 rating reflect an assurance for timely payment
only slightly less than the strongest issues. Notes assigned the F-2 rating have
a degree of assurance for timely payment with a lesser margin of safety than
higher-rated notes.
3. TAX-EXEMPT COMMERCIAL PAPER. Commercial paper rated Fitch-1 is
regarded as having the strongest degree of assurance for timely payment. Issues
assigned the Fitch-2 rating reflect an assurance of timely payment only slightly
less in degree than the strongest issues.
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GENERAL. The ratings of Moody's, S&P and Fitch represent their opinions
of the quality of the obligations rated by them. It should be emphasized that
such ratings are general and are not absolute standards of quality.
Consequently, obligations with the same maturity, coupon and rating may have
different yields, while obligations of the same maturity and coupon, but with
different ratings, may have the same yield. It is the responsibility of the
Adviser to appraise independently the fundamental quality of the obligations
held by the Funds. Certain Municipal Obligations may be backed by letters of
credit or similar commitments issued by banks and, in such instances, the
obligation of the bank and other credit factors will be considered in assessing
the quality of the Municipal Obligations.
Any Municipal Obligation which depends on the credit of the U.S.
Government (e.g. project notes) will be considered by the Adviser as having the
equivalent of the highest rating of Moody's, S&P or Fitch. In addition, unrated
Municipal Obligations will be considered as being within the foregoing quality
ratings if other equal or junior Municipal Obligations of the same issuer are
rated and their ratings are within the foregoing ratings of Moody's, S&P or
Fitch. Each Fund may also invest in Municipal Obligations which are not rated
if, in the opinion of the Adviser, such obligations are of comparable quality to
those rated obligations in which the applicable Fund may invest.
Subsequent to its purchase by a Fund, an obligation may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. If the rating of an obligation held by a Fund is reduced below its
minimum requirements, the Fund will be required to exercise the demand provision
or sell the obligation as soon as practicable.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
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A more detailed discussion of some of the terms used and investment
policies described in the Prospectuses (see "Investment Objectives and
Policies") appears below:
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or of banks or institutions the accounts of which are insured by
the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable certificates
evidencing the indebtedness of a commercial bank to repay funds deposited with
it for a definite period of time (usually from fourteen days to one year) at a
stated or variable interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been
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drawn on it by a customer, which instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon maturity.
The Funds will only invest in bankers' acceptances of banks having a short-term
rating of A-1 by S&P or Prime-1 by Moody's. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at a
stated interest rate. Each Fund will not invest in time deposits maturing in
more than seven days if, as a result thereof, more than 10% of the value of its
net assets would be invested in such securities and other illiquid securities.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from
one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations. Each Fund will only
invest in taxable commercial paper provided the paper is rated in one of the two
highest categories by any two NRSROs (or by any one NRSRO if the security is
rated by only that NRSRO). Each Fund may also invest in unrated commercial paper
of issuers who have outstanding unsecured debt rated Aa or better by Moody's or
AA or better by S&P. Certain notes may have floating or variable rates. Variable
and floating rate notes with a demand notice period exceeding seven days will be
subject to each Fund's restrictions on illiquid investments (see "Investment
Limitations") unless, in the judgment of the Adviser, subject to the direction
of the Board of Trustees, such note is liquid. The Funds do not presently intend
to invest in taxable commercial paper.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's. Among the factors considered by Moody's in assigning ratings are the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist with the
issuer; and recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated Prime-1 or Prime-2. Commercial paper rated A (highest
quality) by S&P has the following characteristics: liquidity ratios are adequate
to meet cash requirements; long-term senior debt is rated "A" or better,
although in some cases "BBB" credits may be allowed; the issuer has access to at
least two additional channels of borrowing; basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and the reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-1 or A-2.
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REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 10% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time a Fund enters
into a repurchase agreement, the value of the underlying security, including
accrued interest, will equal or exceed the value of the repurchase agreement,
and in the case of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including accrued interest,
will at all times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must consist of either certificates
of deposit, eligible bankers' acceptances or securities which are issued or
guaranteed by the United States Government or its agencies. The collateral will
be held by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Fund to the seller subject to the
repurchase agreement and is therefore subject to that Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by a Fund subject to a repurchase agreement as being
owned by that Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, a Fund may encounter delays and incur costs before being
able to sell the security. Delays may involve loss
- 14 -
<PAGE>
of interest or decline in price of the security. If a court characterized the
transaction as a loan and a Fund has not perfected a security interest in the
security, that Fund may be required to return the security to the seller's
estate and be treated as an unsecured creditor of the seller. As an unsecured
creditor, a Fund would be at the risk of losing some or all of the principal and
income involved in the transaction. As with any unsecured debt obligation
purchased for a Fund, the Adviser seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligor, in this
case, the seller. Apart from the risk of bankruptcy or insolvency proceedings,
there is also the risk that the seller may fail to repurchase the security, in
which case a Fund may incur a loss if the proceeds to that Fund of the sale of
the security to a third party are less than the repurchase price. However, if
the market value of the securities subject to the repurchase agreement becomes
less than the repurchase price (including interest), the Fund involved will
direct the seller of the security to deliver additional securities so that the
market value of all securities subject to the repurchase agreement will equal or
exceed the repurchase price. It is possible that a Fund will be unsuccessful in
seeking to enforce the seller's contractual obligation to deliver additional
securities.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities subject to the restrictions stated in its Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by a Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Funds receive amounts equal to the interest on loaned securities and also
receive one or more of (a) negotiated loan fees, (b) interest on securities used
as collateral, or (c) interest on short-term debt securities purchased with such
collateral; either type of interest may be shared with the borrower. The Funds
may also pay fees to placing brokers as well as custodian and administrative
fees in connection with loans. Fees may only be paid to a placing broker
provided that the Trustees determine that the fee paid to the placing broker is
reasonable and based solely upon services rendered, that the Trustees separately
consider the propriety of any fee shared by the placing broker with the
borrower, and that the fees are not used to compensate the Adviser or any
affiliated person of the Trust or an affiliated person of the Adviser or other
affiliated person. The terms of the Funds' loans must meet applicable tests
under the Internal Revenue Code and permit the Funds to reacquire loaned
securities on five days' notice or in time to vote on any important matter.
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<PAGE>
MAJORITY. As used in the Prospectuses and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
any Fund) means the lesser of (1) 67% or more of the outstanding shares of the
Trust (or the applicable Fund) present at a meeting, if the holders of more than
50% of the outstanding shares of the Trust (or the applicable Fund) are present
or represented at such meeting or (2) more than 50% of the outstanding shares of
the Trust (or the applicable Fund).
INVESTMENT LIMITATIONS
- ----------------------
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to any Fund without the affirmative vote of a
majority of the outstanding shares of that Fund. For the purpose of these
investment limitations, the identification of the "issuer" of Municipal
Obligations which are not general obligation bonds is made by the Adviser on the
basis of the characteristics of the obligation, the most significant of which is
the source of funds for the payment of principal of and interest on such
obligations.
THE LIMITATIONS APPLICABLE TO THE TAX-FREE MONEY FUND, THE
TAX-FREE INTERMEDIATE TERM FUND AND THE OHIO INSURED TAX-FREE FUND ARE:
1. Borrowing Money. Each Fund will not borrow money or pledge, mortgage
or hypothecate its assets, except as a temporary measure for extraordinary or
emergency purposes and then only in amounts not in excess of 10% of the value of
its total assets. A Fund will not make any additional purchases of portfolio
securities while borrowings are outstanding.
2. Underwriting. Each Fund will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), a
Fund may be deemed an underwriter under certain federal securities laws.
3. Illiquid Investments. Each Fund will not purchase securities for
which there are legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 10% of the value of the total assets of the Fund would be invested in
such securities.
4. Real Estate. Each Fund will not purchase, hold or deal in real
estate, but this shall not prevent investments in Municipal Obligations which
are secured by or represent interests in real estate.
- 16 -
<PAGE>
5. Commodities. Each Fund will not purchase, hold or deal in
commodities or commodities futures contracts, or invest in oil, gas or other
mineral explorative or development programs.
6. Loans. Each Fund will not make loans to other persons, except (a) by
the purchase of a portion of an issue of debt securities in accordance with its
investment objective, policies and limitations, (b) by loaning portfolio
securities, or (c) by engaging in repurchase transactions.
7. Certain Companies. Each Fund will not purchase securities of a
company, if such purchase at the time thereof, would cause more than 5% of the
Fund's total assets to be invested in securities of companies, which, including
predecessors, have a record of less than three years' continuous operation.
8. Obligations of One Issuer. Each Fund will not purchase more than 10%
of the outstanding publicly issued debt obligations of any issuer. With respect
to the Ohio Insured Tax-Free Fund, this limitation does not apply to securities
issued or guaranteed by the State of Ohio and its political subdivisions and
duly constituted authorities and corporations. This limitation is not applicable
to privately issued Municipal Obligations.
9. Investing for Control. Each Fund will not invest in companies for
the purpose of exercising control.
10. Other Investment Companies. Each Fund will not invest more than 10%
of its total assets in the securities of other investment companies and then
only for temporary purposes in companies whose dividends are tax-exempt or
invest more than 5% of its total assets in the securities of any investment
company. Each Fund will not purchase more than 3% of the outstanding voting
stock of any investment company.
11. Margin Purchases. Each Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short-term credit obtained by a Fund for the clearance of purchases and sales or
redemption of securities.
12. Common Stocks. Each Fund will not invest in common stocks.
13. Securities Owned by Affiliates. Each Fund will not purchase or
retain the securities of any issuer if, to the Trust's knowledge, those Trustees
and officers of the Trust or of the Adviser, who individually own beneficially
more than 0.5% of the outstanding securities of such issuer, together own
beneficially more than 5% of such securities.
- 17 -
<PAGE>
14. Short Sales and Options. Each Fund will not sell any securities
short or write call options. This limitation is not applicable to the extent
that sales by a Fund of Municipal Obligations with puts attached or sales by a
Fund of other securities in which the Fund may otherwise invest would be
considered to be sales of options.
As diversified series of the Trust, the Tax-Free Money Fund and the
Tax-Free Intermediate Term Fund have adopted the following additional investment
limitation, which may not be changed with respect to either Fund without the
affirmative vote of a majority of the outstanding shares of the applicable Fund.
Neither Fund will purchase the securities of any issuer if such purchase at the
time thereof would cause less than 75% of the value of the total assets of the
Fund to be invested in cash and cash items (including receivables), securities
issued by the U.S. Government, its agencies or instrumentalities, securities of
other investment companies, and other securities for the purposes of this
calculation limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the total assets of a Fund and to not more than
10% of the outstanding voting securities of such issuer.
THE LIMITATIONS APPLICABLE TO THE OHIO TAX-FREE MONEY FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that, when made, such temporary borrowings are
in an amount not exceeding 5% of the Fund's total assets. The Fund also will not
make any borrowing which would cause outstanding borrowings to exceed one-third
of the value of its total assets. The Fund will not make any additional
purchases of portfolio securities if outstanding borrowings exceed 5% of the
value of its total assets.
2. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by it
except as may be necessary in connection with borrowings described in limitation
(1) above. The Fund will not mortgage, pledge or hypothecate more than one-third
of its assets in connection with borrowings.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of its portfolio securities (including
restricted securities), the Fund may be deemed an underwriter under certain
federal securities laws.
- 18 -
<PAGE>
4. Illiquid Investments. The Fund will not invest more than 10% of its
net assets in securities for which there are legal or contractual restrictions
on resale, repurchase agreements maturing in more than seven days and other
illiquid securities.
5. Real Estate. The Fund will not purchase, hold or deal in real
estate. This limitation is not applicable to investments in securities which are
secured by or represent interests in real estate.
6. Commodities. The Fund will not purchase, hold or deal in commodities
or commodities futures contracts, or invest in oil, gas or other mineral
explorative or development programs. This limitation is not applicable to the
extent that the tax-exempt obligations, U.S. Government obligations and other
securities in which the Fund may otherwise invest would be considered to be such
commodities, contracts or investments.
7. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
a portion of an issue of tax-exempt obligations or publicly distributed bonds,
debentures or other securities.
8. Margin Purchases. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short-term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities.
9. Short Sales and Options. The Fund will not sell any securities short
or sell put and call options. This limitation is not applicable to the extent
that sales by the Fund of tax-exempt obligations with puts attached or sales by
the Fund of other securities in which the Fund may otherwise invest would be
considered to be sales of options.
10. Other Investment Companies. The Fund will not invest more than 5%
of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Concentration. The Fund will not invest more than 25% of its total
assets in a particular industry; this limitation is not applicable to
investments in tax-exempt obligations issued by the U.S. Government, its
territories and possessions, the District of Columbia and their respective
agencies and instrumentalities or any state and its political subdivisions,
agencies, authorities and instrumentalities. The Fund may invest more than 25%
of its total assets in tax-exempt obligations in a particular segment of the
bond market.
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<PAGE>
THE LIMITATIONS APPLICABLE TO THE CALIFORNIA TAX-FREE MONEY FUND AND
THE FLORIDA TAX-FREE MONEY FUND ARE:
1. Borrowing Money. Each Fund will not borrow money, except from a bank
for temporary purposes only, provided that, when made, such temporary borrowings
are in an amount not exceeding 10% of its total assets. Each Fund will not make
any additional purchases of portfolio securities if outstanding borrowings
exceed 5% of the value of its total assets.
2. Pledging. Each Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. Each Fund will not mortgage, pledge or hypothecate more
than 10% of the value of its total assets in connection with borrowings.
3. Underwriting. Each Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of its portfolio securities (including
restricted securities), a Fund may be deemed an underwriter under certain
federal securities laws.
4. Illiquid Investments. Each Fund will not invest more than 10% of its
net assets in securities for which there are legal or contractual restrictions
on resale, repurchase agreements maturing in more than seven days and other
illiquid securities.
5. Real Estate. Each Fund will not purchase, hold or deal in real
estate. This limitation is not applicable to investments in securities which are
secured by or represent interests in real estate.
6. Commodities. Each Fund will not purchase, hold or deal in
commodities or commodities futures contracts, or invest in oil, gas or other
mineral explorative or development programs. This limitation is not applicable
to the extent that the tax-exempt obligations, U.S. Government obligations and
other securities in which the Funds may otherwise invest would be considered to
be such commodities, contracts or investments.
7. Loans. Each Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
a portion of an issue of tax-exempt obligations or publicly distributed bonds,
debentures or other securities.
- 20 -
<PAGE>
8. Margin Purchases. Each Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short-term credit obtained by the Funds for the clearance of purchases and sales
or redemption of securities.
9. Short Sales and Options. Each Fund will not sell any securities
short or sell put and call options. This limitation is not applicable to the
extent that sales by a Fund of tax-exempt obligations with puts attached or
sales by a Fund of other securities in which a Fund may otherwise invest would
be considered to be sales of options.
10. Other Investment Companies. Each Fund will not invest more than 5%
of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Concentration. Each Fund will not invest more than 25% of its total
assets in a particular industry; this limitation is not applicable to
investments in tax-exempt obligations issued by governments or political
subdivisions of governments.
12. Senior Securities. Each Fund will not issue or sell any class of
senior security as defined by the Investment Company Act of 1940 except to the
extent that notes evidencing temporary borrowings or the purchase of securities
on a when-issued basis might be deemed as such.
With respect to the percentages adopted by the Trust as maximum
limitations on the Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.
The Trust has never pledged, mortgaged or hypothecated the assets of
any Fund, and the Trust presently intends to continue this policy. The Trust has
never acquired, nor does it presently intend to acquire, securities issued by
any other investment company or investment trust. The Funds will not purchase
securities for which there are legal or contractual restrictions on resale or
enter into a repurchase agreement maturing in more than seven days if, as a
result thereof, more than 10% of the value of a Fund's net assets would be
invested in such securities. The statements of intention in this paragraph
reflect nonfundamental policies which may be changed by the Board of Trustees
without shareholder approval.
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<PAGE>
INSURERS OF THE OHIO INSURED TAX-FREE FUND'S PORTFOLIO SECURITIES
- -----------------------------------------------------------------
In connection with its investments in insured long-term Ohio
Obligations, the Ohio Insured Tax-Free Fund may purchase insurance from, or
obligations insured by, one of the following recognized insurers of municipal
obligations: MBIA Insurance Corp.("MBIA"), AMBAC Assurance Corp. ("AMBAC"),
Financial Guaranty Insurance Co. ("FGIC") or Financial Security Assurance Inc.
("FSA"). Each insurer is rated Aaa by Moody's and AAA by S&P and each insurer
maintains a statutory capital claims ratio well below the exposure limits set by
the Insurance Commissioner of New York (300:1 insurance risk exposure to every
dollar of statutory capital). While such insurance reduces the risk that
principal or interest will not be paid when due, it is not a protection against
market risks arising from other factors, such as changes in prevailing interest
rates. If the issuer defaults on payments of interest or principal, the trustee
and/or payment agent of the issuer will notify the insurer who will make payment
to the bondholders. There is no assurance that any insurance company will meet
its obligations.
MBIA has been the leader in the municipal bond insurance market for the
past sixteen years, holding a 42% share of the market in 1997. MBIA's volume of
new issue municipal bonds increased to approximately $44 billion in 1997, as
compared to $37 billion during the previous year. While premium levels in the
municipal market continue to be very competitive, insurers throughout the
industry are diversifying their products by targeting both the asset-based and
the international markets. Although municipal bond insurance remains the
dominant component of MBIA's written and earned premiums, the company further
expanded its asset-backed business in 1998 with the acquisition of CapMAC
Holdings Inc. MBIA's efforts to capitalize on international insurance
opportunities began in 1995 when it entered into a European joint venture with
AMBAC and expanded further in 1998 with the opening of an office in Japan.
MBIA's international business volume as of December 31, 1997 represents 2.3% of
its total insured portfolio. MBIA continues to successfully position itself for
continued growth and diversification without a material negative impact on its
overall consolidated risk profile. MBIA is 98.4% publicly owned, with its
remaining shares owned by Aetna Casualty & Surety Company.
AMBAC is the oldest and second largest bond insurer. AMBAC held a 24%
share of the municipal bond market in 1997, down from 29% the previous year, as
management was not willing to follow downward pricing trends to maintain its
share of the market. AMBAC has historically taken a very conservative approach
to the bond insurance business, beyond simply underwriting, to a zero- loss
philosophy. Management remains committed to investment- grade underwriting and
risk management, not only for its bond insurance business, but for all of its
products. AMBAC's
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<PAGE>
disciplined underwriting continues to produce a high-quality book of business
with a very low insured portfolio risk profile and a high margin of safety. As
with other insurers, product diversification has been a cornerstone of the AMBAC
strategic plan. The AMBAC and MBIA joint venture in Europe has made a material
contribution to the overall business success of AMBAC's specialized finance
division and AMBAC's entry into the asset-based insurance sector now accounts
for 35% of its net par written. AMBAC is entirely owned by public shareholders.
FGIC is 99% owned by General Electric Capital Services and 1% owned by
Sumitomo Marine & Fire Insurance Co. Ltd. FGIC remains committed to
investment-grade, zero-loss underwriting and risk management standards. This has
resulted in a high-quality book of insured business. FGIC employs a conservative
underwriting strategy in terms of its target markets, focusing on the low-risk
sectors of the municipal market such as general obligations, tax-backed, water,
sewer and transportation sectors. Although the company posted a 49.7% increase
in net par written in 1997, net premiums written only rose 12.7%. The lower
growth rate of net premiums written compared to net par written is the result of
pricing declines in FGIC's targeted sectors, which represent the most
competitively priced sectors. Without pressure from its parent to provide ever
increasing returns, FGIC has little incentive to expand into the riskier sectors
of the municipal market and therefore continues to focus on the lower- risk
sectors that provide stable earnings.
FSA continues to expand its presence in the municipal bond market with
a 15% market share in 1997, up from a 5% market share in 1995. While FSA's roots
are in the asset-based insurance sector, it no longer is the perennial market
share leader in this market, although it remains a major player. From a total
portfolio perspective, municipal insurance in force has surpassed the insured
asset-backed portfolio. Municipal net par now represents 63% of the total par
book of business with asset- backed net exposure declining to about 37%. The
company's quality and risk management measurements are generally equal to or
slightly better than most industry averages and it continues to predominately
seek investment-grade underwriting. FSA's capital adequacy margin of safety,
currently in the 1.5x - 1.6x range is above the industry average of 1.3x - 1.4x
and management has indicated that it intends for the near-term to maintain its
current margin of safety. Notwithstanding its underwriting conservatism, FSA's
earnings measurements have exhibited recent improvement due to increased
municipal bond market share, lower capital charges and economy of scale
improvements. During the year ended December 31, 1997, net premiums written by
FSA increased 43%.
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<PAGE>
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the
Trust, their compensation from the Trust and their aggregate compensation from
the Countrywide complex of mutual funds (consisting of the Trust, Countrywide
Investment Trust and Countrywide Strategic Trust) for the fiscal year ended June
30, 1998. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk. Each of the
Trustees is also a Trustee of Countrywide Investment Trust and Countrywide
Strategic Trust.
AGGREGATE
COMPENSATION
COMPENSATION FROM
POSITION FROM COUNTRYWIDE
NAME AGE HELD TRUST COMPLEX
- --------------------- --- -------- ------------ -----------
Donald L. Bodgon, MD 67 Trustee $ 4,000 $ 12,000
+H. Jerome Lerner 60 Trustee 4,000 12,000
*Robert H. Leshner 59 President/Trustee 0 0
Howard J. Levine 62 Trustee 0 0
*Angelo R. Mozilo 59 Chairman/Trustee 0 0
Fred A. Rappoport 51 Trustee 2,000 6,000
+Oscar P. Robertson 59 Trustee 4,000 12,000
John F. Seymour, Jr. 60 Trustee 3,500 10,500
+Sebastiano Sterpa 69 Trustee 4,000 12,000
Maryellen Peretzky 47 Vice President 0 0
William E. Hortz 40 Vice President 0 0
Tina D. Hosking 30 Secretary 0 0
Theresa M. Samocki 29 Treasurer 0 0
* Mr. Leshner and Mr. Mozilo, as officers and directors of
Countrywide Investments, Inc., are each an "interested
person" of the Trust within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the Trust
during the past five years are set forth below:
DONALD L. BOGDON, M.D., 1551 Hillcrest Avenue, Glendale, California is a
physician with Hematology Oncology Consultants and a Director of Verdugo VNA (a
hospice facility). Until 1996 he was President of Western Hematology/Oncology.
H. JEROME LERNER, 7149 Knoll Road, Cincinnati, Ohio is a principal of
HJL Enterprises and is Chairman of Crane Electronics, Inc., a manufacturer of
electronic connectors. He is also a director of Slush Puppy Inc., a manufacturer
of frozen beverages, and Peerless Manufacturing, a manufacturer of bakery
equipment.
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<PAGE>
ROBERT H. LESHNER, 312 Walnut Street, Cincinnati, Ohio is President and
a director of Countrywide Investments, Inc. (the investment adviser and
principal underwriter of the Trust), Countrywide Financial Services, Inc.
(a financial services company and parent of Countrywide Investments, Inc.,
Countrywide Fund Services, Inc. and CW Fund Distributors, Inc.), Countrywide
Fund Services, Inc. (a registered transfer agent) and CW Fund Distributors, Inc.
(a registered broker-dealer). He is also President and a Trustee of Countrywide
Strategic Trust and Countrywide Investment Trust, registered investment
companies.
HOWARD J. LEVINE, 26901 Agoura Road, Calabasas Hills, California is
President of ARCS Commercial Mortgage Co., L.P.
ANGELO R. MOZILO, 4500 Park Granada Boulevard, Calabasas, California is
Chairman, Director and Chief Executive Officer of Countrywide Credit Industries,
Inc. (a holding company). He is Chairman and a director of Countrywide Home
Loans, Inc. (a residential mortgage lender), Countrywide Financial Services,
Inc., Countrywide Investments, Inc., Countrywide Fund Services, Inc., CW Fund
Distributors, Inc., Countrywide Servicing Exchange (a loan servicing broker),
Countrywide Lending Corporation and Countrywide Capital Markets, Inc.
(parent company). He is also a director of CCM Municipal Services, Inc.
(a tax lien purchaser), CTC Real Estate Services Corporation (a foreclosure
trustee), LandSafe, Inc. (parent company) and various LandSafe, Inc.
subsidiaries which provide property appraisals, credit reporting services, home
inspection services, flood zone determination services, title insurance and/or
closing services for residential mortgages.
FRED A. RAPPOPORT, 830 Birchwood Drive, Los Angeles, California is Chairman
of The Fred Rappoport Company, a broadcasting and entertainment company.
OSCAR P. ROBERTSON, 4293 Muhlhauser Road, Fairfield, Ohio is President
of Orchem Corp., a chemical specialties distributor, and Orpack Stone
Corporation, a corrugated box manufacturer.
JOHN F. SEYMOUR, JR., 46-393 Blackhawk Drive, Indian Wells, California
is Chief Executive Officer of the Southern California Housing Development
Corporation (a non-profit affordable housing company). He is a director and a
consultant for Orange Coast Title Insurance Co. and is also a director of Irvine
Apartment Communities (a REIT) and Inco Homes (a home builder). Until
January 1, 1995, he was the Executive Director of the California Housing Finance
Agency. He is a former U.S. Senator, State Senator, California State Legislator
and Mayor of Anaheim, California.
SEBASTIANO STERPA, 200 West Glenoaks Boulevard, Glendale, California is
Chairman of Sterpa Realty, Inc. and Chairman and a director of the California
Housing Finance Agency. He is also a director of Real Estate Business Services
and a director of the SunAmerica Mutual Funds.
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<PAGE>
MARYELLEN PERETZKY, 312 Walnut Street, Cincinnati, Ohio is
Senior Vice President, Chief Operating Officer and Secretary of
Countrywide Investments, Inc. and Senior Vice President and
Secretary of Countrywide Financial Services, Inc., Countrywide
Fund Services, Inc. and CW Fund Distributors, Inc. She is also
Vice President of Countrywide Investment Trust and Countrywide
Strategic Trust.
WILLIAM E. HORTZ, 312 Walnut Street, Cincinnati, Ohio is
Executive Vice President and Director of Sales of Countrywide
Investments, Inc. and Countrywide Financial Services, Inc. He is
also Vice President of Countrywide Investment Trust and
Countrywide Strategic Trust. From 1996 until 1998, he was
President of Peregrine Asset Management (an investment adviser).
From 1991 until 1996, he was Regional Director of Neuberger &
Berman Management (an investment adviser).
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio is
Associate General Counsel and Assistant Vice President of
Countrywide Fund Services, Inc. and CW Fund Distributors, Inc.
She is also Secretary of Countrywide Investment Trust and
Countrywide Strategic Trust.
THERESA M. SAMOCKI, 312 Walnut Street, Cincinnati, Ohio is
Assistant Vice President-Fund Accounting Manager of Countrywide
Fund Services, Inc. and CW Fund Distributors, Inc. She is also
Treasurer of Countrywide Investment Trust and Countrywide
Strategic Trust.
Each Trustee, except for Messrs. Leshner and Mozilo, receives a
quarterly retainer of $1,500 and a fee of $1,500 for each Board meeting
attended. Such fees are split equally among the Trust, Countrywide Strategic
Trust and Countrywide Investment
Trust.
THE INVESTMENT ADVISER AND UNDERWRITER
- --------------------------------------
Countrywide Investments, Inc. (the "Adviser"), formerly Midwest Group
Financial Services, Inc., is the Funds' investment manager. The Adviser is a
subsidiary of Countrywide Financial Services, Inc., which is a wholly-owned
subsidiary of Countrywide Credit Industries, Inc., a New York Stock Exchange
listed company principally engaged in the business of residential mortgage
lending. Messrs. Mozilo and Leshner are deemed to be affiliates of the Adviser
by reason of their position as Chairman and President, respectively, of the
Adviser. Messrs. Mozilo and Leshner, by reason of such affiliation, may
directly or indirectly receive benefits from the advisory fees paid to the
Adviser.
Under the terms of the investment advisory agreements between the Trust
and the Adviser, the Adviser manages the Funds' investments. Each Fund pays the
Adviser a fee computed and accrued daily and paid monthly at an annual rate of
.5% of its
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<PAGE>
average daily net assets up to $100,000,000, .45% of such assets from
$100,000,000 to $200,000,000, .4% of such assets from $200,000,000 to
$300,000,000 and .375% of such assets in excess of $300,000,000. The total fees
paid by a Fund during the first and second halves of each fiscal year of the
Trust may not exceed the semiannual total of the daily fee accruals requested by
the Adviser during the applicable six month period.
For the fiscal years ended June 30, 1998, 1997 and 1996, the Tax-Free
Money Fund paid advisory fees of $150,790, $149,097 and $140,891, respectively.
For the fiscal years ended June 30, 1998, 1997 and 1996, the Tax-Free
Intermediate Term Fund paid advisory fees of $302,947, $343,509 and $398,576,
respectively. For the fiscal years ended June 30, 1998, 1997 and 1996, the Ohio
Insured Tax-Free Fund paid advisory fees of $378,345, $393,579 and $397,265,
respectively; however, the Adviser voluntarily reimbursed the Fund for $948 and
$2,708 of Class A expenses for the fiscal years ended June 30, 1998 and 1996,
respectively, in order to reduce the operating expenses of the Fund. For the
fiscal years ended June 30, 1998, 1997 and 1996, the Ohio Tax- Free Money Fund
accrued advisory fees of $1,421,029, $1,181,638 and $1,117,233, respectively;
however, the Adviser voluntarily waived $46,680 and $54,672 of its fees and
reimbursed the Fund for $7,979 and $9,148 of Class B expenses for the fiscal
years ended June 30, 1998 and 1997, respectively, in order to reduce the
operating expenses of the Fund. For the fiscal years ended June 30, 1998, 1997
and 1996, the California Tax-Free Money Fund accrued advisory fees of $210,813,
$200,103 and $142,143, respectively; however, the Adviser voluntarily waived
$6,600 of its fees for the fiscal year ended June 30, 1996 in order to reduce
the operating expenses of the Fund. For the fiscal years ended June 30, 1998,
1997 and 1996, the Florida Tax-Free Money Fund accrued advisory fees of
$276,608, $234,628 and $152,663, respectively; however, the Adviser voluntarily
waived $107,645, $87,852 and $58,284 of its fees for the fiscal years ended June
30, 1998, 1997 and 1996, respectively, and reimbursed the Fund for $7,114 and
$18,259 of Class B expenses for the fiscal years ended June 30, 1998 and 1997,
respectively, in order to reduce the operating expenses of the Fund.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The Adviser bears promotional expenses in
connection with the distribution of the Funds' shares to the extent that such
expenses are not assumed by the Funds under their plans of distribution (see
below). The compensation and expenses of any officer, Trustee or employee of the
Trust who is an officer, director or employee of the Adviser are paid by the
Adviser.
- 27 -
<PAGE>
By their terms, the Funds' investment advisory agreements remain in
force until February 28, 2000 and from year to year thereafter, subject to
annual approval by (a) the Board of Trustees or (b) a vote of the majority of a
Fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Trustees who are not interested persons of
the Trust, by a vote cast in person at a meeting called for the purpose of
voting such approval. The Funds' investment advisory agreements may be
terminated at any time, on sixty days' written notice, without the payment of
any penalty, by the Board of Trustees, by a vote of the majority of a Fund's
outstanding voting securities, or by the Adviser. The investment advisory
agreements automatically terminate in the event of their assignment, as defined
by the Investment Company Act of 1940 and the rules thereunder.
The Adviser is also the principal underwriter of the Funds and, as
such, the exclusive agent for distribution of shares of the Funds. The Adviser
is obligated to sell the shares on a best efforts basis only against purchase
orders for the shares. Shares of each Fund are offered to the public on a
continuous basis.
The Adviser currently allows concessions to dealers who sell shares of
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund. The
Adviser retains the entire sales load on all direct initial investments in the
Funds and on all investments in accounts with no designated dealer of record.
For the fiscal year ended June 30, 1998, the aggregate underwriting commissions
on sales of the Funds' shares were $141,856 of which the Adviser paid $124,248
to unaffiliated broker-dealers in the selling network, earned $7,484 as a
broker-dealer in the selling network and retained $10,124 in underwriting
commissions. For the fiscal year ended June 30, 1997, the aggregate underwriting
commissions on sales of the Funds' shares were $190,011 of which the Adviser
paid $170,321 to unaffiliated broker-dealers in the selling network, earned
$5,456 as a broker-dealer in the selling network and retained $14,234 in
underwriting commissions. For the fiscal year ended June 30, 1996, the aggregate
underwriting commissions on sales of the Funds' shares were $311,870 of which
the Adviser paid $279,354 to unaffiliated dealers in the selling network, earned
$14,509 as a broker-dealer in the selling network and retained $18,007 in
underwriting commissions.
The Adviser retains the contingent deferred sales load on redemptions
of shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free
Fund which are subject to a contingent deferred sales load. For the fiscal year
ended June 30, 1998, the Adviser retained $6,430 and $5,587 of contingent
deferred sales loads on the redemption of Class C shares of the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund, respectively. For the
fiscal year ended June 30, 1997, the
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<PAGE>
Adviser retained $5,958 and $1,441 of contingent deferred sales loads on the
redemption of Class C shares of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund, respectively. For the fiscal year ended June 30, 1996,
the Adviser retained $5,802 and $349 of contingent deferred sales loads on the
redemption of Class C shares of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund, respectively.
The Funds may compensate dealers, including the Adviser and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plans" below.
DISTRIBUTION PLANS
- ------------------
Class A Plan -- As stated in the Prospectus, the Funds have adopted a
plan of distribution (the "Class A Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 which permits each Fund to pay for expenses
incurred in the distribution and promotion of the Funds' shares, including but
not limited to, the printing of prospectuses, statements of additional
information and reports used for sales purposes, advertisements, expenses of
preparation and printing of sales literature, promotion, marketing and sales
expenses, and other distribution-related expenses, including any distribution
fees paid to securities dealers or other firms who have executed a distribution
or service agreement with the Adviser. The Class A Plan expressly limits payment
of the distribution expenses listed above in any fiscal year to a maximum of
.25% of the average daily net assets of the Tax-Free Money Fund and .25% of the
average daily net assets of the Class A shares of the Tax-Free Intermediate Term
Fund, the Ohio Insured Tax-Free Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund. Unreimbursed
expenses will not be carried over from year to year.
For the fiscal year ended June 30, 1998, the aggregate
distribution-related expenditures of the Tax-Free Money Fund ("MF"), the
Tax-Free Intermediate Term Fund ("ITF"), the Ohio Insured Tax-Free Fund ("OIF"),
the Ohio Tax-Free Money Fund ("OMF"), the California Tax-Free Money Fund ("CMF")
and the Florida Tax-Free Money Fund ("FMF") under the Class A Plan were $10,767,
$71,805, $18,754, $435,722, $19,803 and $39,096, respectively. Amounts were
spent as follows:
- 29 -
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
MF ITF OIF OMF CMF FMF
-- --- --- --- --- ---
Printing and mailing
of prospectuses and
reports to prospective
shareholders . . . . $ 1,767 $ 3,647 $ 4,605 $ 5,283 $ 4,803 $ 1,982
Payments to broker-
dealers and others
for the sale or
retention of assets . 9,000 68,158 14,149 425,979 15,000 37,114
Other promotional
expenses . . . . . . --- --- --- 4,460 --- ---
-------- ------- ------- ---------- --------- ----------
$10,767 $ 71,805 $18,754 $435,722 $19,803 $39,096
======= ======== ======= ======== ======= =======
</TABLE>
Class C Plan (Tax-Free Intermediate Term Fund and Ohio Insured Tax-Free
Fund) -- The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
have also adopted a plan of distribution (the "Class C Plan") with respect to
the Class C shares of such Funds. The Class C Plan provides for two categories
of payments. First, the Class C Plan provides for the payment to the Adviser of
an account maintenance fee, in an amount equal to an annual rate of .25% of the
average daily net assets of the Class C shares, which may be paid to other
dealers based on the average value of Class C shares owned by clients of such
dealers. In addition, a Fund may pay up to an additional .75% per annum of the
daily net assets of the Class C shares for expenses incurred in the distribution
and promotion of the shares, including prospectus costs for prospective
shareholders, costs of responding to prospective shareholder inquiries, payments
to brokers and dealers for selling and assisting in the distribution of Class C
shares, costs of advertising and promotion and any other expenses related to the
distribution of the Class C shares. Unreimbursed expenditures will not be
carried over from year to year. The Funds may make payments to dealers and other
persons in an amount up to .75% per annum of the average value of Class C shares
owned by their clients, in addition to the .25% account maintenance fee
described above.
For the fiscal year ended June 30, 1998, the aggregate
distribution-related expenditures of the Tax-Free Intermediate Term Fund ("ITF")
and the Ohio Insured Tax-Free Fund ("OIF") under the Class C Plan were $33,170
and $29,140, respectively.
Amounts were spent as follows:
ITF OIF
Printing and mailing of
prospectuses and reports
to prospective shareholders. . . . . . $ 328 $ 341
Payments to broker-dealers and
others for the sale or
retention of assets. . . . . . . . . . 32,842 28,799
------- -------
$33,170 $29,140
======= =======
- 30 -
<PAGE>
GENERAL INFORMATION -- Agreements implementing the Plans (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plans are made in accordance with written agreements.
The continuance of the Plans and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plans or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. A Plan may be terminated at any time
by a vote of a majority of the Independent Trustees or by a vote of the holders
of a majority of the outstanding shares of a Fund or the applicable class of a
Fund. In the event a Plan is terminated in accordance with its terms, the
affected Fund (or class) will not be required to make any payments for expenses
incurred by the Adviser after the termination date. Each Implementation
Agreement terminates automatically in the event of its assignment and may be
terminated at any time by a vote of a majority of the Independent Trustees or by
a vote of the holders of a majority of the outstanding shares of a Fund (or the
applicable class) on not more than 60 days' written notice to any other party to
the Implementation Agreement. The Plans may not be amended to increase
materially the amount to be spent for distribution without shareholder approval.
All material amendments to the Plans must be approved by a vote of the Trust's
Board of Trustees and by a vote of the Independent Trustees.
In approving the Plans, the Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties as Trustees, that
there is a reasonable likelihood that the Plans will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plans should assist in the growth of
the Funds which will benefit the Funds and their shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plans will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plans. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plans are in effect, all amounts spent by the Funds pursuant
to the Plans and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. Distribution
expenses attributable to the sale of more than one class of shares of a Fund
will be allocated at least annually to each
- 31 -
<PAGE>
class of shares based upon the ratio in which the sales of each class of shares
bears to the sales of all the shares of such Fund. In addition, the selection
and nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
Angelo R. Mozilo and Robert H. Leshner, as interested persons of the
Trust, may be deemed to have a financial interest in the operation of the Plans
and the Implementation Agreements.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer. Because the portfolio securities of the Funds are
generally traded on a net basis and transactions in such securities do not
normally involve brokerage commissions, the cost of portfolio securities
transactions of the Funds will consist primarily of dealer or underwriter
spreads. No brokerage commissions have been paid by the Funds or the Predecessor
Fund during the last three fiscal years.
The Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Funds and/or other accounts over
which the Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
Adviser determines in good faith that the commission is reasonable in relation
to the value of the brokerage and research services provided. The determination
may be viewed in terms of a particular transaction or the Adviser's overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
- 32 -
<PAGE>
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Adviser and other affiliates
of the Trust or the Adviser may effect securities transactions which are
executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. No Fund will effect any
brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Funds do not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Adviser nor
affiliates of the Trust or the Adviser will receive reciprocal brokerage
business as a result of the brokerage business transacted by the Funds with
other brokers.
CODE OF ETHICS. The Trust and the Adviser have each adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act of 1940. The Code significantly
restricts the personal investing activities of all employees of the Adviser and,
as described below, imposes additional, more onerous, restrictions on investment
personnel of the Adviser. The Code requires that all employees of the Adviser
preclear any personal securities investment (with limited exceptions, such as
U.S. Government obligations). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition or limitation
applicable to the proposed investment. In addition, no employee may purchase or
sell any security which at the time is being purchased or sold (as the case may
be), or to the knowledge of the employee is being considered for purchase or
sale, by any Fund. The substantive restrictions applicable to investment
personnel of the Adviser include a ban on acquiring any securities in an initial
public offering and a prohibition from profiting on short-term trading in
securities. Furthermore, the Code provides for trading "blackout periods" which
prohibit trading by investment personnel of the Adviser within periods of
trading by the Funds in the same (or equivalent) security.
- 33 -
<PAGE>
PORTFOLIO TURNOVER
- ------------------
The Adviser intends to hold the portfolio securities of the Tax-Free
Money Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and
the Florida Tax-Free Money Fund to maturity and to limit portfolio turnover to
the extent possible. Nevertheless, changes in a Fund's portfolio will be made
promptly when determined to be advisable by reason of developments not foreseen
at the time of the original investment decision, and usually without reference
to the length of time a security has been held.
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
do not intend to purchase securities for short term trading; however, a security
may be sold in anticipation of a market decline, or purchased in anticipation of
a market rise and later sold. Securities will be purchased and sold in response
to the Adviser's evaluation of an issuer's ability to meet its debt obligations
in the future. A security may be sold and another purchased when, in the opinion
of the Adviser, a favorable yield spread exists between specific issues or
different market sectors.
A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. The Adviser anticipates that the portfolio turnover rate for each Fund
normally will not exceed 100%. A 100% turnover rate would occur if all of a
Fund's portfolio securities were replaced once within a one year period.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- -----------------------------------------------------
The share price (net asset value) of the shares of the Tax- Free Money
Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the
Florida Tax-Free Money Fund is determined as of 12:00 noon and 4:00 p.m.,
Eastern time, on each day the Trust is open for business. The share price (net
asset value) and the public offering price (net asset value plus applicable
sales load) of the shares of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund are determined as of the close of the regular session of
trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time), on
each day the Trust is open for business. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. The Trust may also be open for
business on other days in which there is sufficient trading in a
- 34 -
<PAGE>
Fund's portfolio securities that its net asset value might be materially
affected. For a description of the methods used to determine the share price and
the public offering price, see "Calculation of Share Price and Public Offering
Price" in the Prospectus.
Pursuant to Rule 2a-7 promulgated under the Investment Company Act of
1940, the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California
Tax-Free Money Fund and the Florida Tax-Free Money Fund each value their
portfolio securities on an amortized cost basis. The use of the amortized cost
method of valuation involves valuing an instrument at its cost and, thereafter,
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. Under the amortized cost method of valuation, neither the amount
of daily income nor the net asset value of the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund or the Florida Tax-Free
Money Fund is affected by any unrealized appreciation or depreciation of the
portfolio. The Board of Trustees has determined in good faith that utilization
of amortized cost is appropriate and represents the fair value of the portfolio
securities of the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund.
Pursuant to Rule 2a-7, the Tax-Free Money Fund, the Ohio Tax-Free Money
Fund, the California Tax-Free Money Fund and the Florida Tax-Free Money Fund
each maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only securities having remaining maturities of thirteen months or less
and invest only in United States dollar-denominated securities determined by the
Board of Trustees to be of high quality and to present minimal credit risks. If
a security ceases to be an eligible security, or if the Board of Trustees
believes such security no longer presents minimal credit risks, the Trustees
will cause the Fund to dispose of the security as soon as possible.
The maturity of a floating or variable rate instrument subject to a
demand feature held by the Tax-Free Money Fund, the Ohio Tax-Free Money Fund,
the California Tax-Free Money Fund or the Florida Tax-Free Money Fund will be
determined as follows, provided that the conditions set forth below are met. The
maturity of a long-term floating rate instrument with a demand feature (or a
participation interest in such a floating rate instrument) will be deemed to be
the period of time remaining until the principal amount owed can be recovered
through demand. The maturity of a short-term floating rate instrument with a
demand feature (or a participation interest in such a floating rate instrument)
will be one day. The maturity of a long-term variable rate instrument with a
demand feature (or a
- 35 -
<PAGE>
participation interest in such a variable rate instrument) will be deemed to be
the longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount owed can be recovered
through demand. The maturity of a short-term variable rate instrument with a
demand feature (or a participation interest in such a variable rate instrument)
will be deemed to be the earlier of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount owed can be recovered through demand.
The demand feature of each such instrument must entitle a Fund to
receive the principal amount of the instrument plus accrued interest, if any, at
the time of exercise and must be exercisable either (1) at any time upon no more
than thirty days' notice or (2) at specified intervals not exceeding thirteen
months and upon no more than thirty days' notice. Furthermore, the maturity of
any such instrument may only be determined as set forth above as long as the
instrument continues to receive a short-term rating in one of the two highest
categories from any two nationally recognized statistical rating organizations
("NRSROs") (or from any one NRSRO if the security is rated by only that NRSRO)
or, if not rated, is determined to be of comparable quality by the Adviser,
under the direction of the Board of Trustees. However, an instrument having a
demand feature other than an "unconditional" demand feature must have both a
short-term and a long-term rating in one of the two highest categories from any
two NRSROs (or from any one NRSRO if the security is rated by only that NRSRO)
or, if not rated, to have been determined to be of comparable quality by the
Adviser, under the direction of the Board of Trustees. An "unconditional" demand
feature is one that by its terms would be readily exercisable in the event of a
default on the underlying instrument.
The Board of Trustees has established procedures designed to stabilize,
to the extent reasonably possible, the price per share of the Tax-Free Money
Fund, the Ohio Tax-Free Money Fund, the California Tax-Free Money Fund and the
Florida Tax-Free Money Fund as computed for the purpose of sales and redemptions
at $1 per share. The procedures include review of each Fund's portfolio holdings
by the Board of Trustees to determine whether a Fund's net asset value
calculated by using available market quotations deviates more than one-half of
one percent from $1 per share and, if so, whether such deviation may result in
material dilution or is otherwise unfair to existing shareholders. In the event
the Board of Trustees determines that such a deviation exists, it will take
corrective action as it regards necessary and appropriate, including the sale of
portfolio securities prior to maturity to realize capital gains or losses or to
shorten average portfolio maturities; withholding dividends; redemptions of
shares in kind; or establishing a net asset value per share by using available
market quotations. The Board of Trustees has also established procedures
designed to ensure that each Fund complies with the quality requirements of Rule
2a-7.
- 36 -
<PAGE>
While the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument, as determined by
amortized cost, is higher or lower than the price the Tax-Free Money Fund, the
Ohio Tax-Free Money Fund, the California Tax-Free Money Fund or the Florida
Tax-Free Money Fund would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on shares of each Fund may tend to be
higher than a like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its portfolio securities. Thus, if the use of amortized cost
by a Fund resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in the Fund would be able to obtain a somewhat higher yield
than would result from investment in a fund utilizing solely market values and
existing investors would receive less investment income. The converse would
apply in a period of rising interest rates.
Tax-exempt portfolio securities are valued for the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund by an outside
independent pricing service approved by the Board of Trustees. The service
generally utilizes a computerized grid matrix of tax-exempt securities and
evaluations by its staff to determine what it believes is the fair value of the
portfolio securities. The Board of Trustees believes that timely and reliable
market quotations are generally not readily available to the Funds for purposes
of valuing tax-exempt securities and that valuations supplied by the pricing
service are more likely to approximate the fair value of the tax-exempt
securities.
If, in the Adviser's opinion, the valuation provided by the pricing
service ignores certain market conditions affecting the value of a security, the
Adviser will use (consistent with procedures established by the Board of
Trustees) such other valuation as it considers to represent fair value.
Valuations, market quotations and market equivalents provided to the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund by pricing services
will only be used when such use and the methods employed have been approved by
the Board of Trustees. Valuations provided by pricing services or the Adviser
may be determined without exclusive reliance on matrixes and may take into
consideration appropriate factors such as bid prices, quoted prices,
institution-size trading in similar groups of securities, yield, quality, coupon
rates, maturity, type of issue, trading characteristics and other market data.
Since it is difficult to evaluate the likelihood of exercise or the
potential benefit of a put attached to an obligation, it is expected that such
puts will be determined to have a value of zero, regardless of whether any
direct or indirect consideration was paid.
- 37 -
<PAGE>
The Board of Trustees has adopted the policy for the Tax- Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund which may be changed
without shareholder approval, that the maturity of fixed rate or floating and
variable rate instruments with demand features will be determined as follows.
The maturity of each such fixed rate or floating rate instrument will be deemed
to be the period of time remaining until the principal amount owed can be
recovered through demand. The maturity of each such variable rate instrument
will be deemed to be the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount owed can be recovered through demand.
Taxable securities, if any, held by the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund for which market quotations are readily
available are valued at their most recent bid prices as obtained from one or
more of the major market makers for such securities. Securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees.
OTHER PURCHASE INFORMATION
- --------------------------
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of Class A
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
Class A shares of the Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund has the right to combine the cost or current net asset value
(whichever is higher) of his existing shares of the load funds distributed by
the Adviser with the amount of his current purchases in order to take advantage
of the reduced sales loads set forth in the tables in the Prospectus. The
purchaser or his dealer must notify the Transfer Agent that an investment
qualifies for a reduced sales load. The reduced load will be granted upon
confirmation of the purchaser's holdings by the Transfer Agent.
LETTER OF INTENT. The reduced sales loads set forth in the tables in
the Prospectus may also be available to any "purchaser" of Class A shares of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund who submits a
Letter of Intent to the Transfer Agent. The Letter must state an intention to
invest within a thirteen month period in any load fund distributed by the
Adviser a specified amount which, if made at one time, would qualify for a
reduced sales load. A Letter of Intent may be submitted with a purchase at the
beginning of the thirteen month period or within ninety days of the first
purchase under the
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<PAGE>
Letter of Intent. Upon acceptance of this Letter, the purchaser becomes eligible
for the reduced sales load applicable to the level of investment covered by such
Letter of Intent as if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose a front-end sales load or
imposes a reduced sales load in connection with purchases of Class A shares of
the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund made
under the reinvestment privilege or the purchases described in the "Reduced
Sales Load," "Purchases at Net Asset Value" or "Exchange Privilege" sections in
the Prospectus because such purchases require minimal sales effort by the
Adviser. Purchases described in the "Purchases at Net Asset Value" section may
be made for investment only, and the shares may not be resold except through
redemption by or on behalf of the Trust.
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal and state taxes.
Each Fund has qualified and intends to qualify annually for the special
tax treatment afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to
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<PAGE>
securities loans, gains from the sale or other disposition of stock, securities
or foreign currency, or certain other income (including but not limited to gains
from options, futures and forward contracts) derived with respect to its
business of investing in stock, securities or currencies; and (ii) diversify its
holdings so that at the end of each quarter of its taxable year the following
two conditions are met: (a) at least 50% of the value of the Fund's total assets
is represented by cash, U.S. Government securities, securities of other
regulated investment companies and other securities (for this purpose such other
securities will qualify only if the Fund's investment is limited in respect to
any issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer) and (b) not more than 25% of the
value of the Fund's assets is invested in securities of any one issuer (other
than U.S. Government securities or securities of other regulated investment
companies).
Each Fund intends to invest in sufficient obligations so that it will
qualify to pay, for federal income tax purposes, "exempt-interest dividends" (as
defined in the Internal Revenue Code) to shareholders. A Fund's dividends
payable from net tax-exempt interest earned from tax-exempt obligations will
qualify as exempt-interest dividends for federal income tax purposes if, at the
close of each quarter of the taxable year of the Fund, at least 50% of the value
of its total assets consists of tax-exempt obligations. The percentage of income
that is exempt from federal income taxes is applied uniformly to all
distributions made during each calendar year. This percentage may differ from
the actual tax-exempt percentage during any particular month.
Each Fund intends to invest primarily in obligations with interest
income exempt from federal income taxes. To the extent possible, the Ohio
Insured Tax-Free Fund and the Ohio Tax-Free Money Fund intend to invest
primarily in obligations the income from which is exempt from Ohio personal
income tax, the California Tax-Free Money Fund intends to invest primarily in
obligations the income from which is exempt from California income tax and the
Florida Tax-Free Money Fund intends to invest primarily in obligations the value
of which is exempt from the Florida intangible personal property tax.
Distributions from net investment income and net realized capital gains,
including exempt-interest dividends, may be subject to state taxes in other
states.
Under the Internal Revenue Code, interest on indebtedness incurred or
continued to purchase or carry shares of investment companies paying
exempt-interest dividends, such as the Funds, will not be deductible by the
investor for federal income tax purposes. Shareholders should consult their tax
advisors as to the application of these provisions.
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<PAGE>
Shareholders receiving Social Security benefits may be subject to
federal income tax (and perhaps state personal income tax) on a portion of those
benefits as a result of receiving tax-exempt income (including exempt-interest
dividends distributed by the Funds). In general, the tax will apply to such
benefits only in cases where the recipient's provisional income, consisting of
adjusted gross income, tax-exempt interest income and 50% of any Social Security
benefits, exceeds a base amount ($25,000 for single individuals and $32,000 for
individuals filing a joint return). In such cases, the tax will be imposed on
the lesser of 50% of the recipient's Social Security benefits or the excess of
provisional income over the base amount. A second tier of inclusion rules for
high-income social security recipients has been added for tax years beginning
after 1993. These new rules apply to taxpayers who have provisional income over
$44,000 (married filing jointly) or $34,000 (single). For these taxpayers, the
amount of benefit subject to tax is the lesser of (1) 85% of the social security
benefit received or (2) 85% of the excess of the taxpayer's provisional income
over $44,000 (married filing jointly) or $34,000 (single) plus the smaller of
(a) $6,000 (married filing jointly) or $4,500 (single) or (b) the amount taxable
under the 50% inclusion rules described above. Shareholders receiving Social
Security benefits may wish to consult their tax advisors.
All or a portion of the sales load incurred in purchasing Class A
shares of each of the Tax-Free Intermediate Term Fund and the Ohio Insured
Tax-Free Fund will not be included in the federal tax basis of any of such
shares sold within 90 days of their purchase (for the purpose of determining
gain or loss upon the sale of such shares) if the sales proceeds are reinvested
in any other fund of Countrywide Investments and a sales load that would
otherwise apply to the reinvestment is reduced or eliminated because the sales
proceeds were reinvested in the funds of Countrywide Investments. The portion of
the sales load so excluded from the tax basis of the shares sold will equal the
amount by which the sales load that would otherwise be applicable upon the
reinvestment is reduced. Any portion of such sales load excluded from the tax
basis of the shares sold will be added to the tax basis of the shares acquired
in the reinvestment.
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction. As of June 30, 1998, the Tax- Free Intermediate Term
Fund had capital loss carryforwards for federal income tax purposes of $996,209,
none of which expire prior to June 30, 1999.
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<PAGE>
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
- ------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
Yield quotations on investments in the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund are provided on both a current and an effective (compounded) basis.
Current yields are calculated by determining the net change in the value of a
hypothetical account for a seven calendar day period (base period) with a
beginning balance of one share, dividing by the value of the account at the
beginning of the base period to obtain the base period return, multiplying the
result by (365/7) and carrying the resulting yield figure to the nearest
hundredth of one percent. Effective yields reflect daily compounding and are
calculated as follows: Effective yield = (base period return + 1)365/7 - 1. For
purposes of these calculations, no effect is given to realized or unrealized
gains or losses (the Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund do not
normally recognize unrealized gains and losses under the amortized cost
valuation method). The Tax-Free Money Fund's current and
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effective yields for the seven days ended June 30, 1998 were 3.04% and 3.09%,
respectively. The Ohio Tax-Free Money Fund's current and effective yields for
the seven days ended June 30, 1998 were 3.02% and 3.07%, respectively, for Class
A shares and 3.27% and 3.32%, respectively, for Class B shares. The California
Tax-Free Money Fund's current and effective yields for the seven days ended June
30, 1998 were 3.12% and 3.17%, respectively. The Florida Tax-Free Money Fund's
current and effective yields for the seven days ended June 30, 1998 were 3.00%
and 3.04%, respectively, for Class A shares and 3.26% and 3.31%, respectively,
for Class B shares. The Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the
California Tax-Free Money Fund and the Florida Tax-Free Money Fund may also
quote a tax- equivalent current or effective yield, computed by dividing that
portion of a Fund's current or effective yield which is tax-exempt by one minus
a stated income tax rate and adding the product to that portion, if any, of the
yield that is not tax-exempt. Based on the highest marginal federal income tax
rate for individuals (39.6%), the Tax-Free Money Fund's tax-equivalent current
and effective yields for the seven days ended June 30, 1998 were 5.03% and
5.12%, respectively. Based on the highest combined marginal federal and Ohio
income tax rate for individuals (44.13%), the Ohio Tax-Free Money Fund's tax-
equivalent current and effective yields for the seven days ended June 30, 1998
were 5.41% and 5.49%, respectively, for Class A shares and 5.85% and 5.94%,
respectively, for Class B shares. Based on the highest combined marginal federal
and California income tax rate for individuals (45.22%), the California Tax-Free
Money Fund's tax-equivalent current and effective yields for the seven days
ended June 30, 1998 were 5.70% and 5.79%, respectively. Based on the highest
marginal federal income tax rate for individuals (39.6%), the Florida Tax-Free
Money Fund's tax-equivalent current and effective yields for the seven days
ended June 30, 1998 were 4.97% and 5.03%, respectively, for Class A shares and
5.40% and 5.48%, respectively, for Class B shares.
From time to time, the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund may advertise average annual total return. Average annual
total return quotations will be computed by finding the average annual
compounded rates of return over 1, 5 and 10 year periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
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<PAGE>
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions. The calculation also assumes the deduction of the
current maximum sales load from the initial $1,000 payment. If a Fund (or class)
has been in existence less than one, five or ten years, the time period since
the date of the initial public offering of shares will be substituted for the
periods stated. The average annual total returns of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund for the periods ended June 30, 1998
are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 year 3.52%
5 years 4.44%
10 years 6.10%
Tax-Free Intermediate Term Fund (Class C)
1 year 4.85%
Since inception (February 1, 1994) 3.74%
Ohio Insured Tax-Free Fund (Class A)
1 year 2.75%
5 years 4.45%
10 years 6.89%
Ohio Insured Tax-Free Fund (Class C)
1 year 6.24%
Since inception (November 1, 1993) 4.33%
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from average annual total return. A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. This computation does not include the effect of
the applicable front-end sales load (or contingent deferred sales load for the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund) which, if
included, would reduce total return. The total returns of the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund as calculated in this
manner for each of the last ten fiscal years (or since inception) are as
follows:
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<PAGE>
Ohio Ohio
Tax-Free Tax-Free Insured Insured
Intermediate Intermediate Tax-Free Tax-Free
Term Fund Term Fund Fund Fund
Class A Class C Class A Class C
Period Ended ------------ ------------ --------- --------
June 30, 1989 5.76% 9.75%
June 30, 1990 6.35% 5.53%
June 30, 1991 7.38% 7.98%
June 30, 1992 8.78% 11.55%
June 30, 1993 10.75% 12.24%
June 30, 1994 1.70% -3.40%(1) -0.41% -4.01%(2)
June 30, 1995 6.36% 5.82% 7.75% 7.31%
June 30, 1996 4.51% 4.00% 5.05% 4.44%
June 30, 1997 6.19% 5.49% 7.36% 6.65%
June 30, 1998 5.63% 4.85% 7.03% 6.24%
(1) From date of initial public offering on February 1, 1994.
(2) From date of initial public offering on November 1, 1993.
A nonstandardized quotation may also indicate average annual compounded rates of
return without including the effect of the applicable front-end or contingent
deferred sales load or over periods other than those specified for average
annual total return. The average annual compounded rates of return for Class A
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
(excluding sales loads) for the periods ended June 30, 1998 are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 Year 5.63%
3 Years 5.44%
5 Years 4.86%
10 Years 6.32%
Since inception (September 10, 1981) 6.42%
Ohio Insured Tax-Free Fund (Class A)
1 Year 7.03%
3 Years 6.47%
5 Years 5.31%
10 Years 7.33%
Since inception (April 1, 1985) 8.01%
A nonstandardized quotation of total return will always be accompanied by the
Fund's average annual total return as described above.
From time to time, the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund may advertise their yield and tax- equivalent yield. A
yield quotation is based on a 30-day (or one month) period and is computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:
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<PAGE>
Yield = 2[(a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Generally, interest earned (for the purpose of "a" above) on debt obligations is
computed by reference to the yield to maturity of each obligation held based on
the market value of the obligation (including actual accrued interest) at the
close of business on the last business day prior to the start of the 30-day (or
one month) period for which yield is being calculated, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest). The yields of Class A and Class C shares of the Tax-Free Intermediate
Term Fund for June 1998 were 4.10% and 3.44%, respectively. The yields of Class
A and Class C shares of the Ohio Insured Tax-Free Fund for June 1998 were 4.53%
and 3.97%, respectively. Tax-equivalent yield is computed by dividing that
portion of a Fund's yield which is tax-exempt by one minus a stated income tax
rate and adding the product to that portion, if any, of the Fund's yield that is
not tax-exempt. Based on the highest marginal federal income tax rate for
individuals (39.6%), the tax-equivalent yields of Class A and Class C shares of
the Tax-Free Intermediate Term Fund for June 1998 were 6.79% and 5.70%,
respectively. Based on the highest combined marginal federal and Ohio income tax
rate for individuals (44.13%), the tax-equivalent yields of Class A and Class C
shares of the Ohio Insured Tax-Free Fund for June 1998 were 8.11% and 7.11%,
respectively.
The performance quotations described above are based on historical
earnings and are not intended to indicate future performance. Yield quotations
are computed separately for Class A and Class B shares of the Ohio Tax-Free
Money Fund and the Florida Tax-Free Money Fund. The yield of Class B shares is
expected to be higher than the yield of Class A shares due to the distribution
fees imposed on Class A shares. Average annual total return and yield are
computed separately for Class A and Class C shares of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund. The yield of Class A shares is
expected to be higher than the yield of Class C shares due to the higher
distribution fees imposed on Class C shares.
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding each Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements
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<PAGE>
may also compare performance (using the calculation methods set forth in the
Prospectus) to performance as reported by other investments, indices and
averages. When advertising current ratings or rankings, the Funds may use the
following publications or indices to discuss or compare Fund performance:
IBC's Money Fund Report provides a comparative analysis of performance
for various categories of money market funds. The Tax-Free Money Fund may
compare performance rankings with money market funds appearing in the Tax-Free
Stockbroker & General Purpose Funds category. In addition, the Ohio Tax-Free
Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free Money
Fund may compare performance rankings with money market funds appearing in the
Tax-Free State Specific Stockbroker & General Purpose Funds categories.
Lipper Fixed Income Fund Performance Analysis measures total return and
average current yield for the mutual fund industry and ranks individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Tax-Free Money Fund may provide
comparative performance information appearing in the Tax-Exempt Money Market
Funds category, the Ohio Tax-Free Money Fund may provide comparative performance
information appearing in the Ohio Tax- Exempt Money Market Funds category, the
California Tax-Free Money Fund may provide comparative performance information
appearing in the California Tax-Exempt Money Market Funds category and the
Florida Tax-Free Money Fund may provide comparative performance information
appearing in the Other States Tax-Exempt Money Market Funds category. The
Tax-Free Intermediate Term Fund may provide comparative performance information
appearing in the Intermediate (5-10 year) Municipal Debt Funds category and the
Ohio Insured Tax-Free Fund may provide comparative performance information
appearing in the Ohio Municipal Debt Funds category.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Funds' portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Funds to calculate
their performance. In addition, there can be no assurance that the Funds will
continue this performance as compared to such other averages.
PRINCIPAL SECURITY HOLDERS
- --------------------------
As of August 13, 1999, The Fifth Third Bank Trust Department, 38
Fountain Square Plaza, Cincinnati, Ohio, owned of record 35.30% of the Trust's
outstanding shares, including 89.57% of the outstanding Class B shares of the
Ohio Tax-Free Money Fund and 65.97% of the outstanding Class B shares of the
Florida Tax-
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<PAGE>
Free Money Fund. The Fifth Third Bank may be deemed to control the Trust, the
Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund by virtue of the
fact that it owned of record more than 25% of such shares as of such date. As of
August 13, 1999, BHC Securities, Inc., 2005 Market Street, Philadelphia,
Pennsylvania owned of record 33.80% of the outstanding Class A shares of the
Ohio Tax-Free Money Fund and 5.49% of the outstanding Class C shares of the Ohio
Insured Tax-Free Fund. BHC Securities, Inc. may be deemed to control the Class A
shares of the Ohio Tax-Free Money Fund by virtue of the fact that it owned of
record more than 25% of such shares as of such date. As of August 13, 1999,
Wachovia Investments, Inc., P.O. Box 110, Winston Salem, North Carolina owned of
record 56.46% of the outstanding Class A shares of the Florida Tax-Free Money
Fund. Wachovia Investments, Inc. may be deemed to control the Class A shares of
the Florida Tax-Free Money Fund by virtue of the fact that it owned of record
more than 25% of such shares on such date. For purposes of voting on matters
submitted to shareholders, any person who owns more than 50% of the outstanding
shares of a Fund generally would be able to cast the deciding vote on such
matters.
As of August 13, 1999, National Investor Services Corp. FBO The
Exclusive Benefit of its Customers, 55 Water Street, New York, New York owned of
record 10.83% of the outstanding shares of the Tax-Free Money Fund and 21.59% of
the outstanding Class B shares of the Florida Tax-Free Money Fund; Edward A.
Striker and Carol A. Striker, 9711 Bennington Drive, Cincinnati, Ohio owned of
record 5.99% of the outstanding shares of the Tax-Free Money Fund; David Tondow
Jr. and Margaret L. Tondow, 2937 Alpine Terrace, Cincinnati, Ohio owned of
record 5.25% of the outstanding shares of the Tax-Free Money Fund: Merrill
Lynch, Pierce, Fenner & Smith Incorporated, For the Sole Benefit of Its
Customers, 4800 Deer Lake Drive East, Jacksonville, Florida owned of record
5.30% of the outstanding Class A shares of the Tax-Free Intermediate Term Fund;
Deborah L. Lontor, 584 Lindford Drive, Bay Village, Ohio owned of record 6.15%
of the outstanding Class C shares of the Tax-Free Intermediate Term Fund; Regina
M. Gray, 18442 Piers End Drive, Noblesville, Indiana owned of record 7.60% of
the outstanding Class C shares of the Tax-Free Intermediate Term Fund;
PaineWebber FBO Leland Brubaker Trustee, 4229 Westleton Court, Columbus, Ohio
owned of record 6.03% of the outstanding Class C shares of the Ohio Insured
Tax-Free Fund; Jerry Bach, 9055 Shawnee Run Road, Cincinnati, Ohio owned of
record 7.13% of the outstanding Class A shares of the Ohio Tax- Free Money Fund;
Joseph H. Kanter, 9792 Windisch Road, West Chester, Ohio owned of record 7.10%
of the outstanding Class A shares of the Florida Tax-Free Money Fund; Milton R.
Psaty Trustee, The Milton Psaty Revocable Living Trust, 2580 S. Ocean Boulevard,
Palm Beach, Florida owned of record 6.72% of the outstanding Class A shares of
the Florida Tax-Free Money Fund; and Bode Finn Limited Partnership, P.O. Box
83250, Columbus, Ohio owned of record 7.94% of the outstanding Class B shares of
the Florida Tax-Free Money Fund.
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<PAGE>
As of August 13, 1999, the Trustees and officers of the Trust as a
group owned of record and beneficially 3.09% of the outstanding shares of the
California Tax-Free Money Fund. As of the same date, the Trustees and officers
owned of record or beneficially less than 1% of the outstanding shares of the
Trust and of each other Fund.
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has
been retained to act as Custodian for investments of the Tax-Free Money Fund,
the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Fund and the California Tax-Free Money Fund. The Fifth Third Bank
acts as each Fund's depository, safekeeps its portfolio securities, collects all
income and other payments with respect thereto, disburses funds as instructed
and maintains records in connection with its duties. As compensation, The Fifth
Third Bank receives from each Fund a base fee at the annual rate of .005% of
average net assets (subject to a minimum annual fee of $1,500 per Fund and a
maximum fee of $5,000 per Fund) plus transaction charges for each security
transaction of the Funds.
The Huntington Trust Company, N.A., 41 South High Street, Columbus,
Ohio, has been retained to act as Custodian for investments of the Florida
Tax-Free Money Fund. The Huntington Trust Company, N.A. acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties. As compensation, The Huntington Trust
Company receives a fee at the annual rate of .026% of the Fund's average net
assets.
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent
auditors for the Trust for the fiscal year ending June 30, 1999. Arthur Andersen
LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of the
Trust's financial statements and advises the Funds as to certain accounting
matters.
TRANSFER AGENT
- --------------
The Trust's transfer agent, Countrywide Fund Services, Inc. ("CFS"),
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. CFS is an affiliate of the Adviser by
reason of common ownership. CFS receives for its services as transfer agent a
fee payable monthly at an annual
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<PAGE>
rate of $25 per account from each of the Tax-Free Money Fund, the Ohio Tax-Free
Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free Money
Fund and $21 per account from each of the Tax-Free Intermediate Term Fund and
the Ohio Insured Tax-Free Fund, provided, however, that the minimum fee is
$1,000 per month for each class of shares of a Fund. In addition, the Funds pay
out-of-pocket expenses, including but not limited to, postage, envelopes,
checks, drafts, forms, reports, record storage and communication lines.
CFS also provides accounting and pricing services to the Trust. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable CFS to perform its duties, the Tax-Free Money
Fund and the California Tax-Free Money Fund each pay CFS a fee in accordance
with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $2,500
$ 50,000,000 - $100,000,000 $3,000
$100,000,000 - $200,000,000 $3,500
$200,000,000 - $300,000,000 $4,000
Over $300,000,000 $5,000*
The Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Fund and the Florida Tax-Free Money Fund each pay CFS a fee in
accordance with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $3,500
$ 50,000,000 - $100,000,000 $4,000
$100,000,000 - $200,000,000 $4,500
$200,000,000 - $300,000,000 $5,000
Over $300,000,000 $6,000*
* Subject to an additional fee of .001% of average daily net assets in excess
of $300 million.
In addition, each Fund pays all costs of external pricing services.
CFS is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, CFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. CFS supervises
the preparation of tax returns, reports to shareholders of the Funds, reports to
and filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For the
performance of these administrative services, CFS receives a fee from the
Adviser.
- 50 -
<PAGE>
The Adviser is solely responsible for the payment of these administrative fees
to CFS, and CFS has agreed to seek payment of such fees solely from the Adviser.
TAX EQUIVALENT YIELD TABLES
- ---------------------------
The tax equivalent yield tables illustrate approximately the yield an
individual investor must earn on taxable investments to equal a tax-exempt yield
in various income tax brackets.
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND AND FLORIDA TAX-FREE
MONEY FUND TABLE. The table on the following page shows the approximate taxable
yields for individuals that are equivalent to tax-exempt yields under marginal
federal 1998 income tax rates. No adjustments have been made for state or local
taxes.
OHIO INSURED TAX-FREE FUND AND OHIO TAX-FREE MONEY FUND TABLE. The
table on the following page shows the approximate taxable yields for individuals
that are equivalent to tax-exempt yields under combined marginal federal and
Ohio 1998 income tax rates. Where more than one state bracket falls within a
federal bracket, the highest state tax bracket has been combined with the
federal bracket. The combined marginal state and federal tax brackets shown
reflect the fact that state income tax payments are currently deductible for
federal tax purposes.
CALIFORNIA TAX-FREE MONEY FUND TABLE. The table on the following page
shows the approximate taxable yields for individuals that are equivalent to
tax-exempt yields under combined marginal federal and California 1998 income tax
rates. Where more than one state bracket falls within a federal bracket, the
highest state tax bracket has been combined with the federal bracket. The
combined marginal state and federal tax brackets shown reflect the fact that
state income tax payments are currently deductible for federal tax purposes.
For federal income tax purposes, the total amount otherwise allowable
as a deduction for personal exemptions in computing taxable income is reduced by
2% for each $2,500 (or fraction of that amount) by which the taxpayer's adjusted
gross income exceeds $124,500 (single return) or $186,800 (joint return). In
addition, the total amount otherwise allowable as itemized deductions in
computing taxable income is reduced by 3% of the amount by which the taxpayer's
adjusted gross income exceeds $124,500. The tax equivalent yield tables have not
been adjusted to reflect the impact of these adjustments to taxable income.
- 51 -
<PAGE>
<TABLE>
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND
AND FLORIDA TAX-FREE MONEY FUND
<S> <C> <C> <C> <C> <C> <C>
Tax-Exempt Yield
--------------------------------------------
3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
15% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47
28% 4.17 4.86 5.56 6.25 6.94 7.64
31% 4.35 5.07 5.80 6.52 7.25 7.97
36% 4.69 5.47 6.25 7.03 7.81 8.59
39.6% 4.97 5.79 6.62 7.45 8.28 9.11
OHIO INSURED TAX-FREE FUND
OHIO TAX-FREE MONEY FUND
Tax-Exempt Yield
Combined --------------------------------------------
Ohio and 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
18.788% 3.69% 4.31% 4.93% 5.54% 6.16% 6.77
31.745% 4.40 5.13 5.86 6.59 7.33 8.06
35.761% 4.67 5.45 6.23 7.01 7.78 8.56
40.800% 5.07 5.91 6.76 7.60 8.45 9.29
44.130% 5.37 6.26 7.16 8.05 8.95 9.84
CALIFORNIA TAX-FREE MONEY FUND
Tax-Exempt Yield
Combined --------------------------------------------
California and 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Federal
Tax Bracket* Tax Equivalent Yield
- ----------- ---------------------------------------------
20.100% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88
34.696% 4.59 5.36 6.13 6.89 7.66 8.42
37.417% 4.79 5.59 6.39 7.19 7.99 8.79
41.952% 5.17 6.03 6.89 7.75 8.61 9.47
45.217% 5.48 6.39 7.30 8.21 9.13 10.04
*Tax Brackets Combined Combined
- ------------- Ohio and California and
Federal Federal Federal
Single Joint Tax Tax Tax
Return Return Bracket Bracket Bracket
- ---------------------------------------------------------------------------------------------------------------
Not over $25,350 Not Over $42,350 15% 18.788% 20.100%
$25,350-$61,400 $42,350-$102,300 28% 31.745% 34.696%
$61,400-$128,100 $102,300-$155,950 31% 35.761% 37.417%
$128,100-$278,450 $155,950-$278,450 36% 40.800% 41.952%
Over $278,450 Over $278,450 39.6% 44.130% 45.217%
</TABLE>
<PAGE>
ANNUAL REPORT
- -------------
The Funds' financial statements as of June 30, 1998 appear in the Trust's
annual report which is attached to this Statement of Additional Information.
- 53 -
<PAGE>
ANNUAL REPORT
JUNE 30, 1998
TAX-FREE
MONEY FUND
(Diamond)
CALIFORNIA TAX-FREE
MONEY FUND
(Diamond)
OHIO TAX-FREE
MONEY FUND
(Diamond)
FLORIDA TAX-FREE
MONEY FUND
(Diamond)
TAX-FREE INTERMEDIATE
TERM FUND
(Diamond)
OHIO INSURED
TAX-FREE FUND
(Diamond)
KENTUCKY TAX-FREE
MONEY FUND
- 54 -
<PAGE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
Overview
The performance of the domestic economy over the twelve months ended June 30,
1998 has been nothing short of remarkable. Economic growth continued at an above
trend pace with little or no signs of inflation. In fact, inflation, as measured
by the Consumer Price Index, declined from an annual rate of 2.3% on June 30,
1997 to 1.7% a year later. Employment growth, rising incomes and a very strong
stock market buoyed consumer confidence and led to the tremendous growth
experienced over the past year. After a rocky start, the performance of the bond
market was impressive as well. During the summer of 1997, bond yields
experienced somewhat of a roller coaster ride as investor focus shifted from the
low level of inflation to the robust domestic economy. However, in the months
that followed, the focus of investors shifted again to the financial crisis
unfolding in Asia. Bond investors became concerned that weakness in the Asian
economies would negatively impact our domestic economy and, in turn, allow
interest rates to move lower. This remained the dominant theme for the balance
of the fiscal year.
In the Treasury market, yields declined with the 30-year Treasury bond reaching
a near record low of 5.62% on June 30,1998. Yields on short and
intermediate-term Treasuries did not decline as much, however, as the
realization that the Federal Reserve would not lower interest rates provided a
floor for yields on short and intermediate-term Treasuries. Performance in the
municipal market lagged that of the Treasury market for much of the fiscal year.
Low interest rates and healthy financial positions spurred municipalities to
issue a near record amount of new debt. This burdensome new-issue supply caused
municipal bonds to underperform relative to Treasuries.
Tax-Free Intermediate Term Fund
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal conditions
of between three and ten years. To the extent consistent with the Fund's primary
objective, capital appreciation is a secondary objective. For the fiscal year
ended June 30, 1998, the Fund's total returns (excluding the impact of
applicable sales loads) were 5.63% and 4.85% for Class A shares and Class C
shares, respectively. The Lehman Brothers 5-Year Municipal G.O. Bond Index
returned 6.35% during the same period.
The Tax-Free Intermediate Term Fund performed comparably to the Lehman Brothers
5-Year Municipal G.O. Bond Index after giving consideration to associated
operating expenses of the Fund. Our focus in this Fund remains unchanged: to
provide high tax-free income while minimizing principal volatility. Given the
relative steepness of the municipal yield curve, we have recently been buying in
the ten to fifteen year maturity range where the investor is being compensated
for the additional risk.
<PAGE>
Ohio Insured Tax-Free Fund
The Ohio Insured Tax-Free Fund seeks the highest level of interest income exempt
from federal income tax and Ohio personal income tax, consistent with protection
of capital. The Fund invests primarily in high and medium-quality, long-term
Ohio municipal obligations which are protected by insurance guaranteeing the
payment of principal and interest in the event of a default. For the fiscal year
ended June 30, 1998, the Fund's total returns (excluding the impact of
applicable sales loads) were 7.03% and 6.24% for Class A shares and Class C
shares, respectively. The Lehman Brothers 15-Year Municipal G.O. Bond Index
returned 9.64% during the same period.
Performance of the Fund lagged the performance of the Lehman Brothers 15-Year
Municipal G.O. Bond Index during the first half of the fiscal year as the
general decline in interest rates, combined with the Fund's shorter maturity and
duration, hampered our ability to keep pace. In the second half of the fiscal
year, we selectively sold short-term prerefunded issues and invested the
proceeds in securities with maturities of twenty to twenty-five years and good
call protection. While this swap generated long-term capital gains in the Fund,
we felt it was necessary for two reasons. First, the issues that were sold had
realized most of their upside price potential and would only decline in price as
they approached maturity. Second, we felt the need to restructure the maturity
and duration characteristics of the portfolio in an effort to keep pace with its
benchmark on a total return basis. Going forward, we will continue to look for
those issues which, we believe, will provide the best combination of yield and
total return.
Kentucky Tax-Free Fund
The Kentucky Tax-Free Fund seeks the highest level of interest income exempt
from federal and Kentucky income taxes, consistent with the protection of
capital. The Fund invests primarily in high and medium-quality Kentucky
municipal obligations. For the ten months ended June 30, 1998, the Fund's total
return (excluding the impact of applicable sales loads) was 6.05%, as compared
to 6.72% for the Lehman Brothers Municipal Bond Index during the same period.
In September 1997, we acquired the Kentucky Tax-Free Fund and assumed portfolio
management responsibility. At that time, the Fund was managed to maximize
liquidity and, as a result, had a weighted-average maturity comparable to that
of intermediate-term funds. After researching the market, we determined that a
long-term maturity structure would allow us to be more competitive with the
other Kentucky tax-free funds in the marketplace. During the first four months
of the fiscal period, we underperformed the Lehman Brothers Municipal Bond Index
due to the relatively short average maturity of the portfolio. In late 1997, we
began to extend the weighted-average maturity of the Fund to bring it more in
line with its benchmark and our peers. This enhanced the performance of the Fund
during the last six months of the period. We will continue to extend the average
maturity of the Fund by seeking issues with maturities of twenty to twenty-five
years and good call protection.
Outlook
Our outlook for the remainder of the year is constructive for the bond market.
With the exception of a larger trade deficit, there has been little impact on
the U.S. economy from the Asian financial crisis. Consumer demand, which has
been one of the main drivers of economic growth, remains strong. However, if the
stock market should falter, consumers will be less willing to spend more than
they are earning. A slowdown in consumption would likely reduce economic
activity, allowing interest rates to move lower. In addition, given that
municipals have lagged the Treasury market for much of the year, we believe that
municipal bonds offer investors added value as a fixed-income investment
alternative.
<PAGE>
A Representation of the Graphic Material Contained in the June 30, 1998 Annual
Report for Countrywide Tax-Free Trust is set forth below:
Comparison of the Change in Value since June 30, 1988 of a $10,000 Investment
in the Tax-Free Intermediate Term Fund* and the Lehman Brothers 5-Year
Municipal G.O. Bond Index
LEHMAN BROTHERS 5-YEAR MUNICIPAL G.O. TAX-FREE INTERMEDIATE TERM FUND:
BOND INDEX:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/88 10,000 06/30/88 9,800
09/30/88 1.14% 10,114 09/30/88 1.14% 9,911
12/31/88 0.61% 10,176 12/31/88 1.16% 10,027
03/31/89 -0.28% 10,147 03/31/89 0.79% 10,106
06/30/89 4.70% 10,624 06/30/89 2.56% 10,364
09/30/89 1.11% 10,742 09/30/89 1.54% 10,524
12/31/89 2.99% 11,063 12/31/89 2.32% 10,769
03/31/90 0.48% 11,116 03/31/90 0.57% 10,830
06/30/90 2.24% 11,365 06/30/90 1.78% 11,023
09/30/90 1.06% 11,486 09/30/90 0.47% 11,075
12/31/90 3.32% 11,867 12/31/90 3.11% 11,419
03/31/91 2.15% 12,122 03/31/91 1.93% 11,638
06/30/91 1.75% 12,334 06/30/91 1.69% 11,836
09/30/91 3.55% 12,772 09/30/91 2.89% 12,178
12/31/91 3.35% 13,200 12/31/91 2.29% 12,457
03/31/92 -0.08% 13,190 03/31/92 0.48% 12,516
06/30/92 3.25% 13,618 06/30/92 2.87% 12,875
09/30/92 2.49% 13,957 09/30/92 2.19% 13,157
12/31/92 1.59% 14,179 12/31/92 1.98% 13,417
03/31/93 2.54% 14,539 03/31/93 3.40% 13,874
06/30/93 2.36% 14,883 06/30/93 2.78% 14,259
09/30/93 2.16% 15,204 09/30/93 3.17% 14,711
12/31/93 1.23% 15,391 12/31/93 1.19% 14,885
03/31/94 -3.15% 14,906 03/31/94 -3.37% 14,383
06/30/94 1.34% 15,106 06/30/94 0.82% 14,501
09/30/94 0.81% 15,228 09/30/94 0.57% 14,583
12/31/94 -0.33% 15,178 12/31/94 -0.91% 14,450
03/31/95 4.06% 15,794 03/31/95 4.35% 15,077
06/30/95 2.55% 16,197 06/30/95 2.29% 15,422
09/30/95 2.73% 16,639 09/30/95 2.07% 15,741
12/31/95 1.83% 16,944 12/31/95 2.43% 16,123
03/31/96 0.32% 16,999 03/31/96 -0.43% 16,054
06/30/96 0.43% 17,072 06/30/96 0.40% 16,119
09/30/96 1.63% 17,350 09/30/96 1.60% 16,377
12/31/96 2.18% 17,728 12/31/96 2.26% 16,747
03/31/97 -0.16% 17,700 03/31/97 -0.15% 16,722
06/30/97 2.49% 18,141 06/30/97 2.36% 17,116
09/30/97 2.19% 18,539 09/30/97 1.87% 17,435
12/31/97 1.84% 18,880 12/31/97 1.69% 17,729
03/31/98 1.17% 19,101 03/31/98 0.84% 17,878
06/30/98 1.01% 19,294 06/30/98 1.13% 18,080
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. Fund inception was September 10,
1981, and the initial public offering of Class C shares commenced on February 1,
1994.
Tax-Free Intermediate Term Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 3.52% 4.44% 6.10% 6.29%
Class C 4.85% --- --- 3.74%
Past performance is not predictive of future performance.
<PAGE>
Comparison of the Change in Value since June 30, 1988 of a $10,000 Investment
in the Ohio Insured Tax-Free Fund* and the Lehman Brothers 15-Year Municipal
G.O. Bond Index
LEHMAN BROTHERS 15-YEAR MUNICIPAL
G.O. BOND INDEX: OHIO INSURED TAX-FREE FUND:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/30/88 10,000 06/30/88 9,600
09/30/88 2.57% 10,257 09/30/88 2.15% 9,806
12/31/88 1.94% 10,456 12/31/88 2.24% 10,026
03/31/89 0.38% 10,496 03/31/89 0.79% 10,104
06/30/89 6.32% 11,159 06/30/89 4.27% 10,536
09/30/89 -0.43% 11,111 09/30/89 -0.04% 10,532
12/31/89 4.42% 11,602 12/31/89 3.71% 10,923
03/31/90 -0.01% 11,601 03/31/90 -0.10% 10,912
06/30/90 2.29% 11,867 06/30/90 1.90% 11,118
09/30/90 -0.41% 11,818 09/30/90 0.08% 11,127
12/31/90 4.42% 12,340 12/31/90 3.97% 11,569
03/31/91 1.85% 12,569 03/31/91 1.78% 11,775
06/30/91 1.96% 12,815 06/30/91 1.96% 12,006
09/30/91 4.09% 13,339 09/30/91 3.67% 12,446
12/31/91 3.13% 13,757 12/31/91 3.19% 12,842
03/31/92 0.54% 13,831 03/31/92 -0.06% 12,835
06/30/92 3.81% 14,358 06/30/92 4.35% 13,393
09/30/92 2.86% 14,769 09/30/92 1.95% 13,654
12/31/92 2.47% 15,133 12/31/92 2.29% 13,967
03/31/93 4.24% 15,775 03/31/93 3.78% 14,495
06/30/93 3.67% 16,354 06/30/93 3.70% 15,032
09/30/93 4.17% 17,036 09/30/93 3.86% 15,611
12/31/93 1.56% 17,302 12/31/93 0.73% 15,725
03/31/94 -6.78% 16,129 03/31/94 -5.28% 14,894
06/30/94 1.42% 16,358 06/30/94 0.50% 14,969
09/30/94 0.41% 16,425 09/30/94 0.17% 14,995
12/31/94 -1.75% 16,137 12/31/94 -0.77% 14,880
03/31/95 8.41% 17,494 03/31/95 6.59% 15,861
06/30/95 2.23% 17,885 06/30/95 1.69% 16,129
09/30/95 3.65% 18,537 09/30/95 2.33% 16,506
12/31/95 4.05% 19,288 12/31/95 4.45% 17,241
03/31/96 -0.95% 19,105 03/31/96 -2.15% 16,869
06/30/96 0.35% 19,172 06/30/96 0.44% 16,944
09/30/96 2.40% 19,632 09/30/96 2.38% 17,346
12/31/96 3.03% 20,227 12/31/96 2.44% 17,770
03/31/97 -0.07% 20,213 03/31/97 -0.81% 17,625
06/30/97 4.18% 21,057 06/30/97 3.21% 18,190
09/30/97 3.43% 21,780 09/30/97 2.42% 18,631
12/31/97 2.83% 22,396 12/31/97 2.24% 19,049
03/31/98 1.32% 22,692 03/31/98 0.89% 19,218
06/30/98 1.76% 23,091 06/30/98 1.31% 19,469
Ohio Insured Tax-Free Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 2.75% 4.45% 6.89% 7.68%
Class C 6.24% --- --- 4.33%
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. Fund inception was April 1, 1985,
and the initial public offering of Class C shares commenced on November 1, 1993.
Past performance is not predictive of future performance.
<PAGE>
Comparison of the Change in Value Since Inception (September 27, 1995) of
a $10,000 Investment in the Kentucky Tax-Free Fund and the Lehman Brothers
Municipal Bond Index
LEHMAN BROTHERS MUNICIPAL
BOND INDEX: (w/ reinvested divds) KENTUCKY TAX-FREE FUND:
MONTHLY MONTHLY
DATE RETURN BALANCE DATE RETURN BALANCE
09/27/95 10,000 09/27/95 9,600
10/31/95 1.45% 10,145 10/31/95 2.42% 9,832
11/30/95 1.66% 10,313 11/30/95 1.90% 10,019
12/31/95 0.96% 10,412 12/31/95 1.23% 10,142
01/31/96 0.76% 10,492 01/31/96 0.65% 10,208
02/29/96 -0.68% 10,420 02/29/96 -0.73% 10,133
03/31/96 -1.28% 10,287 03/31/96 -1.20% 10,011
04/30/96 -0.28% 10,258 04/30/96 -0.17% 9,994
05/31/96 -0.04% 10,254 05/31/96 -0.01% 9,992
06/30/96 1.09% 10,366 06/30/96 -0.18% 9,974
07/31/96 0.91% 10,460 07/31/96 1.66% 10,140
08/31/96 -0.02% 10,458 08/31/96 0.17% 10,157
09/30/96 1.40% 10,604 09/30/96 1.00% 10,259
10/31/96 1.13% 10,724 10/31/96 0.94% 10,355
11/30/96 1.83% 10,920 11/30/96 1.53% 10,514
12/31/96 -0.42% 10,875 12/31/96 -0.34% 10,478
01/31/97 0.19% 10,895 01/31/97 0.26% 10,505
02/28/97 0.92% 10,995 02/28/97 0.89% 10,598
03/31/97 -1.33% 10,849 03/31/97 -0.75% 10,518
04/30/97 0.84% 10,940 04/30/97 0.53% 10,574
05/31/97 1.50% 11,104 05/31/97 1.03% 10,684
06/30/97 1.07% 11,223 06/30/97 0.72% 10,761
07/31/97 2.77% 11,534 07/31/97 1.90% 10,965
08/31/97 -0.94% 11,426 08/31/97 -0.55% 10,904
09/30/97 1.19% 11,562 09/30/97 1.13% 11,027
12/31/97 2.71% 11,875 12/31/97 2.06% 11,254
03/31/98 1.15% 12,012 03/31/98 1.02% 11,368
06/30/98 1.52% 12,194 06/30/98 1.72% 11,564
Kentucky Tax-Free Fund
Average Annual Total Returns
1 Year Since Inception
3.17% 5.40%
Past performance is not predictive of future performance.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998
======================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment securities:
At acquisition cost ................................... $36,750,235 $40,814,685
=========== ===========
At amortized cost ..................................... $36,707,536 $40,697,653
=========== ===========
At market value (Note 2) .............................. $36,707,536 $40,697,653
Cash ..................................................... 325,444 105,757
Interest receivable ...................................... 309,049 503,229
Receivable for securities sold ........................... 500,000 --
Other assets ............................................. 8,908 2,348
----------- -----------
TOTAL ASSETS ........................................ 37,850,937 41,308,987
----------- -----------
LIABILITIES
Dividends payable ........................................ 954 5,230
Payable for securities purchased ......................... 438,641 264,008
Payable to affiliates (Note 4) ........................... 23,780 23,446
Other accrued expenses and liabilities ................... 4,119 3,471
----------- -----------
TOTAL LIABILITIES ................................... 467,494 296,155
----------- -----------
NET ASSETS ............................................... $37,383,443 $41,012,832
=========== ===========
Net assets consist of:
Paid-in capital .......................................... $37,384,479 $41,014,335
Accumulated net realized losses from security transactions ( 1,036 ) ( 1,503 )
----------- -----------
Net assets ............................................... $37,383,443 $41,012,832
=========== ===========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) ... 37,394,922 41,014,335
=========== ===========
Net asset value, offering price and redemption price
per share (Note 2) ..................................... $ 1.00 $ 1.00
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998
<CAPTION>
=======================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment securities:
At acquisition cost .................................................. $322,702,801 $ 68,259,809
============ ============
At amortized cost .................................................... $322,516,570 $ 68,180,277
============ ============
At market value (Note 2) ............................................. $322,516,570 $ 68,180,277
Cash .................................................................... -- 73,888
Interest receivable ..................................................... 2,701,856 489,684
Other assets ............................................................ 13,706 2,925
------------ ------------
TOTAL ASSETS ......................................................... 325,232,132 68,746,774
------------ ------------
LIABILITIES
Bank overdraft .......................................................... 49,333 --
Dividends payable ....................................................... 314,897 81,525
Payable for securities purchased ........................................ 4,103,340 5,102,873
Payable to affiliates (Note 4) .......................................... 161,437 27,839
Other accrued expenses and liabilities .................................. 20,614 7,841
------------ ------------
TOTAL LIABILITIES .................................................. 4,649,621 5,220,078
------------ ------------
NET ASSETS .............................................................. $320,582,511 $ 63,526,696
============ ============
Net assets consist of:
Paid-in capital ......................................................... $320,568,987 $ 63,504,408
Accumulated net realized gains from security transactions ............... 13,524 22,288
------------ ------------
Net assets .............................................................. $320,582,511 $ 63,526,696
============ ============
PRICING OF RETAIL SHARES
Net assets applicable to Retail shares .................................. $205,316,016 $ 14,367,574
============ ============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 205,302,700 14,363,852
============ ============
Net asset value, offering price and redemption price per share (Note 2) . $ 1.00 $ 1.00
============ ============
PRICING OF INSTITUTIONAL SHARES
Net assets applicable to Institutional shares ........................... $115,266,495 $ 49,159,122
============ ============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 115,266,287 49,140,556
============ ============
Net asset value, offering price and redemption price per share (Note 2) . $ 1.00 $ 1.00
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998
<CAPTION>
=====================================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment securities:
At acquisition cost .................................................. $55,640,628 $67,563,484
=========== ===========
At amortized cost .................................................... $55,269,289 $67,480,117
============ ===========
At market value (Note 2) ............................................. $57,707,503 $72,161,280
Cash .................................................................... 196,257 21,861
Interest receivable ..................................................... 1,007,671 642,409
Receivable for capital shares sold ...................................... 57,052 246,525
Receivable for securities sold .......................................... 486,250 3,287,142
Other assets ............................................................ 13,430 4,090
----------- -----------
TOTAL ASSETS ......................................................... 59,468,163 76,363,307
----------- -----------
LIABILITIES
Dividends payable ....................................................... 39,217 74,833
Payable for capital shares redeemed ..................................... 262,082 24,084
Payable for securities purchased ........................................ 1,472,824 1,706,334
Payable to affiliates (Note 4) .......................................... 43,229 45,207
Other accrued expenses and liabilities .................................. 7,824 9,005
----------- -----------
TOTAL LIABILITIES .................................................... 1,825,176 1,859,463
----------- -----------
NET ASSETS .............................................................. $57,642,987 $74,503,844
=========== ===========
Net assets consist of:
Paid-in capital ......................................................... $56,200,982 $68,581,109
Accumulated net realized gains (losses) from security transactions ...... ( 996,209 ) 1,241,572
Net unrealized appreciation on investments .............................. 2,438,214 4,681,163
----------- -----------
Net assets .............................................................. $57,642,987 $74,503,844
=========== ===========
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares ................................. $52,896,431 $69,289,212
=========== ===========
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 4,757,501 5,599,945
=========== ===========
Net asset value and redemption price per share (Note 2) ................. $ 11.12 $ 12.37
=========== ===========
Maximum offering price per share (Note 2) ............................... $ 11.35 $ 12.89
=========== ===========
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares ................................. $ 4,746,556 $ 5,214,632
=========== ===========
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 426,820 421,552
=========== ===========
Net asset value, offering price and redemption price per share (Note 2) . $ 11.12 $ 12.37
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
<CAPTION>
======================================================================
KENTUCKY
TAX-FREE
FUND
- ----------------------------------------------------------------------
<S> <C>
ASSETS
Investment securities:
At acquisition cost .................................. $7,400,843
==========
At amortized cost .................................... $7,363,205
==========
At market value (Note 2) ............................. $7,506,941
Cash .................................................... 39,027
Interest receivable ..................................... 131,806
Receivable from affiliates (Note 4) ..................... 1,527
Organization costs, net (Note 2) ........................ 14,288
Other assets ............................................ 667
----------
TOTAL ASSETS ......................................... 7,694,256
----------
LIABILITIES
Dividends payable ....................................... 15,160
Payable for securities purchased ........................ 344,806
Other accrued expenses and liabilities .................. 4,460
----------
TOTAL LIABILITIES .................................... 364,426
----------
NET ASSETS .............................................. $7,329,830
==========
Net assets consist of:
Paid-in capital ......................................... $7,072,889
Accumulated net realized gains from security transactions 113,205
Net unrealized appreciation on investments .............. 143,736
----------
Net assets .............................................. $7,329,830
==========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) .. 700,507
==========
Net asset value and redemption price per share (Note 2) . $ 10.46
==========
Maximum offering price per share (Note 2) ............... $ 10.90
==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1998
<CAPTION>
==================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ..................................... $1,176,743 $1,546,509
---------- ----------
EXPENSES
Investment advisory fees (Note 4) ................... 150,790 210,813
Accounting services fees (Note 4) ................... 34,500 34,500
Transfer agent and shareholder services fees (Note 4) 29,891 25,510
Distribution expenses (Note 4) ...................... 10,767 19,803
Postage and supplies ................................ 19,032 7,693
Professional fees ................................... 7,379 8,179
Registration fees ................................... 8,777 2,151
Trustees' fees and expenses ......................... 4,835 4,835
Insurance expense ................................... 3,212 4,138
Pricing expenses .................................... 2,987 2,697
Custodian fees ...................................... 1,890 3,681
Reports to shareholders ............................. 2,085 1,970
Other expenses ...................................... 1,107 767
---------- ----------
TOTAL EXPENSES ......................................... 277,252 326,737
---------- ----------
NET INVESTMENT INCOME .................................. 899,491 1,219,772
---------- ----------
NET REALIZED GAINS FROM SECURITY TRANSACTIONS .......... 7 2,000
---------- ----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............. $ 899,498 $1,221,772
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1998
<CAPTION>
==================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ................................................... $12,057,007 $ 2,062,394
----------- -----------
EXPENSES
Investment advisory fees (Note 4) ................................. 1,421,029 276,608
Distribution expenses, Retail class (Note 4) ...................... 435,722 39,096
Accounting services fees (Note 4) ................................. 69,223 48,500
Transfer agent and shareholder services fees, Retail class (Note 4) 73,358 12,000
Transfer agent and shareholder services fees,
Institutional class (Note 4) ...................................... 12,000 12,000
Postage and supplies .............................................. 53,096 10,520
Professional fees ................................................. 24,679 9,679
Insurance expense ................................................. 18,808 5,239
Custodian fees (Note 4) ........................................... 5,731 14,395
Pricing expenses .................................................. 7,609 3,886
Trustees' fees and expenses ....................................... 4,835 4,835
Registration fees ................................................. 7,530 1,034
Reports to shareholders ........................................... 4,928 487
Other expenses .................................................... 12,887 2,341
----------- -----------
TOTAL EXPENSES ....................................................... 2,151,435 440,620
Fees waived by the Adviser (Note 4) ............................... ( 46,680 ) ( 107,645 )
Institutional class expenses reimbursed by the Adviser (Note 4) ... ( 7,979 ) ( 7,114 )
----------- -----------
NET EXPENSES ......................................................... 2,096,776 325,861
----------- -----------
NET INVESTMENT INCOME ................................................ 9,960,231 1,736,533
----------- -----------
NET REALIZED GAINS FROM SECURITY TRANSACTIONS ........................ 573 23,116
----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........................... $ 9,960,804 $ 1,759,649
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1998
<CAPTION>
================================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ................................................. $ 3,326,159 $ 4,313,747
----------- -----------
EXPENSES
Investment advisory fees (Note 4) ............................... 302,947 378,345
Distribution expenses, Class A (Note 4) ......................... 71,805 18,754
Distribution expenses, Class C (Note 4) ......................... 33,170 29,140
Transfer agent and shareholder services fees, Class A (Note 4) .. 59,018 34,859
Transfer agent and shareholder services fees, Class C (Note 4) .. 12,000 12,000
Accounting services fees (Note 4) ............................... 52,500 52,500
Postage and supplies ............................................ 46,573 25,209
Pricing expenses ................................................ 12,659 15,165
Professional fees ............................................... 9,679 10,679
Registration fees, Common ....................................... 1,768 192
Registration fees, Class A ...................................... 6,093 3,344
Registration fees, Class C ...................................... 4,279 1,905
Insurance expense ............................................... 5,752 6,566
Custodian fees .................................................. 4,823 6,017
Trustees' fees and expenses ..................................... 4,835 4,835
Reports to shareholders ......................................... 5,266 3,265
Other expenses .................................................. 3,885 4,600
----------- -----------
TOTAL EXPENSES ..................................................... 637,052 607,375
Class A expenses reimbursed by the Adviser (Note 4) ............. -- (948)
----------- -----------
NET EXPENSES ....................................................... 637,052 606,427
----------- -----------
NET INVESTMENT INCOME .............................................. 2,689,107 3,707,320
----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ................... 504,427 1,576,938
Net change in unrealized appreciation/depreciation on investments 120,496 (19,066)
----------- -----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ................... 624,923 1,557,872
----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ......................... $ 3,314,030 $ 5,265,192
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
For the Periods Ended June 30, 1998 and August 31, 1997
<CAPTION>
=========================================================================================
KENTUCKY TAX-FREE FUND
Ten Months Year
Ended Ended
June 30, August 31,
1998(A) 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ................................................ $337,659 $626,947
-------- --------
EXPENSES
Investment advisory fees (Note 4) .............................. 32,172 47,946
Accounting services fees (Note 4) .............................. 28,000 36,000
Transfer agent fees (Note 4) ................................... 9,830 29,221
Professional fees .............................................. 5,821 25,286
Shareholder services fees (Note 4) ............................. -- 29,966
Administration fees (Note 4) ................................... -- 24,866
Amortization of organization costs (Note 2) .................... 5,296 6,351
Pricing expenses ............................................... 3,330 6,443
Custodian fees ................................................. 2,839 2,150
Distribution expenses (Note 4) ................................. 4,776 --
Trustees' fees and expenses .................................... 3,562 1,193
Reports to shareholders ........................................ 592 2,199
Postage and supplies ........................................... 2,279 --
Insurance expense .............................................. 716 1,367
Registration fees .............................................. 149 238
Other expenses ................................................. 454 1,623
-------- --------
TOTAL EXPENSES .................................................... 99,816 214,849
Fees waived and expenses reimbursed (Note 4) ................... ( 68,508 )( 112,585)
-------- --------
NET EXPENSES ...................................................... 31,308 102,264
-------- --------
NET INVESTMENT INCOME ............................................. 306,351 524,683
-------- --------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ................... 109,080 6,913
Net change in unrealized appreciation/depreciation on investments 51,636 351,842
-------- --------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS .................. 160,716 358,755
-------- --------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........................ $467,067 $883,438
======== ========
(A) Effective as of the close of business on August 29, 1997, the Kentucky Tax-Free Fund was reorganized
and the fiscal year-end of the Fund, subsequent to August 31, 1997, was changed to June 30 (Note 7).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
<CAPTION>
=============================================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ................. $ 899,491 $ 850,627 $ 1,219,772 $ 1,106,884
Net realized gains (losses) from
security transactions ............... 7 7 2,000 (1,923)
------------- ------------- ------------- -------------
Net increase in net assets from operations 899,498 850,634 1,221,772 1,104,961
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............ (899,491) (850,627) (1,219,772) (1,106,884)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
Proceeds from shares sold ............. 63,515,504 59,171,857 178,294,681 166,476,608
Net asset value of shares issued in
reinvestment of distributions
to shareholders ................... 884,700 828,537 1,138,976 1,029,746
Payments for shares redeemed .......... (57,142,444) (55,217,113) (170,609,136) (171,440,181)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
from capital share transactions ....... 7,257,760 4,783,281 8,824,521 (3,933,827)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ......................... 7,257,767 4,783,288 8,826,521 (3,935,750)
NET ASSETS:
Beginning of year ..................... 30,125,676 25,342,388 32,186,311 36,122,061
------------- ------------- ------------- -------------
End of year ........................... $ 37,383,443 $ 30,125,676 $ 41,012,832 $ 32,186,311
============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
<CAPTION>
===================================================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ....................... $ 9,960,231 $ 7,733,755 $ 1,736,533 $ 1,386,725
Net realized gains from security transactions 573 46 23,116 370
------------- ------------- ------------- -------------
Net increase in net assets from operations ..... 9,960,804 7,733,801 1,759,649 1,387,095
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Retail .......... (6,053,491) (6,297,760) (586,926) (814,499)
From net investment income, Institutional ... (3,906,740) (1,435,995) (1,149,607) (572,226)
------------- ------------- ------------- -------------
Decrease in net assets from distributions to
shareholders ................................ (9,960,231) (7,733,755) (1,736,533) (1,386,725)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
RETAIL
Proceeds from shares sold ................... 443,151,458 572,337,891 27,490,101 57,130,891
Net asset value of shares issued in
reinvestment of distributions
to shareholders ........................... 5,971,760 4,862,899 577,444 675,817
Payments for shares redeemed ................ (410,526,902) (650,804,392) (36,138,595) (64,279,383)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
from Retail share transactions .............. 38,596,316 (73,603,602) (8,071,050) (6,472,675)
------------- ------------- ------------- -------------
INSTITUTIONAL
Proceeds from shares sold ................... 303,525,174 216,396,635 129,691,125 38,407,914
Net asset value of shares issued in
reinvestment of distributions
to shareholders ........................... 1,880 -- 106,367 --
Payments for shares redeemed ................ (285,849,088) (118,808,315) (100,005,326) (38,204,284)
------------- ------------- ------------- -------------
Net increase in net assets
from Institutional share transactions ....... 17,677,966 97,588,320 29,792,166 203,630
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS .............................. 56,274,855 23,984,764 21,744,232 (6,268,675)
NET ASSETS:
Beginning of year ........................... 264,307,656 240,322,892 41,782,464 48,051,139
------------- ------------- ------------- -------------
End of year ................................. $ 320,582,511 $ 264,307,656 $ 63,526,696 $ 41,782,464
============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1998 and 1997
<CAPTION>
===============================================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ................... $ 2,689,107 $ 3,097,197 $ 3,707,320 $ 3,949,356
Net realized gains from security
transactions .......................... 504,427 120,146 1,576,938 134,212
Net change in unrealized appreciation/
depreciation on investments ........... 120,496 896,811 (19,066) 1,565,046
------------- ------------- ------------- -------------
Net increase in net assets from operations . 3,314,030 4,114,154 5,265,192 5,648,614
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ..... (2,502,901) (2,894,253) (3,489,518) (3,767,741)
From net investment income, Class C ..... (186,206) (202,944) (217,802) (181,615)
From net realized gains, Class A ........ -- -- (434,273) --
From net realized gains, Class C ........ -- -- (34,811) --
------------- ------------- ------------- -------------
Decrease in net assets from distributions to
shareholders ............................ (2,689,107) (3,097,197) (4,176,404) (3,949,356)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold ............... 12,407,637 12,588,991 140,842,715 171,413,856
Net asset value of shares issued in
reinvestment of distributions
to shareholders ....................... 2,009,499 2,298,321 2,921,236 2,840,761
Payments for shares redeemed ............ (20,581,067) (25,016,687) (146,316,005) (180,995,415)
------------- ------------- ------------- -------------
Net decrease in net assets
from Class A share transactions ......... (6,163,931) (10,129,375) (2,552,054) (6,740,798)
------------- ------------- ------------- -------------
CLASS C
Proceeds from shares sold ............... 1,781,236 1,847,102 2,551,977 1,641,830
Net asset value of shares issued in
reinvestment of distributions
to shareholders ....................... 173,075 191,889 209,923 159,120
Payments for shares redeemed ............ (2,418,483) (2,193,811) (2,249,977) (1,214,900)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
from Class C share transactions ......... (464,172) (154,820) 511,923 586,050
------------- ------------- ------------- -------------
TOTAL DECREASE IN NET ASSETS ............... (6,003,180) (9,267,238) (951,343) (4,455,490)
NET ASSETS:
Beginning of year ....................... 63,646,167 72,913,405 75,455,187 79,910,677
------------- ------------- ------------- -------------
End of year ............................. $ 57,642,987 $ 63,646,167 $ 74,503,844 $ 75,455,187
============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended June 30, 1998 and August 31, 1997 and 1996
<CAPTION>
====================================================================================================
KENTUCKY TAX-FREE FUND
Ten Months Year Period
Ended Ended Ended
June 30, August 31, August 31,
1998(A) 1997 1996(B)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income ............................ $ 306,351 $ 524,683 $ 714,832
Net realized gains (losses) from
security transactions .......................... 109,080 6,913 (2,788)
Net change in unrealized appreciation/depreciation
on investments ................................. 51,636 351,842 (259,742)
------------ ------------ ------------
Net increase in net assets from operations .......... 467,067 883,438 452,302
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ....................... (306,351) (524,683) (828,883)
Distributions in excess of net investment income . -- (100,598) --
------------ ------------ ------------
Decrease in net assets from distributions
to shareholders ................................... (306,351) (625,281) (828,883)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold ........................ 458,492 1,302,552 28,751,437
Net asset value of shares issued in
reinvestment of distributions to shareholders .. 157,294 303,297 559,139
Payments for shares redeemed ..................... (1,884,304) (9,266,863) (13,093,506)
------------ ------------ ------------
Net increase (decrease) in net assets from
capital share transactions ........................ (1,268,518) (7,661,014) 16,217,070
------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............. (1,107,802) (7,402,857) 15,840,489
NET ASSETS:
Beginning of period .............................. 8,437,632 15,840,489 --
------------ ------------ ------------
End of period .................................... $ 7,329,830 $ 8,437,632 $ 15,840,489
============ ============ ============
(A) Effective as the close of business on August 29, 1997, the Kentucky Tax-Free Fund was reorganized
and the fiscal year-end of the Fund, subsequent to August 31, 1997, was changed to June 30 (Note 7).
(B) Represents the period from the commencement of operations (September 27, 1995) through August 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
=============================================================================================================
Year Ended June 30,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- ---------- --------- ----------
Net investment income........................... 0.030 0.029 0.031 0.030 0.021
---------- --------- ---------- --------- ----------
Dividends from net investment income............ (0.030) (0.029) (0.031) (0.030) (0.021)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ==========
Total return ................................... 3.03% 2.89% 3.15% 3.07% 2.12%
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $ 37,383 $ 30,126 $ 25,342 $ 26,692 $31,168
========== ========= ========== ========= ==========
Ratio of expenses to average net assets......... 0.92% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to average
net assets................................... 2.98% 2.85% 3.09% 3.00% 2.09%
</TABLE>
<PAGE>
<TABLE>
CALIFORNIA TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
=============================================================================================================
Year Ended June 30,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- ---------- --------- ----------
Net investment income........................... 0.029 0.028 0.029 0.029 0.019
---------- --------- ---------- --------- ----------
Dividends from net investment income............ (0.029) (0.028) (0.029) (0.029) (0.019)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ==========
Total return ................................... 2.94% 2.81% 2.95% 2.95% 1.93%
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $ 41,013 $ 32,186 $ 36,122 $ 19,525 $24,508
========== ========= ========== ========= ==========
Ratio of expenses to average net assets(A) .... 0.77% 0.80% 0.80% 0.70% 0.60%
Ratio of net investment income to average
net assets.................................... 2.89% 2.76% 2.88% 2.83% 1.90%
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets
would have been 0.82%, 0.85% and 0.86% for the years ended June 30, 1996, 1995 and 1994, respectively.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OHIO TAX-FREE MONEY FUND - RETAIL
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
============================================================================================================
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- ---------- --------- ----------
Net investment income........................... 0.030 0.030 0.031 0.031 0.020
---------- --------- ---------- --------- ----------
Dividends from net investment income ........... (0.030) (0.030) (0.031) (0.031) (0.020)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= ==========
Total return.................................... 3.07% 2.99% 3.14% 3.12% 1.99%
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $205,316 $166,719 $240,323 $226,606 $213,001
========== ========= ========== ========= ==========
Ratio of expenses to average net assets(A) ..... 0.75% 0.75% 0.75% 0.74% 0.73%
Ratio of net investment income to average
net assets.................................... 3.02% 2.93% 3.09% 3.08% 1.97%
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net assets would have been 0.76% and 0.77%
for the years ended June 30, 1998 and 1997, respectively (Note 4).
</TABLE>
<PAGE>
<TABLE>
OHIO TAX-FREE MONEY FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
<CAPTION>
==================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
==================================================================================
Year Period
Ended Ended
June 30, June 30,
1998 1997(A)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period ............. $ 1.000 $ 1.000
------------ -----------
Net investment income .............................. 0.033 0.016
------------ -----------
Dividends from net investment income ............... (0.033) (0.016)
------------ -----------
Net asset value at end of period ................... $ 1.000 $ 1.000
============ ===========
Total return ....................................... 3.33% 3.31%(C)
============ ===========
Net assets at end of period (000's) ................ $ 115,266 $ 97,589
============ ===========
Ratio of expenses to average net assets(B) ......... 0.50% 0.50%(C)
Ratio of net investment income to average net assets 3.27% 3.28%(C)
(A) Represents the period from the initial public offering of Institutional shares (January 7, 1997) through June 30, 1997.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets
would have been 0.52% and 0.56%(C) for the periods ended June 30, 1998 and 1997, respectively (Note 4).
(C) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FLORIDA TAX-FREE MONEY FUND - RETAIL
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
============================================================================================================
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ........... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- ---------- --------- ---------
Net investment income........................... 0.030 0.029 0.032 0.031 0.021
---------- --------- ---------- --------- ---------
Dividends from net investment income ........... (0.030) ( 0.029) ( 0.032) ( 0.031 ) (0.021)
---------- --------- ---------- --------- ---------
Net asset value at end of year ................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========= ========== ========= =========
Total return ................................... 3.03% 2.90% 3.29% 3.17% 2.11%
========== ========= ========== ========= =========
Net assets at end of year (000's) .............. $ 14,368 $ 22,434 $ 28,906 $ 24,119 $26,276
========== ========= ========== ========= =========
Ratio of expenses to average net assets(B) .... 0.75% 0.75% 0.61% 0.66% 0.58%
Ratio of net investment income to average
net assets.................................... 2.98% 2.85% 3.24% 3.12% 2.10%
(A) Represents the period from the initial public offering of Retail shares (November 13, 1992) through June 30, 1993.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would
have been 0.95%, 0.94%, 0.80%, 0.80% and 0.81% for the years ended June 30, 1998, 1997, 1996, 1995 and 1994,
respectively (Note 4).
</TABLE>
<PAGE>
<TABLE>
FLORIDA TAX-FREE MONEY FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
============================================================================================================
Period
Year Ended June 30, Ended
June 30,
1998 1997 1996(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period ................. $ 1.000 $ 1.000 $ 1.000
-------------- --------------- ---------------
Net investment income................................... 0.032 0.031 0.003
-------------- --------------- ---------------
Dividends from net investment income ................... (0.032) (0.031) (0.003)
-------------- --------------- ---------------
Net asset value at end of period ....................... $ 1.000 $ 1.000 $ 1.000
============== =============== ===============
Total return............................................ 3.28% 3.16% 3.03%(C)
============== =============== ===============
Net assets at end of period (000's) .................... $ 49,159 $ 19,349 $ 19,145
============== =============== ===============
Ratio of net expenses to average net assets(B) ........ 0.50% 0.50% 0.50%(C)
Ratio of net investment income to average net assets.... 3.23% 3.11% 3.03%(C)
(A) Represents the period from the initial public offering of Institutional shares (May 29, 1996) through June 30, 1996.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 0.71%, 0.79% and 0.87%(C) for the periods ended June 30, 1998, 1997 and 1996, respectively (Note 4).
(C) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
TAX-FREE INTERMEDIATE TERM FUND - CLASS A
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
============================================================================================================
Year Ended June 30,
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 11.01 $ 10.85 $ 10.86 $ 10.69 $ 10.98
---------- --------- ---------- --------- ---------
Income from investment operations:
Net investment income ....................... 0.50 0.50 0.50 0.49 0.48
Net realized and unrealized gains (losses)
on investments............................. 0.11 0.16 (0.01) 0.17 (0.29)
---------- --------- ---------- --------- ----------
Total from investment operations ............... 0.61 0.66 0.49 0.66 0.19
---------- --------- ---------- --------- ----------
Dividends from net investment income ........... (0.50) (0.50) (0.50) (0.49) (0.48)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
========== ========= ========== ========= ==========
Total return(A) ................................ 5.63% 6.19% 4.51% 6.36% 1.70%
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $ 52,896 $ 58,485 $ 67,675 $ 81,140 $106,472
========== ========= ========== ========= ==========
Ratio of expenses to average net assets ........ 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to average
net asset..................................... 4.50% 4.55% 4.52% 4.59% 4.35%
Portfolio turnover rate......................... 36% 30% 37% 32% 46%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
TAX-FREE INTERMEDIATE TERM FUND - CLASS C
FINANCIAL HIGHLIGHTS
<CAPTION>
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
=============================================================================================================
Period
Year Ended June 30, Ended
June 30,
1998 1997 1996 1995 1994(A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 11.01 $ 10.85 $ 10.86 $ 10.69 $ 11.27
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.42 0.43 0.44 0.44 0.20
Net realized and unrealized gains (losses)
on investments............................. 0.11 0.16 ( 0.01) 0.17 ( 0.58 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 0.53 0.59 0.43 0.61 ( 0.38 )
---------- --------- ---------- --------- ----------
Dividends from net investment income............ ( 0.42) ( 0.43) ( 0.44) ( 0.44 ) ( 0.20 )
---------- --------- ---------- --------- ----------
Net asset value at end of period................ $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
========== ========= ========== ========= ==========
Total return(B) ................................ 4.85% 5.49% 4.00% 5.82% ( 8.28%)(D)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 4,747 $ 5,161 $ 5,239 $ 4,814 $ 3,084
========== ========= ========== ========= ==========
Ratio of expenses to average net assets(C) ..... 1.74% 1.65% 1.49% 1.49% 1.45%(D)
Ratio of net investment income to average
net assets.................................... 3.75% 3.89% 4.02% 4.08% 3.79%(D)
Portfolio turnover rate......................... 36% 30% 37% 32% 46%(D)
(A) Represents the period from the initial public offering of Class C shares (February 1, 1994) through June 30, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would have
been 1.75%(D) for the period ended June 30, 1994.
(D) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OHIO INSURED TAX-FREE FUND - CLASS A
FINANCIAL HIGHLIGHTS
<CAPTION>
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
=============================================================================================================
Year Ended June 30,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 12.22 $ 11.97 $ 11.99 $ 11.74 $ 12.41
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income ....................... 0.61 0.61 0.62 0.63 0.61
Net realized and unrealized gains (losses)
on investments............................. 0.23 0.25 ( 0.02) 0.25 ( 0.64 )
---------- --------- ---------- --------- ----------
Total from investment operations ............... 0.84 0.86 0.60 0.88 ( 0.03 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income ........ ( 0.61) ( 0.61) ( 0.62) ( 0.63 ) ( 0.61 )
Distributions from net realized gains........ ( 0.08) -- -- -- ( 0.03 )
---------- --------- ---------- --------- ----------
Total distributions ............................ ( 0.69) ( 0.61) ( 0.62) ( 0.63 ) ( 0.64 )
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 12.37 $ 12.22 $ 11.97 $ 11.99 $ 11.74
========== ========= ========== ========= ==========
Total return(A) ............................... 7.03% 7.36% 5.05% 7.75% ( 0.41% )
========== ========= ========== ========= ==========
Net assets at end of year (000's) .............. $ 69,289 $ 70,816 $ 75,938 $ 71,393 $79,889
========== ========= ========== ========= ==========
Ratio of expenses to average net assets(B) .... 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to average
net assets.................................... 4.95% 5.05% 5.12% 5.35% 4.94%
Portfolio turnover rate......................... 41% 33% 46% 29% 45%
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets
would have been 0.77% for the year ended June 30, 1995.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
OHIO INSURED TAX-FREE FUND - CLASS C
FINANCIAL HIGHLIGHTS
<CAPTION>
============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
============================================================================================================
Period
Year Ended June 30, Ended
June 30,
1998 1997 1996 1995 1994(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 12.22 $ 11.97 $ 12.00 $ 11.74 $12.62
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.52 0.53 0.56 0.57 0.36
Net realized and unrealized gains (losses)
on investments............................. 0.23 0.25 ( 0.03) 0.26 ( 0.85 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 0.75 0.78 0.53 0.83 ( 0.49 )
---------- --------- ---------- -------- ----------
Less distributions:
Dividends from net investment income......... ( 0.52) ( 0.53) ( 0.56) ( 0.57 ) ( 0.36 )
Distributions from net realized gains........ ( 0.08) -- -- -- ( 0.03 )
---------- --------- ---------- --------- ----------
Total distributions............................. ( 0.60) ( 0.53) ( 0.56) ( 0.57 ) ( 0.39 )
---------- --------- --------- --------- ----------
Net asset value at end of period................ $ 12.37 $ 12.22 $ 11.97 $ 12.00 $11.74
========== ========= ========== ========= ==========
Total return(B) ................................ 6.24% 6.65% 4.44% 7.31% ( 6.05%)(D)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 5,215 $ 4,639 $ 3,972 $ 4,165 $ 2,659
========== ========= ========= ========= =========
Ratio of expenses to average net assets(C) ..... 1.50% 1.42% 1.25% 1.25% 1.22% (D)
Ratio of net investment income to average
net assets.................................... 4.20% 4.37% 4.62% 4.84% 4.09% (D)
Portfolio turnover rate......................... 41% 33% 46% 29% 45% (D)
(A) Represents the period from the initial public offering of Class C shares (November 1, 1993) through June 30, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio of expenses to average net assets would
have been 1.27% and 1.28%(D) for the periods ended June 30, 1995 and 1994, respectively.
(D) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
KENTUCKY TAX-FREE FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
==========================================================================================================
Per Share Data For a Share Outstanding Throughout Each Period
==========================================================================================================
Ten Months Year Period
Ended Ended Ended
June 30, August 31, August 31,
1998(A) 1997 1996(B)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 10.26 $ 10.06 $ 10.00
-------------- --------------- ---------------
Income from investment operations:
Net investment income................................ 0.41 0.44 0.51(C)
Net realized and unrealized gains on investments..... 0.20 0.28 0.06
-------------- --------------- ---------------
Total from investment operations........................ 0.61 0.72 0.57
-------------- --------------- ---------------
Less distributions:
Dividends from net investment income................. ( 0.41) ( 0.44 ) ( 0.51 )
Distributions in excess of net investment income..... -- ( 0.08 ) --
-------------- --------------- ---------------
Total distributions..................................... ( 0.41) ( 0.52 ) ( 0.51 )
-------------- --------------- ---------------
Net asset value at end of period........................ $ 10.46 $ 10.26 $ 10.06
============== =============== ===============
Total return(D) ........................................ 7.29%(F) 7.36% 5.80%
============== =============== ===============
Net assets at end of period (000's)..................... $ 7,330 $ 8,438 $ 15,840
============== =============== ===============
Ratio of expenses to average net assets(E) ............. 0.49%(F) 0.85% 0.82%(F)
Ratio of net investment income to average net assets.... 4.75%(F) 4.35% 5.30%(F)
Portfolio turnover rate................................. 61%(F) 0% 145%
(A) Effective as of the close of business on August 29, 1997, the Kentucky Tax-Free Fund was reorganized and the
fiscal year-end of the Fund, subsequent to August 31, 1997, was changed to June 30 (Note 7).
(B) Represents the period from the commencement of operations (September 27, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratio of expenses to average net assets would have been
1.55%(F), 1.78% and 1.65%(F) for the periods ended June 30, 1998 and August 31, 1997 and 1996, respectively (Note 4).
(F) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
================================================================================
1. Organization
The Tax-Free Money Fund, the California Tax-Free Money Fund, the Ohio Tax-Free
Money Fund, the Florida Tax-Free Money Fund, the Tax-Free Intermediate Term
Fund, the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free Fund
(collectively, the Funds) are each a separate series of shares of Countrywide
Tax-Free Trust (the Trust). The Trust is registered under the Investment Company
Act of 1940 (the 1940 Act) as an open-end management investment company. The
Trust was established as a Massachusetts business trust under a Declaration of
Trust dated April 13, 1981. The Declaration of Trust, as amended, permits the
Trustees to issue an unlimited number of shares of each Fund. The Kentucky
Tax-Free Fund was originally organized as a series of Trans Adviser Funds, Inc.
(Note 7).
The Tax-Free Money Fund seeks the highest level of interest income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-quality, short-term municipal obligations.
The California Tax-Free Money Fund seeks the highest level of interest income
exempt from federal and California income taxes, consistent with liquidity and
stability of principal, by investing primarily in high-quality, short-term
California municipal obligations.
The Ohio Tax-Free Money Fund seeks the highest level of current income exempt
from federal income tax and Ohio personal income tax, consistent with liquidity
and stability of principal. The Fund invests primarily in a portfolio of
high-quality, short-term Ohio municipal obligations.
The Florida Tax-Free Money Fund seeks the highest level of interest income
exempt from federal income tax, consistent with liquidity and stability of
principal, by investing primarily in high-quality, short-term Florida municipal
obligations the value of which is exempt from the Florida intangible personal
property tax.
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income exempt
from federal income tax and Ohio personal income tax, consistent with protection
of capital. The Fund invests primarily in high and medium-quality, long-term
Ohio municipal obligations which are protected by insurance guaranteeing the
payment of principal and interest in the event of a default.
The Kentucky Tax-Free Fund seeks the highest level of interest income exempt
from federal and Kentucky income taxes, consistent with protection of capital.
The Fund invests primarily in high and medium-quality Kentucky municipal
obligations.
<PAGE>
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund each
offer two classes of shares: Class A shares (sold subject to a maximum front-end
sales load of 2% for the Tax-Free Intermediate Term Fund and 4% for the Ohio
Insured Tax-Free Fund and a distribution fee of up to 0.25% of average daily net
assets of each Fund) and Class C shares (sold subject to a maximum contingent
deferred sales load of 1% for a one-year period and a distribution fee of up to
1% of average daily net assets of each Fund). Each Class A and Class C share of
the Fund represents identical interests in the Fund's investment portfolio and
has the same rights, except that (i) Class C shares bear the expenses of higher
distribution fees, which will cause Class C shares to have a higher expense
ratio and to pay lower dividends than those related to Class A shares; (ii)
certain other class specific expenses will be borne solely by the class to which
such expenses are attributable; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements.
The Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund each offer two
classes of shares: Retail shares (sold subject to a distribution fee of up to
0.25% of average daily net assets of each Fund) and Institutional shares (sold
without a distribution fee). Each Retail and Institutional share of the Fund
represents identical interests in the Fund's investment portfolio and has the
same rights, except that (i) Retail shares bear the expenses of distribution
fees, which will cause Retail shares to have a higher expense ratio and to pay
lower dividends than those related to Institutional shares; (ii) certain other
class specific expenses will be borne solely by the class to which such expenses
are attributable; (iii) each class has exclusive voting rights with respect to
matters affecting only that class; and (iv) Retail shares are subject to a lower
minimum initial investment requirement and offer certain shareholder services
not available to Institutional shares such as checkwriting and automatic
investment and redemption plans.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
2. Significant Accounting Policies
The periods ended June 30, 1998, referred to within the Notes to Financial
Statements, represent the year then ended, except for the Kentucky Tax-Free Fund
which represents the ten months then ended. The following is a summary of the
Trust's significant accounting policies:
Security valuation -- Tax-Free Money Fund, California Tax-Free Money Fund, Ohio
Tax-Free Money Fund and Florida Tax-Free Money Fund securities are valued on an
amortized cost basis, which approximates market. This involves initially valuing
a security at its original cost and thereafter assuming a constant amortization
to maturity of any discount or premium. This method of valuation is expected to
enable these Funds to maintain a constant net asset value per share. Tax-Free
Intermediate Term Fund, Ohio Insured Tax-Free Fund and Kentucky Tax-Free Fund
securities are valued at market using an independent pricing service which
generally utilizes a computerized grid matrix of tax-exempt securities and
evaluations by its staff to determine what it believes is the fair value of the
securities. On limited occasions, if the valuation provided by the pricing
service ignores certain market conditions affecting the value of a security or
the pricing service cannot provide a valuation, the fair value of the security
will be determined in good faith consistent with procedures established by the
Board of Trustees.
Share valuation -- The net asset value per share of the Tax-Free Money Fund, the
California Tax-Free Money Fund and the Kentucky Tax-Free Fund is calculated
daily by dividing the total value of a Fund's assets, less liabilities, by its
number of shares outstanding. The net asset value per share of each class of
shares of the Ohio Tax-Free Money Fund, the Florida Tax-Free Money Fund, the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund is also
calculated daily by dividing the total value of a Fund's assets attributable to
that class, less liabilities attributable to that class, by the number of shares
of that class outstanding.
The offering price per share of the Tax-Free Money Fund, the California Tax-Free
Money Fund, the Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund is
equal to the net asset value per share. The maximum offering price of Class A
shares of the Tax-Free Intermediate Term Fund is equal to net asset value per
share plus a sales load equal to 2.04% of the net asset value (or 2% of the
offering price). The maximum offering price of Class A shares of the Ohio
Insured Tax-Free Fund and shares of the Kentucky Tax-Free Fund is equal to net
asset value per share plus a sales load equal to 4.17% of the net asset value
(or 4% of the offering price). The offering price of Class C shares of each Fund
is equal to the net asset value per share.
<PAGE>
The redemption price per share of each Fund, including each class of shares with
respect to the Ohio Tax-Free Money Fund, the Florida Tax-Free Money Fund, the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund, is equal to
net asset value per share. However, Class C shares of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund are subject to a contingent
deferred sales load of 1% of the original purchase price if redeemed within a
one-year period from the date of purchase.
Investment income -- Interest income is accrued as earned. Discounts and
premiums on securities purchased are amortized in accordance with income tax
regulations which approximate generally accepted accounting principles.
Distributions to shareholders -- Dividends from net investment income are
declared daily and paid on the last business day of each month. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income distributions and capital gain distributions are determined in
accordance with income tax regulations.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Allocations between classes -- Investment income earned by the Ohio Tax-Free
Money Fund, the Florida Tax-Free Money Fund, the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund is allocated daily to each class of shares
based on the percentage of the net asset value of settled shares of such class
to the total of the net asset value of settled shares of both classes of shares.
Realized capital gains and losses and unrealized appreciation and depreciation
are allocated daily to each class of shares based upon its proportionate share
of total net assets of the Fund. Class specific expenses are charged directly to
the class incurring the expense. Common expenses which are not attributable to a
specific class are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
Organization costs -- Costs incurred by the Kentucky Tax-Free Fund in connection
with the organization and registration of shares, net of certain expenses, have
been capitalized and are being amortized on a straight-line basis over a five
year period beginning with the Fund's commencement of operations.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund will be
relieved of federal income tax on the income distributed. Accordingly, no
provision for income taxes has been made. In addition, each Fund intends to
satisfy conditions which enable it to designate the interest income generated by
its investment in municipal securities, which is exempt from federal income tax
when received by the Fund, as exempt-interest dividends upon distribution to
shareholders.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
The following information is based upon the federal income tax cost of portfolio
investments as of June 30, 1998:
<TABLE>
<CAPTION>
Tax-Free Ohio Insured Kentucky
Intermediate Tax-Free Tax-Free
Term Fund Fund Fund
<S> <C> <C> <C>
Gross unrealized appreciation........................... $ 2,440,258 $ 4,683,745 $ 144,927
Gross unrealized depreciation........................... (2,044) (2,582) (1,191)
-------------- --------------- ---------------
Net unrealized appreciation............................. $ 2,438,214 $ 4,681,163 $ 143,736
============== =============== ===============
</TABLE>
The tax basis of investments for each Fund is equal to the amortized cost as
shown on the Statements of Assets and Liabilities.
As of June 30, 1998, the Tax-Free Intermediate Term Fund had capital loss
carryforwards for federal income tax purposes of $996,209, none of which expire
prior to June 30, 1999. These capital loss carryforwards may be utilized in
future years to offset net realized capital gains prior to distribution to
shareholders.
<PAGE>
3. Investment Transactions
Investment transactions (excluding short-term investments) were as follows for
the period ended June 30, 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Tax-Free Ohio Insured Kentucky
Intermediate Tax-Free Tax-Free
Term Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases of investment securities...................... $ 20,968,625 $ 29,736,635 $ 3,887,513
============== ============== =============
Proceeds from sales and maturities of
investment securities................................. $ 26,989,988 $ 34,424,889 $ 4,688,048
============== ============== =============
</TABLE>
4. Transactions with Affiliates
The Chairman and the President of the Trust are also officers of Countrywide
Financial Services, Inc., whose subsidiaries include Countrywide Investments,
Inc. (the Adviser), the Trust's investment adviser and principal underwriter,
and Countrywide Fund Services, Inc. (CFS), the Trust's transfer agent,
shareholder service agent and accounting services agent. Countrywide Financial
Services, Inc. is a wholly-owned subsidiary of Countrywide Credit Industries,
Inc., a New York Stock Exchange listed company principally engaged in the
business of residential mortgage lending.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
MANAGEMENT AGREEMENT
Each Fund's investments are managed by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, each Fund pays the Adviser
a fee, computed and accrued daily and paid monthly, at an annual rate of 0.5% of
its respective average daily net assets up to $100 million, 0.45% of such net
assets from $100 million to $200 million, 0.4% of such net assets from $200
million to $300 million and 0.375% of such net assets in excess of $300 million.
In order to voluntarily reduce operating expenses during the periods ended June
30, 1998, the Adviser waived $46,680 of its investment advisory fees and
reimbursed $7,979 of Institutional expenses for the Ohio Tax-Free Money Fund,
waived $107,645 of its investment advisory fees and reimbursed $7,114 of
Institutional expenses for the Florida Tax-Free Money Fund, reimbursed $948 of
Class A expenses for the Ohio Insured Tax-Free Fund and waived its investment
advisory fees of $32,172 and reimbursed $36,336 of other operating expenses for
the Kentucky Tax-Free Fund.
The Adviser has agreed, until at least August 31, 1999, to waive fees and
reimburse expenses to the extent necessary to limit total operating expenses to
0.82% for the Kentucky Tax-Free Fund.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and CFS, CFS maintains the records for
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, CFS receives a monthly fee at an annual
rate of $25.00 per shareholder account from each of the Tax-Free Money Fund, the
California Tax-Free Money Fund, the Ohio Tax-Free Money Fund and the Florida
Tax-Free Money Fund and $21.00 per shareholder account from each of the Tax-Free
Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free
Fund, subject to a $1,000 minimum monthly fee for each Fund, or for each class
of shares of a Fund, as applicable. In addition, each Fund pays out-of-pocket
expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and CFS,
CFS calculates the daily net asset value per share and maintains the financial
books and records of each Fund. For these services, CFS receives a monthly fee,
based on current net assets, of $2,500 per month from each of the Tax-Free Money
Fund, the California Tax-Free Money Fund and the Kentucky Tax-Free Fund, $6,000
per month from the Ohio Tax-Free Money Fund and $4,000 per month from each of
the Florida Tax-Free Money Fund, the Tax-Free Intermediate Term Fund and the
Ohio Insured Tax-Free Fund. In addition, each Fund is subject to an additional
charge of 0.001% of its respective average daily net assets in excess of $300
million, and each Fund pays certain out-of-pocket expenses incurred by CFS in
obtaining valuations of such Fund's portfolio securities.
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as exclusive
agent for distribution of the Funds' shares. Under the terms of the Underwriting
Agreement between the Trust and the Adviser, the Adviser earned $3,650, $8,177
and $5,781 from underwriting and broker commissions on the sale of shares of the
Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund and the Kentucky
Tax-Free Fund, respectively, during the periods ended June 30, 1998. In
addition, the Adviser collected $6,430 and $5,587 of contingent deferred sales
loads on the redemption of Class C shares of the Tax-Free Intermediate Term Fund
and the Ohio Insured Tax-Free Fund, respectively.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of each
Fund having one class of shares and Class A shares of each Fund having two
classes of shares may directly incur or reimburse the Adviser for expenses
related to the distribution and promotion of shares. The annual limitation for
payment of such expenses under the Class A Plan is 0.25% of average daily net
assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
may directly incur or reimburse the Adviser for expenses related to the
distribution and promotion of shares. The annual limitation for payment of such
expenses under the Class C Plan is 1% of average daily net assets attributable
to Class C shares.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
CUSTODIAN AGREEMENTS
The Fifth Third Bank, which serves as the custodian for each Fund except for the
Florida Tax-Free Money Fund, was a significant shareholder of record of the Ohio
Tax-Free Money Fund as of June 30, 1998. Under the terms of its Custodian
Agreement, The Fifth Third Bank receives from each such Fund an asset-based fee
plus transaction charges for each security transaction entered into by the
Funds. Huntington Trust Company, N.A. (Huntington), which serves as the
custodian for the Florida Tax-Free Money Fund, was a significant shareholder of
record of such Fund as of June 30, 1998. Under the terms of its Custodian
Agreement, Huntington receives from the Fund an asset-based fee.
PRIOR AFFILIATE AGREEMENTS
Prior to August 30, 1997, the investment adviser of the Kentucky Tax-Free Fund
was Trans Financial Bank, N.A.; Forum Financial Corp. served as the transfer
agent and dividend disbursing agent and performed portfolio accounting services;
Forum Financial Services, Inc. acted as distributor of the Fund's shares; and
Forum Administrative Services, LLC supervised the administration of all aspects
of the Fund's operations. Contractual amounts paid by the Fund for the
performance of these services are reflected in the Fund's Statement of
Operations for the year ended August 31, 1997. As of June 30, 1998, Trans
Financial Bank, N.A. was a significant shareholder of record of the Kentucky
Tax-Free Fund.
<PAGE>
5. Capital Share Transactions
Capital share transactions for the Tax-Free Money Fund, the California Tax-Free
Money Fund, the Ohio Tax-Free Money Fund and the Florida Tax-Free Money Fund are
identical to the dollar value of those transactions as shown in the Statements
of Changes in Net Assets. Proceeds and payments on capital shares as shown in
the Statements of Changes in Net Assets for the Tax-Free Intermediate Term Fund,
the Ohio Insured Tax-Free Fund and the Kentucky Tax-Free Fund are the result of
the following capital share transactions for the periods shown:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Tax-Free Intermediate Ohio Insured
Term Fund Tax-Free Fund
Year Year Year Year
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .................................... 1,116,388 1,150,995 11,401,093 14,158,992
Shares issued in reinvestment of
distributions to shareholders ............... 180,589 209,803 236,258 233,941
Shares redeemed ................................ (1,853,155) (2,285,966) (11,832,144) (14,943,520)
----------- ----------- ----------- -----------
Net decrease in shares outstanding ............. (556,178) (925,168) (194,793) ( 550,587 )
Shares outstanding, beginning of year .......... 5,313,679 6,238,847 5,794,738 6,345,325
----------- ----------- ----------- -----------
Shares outstanding, end of year ................ 4,757,501 5,313,679 5,599,945 5,794,738
=========== =========== =========== ===========
CLASS C
Shares sold .................................... 160,180 168,900 206,187 135,167
Shares issued in reinvestment of
distributions to shareholders ............... 15,574 17,517 16,990 13,108
Shares redeemed ................................ (217,791) (200,429) ( 181,289 ) ( 100,548 )
----------- ----------- ----------- -----------
Net increase (decrease) in shares outstanding .. (42,037) (14,012) 41,888 47,727
Shares outstanding, beginning of year .......... 468,857 482,869 379,664 331,937
----------- ----------- ----------- -----------
Shares outstanding, end of year ................ 426,820 468,857 421,552 379,664
=========== =========== =========== ===========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Kentucky Tax-Free Fund
Ten Months Year Period
Ended Ended Ended
June 30, Aug. 31, Aug. 31,
1998 1997 1996(A)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares sold .................................. 43,967 127,642 2,814,888
Shares issued in reinvestment of distributions
to shareholders ............................ 15,102 29,744 57,538
Shares redeemed .............................. (181,304) ( 909,256 ) (1,297,814)
--------- --------- ---------
Net increase (decrease) in shares outstanding (122,235) ( 751,870 ) 1,574,612
Shares outstanding, beginning of period ...... 822,742 1,574,612 --
--------- --------- ---------
Shares outstanding, end of period ............ 700,507 822,742 1,574,612
========= ========= =========
</TABLE>
(A) Represents the period from the commencement of operations (September 27,
1995) through August 31, 1996.
6. Portfolio Composition
As of June 30, 1998, the Ohio Tax-Free Money Fund and the Ohio Insured Tax-Free
Fund were invested exclusively in debt obligations issued by the State of Ohio
and its political subdivisions, agencies, authorities and instrumentalities and
by other issuers the interest from which is exempt from Ohio personal income
tax. The California Tax-Free Money Fund was invested exclusively in debt
obligations issued by the State of California and its political subdivisions,
agencies, authorities and instrumentalities and by other issuers the interest
from which is exempt from California income tax. The Florida Tax-Free Money Fund
was 65.9% invested in debt obligations issued by the State of Florida and its
political subdivisions, agencies, authorities and instrumentalities and by other
issuers the value of which is exempt from the Florida intangible personal
property tax. The Kentucky Tax-Free Fund was invested exclusively in debt
obligations issued by the State of Kentucky and its political subdivisions,
agencies, authorities and instrumentalities and by other issuers the interest
from which is exempt from Kentucky income tax. As of June 30, 1998, 22.8% of the
portfolio securities of the Tax-Free Money Fund were concentrated in the State
of Ohio, 12.9% in the State of Kentucky and 10.0% in the State of Texas. For
information regarding portfolio composition by state for the Tax-Free
Intermediate Term Fund, see the Fund's Portfolio of Investments.
The Ohio Insured Tax-Free Fund and the Kentucky Tax-Free Fund are each
non-diversified Funds under the 1940 Act. Thus, investments may be concentrated
in fewer issuers than those of a diversified fund. As of June 30, 1998, the
Kentucky Tax-Free Fund had concentrations of investments (10% or greater) in two
issuers which collectively totaled 23.2%. No other Funds had concentrations of
investments in any one issuer.
The Tax-Free Money Fund, the California Tax-Free Money Fund, the Ohio Tax-Free
Money Fund and the Florida Tax-Free Money Fund each invest in municipal
securities maturing in 13 months or less and having a short-term rating in one
of the top two ratings categories by at least two nationally recognized
statistical rating agencies (or by one such agency if a security is rated by
only that agency) or, if unrated, are determined by the Adviser, under the
supervision of the Board of Trustees, to be of comparable quality.
As of June 30, 1998, 42.1% of the Tax-Free Intermediate Term Fund's portfolio
securities were rated AAA/Aaa [using the higher of Standard & Poor's Corporation
(S&P) or Moody's Investors Service, Inc. (Moody's) ratings], 28.2% were rated
AA/Aa, 26.3% were rated A/A and 3.4% were not rated. For the Kentucky Tax-Free
Fund's portfolio securities, 41.0% were rated AAA/Aaa, 10.2% were rated AA/Aa,
20.4% were rated A/A, and 25.7% were rated BBB/Baa, and 2.7% were not rated.
As of June 30, 1998, 92.9% of the Ohio Insured Tax-Free Fund's long-term
portfolio securities were either (1) insured by an insurance policy obtained
from a recognized insurer which carries a rating of AAA by S&P or Aaa by
Moody's, (2) guaranteed as to the payment of interest and principal by an agency
or instrumentality of the U.S. Government or (3) secured as to the payment of
interest and principal by an escrow account consisting of obligations of the
U.S. Government. Three private insurers individually insure more than 10% of the
Ohio Insured Tax-Free Fund's portfolio securities and collectively insure 72.3%
of its portfolio securities.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
The concentration of investments for each Fund as of June 30, 1998, classified
by revenue source, was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
California Ohio Florida Tax-Free Ohio
Tax-Free Tax-Free Tax-Free Tax-Free Intermediate Insured Kentucky
Money Money Money Money Term Tax-Free Tax-Free
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
General Obligations............................ 12.5% 14.7% 28.5% 14.5% 20.8% 42.9% --
Revenue Bonds:
Industrial Development/Pollution Control..... 38.1% 31.7% 24.2% 12.4% 8.2% 4.5% 10.7%
Hospital/Health Care......................... 15.9% 4.6% 27.4% 29.0% 12.7% 20.6% 10.6%
Housing/Mortgage............................. 9.3% 5.7% 2.8% 15.6% 11.5% 5.0% 7.1%
Utilities.................................... 6.9% 21.3% 3.4% 5.2% 4.2% 14.4% 7.6%
Education.................................... 6.3% 4.7% 4.5% 8.4% 21.2% 4.3% 11.0%
Transportation............................... 4.6% 2.3% -- 1.3% 6.9% 2.8% 15.7%
Public Facilities............................ 1.4% 1.5% 3.5% 0.2% 1.8% 1.7% 19.2%
Economic Development......................... 5.0% 4.8% 3.5% 5.6% 3.1% -- 12.6%
Leases....................................... -- 4.0% -- 0.5% 2.9% -- 5.5%
Special Tax.................................. -- 1.3% 0.3% 0.5% 3.7% 2.7% --
Miscellaneous................................ -- 3.4% 1.9% 6.8% 3.0% 1.1% --
------- ------- ------- ------- ------ ------ -------
Total ......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= ====== ====== =======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
7. Agreement and Plan of Reorganization
The Kentucky Tax-Free Fund was originally organized as a series of Trans Adviser
Funds, Inc. (Trans Adviser), an open-end management investment company
incorporated under the laws of the State of Maryland. Pursuant to an Agreement
and Plan of Reorganization dated May 31, 1997, the Fund, on August 29, 1997,
succeeded to the assets and liabilities of a series of Trans Adviser with the
same name (the Predecessor Fund). The investment objectives, policies and
restrictions of the Fund and its Predecessor Fund are substantially identical.
For federal income tax purposes, the reorganization of the Kentucky Tax-Free
Fund qualifies as a tax-free reorganization with no tax consequences to the
Fund, its Predecessor Fund or their shareholders. In connection with the
reorganization, the fiscal year-end of the Fund, subsequent to August 31, 1997,
has been changed from August 31 to June 30.
8. Federal Tax Information for Shareholders (Unaudited)
In accordance with federal tax requirements, each Fund designates its respective
dividends paid from net investment income during the periods ended June 30, 1998
as "exempt-interest dividends". On November 28, 1997, the Ohio Insured Tax-Free
Fund paid a short-term capital gain distribution of $0.0240 per share and a
long-term capital gain distribution of $0.0550, of which $0.0253 was designated
as 28% rate gains. As required by federal regulations, shareholders will receive
notification of their portion of a Fund's taxable capital gain distributions, if
any, paid during the 1998 calendar year early in 1999.
<PAGE>
<TABLE>
TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 21.8% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 750,000 Goodman, WI, Sanitation Dist. No. 1 Sys. Rev. BANS.......... 4.100% 12/01/1998 $ 750,000
500,000 Pima Co., AZ, USD No.1 (Tucson), Prerefunded @ 102.......... 6.750 07/01/1998 510,000
200,000 Arizona St. Highway Trans. Rev., Ser. A..................... 5.700 07/01/1998 200,000
635,000 Los Alamos Co., NM, Income Utility Rev., Ser. A............. 4.800 07/01/1998 635,000
110,000 University of New Mexico, Valencia Co. Branch Comm.
College, GO................................................ 4.500 08/01/1998 110,061
100,000 Ohio St., GO................................................ 3.850 08/01/1998 100,000
500,000 Mesquite, TX, ISD GO, Ser. A................................ 7.250 08/15/1998 502,014
130,000 New York St. Medical Care Fac. Rev., Escrowed to Maturity... 7.250 08/15/1998 130,538
370,000 Charlotte, NC, COP, Ser. D (Equipment Acq. Proj.)........... 4.050 09/01/1998 370,180
245,000 Pace, FL, Ppty. Fin. Auth. Util. Sys. Rev................... 4.000 09/01/1998 245,000
110,000 Philadelphia, PA, Parking Auth. Rev., Prerefunded @ 102..... 7.250 09/01/1998 112,825
250,000 Alabama St. Municipal Elec. Auth. Power Supply Rev., Ser. A. 6.000 09/01/1998 250,937
150,000 Ohio St. IDR, Ser. 1997 (Bomaine Corp. Proj.)............... 4.300 11/01/1998 150,000
110,000 Okanogan Co., WA, GO........................................ 3.800 12/01/1998 110,000
1,000,000 Merrimack Co., NH, TANS..................................... 3.780 12/30/1998 1,000,146
500,000 Chesterfield Co., VA, GO, Ser. B............................ 6.200 01/01/1999 505,765
600,000 Massillion, OH, GO BANS..................................... 4.550 01/15/1999 602,034
641,600 American Municipal Power Sys. Impt. BANS (Village
of Milan Proj.)............................................ 3.950 01/22/1999 641,600
435,000 Collin Co., TX, Comm. College Dist. Rev..................... 4.500 02/01/1999 436,684
459,000 St. Mary's, OH, CSD, GO BANS................................ 3.990 02/23/1999 459,399
315,000 Washoe Co., NV, GO, Prerefunded @ 102....................... 7.375 07/01/1999 331,275
- -------------- ------------
$ 8,110,600 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $8,153,458)................................. $ 8,153,458
------------
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 900,000 Eddyville, IA, IDR (Heartland Lysine, Inc.)................. 3.800% 07/01/1998 $ 900,000
1,500,000 Montgomery Co., OH, Ser. 1998A (Miami Valley Hosp.)......... 4.000 07/01/1998 1,500,000
500,000 Hopewell, VA, IDR (Hadson Power)............................ 4.050 07/01/1998 500,000
600,000 Idaho Health Fac. Auth. Rev., Ser. 1995 (St. Luke's Reg.
Medical Cntr.)............................................. 3.750 07/01/1998 600,000
1,550,000 Kentucky Econ. Dev. Fin. Auth. Rev., Ser. 1995 (Sisters
of Charity Nazareth)....................................... 3.800 07/01/1998 1,550,000
500,000 Arapahoe Co., CO, Rev., Ser. 1997 (Denver Jet Cntr. Proj.).. 3.900 07/01/1998 500,000
1,000,000 Ohio St. Air Qual. Dev. Auth. Rev., Ser. 1995A.............. 3.800 07/01/1998 1,000,000
1,000,000 Cuyahoga Co., OH, Hosp. Impt. Rev., Ser. 1997D (Cleveland
Clinic Foundation)......................................... 4.000 07/01/1998 1,000,000
700,000 Pinal, Co., AZ, IDA PCR (Magma Copper Co.).................. 3.900 07/01/1998 700,000
900,000 Pinellas Co., FL, Health Fac. Rev. (Pooled Hosp. Loan)...... 3.900 07/01/1998 900,000
1,800,000 Trinity River, TX, Ser. 1997 (ADP Proj.).................... 4.000 07/01/1998 1,800,000
1,000,000 Hamilton Co., OH, Health System Rev. (Franciscan Sisters)... 4.750 07/01/1998 1,000,000
1,000,000 Chicago, IL, O'Hare International Airport, Ser. B
(American Airlines)........................................ 4.000 07/01/1998 1,000,000
1,000,000 Illinois Dev. Fin. Auth. MFH Rev. (Cobbler Square Proj.).... 4.250 07/01/1998 1,000,000
400,000 Montebello, CA, COP, Ser. 1997 (Montebello Public
Impt. Corp.)............................................... 3.950 07/01/1998 400,000
200,000 Kentucky EDR, Hosp. Facs. Rev., Ser. D (Health Alliance).... 3.550 07/01/1998 200,000
330,000 Coppell, TX, IDR (Minyards Prop., Inc.)..................... 3.900 07/01/1998 330,000
335,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)................... 4.050 07/02/1998 335,000
70,000 St. Cloud, MN, Hsg. & Redev. Auth. Rev. (Coborn Realty Co.). 3.800 07/02/1998 70,000
1,000,000 District of Columbia MFH, Tyler House Trust COP,
Ser. 1995A................................................. 3.850 07/02/1998 1,000,000
675,000 Brooklyn Park, MN, IDR (Schmidt Proj.)...................... 3.800 07/02/1998 675,000
1,500,000 Athens-Clarke Co., GA, IDR (Nakanishi Corp. Proj.).......... 4.125 07/02/1998 1,500,000
<PAGE>
<CAPTION>
TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,200,000 Indiana St. Dev. Fin. Auth. Rev. (Lutheran H.S. Proj.)...... 3.700% 07/02/1998 $ 1,200,000
1,315,000 Mankato, MN, IDR, Ser. 1998 (Sacco Family Proj.)............ 3.950 07/02/1998 1,315,000
525,000 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.)................... 3.800 07/02/1998 525,000
- -------------- ------------
$ 21,500,000 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
- --------------
(Amortized Cost $21,500,000)................................ $21,500,000
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 18.9% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 735,000 Buckeye Tax-Exempt Mtg. Bond Trust.......................... 4.050% 08/01/1998 $ 733,481
570,000 Fort Mitchell, KY, Indust. Bldg. Rev.
(Grandview/Hemmer Proj.)................................... 4.000 08/01/1998 570,000
605,000 Corpus Christi, TX, IDR (Tex-Air Investment Co. Proj.)...... 3.900 08/01/1998 605,000
290,000 Lansing, MI, EDR (LGH Office Bldg. Proj.)................... 3.700 08/15/1998 290,000
1,200,000 Owensboro, KY, IDR, Ser. 1985 (Dart Container).............. 3.750 09/01/1998 1,200,000
106,000 Citizens Federal Tax-Exempt Mtg. Bond Trust................. 3.850 09/01/1998 106,000
150,000 Cuyahoga Co., OH, IDR (Halle Office Bldg.).................. 4.015 10/01/1998 150,000
500,000 Santa Clara Co., CA, Hsg. Auth. Rev. (Orchard
Glen Apartments)........................................... 5.250 11/01/1998 500,000
180,000 Medina Co., OH, IDR (Nationwide One Proj.).................. 3.950 11/01/1998 179,948
1,000,000 Westmoreland Co., PA, IDR (White Cons Indust.).............. 4.010 12/01/1998 1,000,000
540,000 Henderson Co., KY, River Port Auth. IDR
(David Joseph Proj.)....................................... 3.700 01/01/1999 539,649
500,000 Colorado Health Fac. Auth. Rev., Ser. 1998A................. 3.700 01/15/1999 500,000
680,000 Lexington-Fayette Co., KY, Urban Govt. Rev.
(Providence Montessori).................................... 4.125 07/01/1999 680,000
- -------------- ------------
$ 7,056,000 TOTAL ADJUSTABLE RATE PUT BONDS
- --------------
(Amortized Cost $7,054,078)................................. $ 7,054,078
------------
$ 36,666,600 TOTAL INVESTMENT SECURITIES-- 98.2%
==============
(Amortized Cost $36,707,536)................................ $36,707,536
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.8% ............... 675,907
------------
NET ASSETS-- 100.0% ........................................ $37,383,443
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
CALIFORNIA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
<CAPTION>
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 37.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 150,000 Brawley, CA, Wastewater Treatment Fac. Rev., COP............ 3.800% 07/01/1998 $ 150,000
460,000 Shasta, CA, Joint Powers Fin. Auth. Landfill Rev.,
Ser. 1997A................................................. 3.850 07/01/1998 460,000
500,000 Los Angeles Co., CA, Transportation Sales Tax Rev., Ser. A.. 5.200 07/01/1998 500,000
160,000 Los Angeles Co., CA, Transportation Comm. Sales Tax
Rev., Ser. A............................................... 7.200 07/01/1998 163,200
110,000 San Mateo Co., CA, Joint Powers Fin. Auth. Lease Rev........ 3.700 07/15/1998 110,000
1,000,000 Santa Cruz Co., CA, Office of Educ. TRANS................... 4.500 07/30/1998 1,000,460
1,000,000 Butte Co., CA, Office of Educ. TRANS........................ 4.500 07/31/1998 1,000,487
430,000 Calaveras, CA, USD, GO...................................... 3.600 08/01/1998 430,000
100,000 San Jose Redev. Agcy., Tax Alloc. (Merged Area Proj.)....... 4.200 08/01/1998 100,032
250,000 Pasadena, CA, Comm. Dev., Tax Alloc. (Downtown
Redev. Proj.).............................................. 4.750 08/01/1998 250,185
1,000,000 South Coast Air Quality Mgmt. Dist. Bldg. Corp.,
CA, Rev., Prerefunded @ 102................................ 7.800 08/01/1998 1,024,803
500,000 California St. Dept. of Veteran Affairs, Home
Purchase Rev., Ser. A...................................... 8.300 08/01/1998 511,782
1,000,000 Oxnard, CA, School Dist. TRANS.............................. 4.500 08/13/1998 1,000,734
235,000 Northern CA, Power Agcy. Rev................................ 6.125 08/15/1998 235,657
200,000 Los Angeles Co., CA, Public Works Fin. Auth. Rev............ 4.000 09/01/1998 200,090
400,000 Modesto, CA, Irrigation Dist. Fin. Auth. Water Proj.
Rev., Ser. 1998D........................................... 4.250 09/01/1998 400,467
265,000 Montebello, CA, Comm. Redev. Agcy., Tax Alloc., Ser. A..... 4.500 09/01/1998 265,305
300,000 California St. GO........................................... 5.400 09/01/1998 300,766
1,200,000 Simi Valley, CA, Public Fin. Auth. Rev., Prerefunded @ 102.. 7.000 09/01/1998 1,230,193
635,000 California St. GO........................................... 4.700 10/01/1998 636,706
190,000 Virgin Islands, Public Fin. Auth. Rev., Ser. B.............. 6.900 10/01/1998 191,538
1,000,000 California St. GO Veterans Bonds, Ser. A-Q.................. 8.750 10/01/1998 1,012,074
205,000 California St. GO, Veterans Bonds, Ser. A-S................. 11.000 10/01/1998 208,631
215,000 Sacramento, CA, COP, Prerefunded @ 100...................... 6.500 11/01/1998 217,126
750,000 University of California, COP, UCLA Central
Chiller/Congeneration Fac. ................................ 10.750 11/01/1998 767,349
175,000 Rubidoux, CA, Community Service Dist. COP (Water Sys.
Impt. Proj.)............................................... 3.500 12/01/1998 174,834
100,000 California St. Dept. of Veteran Affairs, Home
Purchase Rev., Ser. B...................................... 3.850 12/01/1998 100,000
205,000 San Ramon, CA, Public Fin. Auth., Tax Alloc................. 3.600 02/01/1999 205,000
270,000 Big Bear Lake, CA, COP (Big Bear Lake Impt. Agcy.).......... 6.000 02/01/1999 273,226
500,000 Los Angeles, CA, Wastewater Sys. Rev., Ser. A,
Prerefunded @ 102.......................................... 7.000 02/01/1999 519,835
330,000 Los Angeles, CA, Wastewater Sys. Rev., Ser. A,
Prerefunded @ 102.......................................... 7.100 02/01/1999 342,715
285,000 Madera Co., CA, COP (Valley Childrens Hosp.)................ 3.600 03/15/1999 285,000
200,000 California Fin. Auth. Solid Waste Disposal Rev.,
Ser. 1998C (City Fibers, Inc.)............................. 4.000 04/01/1999 200,000
250,000 San Diego Co., CA, Regional Transportation Comm.
Sales Tax Rev., Ser. A..................................... 5.000 04/01/1999 252,366
100,000 San Diego, CA, Sewer Rev., Ser. A........................... 4.000 05/15/1999 100,125
100,000 California St. GO, Ser. B-J................................. 4.125 06/01/1999 100,118
160,000 California St. University Trust COP......................... 6.000 06/01/1999 163,139
255,000 Napa Valley, CA, USD, GO.................................... 7.000 08/01/1999 263,711
- -------------- ------------
$ 15,185,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS.........
- --------------
(Amortized Cost $15,347,653)................................ $15,347,653
------------
<PAGE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 56.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,000,000 California Higher Educ. Loan Auth. Student Loan Rev......... 3.500% 07/01/1998 $ 1,000,000
1,600,000 Vacaville, CA, IDA, IDR (Leggett & Platt, Inc.)............. 3.650 07/01/1998 1,600,000
1,500,000 Dinuba, CA, Fin. Auth. Rev., Ser. 1996A (Wastewater
Treatment Plant Proj.)..................................... 3.950 07/01/1998 1,500,000
400,000 Newport Beach, CA, Rev., Ser. C (Hoag Memorial Hosp.)....... 3.600 07/01/1998 400,000
1,400,000 San Rafael, CA, IDR, Ser. 1984 (Phoenix American, Inc.)..... 3.700 07/01/1998 1,400,000
2,900,000 Santa Paula, CA, Public Fin. Auth. Rev., Ser. 1996
(Water Sys. Acquisition Proj.)............................. 4.300 07/01/1998 2,900,000
1,500,000 Ontario, CA, Rev., Ser. A (Redev. Agcy. Hsg. Fin.).......... 4.250 07/01/1998 1,500,000
600,000 Montebello, CA, COP, Ser. 1997 (Montebello Public
Impt. Corp.)............................................... 3.950 07/01/1998 600,000
1,200,000 Newport Beach, CA, Rev., Ser. A (Hoag Memorial Hosp.)....... 3.600 07/01/1998 1,200,000
1,000,000 San Bernardino Co., CA, Capital Impt.
Refinancing Proj. Rev. .................................... 3.900 07/02/1998 1,000,000
1,150,000 Alameda Co., CA, IDR, Ser. A (Tool Family Partnership)...... 3.500 07/02/1998 1,150,000
1,300,000 San Bernardino Co., CA, COP................................. 3.600 07/02/1998 1,300,000
900,000 San Bernardino, CA, IDR (LaQuinta Motor Inns)............... 3.650 07/02/1998 900,000
1,500,000 Hanford, CA, Sewer Rev., Ser. A............................. 3.900 07/02/1998 1,500,000
2,000,000 Alameda Co., CA, IDR (Dicon Fiberoptics, Inc., Proj. A)..... 3.500 07/02/1998 2,000,000
3,200,000 California PCR Fin. Auth., Ser. 1983 (Southdown, Inc.)...... 3.800 07/15/1998 3,200,000
- -------------- ------------
$ 23,150,000 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
- --------------
(Amortized Cost $23,150,000)................................ $23,150,000
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 2.9% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,200,000 Huntington Park, CA, Redev. Agcy. Rev. (Huntington
Park Personal Storage II).................................. 3.800% 08/01/1998 $ 1,200,000
- -------------- ------------
(Amortized Cost $1,200,000)
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 2.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,000,000 San Diego, CA, IDR (SDG&E).................................. 3.550% 07/14/1998 $ 1,000,000
- -------------- ------------
(Amortized Cost $1,000,000)
$ 40,535,000 TOTAL INVESTMENT SECURITIES-- 99.2%
==============
(Amortized Cost $40,697,653)................................ $40,697,653
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.8% ............... 315,179
------------
NET ASSETS-- 100.0% ........................................ $41,012,832
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
OHIO TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 33.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 500,000 Ohio St. Higher Educ. Fac. Comm. Rev.
(Western Reserve Univ.).................................... 4.750% 07/01/1998 $ 500,000
925,000 Seneca Co., OH, Human Fac. GO BANS.......................... 4.120 07/09/1998 925,054
700,000 Marysville, OH, Road Realignment GO BANS.................... 4.060 07/15/1998 700,069
2,000,000 Plain Township, OH, Fire Station GO BANS.................... 4.330 07/15/1998 2,000,438
893,000 Reynoldsburg City, OH, Cap. Fac. GO BANS, Ser. 1998......... 4.150 07/15/1998 893,135
1,000,000 Springboro City, OH, Water Sys. Impt. GO BANS, Ser. 1998.... 4.050 07/28/1998 1,000,219
2,226,000 Wood Co., OH, Sheriff's Dept. Impt. GO BANS, Ser. 1997...... 4.250 07/31/1998 2,226,615
1,000,000 Euclid City, OH, Various Purpose GO BANS.................... 4.120 07/31/1998 1,000,134
2,000,000 Ohio St. GO................................................. 3.850 08/01/1998 2,000,073
250,000 Ohio St. GO................................................. 4.000 08/01/1998 250,054
1,000,000 Ohio St. GO................................................. 5.500 08/01/1998 1,001,476
270,000 Ohio St., Infrastructure GO................................. 3.800 08/01/1998 270,014
1,000,000 Pickerington, OH, LSD School Impt. GO BANS, Ser. 1998....... 4.070 08/03/1998 1,000,393
1,400,000 Wadsworth, OH, CSD School Impt. GO BANS, Ser. 1998.......... 4.230 08/04/1998 1,400,554
1,000,000 Wadsworth, OH, CSD School Impt. GO BANS..................... 4.375 08/04/1998 1,000,431
1,060,000 Mason-Deerfield Joint Fire Dist. GO BANS, Ser. 1997......... 4.260 08/05/1998 1,060,254
2,440,000 Ottawa Co., OH, Regional Water Sys. Impt. GO BANS........... 4.125 08/06/1998 2,440,578
1,055,000 Marysville, OH, Downtown Sidewalk GO BANS................... 4.220 09/03/1998 1,055,481
207,000 Plain, OH, LSD School Impt. GO BANS......................... 4.310 09/03/1998 207,067
890,000 Marysville, OH, Various Purpose GO BANS..................... 4.160 09/03/1998 890,390
1,000,000 Wilmington, OH, CSD School Impt. GO BANS.................... 4.300 09/08/1998 1,001,113
1,180,000 Loveland, OH, Real Estate Acq. GO BANS...................... 4.110 09/10/1998 1,180,464
250,000 Columbus, OH, GO, Ser. 2.................................... 4.350 09/15/1998 250,329
4,075,000 Mayfield Village, OH, Various Purpose GO BANS............... 4.125 09/29/1998 4,077,107
1,200,000 Rural Lorain, OH, Water Auth. Rev., Prerefunded @ 102....... 7.700 10/01/1998 1,235,107
900,000 Salem, OH, CSD Energy Conserv. GO BANS, Ser. 1997........... 4.130 10/01/1998 900,390
1,050,000 Ohio St. Bldg. Auth. Rev., Ser. C........................... 7.100 10/01/1998 1,058,367
2,000,000 Ontario, OH, LSD School Impt. GO BANS....................... 4.375 10/07/1998 2,003,340
1,000,000 Lake Co., OH, Various Purpose GO BANS....................... 4.070 10/08/1998 1,000,442
1,580,000 Streetsboro City, OH, Various Purpose GO BANS............... 4.150 10/09/1998 1,580,623
2,030,000 Jackson Co., OH, Correction Fac. GO BANS, Ser. 1997........ 4.330 10/15/1998 2,031,884
1,000,000 Hamilton, OH, Elec. Sys. Rev., Ser. B, Prerefunded @ 102.... 8.000 10/15/1998 1,032,011
500,000 Columbus, OH, Water Sys. Rev................................ 5.500 11/01/1998 502,929
1,000,000 Ohio St. Public Fac. Rev., Ser. II-B........................ 4.500 11/01/1998 1,002,597
500,000 Ohio St. Higher Educ. Fac. Comm. Rev. (Xavier
Univ. Proj.), Prerefunded @ 100............................ 7.200 11/01/1998 505,927
500,000 Lima, OH, River Corridor Land Acq. GO BANS.................. 4.250 11/10/1998 500,435
500,000 Cuyahoga Co., OH, Hosp. Rev. (Cleveland Clinic Foundation).. 5.250 11/15/1998 502,819
1,155,000 Marysville, OH, Various Purpose GO BANS..................... 4.220 11/19/1998 1,156,157
3,500,000 Hamilton, OH, Real Estate Acq. GO BANS...................... 4.850 11/19/1998 3,503,227
2,000,000 Summit Co., OH, Various Purpose GO BANS, Ser. 1997B......... 4.875 11/19/1998 2,007,996
1,425,000 Marion Co., OH, Correctional Fac. GO BANS................... 4.100 11/23/1998 1,426,195
1,190,500 Fort Recovery, OH, LSD School Construction GO BANS.......... 4.230 11/24/1998 1,192,721
600,000 Gahanna-Jefferson, OH, CSD GO BANS.......................... 4.500 12/01/1998 601,937
500,000 Kettering, OH, Recreation Center GO......................... 4.300 12/01/1998 501,421
1,580,000 Toledo, OH, Various Purpose GO, Ser. A...................... 3.850 12/01/1998 1,580,000
730,000 Toledo, OH, Various Purpose GO, Ser. B...................... 3.850 12/01/1998 730,293
1,135,000 Olentangy, OH, LSD School Impt. GO BANS..................... 3.900 12/01/1998 1,135,898
300,000 Adams Co., OH, Valley LSD School Impt. GO BANS.............. 4.550 12/01/1998 300,968
640,000 Muskingum Co., OH, Brandywine Blvd. Extension GO BANS....... 4.350 12/02/1998 640,778
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 33.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,200,000 Muskingum Co., OH, Juvenile Detention GO BANS............... 4.100% 12/03/1998 $ 1,202,079
900,000 Hudson City, OH, Various Purpose GO BANS.................... 4.125 12/10/1998 900,826
2,900,000 Geauga Co., OH, Park Dist. GO............................... 4.080 12/10/1998 2,900,981
840,000 Maple Heights, OH, CSD GO TRANS, Ser. 1998.................. 4.000 12/11/1998 840,728
885,000 Painesville City, OH, Various Purpose GO BANS............... 4.140 12/16/1998 885,937
710,000 Wood Co., OH, Regional Water & Sewer GO BANS................ 4.100 01/22/1999 710,570
850,000 Marysville, OH, Various Purpose GO BANS..................... 4.070 01/28/1999 851,276
3,239,377 Toledo, OH, CSD Energy Conserv. GO BANS..................... 4.000 01/29/1999 3,242,999
600,000 North Ridgeville City, OH, Waterworks Sys. Impt. GO BANS.... 4.200 02/03/1999 600,857
1,190,000 Marion Co., OH, Human Services Bldg. Impt. GO BANS.......... 4.100 02/10/1999 1,192,108
1,200,000 South Euclid-Lyndhurst, OH, CSD Energy Conserv. GO.......... 3.980 02/11/1999 1,201,636
1,000,000 Mason, OH, CSD GO BANS, Ser. 1998A.......................... 4.020 02/18/1999 1,002,575
2,000,000 Van Wert Co., OH, Jail Construction GO BANS................. 3.930 02/18/1999 2,001,589
950,000 Ottawa Co., OH, Port Auth. Fac. GO BANS.................... 3.980 02/23/1999 951,662
1,130,000 Akron, OH, Waterworks Rev................................... 3.650 03/01/1999 1,130,000
500,000 Ohio St. Bldg. Auth. Rev., Ser. A........................... 7.150 03/01/1999 511,060
1,050,000 Salem, OH, CSD School Impt. GO BANS, Ser. 1998.............. 3.900 03/04/1999 1,051,362
3,960,000 American Municipal Power, OH, Rev. BANS (City of
Wadsworth Proj.)........................................... 3.850 03/17/1999 3,960,000
300,000 New Knoxville, OH, LSD School Impt. GO BANS................. 4.070 03/25/1999 300,463
1,800,000 American Municipal Power, OH, Rev. BANS (Lodi Village Proj.) 3.875 03/25/1999 1,800,000
1,266,000 Crestline Village, OH, Capital Facilities GO BANS, Ser. 1998 4.250 04/07/1999 1,267,865
900,000 Allen Co., OH, Bath Township Ditch GO BANS.................. 4.100 04/13/1999 902,037
3,300,000 Hebron Village, OH, Sanitary Sewer Sys., Ser. 1998.......... 4.580 04/15/1999 3,314,503
1,000,000 Ohio St. Pub. Fac., Higher Educ. Rev., Ser. II-A............ 4.750 05/01/1999 1,008,499
1,250,000 Marysville, OH, Various Purpose GO BANS..................... 4.160 05/06/1999 1,252,639
1,150,000 Ross Co., OH, Bldg. Acq. GO BANS............................ 4.000 05/19/1999 1,150,000
2,000,000 Summit Co., OH, Various Purpose GO BANS, Ser. 1998A......... 4.500 06/03/1999 2,013,462
1,000,000 Norwalk City, OH, Street Impt. GO BANS (Downtown
Rental Proj.).............................................. 4.000 06/10/1999 1,001,536
2,500,000 Hamilton City, OH, Various Purpose GO BANS, Ser. 1998....... 3.750 06/11/1999 2,500,000
2,400,000 Obetz Village, OH, Street Impt. GO BANS..................... 4.170 06/15/1999 2,403,736
1,870,000 St. Mary's City, OH, Sanitation Impt. GO BANS............... 4.200 06/15/1999 1,875,160
1,100,000 Van Wert City, OH, Sewer Sys. Impt. GO BANS................. 4.150 06/17/1999 1,103,054
410,000 Parma, OH, CSD School Impt. GO BANS......................... 3.850 06/24/1999 410,000
1,640,000 Clark Co., OH, Various Purpose GO BANS...................... 4.150 06/24/1999 1,645,420
2,100,000 American Municipal Power, OH, Rev. BANS
(Montpelier Village Proj.)................................. 3.950 07/15/1999 2,100,000
- -------------- ------------
$107,926,877 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $108,152,523)............................... $108,152,523
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 50,000 Franklin Co., OH, IDR (Columbus Dist.)...................... 3.700% 07/01/1998 $ 50,000
2,200,000 Cuyahoga Co., OH, Educ. Fac. Rev., Ser. 1998 (United
Cerebral Palsy Assoc.)..................................... 3.650 07/01/1998 2,200,000
4,100,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. 1997B
(Health Alliance of Greater Cincinnati)..................... 3.550 07/01/1998 4,100,000
3,500,000 Summit, OH, Civic Fac. Rev., Ser. 1997 (YMCA Proj.)......... 3.650 07/01/1998 3,500,000
965,000 Centerville, OH, Health Care Rev. (Bethany Memorial)........ 3.600 07/01/1998 965,000
3,000,000 Cuyahoga Co., OH, Hosp. Rev., Ser. 1997C
(Cleveland Clinic Foundation).............................. 3.550 07/01/1998 3,000,000
1,700,000 Lorain Co., OH, IDR (EMH Med. Ctr. Proj.)................... 3.600 07/01/1998 1,700,000
1,000,000 Butler Co., OH, IDR (Phillip Morris Co.).................... 3.600 07/01/1998 1,000,000
1,375,000 Greene Co., OH, Health Care Fac. Rev. (Green Oaks Proj.).... 3.650 07/01/1998 1,375,000
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 2,320,000 Erie Co., OH, IDR (Toft Dairy, Inc.)........................ 3.650% 07/01/1998 $ 2,320,000
750,000 Orrville, OH, Hosp. Fac. Rev., Ser. 1990 (Orrville Hosp.)... 3.650 07/01/1998 750,000
2,700,000 Hamilton Co., OH, Health Alliance, Ser. F................... 3.550 07/01/1998 2,700,000
3,000,000 Clinton Co., OH, Hosp. Rev. (Ohio Hospital Cap., Inc.)...... 3.650 07/01/1998 3,000,000
2,000,000 Montgomery Co., OH, EDR Rev. (Dayton Art Institute)......... 3.550 07/01/1998 2,000,000
500,000 Ohio St. Environmental Impt. Rev. (U.S. Steel Corp.)........ 3.850 07/01/1998 500,000
2,900,000 Muskingum Co., OH, IDR (Elder-Beerman)...................... 3.850 07/01/1998 2,900,000
4,045,000 Cuyahoga Co., OH, IDR (S & R Playhouse Realty).............. 3.900 07/01/1998 4,045,000
1,865,000 Franklin Co., OH, IDR (Capitol South)....................... 3.950 07/01/1998 1,865,000
2,200,000 Delaware Co., OH, IDR (Radiation Sterilizers, Inc.)......... 3.900 07/01/1998 2,200,000
1,000,000 Cuyahoga Co., OH, Hosp. Rev., Ser. 1997D (Cleveland
Clinic Foundation)......................................... 4.000 07/01/1998 1,000,000
375,000 Franklin Co., OH, IDR (BOA Ltd. Proj.)...................... 4.000 07/01/1998 375,000
1,000,000 Wyandot Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.)............ 3.600 07/01/1998 1,000,000
800,000 Cincinnati & Hamilton Co., OH, Port. Auth. EDR
(Kenwood Office Assoc. Proj.).............................. 3.700 07/01/1998 800,000
1,700,000 Montgomery Co., OH, Rev., Ser. 1998A (Miami Valley Hospital) 4.000 07/01/1998 1,700,000
14,500,000 Hamilton Co., OH, Health Sys. Rev. (Franciscan Sisters)..... 4.750 07/01/1998 14,500,000
5,600,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. 1995A
(Cincinnati Gas & Elect.).................................. 3.800 07/01/1998 5,600,000
900,000 Lucas Co., OH, EDR (Glendale Meadows)....................... 3.650 07/01/1998 900,000
905,000 Cuyahoga Co., OH, IDR (Pleasant Lake Assoc.)................ 3.650 07/01/1998 905,000
2,170,000 Summit Co., OH, IDR (Bowery Assoc.)......................... 3.600 07/01/1998 2,170,000
1,000,000 Meigs Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.).............. 3.600 07/01/1998 1,000,000
494,000 Lorain Co., OH, IDR, Ser. C (Kindercare).................... 3.700 07/01/1998 494,000
300,000 Medina, OH, IDR (Kindercare)................................ 3.700 07/01/1998 300,000
1,000,000 Delaware Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.)........... 3.600 07/01/1998 1,000,000
375,000 Hudson Village, OH, IDR, Ser. A (Kindercare)................ 3.700 07/01/1998 375,000
965,000 Huron Co., OH, Rev. (Norwalk Furniture Corp.)............... 3.650 07/01/1998 965,000
670,000 Montgomery Co., OH, Health Care Rev., Ser. A
(Dayton Area MRI Consortium)............................... 3.650 07/01/1998 670,000
200,000 Ohio St. Water Dev. Auth. Rev. (Timken Co. Proj.)........... 3.600 07/01/1998 200,000
775,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993A
(Hospice of the Western Reserve)............................ 3.650 07/01/1998 775,000
900,000 Cuyahoga Co., OH, Health Care Fac. Rev. (Benjamin
Rose Inst.)................................................ 3.600 07/01/1998 900,000
340,000 Montgomery Co., OH, IDR (Kindercare)........................ 3.700 07/01/1998 340,000
437,000 Stark Co., OH, IDR, Ser. D (Kindercare)..................... 3.700 07/01/1998 437,000
935,000 Lucas Co., OH, IDR, Ser. D (Kindercare)..................... 3.700 07/01/1998 935,000
564,000 Franklin Co., OH, IDR, Ser. D (Kindercare).................. 3.700 07/01/1998 564,000
2,160,000 Defiance Co., OH, IDR (Isaac Property Proj.)................ 3.650 07/01/1998 2,160,000
1,000,000 Morrow Co., OH, IDR (Field Container Corp.)................. 3.550 07/01/1998 1,000,000
1,000,000 Toledo, OH, City Serv., Special Assessment.................. 3.550 07/01/1998 1,000,000
287,000 Middletown, OH, IDR, Ser. A (Kindercare).................... 3.700 07/01/1998 287,000
1,300,000 Franklin Co., OH, IDR (Jacobsen Stores)..................... 3.950 07/01/1998 1,300,000
375,000 Wadsworth, OH, IDR (Kindercare)............................. 3.700 07/01/1998 375,000
1,750,000 Cuyahoga Co., OH, Health Care Fac. Rev., Ser. 1993B
(Hospice of the Western Reserve)........................... 3.650 07/01/1998 1,750,000
2,690,000 Hancock Co., OH, MFM Rev., Ser. A (Crystal Glen Apts.
Proj. Phase II)............................................ 3.600 07/02/1998 2,690,000
4,485,000 Trumbull Co., OH, Health Care Fac. Rev. (Shepherd of
the Valley)................................................ 3.600 07/02/1998 4,485,000
770,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.)....... 3.600 07/02/1998 770,000
770,000 Marion Co., OH, Hosp. Impt. Rev., Ser. 1992
(Pooled Lease Proj.)....................................... 3.600 07/02/1998 770,000
4,000,000 Montgomery Co., OH, Ltd. Oblig. Rev., Ser. 1996
(St. Vincent De Paul Proj.)................................ 3.750 07/02/1998 4,000,000
3,500,000 Lima, OH, Hosp. Fac. & Impt. Rev., Ser. 1996
(Lima Memorial Hosp.)...................................... 3.600 07/02/1998 3,500,000
1,610,000 Mahoning Co., OH, Health Care Fac. Rev.
(Ohio Heart Institute)..................................... 3.600 07/02/1998 1,610,000
3,200,000 Butler Co., OH, Hosp. Fac. Rev., Ser. 1998A
(Berkeley Square Retirement Cntr. Proj.).................... 3.650 07/02/1998 3,200,000
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 57.7% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 750,000 Pike Co., OH, EDR (Pleasant Hill)........................... 3.600% 07/02/1998 $ 750,000
450,000 Akron, Bath & Copley, OH, Joint Twp. Hosp. Rev.
(Visiting Nurse Svcs. Proj.)............................... 3.600 07/02/1998 450,000
1,252,900 Hamilton Co., OH, EDR, Ser. 1995 (Cincinnati Assoc.
for the Performing Arts)................................... 3.650 07/02/1998 1,252,900
350,000 Lucas Co., OH, Rev. (Sunshine Children's Home).............. 3.600 07/02/1998 350,000
3,700,000 Ashtabula Co., OH, Hosp. Fac. Rev., Ser. 1995
(Ashtabula Co. Med. Ctr. Proj.)............................ 3.600 07/02/1998 3,700,000
1,445,000 Village of Andover, OH, Health Care Rev., Ser. 1996
(D&M Realty Proj.)......................................... 3.600 07/02/1998 1,445,000
405,000 Lucas Co., OH, IDR (S.A. Associates Proj.).................. 3.700 07/02/1998 405,000
565,000 Summit Co., OH, IDR (Go-Jo Indust., Inc. Proj.)............. 3.600 07/02/1998 565,000
100,000 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.)....... 3.600 07/02/1998 100,000
1,180,000 Franklin Co., OH, IDR (Ohio Girl Scouts).................... 3.600 07/02/1998 1,180,000
1,560,000 Allen Co., OH, Health Care Fac. Rev. (Mennonite
Memorial Home Proj.)....................................... 3.500 07/02/1998 1,560,000
1,900,000 Summit Co., OH, Health Care Fac. Rev., Ser. 1997
(Evant, Inc. Proj.)........................................ 3.600 07/02/1998 1,900,000
2,000,000 Franklin Co., OH, IDR (Alco Standard Corp.)................. 3.650 07/02/1998 2,000,000
1,700,000 Clinton Co., OH, Hosp. Rev. (Clinton Memorial Hosp.)........ 3.600 07/02/1998 1,700,000
5,630,000 Sharonville, OH, IDR (Duke Realty Proj.).................... 3.600 07/02/1998 5,630,000
5,000,000 Hamilton Co., OH, Fac. Rev., Ser. 1997A (Episcopal
Retirement Homes).......................................... 3.650 07/02/1998 5,000,000
1,600,000 Warren Co., OH, IDR (Liquid Container Proj.)................ 3.600 07/02/1998 1,600,000
3,740,000 Montgomery Co., OH, Health Care Rev. (Comm.
Blood Ctr. Proj.).......................................... 3.600 07/02/1998 3,740,000
8,000,000 Franklin Co., OH, IDR (Berwick Steel)....................... 4.250 07/02/1998 8,000,000
1,000,000 Franklin Co., OH, Hosp. Rev. (U.S. Health Corp.)............ 3.550 07/02/1998 1,000,000
4,600,000 Ohio St. Higher Educ. Fac. Rev. (Pooled Fin.)............... 3.600 07/02/1998 4,600,000
400,000 Franklin Co., OH, IDR (Columbus College).................... 3.600 07/02/1998 400,000
4,800,000 Ohio St. EDR, Ser. 1983 (Court St. Ctr. Assoc. Ltd. Proj.).. 3.600 07/02/1998 4,800,000
900,000 Rickenbacker, OH, Port. Auth. Rev. (Rickenbacker
Holdings, Inc.)............................................ 3.600 07/02/1998 900,000
1,750,000 Westlake, OH, IDR (Nordson Co.)............................. 3.500 07/02/1998 1,750,000
5,000,000 Ohio St. Higher Educ. Fac. Comm. Rev. (Pooled Fin.)......... 3.600 07/02/1998 5,000,000
2,000,000 Cuyahoga Co., OH, IDR, Ser. 1989 (Motch Corp. Proj.)........ 3.750 07/02/1998 2,000,000
5,800,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. 1997A
(Children's Hosp. Med. Ctr................................. 3.600 07/02/1998 5,800,000
1,955,000 Mahoning Co., OH, Health Care Fac. Rev. (Copeland Oaks)..... 3.600 07/02/1998 1,955,000
1,975,000 Ashland Co., OH, Hosp. Fac. Rev., Ser. 1989
(Good Shepherd Home)....................................... 4.000 07/03/1998 1,975,000
600,000 Ohio St. Higher Educ. Fac. Rev., (John Carroll University).. 4.250 07/06/1998 600,000
4,250,000 Cincinnati & Hamilton Co., OH, Port. Auth. Rev.
(Kaiser Agric. Chemical Co.)............................... 3.350 07/07/1998 4,250,000
1,400,000 Hamilton Co., OH, IDR (ADP System).......................... 3.700 07/15/1998 1,400,000
- -------------- ------------
$184,729,900 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
- --------------
(Amortized Cost $184,729,900)............................... $184,729,900
------------
<PAGE>
<CAPTION>
OHIO TAX-FREE MONEY FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 9.2% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 2,500,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. A
(Duquesne Light)........................................... 3.950% 07/10/1998 $ 2,500,000
1,215,000 Hamilton, OH, IDR (Continental Commercial Ppty.)............ 3.850 08/01/1998 1,215,000
1,000,000 Ohio St. Air Quality Dev. Auth. Rev., Ser. A
(Ohio Edison Proj.)........................................ 4.350 08/01/1998 1,000,371
884,000 Citizens Federal Tax-Exempt Mtg. Bond Trust................. 3.850 09/01/1998 884,000
2,520,000 Perry Co., OH, Nursing Fac. Rev., Ser. 1996
(New Lexington Health Corp. Proj.)......................... 4.000 09/01/1998 2,520,000
640,000 Riverside, OH, Econ. Dev. Rev. (Riverside Assoc. Ltd. Proj.) 3.800 09/01/1998 640,000
4,915,000 Cuyahoga Co., OH, IDR (Halle Office Building)............... 4.015 10/01/1998 4,915,000
165,000 Franklin Co., OH, IDR (Pan Western Life).................... 3.650 10/01/1998 165,000
1,210,000 Miami Valley Tax-Exempt Mtg. Bond Trust..................... 4.880 10/15/1998 1,210,000
1,410,000 Clermont Co., OH, EDR (John Q. Hammons Proj.)............... 3.800 11/01/1998 1,410,000
615,000 Franklin Co., OH, IDR (GSW Proj.)........................... 3.750 11/01/1998 615,000
3,125,000 Ohio St. HFA MFH (Lincoln Park)............................. 3.850 11/01/1998 3,125,000
3,570,000 Richland Co., OH, IDR (Mansfield Sq. Proj.)................. 3.850 11/15/1998 3,570,000
585,000 Cuyahoga Co., OH, Health Care Rev........................... 3.950 12/01/1998 585,000
2,290,000 Franklin Co., OH, IDR (Leveque & Assoc. Proj.).............. 3.800 12/01/1998 2,290,000
905,000 Scioto Co., OH, Health Care Rev. Bonds (Hillview Retirement) 3.800 12/01/1998 905,000
1,000,000 Gallia Co., OH, IDR (Jackson Pike Assoc.)................... 3.700 12/15/1998 1,000,000
1,085,000 Ohio Company Tax-Exempt Mtg. Bond Trust, Ser. 2............. 3.900 12/15/1998 1,084,776
- -------------- ------------
$ 29,634,000 TOTAL ADJUSTABLE RATE PUT BONDS
- --------------
(Amortized Cost $29,634,147)................................ $29,634,147
------------
$322,290,777 TOTAL INVESTMENT SECURITIES -- 100.6%
==============
(Amortized Cost $322,516,570)............................... $322,516,570
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.6)% ............. (1,934,059)
------------
NET ASSETS-- 100.0% ........................................ $320,582,511
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
FLORIDA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 33.9% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 250,000 Puerto Rico Elec. Power Auth. Rev., Ser. O.................. 6.300% 07/01/1998 $ 250,000
200,000 Florida School Board Assoc. Lease Rev. (Orange Co. Proj.)... 6.800 07/01/1998 200,000
140,000 Florida St. GO.............................................. 7.000 07/01/1998 140,000
100,000 Parker, AZ, Street & Highway Rev. Proj. 1997, Ser. A........ 9.000 07/01/1998 100,000
155,000 Florida St. GO, Prerefunded @ 102........................... 7.000 07/01/1998 158,100
1,150,000 Dade Co., FL, GO, Ser. 1.................................... 6.750 07/01/1998 1,150,000
100,000 Brevard Co., FL, School Dist. COP, Ser. A................... 5.110 07/01/1998 100,000
150,000 Florida St. Div. Board Fin. Rev. (Dept. of Natural Resources) 4.300 07/01/1998 150,000
500,000 Seattle, WA, GO, Prerefunded @ 100.......................... 7.200 07/01/1998 500,000
100,000 Broward Co., FL, School Board COP........................... 6.750 07/01/1998 102,812
335,000 Clay Co., FL, School Board Master Lease Program COP......... 4.200 07/01/1998 335,000
300,000 Westfield, IN, High School Bldg. Corp. Rev., Ser. 1998...... 3.600 07/05/1998 300,000
435,000 Lawrence Twp., IN, School Bldg. Corp. Rev................... 3.750 07/05/1998 435,000
385,000 East Chicago, IN, Multi-School Bldg. Rev., Ser. 1998........ 4.000 07/15/1998 385,020
280,000 Lakeland, NY, Central School Dist. GO....................... 6.000 07/15/1998 280,244
835,000 Miami-Dade Co., FL, School Boards COP, Ser. A............... 4.250 08/01/1998 835,084
100,000 Lee Co., FL, School Board COP, Ser. A....................... 4.750 08/01/1998 100,074
500,000 Palm Beach Co., FL, School Board COP, Ser. A................ 4.150 08/01/1998 500,138
150,000 Indian Trail, FL, Water Control Dist. Impt. Rev............. 4.100 08/01/1998 150,043
100,000 Dade Co., FL, School Dist. GO............................... 6.400 08/01/1998 100,206
500,000 Dade Co., FL, School Dist. GO............................... 6.000 08/01/1998 500,941
250,000 Dade Co., FL, School Board COP (G. Holmes Braddock
High School)............................................... 4.375 08/01/1998 250,097
500,000 Seminole Co., FL, School Dist. GO........................... 5.400 08/01/1998 500,672
325,000 Dallas, TX, Tax Increment Fin. Reinvest. Zone, Tax Alloc.... 5.600 08/15/1998 325,656
200,000 Indian River Co., FL, Water & Sewer Rev., Ser. B............ 4.400 09/01/1998 200,180
1,000,000 Yakima Co., WA, BANS........................................ 4.125 09/01/1998 1,000,588
500,000 Aurora, IL, MFH Rev., Ser. 1988 (Fox Valley)................ 7.750 09/01/1998 502,424
150,000 Miami, FL, Spec. Rev........................................ 4.500 09/01/1998 150,160
360,000 Port St. Lucie, FL, Sales Tax Rev........................... 3.500 09/01/1998 360,000
100,000 Hollywood, FL, Water & Sewer Rev............................ 6.000 10/01/1998 100,507
100,000 Broward Co., FL, Airport Sales Rev., Ser. C................. 4.100 10/01/1998 100,060
250,000 Dade Co., FL, Aviation Rev., Ser. A......................... 5.150 10/01/1998 250,827
150,000 Dade Co., FL, Seaport Rev................................... 4.000 10/01/1998 150,090
200,000 Tallahassee, FL, Municipal Elec. Rev., Ser. A............... 4.900 10/01/1998 200,414
250,000 Destin, FL, Capital Impt. Rev., Prerefunded @ 102........... 7.100 10/01/1998 260,127
100,000 Jacksonville, FL, Elec. Auth. Rev........................... 9.750 10/01/1998 101,478
600,000 Indiana St. Univ., IN, Student Fees Rev., Ser. H............ 3.900 10/01/1998 600,140
425,000 Lake Superior St. Univ., MI, Rev............................ 4.500 11/15/1998 426,172
230,000 Clinton Co., IN, Jail Bldg. Corp. Rev....................... 3.900 11/15/1998 230,000
1,339,000 South Bay, FL, Subordinate Water & Sewer Rev. BANS,
Ser. 1998.................................................. 4.350 12/01/1998 1,340,864
320,000 Virginia Beach, VA, Dev. Auth. Lease Rev., Social Svcs. Fac. 4.300 12/01/1998 320,915
230,000 Grand Co., CO, School Dist. East Grand #2................... 3.700 12/01/1998 230,000
300,000 Sycamore, OH, Comm. School Dist. School Impt. GO, Ser. 1998. 3.700 12/01/1998 300,000
2,000,000 Merrimack Co., NH, TANS..................................... 3.780 12/30/1998 2,000,291
185,000 Escambia Co., FL, Utilities Auth. Rev., Ser. 1998A.......... 3.600 01/01/1999 185,000
1,000,000 Florida St. Board of Educ. Cap. Outlay GO, Ser. A........... 4.500 01/01/1999 1,003,160
500,000 Texas Turnpike Auth. Rev. (N. Dallas Tollway),
Prerefunded @ 102.......................................... 7.250 01/01/1999 523,462
<PAGE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 33.9% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 300,000 West Palm Beach, FL, GO, Prerefunded @ 102.................. 6.000% 03/01/1999 $ 310,237
360,000 Dade Co., FL, School Board COP, Ser. A...................... 4.300 05/01/1999 361,394
2,500,000 Port St. Joe, FL, Cap. Impt. Rev. BANS, Ser. 1998........... 4.350 07/01/1999 2,507,700
- -------------- ------------
$ 21,489,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $21,565,277)................................ $21,565,277
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 62.6% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,900,000 Broward Co., FL, HFA MFH (Margate Investment Proj.)......... 3.600% 07/01/1998 $ 1,900,000
1,000,000 Eustis, FL, Multi-Purpose Rev............................... 3.600 07/01/1998 1,000,000
3,800,000 Pinellas Co., FL, Health Fac. Auth. Rev. (Pooled Hosp. Loan) 3.900 07/01/1998 3,800,000
500,000 Pinal Co., AZ, IDA PCR (Magma Copper Co.)................... 3.900 07/01/1998 500,000
1,000,000 Palm Beach Co., FL, Water & Sewer Rev....................... 4.450 07/01/1998 1,000,000
3,800,000 Kentucky Econ. Dev. Fin. Auth., Ser. 1995 (Sisters
of Charity Nazareth)....................................... 3.800 07/01/1998 3,800,000
2,600,000 Jacksonville, FL, Health Fac. Auth. Rev., Ser. 1996
(Genesis Rehab. Hosp.)..................................... 4.000 07/01/1998 2,600,000
1,000,000 Hillsborough Co., FL, IDA PCR (Tampa Elec.)................. 4.100 07/01/1998 1,000,000
1,500,000 Trinity River, TX, IDR, Ser. 1997 (ADP Proj.)............... 4.000 07/01/1998 1,500,000
2,000,000 Orange Co., FL, IDR, Ser. 1997 (Univ. of Central Florida
Foundation Proj.).......................................... 3.600 07/01/1998 2,000,000
1,000,000 St. Petersburg, FL, HFA Rev., Ser. 1997 (Menorah
Manor Project)............................................. 3.550 07/01/1998 1,000,000
1,305,000 Florida HFA MFH, Ser. EEE (Carlton Arms II Proj.)........... 3.650 07/01/1998 1,305,000
1,735,000 Illinois Dev. Fin. Auth., MFH Rev. (Cobbler Square Proj.)... 4.250 07/01/1998 1,735,000
300,000 Indiana HFA, Ser. 1991 (Capital Access Pool)................ 3.600 07/01/1998 300,000
1,000,000 Indiana Health Fac. Fin. Auth. Rev. (Capital Access Pool)... 3.600 07/01/1998 1,000,000
1,300,000 Manatee Co., FL, HFA MFH Rev. (Harbour Proj. B)............. 3.600 07/01/1998 1,300,000
2,000,000 Boca Raton, FL, IDR (Parking Garage)........................ 3.875 07/02/1998 2,000,000
3,500,000 Iowa Financing Auth. Rev. (Burlington Medical Center)....... 3.650 07/02/1998 3,500,000
1,750,000 Harvard, IL, Health Care Fac. Rev., Ser. 1998............... 3.550 07/02/1998 1,750,000
1,600,000 Plant City, FL, Hosp. Rev. (South Florida Baptist Hosp.).... 3.600 07/02/1998 1,600,000
1,500,000 Marion Co., FL, HFA (Summer Trace Apts.).................... 3.600 07/02/1998 1,500,000
1,500,000 Marion Co., FL, HFA (Paddock Place Proj.)................... 3.600 07/02/1998 1,500,000
1,300,000 Jacksonville, FL, Health Fac. Rev. (Faculty Practice Assoc.) 3.650 07/02/1998 1,300,000
875,000 Volusia Co., FL, HFA MFH Rev., Ser. H (Sun Pointe Apts.).... 3.450 07/07/1998 875,000
- -------------- ------------
$ 39,765,000 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
- --------------
(Amortized Cost $39,765,000)................................ $39,765,000
------------
<CAPTION>
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS-- 2.3% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,000,000 Putnam Co., FL, Dev. Auth. PCR, Ser. 1984D (Seminole
Elec. Coop.)............................................... 3.650% 12/15/1998 $ 1,000,000
450,000 Wheat Ridge, CO, IDR, Ser. 1984 (Pearse Electronics Proj.).. 4.180 06/01/1999 450,000
- -------------- ------------
$ 1,450,000 TOTAL ADJUSTABLE RATE PUT BONDS
- --------------
(Amortized Cost $1,450,000)................................. $ 1,450,000
------------
<PAGE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER-- 8.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,500,000 St. Lucie Co., FL, Rev...................................... 3.650% 07/07/1998 $ 1,500,000
1,400,000 Orange Co., FL, Health Fac. Auth. Rev....................... 3.750 07/08/1998 1,400,000
2,500,000 Orange Co., FL, Health Fac. Auth. Rev....................... 3.600 07/09/1998 2,500,000
- -------------- ------------
$ 5,400,000 TOTAL COMMERCIAL PAPER
- --------------
(Amortized Cost $5,400,000)................................. $ 5,400,000
------------
$ 68,104,000 TOTAL INVESTMENT SECURITIES-- 107.3%
- --------------
(Amortized Cost $68,180,277)................................ $68,180,277
LIABILITIES IN EXCESS OF OTHER ASSETS-- (7.3)% ............. ( 4,653,581 )
------------
NET ASSETS-- 100.00% ....................................... $63,526,696
=============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
TAX-FREE INTERMEDIATE TERM FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
==============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
ARIZONA -- 2.7%
$ 400,000 Arizona Educ. Loan Mkt. Corp. Rev., Ser. A.................. 6.700% 03/01/2000 $ 415,496
600,000 Maricopa Co., AZ, School Dist. Rev., Ser. 1991C (Tempe Elem.) 8.000 07/01/2004 716,706
300,000 Tucson, AZ, Water Dist. Rev................................. 9.750 07/01/2010 439,422
------------
1,571,624
------------
CALIFORNIA -- 3.2%
600,000 Alameda Co., CA, IDR (Dicon Fiberoptics, Inc. Proj)......... 3.500 07/02/1998 600,000
460,000 Sacramento Co., CA, MFH ARPB (Fairway One Apts.)............ 5.875 02/01/2003 463,100
500,000 Santa Monica, CA, Redev. Agy. Lease Rev..................... 6.000 07/01/2003 540,230
250,000 California HFA Multi-Unit Rental Rev., Ser. B............... 6.500 08/01/2005 264,820
------------
1,868,150
------------
COLORADO -- 0.5%
300,000 Highland Ranch, CO, Metro Dist. GO, Ser. A.................. 5.000 12/01/2010 299,439
------------
FLORIDA -- 13.3%
500,000 Florida HFA MFH ARPB, Ser. 1978B (Hampton Lakes II Proj.)... 5.700 04/01/2001 505,910
200,000 Florida St. GO.............................................. 6.500 05/01/2004 202,836
1,000,000 Jacksonville, FL, Excise Tax Rev., Ser. B................... 5.400 10/01/2006 1,036,760
750,000 Hillsborough Co., FL, Solid Waste Rev....................... 5.500 10/01/2006 802,455
455,000 Pensacola, FL, Airport Rev., Ser. 1997B..................... 5.400 10/01/2007 484,261
1,000,000 Pasco Co., FL, HFA MFH Rev., Ser. 1997B (Cypress
Trail Apt. Proj.).......................................... 5.500 06/01/2008 1,041,070
1,345,000 Florida HFA MFA Sr. Lien, Ser. I-1.......................... 6.100 01/01/2009 1,399,109
1,000,000 Halifax Hosp. Medical Ctr., FL, Health Care Fac. Rev.,
Ser. 1998A................................................. 4.800 04/01/2010 985,630
365,000 Halifax Hosp. Medical Ctr., FL, Health Care Fac. Rev.,
Ser. 1998A................................................. 5.000 04/01/2011 363,609
455,000 Tampa, FL, Health Sys. Rev., Ser. A-1 (Catholic Health East) 5.250 11/15/2011 472,618
365,000 Halifax Hosp. Medical Ctr., FL, Health Care Fac. Rev.,
Ser. 1998A................................................. 5.000 04/01/2012 360,332
------------
7,654,590
------------
ILLINOIS -- 3.5%
1,000,000 Illinois HFA Rev. (Northwestern Medical Fac. Foundation).... 5.000 11/15/2012 995,890
1,000,000 Chicago, IL, Park Dist. GO, Ser. A.......................... 5.250 11/15/2012 1,024,050
------------
2,019,940
------------
INDIANA -- 8.7%
3,185,000 Purdue University, IN, COP, Prerefunded @ 102............... 6.250 07/01/2001 3,439,609
1,000,000 Indiana Bond Bank Special Prog. Rev., Ser. A-1.............. 6.650 01/01/2004 1,073,670
500,000 Indiana HFA Multi-Unit Mtg. Prog. Rev., Ser. 1992A.......... 6.600 01/01/2012 531,155
------------
5,044,434
------------
IOWA -- 2.1%
250,000 Iowa Student Loan Liquidity Corp. Rev....................... 6.400 07/01/2004 269,563
365,000 Iowa HFA Rev................................................ 6.500 07/01/2006 386,396
240,000 Iowa Student Loan Liquidity Corp. Rev....................... 6.600 07/01/2008 255,909
250,000 Cedar Rapids, IA, Hosp. Fac. Rev. (St. Luke's
Methodist Hosp.)........................................... 6.000 08/15/2009 273,125
------------
1,184,993
------------
KENTUCKY -- 3.1%
250,000 Kentucky EDR, Ser. 1995 (Sisters of Charity of Nazareth
Hlth. Sys.)................................................ 3.800 07/01/1998 250,000
675,000 Owensboro, KY, Elec. Light & Power Rev., Prerefunded @ 102.. 10.250 01/01/2000 749,453
750,000 Kentucky St. Turnpike Auth. EDR (Revitalization Proj.)...... 5.250 07/01/2005 791,760
------------
1,791,213
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
LOUISIANA -- 1.7%
$ 440,000 Louisiana Public Fac. Auth. Rev. (Medical Ctr. of Louisiana) 6.000% 10/15/2003 $ 469,528
500,000 West Ouachita Parish, LA, School Dist. GO, Ser. A........... 6.700 03/01/2006 542,330
------------
1,011,858
------------
MASSACHUSETTS -- 4.0%
750,000 Massachusetts St. Indust. Fin. Agy. ARPB
(Asahi/America, Inc.)...................................... 5.100 03/01/1999 756,495
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992B.......... 6.600 09/01/2002 542,500
500,000 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992A.......... 6.500 09/01/2002 540,610
450,000 Massachusetts St. Indust. Fin. Agy. Rev., Ser. 1997
(Hudner Assoc.)............................................ 5.000 01/01/2008 460,597
------------
2,300,202
------------
MICHIGAN -- 2.7%
1,000,000 Michigan St. Bldg. Auth. Rev., Ser. II...................... 6.400 10/01/2004 1,085,540
475,000 Battle Creek, MI, EDR Rev. (Kellogg Co Proj.)............... 5.125 02/01/2009 488,347
------------
1,573,887
------------
MISSISSIPPI -- 2.7%
500,000 Mississippi Higher Educ. Rev., Ser. B....................... 6.100 07/01/2001 521,525
1,000,000 Rankin Co., MS, School Dist. GO............................. 5.250 02/01/2010 1,052,320
------------
1,573,845
------------
NEBRASKA -- 1.1%
620,000 Nebraska Invest. Fin. Auth. Rev., Ser. 1989 (Foundation
for Educ. Fund), Escrowed to Maturity...................... 7.000 11/01/2009 635,984
------------
NEVADA -- 2.2%
1,000,000 Las Vegas, NV, GO, Sewer Impt. Rev., Prerefunded @ 102...... 6.500 04/01/2002 1,098,320
185,000 Washoe Co., NV, GO.......................................... 7.375 07/01/2009 195,160
------------
1,293,480
------------
NEW YORK -- 3.6%
500,000 New York Local Govt. Asst. Corp. Rev., Ser. 1991B........... 7.000 04/01/2002 545,325
1,300,000 New York St. Twy Auth. Local Hwy. & Impt. Rev............... 5.500 04/01/2006 1,390,337
------------
1,935,662
------------
NORTH CAROLINA -- 2.0%
1,065,000 Durham, NC, COP, Prerefunded @ 102.......................... 6.375 12/01/2001 1,163,289
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
OHIO -- 20.0%
$ 700,000 Franklin Co., OH, Rev., Ser. 1993 (American Chemical Soc.).. 5.500% 04/01/2000 $ 715,890
500,000 Franklin Co., OH, Rev. (Online Computer Library Ctr.)....... 5.500 04/15/2000 513,545
670,000 Fairfield, OH, IDR ARPB (Skyline Chili, Inc.)............... 5.000 09/01/2000 670,663
270,000 Warren Co., OH, Hosp. Fac. Rev. (Otterbein Home)............ 7.000 07/01/2003 296,209
1,105,000 Ohio St. EDR Ohio Enterprise Bond Fd. (Smith Steelite Proj.) 5.600 12/01/2003 1,165,554
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Episcopal
Retirement Home)........................................... 6.600 01/01/2004 541,675
360,000 Ohio St. EDR Ohio Enterprise Bond Fd. (Cheryl & Co.)........ 5.500 12/01/2004 382,957
1,000,000 Ohio St. Special Obligation Elem. & Secondary Educ.
Fac. Rev. ................................................. 5.000 12/01/2004 1,039,440
1,005,000 Franklin Co., OH, Health Care Fac. Rev. (First
Comm. Village)............................................. 6.000 06/01/2006 1,066,144
400,000 Painesville, OH, Elec. Rev.................................. 6.000 11/01/2006 429,964
530,000 Toledo, OH, GO.............................................. 6.000 12/01/2006 589,106
840,000 Kent State University General Receipts Rev.................. 6.000 05/01/2007 934,206
500,000 Ohio St. IDR, Ser. 1997 (Bomaine Corporation Proj.)......... 5.500 11/01/2007 506,090
749,067 Columbus, OH, Special Assessment GO......................... 5.050 04/15/2008 759,764
800,000 West Clermont, OH, LSD GO................................... 6.150 12/01/2008 884,040
500,000 Hamilton Co., OH, Hosp. Fac. Rev. (Bethesda Hosp.).......... 7.000 01/01/2009 507,545
500,000 Jefferson Co., OH, County Jail Construction GO.............. 4.900 12/01/2011 505,975
------------
11,508,767
------------
PENNSYLVANIA -- 4.6%
500,000 Pennsylvania St., IDR, Ser. A, Prerefunded @ 102............ 7.000 07/01/2001 550,625
500,000 Pennsylvania St., Higher Educ. Fac. Auth. Rev., Ser. A
(Univ. of Pennsylvania Health Serv.)........................ 6.000 01/01/2006 548,645
500,000 Pennsylvania Fin. Auth. Muni. Cap. Impt. Proj. Rev.......... 6.600 11/01/2009 553,895
1,000,000 Montgomery Co., PA, GO...................................... 4.600 10/15/2011 985,470
------------
2,638,635
------------
SOUTH CAROLINA -- 2.3%
525,000 South Carolina St. GO, Ser. A............................... 6.000 03/01/2004 560,238
725,000 Richland-Lexington, SC, Airport Dist. Rev., Ser. 1995
(Columbia Metro.).......................................... 6.000 01/01/2008 782,333
------------
1,342,571
------------
SOUTH DAKOTA -- 1.0%
510,000 South Dakota Student Loan Assistance Corp. Rev., Ser. A..... 7.600 08/01/2004 569,277
------------
TENNESSEE -- 2.0%
525,000 Southeast, TN, Tax-Exempt Mtg. Trust ARPB, Ser. 1990........ 7.250 04/01/2003 588,494
500,000 Nashville, TN, Metro. Airport Rev., Ser. C.................. 6.625 07/01/2007 543,590
------------
1,132,084
------------
TEXAS -- 7.2%
500,000 Houston, TX, Sr. Lien Rev., Ser. A (Hotel
Tax & Parking Fac.), Prerefunded @ 100..................... 7.000 07/01/2001 541,750
350,000 Univ. of Texas, TX, Rev., Ser. B, Prerefunded @102.......... 6.750 08/15/2001 384,174
1,000,000 Texas National Research Lab. Fin. Corp. Lease Rev.,
Prerefunded @ 102.......................................... 6.850 12/01/2001 1,107,390
50,000 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS, Prerefunded @ 102.......................... 7.950 05/15/2002 55,400
500,000 N. Texas Higher Educ. Student Loan Rev., Ser. 1991A......... 6.875 04/01/2002 529,395
450,000 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS............................................. 7.950 05/15/2008 493,232
321,908 Midland, TX, HFC Rev., Ser. A-2............................. 8.450 12/01/2011 350,063
650,000 Univ. of Texas, TX, Rev., Ser. B............................ 6.750 08/15/2013 708,240
------------
4,169,644
------------
<PAGE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT MUNICIPAL BONDS RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
UTAH -- 1.5%
$ 870,000 Utah St. School Dist. Fin. Corp. Rev., Mandatory Redemption. 8.375% 02/15/2002 $ 872,958
------------
VIRGINIA -- 1.2%
700,000 Virginia St. Resource Auth. Sys. Rev........................ 4.875 05/01/2013 694,484
------------
WASHINGTON -- 2.5%
335,000 Washington St. GO, Ser. A, Prerefunded @ 100................ 6.400 03/01/2001 354,966
1,000,000 Washington St. Motor Vehicle Fuel Tax GO.................... 6.000 09/01/2004 1,074,550
------------
1,429,516
------------
WISCONSIN -- 0.7%
430,000 Wisconsin St. Health and Educ. Fac. Auth. Rev. (Agnesian
Healthcare, Inc.).......................................... 4.900 07/01/2011 426,977
- -------------- ------------
$ 54,465,975 TOTAL MUNICIPAL BONDS-- 100.1%
==============
(Amortized Cost $55,269,289)................................ $57,707,503
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.1)% ............. (64,516)
------------
NET ASSETS-- 100.0% ........................................ $57,642,987
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
OHIO INSURED TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
==============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 95.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
$ 200,000 Montgomery Co., OH, Hosp. Rev. (Sisters of Charity),
Prerefunded @ 102.......................................... 6.625% 05/15/2001 $ 216,486
250,000 Franklin Co., OH, IDR (1st Comm. Village Healthcare),
Crossover Refunded @ 101.5.................................. 10.125 08/01/2001 295,818
30,000 Clermont Co., OH, Hosp. Fac. Rev., Ser. A (Mercy
Health Sys.), Prerefunded @ 100............................ 7.500 09/01/2001 33,047
460,000 Westerville, Minerva Park & Blendon, OH, Joint Hosp.
Dist. Rev. (St. Ann's), Prerefunded @ 102.................. 7.100 09/15/2001 509,864
1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.),
Prerefunded @ 102.......................................... 6.730 09/25/2001 1,098,820
850,000 Alliance, OH, Waterworks Sys. Rev., Prerefunded @ 102....... 6.650 10/15/2001 933,682
500,000 Clermont Co., OH, Sewer Sys. Rev., Ser. 1991,
Prerefunded @ 102.......................................... 7.100 12/01/2001 557,450
5,000 Cleveland, OH, Waterworks Impt. Rev., Ser. 1992B (First Mtg.),
Prerefunded @ 102........................................... 6.500 01/01/2002 5,480
1,000,000 Kent St. Univ. General Receipts Rev., Prerefunded @ 102..... 6.500 05/01/2002 1,101,820
500,000 Franklin Co., OH, Hosp. Rev., Ser. 1991 (Mt. Carmel),
Prerefunded @ 102.......................................... 6.750 06/01/2002 555,455
500,000 Mahoning Co., OH, Hosp. Impt. Rev. (YHA, Inc.),
Prerefunded @ 100.......................................... 7.000 10/15/2002 555,450
675,000 Reynoldsburg, OH, CSD GO, Prerefunded @102.................. 6.550 12/01/2002 752,774
145,000 Ohio St. Bldg. Auth. Rev. (Columbus St. Proj.),
Prerefunded @ 100.......................................... 10.125 04/01/2003 172,775
35,000 Ohio St. Bldg. Auth. Rev. (Frank Lausch Proj.),
Prerefunded @ 100.......................................... 10.125 04/01/2003 41,704
230,000 Summit Co., OH, GO, Ser. A, Prerefunded @ 100............... 6.900 08/01/2003 258,589
290,000 Alliance, OH, CSD GO........................................ 6.900 12/01/2006 321,288
500,000 Mansfield, OH, Hosp. Impt. Rev. (Mansfield General)......... 6.700 12/01/2009 546,575
250,000 Ohio St. Water Dev. Auth. & Impt. Rev., Ser. I,
Escrowed to Maturity....................................... 7.000 12/01/2009 293,158
500,000 Ohio Capital Corp. MFH Rev., Ser. 1990A..................... 7.500 01/01/2010 527,555
500,000 Hamilton, OH, Water Sys. Mtg. Rev., Ser. 1991A.............. 6.400 10/15/2010 542,330
500,000 Butler Co., OH, Hosp. Fac. Rev. (Middletown Regional Hosp.). 6.750 11/15/2010 547,730
1,000,000 Canton, OH, Waterworks Sys. GO, Ser. 1995................... 5.750 12/01/2010 1,086,490
495,000 Cleveland, OH, Waterworks Impt Rev., Ser. F (First Mtg.).... 6.500 01/01/2011 537,580
255,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.),
Escrowed to Maturity....................................... 9.000 06/01/2011 326,576
450,000 Ohio HFA SFM Rev., Ser. 1991D............................... 7.000 09/01/2011 476,784
500,000 Greene Co., OH, Water Sys. Rev.............................. 6.850 12/01/2011 549,440
365,000 Bexley, OH, CSD GO.......................................... 7.125 12/01/2011 454,002
600,000 Westerville, OH, Water Sys. Impt. GO........................ 6.450 12/01/2011 660,828
530,000 Urbana, OH, Wastewater Impt. GO............................. 7.050 12/01/2011 595,482
500,000 Maple Heights, OH, Various Purpose GO....................... 7.000 12/01/2011 556,545
500,000 Cleveland, OH, GO, Ser. A................................... 6.375 07/01/2012 550,295
255,000 Summit Co., OH, GO, Ser. A.................................. 6.900 08/01/2012 278,740
500,000 Worthington, OH, CSD GO..................................... 6.375 12/01/2012 543,890
500,000 Strongsville, OH, CSD GO.................................... 5.375 12/01/2012 532,875
500,000 Summit Co., OH, Various Purpose GO.......................... 6.625 12/01/2012 545,895
95,000 Ohio St. Higher Educ. Fac. Comm. Rev........................ 7.250 12/01/2012 103,268
500,000 Warrensville Heights, OH, GO................................ 6.400 12/01/2012 548,270
1,095,000 West Clermont, OH, LSD GO................................... 6.900 12/01/2012 1,271,886
500,000 Brunswick, OH, CSD GO....................................... 6.900 12/01/2012 550,225
290,000 Ohio HFA SFM Rev., Ser. 1990D............................... 7.500 09/01/2013 305,126
1,000,000 Lorain Co., OH, Hosp. Rev. (Catholic Health Care Partners).. 5.625 09/01/2014 1,062,610
500,000 Ohio St. Bldg. Auth Rev., Ser. 1994A (Juvenille
Correctional Bldg.)........................................ 6.600 10/01/2014 564,495
460,000 Bedford Heights, OH, GO..................................... 6.500 12/01/2014 517,969
290,000 Garfield Heights, OH, Various Purpose GO.................... 6.300 12/01/2014 323,341
530,000 Ottawa Co., OH, GO.......................................... 5.750 12/01/2014 568,605
1,000,000 Portage Co., OH, GO......................................... 6.200 12/01/2014 1,109,450
290,000 Northwest, OH, LSD GO....................................... 7.050 12/01/2014 320,502
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (Continued)
============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 95.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,000,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.)....... 5.875% 09/01/2015 $ 1,059,510
600,000 Toledo-Lucas Co., OH, Convention Ctr. Rev................... 5.700 10/01/2015 641,568
400,000 Warren, OH, Waterworks Rev.................................. 5.500 11/01/2015 427,788
1,420,000 Stow, OH, Safety Center Const. GO........................... 6.150 12/01/2015 1,558,194
1,000,000 Tuscarawas Valley, OH, LSD GO, Ser. 1995.................... 6.600 12/01/2015 1,142,820
1,700,000 Massillon, OH, GO........................................... 6.625 12/01/2015 1,945,446
500,000 Ohio St. Higher Educ. Fac. Rev. (Univ. of Dayton)........... 6.750 12/01/2015 555,805
500,000 Delaware, OH, CSD GO........................................ 5.750 12/01/2015 530,425
1,000,000 Buckeye Valley, OH, LSD GO.................................. 6.850 12/01/2015 1,227,460
750,000 Columbus-Polaris Hsg. Corp. Ohio Mtg. Rev.,
Prerefunded @ 10........................................... 7.400 01/01/2016 870,795
500,000 Cleveland, OH, Waterworks Impt. Rev., Ser. F (First Mtg.)... 6.250 01/01/2016 538,990
500,000 Ohio St. Air Quality Dev. Rev., Ser. A (Ohio Edison)........ 7.450 03/01/2016 534,300
316,000 Ohio HFA SFM Rev., Ser. 1990F............................... 7.600 09/01/2016 334,581
846,000 Ohio HFA SFM Rev., Ser. 1991D............................... 7.050 09/01/2016 895,034
500,000 Celina, OH, Wastewater Sys. Mtg. Rev........................ 6.550 11/01/2016 539,565
1,000,000 Cleveland, OH, Public Power Sys. Rev., Ser. 1............... 7.000 11/15/2016 1,152,810
750,000 Montgomery Co., OH, Hosp. Rev. (Miami Valley Hosp.)......... 6.250 11/15/2016 815,145
590,000 Garfield Heights, OH, Various Purpose GO.................... 7.050 12/01/2016 639,513
1,000,000 Greater Cleveland, OH, Regional Transit Auth. GO............ 5.650 12/01/2016 1,055,150
815,000 Butler Co., OH, GO.......................................... 5.750 12/01/2016 869,263
2,250,000 North Olmsted, OH, GO....................................... 5.000 12/01/2016 2,236,522
1,260,000 Cleveland, OH, Airport Sys. Rev., Ser. C.................... 5.125 01/01/2017 1,260,542
800,000 Ohio St. Bldg. Auth. Rev. (Adult Correctional Bldg.)........ 5.600 04/01/2017 839,632
750,000 Butler Co., OH, Transportation Impt. Dist., Ser. A.......... 5.125 04/01/2017 748,688
1,000,000 Lorain Co., OH, Hosp. Rev................................... 5.625 09/01/2017 1,052,040
500,000 Toledo, OH, Sewer Sys. Rev.................................. 6.350 11/15/2017 558,565
1,000,000 Mason, OH, CSD GO........................................... 5.300 12/01/2017 1,025,040
755,000 Dayton, OH, GO.............................................. 5.000 12/01/2017 747,563
1,330,000 Ohio St. Univ. COP (Agriculture Tech. Inst.)................ 5.050 12/01/2017 1,307,643
1,000,000 Rocky River, OH, CSD GO, Ser. 1998.......................... 5.375 12/01/2017 1,051,310
1,000,000 Hamilton Co., OH, Sewer Sys. Impt. Rev., Ser. A............. 5.000 12/01/2017 990,150
1,400,000 Cuyahoga Co., OH, Util. Sys. Impt. Rev. (Medical
Center Proj.).............................................. 5.125 02/15/2018 1,390,494
1,660,000 Franklin Co., OH, Hosp. Rev. (Holy Cross Health Sys.)....... 5.000 06/01/2018 1,625,090
500,000 Ohio St. Air Quality Dev. Rev., Ser. 1990B (Ohio Edison).... 7.100 06/01/2018 534,625
1,265,000 Defiance, OH, Waterworks Sys. GO............................ 5.650 12/01/2018 1,339,369
1,000,000 Hamilton Co., OH, Sales Tax Rev. (Football Stadium Proj.)... 5.000 12/01/2018 984,870
1,000,000 S. Euclid-Lyndhurst, OH, CSD GO, Ser. 1996.................. 6.400 12/01/2018 1,135,060
500,000 Seneca Co., OH, GO (Jail Fac.).............................. 6.500 12/01/2018 550,835
500,000 Newark, OH, Water Sys. Impt. Rev............................ 6.000 12/01/2018 544,560
1,000,000 Little Miami, OH, LSD GO.................................... 5.000 12/01/2018 986,100
500,000 Crawford Co., OH, GO........................................ 6.750 12/01/2019 569,915
1,000,000 Butler Co., OH, Sales Tax Rev............................... 5.000 12/15/2019 981,910
360,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.)............. 6.250 01/15/2020 387,047
1,000,000 Alliance, OH, Waterworks Sys. Rev........................... 5.000 11/15/2020 977,550
1,210,000 Greene Co., OH, Sewer Sys. Rev.............................. 5.125 12/01/2020 1,205,789
1,000,000 Ohio St. Air Quality Dev. Rev., Ser. 1985A (Columbus
Southern Power)............................................ 6.375 12/01/2020 1,086,150
15,000 Puerto Rico, HFC SFM Rev., Ser. A........................... 7.800 10/15/2021 15,310
1,750,000 Cuyahoga Co., OH, Hosp. Rev., Ser. I (Walker Center)........ 5.000 01/01/2023 1,699,460
1,000,000 Ohio St. Air Quality Dev. Rev. (Penn Power)................. 6.450 05/01/2027 1,086,270
- -------------- ------------
$ 66,412,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $66,380,117)................................ $71,061,280
------------
<PAGE>
<CAPTION>
OHIO INSURED TAX-FREE FUND (Continued)
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 1.5% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 1,100,000 Hamilton Co., OH, Waterworks Sys. Rev. (Health Alliance).... 3.550% 07/01/1998 $ 1,100,000
- -------------- ------------
(Amortized Cost $1,100,000)
$ 67,512,000 TOTAL INVESTMENT SECURITIES-- 96.9%
==============
(Amortized Cost $67,480,117)................................ $72,161,280
OTHER ASSETS IN EXCESS OF LIABILITIES-- 3.1% ............... 2,342,564
------------
NET ASSETS-- 100.0% ........................................ $74,503,844
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
<TABLE>
KENTUCKY TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS-- 101.0% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 90,000 Jefferson Co., KY, Capital Proj. Corp. Rev., Ser. A......... 0.000% 08/15/1999 $ 85,606
200,000 Owensboro, KY, Electric Light & Power Rev.,
Prerefunded @ 102.......................................... 10.250 01/01/2000 222,060
200,000 Mt. Sterling, KY, Lease Rev., Kentucky League of Cities..... 5.625 03/01/2003 210,398
615,000 Kentucky St. Turnpike Auth. Resource Recovery Road Rev.,
Escrowed to Maturity....................................... 6.125 07/01/2007 659,784
50,000 Lexington-Fayette Urban Co., KY, Airport Corp.,
First Mtg. Rev. ........................................... 7.750 04/01/2008 51,493
450,000 Ashland, KY, PCR (Ashland Oil, Inc.)........................ 7.375 07/01/2009 479,331
275,000 Kentucky St.Turnpike Auth. Resource Recovery Road Rev.,
Ser. A..................................................... 6.000 07/01/2009 275,508
370,000 Kentucky St. EDR, Ser. A (South Central Nursing)............ 6.000 07/01/2011 403,581
250,000 Kentucky Higher Educ. Student Loan Rev., Ser. D............. 7.100 12/01/2011 269,457
200,000 Univ. of Louisville, KY, Rev., Ser. H....................... 5.875 05/01/2012 213,974
400,000 Kentucky St. EDA Hosp. Sys. Rfdg. and Impt. Rev.
(Appalachian Reg. Healthcare).............................. 5.800 10/01/2012 416,508
725,000 Boone Co., KY, Public Properties Corp. Sewer Sys. Rev....... 5.150 12/01/2012 733,497
305,000 Fern Creek, KY, Fire Protection Dist. Hldg. Co. Rev.
(Fire Station No. 2)....................................... 5.750 01/15/2014 316,017
350,000 Richmond, KY, Water, Gas & Sewer Rev., Ser. A.............. 5.000 07/01/2015 349,206
350,000 Kentucky St. EDA, Ser. 1998A (Catholic Health).............. 5.000 12/01/2018 342,535
200,000 Kentucky Area Dev. Dist. Fin. Trust Lease Prog. Rev.
(Calloway Fire)............................................ 5.600 12/01/2018 202,856
295,000 Ashland, KY, Solid Waste Rev. (Ashland Oil, Inc. Proj.)..... 7.200 10/01/2020 321,674
350,000 Lexington-Fayette Co., KY, Proj. Rev.
(University of Kentucky Alumni Assn., Inc.)................ 5.000 11/01/2020 343,511
260,000 Greater Kentucky Hsg Assistance Corp. Mtg. Rev., Ser. A
(FHA, Osage, Sec. 8)....................................... 5.350 07/01/2022 260,081
270,000 Greater Kentucky Hsg Assistance Corp. Mtg. Rev., Ser. A..... 6.250 07/01/2022 275,759
350,000 Kenton Co., KY, Public Properties Corp. Rev., Ser. A........ 5.000 03/01/2023 339,360
400,000 Kentucky St. EDR Fin. Auth. Health Care Fac. Rev., Ser. 1998
(Christian Church Homes).................................... 5.375 11/15/2023 393,712
250,000 Louisville & Jefferson Co., KY, Regional Airport Auth.
Sys. Rev., Ser. A.......................................... 5.000 07/01/2025 241,033
- -------------- ------------
$ 7,205,000 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
- --------------
(Amortized Cost $7,263,205)................................. $ 7,406,941
------------
=============================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE RATE DEMAND NOTES-- 1.4% RATE DATE VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 100,000 Kentucky St. EDR, Ser. 1995 (Sisters of Charity of
Nazareth Hlth. Sys.)....................................... 3.800% 07/01/1998 $ 100,000
- -------------- ------------
(Amortized Cost $100,000)
$ 7,305,000 TOTAL INVESTMENT SECURITIES-- 102.4%
==============
(Amortized Cost $7,363,205)................................. $ 7,506,941
LIABILITIES IN EXCESS OF OTHER ASSETS-- (2.4)% ............. ( 177,111 )
------------
NET ASSETS-- 100.0% ........................................ $ 7,329,830
============
See accompanying notes to financial statements and notes to portfolios of
investments.
</TABLE>
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS
June 30, 1998
================================================================================
Variable and adjustable rate put bonds earn interest at a coupon rate which
fluctuates at specified intervals, usually daily, monthly or semi-annually. The
rates shown in the Portfolios of Investments are the coupon rates in effect at
June 30, 1998.
Put bonds may be redeemed at the discretion of the holder on specified dates
prior to maturity. Mandatory put bonds are automatically redeemed at a specified
put date unless action is taken by the holder to prevent redemption.
Bonds denoted as prerefunded are anticipated to be redeemed prior to their
scheduled maturity. The dates indicated in the Portfolios of Investments are the
stipulated prerefunded dates.
<TABLE>
<CAPTION>
PORTFOLIO ABBREVIATIONS:
<S> <C>
ARPB - Adjustable Rate Put Bonds ISD - Independent School District
BANS - Bond Anticipation Notes LSD - Local School District
COP - Certificates of Participation MFH - Multi-Family Housing
CSD - City School District MFM - Multi-Family Mortgage
EDA - Economic Development Authority PCR - Pollution Control Revenue
EDR - Economic Development Revenue RANS - Revenue Anticipation Notes
GO - General Obligation SFM - Single Family Mortgage
HFA - Housing Finance Authority/Agency TANS - Tax Anticipation Notes
HFC - Housing Finance Corporation TRANS - Tax Revenue Anticipation Notes
IDA - Industrial Development Authority/Agency USD - Unified School District
IDR - Industrial Development Revenue VRDN - Variable Rate Demand Notes
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
LOGO: ARTHUR ANDERSEN LLP
To the Shareholders and Board of Trustees of Countrywide Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments of Countrywide Tax-Free Trust (comprising,
respectively, the Tax-Free Money Fund, California Tax-Free Money Fund, Ohio
Tax-Free Money Fund, Florida Tax-Free Money Fund, Tax-Free Intermediate Term
Fund, Ohio Insured Tax-Free Fund and Kentucky Tax-Free Fund) (a Massachusetts
business trust) as of June 30, 1998, and (i) for the Tax-Free Money Fund,
California Tax-Free Money Fund, Ohio Tax-Free Money Fund, Florida Tax-Free Money
Fund, Tax-Free Intermediate Term Fund, Ohio Insured Tax-Free Fund the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years then ended and the financial highlights for
the periods indicated thereon and (ii) for the Kentucky Tax-Free Fund the
related statements of operations, statements of changes in net assets and the
financial highlights for the ten-month period ended June 30, 1998 and the year
ended August 31, 1997. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits. The financial statements and financial highlights for the Kentucky
Tax-Free Fund for the period ended August 31, 1996 were audited by other
auditors whose report dated October 18, 1996, expressed an unqualified opinion
on those financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with custodians and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights audited by us
and referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Countrywide Tax-Free
Trust as of June 30, 1998, the results of their operations for the year then
ended, the changes in their net assets for each of the two years then ended, and
the financial highlights for the periods referred above, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
August 7, 1998
