As filed with the Securities and Exchange Commission on June 9, 2000
Registration No. 2-72101
Registration No. 811-03174
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
------------------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 46 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 45 [X]
(Check appropriate box or boxes)
------------------------------
TOUCHSTONE TAX-FREE TRUST
(formerly known as
Countrywide Tax-Free Trust)
(Exact name of Registrant as Specified in Charter)
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
(Address of Registrant's Principal Executive Offices)
Registrant's Telephone Number (513) 629-2000
------------------------------
Copy to:
ROBERT H. LESHNER. KAREN M. MCLAUGHLIN, ESQ.
312 Walnut Street, 21st Floor Frost & Jacobs LLP
Cincinnati, Ohio 45202 2500 PNC Center
(Name and Address of Agent for Service) 201 East Fifth Street
Cincinnati, Ohio 45202
------------------------------
Approximate Date of Proposed Public Offering: Continuous Offering
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on June 9, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on __________ pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on __________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment desginates a new effective date for a
previously filed post-effective amendment.
TOTAL NUMBER OF PAGES:
EXHIBIT INDEX ON PAGE:
<PAGE>
TOUCHSTONE TAX-FREE TRUST
FORM N-1A CROSS-REFERENCE SHEET
FORM N-1A ITEM NO. HEADING IN PROSPECTUS
--------------------------------------------------------------------------------
1. Front and Back Cover Pages Cover Page; For More Information
2. Risk/Return Summary: Tax-Free Money Fund; Tax-Free Intermediate
Investments, Risks, and Term Fund; Ohio Insured Tax-Free Fund;
Performance Ohio Tax-Free Money Fund; California
Tax-Free Money Fund; Florida Tax-Free
Money Fund; Investment Strategies and Risks
3. Risk/Return Summary: Fee Table 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
4. Investment Objectives, Investment Strategies and Risks
Principal Investment
Strategies, and Related Risks
5. Management's Discussion of None
Fund Performance
6. Management, Organization, and The Funds' Management
Capital Structure
7. Shareholder Information Investing with Touchstone; Distributions
and Taxes
8. Distribution Arrangements Investing with Touchstone
9. Financial Highlights Financial Highlights
Information
HEADING IN STATEMENT OF ADDITIONAL
FORM N-1A ITEM NO. INFORMATION
10. Cover Page and Table of Cover Page; Table of Contents
Contents
11. Fund History The Trust
12. Description of the Fund and Definitions; Policies and Risk
Its Investment and Risks Considerations; Investment Restrictions;
Portfolio Turnover; Appendix
13. Management of the Fund Trustees and Officers
14. Control Persons and Principal Principal Security Holders
Holders of Securities
<PAGE>
15. Investment Advisory and Other The Investment Adviser and Sub-Advisors;
Services The Distributor; Distribution Plans;
Custodian; Auditors; Transfer, Accounting
and Administrative Services; Choosing a
Share Class
16. Brokerage Allocation and Securities Transactions
Other Practices
17. Capital Stock and Other The Trust; Choosing a Share Class
Securities
18. Purchase, Redemption, and Calculation of Share Price and Public
Pricing of Shares Offering Price; Other Purchase
Information; Redemption in Kind
19. Taxation of the Fund Taxes
20. Underwriters The Distributor
21. Calculation of Performance Historical Performance Information
Data
22. Financial Statements None
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
--------------------------
PROSPECTUS
JUNE 9, 2000
TOUCHSTONE TAX-FREE TRUST
o TAX-FREE INTERMEDIATE TERM FUND
o OHIO INSURED TAX-FREE FUND
o TAX-FREE MONEY FUND
o OHIO TAX-FREE MONEY FUND
o CALIFORNIA TAX-FREE MONEY FUND
o FLORIDA TAX-FREE MONEY FUND
The Securities and Exchange Commission has not approved the Funds' shares as an
investment or determined whether this Prospectus is accurate or complete. Anyone
who tells you otherwise is committing a crime.
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Each Fund is a series of Touchstone Tax-Free Trust (the "Trust"), a group of 6
tax-free bond funds and money market funds. The Trust is part of the Touchstone
Family of Funds which also includes Touchstone Investment Trust, a group of 6
taxable bond and money market mutual funds, and Touchstone Strategic Trust, a
group of 8 equity mutual funds. Each Fund has a different investment goal and
risk level. For further information about the Touchstone Family of Funds,
contact Touchstone at 800.543.0407.
2
<PAGE>
TABLE OF CONTENTS
PAGE
TAX-FREE INTERMEDIATE TERM FUND................................................4
OHIO INSURED TAX-FREE FUND.....................................................9
TAX-FREE MONEY FUND...........................................................14
OHIO TAX-FREE MONEY FUND......................................................19
CALIFORNIA TAX-FREE MONEY FUND................................................24
FLORIDA TAX-FREE MONEY FUND...................................................29
INVESTMENT STRATEGIES AND RISKS...............................................34
THE FUNDS' MANAGEMENT.........................................................39
INVESTING WITH TOUCHSTONE.....................................................41
DISTRIBUTIONS AND TAXES.......................................................52
FINANCIAL HIGHLIGHTS..........................................................55
FOR MORE INFORMATION..........................................................65
3
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND
-------------------------------
THE FUND'S INVESTMENT GOAL
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital. To the extent
consistent with the Fund's primary goal, capital appreciation is a secondary
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in municipal obligations rated within the 3 highest
rating categories. If a security's rating is reduced below the 3 highest rating
categories by a rating agency, the security will be sold. The Fund may purchase
unrated securities only if the portfolio manager determines the securities meet
the Fund's quality standards.
The Fund will primarily invest in municipal obligations with remaining
maturities of 20 years or less and will seek to maintain an average weighted
maturity of between 3 and 10 years. However, the Fund may invest in securities
of any maturity.
The Fund has a fundamental investment policy that under normal circumstances the
Fund will invest its assets so that at least 80% of its annual income will be
exempt from federal income tax, including the alternative minimum tax. This
fundamental policy may not be changed without the approval of the Fund's
shareholders.
The Fund may invest more than 25% of its assets in municipal obligations within
a particular segment of the bond market. The Fund may also invest more than 25%
of its assets in industrial development bonds, which may be backed only by
nongovernmental entities. The Fund will not invest more than 25% of its assets
in securities backed by nongovernmental entities that are in the same industry.
The Fund may invest in the following types of municipal obligations:
o Tax-exempt bonds, including general obligation bonds, revenue bonds
and industrial development bonds
o Tax-exempt notes
o Tax-exempt commercial paper
o When-issued obligations
o Obligations with puts attached
4
<PAGE>
THE KEY RISKS
The Fund's share price will fluctuate. You could lose money on your investment
in the Fund and the Fund could also return less than other investments:
o If interest rates go up, causing the value of any debt securities held
by the Fund to decline
o Because securities with longer maturities may lose more value due to
increases in interest rates than securities with shorter maturities
o Because issuers may be unable to make timely payments of interest or
principal
o If the Fund's investments are concentrated in a particular segment of
the bond market and adverse economic developments affecting one bond
affect other bonds in the same segment
o Because the Fund's securities may have longer maturities and/or lower
ratings than other bond funds, which could cause greater fluctuation
in the Fund's share price
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading "Investment
Strategies And Risks" later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you seek an intermediate-term
investment with moderate risk that offers tax-exempt income. Safety of your
investment and the receipt of tax-exempt income are of key importance to you.
Additionally, you are willing to accept some interest rate risk in order to seek
a higher income return or higher yield than a short-term investment, like a
money market fund. This Fund is appropriate for you if you want the added
convenience of writing checks directly from your account.
5
<PAGE>
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Tax-Free
Intermediate Term Fund. It shows changes in the performance of the Fund's Class
A shares from year to year during the past 10 years. The chart does not reflect
any sales charges. Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for Class C shares offered by the Fund will differ from the Class A
returns shown in the bar chart, depending on the expenses of that class.
TAX-FREE INTERMEDIATE TERM FUND -- CLASS A
YEARS TOTAL RETURN
1990 6.04%
1991 9.09%
1992 7.71%
1993 10.94%
1994 -2.93%
1995 11.58%
1996 3.87%
1997 5.87%
1998 5.07%
1999 0.87%
During the period shown in the bar chart, the highest quarterly return was
4.35% (for the quarter ended March 31, 1995) and the lowest quarterly
return was -3.37% (for the quarter ended March 31, 1994).
The year-to-date total return of the Fund's Class A shares as of March 31,
2000 is 1.52%.
The table below indicates the risks of investing in the Touchstone Tax-Free
Intermediate Term Fund. It shows how the Fund's average annual returns for the
periods shown compare to those of the Lehman Brothers 5-Year Municipal General
Obligation Bond Index. The Lehman Brothers 5-Year Municipal General Obligation
Bond Index is a _________________________. The table shows the effect of the
applicable sales charge.
6
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1999
Since Fund
1 Year 5 Years 10 Years Started*
Tax-Free Intermediate Term
Fund - Class A -5.58% 4.01% 5.03% 5.71%
--------------------------------------------------------------------------------
Lehman Brothers 5-Year
Municipal General
Obligation Bond Index _____% ______% ____% ______%
--------------------------------------------------------------------------------
Tax-Free Intermediate Term
Fund - Class C -2.75% 4.10% N/A 2.74%
--------------------------------------------------------------------------------
Lehman Brothers 5-Year
Municipal General
Obligation Bond Index _____% ______% N/A ______%
--------------------------------------------------------------------------------
* Inception date for the Class A shares was September 10, 1981, and
Class C shares was February 1, 1994.
THE FUND'S FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees (fees paid
directly from your investment)
Class A Shares Class C Shares
Maximum Sales Charge (Load) 4.75% 2.25%
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) 4.75%1 1.25%
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price * 1.00%2
or the amount redeemed, whichever is less)
--------------------------------------------------------------------------------
Redemption Fee ** **
--------------------------------------------------------------------------------
Exchange Fee None None
--------------------------------------------------------------------------------
Check Redemption Processing Fee
--------------------------------------------------------------------------------
First 6 checks per month None None
--------------------------------------------------------------------------------
Additional checks per month $ 0.25 $ 0.25
--------------------------------------------------------------------------------
7
<PAGE>
Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
Management Fees 0.50% 0.50%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.09% 0.53%
--------------------------------------------------------------------------------
Other Expenses 0.40% 0.71%
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.99% 1.74%
--------------------------------------------------------------------------------
* There is no sales charge at the time of purchase for purchases of $1
million or more but a sales charge of 1.00% will be assessed on shares
redeemed within one year of their purchase.
** You will be charged a fee for each wire redemption. This fee is
subject to change.
1 You may pay a reduced sales charge on very large purchases.
2 The 1.00% is waived if shares are held for one year or longer.
The following example should help you compare the cost of investing in the
Tax-Free Intermediate Term Fund with the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. The costs would be the same
whether or not shares are redeemed at the end of the time periods indicated.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
Class A Shares Class C Shares
1 Year $ 571 $ 300
----------------------------------------------------
3 Years $ 775 $ 666
----------------------------------------------------
5 Years $ 996 $1,057
----------------------------------------------------
10 Years $1,630 $2,151
----------------------------------------------------
8
<PAGE>
OHIO INSURED TAX-FREE FUND
--------------------------
THE FUND'S INVESTMENT GOAL
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 the
protection of capital.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily (at least 65% of total assets) in high quality,
long-term Ohio municipal obligations that are protected by insurance
guaranteeing the payment of principal and interest in the event of default. The
Fund may also purchase uninsured Ohio municipal obligations if they are either
short-term Ohio municipal obligations or obligations guaranteed by the U.S.
Government.
The Fund has a fundamental investment policy that under normal circumstances the
Fund will invest its assets so that at least 80% of its annual income will be
exempt from federal income tax, including the alternative minimum tax, and Ohio
personal income tax. This fundamental policy may not be changed without the
approval of the Fund's shareholders.
The Fund may purchase Ohio municipal obligations and other securities that are
rated within the 4 highest rating categories by a rating agency. [INSERT AVERAGE
QUALITY OR AVERAGE QUALITY RANGE] If a security's rating is reduced below the 4
highest rating categories, the security will be sold. The Fund may purchase
unrated obligations that the Sub-Advisor determines to be of comparable quality.
The Fund will seek to maintain an average weighted maturity of more than 15
years. The Fund may reduce its average weighted maturity if warranted by market
conditions, but will not reduce its average weighted maturity to below 10 years.
The Fund may invest more than 25% of its assets in municipal obligations within
a particular segment of the bond market. The Fund may also invest more than 25%
of its assets in industrial development bonds, which may be backed only by
nongovernmental entities. The Fund will not invest more than 25% of its assets
in securities backed by nongovernmental entities that are in the same industry.
The Fund may invest in the following types of municipal obligations:
o Tax-exempt bonds, including general obligation bonds, revenue bonds
and industrial development bonds
o Tax-exempt notes
o Tax-exempt commercial paper
o When-issued obligations
o Obligations with puts attached
9
<PAGE>
THE KEY RISKS
The Fund's share price will fluctuate. You could lose money on your investment
in the Fund and the Fund could also return less than other investments:
o If interest rates go up, causing the value of any debt securities held
by the Fund to decline
o Because issuers of uninsured obligations may be unable to make timely
payments of interest or principal
o Because the Fund's securities may have longer maturities than other
bond funds, which could cause greater fluctuation in the Fund's share
price
o If the Fund's investments are concentrated in a particular segment of
the bond market and adverse economic developments affecting one bond
affect other bonds in the same segment
o If economic conditions within the State of Ohio decline
o Because the Fund is non-diversified, it may hold a significant
percentage of its assets in the securities of one issuer and the
securities of that issuer may not increase in value as expected
The portfolio manager believes that the Fund's credit risks will be
substantially reduced by insurance. Although insurance reduces the credit risks
to the Fund by protecting against losses from defaults by an issuer, it does not
protect against market fluctuation. Also, there are no guarantees that any
insurer will be able to meet its obligations under an insurance policy.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading "Investment
Strategies And Risks" later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you are an Ohio resident looking for an
intermediate-term investment with moderate risk that offers income exempt from
both federal and Ohio income tax. Safety of your investment and the receipt of
tax-exempt income are of key importance to you. Additionally, you are willing to
accept some interest rate risk in order to seek a higher income return or higher
yield than a short-term investment, like a money market fund.
10
<PAGE>
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Ohio Insured
Tax-Free Fund. It shows changes in the performance of the Fund's Class A shares
from year to year during the past 10 years. The chart does not reflect any sales
charges. Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for Class C shares offered by the Fund will differ from the Class A
returns shown in the bar chart, depending on the expenses of that class.
OHIO INSURED TAX-FREE FUND -- CLASS A
YEARS TOTAL RETURN
1990 5.92%
1991 11.01%
1992 8.76%
1993 12.59%
1994 -5.37%
1995 15.86%
1996 3.07%
1997 7.20%
1998 5.54%
1999 -3.10%
During the period shown in the bar chart, the highest quarterly return was
6.59% (for the quarter ended March 31, 1995) and the lowest quarterly
return was -5.28% (for the quarter ended March 31, 1994).
The year-to-date return of the Fund's Class A shares as of March 31, 2000
is 3.27%.
The table below indicates the risks of investing in the Touchstone Ohio Insured
Tax-Free Fund. It shows how the Fund's average annual returns for the periods
shown compare to that of the Lehman Brothers 15-Year Municipal General
Obligation Bond Index. The Lehman Brothers 15-Year Municipal General Obligation
Bond Index is a __________________. The table shows the effect of the applicable
sales charge.
11
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1999
Since Fund
1 year 5 Years 10 Years Started*
Ohio Insured Tax-Free Fund -
Class A -7.70% 4.51% 5.44% 6.81%
--------------------------------------------------------------------------------
Lehman Brothers 15-Year
Municipal General
Obligation Bond Index _____% ______% ____% N/A
--------------------------------------------------------------------------------
Ohio Insured Tax-Free Fund -
Class C -5.02% 4.58% N/A 2.87%
--------------------------------------------------------------------------------
Lehman Brothers 15-Year
Municipal General
Obligation Bond Index _____% ______% N/A _____%
--------------------------------------------------------------------------------
* Inception date for the Class A shares was April 1, 1985, and Class C
shares was November 1, 1993.
THE FUND'S FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees (fees paid
directly from your investment)
Class A Shares Class C Shares
Maximum Sales Charge (Load) 4.75% 2.25%
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) 4.75%1 1.25%
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or the
amount redeemed, whichever is less) * 1.00%2
--------------------------------------------------------------------------------
Redemption Fee ** **
--------------------------------------------------------------------------------
Exchange Fee None None
--------------------------------------------------------------------------------
Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
Management Fees 0.50% 0.50%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.01% 0.54%
--------------------------------------------------------------------------------
Other Expenses 0.24% 0.50%
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.75% 1.50%
--------------------------------------------------------------------------------
12
<PAGE>
* There is no sales charge at the time of purchase for purchases of $1
million or more but a sales charge of 1.00% will be assessed on shares
redeemed within one year of their purchase.
** You will be charged a fee for each wire redemption. This fee is
subject to change.
1 You may pay a reduced sales charge on very large purchases.
2 The 1.00% is waived if shares are held for one year or longer.
The following example should help you compare the cost of investing in the Ohio
Insured Tax-Free Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. The costs would be the same whether
or not shares are redeemed at the end of the time periods indicated. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
Class A Shares Class C Shares
1 Year $ 548 $ 276
--------------------------------------------------------
3 Years $ 703 $ 593
--------------------------------------------------------
5 Years $ 872 $ 933
--------------------------------------------------------
10 Years $1,361 $1,893
--------------------------------------------------------
13
<PAGE>
TAX-FREE MONEY FUND
-------------------
THE FUND'S INVESTMENT GOAL
The Tax-Free Money Fund seeks the highest level of interest income exempt from
federal income tax, consistent with the protection of capital. The Fund is a
money market fund which seeks to maintain a constant share price of $1.00 per
share.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in high-quality, short-term municipal obligations
that pay interest exempt from federal income tax.
The Fund has a fundamental investment policy that under normal circumstances the
Fund will invest its assets so that at least 80% of its annual income will be
exempt from federal income tax, including the alternative minimum tax. This
fundamental policy may not be changed without the approval of the Fund's
shareholders.
The Fund may invest more than 25% of its assets in municipal obligations within
a particular segment of the bond market. The Fund may also invest more than 25%
of its assets in industrial development bonds, which may be backed only by
nongovernmental entities. The Fund will not invest more than 25% of its assets
in securities backed by nongovernmental entities that are in the same industry.
The Fund may invest in the following types of municipal obligations:
o Tax-exempt bonds, including general obligation bonds, revenue bonds
and industrial development bonds
o Tax-exempt notes
o Tax-exempt commercial paper
o Floating and variable rate municipal obligations
o When-issued obligations
o Obligations with puts attached
To comply with SEC rules pertaining to money market funds, the Fund will limit
its investments as follows:
o The Fund will invest in securities rated in one of the two highest
rating categories by a rating agency.
o The Fund may purchase unrated securities only if the portfolio manager
determines the securities meet the Fund's quality standards.
o The Fund will only invest in securities that mature in 13 months or
less.
o The dollar-weighted average maturity of its portfolio will be 90 days
or less.
14
<PAGE>
THE KEY RISKS
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC, the U.S. Treasury or any other government entity. Although the Fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund. The Fund's yield may decrease:
o If interest rates decrease
o Because issuers may be unable to make timely payments of interest or
principal
o If the Fund's investments are concentrated in a particular segment of
the bond market and adverse economic developments affecting one bond
affect other bonds in the same segment
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading "Investment
Strategies And Risks" later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you seek a relatively low risk,
short-term investment that offers tax-exempt income. Safety of your investment
and the receipt of tax-exempt income are of key importance to you. Additionally,
you are willing to accept potentially lower returns in order to maintain a
lower, more tolerable level of risk and receive the benefits of tax-exempt
income. This Fund is appropriate for you if you are looking for an investment
that maintains a stable share price and offers the added convenience of writing
checks directly from your account.
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Tax-Free Money
Fund. It shows changes in the performance of the Fund's shares from year to year
during the past 10 years.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
15
<PAGE>
TAX-FREE MONEY FUND
YEARS TOTAL RETURN
1990 5.56%
1991 4.38%
1992 2.82%
1993 2.09%
1994 2.49%
1995 3.40%
1996 2.92%
1997 2.97%
1998 2.98%
1999 2.77%
During the period shown in the bar chart, the highest quarterly return was
1.38% (for the quarter ended December 31, 1990) and the lowest quarterly
return was 0.47% (for the quarter ended September 30, 1993).
For information on the Fund's current and effective 7-day yield, call
800.543.0407.
The table below indicates the risks of investing in the Tax-Free Money Fund. It
shows the Fund's average annual returns for the periods indicated.
FOR THE PERIODS ENDED DECEMBER 31, 1999
1 Year 5 Years 10 Years
Tax-Free Money Fund 2.77% 3.01% 3.23%
--------------------------------------------------------------------------------
16
<PAGE>
THE FUND'S FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees (fees paid
directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None
--------------------------------------------------------------------------------
Redemption Fee *
--------------------------------------------------------------------------------
Exchange Fee None
--------------------------------------------------------------------------------
Check Redemption Processing Fee
--------------------------------------------------------------------------------
First 6 checks per month None
--------------------------------------------------------------------------------
Additional checks per month $0.25
--------------------------------------------------------------------------------
Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
Management Fees 0.50%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.01%
--------------------------------------------------------------------------------
Other Expenses 0.44%
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses1 0.95%
--------------------------------------------------------------------------------
Fee Waiver and Expense Reimbursement1 0.06%
--------------------------------------------------------------------------------
Net Expenses 0.89%
--------------------------------------------------------------------------------
* You will be charged a fee for each wire redemption. This fee is
subject to change.
1 Pursuant to a written contract between Touchstone Advisors, Inc. and
the Trust, Touchstone Advisors has agreed to waive a portion of its
advisory fee and/or reimburse certain fund expenses in order to limit
Total Annual Fund Operating Expenses to 0.89%. Touchstone Advisors has
agreed to maintain these expense limitations through at least June 30,
2001.
The following example should help you compare the cost of investing in the
Touchstone Tax-Free Money Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. The costs would be the same whether
or not shares are redeemed at the end of the periods indicated. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
17
<PAGE>
1 Year $ 91
-------------------------------------
3 Years $ 297
-------------------------------------
5 Years $ 520
-------------------------------------
10 Years $1,161
-------------------------------------
* The examples for the 3, 5 and 10 year periods are calculated using the
Total Annual Fund Operating Expenses before the limits agreed to under the
written contract between Touchstone Advisors and the Trust for the periods
after year 1.
18
<PAGE>
OHIO TAX-FREE MONEY FUND
------------------------
THE FUND'S INVESTMENT GOAL
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 is a money market fund which seeks to
maintain a constant share price of $1.00 per share.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily (at least 65% of total assets) in high-quality,
short-term Ohio municipal obligations issued by the State of Ohio, its agencies
and municipalities that pay interest that is exempt from both federal income tax
and Ohio personal income tax.
The Fund has a fundamental investment policy that under normal circumstances the
Fund will invest at least 80% of its total assets in short-term municipal
obligations that pay interest that is exempt from federal income tax, including
the alternative minimum tax. This fundamental policy may not be changed without
the approval of the Fund's shareholders.
The Fund may invest more than 25% of its assets in municipal obligations within
a particular segment of the bond market. The Fund may also invest more than 25%
of its assets in industrial development bonds, which may be backed only by
nongovernmental entities. The Fund will not invest more than 25% of its assets
in securities backed by nongovernmental entities that are in the same industry.
The Fund may invest in the following types of Ohio municipal obligations and
other municipal obligations:
o Tax-exempt bonds, including general obligation bonds, revenue bonds
and industrial development bonds
o Tax-exempt notes
o Tax-exempt commercial paper
o Floating and variable rate municipal obligations
o When-issued obligations
o Obligations with puts attached
To comply with SEC rules pertaining to money market funds, the Fund will limit
its investments as follows:
o The Fund will invest in securities rated in one of the two highest
rating categories by a rating agency.
o The Fund may purchase unrated securities only if the portfolio manager
determines the securities meet the Fund's quality standards.
o The Fund will only invest in securities that mature in 13 months or
less.
o The dollar-weighted average maturity of its portfolio will be 90 days
or less.
19
<PAGE>
THE KEY RISKS
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC, the U.S. Treasury or any other government entity. Although the Fund
is a money market fund and seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund. The
Fund's yield may decrease:
o If interest rates decrease
o Because issuers may be unable to make timely payments of interest or
principal
o If theo Fund's investments are concentrated in a particular segment of
the bond market and adverse economic developments affecting one bond
affect other bonds in the same segment
o If economic conditions within the State of Ohio decline
o May decrease because the Fund is non-diversified and it holds a
significant percentage of its assets in the securities of one issuer
and the securities of that issuer may not increase in value as
expected
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading "Investment
Strategies And Risks" later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you are an Ohio resident seeking a
relatively low risk, short-term investment that offers income exempt from both
federal and Ohio income tax. Safety of your investment and the receipt of
tax-exempt income are of key importance to you. Additionally, you are willing to
accept potentially lower returns in order to maintain a lower, more tolerable
level of risk and receive the benefits of tax-exempt income. This Fund is
appropriate for you if you are looking for an investment that maintains a stable
share price and offers retail shareholders the added convenience of writing
checks directly from their account.
20
<PAGE>
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Ohio Tax-Free
Money Fund. It shows changes in the performance of the Fund's Retail (Class A)
shares from year to year during the past 10 years.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for Institutional shares offered by the Fund will differ from the
returns of Retail Shares shown in the bar chart, depending on the expenses of
that class.
OHIO TAX-FREE MONEY FUND - RETAIL SHARES
YEARS TOTAL RETURN
1990 5.48%
1991 4.25%
1992 2.68%
1993 1.99%
1994 2.40%
1995 3.40%
1996 2.94%
1997 3.08%
1998 2.96%
1999 2.70%
During the period shown in the bar chart, the highest quarterly return was
1.37% (for the quarter ended December 31, 1990) and the lowest quarterly
return was 0.46% (for the quarter ended March 31, 1994).
For information on the Fund's current and effective 7-day yield, call
800.543.0407.
The table below indicates the risks of investing in the Ohio Tax-Free Money
Fund. It shows the Fund's average annual returns for the periods indicated.
21
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1999
Since Fund
1 year 5 Years 10 Years Started*
Ohio Tax-Free Money Fund -
Retail Shares 2.70% 3.01% 3.18% N/A
--------------------------------------------------------------------------------
Ohio Tax-Free Money Fund -
Institutional Shares 2.96% N/A N/A 3.17%
--------------------------------------------------------------------------------
* Inception date for Institutional shares was January 7, 1997.
THE FUND'S FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees (fees paid
directly from your investment)
Retail Institutional
Shares Shares
Maximum Sales Charge (Load) Imposed on Purchases None None
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None None
--------------------------------------------------------------------------------
Redemption Fee * None
--------------------------------------------------------------------------------
Exchange Fee None None
--------------------------------------------------------------------------------
Check Redemption Processing Fee Not Available
--------------------------------------------------------------------------------
First 6 checks per month None
--------------------------------------------------------------------------------
Additional checks per month $ 0.25
--------------------------------------------------------------------------------
Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
Management Fees 0.44% 0.44%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.23% None
--------------------------------------------------------------------------------
Other Expenses 0.10% 0.07%
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.77% 0.51%
--------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement1 0.02% 0.01%
--------------------------------------------------------------------------------
Net Expenses 0.75% 0.50%
--------------------------------------------------------------------------------
* Retail shareholders will be charged a fee for each wire redemption.
This fee is subject to change.
1 Pursuant to a written contract between Touchstone Advisors, Inc. and
the Trust, Touchstone Advisors has agreed to waive a portion of its
advisory fee and/or reimburse certain expenses in order to limit Total
Annual Fund Operating Expenses to 0.75% for
22
<PAGE>
Retail Shares and 0.50% for Institutional Shares. Touchstone Advisors
has agreed to maintain these expense limitations through at least June
30, 2001.
The following example should help you compare the cost of investing in Ohio
Tax-Free Money Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. The costs would be the same whether
or not shares are redeemed at the end of the periods indicated. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
Institutional
Retail Shares Shares
1 Year $ 77 $ 51
----------------------------------------------------
3 Years $244 $163
----------------------------------------------------
5 Years $426 $284
----------------------------------------------------
10 Years $995 $640
----------------------------------------------------
* The examples for the 3, 5 and 10 year periods are calculated using the
Total Annual Fund Operating Expenses before the limits agreed to under
the written contract between Touchstone Advisors and the Trust for the
periods after Year 1.
23
<PAGE>
CALIFORNIA TAX-FREE MONEY FUND
------------------------------
THE FUND'S INVESTMENT GOAL
The California Tax-Free Money Fund seeks the highest level of current income
exempt from federal income tax and California income tax, consistent with
liquidity and stability of principal. The Fund is a money market fund which
seeks to maintain a constant share price of $1.00 per share.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily (at least 65% of total assets) in high-quality,
short-term California municipal obligations issued by the State of California,
its agencies and municipalities that pay interest that is exempt from both
federal income tax and California income tax.
The Fund has a fundamental investment policy that under normal circumstances the
Fund will invest its assets so that at least 80% of its annual income will be
exempt from federal income tax, including the alternative minimum tax. This
fundamental policy may not be changed without the approval of the Fund's
shareholders.
The Fund may invest more than 25% of its assets in municipal obligations within
a particular segment of the bond market. The Fund may also invest more than 25%
of its assets in industrial development bonds, which may be backed only by
non-governmental entities. The Fund will not invest more than 25% of its assets
in securities backed by non-governmental entities that are in the same industry.
The Fund may invest in the following types of California municipal obligations
and other municipal obligations:
o Tax-exempt bonds, including general obligation bonds, revenue bonds
and industrial development bonds
o Tax-exempt notes
o Tax-exempt commercial paper
o Floating and variable rate municipal obligations
o When-issued obligations
o Obligations with puts attached
To comply with SEC rules pertaining to money market funds, the Fund will limit
its investments as follows:
o The Fund will invest in securities rated in one of the two highest
rating categories by a rating agency.
o The Fund may purchase unrated securities only if the portfolio manager
determines the securities meet the Fund's quality standards.
o The Fund will only invest in securities that mature in 13 months or
less.
o The dollar-weighted average maturity of its portfolio will be 90 days
or less.
24
<PAGE>
THE KEY RISKS
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC, the U.S. Treasury or any other government entity. Although the Fund
is a money market fund and seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund. The
Fund's yield may decrease:
o If interest rates decrease
o Because issuers may be unable to make timely payments of interest or
principal
o If the Fund's investments are concentrated in a particular segment of
the bond market and adverse economic developments affecting one bond
affect other bonds in the same segment
o If the economic conditions within the State of California decline
o Because the Fund is non-diversified and it holds a significant
percentage of its assets in the securities of one issuer and the
securities of that issuer may not increase in value as expected
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading "Investment
Strategies And Risks" later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you are a California resident seeking a
relatively low risk, short-term investment that offers income exempt from both
federal and California income tax. Safety of your investment and the receipt of
tax-exempt income are of key importance to you. Additionally, you are willing to
accept potentially lower returns in order to maintain a lower, more tolerable
level of risk and receive the benefits of tax-exempt income. This Fund is
appropriate for you if you are looking for an investment that maintains a
constant share price and offers the added convenience of writing checks directly
from your account.
25
<PAGE>
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the California
Tax-Free Money Fund. It shows changes in the performance of the Fund's shares
from year to year during the past 10 years.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
CALIFORNIA TAX-FREE MONEY FUND
YEARS TOTAL RETURN
1990 5.48%
1991 4.25%
1992 2.77%
1993 1.95%
1994 2.29%
1995 3.18%
1996 2.78%
1997 2.89%
1998 2.82%
1999 2.52%
During the period shown in the bar chart, the highest quarterly return was
1.29% (for the quarter ended December 31, 1990) and the lowest quarterly
return was 0.44% (for the quarter ended March 31, 1994).
For information on the Fund's current and effective 7-day yield, call
800.543.0407.
The table below indicates the risks of investing in the California Tax-Free
Money Fund. It shows the Fund's average annual returns for the periods
indicated.
26
<PAGE>
FOR THE PERIODS ENDED DECEMBER 31, 1999
Since Fund
1 year 5 Years 10 Years Started*
California Tax-Free Money Fund 2.52% 2.84% 3.09% 3.20%
--------------------------------------------------------------------------------
* Inception date for the Fund was July 25, 1989.
THE FUND'S FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees (fees paid
directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None
--------------------------------------------------------------------------------
Redemption Fee *
--------------------------------------------------------------------------------
Exchange Fee None
--------------------------------------------------------------------------------
Check Redemption Processing Fee
--------------------------------------------------------------------------------
First 6 checks per month None
--------------------------------------------------------------------------------
Additional checks per month $0.25
--------------------------------------------------------------------------------
Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
Management Fees 0.50%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.05%
--------------------------------------------------------------------------------
Other Expenses 0.20%
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.75%
--------------------------------------------------------------------------------
* You will be charged a fee for each wire redemption. This fee is
subject to change.
27
<PAGE>
The following example should help you compare the cost of investing in the
California Tax-Free Money Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. The costs would be the same whether
or not shares are redeemed at the end of the periods indicated. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
1 Year $ 77
-------------------------------------
3 Years $240
-------------------------------------
5 Years $417
-------------------------------------
10 Years $930
-------------------------------------
28
<PAGE>
FLORIDA TAX-FREE MONEY FUND
---------------------------
THE FUND'S INVESTMENT GOAL
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. The Fund is a money market fund which seeks to maintain a constant
share price of $1.00 per share.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily (at least 65% of total assets) in high-quality,
short-term Florida municipal obligations issued by the State of Florida, its
agencies and municipalities that pay interest that is exempt from both federal
income tax and the Florida intangible personal property tax.
The Fund has a fundamental investment policy that under normal circumstances the
Fund will invest its assets so that at least 80% of its annual income will be
exempt from federal income tax, including the alternative minimum tax. This
fundamental policy may not be changed without the approval of the Fund's
shareholders.
The Fund may invest more than 25% of its assets in municipal obligations within
a particular segment of the bond market. The Fund may also invest more than 25%
of its assets in industrial development bonds, which may be backed only by
non-governmental entities. The Fund will not invest more than 25% of its assets
in securities backed by non-governmental entities that are in the same industry.
The Fund may invest in the following types of Florida municipal obligations and
other municipal obligations:
o Tax-exempt bonds, including general obligation bonds, revenue bonds
and industrial development bonds
o Tax-exempt notes
o Tax-exempt commercial paper
o Floating and variable rate municipal obligations
o When-issued obligations
o Obligations with puts attached
To comply with SEC rules pertaining to money market funds, the Fund will limit
its investments as follows:
o The Fund will invest in securities rated in one of the two highest
rating categories by a rating agency.
o The Fund may purchase unrated securities only if the portfolio manager
determines the securities meet the Fund's quality standards.
o The Fund will only invest in securities that mature in 13 months or
less.
o The dollar-weighted average maturity of its portfolio will be 90 days
or less.
29
<PAGE>
THE KEY RISKS
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC, the U.S. Treasury or any other government entity. Although the Fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund. The Fund's yield may decrease:
o If interest rates decrease
o Because issuers may be unable to make timely payments of interest or
principal
o If the Fund's investments are concentrated in a particular segment of
the bond market and adverse economic developments affecting one bond
affect other bonds in the same segment
o If economic conditions within the State of Florida decline
o Because the Fund is non-diversified and it holds a significant
percentage of its assets in the securities of one issuer and the
securities of that issuer may not increase in value as expected
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading "Investment
Strategies And Risks" later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you are a Florida resident seeking a
relatively low risk, short-term investment that offers income exempt from both
federal tax and the Florida intangible personal tax. Safety of your investment
and the receipt of tax-exempt income are of key importance to you. Additionally,
you are willing to accept potentially lower returns in order to maintain a
lower, more tolerable level of risk and receive the benefits of tax-exempt
income. This Fund is appropriate for you if you are looking for an investment
which maintains a constant share price and offers the added convenience of
writing checks directly from your account.
30
<PAGE>
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Florida
Tax-Free Money Fund. It shows changes in the performance of the Fund's shares
from year to year since the Fund started.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
FLORIDA TAX-FREE MONEY FUND
YEARS TOTAL RETURN
1993 2.24%
1994 2.40%
1995 3.56%
1996 2.98%
1997 3.00%
1998 2.94%
1999 2.63%
During the period shown in the bar chart, the highest quarterly return was
0.94% (for the quarter ended June 30, 1995) and the lowest quarterly return
was 0.49% (for the quarter ended March 31, 1994).
For information on the Fund's current and effective 7-day yield, call
800.543.0407.
The table below indicates the risk of investing in the Florida Tax-Free Money
Fund. It shows the Fund's average annual returns for the periods indicated.
FOR THE PERIODS ENDED DECEMBER 31, 1999
Since
Fund
1 Year 5 Years Started*
Florida Tax-Free Money Fund 2.63% 3.02% 2.82%
--------------------------------------------------------------------------------
* Inception date for the Fund was November 13, 1992.
31
<PAGE>
THE FUND'S FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees (fees paid
directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) None
--------------------------------------------------------------------------------
Redemption Fee *
--------------------------------------------------------------------------------
Exchange Fee None
--------------------------------------------------------------------------------
Check Redemption Processing Fee
--------------------------------------------------------------------------------
First 6 checks per month None
--------------------------------------------------------------------------------
Additional checks per month $0.25
--------------------------------------------------------------------------------
Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
Management Fees 0.50%
--------------------------------------------------------------------------------
Distribution (12b-1) Fees 0.22%
--------------------------------------------------------------------------------
Other Expenses 0.26%
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.98%
--------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement1 0.23%
--------------------------------------------------------------------------------
Net Expenses 0.75%
--------------------------------------------------------------------------------
* You will be charged a fee for each wire redemption. This fee is
subject to change.
1 Pursuant to a written contract between Touchstone Advisors, Inc. and
the Trust, Touchstone Advisors has agreed to waive a portion of its
advisory fee and/or reimburse certain expenses in order to limit Total
Annual Fund Operating Expenses to 0.75%. Touchstone Advisors has
agreed to maintain these expense limitations through at least June 30,
2001.
The following example should help you compare the cost of investing in the
Florida Tax-Free Money Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. The costs would be the same whether
or not shares are redeemed at the end of the periods indicated. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
32
<PAGE>
1 Year $ 77
-------------------------------------
3 Years $ 289
-------------------------------------
5 Years $ 519
-------------------------------------
10 Years $1,180
-------------------------------------
* The examples for the 3, 5 and 10 year periods are calculated using the
Total Annual Fund Operating Expenses before the limits agreed to under
the written contract between Touchstone advisors and the Trust for the
periods after Year 1.
33
<PAGE>
INVESTMENT STRATEGIES AND RISKS
-------------------------------
CAN A FUND DEPART FROM ITS NORMAL STRATEGIES?
Each Fund may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. During these times, a Fund may not achieve its investment
goals.
CAN A FUND CHANGE ITS INVESTMENT GOAL?
Each of the Tax-Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund and
the Ohio Tax-Free Money Fund may change its investment goal(s) by a vote of the
Board of Trustees, without shareholder approval. You would be notified at least
30 days before any such change took effect.
DO THE FUNDS HAVE OTHER INVESTMENT STRATEGIES IN ADDITION TO THEIR PRINCIPAL
INVESTMENT STRATEGIES?
Each of the Tax Free-Intermediate Term Fund and Ohio Insured Tax-Free Fund also
invests in:
o Floating and variable rate municipal obligations
o Lease obligatons
THE FUNDS AT A GLANCE.
The following two tables can give you a quick basic understanding of the types
of securities a Fund tends to invest in and some of the main risks associated
with a Fund's investments. You should read all of the information about a Fund
and its risks before deciding to invest.
34
<PAGE>
HOW CAN I TELL, AT A GLANCE, WHICH TYPES OF SECURITIES A FUND MIGHT INVEST IN?
The following table shows the types of securities in which each Fund generally
will invest. Investments marked P are principal investments. Investments marked
O are other types of securities in which the Fund may invest to a lesser extent.
Some of the Funds' investments are described in detail below.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
TAX FREE CALIFORNIA FLORIDA
INTERMEDIATE OHIO INSURED TAX-FREE OHIO TAX-FREE TAX-FREE TAX-FREE
TERM FUND TAX-FREE FUND MONEY FUND MONEY FUND MONEY FUND MONEY FUND
-------------------------------------------------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
---------------------
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Invests primarily in P P P P P P
Municipal Obligations
-------------------------------------------------------------------------------------------------------------------------
Invests in money market P P P P
instruments
-------------------------------------------------------------------------------------------------------------------------
Invests primarily in
investment grade debt P P
securities
-------------------------------------------------------------------------------------------------------------------------
Invests in floating and
variable rate municipal O O P P P P
obligations
-------------------------------------------------------------------------------------------------------------------------
Invests in when-issued P P P P P P
obligations
-------------------------------------------------------------------------------------------------------------------------
Invests in obligations with P P P P P P
puts attached
-------------------------------------------------------------------------------------------------------------------------
Invests in lease obligations O O
-------------------------------------------------------------------------------------------------------------------------
INVESTMENT TECHNIQUES
---------------------
-------------------------------------------------------------------------------------------------------------------------
Emphasizes federal P P P P P P
tax-exempt income
-------------------------------------------------------------------------------------------------------------------------
Emphasizes state tax-exempt P P P P
income
-------------------------------------------------------------------------------------------------------------------------
Emphasizes insured P
municipal obligations
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
MUNICIPAL OBLIGATIONS are debt securities issued by states and their political
subdivisions, agencies, authorities and instrumentalities to finance public
works facilities, to pay general operating expenses or to refinance outstanding
debt. Municipal obligations may also be issued to finance various private
activities for the construction of housing, educational or medical facilities or
the financing of privately owned or operated facilities. The two principal types
of municipal obligations are general obligation bonds and revenue bonds,
including industrial revenue bonds. General obligation bonds are backed by the
issuer's full faith and credit and taxing power. Revenue bonds are backed by the
revenues of a specific project, facility or tax. Industrial revenue bonds are
backed by the credit of a private user of the facility. Municipal obligations
pay interest that is, in the opinion of bond counsel to the issuer, exempt from
federal income tax, including the alternative minimum tax.
o Ohio Municipal Obligations are issued by the State of Ohio and its
political subdivisions, agencies, authorities and instrumentalities.
They pay interest that is, in the opinion of bond counsel to the
issuer, exempt from both federal income tax and Ohio personal income
tax.
35
<PAGE>
o California Municipal Obligations are issued by the State of California
and its political subdivisions, agencies, authorities and
instrumentalities. They pay interest that is, in the opinion of bond
counsel to the issuer, exempt from both federal income tax and
California income tax.
o Florida Municipal Obligations are issued by the State of Florida and
its political subdivisions, agencies, authorities and
instrumentalities. They pay interest that is, in the opinion of bond
counsel to the issuer, exempt from both federal income tax and the
Florida intangible personal property tax.
FLOATING AND VARIABLE RATE MUNICIPAL OBLIGATIONS are municipal obligations with
interest rates that are adjusted when a specific interest rate index changes
(floating rate obligations) or on a schedule (variable rate obligations).
Although there may not be an active secondary market for a particular floating
or variable rate obligation, these obligations usually have demand features
which permit a Fund to demand payment in full of the principal and interest.
Obligations with demand features are often secured by letters of credit issued
by a bank or other financial institution. A letter of credit may reduce the risk
that an entity will not be able to meet the Fund's demand for repayment of
principal and interest.
WHEN-ISSUED OBLIGATIONS are municipal obligations that are paid for and
delivered within 15 to 45 days after the date of purchase. A Fund investing in
when-issued obligations will maintain a segregated account of cash or liquid
securities to pay for its when-issued obligations and this account will be
valued daily in order to account for market fluctuations in the value of its
when-issued obligations.
OBLIGATIONS WITH PUTS ATTACHED are municipal obligations that may be resold back
to the seller at a specific price or yield within a specific period of time. A
Fund will purchase obligations with puts attached for liquidity purposes and may
pay a higher price for obligations with puts attached than the price of similar
obligations with out puts attached. The purchase of obligations with puts
attached involves the risk that the seller may not be able to repurchase the
underlying obligation.
LEASE OBLIGATIONS are municipal obligations that constitute participations in
lease obligations of municipalities to acquire land and a wide variety of
equipment and facilities. While a lease obligation is not a general obligation
of the municipality that has pledged its taxing power, a lease obligation is
ordinarily backed by the municipality's promise to budget for, appropriate for
and make payments due under the obligation. Some lease obligations may contain
specific clauses providing that the municipality has no obligation to make lease
or installment purchase payments in future years unless money is appropriated
for such purpose on an annual basis.
INSURED MUNICIPAL OBLIGATIONS are municipal obligations that require an insurer
to make payments of principal and interest, when due, if the issuer defaults on
its payments. The obligations purchased by the Ohio Insured Tax-Free Fund will
be insured either through an insurance policy purchased by the issuer of the
obligation or through an insurance policy purchased by the Fund.
36
<PAGE>
HOW CAN I TELL, AT A GLANCE, A FUND'S KEY RISKS?
The following table shows some of the main risks to that each Fund is subject.
Risks marked P are principal risks. Risks marked O are other risks that may
impact the Fund to a lesser extent. Each risk is described in detail below.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
TAX-FREE CALIFORNIA FLORIDA
INTERMEDIATE OHIO INSURED TAX-FREE OHIO TAX-FREE TAX-FREE TAX-FREE
TERM FUND TAX-FREE FUND MONEY FUND MONEY FUND MONEY FUND MONEY FUND
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CREDIT RISK P P P P P P
-----------
-------------------------------------------------------------------------------------------------------------------------
INTEREST RATE RISK P P P P P P
------------------
-------------------------------------------------------------------------------------------------------------------------
NON-DIVERSIFICATION RISK P P P P
------------------------
-------------------------------------------------------------------------------------------------------------------------
CONCENTRATION RISK P P P P P P
------------------
-------------------------------------------------------------------------------------------------------------------------
TAX RISK O O O O O O
--------
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
RISKS OF INVESTING IN THE FUNDS
CREDIT RISK. The securities in a Fund's portfolio are subject to the possibility
that a deterioration in the financial condition of an issuer, or a deterioration
in general economic conditions could cause an issuer to fail to make timely
payments of principal or interest, when due. Also, some municipal obligations
may be backed by a letter of credit issued by a bank or other financial
institution. Adverse developments affecting banks could have a negative effect
on the value of a Fund's portfolio securities.
INTEREST RATE RISK. Each of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund is subject to the risk that the market value of its
portfolio securities will decline because of rising interest rates. The prices
of debt securities are generally linked to the prevailing market interest rates.
In general, when interest rates rise, the prices of debt securities fall, and
when interest rates fall, the prices of debt securities rise. The price
volatility of a debt security also depends on its maturity. Generally, the
longer the maturity of a debt security, the greater its sensitivity to changes
in interest rates. To compensate investors for this higher risk, debt securities
with longer maturities generally offer higher yields than debt securities with
shorter maturities.
The yield 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 will vary
from day to day due to changes in interest rates. Generally, each Fund's yield
will increase when interest rates increase and will decrease when interest rates
decrease.
NON-DIVERSIFICATION RISK. A non-diversified Fund may invest more than 5% of its
assets in the securities of a single issuer. This may cause the value of the
Fund's shares to be more sensitive to any single economic, business, political
or regulatory occurrence than the value of shares in a diversified fund.
CONCENTRATION RISK. A Fund that invests a significant portion of its total
assets (more than 25%) in the securities of a particular bond market segment
(e.g., housing agency bonds or airport bonds) or in the securities of a
particular state is subject to the risk that adverse circumstances
37
<PAGE>
will have a greater impact on the Fund than a fund that does not concentrate its
investments. It is possible that economic, business or political developments or
other changes affecting one security in the area of concentration will affect
other securities in that area of concentration in the same manner, thereby
increasing the risk of such investments.
o Ohio Municipal Obligations. Economic and political conditions in the
state of Ohio may impact the value of Ohio Municipal Obligations. The
economy of Ohio, once concentrated in manufacturing, has diversified
since the 1980s. The state has brought its employment mix more in line
with the national average, although manufacturing is still above the
national average, at 19.8% in 1998, versus 15.3% for the nation.
Statewide employment levels continue to increase, with total
employment in 1998 up 1% over the prior year. At the end of the 1998
fiscal year the state had a general revenue fund balance of $2.6
billion. The state's 2000-2001 budget will address funding for primary
and secondary education in response to a 1998 decision by the Ohio
Supreme Court declaring the current system of school funding
unconstitutional. The Ohio Supreme Court's decision poses challenges
to the state to balance education funding with competing state
spending requirements, while maintaining its strong financial
position. Although no issuers of Ohio Municipal Obligations are
currently in default on their payments of principal and interest, a
default could adversely impact the market values and marketability of
all Ohio Municipal Obligations.
o California Municipal Obligations. Economic and political conditions in
the state of California may impact the value of California Municipal
Obligations. California has a broad-based economy, with manufacturing
representing just 15% of state employment, services representing 31%
and trade 23%. Although the nationwide recession of the early 1990s
severely affected several key industries, such as defense, aerospace
and high technology, gains in the export, entertainment, tourism and
computer sectors have helped drive the recent recovery. This has led
to improved state finances and has eliminated the need to borrow
externally across fiscal years for cash flow purposes. However, the
state's future budgets will be challenged by school enrollment growth
and Proposition 98 mandated school funding levels, prison funding
required by new mandatory sentencing laws, social service needs and a
two-thirds legislative requirement for budget passage. Although no
issuers of California municipal obligations are currently in default
on their payments of interest and principal, a default could adversely
impact the market values and marketability of all California Municipal
Obligations.
o Florida Municipal Obligations. Economic and political conditions in
the state of Florida may impact the value of Florida Municipal
Obligations. Florida has a service-based economy that continues to
diversify and grow at a steady pace. Florida does not have a tax on
personal income but has an ad valorem tax on intangible personal
property as well as sales and use taxes. These taxes are the principal
source of funds to meet state expenses, including the repayment of its
debt obligations. As a result, the state has a relatively narrow tax
base with 71% of its revenues derived from the 6% sales and use tax.
The state's income structure depends more on property income
(dividends, income and rent) and transfer payments (social security
and pension benefits) due to the significant retirement age
population. Despite this reliance on a cyclical revenue source,
Florida has managed its overall financial program well. The
38
<PAGE>
state has generated operating surpluses in recent years while
maintaining tax levels and funding growth-related service
requirements. Florida's future budgets will be challenged by the
passage of a constitutional amendment obligating the state to make
ample provision for high-quality education for all children, limits on
state sales tax growth due to the rapid expansion of Internet
commerce, and the effect of international economic uncertainty on the
state's exports and tourism business. Although no issuers of Florida
Municipal Obligations are currently in default on their payments of
principal and interest, a default could adversely impact the market
values and marketability of all Florida Municipal Obligations
TAX RISK. Certain provisions of the Internal Revenue Code relating to the
issuance of municipal obligations may reduce the volume of municipal securities
that qualify for federal tax exemptions. Proposals that may further restrict or
eliminate the income tax exemptions for interest on municipal obligations may be
introduced in the future. If any such proposal became law, it may reduce the
number of municipal obligations available for purchase by a Fund and could
adversely affect the Fund's shareholders. If this occurs, the Fund would
reevaluate its investment goals and strategies and may submit possible changes
in its structure to shareholders.
THE FUNDS' MANAGEMENT
---------------------
INVESTMENT ADVISOR
Touchstone Advisors, Inc. (the "Advisor" or "Touchstone Advisors") located at
311 Pike Street, Cincinnati, Ohio 45202, is the investment advisor for the
Funds.
Touchstone Advisors has been registered as an investment advisor under the
Investment Advisers Act of 1940, as amended (the "Advisers Act") since 1994. As
of December 31, 1999, Touchstone Advisors had approximately $422 million in
assets under management.
Touchstone Advisors is responsible for selecting each Fund's Sub-Advisor,
subject to review by the Board of Trustees. Touchstone Advisors selects a
Sub-Advisor that has shown good investment performance in its areas of
expertise. Touchstone Advisors considers various factors in evaluating the
Funds' Sub-Advisor, including:
o Level of knowledge and skill
o Performance as compared to its peers or benchmark
o Consistency of performance over 5 years or more
o Level of compliance with investment rules and strategies
o Employees, facilities and financial strength
o Quality of service
Touchstone Advisors will also continually monitor the performance of the Funds'
Sub-Advisor performance through various analyses and through in-person,
telephone and written consultations with the Funds' Sub-Advisor.
Touchstone Advisors discusses its expectations for performance with the Fund's
Sub-Advisor. Touchstone Advisors provides written evaluations and
recommendations to the Board of
39
<PAGE>
Trustees, including whether or not the Sub-Advisor's contract should be renewed,
modified or terminated.
Beginning May 1, 2000, Touchstone Advisors is responsible for running all of the
operations of the Funds, except for those that are subcontracted to the
Sub-Advisor, custodian, transfer agent and administrator.
Each Fund will pay Touchstone Advisors a fee for its services. Out of this fee
Touchstone Advisors pays the Sub-Advisor a fee for its services.
The fee to be paid to Touchstone Advisors by each Fund is 0.50% of assets up to
$100 million, 0.45% of assets from $100 million to $200 million, 0.40% of assets
from $200 million to $300 million, and 0.375% of assets over $300 million.
FUND SUB-ADVISOR
The Sub-Advisor makes the day-to-day decisions regarding buying and selling
specific securities for each Fund. The Fund Sub-Advisor manages the investments
held by a Fund according to the Fund's investment goals and strategies.
SUB-ADVISOR TO THE FUNDS
FORT WASHINGTON INVESTMENT ADVISORS, INC.
(FORT WASHINGTON)
420 East Fourth Street, Cincinnati, OH 45202
Fort Washington has been registered as an investment advisor under the Advisers
Act since 1990. Fort Washington provides investment advisory services to
individual and institutional clients. As of December 31, 1999, Fort Washington
had assets under management of $18 billion. Fort Washington has been managing
each Fund since May 1, 2000.
John J. Goetz, CFA, is primarily responsible for managing the portfolio of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund, and has been
managing each Fund's portfolio since October 1986. Mr. Goetz joined Fort
Washington in May 2000 and is Vice President and Senior Portfolio Manager. He
was employed by Trust's previous investment adviser from 1981 until April 2000.
Fort Washington is an affiliate of Touchstone Advisors. Therefore, Touchstone
Advisors may have a conflict of interest when making decisions to keep Fort
Washington as the Fund Sub-Advisor. The Board of Trustees reviews all of
Touchstone Advisor's decisions to reduce the possibility of a conflict of
interest situation.
40
<PAGE>
INVESTING WITH TOUCHSTONE
-------------------------
INSTITUTIONAL SHARES
CHOOSING THE APPROPRIATE INVESTMENTS TO MATCH YOUR GOALS. Investing well
requires a plan. We recommend that you meet with your financial advisor to plan
a strategy that will best meet your financial goals.
OPENING AN ACCOUNT
You can contact your financial advisor to purchase shares of the Funds. You may
also purchase shares of any Fund directly from Touchstone Securities, Inc.
("Touchstone"). In any event, you must complete the Investment Application
included in this Prospectus. You may also obtain an Investment Application from
Touchstone or your financial advisor.
o Investor Alert: Touchstone may choose to refuse any purchase order.
You should read this Prospectus carefully and then determine how much you
want to invest. Check below to find the minimum investment amount required
to purchase shares as well as to learn about the various
ways you can purchase your shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
RETAIL SHARES
CLASS A SHARES
CLASS C SHARES INSTITUTIONAL SHARES
------------------------------------------------------------------------------------------
Initial Additional Initial Additional
Investment Investment Investment Investment
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Regular Account $1,000 None $1,000,000 None
---------------
------------------------------------------------------------------------------------------
Investments through the Automatic $50 $50 N/A N/A
----------------------------------
Investment Plan
---------------
------------------------------------------------------------------------------------------
</TABLE>
o Investor Alert: Touchstone may change these initial and additional
investment minimums at any time.
PRICING OF FUND SHARES
The share price, also called net asset value (NAV), of 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 (the "Money Market Funds") is determined as of
12:00 noon and 4:00 p.m., Eastern time. The offering price (NAV plus a sales
charge, if applicable) of each of the Tax-Free Intermediate Term Fund and the
Ohio Insured Tax-Free Fund is determined as of the close of trading (normally
4:00 p.m. Eastern time) every day the New York Stock Exchange (NYSE) is open.
Each Fund calculates its NAV per share, generally using market prices, by
dividing the total value of its net assets by the number of shares outstanding.
Shares are purchased at NAV (or the next offering price) determined after your
purchase or sale order is received in proper form by Touchstone.
Each of the Money Market Funds seek to maintain a constant share price of $1.00
per share by valuing investments on an amortized cost basis. Under the amortized
cost method of valuation,
41
<PAGE>
each Money Market Fund maintains a dollar-weighted average portfolio maturity of
90 days or less, purchases only United States dollar-denominated securities with
maturities of 13 months or less and invests only in securities that meet its
quality standards and present minimal credit risks. Each Money Market Fund's
obligations are valued at original cost adjusted for amortization of premium or
accumulation of discount, rather than at market value. This method should enable
each Money Market Fund to maintain a stable net asset value per share. However,
there is no assurance that any Money Market Fund will be able to do so.
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund's
tax-exempt assets are valued by an outside independent pricing service. The
service uses a computerized grid matrix of tax-exempt securities and evaluations
by its staff to determine the fair value of the securities. If the Sub-Advisor
believes that the valuation provided by the service does not accurately reflect
the fair value of a tax-exempt security, it will value the security at the
average of the prices quoted by at least two independent market makers. The
quoted price will represent the market maker's opinion of the price a willing
buyer would pay for the security. All other securities (and other assets) of the
Funds for which market quotations are not available will be determined in good
faith using procedures established by the Board of Trustees.
CHOOSING A CLASS OF SHARES (TAX-FREE INTERMEDIATE TERM FUND AND OHIO INSURED
TAX-FREE FUND)
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund each
offer Class A and Class C shares. Each class of shares has different sales
charges and distribution fees. The amount of sales charges and distribution fees
you pay will depend on which class of shares you decide to purchase.
CLASS A SHARES
The offering price of Class A shares of each of the Tax-Free Intermediate Term
Fund and the Ohio Insured Tax-Free Fund is equal to its NAV plus a front-end
sales charge that you pay when you buy your shares. The front-end sales charge
is generally deducted from the amount of your investment.
The following table shows the amount of front-end sales charge you will pay on
purchases of Class A shares for accounts opened after July 31, 1999. Accounts
opened before July 31, 1999 are subject to different sales charges. These sales
charges are shown in the Statement of Additional Information ("SAI"). The amount
of front-end sales charge in the following table is shown as a percentage of (1)
offering price and (2) the net amount invested after the charge has been
subtracted. Note that the front-end sales charge gets lower as your investment
amount gets larger.
42
<PAGE>
Sales Charge as % of Sales Charge as % of
Amount of Your Investment Offering Price Net Amount Invested
------------------------- -------------- -------------------
Under $50,000 4.75% 4.99%
$50,000 but less than $100,000 4.50% 4.72%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 2.95% 3.04%
$500,000 but less than $1 million 2.25% 2.31%
$1 million or more 0.00% 0.00%
There is no front-end sales charge if you invest $1 million or more in a Fund.
This includes large total purchases made through programs such as Aggregation,
Concurrent Purchases, Letters of Intent and Rights of Accumulation. These
programs are described more fully in the SAI. In addition, there is no front-end
sales charge on purchases by certain persons related to the Funds or its service
providers and certain other persons listed in the SAI. At the option of the
Trust, the front-end sales charge may be included on purchases by such persons
in the future.
If you redeem shares that you purchased as part of the $1 million purchase
within one year, you will pay a contingent deferred sales charge (a sales charge
you pay when you redeem your shares) of 1% on the shares redeemed.
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund have each
adopted a distribution plan under Rule 12b-1 of the Investment Company Act of
1940, as amended (the "1940 Act") for its Class A shares. This plan allows each
Fund to pay distribution fees for the sale and distribution of its Class A
shares.
Under the plan, each Fund pays an annual fee of up to 0.25% of its average daily
net assets that are attributable to Class A shares. Because these fees are paid
out of a Fund's assets on an ongoing basis, these fees will increase the cost of
your investment and over time may cost you more than paying other types of sales
charges.
CLASS C SHARES
The offering price of Class C shares of each of the Tax-Free Intermediate Term
Fund and the Ohio Insured Tax-Free Fund is equal to its NAV plus a 1.25%
front-end sales charge that you pay when you buy your shares. The front-end
sales charge is generally deducted from the amount of your investment. A
contingent deferred sales charge of 1.00% of the offering price will be charged
on Class C shares redeemed within one year after you purchased them.
No contingent deferred sales charge is applied if:
o The shares which you redeem were acquired through the reinvestment of
dividends or capital gains distributions
o The amount redeemed resulted from increases in the value of the
account above the amount of the total purchase payments
When we determine whether a contingent deferred sales charge is payable on a
redemption, we assume that:
43
<PAGE>
o The redemption is made first from amounts free of any contingent
deferred sales charge; then
o From the earliest purchase payment(s) that remain invested in the Fund
When we determine if amounts are available for redemption free of any contingent
deferred sales charge, we:
o Add together all of your original purchase payments
o Subtract any amounts previously withdrawn
o Check if there is any remaining amount free of any contingent deferred
sales charge that can be applied to the total of the current value of
the shares you have asked to redeem
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund have each
adopted a distribution plan under Rule 12b-1 of the 1940 Act for its Class C
shares. This plan allows each Fund to pay distribution and other fees for the
sale and distribution of its Class C shares and for services provided to holders
of Class C shares.
Under the plan, each Fund pays an annual fee of up to 1.00% of its average daily
net assets that are attributable to Class C shares. Because these fees are paid
out of the Funds' assets on an ongoing basis, these fees will increase the cost
of your investment and over time may cost you more than paying other types of
sales charges.
MONEY MARKET FUNDS
Each of the Money Market Funds has adopted a distribution plan under Rule 12b-1
of the 1940 Act for its shares. The Ohio Tax-Free Money Fund's plan is for its
Retail shares only. This plan allows each Money Market Fund to pay an annual fee
of up to 0.25% of its average daily net assets for the sale and distribution of
shares. Because these fees are paid out of a Fund's assets on an ongoing basis,
these fees will increase the cost of your investment and over time may cost you
more than paying other types of sales charges.
INSTITUTIONAL SHARES OF THE OHIO TAX-FREE MONEY FUND
The minimum initial investment in Institutional shares of the Ohio Tax-Free
Money Fund ordinarily is $1 million. Institutional shares are not subject to
distribution fees under a distribution plan under Rule 12b-1 of the 1940 Act.
Institutional shares do not offer redemptions by check, automatic investment
plan or the systematic withdrawal plan.
PURCHASING YOUR SHARES
For information about how to purchase shares, telephone Touchstone at
800.543.0407.
44
<PAGE>
--------------------------------------------------------------------------------
OPENING AN ACCOUNT
--------------------------------------------------------------------------------
BY MAIL OR
THROUGH YOUR
FINANCIAL ADVISOR
o Please make your check (in U.S. dollars) payable to the
applicable Fund.
o Send your check with the completed account application to
Touchstone, P.O. Box 5354, Cincinnati, Ohio 45201-5354. Your
application will be processed subject to your check
clearing.
o You may also open an account through your financial advisor.
o We price direct purchases in the Tax-Free Intermediate Term
Fund and the Ohio Insured Tax-Free Fund based upon the next
determined public offering price (NAV plus any applicable
sales load) after your order is received. Direct purchase
orders received by Touchstone by the close of the regular
session of trading on the NYSE, generally 4:00 p.m., Eastern
time, are processed at that day's public offering price.
Direct investments received by Touchstone after the close of
the regular session of trading on the NYSE, generally 4:00
p.m., Eastern time, are processed at the public offering
price next determined on the following business day.
Purchase orders received from financial advisors before the
close of the regular session of trading on the NYSE,
generally 4:00 p.m., Eastern time, and transmitted to
Touchstone by 5:00 p.m., Eastern time, are processed at that
day's public offering price. Purchase orders received from
financial advisors after 5:00 p.m., Eastern time, are
processed at the public offering price next determined on
the following business day.
o You may receive a dividend in each of the Money Market Funds
on the day you wire an investment if you notify Touchstone
of your wire by 12:00 noon, Eastern time, on that day. Your
purchase will be priced based upon the NAV after a proper
order is received.
--------------------------------------------------------------------------------
BY EXCHANGE
o You may exchange shares of the Funds for shares of the same
class of another Touchstone Fund at NAV. You may also
exchange shares of the Funds for shares of any Touchstone
money market fund.
o You do not have to pay any exchange fee for these exchanges.
o You should review the disclosure provided in the Prospectus
relating to the exchanged-for shares carefully before making
an exchange of your Fund shares.
--------------------------------------------------------------------------------
45
<PAGE>
--------------------------------------------------------------------------------
ADDING TO YOUR ACCOUNT
--------------------------------------------------------------------------------
BY CHECK
o Complete the investment form provided at the bottom of a
recent account statement.
o Make your check payable to the applicable Fund.
o Write your account number on the check.
o Either: (1) Mail the check with the investment form in the
envelope provided with your account statement; or (2) Mail
your check directly to your financial advisor at the address
printed on your account statement. Your financial advisor is
responsible for forwarding payment promptly to Touchstone.
--------------------------------------------------------------------------------
BY WIRE
o Specify your name and account number.
o Purchases in the Tax-Free Intermediate Term Fund and the
Ohio Insured Tax-Free Fund will be processed at that day's
public offering price if Touchstone receives a properly
executed wire by 4:00 p.m. Eastern time on a day when the
NYSE is open for regular trading.
o You may receive a dividend in the Money Market Funds on the
day you wire an investment if you notify Touchstone of your
wire by 12:00 noon, Eastern Time, on that day.
--------------------------------------------------------------------------------
BY EXCHANGE
o You may exchange your shares by calling the Touchstone.
o You do not have to pay any exchange fee for these exchanges.
o You should review the disclosure provided in the Prospectus
relating to the exchanged-for shares carefully before making
an exchange of your Fund shares.
--------------------------------------------------------------------------------
You may make additional purchases in the Funds directly by wire transfers.
Contact your bank and ask it to wire federal funds to Touchstone. Banks may
charge a fee for handling wire transfers. You should contact Touchstone or your
financial advisor for further instructions.
AUTOMATIC INVESTMENT OPTIONS
The various ways that you can invest in the Funds are outlined below. Touchstone
does not charge any fees for these services.
AUTOMATIC INVESTMENT PLAN. You can pre-authorize monthly investments of $50 or
more in each Fund to be processed electronically from a checking or savings
account. You will need to complete the appropriate section in the Investment
Application to do this. For further details about this service, call Touchstone
at 1.800.543.0407.
REINVESTMENT/CROSS REINVESTMENT. Dividends and capital gains can be
automatically reinvested in the Fund that pays them or in another Fund within
the same class of shares without a fee or sales charge. Dividends and capital
gains will be reinvested in the Fund that pays them,
46
<PAGE>
unless you indicate otherwise on your account application. You may also choose
to have your dividends or capital gains paid to you in cash.
DIRECT DEPOSIT PURCHASE PLAN (AVAILABLE TO ALL SHAREHOLDERS EXCEPT INSTITUTIONAL
SHARES OF THE OHIO TAX-FREE MONEY FUND). You may automatically invest Social
Security checks, private payroll checks, pension pay outs or any other
pre-authorized government or private recurring payments in our Funds. This
occurs on a monthly basis and the minimum investment is $50.
DOLLAR COST AVERAGING. Our Dollar Cost Averaging program allows you to diversify
your investments by investing the same amount on a regular basis. You can set up
periodic automatic transfers of at least $50 from one Touchstone Fund to any
other. The applicable sales charge, if any, will be assessed.
CASH SWEEP PROGRAM (AVAILABLE ONLY TO THE MONEY MARKET FUNDS). Cash
accumulations in accounts with financial institutions may be automatically
invested in the Money Market Funds at the next determined NAV on a day selected
by the institution or customer, or when the account balance reaches a
predetermined dollar amount. Institutions participating in this program are
responsible for placing their orders in a timely manner. You may be charged a
fee by your financial institution for participating in this program.
PROCESSING ORGANIZATIONS. You may also purchase shares of the Funds through a
"processing organization," (e.g. a mutual fund supermarket) which is a
broker-dealer, bank or other financial institution that purchases shares for its
customers. Some of the Funds have authorized certain processing organizations to
receive purchase and sales orders on their behalf. Before investing in the Funds
through a processing organization, you should read any materials provided by the
processing organization in conjunction with this Prospectus.
When shares are purchased this way, there may be various differences. The
processing organization may:
o Charge a fee for its services
o Act as the shareholder of record of the shares
o Set different minimum initial and additional investment requirements
o Impose other charges and restrictions
o Designate intermediaries to accept purchase and sales orders on the
Funds' behalf
Touchstone considers a purchase or sales order as received when an authorized
processing organization, or its authorized designee, receives the order in
proper form. These orders will be priced based on the Fund's NAV next computed
after such order is received in proper form.
Shares held through a processing organization may be transferred into your name
following procedures established by your processing organization and Touchstone.
Certain processing organizations may receive compensation from the Funds,
Touchstone, the Advisor or their affiliates.
47
<PAGE>
SELLING YOUR SHARES
You may sell some or all of your Fund shares on any day that the Fund calculates
its NAV. If your request is received in proper form before the close of regular
trading on the NYSE, you will receive a price based on that day's NAV for the
shares you sell. Otherwise, the price you receive will be based on the NAV that
is next calculated.
BY TELEPHONE
o You can sell or exchange your shares over the telephone,
unless you have specifically declined this option. If you do
not wish to have this ability, you must mark the appropriate
section of the Investment Application. You may only sell
shares over the telephone if the amount is less than
$25,000.
o To sell your Fund shares by telephone, call Touchstone at
800.543.0407
--------------------------------------------------------------------------------
BY MAIL
o Write to Touchstone.
o Indicate the number of shares or dollar amount to be sold.
o Include your name and account number.
o Sign your request exactly as your name appears on your
Investment Application
--------------------------------------------------------------------------------
BY WIRE
o Complete the appropriate information on the Investment
Application.
o If your proceeds are $1,000 or more, you may request that
Touchstone wire them to your bank account.
o You may be charged a fee. (There is no fee for wire
redemptions by Institutional shareholders in the Ohio
Tax-Free Money Fund.)
o Redemption proceeds will only be wired to a commercial bank
or brokerage firm in the United States.
o Your redemption proceeds may be deposited without a charge
directly into your bank account through an ACH transaction.
Contact Touchstone for more information.
--------------------------------------------------------------------------------
48
<PAGE>
--------------------------------------------------------------------------------
BY CHECK
o You may open a checking account in any Fund (except the Ohio
Insured Tax-Free Fund and Instutitional Shares of the Ohio
Tax-Free Money Fund) and redeem shares by check.
o Checks will be processed at the NAV the day the check is
presented to the Custodian for payment.
o If the amount of your check is more than the value of the
shares held in your account, you will be charged for each
check returned for insufficient funds.
o If you do not write more than 6 checks per month, there is
no fee for your checking account. If you write more than 6
checks a month, you will be charged 25(cent) for each
additional check written that month.
o Shareholders in the Tax-Free Intermediate Term Fund should
be aware that the Fund's NAV fluctuates daily and that
writing a check is a taxable event.
o Checks may not be certified.
o If you invest in a Money Market Fund through a cash sweep
program with a financial institution, you may not open a
checking account.
--------------------------------------------------------------------------------
THROUGH
YOUR FINANCIAL
ADVISOR
o You may also sell shares by contacting your financial
advisor, who may charge you a fee for this service. Shares
held in street name must be sold through your financial
advisor or, if applicable, the processing organization.
o Your financial advisor is responsible for making sure that
sale requests are transmitted to Touchstone in proper form
in a timely manner.
--------------------------------------------------------------------------------
ooo Special Tax Consideration
--------------------------------------------------------------------------------
Selling your shares in the Tax-Free Intermediate Term Fund or the Ohio Insured
Tax-Free Fund may cause you to incur a taxable gain or loss.
o Investor Alert: Unless otherwise specified, proceeds will be sent to
the record owner at the address shown on Touchstone's records.
SIGNATURE GUARANTEES. Some circumstances require that the request for the sale
of shares have a signature guarantee. A signature guarantee helps protect you
against fraud. You can obtain one from most banks or securities dealers, but not
from a notary public. Some circumstances requiring a signature guarantee
include:
o Proceeds from the sale of shares that exceed $25,000
o Proceeds to be paid when the name or the address on the account has
been changed within 30 days of your sale request
49
<PAGE>
TELEPHONE SALES. If we receive your share sale request before 4:00 p.m., Eastern
time on a day when the NYSE is open for regular trading, the sale of your shares
will be processed at the next determined NAV on that day. Otherwise it will
occur on the next business day. The proceeds of sales of shares in the Money
Market Funds may be wired to you on the same day of your telephone request, if
your request is properly made before 12:00 noon Eastern time.
Interruptions in telephone service could prevent you from selling your shares in
this manner when you want to. When you have difficulty making telephone sales,
you should mail (or send by overnight delivery) a written request for sale of
your shares to Touchstone.
In order to protect your investment assets, Touchstone will only follow
instructions received by telephone that it reasonably believes to be genuine.
However, there is no guarantee that the instructions relied upon will always be
genuine and Touchstone will not be liable, in those cases. Touchstone has
certain procedures to confirm that telephone instructions are genuine. If it
does not follow such procedures in a particular case it may be liable for any
losses due to unauthorized or fraudulent instructions. Some of these procedures
include:
o Requiring personal identification
o Making checks payable only to the owner(s) of the account shown on
Touchstone's records
o Mailing checks only to the account address shown on Touchstone's
records
o Directing wires only to the bank account shown on Touchstone's records
o Providing written confirmation for transactions requested by telephone
o Tape recording instructions received by telephone
SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive or send to a third party
monthly or quarterly withdrawals of $50 or more if your account value is at
least $5,000. There is no special fee for this service. The Systematic
Withdrawal Plan is not available to Institutional shareholders of the Ohio
Tax-Free Money Fund.
ooo Special Tax Consideration
--------------------------------------------------------------------------------
If you exercise the Reinstatement Privilege, you should contact your tax
advisor.
ooo Special Tax Consideration
--------------------------------------------------------------------------------
Involuntary sales in the Tax-Free Intermediate Term Fund or the Ohio Insured
Tax-Free Fund may result in the sale of your shares at a loss or may result in
taxable investment gains.
REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a sale of shares of the
Tax-Free Intermediate Term Fund or the Ohio Insured Tax-Free Fund (or a dividend
or capital gain distribution on these shares) without a sales charge in any of
the Touchstone Funds. You may do so by sending a written request and a check to
Touchstone within 90 days after the date of the
50
<PAGE>
sale, dividend or distribution. Reinvestment will be at the next NAV calculated
after Touchstone receives your request.
LOW ACCOUNT BALANCES
Touchstone may sell your Fund shares and send the proceeds to you if your
balance falls below the minimum amount required for your account as a result of
redemptions that you have made (as opposed to a reduction from market changes).
This involuntary sale does not apply to custodian accounts under the Uniform
Gifts/Transfers to Minors Act (UGTMA). Touchstone will let you know that your
shares are about to be sold and you will have 30 days to increase your account
balance to the minimum amount.
RECEIVING SALE PROCEEDS
TAX-FREE INTERMEDIATE TERM FUND AND OHIO INSURED TAX-FREE FUND
Touchstone will forward the proceeds of your sale of shares of the Funds to you
(or to your financial advisor) within 7 days (normally within 3 business days)
from the date of a proper request.
MONEY MARKET FUNDS
Touchstone will forward the proceeds of your sale to you (or to your financial
adviser) within 3 business days (normally within 3 business days after receipt
of a proper written request and within 1 business day after receipt of a proper
telephone request).
PROCEEDS SENT TO FINANCIAL ADVISORS
Proceeds that are sent to your financial advisor will not usually be re-invested
for you unless you provide specific instructions to do so. Therefore, the
financial advisor may benefit from the use of your money.
FUND SHARES PURCHASED BY CHECK
If you purchase Fund shares by personal check, the proceeds of a sale of those
shares will not be sent to you until the check has cleared, which may take up to
15 days. If you may need your money more quickly, you should purchase shares by
federal funds, bank wire, or with a certified or cashier's check.
It is possible that the payments of your sale proceeds could be postponed or
your right to sell your shares could be suspended during certain circumstances.
These circumstances can occur:
o When the NYSE is closed for other than customary weekends and holidays
o When trading on the NYSE is restricted
o When an emergency situation causes the Sub-Advisor to not be
reasonably able to dispose of certain securities or to fairly
determine the value of its net assets
o During any other time when the SEC, by order, permits.
51
<PAGE>
DISTRIBUTIONS AND TAXES
ooo Special Tax Consideration
--------------------------------------------------------------------------------
You should consult with your tax advisor to address your own tax situation.
Each Fund intends to distribute to its shareholders substantially all of its
income and capital gains. The table below outlines when dividends are declared
and paid for each Fund:
--------------------------------------------------------------------------------
Dividends Declared Dividends Paid
------------------ --------------
Tax-Free Money Fund
Ohio Tax-Free Money Fund
California Tax-Free Money Fund
Florida Tax-Free Money Fund Daily Monthly
--------------------------------------------------------------------------------
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund Monthly Monthly
--------------------------------------------------------------------------------
Distributions of any capital gains earned by a Fund will be made at least
annually.
52
<PAGE>
TAX INFORMATION
DISTRIBUTIONS. Each Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its shareholders. Each
Fund intends to meet all IRS requirements necessary to ensure that it is
qualified to pay "exempt-interest dividends," which means that it may pass on to
shareholders the federal tax-exempt status of its investment income.
Each Fund may invest a portion of its assets in taxable obligations and may make
distributions that may be taxed as ordinary income. Income exempt from Federal
tax may be subject to state and local tax. Taxable distributions may be subject
to federal income tax whether you reinvest your dividends in additional shares
of a Fund or choose to receive cash. Since each Fund's investment income is
derived from interest rather than dividends, no portion of these distributions
is eligible for the dividends received deduction available to corporations.
ORDINARY INCOME. Net investment income and short-term capital gains that are
distributed to you are taxable as ordinary income for federal income tax
purposes regardless of how long you have held your Fund shares. The capital
gains may be taxable at different rates depending upon how long the Fund holds
its assets.
CAPITAL GAINS. (Tax-Free Intermediate Term Fund and Ohio Insured Tax-Free Fund)
Net capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses) distributed to you are taxable as capital gains for
federal income tax purposes regardless of how long you have held your Fund
shares.
ooo Special Tax Consideration
--------------------------------------------------------------------------------
For federal income tax purposes, an exchange of shares is treated as a sale of
the shares and a purchase of the shares you receive in exchange. Therefore, you
may incur a taxable gain or loss in connection with the exchange.
--------------------------------------------------------------------------------
STATEMENTS AND NOTICES. You will receive an annual statement outlining the tax
status of your distributions. Your statement will give the percentage and source
of income earned on tax-exempt obligations held by the Funds during the
preceding year.
The Funds may not be appropriate investments for persons who are "substantial
users" of facilities financed by industrial development bonds or are "related
persons" to such users; such users should consult their tax advisors before
investing in the Funds.
SPECIAL TAX CONSIDERATIONS
o Ohio Insured Tax-Free Fund and Ohio Tax-Free Money Fund. Dividends
from each Fund that are exempt from federal income tax are exempt from
Ohio personal income tax to the extent derived from interest on Ohio
Municipal Obligations. Distributions received from the Funds are
generally not subject to Ohio municipal income taxation. Dividends
from the Funds that are exempt from federal income tax are excluded
from the net income base of the Ohio corporation franchise tax.
However, shares of the
53
<PAGE>
Funds will be included in the computation of the Ohio corporation
franchise tax on the net worth basis.
o California Tax-Free Money Fund. The Fund expects that substantially
all dividends paid by the Fund will not be subject to California state
income tax. However, the Fund may invest a portion of its assets in
obligation which pay interest that is not exempt from federal income
tax and/or California income tax.
o Florida Tax-Free Money Fund. Florida does not impose an income tax on
individuals but does have a corporate income tax. For purposes of the
Florida income tax, corporate shareholders are generally subject to
tax on all distributions from the Fund. Florida imposes an intangible
personal property tax on shares of the Fund owned by a Florida
resident on January 1 of each year unless the shares qualify for an
exemption from that tax. Shares of the Fund owned by a Florida
resident will be exempt from the intangible personal property tax as
long as the portion of the Fund's portfolio not invested in direct
U.S. Government obligations is at least 90% invested in Florida
Municipal Obligations exempt from that tax. The Fund will attempt to
ensure that, on January 1 of each year, at least 90% of its portfolio
consists of Florida Municipal Obligations exempt from the Florida
intangible personal property tax.
54
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The financial highlights table is intended to help you understand the financial
performance of each Fund for the past five years or during the term of its
operation, whichever is shorter. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate an
investor would have earned or lost on an investment in the Funds (assuming
reinvestment of all dividends and distributions. This information has been
audited by Arthur Andersen LLP, whose report, along with the Funds' financial
statements, is included in the SAI, which are available upon request.
55
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND - CLASS A
----------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 30,
ENDED -------------------------------------------------------------
DEC. 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 10.87 $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
--------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.24 0.48 0.50 0.50 0.50 0.49
Net realized and unrealized gains
(losses) on investments (0.23) (0.25) 0.11 0.16 (0.01) 0.17
--------------------------------------------------------------------------
Total from investment operations 0.01 0.23 0.61 0.66 0.49 0.66
--------------------------------------------------------------------------
Dividends from net investment income (0.24) (0.48) (0.50) (0.50) (0.50) (0.49)
--------------------------------------------------------------------------
Net asset value at end of year $ 10.64 $ 10.87 $ 11.12 $ 11.01 $ 10.85 $ 10.86
==========================================================================
Total return(A) 0.12%(C) 2.07% 5.63% 6.19% 4.51% 6.36%
==========================================================================
Net assets at end of year (000's) $ 46,611 $ 47,899 $ 52,896 $ 58,485 $ 67,675 $ 81,140
==========================================================================
Ratio of net expenses to average net
assets(B) 0.99%(C) 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to
average net assets 4.37%(C) 4.33% 4.50% 4.55% 4.52% 4.59%
Portfolio turnover rate 42%(C) 51% 36% 30% 37% 32%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements, the ratio of
expenses to average net assess would have been 1.01% for the period
ended December 31, 1999.
(C) Annualized.
56
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE INTERMEDIATE TERM FUND - CLASS C
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 30,
ENDED ---------------------------------------------------------------------
DEC. 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 10.88 $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
-------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16 0.40 0.42 0.43 0.44 0.44
Net realized and unrealized gains
(losses) on investments (0.23) (0.24) 0.11 0.16 (0.01) 0.17
-------------------------------------------------------------------------------------
Total from investment operations (0.07) 0.16 0.53 0.59 0.43 0.61
-------------------------------------------------------------------------------------
Dividends from net investment income (0.16) (0.40) (0.42) (0.43) (0.44) (0.44)
-------------------------------------------------------------------------------------
Net asset value at end of year $ 10.65 $ 10.88 $ 11.12 $ 11.01 $ 10.85 $ 10.86
=====================================================================================
Total return (A) (0.62%) 1.40% 4.85% 5.49% 4.00% 5.82%
=====================================================================================
Net assets at end of year (000's) $ 3,766 $ 4,634 $ 4,747 $ 5,161 $ 5,239 $ 4,814
=====================================================================================
Ratio of net expenses to average net 1.74%(C) 1.74% 1.74% 1.65% 1.49% 1.49%
assets(B)
Ratio of net investment income to average 3.62%(C) 3.58% 3.75% 3.89% 4.02% 4.08%
net assets
Portfolio turnover rate 42%(C) 51% 36% 30% 37% 32%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursement, the ratio of expenses
to average net assets would have 1.76% for the period ended December
31, 1999.
(C) Annualized.
57
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND - CLASS A
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 30,
ENDED ---------------------------------------------------------------------
DEC. 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 11.99 $ 11.74
---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.29 0.58 0.61 0.61 0.62 0.63
Net realized and unrealized gains
(losses) on investments (0.49) (0.34) 0.23 0.25 (0.02) 0.25
---------------------------------------------------------------------------------------
Total from investment operations (0.20) 0.24 0.84 0.86 0.60 0.88
---------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.29) (0.58) (0.61) (0.61) (0.62) (0.63)
Distributions from net realized gains -.- (0.29) (0.08) --.-- --.-- --.--
---------------------------------------------------------------------------------------
Total distributions (0.29) (0.87) (0.69) (0.61) (0.62) (0.63)
---------------------------------------------------------------------------------------
Net asset value at end of year $ 11.25 $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 11.99
=======================================================================================
Total return (A) (3.39%)(C) 1.81% 7.03% 7.36% 5.05% 7.75%
=======================================================================================
Net assets at end of year (000's) $ 58,044 $ 62,737 $ 69,289 $ 70,816 $ 75,938 $ 71,393
=======================================================================================
Ratio of net expenses to average net
assets (B) 0.75%(C) 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets 5.03%(C) 4.72% 4.95% 5.05% 5.12% 5.35%
Portfolio turnover rate 63%(C) 26% 41% 33% 46% 29%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements, the ratio of
expenses to average net assets would have been 0.77% for the year
ended June 30, 1995.
(C) Annualized.
58
<PAGE>
<TABLE>
<CAPTION>
OHIO INSURED TAX-FREE FUND - CLASS C
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
DEC. 31, 1999 ---------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 12.00 $ 11.74
---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.25 0.49 0.52 0.53 0.56 0.57
Net realized and unrealized gains
(losses) on investments (0.49) (0.34) 0.23 0.25 (0.03) 0.26
---------------------------------------------------------------------------------------
Total from investment operations (0.24) 0.15 0.75 0.78 0.53 0.83
---------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.25) (0.49) (0.52) (0.53) (0.56) (0.57)
Distributions from net realized gains -.- (0.29) (0.08) --.-- --.-- --.--
---------------------------------------------------------------------------------------
Total distributions (0.25) (0.78) (0.60) (0.53) (0.56) (0.57)
---------------------------------------------------------------------------------------
Net asset value at end of year $ 11.25 $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 12.00
=======================================================================================
Total return (A) (4.13%) 1.05% 6.24% 6.65% 4.44% 7.31%
=======================================================================================
Net assets at end of year (000's) $ 4,132 $ 4,740 $ 5,215 $ 4,639 $ 3,972 $ 4,165
=======================================================================================
Ratio of net expenses to average net
assets (B) 1.50%(C) 1.50% 1.50% 1.42% 1.25% 1.25%
Ratio of net investment income to
average net assets 4.28%(C) 3.97% 4.20% 4.37% 4.62% 4.84%
Portfolio turnover rate 63%(C) 26% 41% 33% 46% 29%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements, the ratio of
expenses to average net assets would have been 1.53% and 1.27% for the
periods ended December 31, 1999 and June 30, 1995, respectively.
(C) Annualized
59
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE MONEY FUND
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 30,
ENDED --------------------------------------------------------------------
DEC. 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------
Net investment income 0.014 0.027 0.030 0.029 0.031 0.030
---------------------------------------------------------------------------------------
Dividends from net investment income (0.014) (0.027) (0.030) (0.029) (0.031) (0.030)
---------------------------------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=======================================================================================
Total Return 2.91%(B) 2.75% 3.03% 2.89% 3.15% 3.07%
=======================================================================================
Net assets at end of year (000's) $ 27,606 $ 25,234 $ 37,383 $ 30,126 $ 25,342 $ 26,692
=======================================================================================
Ratio of net expenses to average net
assets (A) 0.89%(B) 0.89% 0.92% 0.99% 0.99% 0.99%
Ratio of net investment income to
average net assets 2.86%(B) 2.74% 2.98% 2.85% 3.09% 3.00%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Absent fee waivers, the ratio of expenses to average net assets would
have been 0.95% for the year ended June 30, 1999.
(B) Annualized.
60
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND - RETAIL (CLASS A) SHARES
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 30,
ENDED ---------------------------------------------------------------------
DEC. 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------
Net investment income 0.014 0.027 0.030 0.030 0.031 0.031
---------------------------------------------------------------------------------------
Dividends from net investment income (0.014) (0.027) (0.030) (0.030) (0.031) (0.031)
---------------------------------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=======================================================================================
Total return 2.79%(B) 2.73% 3.07% 2.99% 3.14% 3.12%
=======================================================================================
Net assets at end of year (000's) $ 236,129 $ 214,691 $ 205,316 $ 166,719 $ 240,323 $ 226,606
=======================================================================================
Ratio of net expenses to average
net assets (A) 0.75%(B) 0.75% 0.75% 0.75% 0.75% 0.74%
Ratio of net investment income to
average net assets 2.78%(B) 2.68% 3.02% 2.93% 3.09% 3.08%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Absent fee waivers and/or expense reimbursements, the ratio of
expenses to average net assets would have been 0.77%, 0.76% and 0.77%
for the years ended June 30, 1999, 1998 and 1997, respectively.
(B) Annualized
61
<PAGE>
<TABLE>
<CAPTION>
OHIO TAX-FREE MONEY FUND - INSTITUTIONAL SHARES
------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, PERIOD ENDED
DEC. 31, 1999 ------------------------ JUNE 30,
(UNAUDITED) 1999 1998 1997 (A)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------
Net investment income 0.015 0.029 0.033 0.016
------------------------------------------------------
Dividends from net investment income (0.015) (0.029) (0.033) (0.016)
------------------------------------------------------
Net asset value at end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
======================================================
Total return 3.05%(C) 2.98% 3.33% 3.31%(C)
======================================================
Net assets at end of period (000's) $ 164,988 $ 176,106 $ 115,266 $ 97,589
======================================================
Ratio of net expenses to average net
assets (B) 0.50%(C) 0.50% 0.50% 0.50%(C)
Ratio of net investment income to
average net assets 3.01%(C) 2.93% 3.27% 3.28%(C)
------------------------------------------------------------------------------------------------
</TABLE>
(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, the ratio of
expenses to average net assets would have been 0.53%, 0.51%, 0.52% and
0.56% (C) for the periods ended December 31, 1999, June 30, 1999, 1998
and 1997, respectively.
(C) Annualized.
62
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY FUND
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 30,
ENDED ---------------------------------------------------------------------
DEC. 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------
Net investment income 0.013 0.025 0.029 0.028 0.029 0.029
---------------------------------------------------------------------------------------
Dividends from net investment income (0.013) (0.025) (0.029) (0.028) (0.029) (0.029)
---------------------------------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=======================================================================================
Total return 2.58%(B) 2.56% 2.94% 2.81% 2.95% 2.95%
=======================================================================================
Net assets at end of year (000's) $ 56,588 $ 47,967 $ 41,013 $ 32,186 $ 36,122 $ 19,525
=======================================================================================
Ratio of net expenses to average net
assets (A) 0.75%(B) 0.75% 0.77% 0.80% 0.80% 0.70%
Ratio of net investment income to
average net assets 2.57(B) 2.52% 2.89% 2.76% 2.88% 2.83%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Absent fee waivers and/or expense reimbursements, the ratios of
expenses to average net assets would have been 0.82% and 0.85% for the
years ended June 30, 1996 and 1995, respectively.
(B) Annualized.
63
<PAGE>
<TABLE>
<CAPTION>
FLORIDA TAX-FREE MONEY FUND
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 30,
ENDED ---------------------------------------------------------------------
DEC. 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------
Net investment income 0.014 0.026 0.030 0.029 0.032 0.031
---------------------------------------------------------------------------------------
Dividends from net investment income (0.014) (0.026) (0.030) (0.029) (0.032) (0.031)
---------------------------------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=======================================================================================
Total return 2.76%(B) 2.68% 3.03% 2.90% 3.29% 3.17%
=======================================================================================
Net assets at end of year (000's) $ 20,084 $ 21,371 $ 14,368 $ 22,434 $ 28,906 $ 24,119
=======================================================================================
Ratio of net expenses to average
net assets(A) 0.75%(B) 0.75% 0.75% 0.75% 0.61% 0.66%
Ratio of net investment income to
average net assets 2.73(B) 2.58% 2.98% 2.85% 3.24% 3.12%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Absent fee waivers and/or expense reimbursements, the ratio of
expenses to average net assets would have been 0.98%, 0.95%, 0.94%,
0.80% and 0.80% for the years ended June 30, 1999, 1998, 1997, 1996
and 1995, respectively.
(B) Annualized.
64
<PAGE>
FOR MORE INFORMATION
--------------------
For investors who want more information about the Funds, the following documents
are available free upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is legally a part of this Prospectus.
ANNUAL/SEMI-ANNUAL REPORTS: The Funds' annual and semi-annual reports provide
additional information about the Funds' investments. In the annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected a Fund's performance during its last fiscal year.
You can get free copies of the SAI, the reports, other information and answers
to your questions about the Funds by contacting your financial advisor, or the
Funds at:
Touchstone Family of Funds
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
800.543.0407
http://www.touchstonefunds.com
Information about the Funds (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. You can receive information about the operation of the Public Reference
Room by calling the SEC at 1.202.942.8090.
Reports and other information about the Funds are available on the SEC's
Internet site at http://www.sec.gov. For a fee, you can get text-only copies of
reports and other information by writing to the Public Reference Room of the
SEC, 450 Fifth Street N.W., Washington, D.C. 20549-0102 or by sending an e-mail
request to: [email protected].
Investment Company Act file no. 811-3174
65
<PAGE>
TOUCHSTONE TAX-FREE TRUST
o TAX-FREE INTERMEDIATE TERM FUND
o OHIO INSURED TAX-FREE FUND
o TAX-FREE MONEY FUND
o OHIO TAX-FREE MONEY FUND
o CALIFORNIA TAX-FREE MONEY FUND
o FLORIDA TAX-FREE MONEY FUND
MULTIPLE CLASSES OF
SHARES ARE OFFERED BY
THIS PROSPECTUS
66
<PAGE>
TOUCHSTONE TAX-FREE TRUST
STATEMENT OF ADDITIONAL INFORMATION
June 9, 2000
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
Tax-Free Money 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 Touchstone Tax-Free
Trust dated June 9, 2000. 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 Touchstone at 800.543.0407.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Touchstone Tax-Free Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS PAGE
THE TRUST......................................................................3
MUNICIPAL OBLIGATIONS..........................................................4
QUALITY RATINGS OF MUNICIPAL OBLIGATIONS......................................10
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS.................................13
INVESTMENT LIMITATIONS........................................................17
INSURANCE ON THE OHIO INSURED TAX-FREE FUND'S SECURITIES......................22
TRUSTEES AND OFFICERS.........................................................25
THE INVESTMENT ADVISOR AND SUB-ADVISOR........................................28
THE DISTRIBUTOR...............................................................30
DISTRIBUTION PLANS............................................................32
SECURITIES TRANSACTIONS.......................................................34
CODE OF ETHICS ...............................................................35
PORTFOLIO TURNOVER............................................................36
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE..........................36
CHOOSING A SHARE CLASS........................................................39
OTHER PURCHASE INFORMATION....................................................44
TAXES.........................................................................46
REDEMPTION IN KIND............................................................48
HISTORICAL PERFORMANCE INFORMATION............................................49
PRINCIPAL SECURITY HOLDERS....................................................53
CUSTODIAN.....................................................................55
INDEPENDENT AUDITORS..........................................................55
TRANSFER AGENT................................................................55
TAX EQUIVALENT YIELD TABLES...................................................57
FINANCIAL STATEMENTS..........................................................59
2
<PAGE>
THE TRUST
---------
Touchstone Tax-Free Trust (the "Trust"), formerly Midwest Group Tax Free Trust
and Countrywide Tax-Free Trust, an open-end, diversified management investment
company, 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.
Shares of each Fund have equal voting rights and liquidation rights. Each Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. Each class of shares of a
Fund shall vote separately on matters relating to its plan of distribution
pursuant to Rule 12b-1. When matters are submitted to shareholders for a vote,
each shareholder is entitled to one vote for each full share owned and
fractional votes for fractional shares owned. The Trust does not normally hold
annual meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon the removal
of any Trustee when requested to do so in writing by shareholders holding 10% or
more of the Trust's outstanding shares. The Trust will comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 in order to
facilitate communications among shareholders.
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 Institutional shares of the Ohio 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,
3
<PAGE>
litigation or other legal expenses relating to a class of shares, Trustees' fees
or expenses incurred as a result of issues relating to a specific class of
shares and accounting fees and expenses relating to a specific class of shares;
(iii) each class has exclusive voting rights with respect to matters affecting
only that class; and (iv) Class A shares are subject to a lower minimum initial
investment requirement and offer certain shareholder services not available to
Institutional 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.
MUNICIPAL OBLIGATIONS
---------------------
Each Fund invests primarily in Municipal Obligations. Municipal Obligations are
debt obligations issued by a state and its political subdivisions, agencies,
authorities and instrumentalities and other qualifying issuers which pay
interest that is, in the opinion of bond
4
<PAGE>
counsel to the issuer, exempt from federal income tax. 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.
Municipal obligations consist of tax-exempt bonds, tax-exempt notes and
tax-exempt commercial paper.
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.
Each Fund may invest in any combination of general obligation bonds, revenue
bonds and industrial development bonds. Each Fund may invest more than 25% of
its assets in tax-exempt obligations issued by municipal governments or
political subdivisions of governments within a particular segment of the bond
market, such as housing agency bonds, hospital revenue bonds or airport bonds.
It is possible that economic, business or political developments or other
changes affecting one bond may also affect other bonds in the same segment in
the same manner, thereby potentially increasing the risk of such investments.
From time to time, each Fund may invest more than 25% of the value of its total
assets in industrial development bonds which, although issued by industrial
development authorities, may be backed only by the assets and revenues of the
nongovernmental users. However, a Fund will not invest more than 25% of its
assets in securities backed by nongovernmental users which are in the same
industry. Interest on municipal obligations (including certain industrial
development bonds) which are private activity obligations, as defined in the
Internal Revenue Code, issued after August 7, 1986, while exempt from federal
income tax, is a preference item for purposes of
5
<PAGE>
the alternative minimum tax. Where a regulated investment company receives such
interest, a proportionate share of any exempt-interest dividend paid by the
investment company will be treated as such a preference item to shareholders.
Each Fund will invest its assets so that no more than 20% of its annual income
gives rise to a preference item for the purpose of the alternative minimum tax
and in other investments subject to federal income tax.
TAX-EXEMPT NOTES. Tax-exempt notes generally are used to provide for short-term
capital needs and generally have maturities of one year or less. Tax-exempt
notes include:
1. Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenues, such as income, sales, use
and business taxes, and are payable from these specific future taxes.
2. Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under the federal revenue sharing programs.
3. Bond Anticipation Notes. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases,
the long-term bonds then provide the money for the repayment of the notes.
TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial paper typically represents
short-term, unsecured, negotiable promissory notes issued by a state and its
political subdivisions. These notes are issued to finance seasonal working
capital needs of municipalities or to provide interim construction financing and
are paid from general revenues of municipalities or are refinanced with
long-term debt. In most cases, tax-exempt commercial paper is backed by letters
of credit, lending agreements, note repurchase agreements or other credit
facility agreements offered by banks or other institutions and is actively
traded.
WHEN-ISSUED OBLIGATIONS. Each Fund may invest in when-issued Municipal
Obligations. Obligations offered on a when-issued basis are settled by delivery
and payment after the date of the transaction, usually within 15 to 45 days. 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,
6
<PAGE>
a Fund remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be a possibility that
the market value of the Fund's assets will have greater fluctuation. The
purchase of securities on a when-issued basis may involve a risk of loss if the
broker-dealer selling the securities fails to deliver after the value of the
securities has risen.
When the time comes for a Fund to make payment for securities purchased on a
when-issued basis, the Fund will do so by using then-available cash flow, by
sale of the securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the securities purchased on a when-issued basis themselves (which may
have a market value greater or less than the Fund's payment obligation).
Although a Fund will only make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, the
Funds may sell these obligations before the settlement date if it is deemed
advisable by the Advisor 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 owned by banks or other financial institutions.
Participation interests frequently are backed by irrevocable letters of credit
or a guarantee of a bank. 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. Each Fund will not invest more than 10% of its net
assets in participation interests that do not have a demand feature and all
other illiquid securities.
Banks and financial institutions are subject to extensive governmental
regulations which may limit the amounts and types of loans and other financial
commitments that may be made and interest rates and fees which may be charged.
The profitability of banks and financial institutions is largely dependent upon
the availability and cost of capital funds to finance lending operations under
prevailing money market conditions. General economic conditions also play an
important part in the operations of these entities and exposure to credit losses
arising from possible financial difficulties of borrowers may affect the ability
of a bank or financial institution to meet its obligations with respect to a
participation interest.
FLOATING AND VARIABLE RATE OBLIGATIONS. Each Fund may invest in floating or
variable rate Municipal Obligations. Floating rate obligations have an interest
rate which is fixed to a specified interest rate, such as a bank prime rate, and
is automatically adjusted when the specified interest rate changes. Variable
rate obligations have an interest rate which is adjusted at
7
<PAGE>
specified intervals to a specified interest rate. Periodic interest rate
adjustments help stabilize the obligations' market values. Each Fund may
purchase these obligations from the issuers or may purchase participation
interests in pools of these obligations from banks or other financial
institutions. Variable and floating rate obligations usually carry demand
features that permit a Fund to sell the obligations back to the issuers or to
financial intermediaries at par value plus accrued interest upon not more than
30 days' notice at any time or prior to specific dates. Certain of these
variable rate obligations, often referred to as "adjustable rate put bonds," may
have a demand feature exercisable on specific dates once or twice each year.
Each Fund will not invest more than 10% of its net assets in floating or
variable rate obligations as to which it cannot exercise the demand feature on
not more than seven days' notice if the Advisor, under the direction of the
Board of Trustees, determines that there is no secondary market available for
these obligations and all other illiquid securities. If a Fund invests a
substantial portion of its assets in obligations with demand features permitting
sale to a limited number of entities, the inability of the entities to meet
demands to purchase the obligations could affect the Fund's liquidity. However,
obligations with demand features frequently are secured by letters of credit or
comparable guarantees that may reduce the risk that an entity would not be able
to meet such demands. In determining whether an obligation secured by a letter
of credit meets a Fund's quality standards, the Advisor will ascribe to such
obligation the same rating given to unsecured debt issued by the letter of
credit provider. In looking to the creditworthiness of a party relying on a
foreign bank for credit support, the Advisor will consider whether adequate
public information about the bank is available and whether the bank may be
subject to unfavorable political or economic developments, currency controls or
other governmental restrictions affecting its ability to honor its credit
commitment.
INVERSE FLOATING OBLIGATIONS. Each of the Tax-Free Intermediate Term Fund and
the Ohio Insured Tax-Free Fund may invest in securities representing interests
in Municipal Obligations, known as inverse floating obligations, which pay
interest rates that vary inversely to changes in the interest rates of specified
short-term Municipal Obligations or an index of short-term Municipal
Obligations. The interest rates on inverse floating obligations will typically
decline as short-term market interest rates increase and increase as short-term
market rates decline. Such securities have the effect of providing a degree of
investment leverage, since they will generally increase or decrease in value in
response to changes in market interest rates at a rate which is a multiple
(typically two) of the rate at which fixed-rate, long-term Municipal Obligations
increase or decrease in response to such changes. As a result, the market value
of inverse floating obligations will generally be more volatile than the market
values of fixed-rate Municipal Obligations.
OBLIGATIONS WITH PUTS ATTACHED. Each Fund may purchase Municipal Obligations
with the right to resell the obligation to the seller at a specified price or
yield within a specified period. The right to resell is commonly known as a
"put" or a "standby commitment." Each Fund may purchase Municipal Obligations
with puts attached from banks and broker-dealers. Each Fund intends to use
obligations with puts attached for liquidity purposes to ensure a ready market
for the underlying obligations at an acceptable price. Although no value is
assigned to any puts on Municipal Obligations, the price which a Fund pays for
the obligations may be higher than the price of similar obligations without puts
attached. The purchase of obligations with puts attached involves the risk that
the seller may not be able to repurchase the underlying obligation.
8
<PAGE>
Each Fund intends to purchase such obligations only from sellers deemed by the
Advisor, under the direction of the Board of Trustees, to present minimal credit
risks. In addition, the value of the obligations with puts attached held by a
Fund will not exceed 10% of its net assets.
LEASE OBLIGATIONS. The Tax-Free Intermediate Term Fund 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.
Although lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. 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. Certain of these lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on an annual basis. In addition to the
"non-appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated with
more conventional bonds. Although "non-appropriation" lease obligations are
secured by the leased property, the disposition of the property in the event of
foreclosure might prove difficult. The 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
Advisor 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 Advisor, under the direction of the Board of Trustees, to be
liquid. In determining the liquidity of such obligations, the Advisor 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. The Funds will only
purchase unrated lease obligations which meet the Fund's quality standards, as
determined by the Advisor, under the direction of the Board of Trustees,
including an assessment of the likelihood that the lease will not be cancelled.
9
<PAGE>
QUALITY RATINGS OF MUNICIPAL OBLIGATIONS
----------------------------------------
The Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the California Tax-Free
Money Fund and the Florida Tax-Free Money Fund may invest in Municipal
Obligations only if rated at the time of purchase within the two highest grades
assigned by any two nationally recognized statistical rating organizations
("NRSROs") (or by any one NRSRO if the obligation is rated by only that NRSRO).
The NRSROs which may rate the obligations of the Tax-Free Money Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund include Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group ("S&P") or Fitch Investors Services, Inc. ("Fitch").
The Tax-Free Intermediate Term Fund may invest in 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
Advisor to meet the Funds' quality standards. Each Fund's quality standards
limit its investments in tax-exempt notes to those which are rated within the
three highest grades by Moody's (MIG 1, MIG 2 or MIG 3) or Fitch (F-1+, F-1 or
F-2) or the two highest grades by S&P (SP-1 or SP-2) and in tax-exempt
commercial paper to those which are rated within the two highest grades by
Moody's (Prime-1 or Prime-2), S&P (A-1 or A-2) or Fitch (Fitch-1 or Fitch-2).
MOODY'S RATINGS
1. TAX-EXEMPT BONDS. The four highest ratings of Moody's for tax-exempt
bonds are Aaa, Aa, A and Baa. Bonds rated Aaa are judged by Moody's to be
of the best quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issuers. Bonds rated Aa are judged to be of high quality
by all standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. Moody's says that Aa bonds are rated
lower than the best bonds because margins of protection or other elements
make long term risks appear somewhat larger than Aaa bonds. Moody's
describes bonds rated A as possessing many favorable investment attributes
and as upper medium grade obligations. Factors giving security to principal
and interest of A rated bonds are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future. Bonds which are rated by Moody's in the fourth highest rating (Baa)
are considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically 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.
10
<PAGE>
2. TAX-EXEMPT NOTES. Moody's highest rating for tax-exempt notes is MIG-1.
Moody's says that notes rated MIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing
or from established and broad-based access to the market for refinancing,
or both. Notes bearing the MIG-2 designation are of high quality, with
margins of protection ample although not so large as in the MIG-1 group.
Notes bearing the designation MIG-3 are of favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades. Market access for refinancing, in particular, is likely
to be less well established.
3. TAX-EXEMPT COMMERCIAL PAPER. The rating Prime-1 is the highest
tax-exempt commercial paper rating assigned by Moody's. Issuers rated
Prime-1 are judged to be of the best quality. Their short-term debt
obligations carry the smallest degree of investment risk. Margins of
support for current indebtedness are large or stable with cash flow and
asset protection well assured. Current liquidity provides ample coverage of
near-term liabilities and unused alternative financing arrangements are
generally available. While protective elements may change over the
intermediate or long term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations. Issuers rated
Prime-2 have a strong capacity for repayment of short-term obligations.
S&P RATINGS
1. TAX-EXEMPT BONDS. The four highest ratings of S&P for tax-exempt bonds
are AAA, AA, A and BBB. Bonds rated AAA have the highest rating assigned by
S&P to a debt obligation. Capacity to pay interest and repay principal is
extremely strong. Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only
in a small degree. Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories. Bonds which are rated by S&P in the fourth highest
rating (BBB) are regarded as having an adequate capacity to pay interest
and repay principal and are considered "investment grade." Whereas they
normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal than for bonds in higher rated
categories. The ratings for tax-exempt bonds may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
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.
11
<PAGE>
3. TAX-EXEMPT COMMERCIAL PAPER. The ratings A-1+ and A-1 are the highest
tax-exempt commercial paper ratings assigned by S&P. These designations
indicate the degree of safety regarding timely payment is either
overwhelming (A-1+) or very strong (A- 1). Capacity for timely payment on
issues rated A-2 is strong. However, the relative degree of safety is not
as overwhelming as for issues designated A-1.
FITCH RATINGS
1. TAX-EXEMPT BONDS. The four highest ratings of Fitch for tax-exempt bonds
are AAA, AA, A and BBB. Bonds rated AAA are regarded by Fitch as being of
the highest quality, with the obligor having an extraordinary ability to
pay interest and repay principal which is unlikely to be affected by
reasonably foreseeable events. Bonds rated AA are regarded by Fitch as high
quality obligations. The obligor's ability to pay interest and repay
principal, while very strong, is somewhat less than for AAA rated bonds,
and more subject to possible change over the term of the issue. Bonds rated
A are regarded by Fitch as being of good quality. The obligor's ability to
pay interest and repay principal is strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings. Bonds rated BBB are regarded by Fitch as being of
satisfactory quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to weaken this
ability than bonds with higher ratings. Fitch ratings may be modified by
the addition of a plus (+) or minus (-) sign.
2. TAX-EXEMPT NOTES. The ratings F-1+, F-1 and F-2 are the highest ratings
assigned by Fitch for tax-exempt notes. Notes assigned the F-1+ rating are
regarded by Fitch as having the strongest degree of assurance for timely
payment. Notes assigned the F-1 rating reflect an assurance for timely
payment only slightly less than the strongest issues. Notes assigned the
F-2 rating have a degree of assurance for timely payment with a lesser
margin of safety than higher-rated notes.
3. TAX-EXEMPT COMMERCIAL PAPER. Commercial paper rated Fitch-1 is regarded
as having the strongest degree of assurance for timely payment. Issues
assigned the Fitch-2 rating reflect an assurance of timely payment only
slightly less in degree than the strongest issues.
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 Advisor 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.
12
<PAGE>
Any Municipal Obligation which depends on credit of the U.S. Government (e.g.
project notes) will be considered by the Advisor 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 Advisor, such obligations are of comparable quality to those
rated obligations in which the applicable Fund may invest.
Subsequent to its purchase by a Fund, an obligation may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. If
the rating of an obligation held by a Fund is reduced below its minimum
requirements, the Fund will be required to exercise the demand provision or sell
the obligation as soon as practicable.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
---------------------------------------------
A more detailed discussion of some of the investment policies of the Funds
described in the Prospectus appears below:
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may invest
consist of certificates of deposit, bankers' acceptances and time deposits
issued by national banks and state banks, trust companies and mutual savings
banks, or of banks or institutions the accounts of which are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time (usually from fourteen days to one year) at a stated or
variable interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft which has been drawn on it by a
customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. The Funds will
only invest in bankers' acceptances of banks having a short-term rating of A-1
by S&P or Prime-1 by Moody's. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Each Fund will not invest in time deposits maturing in more than
seven days if, as a result thereof, more than 10% 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 Advisor, 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.
13
<PAGE>
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.
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.
14
<PAGE>
For purposes of the Investment Company Act of 1940, a repurchase agreement is
deemed to be a loan from a Fund to the seller subject to the repurchase
agreement and is therefore subject to that Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
securities purchased by a Fund subject to a repurchase agreement as being owned
by that Fund or as being collateral for a loan by the Fund to the seller. In the
event of the commencement of bankruptcy or insolvency proceedings with respect
to the seller of the securities before repurchase of the security under a
repurchase agreement, a Fund may encounter delays and incur costs before being
able to sell the security. Delays may involve loss of interest or decline in
price of the security. If a court characterized the transaction as a loan and a
Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for a Fund, the
Advisor 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 make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes a Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that a Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Funds' Custodian in an amount at
least equal to the market value of the loaned securities. Each Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by a Fund without the affirmative
vote of a majority of its outstanding shares.
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
15
<PAGE>
the placing broker with the borrower, and that the fees are not used to
compensate the Advisor or any affiliated person of the Trust or an affiliated
person of the Advisor 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.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, the Tax-Free Money Fund, the Tax-Free Intermediate Term Fund, the Ohio
Insured Tax-Free Fund, the California Tax-Free Money Fund and the Florida
Tax-Free Money Fund may each borrow money from banks or other persons in an
amount not exceeding 10% of its total assets. Each Fund may pledge assets in
connection with borrowings but will not pledge more than 10% of its total
assets. The Funds will not make any additional purchases of portfolio securities
while borrowings are outstanding.
The Ohio Tax-Free Money Fund may borrow money from banks (provided there is 300%
asset coverage) or from banks or other persons for temporary purposes (in an
amount not exceeding 5% of its total assets). The Fund will not make any
borrowing which would cause its outstanding borrowings to exceed one-third of
the value of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than one-third of its total assets. The Fund
will not make any purchases of portfolio securities if outstanding borrowings
exceed 5% of the value of its total assets.
Borrowing magnifies the potential for gain or loss on the portfolio securities
of the Funds and, therefore, if employed, increases the possibility of
fluctuation in a Fund's net asset value. This is the speculative factor known as
leverage. To reduce the risks of borrowing, the Funds will limit their
borrowings as described above. Each Fund's policies on borrowing and pledging
are fundamental policies which may not be changed without the affirmative vote
of a majority of its outstanding shares.
SECURITIES WITH LIMITED MARKETABILITY. Each Fund may invest in the aggregate up
to 10% of its net assets in securities that are not readily marketable,
including: participation interests that are not subject to demand features;
floating and variable rate obligations as to which the Funds cannot exercise the
related demand feature and as to which there is no secondary market; repurchase
agreements not terminable within seven days, and (for the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund) lease obligations for which there
is no secondary market.
MAJORITY. As used in 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).
16
<PAGE>
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 Advisor 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.
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
17
<PAGE>
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 Advisor, who individually own
beneficially more than 0.5% of the outstanding securities of such issuer,
together own beneficially more than 5% of such securities.
14. SHORT SALES AND OPTIONS. Each Fund will not sell any securities short
or write call options. This limitation is not applicable to the extent that
sales by a Fund of Municipal Obligations with puts attached or sales by a
Fund of other securities in which the Fund may otherwise invest would be
considered to be sales of options.
15. 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. Each Fund may invest more than 25% of its
total assets in tax-exempt obligations in a particular segment of the bond
market.
16. 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.
18
<PAGE>
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.
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.
19
<PAGE>
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.
12. SENIOR SECURITIES. The Fund will not issue or sell any class of senior
security as defined by the Investment Company Act of 1940 except to the
extent that notes evidencing temporary borrowings or the purchase of
securities on a when-issued basis might be deemed as such.
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.
20
<PAGE>
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.
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.
21
<PAGE>
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.
Except for temporary defensive purposes, the assets of each of the Tax-Free
Money Fund, the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free
Fund will be invested so that no more than 20% of the annual income of each Fund
will be subject to federal income tax. Except for temporary defensive purposes,
at no time will more than 20% of the value of the net assets of each of the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund be invested in taxable obligations. Under normal market conditions,
each Fund anticipates that not more than 5% of its net assets will be invested
in any one type of taxable obligation.
INSURANCE ON THE OHIO INSURED TAX-FREE FUND'S SECURITIES
--------------------------------------------------------
Under normal market conditions, at least 65% of the value of the Ohio Insured
Tax-Free Fund's total assets will be invested in Ohio municipal obligations
which are insured as to payment of interest and principal either by an insurance
policy obtained by the issuer of the obligations at original issuance or by an
insurance policy obtained by the Fund from a recognized insurer. The Fund also
may own uninsured Ohio municipal obligations, including obligations where the
payment of interest and principal is guaranteed by an agency or instrumentality
of the U.S. Government, or where the payment of interest and principal is
secured by an escrow account consisting of obligations of the U.S. Government.
The Fund may also invest up to 20% of its net assets in short-term Ohio
municipal obligations which are not insured, since insurance on these
obligations is generally unavailable. For temporary defensive purposes, the Fund
may invest more than 20% of its net assets in uninsured short-term Ohio
municipal obligations. The Board of Trustees may terminate the practice of
investing in insured obligations if it determines that such practice is not in
the best interests of the Fund's shareholders.
Ohio municipal obligations purchased by the Ohio Insured Tax-Free Fund may be
insured by one of the following types of insurance: new issue insurance, mutual
fund insurance, or secondary insurance.
22
<PAGE>
NEW ISSUE INSURANCE. A new issue insurance policy is purchased by the issuer or
underwriter of an obligation in order to increase the credit rating of the
obligation. All premiums are paid in advance by the issuer or underwriter. A new
issue insurance policy is non-cancelable and continues in effect as long as the
obligation is outstanding and the insurer remains in business.
MUTUAL FUND INSURANCE. A mutual fund insurance policy is purchased by the Fund
from an insurance company. All premiums are paid from the Fund's assets, thereby
reducing the yield from an investment in the Fund. A mutual fund insurance
policy is non-cancelable except for non-payment of premiums and remains in
effect only as long as the Fund holds the insured obligation. In the event the
Fund sells an obligation covered by a mutual fund policy, the insurance company
is liable only for those payments of principal and interest then due and in
default. If the Fund holds a defaulted obligation, the Fund continues to pay the
insurance premium thereon but is entitled to collect interest payments from the
insurer and may collect the full amount of principal from the insurer when the
obligation becomes due. Accordingly, it is expected that the Fund will retain in
its portfolio any obligations so insured which are in default or are in
significant risk of default to avoid forfeiture of the value of the insurance
feature of such obligations, which would not be reflected in the price for which
the Fund could sell such obligations. In valuing such defaulted obligations, the
Fund will value the insurance in an amount equal to the difference between the
market value of the defaulted obligation and the market value of similar
obligations which are not in default. Because the Fund must hold defaulted
obligations in its portfolio, its ability in certain circumstances to purchase
other obligations with higher yields will be limited.
SECONDARY INSURANCE. A secondary insurance policy insures an obligation for as
long as it remains outstanding, regardless of the owner of such obligation.
Premiums are paid by the Fund and coverage is non-cancelable, except for
non-payment of premiums. Because secondary insurance provides continuous
coverage during the term of the obligation, it provides greater marketability of
the Fund's obligations than is allowed under a mutual fund insurance policy.
Thus, the Fund with secondary insurance may sell an obligation to a third party
as a high-rated insured security at a higher market price than would otherwise
be obtained if the obligation were insured under a mutual fund policy. Secondary
insurance also gives the Fund the option of selling a defaulted obligation
rather than compelling it to hold a defaulted security in its portfolio so that
it may continue to be afforded insurance protection.
The Ohio Insured Tax-Free Fund currently intends to purchase only Ohio municipal
obligations which are insured by the issuer of the obligation under a new issue
insurance policy. In the event the Advisor makes a recommendation to purchase an
obligation which is not otherwise insured, the Fund may purchase such obligation
and thereafter obtain mutual fund or secondary insurance.
The 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
23
<PAGE>
set by the Insurance Commissioner of New York (300:1 insurance risk exposure to
every dollar of statutory capital). The Fund may also purchase insurance from,
or obligations insured by, other insurance companies provided that such
companies have a claims-paying ability rated Aaa by Moody's or AAA by S&P. 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 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
24
<PAGE>
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%.
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
Western-Southern complex of mutual funds for the fiscal year ended June 30,
1999. Messrs. Coleman, Cox, Schwab, Stautberg and Ms. McGruder began serving as
Trustees on October 29, 1999. 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 Touchstone Investment Trust
and Touchstone Strategic Trust. Each of the Trustees, except Mr. Lerner, Mr.
Leshner, Ms. McGruder and Mr. Robertson is also a Trustee of Touchstone Variable
Series Trust and Touchstone Series Trust.
25
<PAGE>
AGGREGATE COMPENSATION
COMPENSATION FROM
TOUCHSTONE
NAME POSITION HELD FROM TRUST COMPLEX (1)
---- ------------- ---------- -----------
William O. Coleman Trustee $0 $2,192
Philip R. Cox Trustee $0 $10,000
+H. Jerome Lerner Trustee $4,000 $15,000
*Robert H. Leshner President/ $0 $0
Trustee
*Jill T. McGruder Trustee $0 $0
+Oscar P. Robertson Trustee $4,000 $15,000
Nelson Schwab, Jr. Trustee $0 $2,192
+Robert E. Stautberg Trustee $0 $10,000
Joseph S. Stern, Jr. Trustee $0 $8,000
Maryellen Peretzky Vice President $0 $0
Tina D. Hosking Secretary $0 $0
Theresa M. Samocki Treasurer $0 $0
(1) The Touchstone complex of funds consists of six series of the Trust,
eight series of Touchstone Strategic Trust, six series of Touchstone
Investment Trust, ten series of the Touchstone Variable Series Trust and
the Touchstone Series Trust.
* Ms. McGruder, as President and a director of Touchstone Advisors, Inc.,
the Trust's investment advisor and Touchstone Securities, Inc., the Trust's
distributor, and Mr. Leshner, as an employee of Fort Washington Investment
Advisors, Inc., the Funds Sub-Advisor, 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:
WILLIAM O. COLEMAN, Age 70, 2 Noel Lane, Cincinnati, Ohio is a retired General
Sales Manager and Vice President of The Procter & Gamble Company and a trustee
of The Procter & Gamble Profit Sharing Plan and The Procter & Gamble Employee
Stock Ownership Plan. He is a director of LCA-Vision (a laser vision correction
institute) and a trustee of Touchstone Strategic Trust, Touchstone Investment
Trust, Touchstone Series Trust and Touchstone Variable Series Trust (registered
investment companies).
PHILLIP R. COX, Age 52, 105 East Fourth Street, Cincinnati, Ohio is President
and Chief Executive Officer of Cox Financial Corp. (a financial services
company). He is a director of the Federal Reserve Bank of Cleveland, Cincinnati
Bell Inc. and Cinergy Corporation. He is also a trustee of Touchstone Strategic
Trust, Touchstone Investment Trust, Touchstone Series Trust and Touchstone
Variable Series Trust (registered investment companies).
26
<PAGE>
H. JEROME LERNER, Age 61, 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).
ROBERT H. LESHNER, Age 60, 312 Walnut Street, Cincinnati, Ohio is President and
a director of Ft. Washington Brokerage Services, Inc. (a broker-dealer), CS
Holdings, Inc. (a financial services company and parent of Integrated Fund
Services, Inc. and IFS Fund Distributors, Inc.), Integrated Fund Services, Inc.
(a registered transfer agent) and IFS Fund Distributors, Inc. (a registered
broker-dealer). He is also President and a trustee of Touchstone Strategic Trust
and Touchstone Investment Trust (registered investment companies).
JILL T. McGRUDER, Age 44, 311 Pike Street, Cincinnati, Ohio is President, Chief
Executive Officer and a director of IFS Financial Services, Inc. (a holding
company), Touchstone Advisors, Inc. (a registered investment advisor of the
Trust) and Touchstone Securities, Inc. (a registered broker-dealer). She is a
Senior Vice President of The Western-Southern Life Assurance Company and a
director of Capital Analysts Incorporated (a registered investment advisor and
broker-dealer), CS Holdings, Inc., Ft. Washington Brokerage Services, Inc., IFS
Fund Distributors, Inc. and Integrated Fund Services, Inc. She is also President
and a director of IFS Agency Services, Inc. and IFS Insurance Agency, Inc.
(insurance agencies). Until December 1996, she was National Marketing Director
of Metropolitan Life Insurance Co. From 1991 until 1996, she was Vice President
of Touchstone Advisors, Inc. and IFS Financial Services, Inc.
OSCAR P. ROBERTSON, Age 60, 4293 Muhlhauser Road, Fairfield, Ohio is President
of Orchem Corp., a chemical specialties distributor, and Orpack Stone
Corporation, a corrugated box manufacturer. Mr. Robertson is also a trustee of
Touchstone Strategic Trust and Touchstone Investment Trust (registered
investment companies).
NELSON SCHWAB, JR., Age 81, 511 Walnut Street, Cincinnati, Ohio is Senior
Counsel of Graydon, Head & Ritchey (a law firm). He is a director of Rotex,
Inc., The Ralph J. Stolle Company and Security Rug Cleaning Company. He is also
a trustee of Touchstone Strategic Trust, Touchstone Investment Trust, Touchstone
Series Trust and Touchstone Variable Series Trust (registered investment
companies).
ROBERT E. STAUTBERG, Age 65, 4815 Drake Road, Cincinnati, Ohio is a retired
partner and director of KPMG Peat Marwick LLP. He is Chairman of the Board of
Trustees of Good Samaritan Hospital and a trustee of Touchstone Strategic Trust,
Touchstone Investment Trust, Touchstone Series Trust and Touchstone Variable
Series Trust (registered investment companies).
JOSEPH S. STERN, JR., Age 81, 3 Grandin Place, Cincinnati, Ohio is a retired
Professor Emeritus of the University of Cincinnati College of Business. He is
also a a trustee of Touchstone Strategic Trust, Touchstone Investment Trust,
Touchstone Series Trust and Touchstone Variable Series Trust (registered
investment companies).
27
<PAGE>
TINA D. HOSKING, Age 31, 312 Walnut Street, Cincinnati, Ohio is Associate
General Counsel and Vice President of Integrated Fund Services, Inc. and IFS
Fund Distributors, Inc. She is also Secretary of Touchstone Investment Trust and
Touchstone Strategic Trust.
THERESA M. SAMOCKI, Age 30, 312 Walnut Street, Cincinnati, Ohio is Vice
President-Fund Accounting Manager of Integrated Fund Services, Inc. and IFS Fund
Distributors, Inc. She is also Treasurer of Touchstone Investment Trust and
Touchstone Strategic Trust.
MARYELLEN PERETSKY, Age 47, 312 Walnut Street, Cincinnati, Ohio is Senior Vice
President, Chief Operating Officer and Secretary of Ft. Washington Brokerage
Services, Inc. and Senior Vice President and Secretary of CS Holdings, Inc.,
Integrated Fund Services, Inc. and IFS Fund Distributors, Inc. She is also Vice
President of Touchstone Investment Trust and Touchstone Strategic Trust.
Each Trustee, except for Mr. Leshner and Ms. McGruder, 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, Touchstone Strategic Trust and
Touchstone Investment Trust.
THE INVESTMENT ADVISOR AND SUB-ADVISOR
--------------------------------------
THE INVESTMENT ADVISOR. Touchstone Advisors, Inc. (the "Advisor") is the Funds'
investment manager. The Advisor is a wholly-owned subsidiary of IFS Financial
Services, Inc., which is a wholly-owned subsidiary of Western-Southern Life
Assurance Company. Western-Southern Life Assurance Company is a wholly-owned
subsidiary of The Western and Southern Life Insurance Company. Ms. McGruder may
be deemed to be an affiliate of the Advisor because of her position as President
and Director of the Advisor. Mr. Leshner may be deemed to be an affiliate of the
Advisor because of his employment with Fort Washington Investment Advisors,
Inc., the Sub-Advisor. Ms. McGruder and Mr. Leshner, by reason of such
affiliations may directly or indirectly receive benefits from the advisory fees
paid to the Advisor.
Under the terms of the investment advisory agreement between the Trust and the
Advisor, the Advisor appoints and supervises each Fund's Sub-Advisor, reviews
and evaluates the performance of a Fund Sub-Advisor and determines whether or
not the Fund's Sub-Advisor should be replaced. The Advisor furnishes at its own
expense all facilities and personnel necessary in connection with providing
these services. Each Fund pays the Advisor a fee computed and accrued daily and
paid monthly at an annual rate as shown below:
Fee to Advisor
(as % of average daily net assets)
Each Fund of the Trust 0.50% of assets up to $100 million
0.45% of assets from $100 million to $200 million
0.40% of assets from $200 million to $300 million
0.375% of assets over $300 million
Set forth below are the advisory fees paid by the Funds to the previous adviser
to the Funds (the "Predecessor Advisor") during the fiscal years ended June 30,
1999, 1998 and 1997.
28
<PAGE>
1999 1998 1997
---- ---- ----
Tax-Free Money Fund(1) $143,015 150,790 149,097
Tax-Free Intermediate Term Fund 271,849 302,947 343,509
Ohio Insured Tax-Free Fund(2) 353,019 378,345 393,579
Ohio Tax-Free Money Fund(3) 1,597,319 1,421,029 1,181,638
California Tax-Free Money Fund 278,310 210,813 200,103
Florida Tax-Free Money Fund(4) 285,704 276,608 234,628
(1) The Predecessor Advisor voluntarily waived $17,332 of its fees for the
fiscal year ended June 30, 1999 in order to reduce the operating
expenses of the Fund.
(2) The Predecessor Advisor voluntarily reimbursed the Fund for $948 of
Class A expenses for the fiscal year ended June 30, 1998 in order to
reduce the operating expenses of the Fund.
(3) The Predecessor Advisor voluntarily waived $51,659, $46,680 and
$54,672 of its fees for the fiscal years ended June 30, 1999, 1998 and
1997, respectively and reimbursed the Fund for $7,979 and $9,148 of
Institutional share expenses for the fiscal years ended June 30, 1998
and 1997, respectively, in order to reduce the operating expenses of
the Fund.
(4) The Predecessor Advisor voluntarily waived $124,338, $107,645 and
$87,852 of its fees for the fiscal years ended June 30, 1999, 1998 and
1997, respectively, and reimbursed the Fund for $7,114 and $18,259 of
Institutional share 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 Advisor 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 Advisor are paid by the Advisor.
By their terms, the Funds' investment advisory agreements remain in force until
May 1, 2002, 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 Advisor. The investment advisory agreements
29
<PAGE>
automatically terminate in the event of their assignment, as defined by the
Investment Company Act of 1940 and the rules thereunder.
THE SUB-ADVISOR. The Advisor has retained Fort Washington Investment Advisors,
Inc. ("the Sub-Advisor") to serve as the discretionary portfolio manager of each
Fund. The Sub-Advisor selects the portfolio securities for investment by a Fund,
purchases and sells securities of a Fund and places orders for the execution of
such portfolio transactions, subject to the general supervision of the Board of
Trustees and the Advisor. The Sub-Advisor receives a fee from the Advisor which
is paid monthly at an annual rate as follows:
Fee to Sub-Advisor
Fund (as % of average daily net assets)
---- ----------------------------------
Tax-Free Intermediate Term Fund 0.20%
Ohio Insured Tax-Free Fund 0.20%
Tax-Free Money Fund 0.15%
Ohio Tax-Free Money Fund 0.15%
California Tax-Free Money Fund 0.15%
Florida Tax-Free Money Fund 0.15%
The services provided by the Sub-Advisor are paid for wholly by the Advisor. The
compensation of any officer, director or employee of the Sub-Advisor who is
rendering services to a Fund is paid by the Sub-Advisor.
The employment of the Sub-Advisor will remain in force until July 1, 2001 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
employment of the Sub-Advisor 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 a majority of a Fund's outstanding voting securities, by the Advisor,
or by the Sub-Advisor. Each Sub-Advisory Agreement will automatically terminate
in the event of its assignment, as defined by the 1940 Act and the rules
thereunder.
THE DISTRIBUTOR
---------------
Touchstone Securities, Inc. ("Touchstone") is the principal underwriter of the
Funds and, as such, the exclusive agent for distribution of shares of the Funds.
Touchstone is an affiliate of the Advisor by reason of common ownership.
Touchstone 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.
30
<PAGE>
Touchstone currently allows concessions to dealers who sell shares of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund. Touchstone
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. Prior to May
1, 2000, the Predecessor Advisor served as the principal underwriter of the
Funds. For the fiscal year ended June 30, 1999, the aggregate underwriting and
broker commissions on sales of the Tax-Free Intermediate Term Fund's shares were
$58,611 of which the Predecessor Advisor paid $54,787 to unaffiliated dealers in
the selling network, earned $965 as a broker-dealer in the selling network and
retained $2,859 in underwriting commissions. For the fiscal year ended June 30,
1999, the aggregate underwriting and broker commissions on sales of the Ohio
Insured Tax-Free Fund's shares were $68,267 of which the Predecessor Advisor
paid $58,562 to unaffiliated dealers in the selling network, earned $4,048 as a
broker-dealer in the selling network and retained $5,657 in underwriting
commissions. For the fiscal year ended June 30, 1998, the aggregate underwriting
commissions on sales of the Tax-Free Intermediate Term Fund's shares were
$49,885 of which the Predecessor Advisor paid $ 46,235 to unaffiliated
broker-dealers in the selling network, earned $1,298 as a broker-dealer in the
selling network and retained $2,352 in underwriting commissions. For the fiscal
year ended June 30, 1998, the aggregate underwriting and broker commissions on
sales of the Ohio Insured Tax-Free Fund's shares were $77,704 of which the
Predecessor Advisor paid $69,527 to unaffiliated dealers in the selling network,
earned $1,683 as a broker-dealer in the selling network and retained $6,493 in
underwriting commissions. For the fiscal year ended June 30, 1997, the aggregate
underwriting commissions on sales of the Tax-Free Intermediate Term Fund's
shares were $75,551 of which the Predecessor Advisor paid $70,274 to
unaffiliated broker-dealers in the selling network, earned $1,550 as a
broker-dealer in the selling network and retained $3,727 in underwriting
commissions. For the fiscal year ended June 30, 1997, the aggregate underwriting
and broker commissions on sales of the Ohio Insured Tax-Free Fund's shares were
$128,695 of which the Predecessor Advisor paid $114,282 to unaffiliated dealers
in the selling network, earned $3,906 as a broker-dealer in the selling network
and retained $10,507 in underwriting commissions.
Touchstone 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, 1999, the Predecessor Advisor retained $13,216 and $1,347 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, 1998, the Predecessor Advisor 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 Predecessor Advisor
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.
The Funds may compensate dealers, including Touchstone 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.
31
<PAGE>
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 Advisor. 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, 1999, 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 $1,718, $42,341, $8,559,
$501,001, $27,528 and $42,826, respectively. Amounts were spent as follows:
<TABLE>
<CAPTION>
MF ITF OIF OMF CMF FMF
<S> <C> <C> <C> <C> <C> <C>
Printing and mailing
of prospectuses and
reports to prospective
shareholders $ 1,718 $ 3,067 $ 4,273 $ 6,377 $ 3,528 $ 2,643
Payments to broker-
dealers and others
for the sale or
retention of assets -- 39,274 4,286 483,607 24,000 40,183
Other promotional
expenses -- -- -- 11,017 -- --
TOTALS $ 1,718 $ 42,341 $ 8,559 $501,001 $ 27,528 $ 42,826
</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 Advisor 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
32
<PAGE>
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, 1999, 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 $25,030 and $27,034,
respectively. Amounts were spent as follows:
ITF OIF
Printing and mailing of
prospectuses and reports
to prospective shareholders $ 304 $ 320
Payments to broker-dealers and
others for the sale or
retention of assets 24,726 26,714
-------- --------
$ 25,030 $ 27,034
======== ========
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 Advisor 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
33
<PAGE>
which will benefit the Funds and their shareholders through increased economies
of scale, greater investment flexibility, greater portfolio diversification and
less chance of disruption of planned investment strategies. The Plans will be
renewed only if the Trustees make a similar determination for each subsequent
year of the Plans. There can be no assurance that the benefits anticipated from
the expenditure of the Funds' assets for distribution will be realized. While
the Plans are in effect, all amounts spent by the Funds pursuant to the Plans
and the purposes for which such expenditures were made must be reported
quarterly to the Board of Trustees for its review. Distribution expenses
attributable to the sale of more than one class of shares of a Fund will be
allocated at least annually to each class of shares based upon the ratio in
which the sales of each class of shares bears to the sales of all the shares of
such Fund. In addition, the selection and nomination of those Trustees who are
not interested persons of the Trust are committed to the discretion of the
Independent Trustees during such period.
Robert H. Leshner and Jill T. McGruder, 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 Sub-Advisor and are subject to review by the Advisor and the Board
of Trustees of the Trust. In the purchase and sale of portfolio securities, the
Sub-Advisor 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 Sub-Advisor generally seeks favorable prices and commission rates
that are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make a market
in the securities involved unless better prices and execution are available
elsewhere. Such dealers usually act as principals for their own account. On
occasion, portfolio securities for the Funds may be purchased directly from the
issuer. Because the portfolio securities of the Funds are generally traded on a
net basis and transactions in such securities do not normally involve brokerage
commissions, the cost of portfolio securities transactions of the Funds will
consist primarily of dealer or underwriter spreads. No brokerage commissions
have been paid by the Funds during the last three fiscal years.
The Sub-Advisor is specifically authorized to select brokers who also provide
brokerage and research services to the Funds and/or other accounts over which
the Sub-Advisor exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
Sub-Advisor 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
Sub-Advisor's overall responsibilities with respect to the Funds and to accounts
over which it exercises investment discretion.
34
<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
Sub-Advisor, 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 Sub-Advisor in servicing all of its accounts and not all such
services may be used by the Sub-Advisor 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 Advisor, the Sub-Advisor and other
affiliates of the Trust or the Advisor or Sub-Advisor 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 an
affiliated broker 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. Affiliated
broker-dealers of the Trust will not receive reciprocal brokerage business as a
result of the brokerage business transacted by the Funds with other brokers.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and such other policies as the Board of Trustees may
determine, the Sub-Advisor may consider sales of shares of the Trust as a factor
in the selection of broker-dealers to execute portfolio transactions. The
Sub-Advisor will make such allocations if commissions are comparable to those
charged by nonaffiliated, qualified broker-dealers for similar services.
In certain instances there may be securities which are suitable for a Fund as
well as for the Sub-Advisor's other clients. Investment decisions for a Fund and
for the Sub-Advisor's other clients are made with a view to achieving their
respective investment objectives. It may develop that a particular security is
bought or sold for only one client even though it might be held by, or bought or
sold for, other clients. Likewise, a particular security may be bought for one
or more clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment advisor, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as a Fund is
concerned. However, it is believed that the ability of a Fund to participate in
volume transactions will produce better executions for the Fund.
CODE OF ETHICS
--------------
The Trust, the Advisor, the Sub-Advisor and Touchstone 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 Advisor and, as described below, imposes additional, more onerous,
restrictions on investment personnel of the Advisor and Sub-Advisor. The Code
requires that all employees of the Advisor and Sub-Advisor
35
<PAGE>
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 Advisor and Sub-Advisor include a ban on acquiring any
securities in an initial public offering. Furthermore, the Code provides for
trading "blackout periods" which prohibit trading by investment personnel of the
Advisor and Sub-Advisor within periods of trading by the Funds in the same (or
equivalent) security. The Code of Ethics adopted by the Trust, the Advisor, the
Sub-Advisor and Touchstone are on public file with, and are available from, the
Securities and Exchange Commission.
PORTFOLIO TURNOVER
------------------
The Sub-Advisor intends to hold the portfolio securities of the Tax-Free Money
Fund, the Ohio 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 Sub-Advisor'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 Sub-Advisor, 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 Advisor and Sub-Advisor anticipate 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
36
<PAGE>
business. The Trust is open for business on every day except Saturdays, Sundays
and the following holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. The Trust may also be open for business on other
days in which there is sufficient trading in a Fund's portfolio securities that
its net asset value might be materially affected. For a description of the
methods used to determine the share price and the public offering price, see
"Pricing of Fund Shares" 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 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.
37
<PAGE>
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 Advisor, 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 Advisor, 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.
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.
38
<PAGE>
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 Advisor's opinion, the valuation provided by the pricing service
ignores certain market conditions affecting the value of a security, the Advisor
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 Advisor 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.
Because it is difficult to evaluate the likelihood of exercise or the potential
benefit of a put attached to an obligation, it is expected that such puts will
be determined to have a value of zero, regardless of whether any direct or
indirect consideration was paid.
The Board of Trustees has adopted the policy for the Tax-Free Intermediate Term
Fund and the Ohio Insured Tax-Free Fund which may be changed without shareholder
approval, that the maturity of fixed rate or floating and variable rate
instruments with demand features will be determined as follows. The maturity of
each such fixed rate or floating rate instrument will be deemed to be the period
of time remaining until the principal amount owed can be recovered through
demand. The maturity of each such variable rate instrument will be deemed to be
the longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount owed can be recovered
through demand.
Taxable securities, if any, held by the Tax-Free Intermediate Term Fund and the
Ohio Insured Tax-Free Fund for which market quotations are readily available are
valued at their most recent bid prices as obtained from one or more of the major
market makers for such securities. Securities (and other assets) for which
market quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
CHOOSING A SHARE CLASS
----------------------
Each of the Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund
offers Class A and Class C shares. Each class represents an interest in the same
portfolio of investments and has the same rights, but differs primarily in sales
loads and distribution expense amounts. Shares of the Tax-Free Intermediate Term
Fund purchased before February 1, 1994 are Class A shares.
39
<PAGE>
Shares of the Ohio Insured Tax-Free Fund purchased before November 1, 1993 are
Class A shares. Before choosing a class, you should consider the following
factors, as well as any other relevant facts and circumstances:
The decision as to which class of shares is more beneficial to you depends on
the amount of your investment, the intended length of your investment and the
quality and scope of the value-added services provided by financial advisors who
may work with a particular sales load structure as compensation for their
services. If you qualify for reduced sales loads or, in the case of purchases of
$1 million or more, no initial sales load, you may find Class A shares
attractive because similar sales load reductions are not available for Class C
shares. Moreover, Class A shares are subject to lower ongoing expenses than
Class C shares over the term of the investment. As an alternative, Class C
shares are sold with a lower initial sales load so more of the purchase price is
immediately invested in a Fund. If you do not plan to hold your shares in a Fund
for a long time (less than 4 1/4 years), it may be better to purchase Class C
shares so that more of your purchase is invested directly in the Fund, although
you will pay higher distribution fees. If you plan to hold your shares in a Fund
for more than 4 1/4 years, it may be better to purchase Class A shares, since
after 4 1/4 years your accumulated distribution fees may be more than the sales
load paid on your purchase.
When determining which class of shares to purchase, you may want to consider the
services provided by your financial advisor and the compensation provided to
these financial advisors under each share class. Touchstone works with many
experienced and very qualified financial advisors throughout the country that
may provide valuable assistance to you through ongoing education, asset
allocation programs, personalized financial planning reviews or other services
vital to your long-term success. Touchstone believes that these value-added
services can greatly benefit you through market cycles and will work diligently
with your chosen financial advisor.
Set forth below is a chart comparing the sales loads and 12b-1 fees applicable
to each class of shares:
CLASS SALES LOAD 12b-1 FEE
--------------------------------------------------------------------------------
A Maximum of 4.75% initial sales load reduced 0.25%
for purchases of $50,000 and over; shares sold
without an initial sales load may be subject
to a 1.00% contingent deferred sales load
during first year if a commission was paid
to a dealer
C 1.25% initial sales load; 1.00% contingent 1.00%
deferred sales load during first year
--------------------------------------------------------------------------------
If you are investing $1 million or more, it is generally more beneficial for you
to buy Class A shares because there is no front-end sales load and the annual
expenses are lower.
40
<PAGE>
Class A Shares
--------------
Class A shares are sold at net asset value ("NAV") plus an initial sales load.
In some cases, reduced initial sales loads for the purchase of Class A shares
may be available, as described below. Investments of $1 million or more are not
subject to a sales load at the time of purchase but may be subject to a
contingent deferred sales load of 1.00% on redemptions made within 1 year after
purchase if a commission was paid by Touchstone to a participating unaffiliated
dealer. Class A shares are also subject to an annual 12b-1 distribution fee of
up to .25% of a Fund's average daily net assets allocable to Class A shares.
The following table illustrates the initial sales load breakpoints for the
purchase of Class A shares of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund for accounts opened after July 31, 1999:
Percentage Which Dealer
of Offering Equals this Reallowance
Price Deducted Percentage as Percentage
for Sales of Your Net of Offering
Amount of Investment Load Investment Price
-------------------- ---- ---------- -----
Less than $50,000 4.75% 4.99% 4.00%
$50,000 but less than $100,000 4.50 4.72 3.75
$100,000 but less than $250,000 3.50 3.63 2.75
$250,000 but less than $500,000 2.95 3.04 2.25
$500,000 but less than $1,000,000 2.25 2.31 1.75
$1,000,000 or more None None
The following table illustrates the initial sales load breakpoints for the
purchase of Class A shares of the Ohio Insured Tax-Free Fund for accounts opened
before August 1, 1999:
Percentage Which Dealer
of Offering Equals this Reallowance
Price Deducted Percentage as Percentage
for Sales of Your Net of Offering
Amount of Investment Load Investment Price
-------------------- ---- ---------- -----
Less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50 3.63 3.30
$250,000 but less than $500,000 2.50 2.56 2.30
$500,000 but less than $1,000,000 2.00 2.04 1.80
$1,000,000 or more None None
The following table illustrates the initial sales load breakpoints for the
purchase of Class A shares of the Tax-Free Intermediate Term Fund for accounts
opened before August 1, 1999 and after January 31, 1995:
41
<PAGE>
Percentage Which Dealer
of Offering Equals this Reallowance
Price Deducted Percentage as Percentage
for Sales of Your Net of Offering
Amount of Investment Load Investment Price
-------------------- ---- ---------- -----
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50 1.52 1.35
$250,000 but less than $500,000 1.00 1.01 .90
$500,000 but less than $1,000,000 0.75 0.76 0.65
$1,000,000 or more None None
The following table illustrates the initial sales load breakpoints for the
purchase of Class A shares of the Tax-Free Intermediate Term Fund for accounts
opened before February 1, 1995:
Percentage Which Dealer
of Offering Equals this Reallowance
Price Deducted Percentage as Percentage
for Sales of Your Net of Offering
Amount of Investment Load Investment Price
-------------------- ---- ---------- -----
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 0.75 0.76 0.75
$1,000,000 or more None None
Under certain circumstances, Touchstone may increase or decrease the reallowance
to selected dealers. In addition to the compensation otherwise paid to
securities dealers, Touchstone may from time to time pay from its own resources
additional cash bonuses or other incentives to selected dealers in connection
with the sale of shares of the Funds. On some occasions, such bonuses or
incentives may be conditioned upon the sale of a specified minimum dollar amount
of the shares of a Fund and/or other funds in the Touchstone Family of Funds
during a specific period of time. Such bonuses or incentives may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and other dealer-sponsored programs or events.
For initial purchases of Class A shares of $1 million or more and subsequent
purchases further increasing the size of the account, participating unaffiliated
dealers will receive first year compensation of up to 1.00% of such purchases
from Touchstone. In determining a dealer's eligibility for such commission,
purchases of Class A shares of the Funds may be aggregated with concurrent
purchases of Class A shares of other funds in the Touchstone Family of Funds.
Dealers should contact Touchstone for more information on the calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Touchstone Funds will not qualify for payment of the
dealer's commission unless the exchange is from a Touchstone Fund with assets as
to which a dealer's commission or similar payment has not been previously paid.
No commission will be paid if the purchase represents the reinvestment of a
redemption from a Fund made during the previous twelve months. Redemptions of
Class A shares may result in the imposition of a contingent deferred sales load
if the dealer's commission described in this paragraph was paid in connection
42
<PAGE>
with the purchase of such shares. See "Contingent Deferred Sales Load for
Certain Purchases of Class A Shares" below.
Reduced Sales Load. You may use the Right of Accumulation to combine the cost or
current NAV (whichever is higher) of your existing Class A shares of any
Touchstone Fund sold with a sales load with the amount of any current purchases
in order to take advantage of the reduced sales loads set forth in the table
above. Purchases made in any Touchstone load fund under a Letter of Intent may
also be eligible for the reduced sales loads. The minimum initial investment
under a Letter of Intent is $10,000. You should contact the Transfer Agent for
information about the Right of Accumulation and Letter of Intent.
Contingent Deferred Sales Load for Certain Purchases of Class A Shares. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Funds (or shares into which such Class A shares were exchanged)
purchased at NAV in amounts totaling $1 million or more, if the dealer's
commission described above was paid by Touchstone and the shares are redeemed
within one year from the date of purchase. The contingent deferred sales load
will be paid to Touchstone and will be equal to the commission percentage paid
at the time of purchase as applied to the lesser of (1) the NAV at the time of
purchase of the Class A shares being redeemed, or (2) the NAV of such Class A
shares at the time of redemption. If a purchase of Class A shares is subject to
the contingent deferred sales load, you will be notified on the confirmation you
receive for your purchase. Redemptions of such Class A shares of the Funds held
for at least one year will not be subject to the contingent deferred sales load.
Class C Shares
--------------
Class C shares are sold with an initial sales load of 1.25% and are subject to a
contingent deferred sales load of 1.00% on redemptions of Class C shares made
within one year of their purchase. The contingent deferred sales load will be a
percentage of the dollar amount of shares redeemed and will be assessed on an
amount equal to the lesser of (1) the NAV at the time of purchase of the Class C
shares being redeemed, or (2) the NAV of such Class C shares being redeemed. A
contingent deferred sales load will not be imposed upon redemptions of Class C
shares held for at least one year. Class C shares are subject to an annual 12b-1
fee of up to 1.00% of a Fund's average daily net assets allocable to Class C
shares. Touchstone intends to pay a commission of 2.00% of the purchase amount
to your broker at the time you purchase Class C shares.
Additional Information on the Contingent Deferred Sales Load
------------------------------------------------------------
The contingent deferred sales load is waived for any partial or complete
redemption following death or disability (as defined in the Internal Revenue
Code) of a shareholder (including one who owns the shares with his or her spouse
as a joint tenant with rights of survivorship) from an account in which the
deceased or disabled is named. Touchstone may require documentation prior to
waiver of the load, including death certificates, physicians' certificates, etc.
All sales loads imposed on redemptions are paid to Touchstone. In determining
whether the contingent deferred sales load is payable, it is assumed that shares
not subject to the contingent
43
<PAGE>
deferred sales load are the first redeemed followed by other shares held for the
longest period of time. The contingent deferred sales load will not be imposed
upon shares representing reinvested dividends or capital gains distributions, or
upon amounts representing share appreciation.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that you open an account and purchase 1,000 shares at $10 per
share and that six months later the NAV per share is $12 and, during such time,
you have acquired 50 additional shares through reinvestment of distributions. If
at such time you should redeem 450 shares (proceeds of $5,400), 50 shares will
not be subject to the load because of dividend reinvestment. With respect to the
remaining 400 shares, the load is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$4,000 of the $5,400 redemption proceeds will be charged the load. At the rate
of 1.00%, the contingent deferred sales load would be $40. In determining
whether an amount is available for redemption without incurring a deferred sales
load, the purchase payments made for all Class C shares in your account are
aggregated.
OTHER PURCHASE INFORMATION
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.
AGGREGATION. Sales charge discounts are available for certain aggregated
investments. Investments which may be aggregated include those made by you, your
spouse and your children under the age of 21, if all parties are purchasing
shares for their own accounts. Individual purchases by trustees or other
fiduciaries may also be aggregated if the investments are: (1) for a single
trust estate or fiduciary account; or (2) for a common trust fund or other
pooled account not specifically formed for the purpose of accumulating Fund
shares. Purchases made for nominee or street name accounts (securities held in
the name of a Dealer or another nominee such as a bank trust department instead
of the customer) may not be aggregated with those made for other accounts and
may not be aggregated with other nominee or street name accounts unless
otherwise qualified as described above.
CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares of two or more Funds (other than a money market
fund). For example, if you concurrently invest $25,000 in one Fund and $25,000
in another Fund, the sales charge would be reduced to reflect a $50,000
purchase.
RIGHT OF ACCUMULATION. A purchaser of shares of a 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 Touchstone with the amount of his current
purchases in order to take advantage of the reduced sales loads set forth in the
table 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. A purchaser includes an individual and his immediate family members,
purchasing shares for his or their own account; or a trustee or other fiduciary
purchasing shares for a single fiduciary account
44
<PAGE>
although more than one beneficiary is involved; or employees of a common
employer, provided that economies of scale are realized through remittances from
a single source and quarterly confirmation of such purchases; or an organized
group, provided that the purchases are made through a central administration, or
a single dealer, or by other means which result in economy of sales effort or
expense (the "Purchaser").
LETTER OF INTENT. The reduced sales loads set forth in the tables in the
Prospectus may also be available to any Purchaser of shares of a 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 Touchstone a specified amount which, if made at one time, would qualify for a
reduced sales load. A Letter of Intent may be submitted with a purchase at the
beginning of the thirteen month period or within ninety days of the first
purchase under the Letter of Intent. Upon acceptance of this Letter, the
Purchaser becomes eligible for the reduced sales load applicable to the level of
investment covered by such Letter of Intent as if the entire amount were
invested in a single transaction.
The Letter of Intent is not a binding obligation on the Purchaser to purchase,
or the Trust to sell, the full amount indicated. During the term of a Letter of
Intent, shares representing 5% of the intended purchase will be held in escrow.
These shares will be released upon the completion of the intended investment. If
the Letter of Intent is not completed during the thirteen month period, the
applicable sales load will be adjusted by the redemption of sufficient shares
held in escrow, depending upon the amount actually purchased during the period.
The minimum initial investment under a Letter of Intent is $10,000.
A ninety-day backdating period can be used to include earlier purchases at the
Purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The Purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
WAIVER OF SALES CHARGE. Sales charges do not apply to shares of the Funds
purchased:
1. By registered representatives or other employees (and their immediate
family members) of broker/dealers, banks or other financial
institutions having agreements with Touchstone.
2. By any director, officer or other employee (and their immediate family
members) of The Western and Southern Life Insurance Company or any of
its affiliates or any portfolio advisor or service provider to the
Trust.
3. By clients of any portfolio advisor who are referred to Touchstone by
a portfolio advisor.
4. In accounts as to which a broker-dealer charges an asset management
fee, provided the broker-dealer has an agreement with Touchstone.
5. As part of certain promotional programs established by the Fund and/or
Touchstone.
6. By one or more members of a group of persons engaged in a common
business, profession, civic or charitable endeavor or other activity
and retirees and immediate
45
<PAGE>
family members of such persons pursuant to a marketing program between
Touchstone and such group.
7. By banks, bank trust departments, savings and loan associations and
federal and state credit unions.
8. Through Processing Organizations described in the Prospectuses.
Immediate family members are defined as the spouse, parents, siblings, natural
or adopted children, mother-in-law, father-in-law, brother-in-law and
sister-in-law of a director, officer or employee. The term "employee" is deemed
to include current and retired employees.
Exemptions must be qualified in advance by Touchstone. Your financial advisor
should call Touchstone for more information.
OTHER INFORMATION. The Trust does not impose a front-end sales load or imposes a
reduced sales load in connection with purchases of shares of a Fund made under
the reinvestment privilege, purchases through exchanges and other purchases
which qualify for a reduced sales load as described herein because such
purchases require minimal sales effort by Touchstone. Purchases made at net
asset value may be made for investment only, and the shares may not be resold
except through redemption by or on behalf of the Trust.
TAXES
-----
The Prospectus describes generally the tax treatment of distributions by the
Funds. This section of the Statement of Additional Information includes
additional information concerning federal and state taxes.
Each Fund has qualified and intends to qualify annually for the special tax
treatment afforded a "regulated investment company" under Subchapter M of the
Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of 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
46
<PAGE>
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.
Interest on "specified private activity bonds," as defined by the Tax Reform Act
of 1986, is an item of tax preference possibly subject to the alternative
minimum tax (at the rate of 26% to 28% for individuals and 20% for
corporations). The Funds may invest in such "specified private activity bonds"
subject to the requirement that each Fund invest its assets so that at least 80%
of its annual income will be exempt from federal income tax, including the
alternative minimum tax. The Tax Reform Act of 1986 also created a tax
preference for corporations equal to one-half of the excess of adjusted net book
income over alternative minimum taxable income. As a result, one-half of
tax-exempt interest income received from the Funds may be a tax preference for
corporate investors.
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 Money Fund intends to
invest primarily in obligations the value of which is exempt from the Florida
intangible personal property tax. Distributions from net investment income and
net realized capital gains, including exempt-interest dividends, may be subject
to state taxes in other states.
Under the Internal Revenue Code, interest on indebtedness incurred or continued
to purchase or carry shares of investment companies paying exempt-interest
dividends, such as the Funds, will not be deductible by the investor for federal
income tax purposes. Shareholders should consult their tax advisors as to the
application of these provisions.
Shareholders receiving Social Security benefits may be subject to federal income
tax (and perhaps state personal income tax) on a portion of those benefits as a
result of receiving tax-exempt income (including exempt-interest dividends
distributed by the Funds). In general, the tax will apply to such benefits only
in cases where the recipient's provisional income, consisting of adjusted gross
income, tax-exempt interest income and 50% of any Social Security benefits,
exceeds a base amount ($25,000 for single individuals and $32,000 for
individuals filing a joint return). In such cases, the tax will be imposed on
the lesser of 50% of the recipient's Social Security benefits or the excess of
provisional income over the base amount. A second tier of inclusion rules for
high-income social security recipients has been added for tax years beginning
after 1993. These new rules apply to taxpayers who have provisional income over
$44,000 (married filing jointly) or $34,000 (single). For these taxpayers, the
amount of benefit subject to tax is the lesser of (1) 85% of the social security
benefit received or (2) 85% of the excess of the taxpayer's provisional income
over $44,000 (married filing jointly) or $34,000 (single) plus the smaller of
(a) $6,000 (married filing jointly) or $4,500 (single) or (b) the amount taxable
under the 50% inclusion rules described above. Shareholders receiving Social
Security benefits may wish to consult their tax advisors.
47
<PAGE>
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
the Touchstone complex of mutual fundS 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 the Touchstone complex of mutual funds. 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, 1999, the Tax-Free Intermediate Term Fund
had capital loss carryforwards for federal income tax purposes of $361,822 which
expires on June 30, 2004.
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.
48
<PAGE>
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 effective yields for
the seven days ended June 30, 1999 were 2.86% and 2.90%, respectively. The Ohio
Tax-Free Money Fund's current and effective yields for the seven days ended June
30, 1999 were 2.87% and 2.91%, respectively, for Class A shares and 3.12% and
3.17%, respectively, for Institutional shares. The California Tax-Free Money
Fund's current and effective yields for the seven days ended June 30, 1999 were
2.82% and 2.86%, respectively. The Florida Tax-Free Money Fund's current and
effective yields for the seven days ended June 30, 1999 were 3.01% and 3.05%.
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, 1999 were 4.74% and 4.80%,
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, 1999 were 5.14%
and 5.21%, respectively, for Class A shares and 5.58% and 5.67%, respectively,
for Institutional 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, 1999 were 5.15% and 5.22%, 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, 1999 were 4.98% and 5.05%.
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:
49
<PAGE>
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions. The calculation also assumes the deduction of the
current maximum sales load from the initial $1,000 payment. If a Fund (or class)
has been in existence less than one, five or ten years, the time period since
the date of the initial public offering of shares will be substituted for the
periods stated. The average annual total returns of the Tax-Free Intermediate
Term Fund and the Ohio Insured Tax-Free Fund for the periods ended June 30, 1999
are as follows:
Tax-Free Intermediate Term Fund (Class A)
1 year 0.03%
5 years 4.52%
10 years 5.73%
Tax-Free Intermediate Term Fund (Class C)
1 year 1.40%
5 years 4.30%
Since inception (February 1, 1994) 3.30%
Ohio Insured Tax-Free Fund (Class A)
1 year -2.27%
5 years 4.92%
10 years 6.09%
Ohio Insured Tax-Free Fund (Class C)
1 year 1.05%
5 years 5.11%
Since inception (November 1, 1993) 3.75%
The Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund may also
advertise total return (a "nonstandardized quotation") which is calculated
differently from average annual total return. A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. This computation does not include the effect of the applicable
front-end or contingent deferred sales load which, if included, would reduce
total return. The total returns of
50
<PAGE>
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:
Ohio Ohio
Tax-Free Tax-Free Insured Insured
Intermediate Intermediate Tax-Free Tax-Free
Term Fund Term Fund Fund Fund
Period Ended Class A Class C Class A Class C
------- ------- ------- -------
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%
June 30, 1999 2.07% 1.40% 1.81% 1.05%
(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, 1999 are as follows:
TAX-FREE INTERMEDIATE TERM FUND (CLASS A)
1 Year 2.07%
3 Years 4.61%
5 Years 4.94%
10 Years 5.94%
Since inception (September 10, 1981) 6.17%
OHIO INSURED TAX-FREE FUND (CLASS A)
1 Year 1.81%
3 Years 5.37%
5 Years 5.78%
10 Years 6.52%
Since inception (April 1, 1985) 7.56%
51
<PAGE>
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:
6
Yield = 2[((a-b)/cd + 1) - 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 1999 were 4.06% and 3.39%, respectively. The yields of Class
A and Class C shares of the Ohio Insured Tax-Free Fund for June 1999 were 4.67%
and 4.11%, 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 1999 were 6.72% and 5.61%,
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 1999 were 8.36% and 7.36%,
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 Institutional shares of the Ohio Tax-Free Money Fund.
The yield of Institutional 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
52
<PAGE>
performance, including current performance ratings and/or rankings appearing in
financial magazines, newspapers and publications which track mutual fund
performance. Advertisements may also compare performance 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 May 26, 2000, the principal owners of each class of shares of each Fund
are listed in the following table:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
FUND SHAREHOLDER # OF SHARES % OF CLASS
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Free Money Fund R. Max Greenwalt 2,431,956.370 8.6959%
Loretta L. Greenwalt
5431 Sugar Hills Dr.
Greenfield, IN 46140
----------------------------------------------------------------------------------------------
Tax-Free Money Fund Bear Stearns & Co. FBO 1,526,324.000 5.4576%
#7205413714-G20
1 Metrotech Center North
Brooklyn, NY 11201 3859
----------------------------------------------------------------------------------------------
53
<PAGE>
----------------------------------------------------------------------------------------------
Tax-Free Money Fund David Tondow, Jr. 1,407,129.440 5.0314%
Margaret L. Tondow
2937 Alpine Terrace
Cincinnati, OH 45208-3407
----------------------------------------------------------------------------------------------
Tax-Free Intermediate Term MLPF & S for the sole benefit 219,085.306 6.1383%
Fund - Class A of its customers
Attn Fund Administration 97181
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
----------------------------------------------------------------------------------------------
Tax-Free Intermediate Term Donaldson Lufkin & Jenrette 31,568.712 9.8454%
Fund - Class C P.O. Box 2052
Jersey City, NJ 07303-2052
----------------------------------------------------------------------------------------------
Tax-Free Intermediate Term Joyce Yates 19,164.161 5.9767%
Fund - Class C 400 S. Lower Schooner Rd.
Nashville, IN 47448
----------------------------------------------------------------------------------------------
Tax-Free Intermediate Term Janice R. Kirlin 16,506.015 5.1477%
Fund - Class C 12049 Cooperwood
Cincinnati, OH 45242
----------------------------------------------------------------------------------------------
Ohio Insured Tax-Free Fund - Painewebber for the Benefit of 24,240.929 7.4002%
Class C Leland F. Brubaker Trustee;
Declaration of Trust U/A DTD
10/10/97
4229 Westleton Ct.
Columbus, OH 43221-4930
----------------------------------------------------------------------------------------------
Ohio Insured Tax-Free Fund - Fiserv Securities Inc. 22,831.366 6.9699%
Class C FAO 44242791, Attn Mutual
One Commerce Square
2005 Market Street Ste. 1200
Philadelphia, PA 19103
----------------------------------------------------------------------------------------------
Ohio Insured Tax-Free Fund - Donaldson Lufkin & Jenrette 21,449.426 6.548%
Class C Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
----------------------------------------------------------------------------------------------
Ohio Tax-Free Money Fund BHC Securities Inc 79,295,383.960 38.041%
Attn: Renee Pressley
2005 Market Street 11th Floor
Philadelphia, PA 19103
----------------------------------------------------------------------------------------------
Ohio Tax-Free Money Fund Jerry Bach 11,614,860.760 5.5721%
9055 Shawnee Run Rd.
Cincinnati, OH 45243
----------------------------------------------------------------------------------------------
Ohio Tax-Free Money Fund - Fifth Third Bank Trust 128,138,001.290 88.0148%
Institutional Shares Attn Jennifer Moser
38 Fountain Square Plaza
Cincinnati, OH 45202-3191
----------------------------------------------------------------------------------------------
California Tax-Free Money Bear Stearns & Co. FBO 6,141,841.000 9.2601%
Fund #5206478819-Y11
1 Metrotech Center North
Brooklyn, NY 11201-3859
----------------------------------------------------------------------------------------------
California Tax-Free Money Bear Stearns & Co. FBO 3,706,475.000 5.5882%
Fund #5206891110-600
1 Metrotech Center North
Brooklyn, NY 11201-3859
----------------------------------------------------------------------------------------------
54
<PAGE>
----------------------------------------------------------------------------------------------
California Tax-Free Money Bear Stearns & Co. FBO 6,644,337.000 5.4946%
Fund #5205274615-Y11
1 Metrotech Center North
Brooklyn, NY 11201-3859
----------------------------------------------------------------------------------------------
California Tax-Free Money Bear Stearns & Co. FBO 3,635,173.000 5.4807%
Fund #5205547317-600
1 Metrotech Center North
Brooklyn, NY 11201-3859
----------------------------------------------------------------------------------------------
Florida Tax-Free Money Fund Fifth Third Bank Trust 9,369,753.000 50.6452%
Attn Kim Haney
38 Fountain Square Plaza
1090F1
Cincinnati, OH 45263
----------------------------------------------------------------------------------------------
Florida Tax-Free Money Fund Joseph H. Kanter 2,092,522.870 11.3104%
9792 Windisch Road
West Chester, OH 45069
----------------------------------------------------------------------------------------------
</TABLE>
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.
INDEPENDENT AUDITORS
--------------------
The firm of Ernst & Young LLP, 250 East Fifth Street, Cincinnati, Ohio, has been
selected as independent auditors for the Trust for the fiscal year ending June
30, 2000 and to advise the Funds on certain accounting matters. Prior to the
fiscal year ending June 30, 2000, other independent auditors performed the
annual audit of the Trust's financial statements and advised the Funds as to
certain accounting matters.
TRANSFER AGENT
--------------
The Trust's transfer agent, Integrated Fund Services, Inc. ("Integrated"),
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
55
<PAGE>
disbursing agent and performs other shareholder service functions. Integrated is
an affiliate of the Advisor by reason of common ownership. Integrated receives
for its services as transfer agent a fee payable monthly at an annual rate of
$25 per account from each of the Tax-Free Money Fund, the Ohio Tax-Free Money
Fund, the California Tax-Free Money Fund and the Florida Tax-Free Money Fund and
$21 per account from each of the Tax-Free Intermediate Term Fund and the Ohio
Insured Tax-Free Fund, provided, however, that the minimum fee is $1,000 per
month for each class of shares of a Fund. In addition, the Funds pay
out-of-pocket expenses, including but not limited to, postage, envelopes,
checks, drafts, forms, reports, record storage and communication lines.
Integrated 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 Integrated to perform its duties, the
Tax-Free Money Fund, the California Tax-Free Money Fund and the Florida Tax-Free
Money Fund each pay Integrated 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 and the Ohio
Tax-Free Money Fund each pay Integrated 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.
Integrated is retained by the Advisor to assist the Advisor in providing
administrative services to the Funds. In this capacity, Integrated supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. Integrated
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, Integrated receives a fee from
the Advisor.
56
<PAGE>
The Advisor is solely responsible for the payment of these administrative fees
to Integrated, and Integrated has agreed to seek payment of such fees solely
from the Advisor.
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
1999 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 1999
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 1999 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.
57
<PAGE>
TAX-FREE MONEY FUND, TAX-FREE INTERMEDIATE TERM FUND
AND FLORIDA TAX-FREE MONEY FUND
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 $25,750 Not Over $43,050 15% 18.788% 20.100%
$25,750-$62,450 $43,050-$104,050 28% 31.745% 34.696%
$62,450-$130,250 $104,050-$158,550 31% 35.761% 37.417%
$130,250-$283,150 $158,550-$283,150 36% 40.800% 41.952%
Over $283,150 Over $283,150 39.6% 44.130% 45.217%
58
<PAGE>
FINANCIAL STATEMENTS
--------------------
The following financial statements for the Trust at and for the fiscal periods
indicated are incorporated herein by reference from their current reports to
shareholders filed with the SEC pursuant to Section 30(b) of the 1940 Act and
Rule 30b2-1 thereunder. A copy of each such report will be provided, without
charge, to each person receiving this Statement of Additional Information.
59
<PAGE>
DISTRIBUTOR
Touchstone Securities, Inc.
311 Pike Street
Cincinnati, Ohio 45202
TOUCHSTONE TAX-FREE TRUST
INVESTMENT ADVISOR o Tax-Free Intermediate Term Fund
Touchstone Advisors, Inc. o Ohio Insured Tax-Free Fund
311 Pike Street o Tax-Free Money Fund
Cincinnati, Ohio 45202 o Ohio Tax-Free Money Fund
o California Tax-Free Money Fund
o Florida Tax-Free Money Fund
TRANSFER AGENT, ADMINISTRATOR AND
FUND ACCOUNTING AGENT
Integrated Fund Services, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
CUSTODIAN FOR ALL FUNDS
(EXCEPT FLORIDA TAX-FREE MONEY FUND)
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45202
CUSTODIAN FOR FLORIDA TAX-FREE MONEY FUND
The Huntington Trust Company
41 South High Street STATEMENT OF ADDITIONAL INFORMATION
Columbus, Ohio 43215 JUNE 9, 2000
INDEPENDENT AUDITORS
Ernst & Young LLP
250 E. Fifth Street
Cincinnati, Ohio 45202
LEGAL COUNSEL
Frost & Jacobs LLP
2500 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
60
<PAGE>
Tax-Exempt
Annual
Report
June 30, 1999
Countrywide Investments
Countrywide Investment Logo
Tax-Free Money Fund
California Tax-Free Money Fund
Ohio Tax-Free Money Fund
Florida Tax-Free Money Fund
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Letter from the Chairman.......................................................3
Letter from the President......................................................4
Management Discussion and Analysis...........................................5-6
Statements of Assets and Liabilities.........................................7-9
Statements of Operations...................................................10-12
Statements of Changes in Net Assets........................................13-15
Financial Highlights.......................................................16-22
Notes to Financial Statements..............................................23-29
Portfolios of Investments:
Tax-Free Money Fund...................................................30-31
California Tax-Free Money Fund........................................32-33
Ohio Tax-Free Money Fund..............................................34-40
Florida Tax-Free Money Fund...........................................41-43
Tax-Free Intermediate Term Fund.......................................44-47
Ohio Insured Tax-Free Fund............................................48-50
Notes to Portfolios of Investments............................................51
Report of Independent Public Accountants......................................52
2. Countrywide Investments
<PAGE>
LETTER FROM THE CHAIRMAN
--------------------------------------------------------------------------------
PHOTO OF ANGELO R. MOZILO
CHAIRMAN
Dear Shareholders:
Thirty years ago, David Loeb and I had an ambitious vision for a new mortgage
lending company. As we pondered a name for the company, we thought big:
Worldwide. But even the two of us, as ambitious as we were, could not conceive
of a global reach for the company. After rejecting Nationwide, we settled on
Countrywide and the rest is history. Now it seems our dreams were too modest. On
February 17, Countrywide signed a letter of intent to form a European mortgage
banking joint venture with Woolwich, plc, one of the five largest mortgage
originators and servicers in the United Kingdom. The initial purpose of the
joint venture is to provide fee-based mortgage services for Woolwich, which has
a mortgage servicing portfolio equivalent to $40 billion, annual fundings
equivalent to $10 billion and mortgage operations in France and Italy. The joint
venture will also market its services to other lenders throughout the European
Union.
Growth and change are crucial to our success at Countrywide. New ideas
and the latest technology -- as well as huge ambition and passion to be the best
-- made us the nation's largest independent residential mortgage lender and
servicer. This philosophy also applies to the many Countrywide subsidiaries,
including Countrywide Investments. We are committed to creating value for our
shareholders by offering a variety of investment opportunities. There are
currently 16 funds offered through Countrywide Investments, each designed to
fulfill specific financial needs. As the merger and acquisition team adds new
funds, shareholders will enjoy an even broader range of investment choices. Just
as Countrywide Home Loans delivers the American dream of homeownership,
Countrywide Investments brings financial dreams within the reach of every
investor. Whether planning for a family, college education or retirement,
Countrywide Investments makes saving and investing money easy and convenient.
Thank you for choosing Countrywide Investments for your financial planning
needs. We hope our services will bring you the financial rewards of careful
planning and big dreams.
Sincerely,
/S/ Angelo R. Mozilo
Angelo R. Mozilo
Chairman
<PAGE>
LETTER FROM THE PRESIDENT
--------------------------------------------------------------------------------
PHOTO OF ROBERT H. LESHNER
Dear Fellow Shareholder:
We are pleased to present Countrywide Tax-Free Trust's Annual Report for the
fiscal year ended June 30, 1999. This report provides financial data and
performance information 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 and Ohio Insured Tax-Free Fund. These Funds represent the
six tax-free money market and bond products offered among the 16 mutual funds
that comprise the Countrywide Family of Funds.
The economic expansion that started in March 1991 showed no signs of faltering
during the past year, and the index of leading economic indicators suggests that
it will continue into the year 2000. The strong economy, coupled with negligible
inflation, low unemployment and a bull market, has resulted in the highest level
of consumer confidence in 30 years.
Continued strength in our economy and signs of improvement in Asian and Latin
American economies proved to be the catalyst for an interest rate increase by
the Federal Reserve Board during the second quarter of 1999. The Fed raised the
federal funds target rate, a key short-term interest rate, by a quarter of a
percentage point to 5%. By increasing the rate just 0.25%, the Fed sent a
message that the 0.75% reduction made in the fall of 1998 was no longer
completely necessary. As the Federal Open Market Committee (FOMC) stated in its
announcement, "Much of the financial strain has eased, foreign economies have
firmed and economic activity in the United States has moved forward at a brisk
pace."
Municipal bonds outperformed Treasuries by a significant margin in the first
half of 1999, reversing last year's underperformance. Heavy issuance of
municipals in 1998, coupled with turmoil in foreign economies, caused a flight
to quality that hurt the performance of municipals relative to Treasuries. This
flight to quality has reversed dramatically in 1999 with returns on municipal
bonds down only half as much as comparable Treasuries.
We believe the tax-exempt sector continues to offer an attractive investment
alternative. Investors can buy high quality, intermediate and longer-term
municipal bonds at yields close to 90% of Treasuries. This gives investors an
appealing tax-free yield with an investment that should continue to provide
relative stability compared to Treasuries and equities.
Countrywide Investments is committed to offering you quality products and
services to help you meet your financial goals. Your confidence in us is
reflected in our success. We thank you for your support and look forward to our
continued partnership.
Sincerely,
/s/ Robert H. Leshner
Robert H. Leshner
President
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
OVERVIEW
The pace of economic activity in the U.S. over the past year remained quite
brisk. Strong employment growth, rising incomes and a relentless stock market
combined to fuel consumer consumption. Inflation remained subdued with the
Consumer Price Index up only 2% for the past fiscal year. The yield curve
steepened during the year with short-term maturities declining in yield, while
yields on bonds with intermediate and long-term maturities increased. During the
quarter ended September 30, 1998, a near meltdown in the emerging markets of
Russia, Asia and Latin America sparked a liquidity crisis in the bond market,
resulting in a "flight to quality" which sent Treasury yields sharply lower.
This caused a dislocation between the Treasury market and other sectors of the
bond market forcing yield spreads to widen dramatically. The Federal Reserve
Board responded by lowering the federal funds rate on three occasions, providing
the liquidity necessary for stability to return to the bond markets.
Interest rates began to rise by the start of 1999 due to improving conditions
overseas and a concern that robust domestic growth would lead to higher
inflation. By mid-year, Treasury yields had increased about 1% and, after
several warnings, the Fed finally raised the federal funds rate by 0.25% to 5%.
The change in municipal yields over the twelve months ended June 30 was
comparable to the change in Treasuries; however, in the second half of the
fiscal year, municipals outperformed Treasuries by a wide margin. Municipal bond
yields were up only about half as much as comparable maturity Treasuries, and
the total returns in most municipal sectors were twice that of the Treasury
market.
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, 1999, the Fund's total returns (excluding the impact of
applicable sales loads) were 2.07% and 1.40% for Class A shares and Class C
shares, respectively. The Lehman Brothers 5-Year Municipal G.O. Bond Index
returned 3.42% during the same period.
Our focus in managing the Tax-Free Intermediate Term Fund is to maximize the
tax-free yield while minimizing the share price volatility. This focus can
negatively impact our total return during periods of declining interest rates as
was experienced during the first three quarters of the Fund's fiscal year.
However, during the last quarter, as interest rates increased, the performance
of the Fund improved relative to the comparative Lehman Brothers Index, and
outperformed it after taking the Fund's operating expenses into consideration.
In addition, the Fund outperformed its Lipper peer group for the fiscal year.
Recently, we have made changes that we believe will help to improve the overall
total return of the portfolio. These changes include selling some of the shorter
maturity, higher coupon issues from the portfolio and buying new issues in the
10-year maturity range. The additional yield available in this maturity sector
provides an attractive opportunity for the Fund.
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, 1999, the Fund's total returns (excluding the impact of
applicable sales loads) were 1.81% and 1.05% for Class A shares and Class C
shares, respectively. The Lehman Brothers 15-Year Municipal G.O. Bond Index
returned 2.70% during the same period.
Performance of the Ohio Insured Tax-Free Fund for the fiscal year was comparable
to that of the Lehman Brothers 15-year Municipal G.O. Bond Index after factoring
in the associated expenses of the Fund. Over the course of the year, we
initiated several trades in the portfolio to improve the overall structure of
the portfolio. To accomplish this, we sold issues with higher coupons and short
call features and bought new issues with better call protection. Concerning the
purchases, we focused on issues in the 20-year maturity range offering call
protection of at least ten years. These issues provide the best combination of
yield and total return which, we believe, will ultimately improve the total
return potential of the Fund.
<PAGE>
Comparison of the Change in Value since June 30, 1989
of a $10,000 Investment in the Tax-Free Intermediate Term Fund - Class A*
and the Lehman Brothers 5-Year Municipal G.O. Bond Index
Tax-Free Intermediate Term Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception*
Class A 0.03% 4.52% 5.73% 6.05%
Class C 1.40% 4.30% - 3.30%
Lehman Brothers 5-Year Tax-Free Intermediate
Municipal G.O. Bond Index Term Fund - Class A
6/89 10000 9800
10111 9951
10413 10182
10463 10241
6/90 10698 10422
10811 10472
11170 10797
11410 11005
6/91 11610 11191
12022 11515
12425 11779
12415 11835
6/92 12818 12174
13137 12441
13346 12687
13685 13118
6/93 14008 13483
14311 13910
14487 14075
14031 13600
6/94 14219 13711
14334 13789
14286 13663
14866 14257
6/95 15246 14583
15662 14884
15948 15246
16000 15180
6/96 16069 15241
16331 15486
16687 15835
16660 15811
6/97 17076 16184
17450 16486
17771 16764
17979 16905
6/98 18160 17096
18660 17519
18807 17614
19001 17677
6/99 18780 17450
Past performance is not predictive of future performance.
* The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and
fees paid by shareholders in the different classes. Fund inception was
September 10, 1981, and the initial public offering of Class C shares
commenced on February 1, 1994.
<PAGE>
Comparison of the Change in Value since June 30, 1989
of a $10,000 Investment in the Ohio Insured Tax-Free Fund - Class A*
and the Lehman Brothers 15-Year Municipal G.O. Bond Index
Ohio Insured Tax-Free Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception*
Class A -2.27% 4.92% 6.09% 7.26%
Class C 1.05% 5.11% - 3.75%
Lehman Brothers 15-Year Ohio Insured
Municipal G.O. Bond Index Tax-Free Fund - Class A
6/89 10000 9600
9957 9596
10397 9952
10396 9942
6/90 10634 10131
10591 10139
11059 10541
11263 10729
6/91 11484 10939
11954 11340
12328 11701
12394 11694
6/92 12867 12203
13235 12441
13561 12726
14137 13207
6/93 14655 13696
15266 14224
15505 14328
14453 13571
6/94 14659 13639
14719 13663
14461 13558
15677 14452
6/95 16027 14696
16612 15039
17285 15709
17120 15371
6/96 17180 15438
17593 15805
18126 16191
18113 16059
6/97 18870 16574
19517 16975
20070 17356
20335 17511
6/98 20693 17740
21469 18285
21606 18318
21764 18408
6/99 21252 18060
Past performance is not predictive of future performance.
* The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. Fund inception was April 1,
1985, and the initial public offering of Class C shares commenced on November
1, 1993.
6. Countrywide Investments
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999
--------------------------------------------------------------------------------
California
Tax-Free Tax-Free
(000's) Money Fund Money Fund
--------------------------------------------------------------------------------
ASSETS
Investment securities:
At acquisition cost $ 24,986 $ 47,809
============================
At amortized cost $ 24,935 $ 47,711
============================
At market value (Note 2) $ 24,935 $ 47,711
Cash 106 119
Interest receivable 208 378
Other assets 9 1
----------------------------
Total assets 25,258 48,209
----------------------------
LIABILITIES
Dividends payable 1 4
Payable for securities purchased -- 201
Payable to affiliates (Note 4) 15 26
Other accrued expenses and liabilities 8 11
----------------------------
Total liabilities 24 242
----------------------------
NET ASSETS $ 25,234 $ 47,967
----------------------------
NET ASSETS CONSIST OF:
Paid-in capital $ 25,231 $ 47,980
Undistributed net investment income 6 --
Accumulated net realized losses from
security transactions (3) (13)
----------------------------
Net assets $ 25,234 $ 47,967
============================
Shares of beneficial interest outstanding (unlimited number of
shares authorized, no par value) (Note 5) 25,242 47,980
============================
Net asset value, offering price and redemption price
per share (Note 2) $ 1.00 $ 1.00
============================
See accompanying notes to financial statements.
Countrywide Investments 7.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999
--------------------------------------------------------------------------------
Ohio Florida
Tax-Free Tax-Free
(000's) Money Fund Money Fund
--------------------------------------------------------------------------------
ASSETS
Investment securities:
At acquisition cost $ 393,693 $ 36,451
============================
At amortized cost $ 393,522 $ 36,379
============================
At market value (Note 2) $ 393,522 $ 36,379
Cash 312 15
Interest receivable 2,753 306
Other assets 12 2
----------------------------
Total assets 396,599 36,702
----------------------------
LIABILITIES
Dividends payable 430 23
Payable for securities purchased 5,113 --
Payable to affiliates (Note 4) 224 12
Other accrued expenses and liabilities 35 12
----------------------------
Total liabilities 5,802 47
----------------------------
NET ASSETS $ 390,797 $ 36,655
============================
NET ASSETS CONSIST OF:
Paid-in capital $ 390,787 $ 36,666
Accumulated net realized gains (losses) from
security transactions 10 (11)
----------------------------
NET ASSETS $ 390,797 $ 36,655
============================
PRICING OF RETAIL SHARES
Net assets applicable to Retail shares $ 214,691 $ 21,371
============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized,
no par value) (Note 5) 214,679 21,375
============================
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 $ 176,106 $ 15,284
============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized,
no par value) (Note 5) 176,108 15,291
============================
Net asset value, offering price and
redemption price per share (Note 2) $ 1.00 $ 1.00
============================
See accompanying notes to financial statements.
8. Countrywide Investments
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999
--------------------------------------------------------------------------------
Tax-Free Ohio Insured
Intermediate Tax-Free
(000's) Term Fund Fund
--------------------------------------------------------------------------------
ASSETS
Investment securities:
<S> <C> <C>
At acquisition cost $ 52,764 $ 62,029
============================
At amortized cost $ 52,525 $ 61,971
============================
At market value (Note 2) $ 53,176 $ 64,501
Cash 59 86
Interest receivable 891 623
Receivable for capital shares sold 143 25
Receivable for securities sold 491 3,579
Other assets 14 7
----------------------------
Total assets 54,774 68,821
----------------------------
LIABILITIES
Dividends payable 33 72
Payable for capital shares redeemed 130 229
Payable for securities purchased 2,027 990
Payable to affiliates (Note 4) 37 36
Other accrued expenses and liabilities 14 17
----------------------------
Total liabilities 2,241 1,344
----------------------------
NET ASSETS $ 52,533 $ 67,477
============================
NET ASSETS CONSIST OF:
Paid-in capital $ 52,244 $ 65,021
Accumulated net realized losses from
security transactions (362) (74)
Net unrealized appreciation on investments 651 2,530
----------------------------
Net Assets $ 52,533 $ 67,477
============================
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares $ 47,899 $ 62,737
============================
Shares of beneficial interest outstanding (unlimited number of
shares authorized, no par value) (Note 5) 4,405 5,343
============================
Net asset value and redemption price
per share (Note 2) $ 10.87 $ 11.74
============================
Maximum offering price per share (Note 2) $ 11.09 $ 12.23
============================
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares $ 4,634 $ 4,740
============================
Shares of beneficial interest outstanding (unlimited number of
shares authorized, no par value) (Note 5) 426 404
============================
Net asset value, offering price and redemption price
per share (Note 2) $ 10.88 $ 11.74
============================
</TABLE>
See accompanying notes to financial statements.
Countrywide Investments 9.
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
--------------------------------------------------------------------------------
California
Tax-Free Tax-Free
(000's) Money Fund Money Fund
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $ 1,037 $ 1,819
----------------------------
EXPENSES
Investment advisory fees (Note 4) 143 278
Accounting services fees (Note 4) 30 36
Transfer agent fees (Note 4) 30 27
Distribution expenses (Note 4) 2 28
Postage and supplies 18 6
Registration fees 16 5
Professional fees 8 9
Custodian fees 7 8
Trustees' fees and expenses 6 6
Pricing expenses 4 4
Insurance expense 3 4
Reports to shareholders 3 2
Other expenses 1 5
----------------------------
TOTAL EXPENSES 271 418
Fees waived by the Adviser (Note 4) (17) --
----------------------------
NET EXPENSES 254 418
NET INVESTMENT INCOME 783 1,401
----------------------------
NET REALIZED LOSSES FROM SECURITY TRANSACTIONS (2) (12)
----------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 781 $ 1,389
============================
See accompanying notes to financial statements.
10. Countrywide Investments
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
--------------------------------------------------------------------------------
Ohio Florida
Tax-Free Tax-Free
(000's) Money Fund Money Fund
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $ 12,556 $ 1,931
----------------------------
EXPENSES
Investment advisory fees (Note 4) 1,597 286
Distribution expenses, Retail class (Note 4) 501 43
Accounting services fees (Note 4) 73 46
Transfer agent fees, Retail class (Note 4) 74 12
Transfer agent fees, Institutional class (Note 4) 12 12
Custodian fees (Note 4) 32 20
Postage and supplies 38 3
Registration fees 31 8
Professional fees 25 10
Pricing expenses 10 5
Insurance expense 9 5
Trustees' fees and expenses 6 6
Reports to shareholders 7 1
Other expenses 19 2
----------------------------
TOTAL EXPENSES 2,434 459
Fees waived by the Adviser (Note 4) (52) (124)
----------------------------
NET EXPENSES 2,382 335
----------------------------
NET INVESTMENT INCOME 10,174 1,596
----------------------------
NET REALIZED LOSSES FROM SECURITY TRANSACTIONS (3) (11)
----------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 10,171 $ 1,585
============================
See accompanying notes to financial statements.
Countrywide Investments 11.
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
--------------------------------------------------------------------------------
Tax-Free Ohio Insured
Intermediate Tax-Free
(000's) Term Fund Fund
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $ 2,894 $ 3,861
----------------------------
EXPENSES
Investment advisory fees (Note 4) 272 353
Transfer agent fees, Class A (Note 4) 53 33
Transfer agent fees, Class C (Note 4) 12 12
Distribution expenses, Class A (Note 4) 42 9
Distribution expenses, Class C (Note 4) 25 27
Accounting services fees (Note 4) 48 48
Postage and supplies 40 20
Registration fees, Common 4 4
Registration fees, Class A 10 4
Registration fees, Class C 9 2
Pricing expenses 13 14
Custodian fees 14 8
Professional fees 10 11
Reports to shareholders 8 5
Trustees' fees and expenses 6 6
Insurance expense 5 6
Other expenses 3 5
----------------------------
TOTAL EXPENSES 574 567
----------------------------
NET INVESTMENT INCOME 2,320 3,294
----------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions 634 353
Net change in unrealized appreciation/depreciation
on investments (1,787) (2,151)
----------------------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (1,153) (1,798)
----------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,167 $ 1,496
============================
See accompanying notes to financial statements.
12. Countrywide Investments
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<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,
(000's) 1999 1998 1999 1998
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income $ 783 $ 899 $ 1,401 $ 1,220
Net realized gains (losses) from
security transactions (2) -- (12) 2
----------------------------------------------------
Net increase in net assets
from operations 781 899 1,389 1,222
----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (777) (899) (1,401) (1,220)
----------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5)
Proceeds from shares sold 48,307 63,515 196,122 178,295
Reinvested distributions 751 884 1,332 1,139
Payments for shares redeemed (61,211) (57,142) (190,488) (170,609)
----------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions (12,153) 7,257 6,966 8,825
----------------------------------------------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS (12,149) 7,257 6,954 8,827
NET ASSETS
Beginning of year 37,383 30,126 41,013 32,186
----------------------------------------------------
End of year $ 25,234 $ 37,383 $ 47,967 $ 41,013
====================================================
UNDISTRIBUTED NET
INVESTMENT INCOME $ 6 $ -- $ -- $ --
====================================================
See accompanying notes to financial statements.
Countrywide Investments 13.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------
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,
(000's) 1999 1998 1999 1998
-----------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 10,174 $ 9,960 $ 1,596 $ 1,737
Net realized gains (losses) from
security transactions (3) 1 (11) 23
----------------------------------------------------
Net increase in net assets
from operations 10,171 9,961 1,585 1,760
----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income,
Retail (5,927) (6,053) (501) (587)
From net investment income,
Institutional (4,247) (3,907) (1,095) (1,150)
From net realized gains,
Retail -- -- (6) --
From net realized gains,
Institutional -- -- (16) --
----------------------------------------------------
Decrease in net assets from
distributions to shareholders (10,174) (9,960) (1,618) (1,737)
----------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5)
RETAIL
Proceeds from shares sold 455,007 443,151 29,958 27,490
Reinvested distributions 5,786 5,971 495 577
Payments for shares redeemed (451,416) (410,527) (23,442) (36,138)
----------------------------------------------------
Net increase (decrease) in net assets
from Retail share transactions 9,377 38,595 7,011 (8,071)
----------------------------------------------------
INSTITUTIONAL
Proceeds from shares sold 459,806 303,525 67,739 129,691
Reinvested distributions 18 2 427 106
Payments for shares redeemed (398,983) (285,849) (102,016) (100,005)
----------------------------------------------------
Net increase (decrease) in net assets
from Institutional
share transactions 60,841 17,678 (33,850) 29,792
----------------------------------------------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS 70,215 56,274 ( 26,872) 21,744
NET ASSETS
Beginning of year 320,582 264,308 63,527 41,783
----------------------------------------------------
End of year $ 390,797 $320,582 $ 36,655 $ 63,527
====================================================
See accompanying notes to financial statements.
14. Countrywide Investments
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------
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,
(000's) 1999 1998 1999 1998
------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 2,320 $ 2,689 $ 3,294 $ 3,707
Net realized gains from
security transactions 634 504 353 1,577
Net change in unrealized
appreciation/depreciation
on investments (1,787) 121 (2,151) (19)
----------------------------------------------------
Net increase in net assets
from operations 1,167 3,314 1,496 5,265
----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income,
Class A (2,149) (2,503) (3,095) (3,489)
From net investment income,
Class C (171) (186) (199) (218)
From net realized gains,
Class A -- -- (1,554) (434)
From net realized gains,
Class C -- -- (115) (35)
----------------------------------------------------
Decrease in net assets from
distributions to shareholders (2,320) (2,689) (4,963) (4,176)
----------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5)
CLASS A
Proceeds from shares sold 13,620 12,408 142,439 140,843
Reinvested distributions 1,723 2,009 3,500 2,921
Payments for shares redeemed (19,292) (20,581) (149,279) (146,316)
-----------------------------------------------------
Net decrease in net assets from
Class A share transactions (3,949) (6,164) (3,340) (2,552)
----------------------------------------------------
CLASS C
Proceeds from shares sold 2,454 1,781 550 2,552
Reinvested distributions 158 173 268 210
Payments for shares redeemed (2,620) (2,418) (1,038) (2,250)
----------------------------------------------------
Net increase (decrease) in net assets
from Class C share transactions (8) (464) (220) 512
----------------------------------------------------
TOTAL DECREASE IN NET ASSETS (5,110) (6,003) (7,027) (951)
NET ASSETS
Beginning of year 57,643 63,646 74,504 75,455
----------------------------------------------------
End of year $ 52,533 $ 57,643 $ 67,477 $ 74,504
====================================================
</TABLE>
See accompanying notes to financial statements.
Countrywide Investments 15.
<PAGE>
TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Per Share Data for a Share Outstanding Throughout Each Year
-----------------------------------------------------------------------------------------------------
Year Ended June 30,
-----------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------
<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 0.027 0.030 0.029 0.031 0.030
-------------------------------------------------------------
Dividends from net investment
income (0.027) (0.030) (0.029) (0.031) (0.030)
-------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------
Total return 2.75% 3.03% 2.89% 3.15% 3.07%
=============================================================
Net assets at end of year (000's) $ 25,234 $ 37,383 $30,126 $ 25,342 $ 26,692
=============================================================
Ratio of net expenses to
average net assets(A) 0.89% 0.92% 0.99% 0.99% 0.99%
Ratio of net investment income to
average net assets 2.74% 2.98% 2.85% 3.09% 3.00%
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net
assets would have been 0.95% for the year ended June 30, 1999 (Note 4).
CALIFORNIA TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------
Per Share Data for a Share Outstanding Throughout Each Year
-----------------------------------------------------------------------------------------------------
Year Ended June 30,
-------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------
Net investment income 0.025 0.029 0.028 0.029 0.029
-------------------------------------------------------------
Dividends from net investment
income (0.025) (0.029) (0.028) (0.029) (0.029)
-------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------
Total return 2.56% 2.94% 2.81% 2.95% 2.95%
=============================================================
Net assets at end of year (000's) $ 47,967 $ 41,013 $ 32,186 $ 36,122 $ 19,525
=============================================================
Ratio of net expenses to
average net assets(A) 0.75% 0.77% 0.80% 0.80% 0.70%
Ratio of net investment income to
average net assets 2.52% 2.89% 2.76% 2.88% 2.83%
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 0.82% and 0.85% for the
years ended June 30, 1996 and 1995, respectively.
See accompanying notes to financial statements.
16. Countrywide Investments
<PAGE>
OHIO TAX-FREE MONEY FUND - RETAIL
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------
Per Share Data for a Share Outstanding Throughout Each Year
-----------------------------------------------------------------------------------------------------
Year Ended June 30,
-------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------
Net investment income 0.027 0.030 0.030 0.031 0.031
-------------------------------------------------------------
Dividends from net investment
income (0.027) (0.030) (0.030) (0.031) (0.031)
-------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=============================================================
Total return 2.73% 3.07% 2.99% 3.14% 3.12%
=============================================================
Net assets at end of year (000's) $214,691 $205,316 $166,719 $240,323 $ 226,606
=============================================================
Ratio of net expenses to
average net assets(A) 0.75% 0.75% 0.75% 0.75% 0.74%
Ratio of net investment income to
average net assets 2.68% 3.02% 2.93% 3.09% 3.08%
</TABLE>
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 0.77%, 0.76% and 0.77% for
the years ended June 30, 1999, 1998 and 1997, respectively (Note 4).
OHIO TAX-FREE MONEY FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Per Share Data for a Share Outstanding Throughout Each Period
-----------------------------------------------------------------------------------------------------
Period
Year Ended June 30, Ended
June 30,
1999 1998 1997(A)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------
Net investment income 0.029 0.033 0.016
-------------------------------------------------------------
Dividends from net investment income (0.029) (0.033) (0.016)
-------------------------------------------------------------
Net asset value at end of period $ 1.000 $ 1.000 $ 1.000
=============================================================
Total return 2.98% 3.33% 3.31%(C)
=============================================================
Net assets at end of period (000's) $ 176,106 $ 115,266 $ 97,589
=============================================================
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 2.93% 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 0.51%, 0.52% and 0.56%(C)
for the periods ended June 30, 1999, 1998 and 1997, respectively (Note 4).
(C) Annualized.
See accompanying notes to financial statements.
Countrywide Investments 17.
<PAGE>
FLORIDA TAX-FREE MONEY FUND - RETAIL
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------------------------------
Per Share Data for a Share Outstanding Throughout Each Year
-------------------------------------------------------------------------------------------------------
Year Ended June 30,
---------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------------------------------------------------------------
Net investment income 0.026 0.030 0.029 0.032 0.031
-------------------------------------------------------------
Dividends from net investment
income (0.026) (0.030) (0.029) (0.032) (0.031)
-------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=============================================================
Total return 2.68% 3.03% 2.90% 3.29% 3.17%
=============================================================
Net assets at end of year (000's) $ 21,371 $ 14,368 $22,434 $28,906 $24,119
=============================================================
Ratio of net expenses to
average net assets(A) 0.75% 0.75% 0.75% 0.61% 0.66%
Ratio of net investment income to
average net assets 2.58% 2.98% 2.85% 3.24% 3.12%
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 0.98%, 0.95%, 0.94%, 0.80%
and 0.80% for the years ended June 30, 1999, 1998, 1997, 1996 and 1995,
respectively (Note 4).
FLORIDA TAX-FREE MONEY FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------
Per Share Data for a Share Outstanding Throughout Each Period
--------------------------------------------------------------------------------------------------------
Period
Year Ended June 30, Ended
June 30,
1999 1998 1997 1996(A)
--------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------
Net investment income 0.029 0.032 0.031 0.003
-------------------------------------------------------------
Dividends from net investment income (0.029) (0.032) (0.031) (0.003)
-------------------------------------------------------------
Net asset value at end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------
Total return 2.93% 3.28% 3.16% 3.03%(C)
=============================================================
Net assets at end of period (000's) $ 15,284 $ 49,159 $ 19,349 $ 19,145
=============================================================
Ratio of net expenses to
average net assets(B) 0.50% 0.50% 0.50% 0.50%(C)
Ratio of net investment income to
average net assets 2.91% 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%, 0.71%, 0.79% and
0.87% for the periods ended June 30, 1999, 1998, 1997 and 1996, respectively
(Note 4).
(C) Annualized.
See accompanying notes to financial statements.
18. Countrywide Investments
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND - CLASS A
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------
Per Share Data for a Share Outstanding Throughout Each Year
--------------------------------------------------------------------------------------------------------
Year Ended June 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
----------------------------------------------------------------
Income from investment operations:
Net investment income 0.48 0.50 0.50 0.50 0.49
Net realized and unrealized gains
(losses) on investments (0.25) 0.11 0.16 (0.01) 0.17
----------------------------------------------------------------
Total from investment operations 0.23 0.61 0.66 0.49 0.66
----------------------------------------------------------------
Dividends from net investment
income (0.48) (0.50) (0.50) (0.50) (0.49)
----------------------------------------------------------------
Net asset value at end of year $ 10.87 $ 11.12 $ 11.01 $ 10.85 $ 10.86
================================================================
Total return(A) 2.07% 5.63% 6.19% 4.51% 6.36%
================================================================
Net assets at end of year (000's) $ 47,899 $ 52,896 $ 58,485 $ 67,675 $81,140
================================================================
Ratio of net expenses to
average net assets 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to
average net assets 4.33% 4.50% 4.55% 4.52% 4.59%
Portfolio turnover rate 51% 36% 30% 37% 32%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
Countrywide Investments 19.
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND - CLASS C
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------
Per Share Data for a Share Outstanding Throughout Each Year
--------------------------------------------------------------------------------------------------------
Year Ended June 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
----------------------------------------------------------------
Income from investment operations:
Net investment income 0.40 0.42 0.43 0.44 0.44
Net realized and unrealized gains
(losses) on investments (0.24) 0.11 0.16 (0.01) 0.17
----------------------------------------------------------------
Total from investment operations 0.16 0.53 0.59 0.43 0.61
----------------------------------------------------------------
Dividends from net investment
income (0.40) (0.42) (0.43) (0.44) (0.44)
----------------------------------------------------------------
Net asset value at end of year $ 10.88 $ 11.12 $ 11.01 $ 10.85 $ 10.86
================================================================
Total return(A) 1.40% 4.85% 5.49% 4.00% 5.82%
================================================================
Net assets at end of year (000's) $ 4,634 $ 4,747 $ 5,161 $ 5,239 $ 4,814
================================================================
Ratio of net expenses to
average net assets 1.74% 1.74% 1.65% 1.49% 1.49%
Ratio of net investment income to
average net assets 3.58% 3.75% 3.89% 4.02% 4.08%
Portfolio turnover rate 51% 36% 30% 37% 32%
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
20. Countrywide Investments
<PAGE>
Ohio Insured Tax-Free Fund - Class A
Financial Highlights
--------------------------------------------------------------------------------------------------------
Per Share Data for a Share Outstanding Throughout Each Year
--------------------------------------------------------------------------------------------------------
Year Ended June 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 12.37 $ 12.22 $ 11.97 $ 11.99 $ 11.74
----------------------------------------------------------------
Income from investment operations:
Net investment income 0.58 0.61 0.61 0.62 0.63
Net realized and unrealized gains
(losses) on investments (0.34) 0.23 0.25 (0.02) 0.25
----------------------------------------------------------------
Total from investment operations 0.24 0.84 0.86 0.60 0.88
----------------------------------------------------------------
Less distributions:
Dividends from net investment
income (0.58) (0.61) (0.61) (0.62) (0.63)
Distributions from net realized
gains (0.29) (0.08) -- -- --
----------------------------------------------------------------
Total distributions (0.87) (0.69) (0.61) (0.62) (0.63)
----------------------------------------------------------------
Net asset value at end of year $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 11.99
================================================================
Total return(A) 1.81% 7.03% 7.36% 5.05% 7.75%
================================================================
Net assets at end of year (000's) $ 62,737 $ 69,289 $70,816 $ 75,938 $71,393
================================================================
Ratio of net 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 4.72% 4.95% 5.05% 5.12% 5.35%
Portfolio turnover rate 26% 41% 33% 46% 29%
(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.
Countrywide Investments 21.
<PAGE>
OHIO INSURED TAX-FREE FUND - CLASS C
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------
Per Share Data for a Share Outstanding Throughout Each Year
--------------------------------------------------------------------------------------------------------
Year Ended June 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 12.37 $ 12.22 $ 11.97 $ 12.00 $ 11.74
----------------------------------------------------------------
Income from investment operations:
Net investment income 0.49 0.52 0.53 0.56 0.57
Net realized and unrealized gains
(losses) on investments (0.34) 0.23 0.25 (0.03) 0.26
----------------------------------------------------------------
Total from investment operations 0.15 0.75 0.78 0.53 0.83
----------------------------------------------------------------
Less distributions:
Dividends from net investment
income (0.49) (0.52) (0.53) (0.56) (0.57)
----------------------------------------------------------------
Distributions from net realized
gains (0.29) (0.08) -- -- --
----------------------------------------------------------------
Total distributions (0.78) (0.60) (0.53) (0.56) (0.57)
Net asset value at end of year $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 12.00
================================================================
Total return(A) 1.05% 6.24% 6.65% 4.44% 7.31%
================================================================
Net assets at end of year (000's) $ 4,740 $ 5,215 $ 4,639 $ 3,972 $ 4,165
================================================================
Ratio of net expenses to
average net assets(B) 1.50% 1.50% 1.42% 1.25% 1.25%
Ratio of net investment income to
average net assets 3.97% 4.20% 4.37% 4.62% 4.84%
Portfolio turnover rate 26% 41% 33% 46% 29%
(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 1.27% for the year ended
June 30, 1995.
</TABLE>
See accompanying notes to financial statements.
22. Countrywide Investments
<PAGE>
Notes to Financial Statements
June 30, 1999
--------------------------------------------------------------------------------
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
and the Ohio Insured Tax-Free Fund (collectively, the Funds) are each a separate
series of shares of Countrywide Tax-Free Trust (the Trust). The Trust is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated April 13, 1981.
The Declaration of Trust, as amended, permits the Trustees to issue an unlimited
number of shares of each Fund.
The Tax-Free Money Fund seeks the highest level of interest income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-quality, short-term municipal obligations.
The California Tax-Free Money Fund seeks the highest level of interest income
exempt from federal and California income taxes, consistent with liquidity and
stability of principal, by investing primarily in high-quality, short-term
California municipal obligations.
The Ohio Tax-Free Money Fund seeks the highest level of current income exempt
from federal income tax and Ohio personal income tax, consistent with liquidity
and stability of principal. The Fund invests primarily in a portfolio of
high-quality, short-term Ohio municipal obligations.
The Florida Tax-Free Money Fund seeks the highest level of interest income
exempt from federal income tax, consistent with liquidity and stability of
principal, by investing primarily in high-quality, short-term Florida municipal
obligations the value of which is exempt from the Florida intangible personal
property tax.
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income exempt
from federal income tax and Ohio personal income tax, consistent with protection
of capital. The Fund invests primarily in high and medium-quality, long-term
Ohio municipal obligations which are protected by insurance guaranteeing the
payment of principal and interest in the event of a default.
The 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.
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 (Note 7).
Countrywide Investments 23.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Trust's significant accounting policies:
Security valuation -- Tax-Free Money Fund, California Tax-Free Money Fund, Ohio
Tax-Free Money Fund and Florida Tax-Free Money Fund securities are valued on an
amortized cost basis, which approximates market. This involves initially valuing
a security at its original cost and thereafter assuming a constant amortization
to maturity of any discount or premium. This method of valuation is expected to
enable these Funds to maintain a constant net asset value per share. Tax-Free
Intermediate Term Fund and Ohio Insured Tax-Free Fund securities are valued at
market using an independent pricing service which generally utilizes a
computerized grid matrix of tax-exempt securities and evaluations by its staff
to determine what it believes is the fair value of the securities. On limited
occasions, if the valuation provided by the pricing service ignores certain
market conditions affecting the value of a security or the pricing service
cannot provide a valuation, the fair value of the security will be determined in
good faith consistent with procedures established by the Board of Trustees.
Share valuation -- The net asset value per share of the Tax-Free Money Fund and
the California Tax-Free Money Fund is calculated daily by dividing the total
value of a Fund's assets, less liabilities, by its number of shares outstanding.
The 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 the net asset value
per share plus a sales load equal to 2.04% of the net asset value (or 2% of the
offering price). The maximum offering price of Class A shares of the Ohio
Insured Tax-Free Fund is equal to the 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 (Note 7).
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
the 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 determined 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. 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.
24. Countrywide Investments
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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, 1999:
-----------------------------------------------------------------------
Tax-Free Ohio Insured
Intermediate Tax-Free
(000's) Term Fund Fund
-----------------------------------------------------------------------
Gross unrealized appreciation $ 1,264 $ 2,910
Gross unrealized depreciation (613) (380)
-----------------------------------------------------------------------
Net unrealized appreciation $ 651 $ 2,530
=======================================================================
The tax basis of portfolio investments for each Fund is equal to the amortized
cost as shown on the Statements of Assets and Liabilities.
As of June 30, 1999, the Tax-Free Intermediate Term Fund had a capital loss
carryforward for federal income tax purposes of $361,822, which expires on June
30, 2004. These capital loss carryforwards may be utilized in future years to
offset net realized capital gains prior to distribution to shareholders.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) were as follows for
the year ended June 30, 1999:
------------------------------------------------------------------------
Tax-Free Ohio Insured
Intermediate Tax-Free
(000's) Term Fund Fund
------------------------------------------------------------------------
Purchases of investment securities $ 26,540 $ 17,908
========================================================================
Proceeds from sales and maturities of
investment securities $ 32,461 $ 26,665
========================================================================
4. TRANSACTIONS WITH AFFILIATES
The Chairman, President and certain other officers of the Trust are also
officers of Countrywide Financial Services, Inc., or its subsidiaries which
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.
Countrywide Investments 25.
<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 year ended June 30,
1999, the Adviser waived investment advisory fees of $17,332 for the Tax-Free
Money Fund, $51,659 for the Ohio Tax-Free Money Fund and $124,338 for the
Florida Tax-Free Money Fund.
TRANSFER AGENT 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 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 per shareholder account from each of the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund, subject to a $1,000
minimum monthly fee for each Fund, or for each class of shares of a Fund, as
applicable. In addition, each Fund pays CFS 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 the Tax-Free Money Fund,
$3,000 per month from the California Tax-Free Money Fund, $6,000 per month from
the Ohio Tax-Free Money Fund, $3,500 per month from the Florida Tax-Free Money
Fund, and $4,000 per month from each of 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 $3,824 and
$9,705 from underwriting and broker commissions on the sale of shares of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund,
respectively, during the year ended June 30, 1999. In addition, the Adviser
collected $13,216 and $1,347 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.
26. Countrywide Investments
<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, 1999. 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, 1999. Under the terms of its Custodian
Agreement, Huntington receives from the Fund an asset-based fee.
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
and the Ohio Insured Tax-Free Fund are the result of the following capital share
transactions:
------------------------------------------------------------------------
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,
(000's) 1999 1998 1999 1998
--------------------------------------------------------------------------------
CLASS A
Shares sold 1,222 1,116 11,637 11,401
Shares reinvested 154 181 287 236
Shares redeemed (1,729) (1,853) (12,181) (11,832)
--------------------------------------------------------------------------------
Net decrease in shares
outstanding (353) (556) (257) (195)
Shares outstanding,
beginning of year 4,758 5,314 5,600 5,795
--------------------------------------------------------------------------------
Shares outstanding,
end of year 4,405 4,758 5,343 5,600
================================================================================
CLASS C
Shares sold 219 160 45 206
Shares reinvested 14 16 22 17
Shares redeemed (234) (218) (85) (181)
--------------------------------------------------------------------------------
Net increase (decrease) in
shares outstanding (1) (42) (18) 42
Shares outstanding,
beginning of year 427 469 422 380
--------------------------------------------------------------------------------
Shares outstanding,
end of year 426 427 404 422
================================================================================
Countrywide Investments 27.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
6. PORTFOLIO COMPOSITION
As of June 30, 1999, 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 74.7% invested in debt obligations issued by the State of Florida and its
political subdivisions, agencies, authorities and instrumentalities and by other
issuers the value of which is exempt from the Florida intangible personal
property tax. As of June 30, 1999, 15.5% of the portfolio securities of the
Tax-Free Money Fund were concentrated in the State of Ohio, 12.2% in the State
of Texas and 10.7% in the state of Minnesota. For information regarding
portfolio composition by state for the Tax-Free Intermediate Term Fund, see the
Fund's Portfolio of Investments.
The California Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the Florida
Tax-Free Money Fund and the Ohio Insured Tax-Free Fund are each non-diversified
Funds under the 1940 Act. Thus, investments may be concentrated in fewer issuers
than those of a diversified fund. As of June 30, 1999, no non-diversified Fund
had concentrations of investments (10% or greater) in any one issuer.
The Tax-Free Money Fund, the California Tax-Free Money Fund, the Ohio Tax-Free
Money Fund and the Florida Tax-Free Money Fund each invest in municipal
securities maturing in 13 months or less and having a short-term rating in one
of the top two ratings categories by at least two nationally recognized
statistical rating agencies (or by one such agency if a security is rated by
only that agency) or, if unrated, are determined by the Adviser, under the
supervision of the Board of Trustees, to be of comparable quality.
As of June 30, 1999, 49.9% of the Tax-Free Intermediate Term Fund's portfolio
securities were rated AAA/Aaa [using the higher of Standard & Poor's Corporation
(S&P) or Moody's Investors Service, Inc. (Moody's) ratings], 22.2% were rated
AA/Aa, 24.4% were rated A/A and 3.5% were not rated.
As of June 30, 1999, 94.7% 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 61.1%
of its portfolio securities.
28. Countrywide Investments
<PAGE>
Notes to Financial Statements (Continued)
The concentration of investments for each Fund as of June 30, 1999, classified
by revenue source, was as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
California Ohio Florida Tax-Free Ohio
Tax-Free Tax-Free Tax-Free Tax-Free Intermediate Insured
Money Money Money Money Term Tax-Free
Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
General Obligations 12.2% 8.7% 19.4% 13.1% 13.3% 43.3%
Revenue Bonds:
-----------------------------------------------------------------------------------------
Industrial Development/
Pollution Control 40.3% 32.5% 18.7% 12.3% 4.8% 4.9%
Hospital/Health Care 7.8% 10.0% 29.6% 14.3% 24.3% 19.1%
Utilities 11.1% 13.8% 12.7% 14.6% 8.7% 16.7%
Education 5.4% 12.5% 4.9% 15.8% 17.6% 2.7%
Housing/Mortgage 8.8% 7.5% 3.9% 16.4% 11.4% 4.4%
Economic Development 4.4% 8.3% 4.1% 5.8% 2.4% --
Public Facilities 5.0% -- 2.5% 1.4% 5.5% 4.9%
Transportation -- 1.1% 2.4% 2.0% 4.8% 3.0%
Special Tax 1.0% 1.3% 1.3% 1.2% 2.5% --
Leases -- 3.4% -- -- -- --
Miscellaneous 4.0% 0.9% 0.5% 3.1% 4.7% 1.0%
-----------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=========================================================================================
</TABLE>
7. MAXIMUM OFFERING PRICE PER SHARE
Effective August 1, 1999, for accounts opened after July 31, 1999, the maximum
offering price per share of Class A shares of the Tax-Free Intermediate Term
Fund and the Ohio Insured Tax-Free Fund is equal to the net asset value per
share plus a sales load equal to 4.99% of the net asset value (or 4.75% of the
offering price). Effective August 1, 1999, for all accounts, the maximum
offering price per share of Class C shares of each Fund is equal to the net
asset value per share plus a sales load equal to 1.27% of the net asset value
(or 1.25% of the offering price).
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 year ended June 30, 1999,
as "exempt-interest dividends." In addition, on October 30, 1998, the Florida
Tax-Free Money Fund declared and paid a long-term capital gain distribution of
$0.000324 per share, and the Ohio Insured Tax-Free Fund declared and paid a
short-term capital gain distribution of $0.0440 per share and a long-term
capital gain distribution of $0.2410 per share. In January of 1999, shareholders
were provided with Form 1099-DIV which reported the amounts and tax status of
such capital gain distributions paid during calendar year 1998.
Countrywide Investments 29.
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Money Fund
Portfolio of Investments
June 30, 1999
-----------------------------------------------------------------------------------------
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds-- 30.2% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 340 West Virginia St. Bldg. Comm. Lease Rev., Ser. C
(WV Regional Jail) 3.600% 07/01/99 $ 340
315 Washoe Co., NV, GO, Prerefunded @ 102 7.375 07/01/99 321
250 Jefferson, LA, Sales Tax Dist. Prerefunded @ 100 8.250 07/01/99 250
400 American Municipal Power Sys. Impt. BANS
(Montpelier Village Proj.) 3.550 07/15/99 400
225 Denton Co., TX, GO 7.500 07/15/99 225
150 Philadelphia, PA, Gas Works Rev., Ser. 15 4.100 08/01/99 150
485 Arlington, TX, Perm. Impt. GO 4.500 08/15/99 485
235 Georgetown, TX, GO 5.500 08/15/99 236
100 Armstrong Co., PA, Hosp. Auth. Health Center Rev.
(St. Francis Health Care Proj.) 6.300 08/15/99 100
250 Charlotte, NC, COP, Ser. D (Govt. Equip. Proj.) 5.050 09/01/99 251
500 Rhode Island St. GO, Ser. B, Prerefunded @ 102 6.800 10/15/99 508
170 Commerce Charter Twnp., MI, Spec.
Assessment GO, Ser. B 3.700 11/01/99 170
100 West Virginia St. Water Dev. Auth. Rev., Ser. A
(Loan Program) 4.800 11/01/99 100
185 Lewistown Boro, PA, GO, Prerefunded @ 100 6.100 12/15/99 187
560 American Municipal Power Sys. Impt. BANS
(Wellington Village Proj.) 3.500 12/16/99 560
600 Massillon City, OH, Parks and Recreation GO BANS 3.730 01/14/00 602
571 American Municipal Power Sys. Impt. BANS
(Milan Village Proj.) 3.500 01/21/00 571
500 American Municipal Power Sys. Equipment BANS
(Distributive Generation Proj.) 4.250 01/21/00 500
500 Northern Ozaukee School Dist., WI, GO BANS . 3.400 02/01/00 500
395 Umatilla Indian Reserv. Conferated
Tribes GO, Ser. A 4.200 02/01/00 397
180 Lewisville, TX, GO 5.000 02/15/00 182
120 The Colony, TX, GO, Prerefunded @ 100 6.800 02/15/00 122
475 American Municipal Power Sys. Impt. BANS
(Bradner Village Proj.) 3.600 03/23/00 475
------ ------------
$7,606 Total Fixed Rate Revenue & General Obligation Bonds
(Amortized Cost $7,632) $ 7,632
-----------------------------------------------------------------------------------------
</TABLE>
30. Countrywide Investments
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Money Fund (Continued)
-----------------------------------------------------------------------------------------
Principal Market
Amount Floating & Variable Rate Coupon Maturity Value
(000's) Demand Notes -- 52.3% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 800 Trinity River, TX, IDR, Ser. 1997 (ADP, Inc. Proj.) 3.700% 07/01/99 $ 800
500 Indiana Health Fac. Fin. Auth. Rev., Ser. 1997
(Capital Access Designated Pool) 3.550 07/07/99 500
600 Arapahoe Co., CO, Parkview Metro. Dist. GO 3.550 07/07/99 600
1,000 Tucson, AZ, IDA MFH Rev. (Lincoln Garden Proj.) 3.600 07/07/99 1,000
600 Illinois Dev. Fin. Auth. Rev., Ser. 1992
(Uhlich Children's Home Proj.) 3.650 07/07/99 600
1,100 Scio Twnp., MI, EDR 3.730 07/07/99 1,100
200 Indiana St. Dev. Fin. Auth. Rev.
(Lutheran High School) 3.750 07/07/99 200
500 San Rafael, CA, IDR, Ser. 1984
(Phoenix American, Inc.) 3.750 07/07/99 500
590 Brooklyn Park, MN, IDR (Schmidt Proj.) 3.850 07/07/99 590
500 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.) 3.850 07/07/99 500
815 Harvard, IL, Health Care Fac. Rev., Ser. 1998
(Harvard Memorial Hosp. Proj.) 3.850 07/07/99 815
200 Hope, AR, IDR, Ser. A (Champion Parts, Inc. Proj.) 3.950 07/07/99 200
973 Kansas City, MO, IDR (A.M. Castle & Co. Proj.) 3.950 07/07/99 973
1,275 Mankota, MN, IDR, Ser. 1998 (Sacco Family LP Proj.) 3.950 07/07/99 1,275
649 Franklin Park, IL, Rev., Ser. 1994
(A.M. Castle & Co. Proj.) 3.950 07/07/99 649
188 Rosemont, IL, IDR (A.M. Castle & Co. Proj.) 3.950 07/07/99 188
290 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.) 4.050 07/07/99 290
900 Eddyville, IA, IDR (Heartland Lysine, Inc.) 4.100 07/07/99 900
1,000 Coppell, TX, IDR (Minyards Prop., Inc.) 3.500 07/30/99 1,000
500 Arapahoe Co., CO, Rev., Ser. 1997
(Denver Jet Center Proj.) 3.550 07/30/99 500
------ ------------
$3,180 Total Floating & Variable Rate Demand Notes
------ (Amortized Cost $13,180) $ 13,180
------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Coupon Maturity Value
(000's) Adjustable Rate Put Bonds-- 16.3% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,200 Owensboro, KY, IDR, Ser. 1985 (Dart Container) 3.300% 09/01/99 $ 1,200
145 Cuyahoga Co., OH, IDR (Halle Office Bldg.) 3.575 10/01/99 145
1,000 Westmoreland Co., PA, IDR (White
Consolidated Industries) 3.520 12/01/99 1,000
650 Lexington-Fayette Co., KY, Urban Govt. Rev.
(Providence Montessori) 3.625 01/01/00 650
525 Colorado Health Fac. Auth. Rev., Ser. 1998A
(AMC Cancer Center) 3.400 01/15/00 525
605 Buckeye Tax-Exempt Mtg. Bond Trust 3.400 02/01/00 603
------ ------------
$4,125 Total Adjustable Rate Put Bonds
(Amortized Cost $4,123) $ 4,123
-----------------------------------------------------------------------------------------
$24,911 Total Investment Securities-- 98.8%
(Amortized Cost $24,935) $ 24,935
======= ------------
Other Assets in Excess of Liabilities-- 1.2% 299
------------
Net Assets-- 100% $ 25,234
============
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
Countrywide Investments 31.
<PAGE>
--------------------------------------------------------------------------------
California Tax-Free Money Fund
Portfolio of Investments
June 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds-- 28.8% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 986 University of California, Regents COP, Ser. A 3.200% 07/01/99 $ 984
425 Sacramento Co., CA, Airport Sys. Rev., Ser. B 3.500 07/01/99 425
340 Fremont, CA, USD, Ser. A 3.400 08/01/99 340
200 Roseville, CA, Local Govt. Fin. Auth. Rev.,
Prerefunded @ 101 6.250 08/01/99 203
400 California St. GO 6.700 08/01/99 401
255 Napa Valley, CA, USD GO 7.000 08/01/99 256
900 Castro Valley, CA, USD GO 7.000 08/01/99 903
110 Reef-Sunset, CA, USD GO 7.500 08/01/99 110
330 Compton, CA, Cmnty. Redev. Agcy.
(Walnut Indust. Park), Prerefunded @ 102 7.500 08/01/99 338
150 Coachella Valley Co., CA, Water Dist.
No. 54 Impt. Rev. 10.200 08/01/99 151
270 California St. Cmntys. Dev. Auth. Rev.
(Monterey Peninsula) 4.000 08/15/99 270
110 California St. Cmntys. Dev. Auth. Rev.
(Sutter Health Obligated Group) 4.500 08/15/99 110
210 Los Angeles, CA, Conv. & Exhib. Ctr. Auth. COP,
Ser. A, Prerefunded @ 101.5 7.375 08/15/99 214
200 Glendora, CA, Pub. Fin. Auth. Rev. 3.150 09/01/99 20
105 Los Angeles Co., CA, Schs. Regionalized
Business Svcs. Rev., Ser. B 3.300 09/01/99 105
250 Modesto, CA, CSD COP 3.500 09/01/99 250
405 Saratoga, CA, USD GO 4.000 09/01/99 405
100 Southern California Rapid Tran. Dist. Rev 5.000 09/01/99 100
310 Escondido, CA, Joint Pwr. Fin. Auth. Lease
Rev., Ser. B (Escondido Civic Ctr.) 5.300 09/01/99 311
100 California St. GO 5.750 09/01/99 100
500 Los Angeles, CA, GO, Ser. A 6.250 09/01/99 503
1,000 San Francisco, CA, City & Co., USD GO 4.500 09/22/99 1,002
794 University of California, Regents COP, Ser. A 3.250 10/01/99 792
250 Sunnyvale, CA, Fin. Auth. Utility Rev., Ser. B
(Solid Waste Materials Recovery) 5.300 10/01/99 251
300 California St. GO 6.600 11/01/99 304
802 University of California, Regents COP, Ser. A 3.350 01/01/00 800
125 California MFH HFA Rev., Ser. A 3.450 02/01/00 125
115 Palmdale, CA, Cmnty. Dev. Agcy.
Residential Mtg. Rev., Ser. A 6.500 02/01/00 117
250 Santa Clara Valley, CA, Water Dist. COP,
Prerefunded @ 102 6.600 02/01/00 260
250 California St. GO 4.800 03/01/00 253
100 Mesa, CA, Consolidated Water Dist. COP 4.400 03/15/00 101
100 California St. GO 6.650 04/01/00 103
150 Northern California Trans. Rev., Ser. A,
Prerefunded @ 101.5 7.000 05/01/00 157
2,500 California St. Veterans GO 3.200 06/01/00 2,500
200 California Health. Fac. Fin. Auth.
Rev., Ser. B (Catholic Health Facs.) 4.250 07/01/00 201
165 Sacramento, CA, Utility Dist. Rev., Ser. 7 5.000 07/01/00 168
---------- ---------
$ 13,757 Total Fixed Rate Revenue & General Obligation Bonds
(Amortized Cost $13,813) $ 13,813
---------- ---------
</TABLE>
32. Countrywide Investments
<PAGE>
California Tax-Free Money Fund (Continued)
<TABLE>
<CAPTION>
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds-- 28.8% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600 California Health Fac. Fin. Auth. Rev.,
Ser. 1998C (Adventist Hosp.) 3.100% 07/01/99 $ 600
398 Orange Co., CA, Impt. Rev. Asses. Dist. No. 88 3.100 07/01/99 398
1,000 California Statewide Cmntys. Dev. Corp. Rev.
(House Ear Institution) 3.100 07/01/99 1,000
300 Santa Ana, CA, Health Fac. Rev.
(Town & Country Manor Proj.) 3.100 07/01/99 300
600 California PCR Fin. Auth.
(Pacific Gas & Electric) 3.100 07/01/99 600
2,000 California Health Fac. Fin. Auth. Rev.,
Ser. 1998B (Adventist Hosp.) 3.100 07/01/99 2,000
700 Newport Beach, CA, Rev., Ser. B
(Hoag Memorial Hosp.) 3.150 07/01/99 700
600 Newport Beach, CA, Rev., Ser. C
(Hoag Memorial Hosp.) 3.150 07/01/99 600
2,000 Rancho, CA, Water Dist. Fin. Rev., Ser. 1998A 3.000 07/07/99 2,000
500 Riverside, CA, IDR Issue A
(Sunclipse, Inc. Proj.) 3.050 07/07/99 500
600 Montebello, CA, IDR (Sunclipse, Inc. Proj.) 3.050 07/07/99 600
400 California PCR Fin. Auth., Ser. 1983
(Southdown, Inc.) 3.150 07/07/99 400
3,100 California PCR Fin. Auth., Ser. 1983
(Southdown, Inc.) 3.150 07/07/99 3,100
1,000 Los Angeles, CA, Comm. Dev. COP
(Willowbrook Proj.) 3.200 07/07/99 1,000
400 Orange, CA, IDR (Control Air Conditioning) 3.450 07/07/99 400
2,000 ABN AMRO Munitops Trust Cert. (San Diego, CA) 3.450 07/07/99 2,000
1,100 Los Angeles, CA, MFH Rev. (Studio Colony) 3.500 07/07/99 1,100
1,600 Vacaville, CA, IDA IDR (Leggett &
Platt, Inc.) 3.550 07/07/99 1,600
1,960 California Public Capital Impt.
Fin. Auth. Rev. 3.600 07/07/99 1,960
1,300 San Bernardino Co., CA, COP 3.620 07/07/99 1,300
900 Alameda Co., CA, IDR, Ser. A
(Plyproperties Proj.) 3.700 07/07/99 900
1,000 Alameda Co., CA, IDR, Ser. A
(Tool Family Partnership) 3.700 07/07/99 1,000
1,100 Alameda Co., CA, IDR (Dicon
Fiberoptics, Inc. Proj. A) 3.700 07/07/99 1,100
2,600 San Rafael, CA, IDR, Ser. 1984
(Phoenix American, Inc.) 3.750 07/07/99 2,600
900 San Bernardino, CA, IDR (LaQuinta Motor Inns) 3.850 07/07/99 900
1,000 San Bernardino Co., CA, Capital Impt.
Refinancing Proj. Rev. 3.850 07/07/99 1,000
1,500 Hanford, CA, Sewer Rev., Ser A 3.850 07/07/99 1,500
2,000 ABAG Fin. Auth. Nonprofit Corps.
MFH Rev., Ser. A 4.000 07/07/99 2,000
520 California Statewide Cmntys. Dev. Corp. Rev.
(Michigan Hanger) 4.400 07/07/99 520
220 California Statewide Cmntys. Dev. Corp. Rev.
(Jaygee Realty Proj.) 4.450 07/07/99 220
---------- ------------
$ 33,898 Total Floating & Variable Rate Demand Notes
(Amortized Cost $33,898) $33,898
---------- ------------
$ 47,655 Total Investment Securities-- 99.5%
(Amortized Cost $47,111) $47,711
==========
Other Assets in Excess of Liabilities-- 0.5% 256
------------
Net Assets-- 100% $47,967
============
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
Countrywide Investments 33.
<PAGE>
Ohio Tax-Free Money Fund
Portfolio of Investments
June 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds-- 29.7% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,100 American Municipal Power Sys. Impt. BANS
(Montpelier Village Proj.) 3.950% 07/15/99 $ 2,100
820 Columbus, OH, GO (Police/Fireman Disability) 4.000 07/15/99 820
800 Miami Co., OH, Bldg. Impt. GO BANS 3.800 07/15/99 800
1,200 Sandusky Co., OH, Various Purpose GO BANS 4.125 07/29/99 1,200
928 Mason-Deerfield, OH, Joint Fire Dist.
GO BANS, Ser. 1998 4.000 08/05/99 928
2,500 Ottawa Co., OH, Regional Water Sys.
Impt. GO BANS 4.000 08/06/99 2,501
625 Lake Co., OH, Hosp. Fac. Rev., Ser. 1998
(Lake Hosp. Sys.) 4.000 08/15/99 625
3,000 American Municipal Power Sys. Impt. BANS
(City of Bryan Proj.) 3.850 08/27/99 3,000
1,454 Leetonia, OH, School Dist. Impt.
GO BANS, Ser. 1999 3.740 09/01/99 1,455
520 Washington Co., OH, Hosp. Impt. Rev.
(Marietta Area Health) 4.000 09/01/99 520
375 Springboro City, OH, Clear Creek
Park Impt. GO BANS 4.150 09/02/99 375
1,000 Loveland, OH, Real Estate Acq. GO BANS 3.860 09/09/99 1,000
900 Springboro, OH, Street Impt. GO BANS
(South Tech. Bus. Park) 4.050 09/09/99 901
1,000 American Municipal Power Sys. Impt. BANS
(Bowling Green Project) 3.800 09/10/99 1,000
200 American Municipal Power Sys. Impt. BANS
(Bowling Green Project) 3.800 09/10/99 200
1,000 Cleveland, OH, Parking Fac Rev. 4.450 09/15/99 1,003
1,325 Marysville, OH, Various Purpose GO BANS 3.460 09/15/99 1,326
500 Ravena Township, OH, Twnp. Hall &
Garage GO BANS 4.050 09/15/99 500
1,100 Adena, OH, LSD School Impt. GO BANS,
Ser. 1999S 3.590 09/16/99 1,101
2,440 Muskingum Co., OH, Various Purpose GO BANS 3.800 09/22/99 2,442
1,475 Mayfield Village, OH, Various Purpose GO BANS 3.650 09/28/99 1,476
50 Fairlawn, OH, Health Care Fac. Rev.
(St. Edward Proj.), Prerefunded @ 102 8.250 10/01/99 52
210 Fairlawn, OH, Health Care Fac. Rev.
(St. Edward Proj.), Prerefunded @ 102 8.300 10/01/99 217
95 Fairlawn, OH, Health Care Fac. Rev.
(St. Edward Proj.), Prerefunded @ 102 8.350 10/01/99 98
500 Fairlawn, OH, Health Care Fac. Rev.
(St. Edward Proj.), Prerefunded @ 102 8.500 10/01/99 516
500 Gallia Co., OH, Hosp. Fac. Rev.
(Holzer Med. Ctr.) 3.300 10/01/99 500
1,000 Ohio St. Bldg. Auth. Rev., Ser. C,
Prerefunded @ 103 7.200 10/01/99 1,039
200 Ohio St. Bldg. Auth. Rev., Ser. A 4.200 10/01/99 200
600 Beachwood, OH, Street & Sewer Impt. GO BANS 3.750 10/07/99 600
550 Van Wert Co., OH, Various Purpose GO BANS 3.800 10/13/99 551
1,945 Jackson Co., OH, Various Purpose GO BANS,
Ser. 1998 3.620 10/14/99 1,947
2,000 Lucas Co., OH, Metro Sewer & Water Dist.
Rev., Ser. 1998 3.625 10/20/99 2,002
135 Hamilton, OH, GO (Police/Fireman Pension) 4.650 11/01/99 136
1,000 Ohio St. Pub. Fac. Higher Educ.
Rev., Ser. II-B 4.500 11/01/99 1,005
2,300 American Municipal Power Sys. Impt. BANS
(Pioneer Village Proj.) 3.400 11/05/99 2,300
4,000 Evergreen, OH, LSD GO BANS 4.500 11/08/99 1,103
34. Countrywide Investments
<PAGE>
Ohio Tax-Free Money Fund (Continued)
-----------------------------------------------------------------------------------------
<CAPTION>
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds -- 29.7% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,100 North Hampton Village, OH, Sewer Sys.
First Mtg. RANS, Ser. 1999 4.400% 11/12/99 $ 1,104
1,065 Marysville, OH, Various Purpose GO BANS 3.510 11/18/99 1,066
2,000 Summit Co., OH, Various Purpose GO BANS,
Ser. 1998 3.625 11/18/99 2,005
2,440 Chesapeake-Union, OH, LSD School Impt. GO BANS 4.200 11/20/99 2,444
1,000 Belmont Co., OH, Sanitary Sewer Impt. GO BANS 3.510 11/23/99 1,001
1,545 Marion Co., OH, Various Purpose GO BANS 3.470 11/23/99 1,546
580 Muskingum Co., OH, GO BANS
(Brandywine Blvd. Extension) 3.650 11/30/99 581
280 Southwest Licking, OH, LSD School
Impt. GO BANS 3.100 12/01/99 280
830 Sycamore, OH, CSD School Impt. GO, Ser. A 3.400 12/01/99 830
250 Tuscarawas Valley, OH, LSD GO 3.400 12/01/99 250
2,000 Eastern Ohio Regional Wastewater
Auth. Impt. Rev. BANS 4.200 12/02/99 2,003
3,000 American Municipal Power Sys. Impt. BANS
(Bowling Green Proj.) 3.400 12/03/99 3,000
1,000 Logan Co., OH, Sanitary Sewer Sys.
Impt. GO BANS 3.640 12/15/99 1,001
810 Mahoning Valley, OH, Sanitation Dist. Rev. 4.000 12/15/99 813
5,000 Hamilton, OH, LSD School Impt.
GO BANS, Ser. 1999 4.200 12/22/99 5,016
748 Lima, OH, Land Aquisition GO BANS
(River Corridor Proj.) 3.600 01/12/00 749
660 Worthington, OH, CSD School Impt.
GO BANS, Ser. 1999 3.440 01/13/00 661
5,000 American Municipal Power Sys. Equipment BANS
(Distributive Generation Proj.) 4.250 01/21/00 5,000
1,335 Marysville, OH, Various Purpose GO BANS 3.410 01/27/00 1,337
500 North Ridgeville, OH, Water Sys. Impt. GO BANS 3.600 02/01/00 501
1,120 Marion Co., OH, Various Purpose GO BANS 3.500 02/08/00 1,122
486 Maple Heights, OH, CSD Energy Conservation Impt.
GO BANS, Ser. 1999 4.000 02/11/00 488
975 Ottawa Co., OH, Regional Water Sys.
Impt. GO BANS 3.500 02/16/00 977
1,000 Mason, OH, CSD School Impt. GO BANS, Ser. 1999 3.380 02/17/00 1,003
765 Ottawa Co., OH, Port Auth. Fac. Impt. GO BANS 3.550 02/21/00 766
600 North Ridgeville, OH, Road Impt.
GO BANS, Ser. 1999 (Bainbridge Proj.) 3.600 03/02/00 601
800 Salem, OH, CSD School Impt. GO BANS, Ser. 1999 3.460 03/03/00 801
1,000 Marysville, OH, Various Purpose GO BANS 3.360 03/16/00 1,002
2,000 American Municipal Power Sys. Impt. BANS
(St. Mary's Proj.) 3.550 03/23/00 2,000
300 New Knoxville, OH, School Construction GO BANS 4.510 03/23/00 303
2,200 American Municipal Power Sys. Impt. BANS
(Lodi Village Proj.) 3.400 03/24/00 2,200
1,400 American Municipal Power Sys. Impt. BANS
(Genoa Village Proj.) 3.600 03/28/00 1,400
850 Genoa, OH, Water Sys. Impt. GO BANS 3.400 03/30/00 850
700 Franklin Co., OH, Dev. Ref. Rev., Ser. 1983
(American Chemical Soc. Proj.) 5.500 04/01/00 710
700 Brook Park, OH, GO BANS 3.500 04/07/00 701
1,060 Marysville, OH, Various Purpose GO BANS 3.460 04/13/00 1,062
1,150 Marysville, OH, Various Purpose GO BANS 3.590 04/13/00 1,153
4,300 Hebron, OH, Sanitary Sewer Sys. Rev. 4.000 04/17/00 4,318
1,000 Ohio St. Highway Impt. GO, Ser. C 4.000 05/01/00 1,004
Countrywide Investments 35.
<PAGE>
<CAPTION>
Ohio Tax-Free Money Fund (Continued)
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds -- 29.7% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,500 Mentor, OH, Exempted Village School Dist.
GO BANS, Ser. 1999 3.380% 05/04/00 $ 1,501
3,000 Cincinnati, OH, CSD GO BANS 3.900 05/12/00 3,013
1,500 Ross Co., OH, Bldg. Auth. Acquisition GO BANS 3.300 05/17/00 1,500
1,100 Williard City, OH, Street Impt. GO BANS 3.650 05/25/00 1,102
1,040 Ohio St. Water Dev. Auth. Impt. Rev. 5.000 06/01/00 1,053
450 Springboro, OH, GO BANS (South Main Street) 3.660 06/01/00 451
1,640 Ohio St. Water Dev. Auth. Impt. Rev. 5.400 06/01/00 1,671
1,100 Marysville, OH, GO BANS (Phase II Notes) 3.880 06/15/00 4,010
2,450 Marysville, OH, Various Purpose GO BANS 3.660 06/15/00 2,456
2,755 Obetz, OH, Various Purpose GO BANS 3.700 06/15/00 2,760
1,000 American Municipal Power Sys. Impt. BANS
(Village of New Bremen Proj.) 3.700 06/16/00 1,000
1,250 American Municipal Power Sys. Impt. BANS
(Deshler, OH, Proj.) 4.000 06/16/00 1,250
3,000 East Muskingum, OH, Water Auth. Rev. BANS 4.320 06/22/00 3,009
---------- ---------
$ 115,681 Total Fixed Rate Revenue & General Obligation Bonds
(Amortized Cost $115,964) $115,964
---------- ---------
<CAPTION>
-----------------------------------------------------------------------------------------
Principal Market
Amount Floating & Variable Rate Coupon Maturity Value
(000's) Demand Notes -- 64.3% Rate Date (000's)
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,400 Cuyahoga Co., OH, Hosp. Rev.
(University Hosp. of Cleveland) 3.800% 07/01/99 $ 4,400
2,800 Ohio St. Air Quality Dev. Auth. Rev. (CG&E) 3.350 07/01/99 2,800
300 Ohio St. Water Dev. Auth. Impt. Rev.,
Ser. 1996B (Mead Corp.) 3.800 07/01/99 300
1,600 Ohio St. Water Dev. Auth. Impt. Rev.,
Ser. B (Mead Corp.) 3.800 07/01/99 1,600
7,000 ABN AMRO Munitops Trust Cert. 1998-I8
(Cleveland Water Works) 3.560 07/07/99 7,000
400 Akron, Bath & Copley, OH, Joint Twnsp.
Hosp. Rev. (Visiting Nurse Svcs. Proj.) 3.650 07/07/99 400
1,515 Allen Co., OH, Health Care Fac. Rev.
(Mennonite Memorial Home Proj.) 3.650 07/07/99 1,515
1,335 Village of Andover, OH, Health Care Rev.,
Ser. 1996 (D&M Realty Proj.) 3.620 07/07/99 1,335
3,400 Ashtabula Co., OH, Hosp. Fac. Rev., Ser. 1995
(Ashtabula Co. Med. Ctr. Proj.) 3.620 07/07/99 3,400
3,055 Butler Co., OH, Hosp. Fac. Rev., Ser. 1998A
(Berkeley Square Retirement Ctr. Proj.) 3.650 07/07/99 3,055
1,000 Butler Co., OH, IDR (Phillip Morris Co.) 3.650 07/07/99 1,000
950 Centerville, OH, Health Care Rev.
(Bethany Memorial) 3.500 07/07/99 950
9,400 Clermont Co., OH, Hosp. Fac. Rev., Ser. A
(Mercy Health Sys.) 3.500 07/07/99 9,400
2,600 Clermont Co., OH, Hosp. Fac. Rev., Ser. B
(Mercy Health Sys.) 3.600 07/07/99 2,600
468 Cleveland, OH, Parking Fac. Rev. 3.770 07/07/99 468
3,910 Cleveland, OH, Waterworks Rev., Ser. 58 3.700 07/07/99 3,910
1,600 Clinton Co., OH, Hosp. Rev.
(Clinton Memorial Hosp.) 3.650 07/07/99 1,600
36. Countrywide Investments
<PAGE>
<CAPTION>
Ohio Tax-Free Money Fund (Continued)
Principal Market
Amount Floating & Variable Rate Coupon Maturity Value
(000's) Demand Notes -- 64.3% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 7,000 Clinton Co., OH, Hosp. Rev. (Ohio
Hospital Cap., Inc.) 3.500% 07/07/99 $ 7,000
200 Columbus, OH, GO, Ser. 1 3.650 07/07/99 200
1,700 Columbus, OH, Sewer Sys. Rev. 3.700 07/07/99 1,700
2,200 Cuyahoga Co., OH, Educ. Fac. Rev., Ser. 1998
(United Cerebral Palsy Assoc.) 3.600 07/07/99 2,200
555 Cuyahoga Co., OH, Health Care Fac. Rev.,
Ser. 1993A (Hospice of Western Reserve) 3.600 07/07/99 555
1,750 Cuyahoga Co., OH, Health Care Fac. Rev.,
Ser. 1993B (Hospice of Western Reserve) 3.600 07/07/99 1,750
2,000 Cuyahoga Co., OH, IDR, Ser. 1989
(Motch Corp. Proj.) 3.800 07/07/99 2,000
865 Cuyahoga Co., OH, IDR (Pleasant Lake Assoc.) 3.600 07/07/99 865
1,890 Defiance Co., OH, IDR (Isaac Property Proj.) 3.600 07/07/99 1,890
3,500 Delaware Co., OH, Health Care Fac. Rev.,
Ser. 1998 (Sarah Moore Home Proj.) 3.770 07/07/99 3,500
900 Delaware Co., OH, IDR, Ser. 1985
(MRG Ltd. Proj.) 3.700 07/07/99 900
2,160 Erie Co., OH, IDR (Toft Dairy, Inc.) 3.600 07/07/99 2,160
2,380 Franklin Co., OH, EDR (Dominican Sisters) 3.650 07/07/99 2,380
3,685 Franklin Co., OH, EDR, Ser. 1998
(Unity Resource Center Proj.) 3.650 07/07/99 3,685
1,215 Franklin Co., OH, Health Care Fac. Rev.
(Lifeline Organ Procurement) 3.650 07/07/99 1,215
4,735 Franklin Co., OH, Hosp. Rev.
(U.S. Health Corp.) 3.550 07/07/99 4,735
4,280 Franklin Co., OH, Hosp. Rev.
(U.S. Health Corp.) 3.550 07/07/99 4,280
8,000 Franklin Co., OH, IDR (Berwick Steel) 4.700 07/07/99 8,000
1,150 Franklin Co., OH, IDR (Ohio Girl Scouts) 3.620 07/07/99 1,150
564 Franklin Co., OH, IDR, Ser. D (Kindercare) 3.650 07/07/99 564
400 Franklin Co., OH, IDR (Columbus College) 3.620 07/07/99 400
2,000 Franklin Co., OH, IDR (Alco Standard Corp.) 3.850 07/07/99 2,000
2,000 Geauga Co., OH, Health Care Fac. Rev.,
Ser. 1998A (Heather Hill Proj.) 3.720 07/07/99 2,000
1,245 Green Co., OH, Health Care Fac. Rev.
(Green Oaks Proj.) 3.600 07/07/99 1,245
1,078 Hamilton Co., OH, EDR, Ser. 1995
(Cincinnati Assoc. for the Performing Arts) 3.650 07/07/99 1,078
5,000 Hamilton Co., OH, Fac. Rev., Ser. 1997A
(Episcopal Retirement Homes) 3.600 07/07/99 5,000
1,080 Hamilton Co., OH, Health Care Fac. Rev.
(Aloysius Orphanage Proj.) 3.600 07/07/99 1,080
6,000 Hamilton Co., OH, Hosp. Fac. Rev., Ser. 1997A
(Children's Hosp. Med. Ctr.) 3.600 07/07/99 6,000
8,600 Hamilton Co., OH, Hosp. Fac. Rev., Ser. E
(Health Alliance of Greater Cincinnati) 3.350 07/07/99 8,600
600 Hamilton Co., OH, Hosp. Fac. Rev., Ser. F
(Health Alliance of Greater Cincinnati) 3.350 07/07/99 600
3,000 Hamilton OH, MFH Rev., Ser. A
(Knollwood Village Apts.) 3.620 07/07/99 3,000
2,000 Hamilton OH, MFH Rev. (Knollwood
Village Apts.) 3.620 07/07/99 2,000
2,690 Hancock Co., OH, MFM Rev., Ser. A
(Crystal Glen Apts. Proj. Phase II) 3.620 07/07/99 2,690
375 Hudson Village, OH, IDR, Ser. A (Kindercare) 3.650 07/07/99 375
885 Huron Co., OH, Rev. (Norwalk Furniture Corp.) 3.600 07/07/99 885
Countrywide Investments 37.
<PAGE>
<CAPTION>
Ohio Tax-Free Money Fund (Continued)
Principal Market
Amount Floating & Variable Rate Coupon Maturity Value
(000's) Demand Notes -- 64.3% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 7,105 Lima, OH, Hosp. Fac. & Impt. Rev., Ser. 1996
(Lima Memorial Hosp.) 3.650% 07/07/99 $ 7,105
7,600 Lorain Co., OH, Hosp. Fac. Rev., Ser. 1998A
(Catholic Healthcare Partners) 3.500 07/07/99 7,600
494 Lorain Co., OH, IDR, Ser. C (Kindercare) 3.650 07/07/99 494
1,880 Lorain Co., OH, IDR (EMH Med. Ctr. Proj.) 3.600 07/07/99 1,880
300 Lucas Co., OH, Rev. (Sunshine Children's Home) 3.650 07/07/99 300
935 Lucas Co., OH, IDR, Ser. D (Kindercare) 3.650 07/07/99 935
360 Lucas Co., OH, IDR (Associates Proj.) 3.720 07/07/99 360
1,900 Mahoning Co., OH, Health Care Fac. Rev.
(Copeland Oaks) 3.620 07/07/99 1,900
1,415 Mahoning Co., OH, Health Care Fac. Rev.
(Ohio Heart Institute) 3.620 07/07/99 1,415
330 Marion Co., OH, Hosp. Impt. Rev.
(Pooled Lease Proj.) 3.620 07/07/99 330
445 Marion Co., OH, Hosp. Impt. Rev.
(Pooled Lease Proj.) 3.620 07/07/99 445
680 Marion Co., OH, Hosp. Impt. Rev.
(Pooled Lease Proj.) 3.620 07/07/99 680
300 Medina, OH, IDR (Kindercare) 3.650 07/07/99 300
900 Meigs Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.) 3.700 07/07/99 900
287 Middletown, OH, IDR, Ser. A (Kindercare) 3.650 07/07/99 287
865 Monroe, OH, IDR, Ser. 1985 (Magnode Corp.) 3.550 07/07/99 865
2,000 Montgomery Co., OH, EDR (Dayton Art Institute) 3.700 07/07/99 2,000
520 Montgomery Co., OH, Health Care Rev., Ser. A
(Dayton Area MRI Consortium) 3.600 07/07/99 520
3,555 Montgomery Co., OH, Health Care Rev.
(Comm. Blood Ctr. Proj.) 3.620 07/07/99 3,555
340 Montgomery Co., OH, IDR (Kindercare) 3.650 07/07/99 340
3,700 Montgomery Co., OH, Ltd. Oblig. Rev., Ser. 1996
(St. Vincent de Paul Proj.) 3.600 07/07/99 3,700
1,000 Morrow Co., OH, IDR (Field Container Corp.) 3.550 07/07/99 1,000
4,800 Ohio St. EDR, Ser. 1983 (Court St. Ctr.
Assoc. Ltd. Proj.) 3.450 07/07/99 4,800
2,845 Ohio St. Higher Educ. Fac. Rev.
(Mount Union College Proj.) 3.550 07/07/99 2,845
4,400 Ohio St. Higher Educ. Fac. Rev. (Pooled Fin.) 3.620 07/07/99 4,400
4,900 Ohio St. Higher Educ. Fac. Rev. (Pooled Fin.) 3.620 07/07/99 4,900
5,000 Ohio St. Higher Educ. Fac. Rev. (Pooled Fin.) 3.620 07/07/99 5,000
3,500 Ohio St. Higher Educ. Fac. Rev.
(Kenyon College Proj.) 3.700 07/07/99 3,500
500 Ohio St. Higher Educ. Fac. Rev.
(John Carroll University) 3.875 07/07/99 500
590 Ohio St. IDR, Ser. 1994 (A.M. Castle
& Co. Proj.) 3.950 07/07/99 590
9,540 Ohio St. Turnpike Rev., Ser. 71 3.690 07/07/99 9,540
2,495 Ohio St. Water Dev. Auth. Impt. Rev. 3.690 07/07/99 2,495
715 Orrville, OH, Hosp. Fac. Rev., Ser. 1990
(Orrville Hosp.) 3.550 07/07/99 715
1,800 Ottawa Co., OH, Hosp. Fac. Rev.
(Luther Home of Mercy Proj.) 3.650 07/07/99 1,800
465 Pike Co., OH, EDR (Pleasant Hill) 3.620 07/07/99 465
900 Rickenbacker, OH, Port. Auth. Rev.
(Rickenbacker Holdings, Inc.) 3.620 07/07/99 900
5,725 Sharonville, OH, IDR (Duke Realty Proj.) 3.620 07/07/99 5,725
437 Stark Co., OH, IDR, Ser. D (Kindercare) 3.650 07/07/99 437
1,870 Summit Co., OH, Health Care Fac. Rev.,
Ser. 1997 (Evant, Inc. Proj.) 3.650 07/07/99 1,870
38. Countrywide Investments
<PAGE>
<CAPTION>
Ohio Tax-Free Money Fund (Continued)
Principal Market
Amount Floating & Variable Rate Coupon Maturity Value
(000's) Demand Notes -- 64.3% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,400 Summit, OH, Civic Fac. Rev., Ser. 1997
(YMCA Proj.) 3.600 07/07/99 $ 3,400
1,910 Summit Co., OH, IDR (Bowery Assoc.) 3.570 07/07/99 1,910
505 Summit Co., OH, IDR (Go-Jo Indust.,
Inc. Proj.) 3.620 07/07/99 505
4,375 Trumbull Co., OH, Health Care Fac. Rev.
(Shepherd of the Valley) 3.620 07/07/99 4,375
375 Wadsworth, OH, IDR (Kindercare) 3.650 07/07/99 375
1,600 Warren Co., OH, IDR (Liquid Container Proj.) 3.650 07/07/99 1,600
1,300 Westlake, OH, IDR (Nordson Co.) 3.700 07/07/99 1,300
900 Wyandot Co., OH, IDR, Ser. 1985
(MRG Ltd. Proj.) 3.700 07/07/99 900
800 Columbus, OH, Elec. Sys. Rev. 3.000 07/30/99 800
3,885 Cuyahoga Co., OH, IDR (S&R Playhouse Realty) 4.000 07/30/99 3,885
3,500 Delaware Co., OH, IDR (Radiation
Sterilizers, Inc.) 3.350 07/30/99 3,500
200 Franklin Co., OH, IDR (BOA Ltd. Proj.) 3.400 07/30/99 200
1,300 Franklin Co., OH, IDR (Jacobsen Stores) 3.400 07/30/99 1,300
1,765 Franklin Co., OH, IDR (Capitol South) 3.400 07/30/99 1,765
1,400 Hamilton Co., OH, IDR (ADP System) 3.250 07/30/99 1,400
2,800 Muskingum Co., OH, IDR (Elder-Beerman) 3.300 07/30/99 2,800
500 Ohio St. Environmental Impt. Rev.
(U.S. Steel Corp. Proj.) 3.300 07/30/99 500
---------- ---------
$ 251,323 Total Floating & Variable Rate Demand Notes
(Amortized Cost $251,323) $251,323
---------- ---------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Principal Market
Amount Coupon Maturity Value
(000's) Adjustable Rate Put Bonds-- 5.9 % Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,495 Perry Co., OH, Nursing Fac. Rev., Ser. 1996
(New Lexington Health Corp. Proj.) 4.000% 09/01/99 $ 2,495
615 Riverside, OH, EDR (Riverside Assoc.
Ltd. Proj.) 3.200 09/01/99 615
4,740 Cuyahoga Co., OH, IDR (Halle Office Building) 3.575 10/01/99 4,740
1,175 Miami Valley Tax-Exempt Mtg. Bond Trust 4.880 10/15/99 1,175
1,365 Clermont Co., OH, EDR (John Q. Hammons Proj.) 3.100 11/01/99 1,365
580 Franklin Co., OH, IDR (GSW Proj.) 3.300 11/01/99 580
3,030 Ohio St. HFA MFH (Lincoln Park) 3.600 11/01/99 3,030
3,425 Richland Co., OH, IDR (Mansfield Sq. Proj.) 3.100 11/15/99 3,425
455 Cuyahoga Co., OH, Health Care Rev., Ser. A
(Cleveland Neighborhood) 3.400 12/01/99 455
3,540 Franklin Co., OH, IDR (Leveque & Assoc. Proj.) 3.250 12/01/99 3,540
875 Scioto Co., OH, Health Care Rev.
(Hillview Retirement) 3.250 12/01/99 875
940 Gallia Co., OH, IDR (Jackson Pike Assoc.) 3.200 12/15/99 940
---------- ---------
$ 23,235 Total Adjustable Rate Put Bonds
(Amortized Cost $23,235) $ 23,235
---------- ---------
</TABLE>
Countrywide Investments 39.
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Ohio Tax-Free Money Fund (Continued)
Principal Market
Amount Coupon Maturity Value
(000's) Commercial Paper-- 0.8 % Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,000 Lorain Co., OH, (Catholic Healthcare Partners) 3.200% 08/03/99 $ 3,000
(Amortized Cost $3,000)
---------- ---------
$ 393,239 Total Investments at Value-- 100.7%
(Amortized Cost $393,522) $393,522
==========
Liabilities in Excess of Other Assets-- (0.7)% (2,725)
---------
Net Assets-- 100.0% $390,797
=========
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
40. Countrywide Investments
<PAGE>
<TABLE>
<CAPTION>
Florida Tax-Free Money Fund
Portfolio of Investments
June 30, 1999
-----------------------------------------------------------------------------------------
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds-- 31.2% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,700 Port St. Joe, FL, Cap. Impt. Rev. BANS,
Ser. 1998 4.350% 07/01/99 $ 1,700
100 Brevard Co., FL, School Board COP, Ser. A 5.300 07/01/99 100
100 Florida St. GO PCR, Ser. X 5.600 07/01/99 100
100 Mesa, AZ, GO 5.800 07/01/99 100
100 Broward Co., FL, School Board COP Rev. 6.000 07/01/99 100
200 Broward Co., FL, School Board COP Rev. 6.750 07/01/99 200
325 Cape Coral, FL, GO, Prerefunded @ 102 6.800 07/01/99 332
200 Miami-Dade Co., FL, School Board COP, Ser. A 4.000 08/01/99 200
100 Manatee Co., FL, School Dist. Sales Tax Rev. 4.000 08/01/99 100
500 Palm Beach Co., FL, School Board COP 4.500 08/01/99 500
100 Dade Co., FL, School Board COP
(G. Holmes Braddock Sr. H.S.) 4.625 08/01/99 100
100 Florida St. Correctional Privatization COP
(Bay Co. Proj.) 4.625 08/01/99 100
1,000 Wadsworth, OH, CSD School Impt. GO BANS 3.470 08/10/99 1,001
250 Texas Muni. Pwr. Agency Rev. 4.500 09/01/99 250
100 Florida St. Dept. of Gen. Services,
Div. of Fac. Mgmt. Rev., Ser. B 4.600 09/01/99 100
250 Las Vegas Valley, NV, Water District Rev. 4.700 09/01/99 251
150 Homestead, FL, Special Ins. Assessment Rev. 4.750 09/01/99 150
300 Abilene, TX, Hlth. Fac. Dev. Hosp. Rev.
(Hendrick Med. Ctr.) 5.100 09/01/99 301
100 Ft. Lauderdale, FL, Excise Tax Rev.,
Prerefunded @ 101 6.375 09/01/99 102
150 Town of Avon, CO, Sales Tax Rev., Ser. 1999 3.250 09/15/99 150
100 North Harris, TX, Montgomery Comm. College
District Rev. 5.000 09/15/99 100
205 Glenwood Springs, CO, Sales & Use Tax Rev. 3.250 10/01/99 205
575 St. Lucie Co., FL, Limited Tax GO 4.000 10/01/99 577
250 Orlando, FL, Capital Impt. Special Rev.,
Ser. B 4.250 10/01/99 251
500 Dade Co., FL, Water & Sewer Sys. Rev. 4.750 10/01/99 502
350 Lee Co., FL, Capital Impt. Rev., Ser. B,
Prerefunded @ 100 6.000 10/01/99 352
200 Hillsborough Co., FL, Aviation Auth.
Rev., Ser. A 6.150 10/01/99 201
500 Hillsborough Co., FL, Aviation Auth.
Rev., Ser. B, Prerefunded @ 102 7.000 10/01/99 514
375 Crawford Co., OH, Various Purpose GO 3.150 12/01/99 375
555 Fostoria, OH, CSD GO 3.200 12/01/99 555
800 Iowa Student Loan Liquidity Corp. Rev., Ser. C 6.500 12/01/99 811
573 Clarendon, NY, GO BANS 3.625 12/22/99 574
500 Northern Ozaukee, WI, School Dist. GO BANS 3.400 02/01/00 500
---------- ---------
$ 11,408 Total Fixed Rate Revenue & General Obligation Bonds
(Amortized Cost $11,454) $ 11,454
---------- ---------
</TABLE>
Countrywide Investments 41.
<PAGE>
<TABLE>
<CAPTION>
Florida Tax-Free Money Fund (Continued)
Principal Market
Amount Floating & Variable Rate Coupon Maturity Value
(000's) Demand Notes -- 65.4% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500 Martin Co., FL, Dev. Auth. PCR, Ser. 1994
(Florida Power & Light) 3.350% 07/01/99 $ 500
400 Putnam Co., FL, Dev. Auth. PCR
(Florida Power & Light) 3.350 07/01/99 400
1,800 Hillsborough Co., FL, IDA PCR (Tampa Elec.) 3.350 07/01/99 1,800
400 Tampa Sports Auth. Rev. (Stadium Proj.) 3.450 07/01/99 400
1,200 Broward Co., FL, HFA MFH Rev.
(Margate Invest. Proj.) 3.450 07/07/99 1,200
1,800 Orange Co., FL, IDA Rev. (Trinity Prep School) 3.500 07/07/99 1,800
400 St. John's Co., FL, HFA Rev., Ser. 1996
(Anastasia Shores Apts. Proj.) 3.500 07/07/99 400
1,080 Florida HFA MFH Rev., Ser. EEE
(Carlton Arms II Proj.) 3.500 07/07/99 1,080
225 Putnam Co., FL, Dev. Auth. PCR, Ser. H-1
(Seminole Elec. Coop.) 3.550 07/07/99 225
250 Putnam Co., FL, Dev. Auth. PCR, Ser. H-2
(Seminole Elec. Coop.) 3.550 07/07/99 250
900 St. Petersburg, FL, HFA Rev., Ser. 1997
(Menorah Manor Proj.) 3.550 07/07/99 900
475 Volusia Co., FL, HFA MFH Rev., Ser. H
(Sun Pointe Apts.) 3.550 07/07/99 475
900 Manatee Co., FL, HFA MFH Rev.
(Harbour Proj. B) 3.600 07/07/99 900
700 ABN AMRO Munitops Trust Cert. 1998-9
(Florida Board of Educ.) 3.640 07/07/99 700
2,000 ABN AMRO Munitops Cert. Trust 1998-8
(Dade Co., FL, Water & Sewer Sys. Rev.) 3.640 07/07/99 2,000
1,100 Plant City, FL, Hosp. Rev.
(South Florida Baptist Hosp.) 3.650 07/07/99 1,100
1,400 Illinois Dev. Fin. Auth. Rev.
(Council for Jewish Elderly) 3.650 07/07/99 1,400
500 Orange Co., FL, Health Fac. Auth. Rev.
(Adventist Sunbelt) 3.650 07/07/99 500
600 Florida Housing Fin. Corp. MFH Rev.,
(South Pointe Proj.) 3.660 07/07/99 600
100 Dade Co., FL, IDA Rev. 3.730 07/07/99 100
960 McCreary Co., KY, IDR (Le Sportsac Proj.) 3.750 07/07/99 960
700 McCreary Co., KY, IDR, Ser. B
(Le Sportsac Proj.) 3.750 07/07/99 700
500 Highlands Co., FL, Health Fac. Rev.
(Adventist Sunbelt) 3.750 07/07/99 500
800 Marion Co., FL, HFA Rev. (Paddock Place Proj.) 3.750 07/07/99 800
500 Marion Co., FL, HFA Rev. (Summer Trace Apts.) 3.750 07/07/99 500
1,000 Lee Co., FL, IDR Educ. Fac. Rev.
(The Canterbury School Proj.) 3.750 07/07/99 1,000
1,150 Jacksonville, FL, Health Fac. Rev.
(River Garden) 3.800 07/07/99 1,150
1,000 Jacksonville, FL, Health Fac. Rev.
(Faculty Practice Assoc.) 3.850 07/07/99 1,000
635 Harvard, IL, Health Care Fac. Rev., Ser. 1998
(Harvard Memorial Hosp.) 3.850 07/07/99 635
---------- ---------
$ 23,975 Total Floating & Variable Rate Demand Notes
(Amortized Cost $23,975) $ 23,975
---------- ---------
</TABLE>
42. Countrywide Investments
<PAGE>
<TABLE>
<CAPTION>
Florida Tax-Free Money Fund (Continued)
Principal Market
Amount Coupon Maturity Value
(000's) Adjustable Rate Put Bonds-- 2.6% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 350 Corpus Christi, TX, IDR (Tex-Air
Invest. Co. Proj.) 3.350% 08/01/99 $ 350
600 Putnam Co., FL, Dev. Auth. PCR, Ser. 1984D
(Seminole Elec. Coop.) 3.125 12/15/99 600
---------- ---------
$ 950 Total Adjustable Rate Put Bonds
(Amortized Cost $950) $ 950
---------- ---------
$ 36,333 Total Investments at Value-- 99.2%
(Amortized Cost $36,379) $ 36,379
==========
Other Assets in Excess of Liabilities-- 0.8% 276
---------
Net Assets-- 100.0% $ 36,655
=========
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
Countrywide Investments 43.
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Intermediate Term Fund
Portfolio of Investments
June 30, 1999
-----------------------------------------------------------------------------------------
Principal Market
Amount Coupon Maturity Value
(000's) Municipal Bonds-- 101.2% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona -- 2.9%
$ 400 Arizona Educ. Loan Mkt. Corp. Rev., Ser. A 6.700% 03/01/00 $ 408
600 Maricopa Co., AZ, School Dist. Rev.,
Ser. 1991C (Tempe Elem.) 8.000 07/01/04 692
300 Tucson, AZ, Water Dist. Rev. 9.750 07/01/10 416
---------
1,516
---------
California -- 1.4%
450 Sacramento Co., CA, MFH ARPB
(Fairway One Apts.) 5.875 02/01/03 450
250 California HFA Multi-Unit Rental Rev., Ser. B 6.500 08/01/05 264
---------
714
---------
Colorado -- 1.3%
400 Arapahoe Co., CO, Parkview Metro. Dist. GO 3.550 07/01/99 400
300 Highland Ranch, CO, Metro. Dist. GO, Ser. A 5.000 12/01/10 295
---------
695
---------
Florida -- 12.2%
200 Hillsborough Co., FL, PCR Rev.
(Tampa Elec. Proj.) 3.350 07/01/99 200
500 Florida HFA MFH ARPB, Ser. 1978B
(Hampton Lakes II Proj.) 5.700 04/01/01 502
750 Hillsborough Co., FL, Solid Waste Rev. 5.500 10/01/06 783
455 Pensacola, FL, Airport Rev., Ser. 1997B 5.400 10/01/07 469
1,000 Pasco Co., FL, HFA MFH Rev., Ser. 1997B
(Cypress Trail Apts.) 5.500 06/01/08 1,041
1,255 Florida HFA MFH Sr. Lien, Ser. I-1 6.100 01/01/09 1,323
1,000 Halifax Hosp. Medical Ctr., FL, Health Care
Fac. Rev., Ser. 1998A 4.800 04/01/10 953
365 Halifax Hosp. Medical Ctr.. FL, Health Care
Fac. Rev., Ser. 1998A 5.000 04/01/11 354
455 Tampa, FL, Health Sys. Rev., Ser. A-1
(Catholic Health East) 5.250 11/15/11 457
365 Halifax Hosp. Medical Ctr., FL, Health Care
Fac. Rev., Ser. 1998A 5.000 04/01/12 352
---------
6,434
---------
Georgia -- 0.3%
150 Savannah, GA, Hosp. Auth. Rev.
(St. Joseph's/Candler Health Sys.) 5.250 07/01/13 149
---------
Illinois -- 2.1%
1,100 Illinois Health Fac. Auth. Rev., Ser. B
(Elmhurst Hosp.) 3.500 07/01/99 1,100
---------
Indiana -- 9.4%
3,185 Purdue University, IN, COP, Prerefunded @ 102 6.250 07/01/01 3,374
1,000 Indiana Bond Bank Special Prog. Rev., Ser. A-1 6.650 01/01/04 1,053
500 Indiana HFA Multi-Unit Mtg. Prog. Rev.,
Ser. 1992A 6.600 01/01/12 526
---------
4,953
---------
</TABLE>
44. Countrywide Investments
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Intermediate Term Fund (Continued)
Principal Market
Amount Coupon Maturity Value
(000's) Municipal Bonds-- 101.2% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Iowa -- 2.1%
$ 120 Cedar Rapids, IA, Hosp. Fac. Rev.
(St. Luke's Methodist Hosp.),
Prerefunded @ 102 6.000% 08/15/03 $ 129
250 Iowa Student Loan Liquidity Corp. Rev. 6.400 07/01/04 265
325 Iowa HFA Rev., Ser. A 6.500 07/01/06 341
240 Iowa Student Loan Liquidity Corp. Rev. 6.600 07/01/08 255
130 Cedar Rapids, IA, Hosp. Fac. Rev.
(St. Luke's Methodist Hosp.) 6.000 08/15/09 138
---------
1,128
---------
Kentucky -- 2.4%
500 Kentucky St. EDR (Health Alliance) 3.350 07/07/99 500
750 Kentucky St. Turnpike Auth. EDR
(Revitalization Proj.) 5.250 07/01/05 777
---------
1,277
---------
Louisiana -- 1.9%
440 Louisiana Public Fac. Auth. Rev.
(Medical Ctr. of Louisiana) 6.000 10/15/03 458
500 West Ouachita Parish, LA, School Dist. GO,
Ser. A 6.700 03/01/06 530
---------
988
---------
Massachusetts -- 2.9%
500 New England Educ. Loan Mkt. Corp. Rev.,
Ser. 1992A 6.500 09/01/02 526
500 New England Educ. Loan Mkt. Corp. Rev.,
Ser. 1992B 6.600 09/01/02 528
445 Massachusetts St. Indust. Fin. Agy. Rev.,
Ser. 1997 (Hudner Assoc.) 5.000 01/01/08 449
---------
1,503
---------
Michigan -- 4.8%
1,000 Michigan St. Bldg. Auth. Rev., Ser. II 6.400 10/01/04 1,064
1,000 Michigan St. Hosp. Fin. Auth. Rev., Ser. A
(McLaren Health Care Corp.) 5.250 06/01/07 1,013
450 Battle Creek, MI, EDR (Kellogg Co. Proj.) 5.125 02/01/09 454
---------
2,531
---------
Mississippi -- 1.6%
500 Mississippi Higher Educ. Rev., Ser. B 6.100 07/01/01 515
335 Jackson, MS, GO 5.250 10/01/10 340
---------
855
---------
Nebraska -- 3.0%
590 Nebraska Invest. Fin. Auth. Rev., Ser. 1989
(Foundation for Educ. Fund),
Escrowed to Maturity 7.000 11/01/09 603
1,000 Nebraska Gas Supply Rev., Ser. A
(American Public Energy Agy.) 4.600 06/01/10 955
---------
1,558
---------
Nevada -- 2.4%
1,000 Las Vegas, NV, GO, Sewer Impt. Rev.,
Prerefunded @ 102 6.500 04/01/02 1,074
185 Washoe Co., NV, GO 7.375 07/01/09 189
---------
1,263
---------
New York -- 1.0%
500 New York Local Govt. Asst. Corp. Rev.,
Ser. 1991B, Prerefunded @ 102 7.000 04/01/01 534
---------
North Carolina -- 2.0%
1,030 Cabarrus Co., NC, Dev. Corp. Install.
Pymt. Rev. 4.950 06/01/09 1,027
---------
</TABLE>
Countrywide Investments 45.
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Intermediate Term Fund (Continued)
Principal Market
Amount Coupon Maturity Value
(000's) Municipal Bonds-- 101.2% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio -- 30.4%
$ 1,300 Ohio St. Air Quality Dev. Auth. Rev.,
Ser. A (CG&E) 3.350% 07/01/99 $ 1,300
500 Franklin Co., OH, Rev. (Online Computer
Library Ctr.) 5.500 04/15/00 506
625 Fairfield, OH, IDR ARPB (Skyline Chili, Inc.) 5.000 09/01/00 626
270 Warren Co., OH, Hosp. Fac. Rev.
(Otterbein Home), Prerefunded @ 102 7.000 07/01/01 289
930 Ohio St. EDR Ohio Enterprise Bond Fd.
(Smith Steelite Proj.) 5.600 12/01/03 961
500 Hamilton Co., OH, Hosp. Fac. Rev.
(Episcopal Retirement Home) 6.600 01/01/04 526
315 Ohio St. EDR Ohio Enterprise Bond Fd.
(Cheryl & Co.) 5.500 12/01/04 324
1,005 Franklin Co., OH, Health Care Rev.
(First Comm. Village) 6.000 06/01/06 1,043
530 Toledo, OH, GO 6.000 12/01/06 572
840 Kent State University General Receipts Rev. 6.000 05/01/07 903
710 Hamilton Co., OH, Health Care Fac.
(Twin Towers) 5.750 10/01/07 744
500 Ohio St. IDR, Ser. 1997 (Bomaine
Corporation Proj.) 5.500 11/01/07 507
674 Columbus, OH, Special Assessment GO 5.050 04/15/08 661
800 West Clermont, OH, LSD GO 6.150 12/01/08 860
500 Hamilton Co., OH, Hosp. Fac. Rev.
(Bethesda Hosp.) 7.000 01/01/09 508
930 Hamilton Co., OH, Health Care Fac.
(Twin Towers) 5.250 10/01/10 928
1,000 Franklin Co., OH, Rev.
(Online Computer Library Ctr.) 4.650 10/01/11 939
1,000 Cuyahoga Co., OH, Hosp. Rev.
(University Hosp.) 5.125 01/15/12 984
1,000 Franklin Co., OH, Rev.
(Online Computer Library Ctr.) 4.700 10/01/12 936
520 Sycamore, OH, CSD COP 4.700 12/01/12 487
1,365 Toledo, OH, GO 5.000 12/01/13 1,344
---------
15,948
---------
Pennsylvania -- 2.0%
500 Pennsylvania St. IDR, Ser. A,
Prerefunded @ 102 7.000 07/01/01 538
500 Pennsylvania Fin. Auth. Muni.
Capital Impt. Proj. Rev. 6.600 11/01/09 539
---------
1,077
---------
South Carolina -- 1.4%
725 Richland-Lexington, SC, Airport Dist. Rev.,
Ser. 1995 (Columbia Metro.) 6.000 01/01/08 759
---------
Tennessee -- 6.0%
525 Southeast, TN, Tax-Exempt Mtg. Trust ARPB,
Ser. 1990 7.250 04/01/03 570
500 Nashville, TN, Metro. Airport Rev., Ser. C 6.625 07/01/07 532
1,000 Nashville & Davidson Co., TN, Health & Educ.
Fac. Rev., Ser. A (Vanderbilt Univ.) 5.000 10/01/11 985
1,035 Johnson City, TN, Health & Educ. Rev.
(Medical Center Hosp.) 5.500 07/01/13 1,060
---------
3,147
---------
</TABLE>
46. Countrywide Investments
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Intermediate Term Fund (Continued)
Principal Market
Amount Coupon Maturity Value
(000's) Municipal Bonds-- 101.2% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas -- 6.9%
$ 500 Houston, TX, Sr. Lien Rev., Ser. A
(Hotel Tax & Parking Fac.),
Prerefunded @ 100 7.000% 07/01/01 $ 528
500 N. Texas Higher Educ. Student Loan Rev.,
Ser. 1991A 6.875 04/01/02 517
50 N. Central, TX, Health Fac. Rev.
(Baylor Health Care), Indexed INFLOS,
Prerefunded @ 102 8.050 05/15/02 54
450 N. Central, TX, Health Fac. Rev.
(Baylor Health Care), Indexed INFLOS 8.050 05/15/08 480
490 Dallas, TX, ISD 5.600 08/15/11 509
236 Midland, TX, HFC Rev., Ser. A-2 8.450 12/01/11 254
10 San Antonio, TX, Elec. & Gas Rev.,
Escrowed to Maturity 5.000 02/01/12 10
990 San Antonio, TX, Elec. & Gas Rev. 5.000 02/01/12 975
300 Waco, TX, COP 4.800 02/01/15 280
---------
3,607
---------
Wisconsin -- 0.8%
430 Wisconsin St. Health & Educ. Fac. Auth. Rev.
(Agnesian Healthcare, Inc.) 4.900 07/01/11 413
---------- ---------
$ 51,825 Total Municipal Bonds-- 101.2%
(Amortized Cost $52,525) $ 53,176
========== ---------
Liabilities in Excess of Other Assets-- (1.2)% (643)
---------
Net Assets-- 100.0% $ 52,533
=========
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
Countrywide Investments 47.
<PAGE>
<TABLE>
<CAPTION>
Ohio Insured Tax-Free Fund
Portfolio of Investments
June 30, 1999
-----------------------------------------------------------------------------------------
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds-- 89.7% Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200 Montgomery Co., OH, Hosp. Rev.
(Sisters of Charity), Prerefunded @ 102 6.625% 05/15/01 $ 212
250 Franklin Co., OH, IDR (1st Comm. Village
Healthcare), Crossover
Prerefunded @ 101.5 10.125 08/01/01 282
415 Ohio HFA SFM Rev., Ser. D 7.000 09/01/01 434
30 Clermont Co., OH, Hosp. Fac. Rev., Ser. A
(Mercy Health Sys.), Prerefunded @ 100 7.500 09/01/01 32
460 Westerville, Minerva Park & Blendon, OH,
Joint Hosp. Dist. Rev. (St. Ann's),
Prerefunded @ 102 7.100 09/15/01 497
1,000 Clermont Co., OH, Hosp. Fac. Rev.
(Mercy Health Sys.), Prerefunded @ 102 6.733 09/25/01 1,070
850 Alliance, OH, Waterworks Sys. Rev.,
Prerefunded @ 102 6.650 10/15/01 914
500 Celina, OH, Wastewater Sys. Mtg. Rev.,
Prerefunded @ 101 6.550 11/01/01 532
500 Summit Co., OH, Various Purpose GO,
Prerefunded @ 102 6.625 12/01/01 539
500 Greene Co., OH, Water Sys. Rev.,
Prerefunded @ 102 6.850 12/01/01 541
290 Northwest, OH, LSD GO, Prerefunded @ 102 7.050 12/01/01 316
500 Clermont Co., OH, Sewer Sys. Rev.,
Prerefunded @ 102 7.100 12/01/01 544
461 Cleveland, OH, Waterworks Impt. Rev.,
Ser. 1992B, Prerefunded @ 102 6.500 01/01/02 494
1,000 Kent St. University General Receipts Rev.,
Prerefunded @ 102 6.500 05/01/02 1,078
500 Franklin Co., OH, Hosp. Rev., Ser. 1991
(Mt. Carmel Health), Prerefunded @ 102 6.750 06/01/02 543
500 Cleveland, OH, GO, Ser. A, Prerefunded @ 102 6.375 07/01/02 539
500 Mahoning Co., OH, Hosp. Impt. Rev.
(YHA Proj.), Prerefunded @ 100 7.000 10/15/02 532
500 Seneca Co., OH, GO (Jail Fac.),
Prerefunded @ 102 6.500 12/01/02 545
675 Reynoldsburg, OH, CSD GO, Prerefunded @ 102 6.550 12/01/02 736
33 Ohio St. Bldg. Auth. Rev. (Frank
Lausch Proj.), Prerefunded @ 100 10.125 04/01/03 38
142 Ohio St. Bldg. Auth. Rev. (Columbus St.
Proj.), Prerefunded @ 100 10.125 04/01/03 164
230 Summit Co., OH, GO, Ser. A, Prerefunded @ 100 6.900 08/01/03 252
500 Newark, OH, Water Sys. Impt. Rev.,
Prerefunded @ 102 6.000 12/01/03 541
500 Ohio St. Bldg. Auth. Rev., Ser. 1994A
(Juvenille Correctional Bldg.),
Prerefunded @ 102 6.600 10/01/04 558
1,000 Cleveland, OH, Public Power Sys. Rev., Ser. I,
Prerefunded @ 102 7.000 11/15/04 1,136
500 Crawford Co., OH, GO, Prerefunded @ 102 6.750 12/01/04 563
1,000 Greater Cleveland, OH, Regional Transit
Auth. GO, Prerefunded @ 101 5.650 12/01/06 1,069
290 Alliance, OH, CSD GO 6.900 12/01/06 313
500 Mansfield, OH, Hosp. Impt. Rev.
(Mansfield General) 6.700 12/01/09 535
500 Hamilton, OH, Water Sys. Mtg. Rev., Ser. 1991A 6.400 10/15/10 532
500 Butler Co., OH, Hosp. Fac. Rev.
(Middleton Regional Hosp.) 6.750 11/15/10 536
1,000 Canton, OH, Waterworks Sys. GO, Ser. 1995 5.750 12/01/10 1,052
39 Cleveland, OH, Waterworks Impt. Rev., Ser. F 6.500 01/01/11 41
</TABLE>
48. Countrywide Investments
<PAGE>
<TABLE>
<CAPTION>
Ohio Insured Tax-Free Fund (Continued)
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds -- 89.7% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 475 Ohio Capital Corp. MFH Rev., Ser. 1990A 7.500% 01/01/10 $ 493
240 Cuyahoga Co., OH, Hosp. Rev. (University
Hosp.), Escrowed to Maturity 9.000 06/01/11 298
600 Westerville, OH, Water Sys. Impt. GO 6.450 12/01/11 647
530 Urbana, OH, Wastewater Impt. GO 7.050 12/01/11 581
365 Bexley, OH, CSD GO 7.125 12/01/11 441
255 Summit Co., OH, GO, Ser. A 6.900 08/01/12 274
500 Strongsville, OH, CSD GO 5.375 12/01/12 515
500 Worthington, OH, CSD GO 6.375 12/01/12 533
500 Brunswick, OH, CSD GO 6.900 12/01/12 538
1,095 West Clermont, OH, LSD GO 6.900 12/01/12 1,232
95 Ohio St. Higher Educ. Fac. Comm. Rev. 7.250 12/01/12 101
1,000 Lorain Co., OH, Hosp. Rev. (Catholic
Health Care Partners) 5.625 09/01/14 1,024
530 Ottawa Co., OH, GO 5.750 12/01/14 554
1,000 Portage Co., OH, GO 6.200 12/01/14 1,079
290 Garfield Heights, OH, Various Purpose GO 6.300 12/01/14 314
460 Bedford Heights, OH, GO 6.500 12/01/14 503
1,000 Clermont Co., OH, Hosp. Fac. Rev.
(Mercy Health Sys.) 5.875 09/01/15 1,032
600 Toledo-Lucas Co., OH, Convention Ctr. Rev. 5.700 10/01/15 625
400 Warren, OH, Waterworks Rev. 5.500 11/01/15 414
500 Delaware, OH, CSD GO 5.750 12/01/15 519
500 Ohio St. Higher Educ. Fac. Rev. (Univ.
of Dayton) 6.750 12/01/15 542
1,000 Buckeye Valley, OH, LSD GO 6.850 12/01/15 1,161
500 Cleveland, OH, Waterworks Impt. Rev., Ser. F 6.250 01/01/16 529
750 Columbus-Polaris Hsg. Corp. Rev. 7.400 01/01/16 842
500 Ohio St. Air Quality Dev. Rev., Ser. A
(Ohio Edison) 7.450 03/01/16 521
781 Ohio HFA SFM Rev., Ser. 1991D 7.050 09/01/16 816
226 Ohio HFA SFM Rev., Ser. 1990F 7.600 09/01/16 235
750 Montgomery Co., OH, Hosp. Rev.
(Miami Valley Hosp.) 6.250 11/15/16 800
1,000 Greater Cleveland, OH, Regional Trans.
Auth. GO 4.750 12/01/16 930
815 Butler Co., OH, GO 5.750 12/01/16 849
590 Garfield Heights, OH, Various Purpose GO 7.050 12/01/16 628
1,260 Cleveland, OH, Airport Sys. Rev., Ser. C 5.125 01/01/17 1,227
750 Butler Co., OH, Trans. Impt. Dist., Ser. A 5.125 04/01/17 733
800 Ohio St. Bldg. Auth. Rev. (Adult
Correctional Bldg.) 5.600 04/01/17 820
1,000 Lorain Co., OH, Hosp. Rev. 5.625 09/01/17 1,015
2,000 Toledo, OH, Waterworks Sys. Mtg. Rev. 4.750 11/15/17 1,852
500 Toledo, OH, Sewer Sys. Rev. 6.350 11/15/17 543
1,000 Hamilton Co., OH, Sewer Sys. Impt. Rev.,
Ser. A 5.000 12/01/17 966
1,000 Mason, OH, CSD GO 5.300 12/01/17 1,002
1,000 Rocky River, OH, CSD GO, Ser. 1998 5.375 12/01/17 1,006
1,400 Cuyahoga Co., OH, Util. Sys. Impt. Rev.
(Medical Center Proj.) 5.125 02/15/18 1,358
500 Ohio St. Air Quality Dev. Rev., Ser. 1990B
(Ohio Edison) 7.100 06/01/18 523
1,670 Canton, OH, GO 4.750 12/01/18 1,538
1,000 Hamilton Co., OH, Sales Tax. Rev.
(Football Stadium Proj.) 5.000 12/01/18 955
1,000 Little Miami, OH, LSD GO 5.000 12/01/18 959
1,265 Defiance, OH, Waterworks Sys. GO 5.650 12/01/18 1,305
1,000 S. Euclid-Lyndhurst, OH, CSD GO, Ser. 1996 6.400 12/01/18 1,091
1,000 Cuyahoga Co., OH, Hosp. Rev.
(University Hosp.) 5.400 01/15/19 1,000
</TABLE>
Countrywide Investments 49.
<PAGE>
<TABLE>
<CAPTION>
Ohio Insured Tax-Free Fund (Continued)
Principal Market
Amount Fixed Rate Revenue & Coupon Maturity Value
(000's) General Obligation Bonds -- 89.7% (Continued) Rate Date (000's)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 360 Cuyahoga Co., OH, Hosp. Rev.
(University Hosp.) 6.250% 01/15/20 $ 379
720 University of Toledo, OH, General
Receipts Rev. 4.750 06/01/20 657
1,210 Greene Co., OH, Sewer Sys. Rev. 5.125 12/01/20 1,171
1,000 Ohio St. Air Quality Dev. Rev., Ser. 1985A
(Columbus & Southern Power) 6.375 12/01/20 1,066
1,000 Hamilton, OH, CSD GO 5.625 12/01/24 990
1,000 Ohio St. Air Quality Dev. Rev. (Penn. Power) 6.450 05/01/27 1,065
---------- ---------
$ 58,147 Total Fixed Rated Revenue & General Obligation Bonds
----------
(Amortized Cost $57,971) $ 60,501
---------
-----------------------------------------------------------------------------------------
Principal Market
Amount Floating & Variable Rate Coupon Maturity Value
(000's) Demand Notes -- 5.9% Rate Date (000's)
-----------------------------------------------------------------------------------------
$ 1,200 Montgomery Co., OH, Ser. 1998A
(Miami Valley Hosp.) 3.450% 07/01/99 $ 1,200
2,800 Columbus, OH, GO Ser. 1 3.650 07/07/99 2,800
---------- ---------
$ 4,000 Total Floating & Variable Rate Demand Notes
(Amortized Cost $4,000) $ 4,000
---------- ---------
$ 62,147 Total Investments at Value-- 95.6%
(Amortized Cost $61,971) $ 64,501
==========
Other Assets in Excess of Liabilities-- 4.4% 2,976
---------
Net Assets-- 100% $ 67,477
=========
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
50. Countrywide Investments
<PAGE>
Notes to Portfolios of Investments
June 30, 1999
--------------------------------------------------------------------------------
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, 1999.
Put bonds may be redeemed at the discretion of the holder on specified dates
prior to maturity. Mandatory put bonds are automatically redeemed at a specified
put date unless action is taken by the holder to prevent redemption.
Bonds denoted as prerefunded are anticipated to be redeemed prior to their
scheduled maturity. The dates indicated in the Portfolios of Investments are the
stipulated prerefunded dates.
Portfolio Abbreviations:
ARPB - Adjustable Rate Put Bond
BANS - Bond Anticipation Notes
COP - Certificates of Participation
CSD - City School District
EDR - Economic Development Revenue
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corporation
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
ISD - Independent School District
LSD - Local School District
MFH - Multi-Family Housing
MFM - Multi-Family Mortgage
PCR - Pollution Control Revenue
RANS - Revenue Anticipation Notes
SFM - Single Family Mortgage
USD - Unified School District
Countrywide Investments 51.
<PAGE>
Report of Independent Public Accountants
--------------------------------------------------------------------------------
ARTHUR ANDERSEN LLP
LOGO
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 and Ohio Insured Tax-Free Fund (a Massachusetts business trust) as of June
30, 1999, the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years then ended and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with custodians and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Countrywide Tax-Free Trust as of
June 30, 1999, 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 Anderson LLP
Cincinnati, Ohio,
August 6, 1999
52. Countrywide Investments
<PAGE>
Countrywide Tax-Free Trust
--------------------------------------------------------------------------------
312 Walnut St., 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll Free) 800-543-8721
Cincinnati: 629-2000
Rate Line: 579-0999
Shareholder Services
--------------------------------------------------------------------------------
Nationwide: (Toll Free) 800-543-0407
Cincinnati: 629-2050
Board of Trustees
--------------------------------------------------------------------------------
Angelo R. Mozilo, Chairman
Robert H. Leshner, President
Donald L. Bogdon, M.D.
H. Jerome Lerner
Howard J. Levine
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
Investment Adviser
--------------------------------------------------------------------------------
Countrywide Investments, Inc.
312 Walnut St., 21st Floor
Cincinnati, Ohio 45202-4094
Transfer Agent
--------------------------------------------------------------------------------
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
This report is authorized for distribution only when it is accompanied or
preceded by a current prospectus of Countrywide Tax-Free Trust.
Countrywide Investments, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
www.countrywideinvestments.com
(C) 1999 Countrywide Investments, Inc. Trade/Service marks are the property of
Countrywide Credit Industries, Inc. and/or its subsidiaries.
<PAGE>
TAX-EXEMPT
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
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
[GRAPHIC]
COUNTRYWIDE
INVESTMENTS
[LOGO]
<PAGE>
TABLE OF CONTENTS
================================================================================
Letter from the President ................................................ 3
Management Discussion and Analysis ....................................... 4-5
Statements of Assets and Liabilities ..................................... 6-8
Statements of Operations ................................................. 9-11
Statements of Changes in Net Assets ...................................... 12-14
Financial Highlights ..................................................... 15-21
Notes to Financial Statements ............................................ 22-28
Portfolios of Investments:
Tax-Free Money Fund ................................................... 29-30
California Tax-Free Money Fund ........................................ 31-33
Ohio Tax-Free Money Fund .............................................. 34-39
Florida Tax-Free Money Fund ........................................... 40-41
Tax-Free Intermediate Term Fund ....................................... 42-45
Ohio Insured Tax-Free Fund ............................................ 46-48
Notes to Portfolios of Investments ....................................... 49
2 - Countrywide Investments
<PAGE>
LETTER FROM THE PRESIDENT
================================================================================
[PHOTO]
Dear Fellow Shareholders:
We are pleased to present Countrywide Tax-Free Trust's semi-annual report for
the six months ended December 31, 1999. This report provides financial data and
performance information for the Tax-Free Money Fund, Ohio Tax-Free Money Fund,
California Tax-Free Money Fund, Florida Tax-Free Money Fund, Tax-Free
Intermediate Term Fund and Ohio Insured Tax-Free Fund. These Funds represent the
six tax-free money market and bond products currently offered among the 16
mutual funds which comprise the Countrywide Family of Funds.
As 1999 came to a close, many of the themes that drove bond market performance
for much of the year remained intact. Economic growth continues to surge, led by
consumer demand, rising incomes and a soaring stock market. 1999 was a difficult
year for bond investors. "Phantom" concerns regarding rising inflation prompted
the Federal Reserve to increase interest rates three times in 1999, effectively
taking back the three interest rate cuts made in the fall of 1998. Rising
interest rates provided downward price pressure, and as a result, the bond
market suffered its worst year since 1994. The 2-year Treasury gained 1.9
percent for the year, while the 30-year Treasury fell 14.8 percent.
We believe the tax-exempt sector continues to offer attractive investment
alternatives. Investors can buy high-quality, intermediate and longer-term
municipal bonds at yields close to 80% to 90% of Treasuries. This gives
tax-conscious investors an appealing tax-free yield.
Countrywide Financial Services, Inc, was acquired by Fort Washington Investment
Advisors, Inc. on October 29, 1999. Fort Washington is part of the
Western-Southern Enterprise, a dynamic financial services group. As part of the
Enterprise, Countrywide will have access to broad managerial, financial and
technological resources. In addition, we will help the Enterprise fulfill its
potential in the financial marketplace by enhancing flexibility, responsiveness,
product diversity and client satisfaction. With the acquisition of Countrywide
Financial Services, Inc., Western-Southern Enterprise assets owned or under
management passed the $20 billion mark.
Countrywide Investments remains committed to providing products and services
that help investors meet their financial goals. On May 1, 2000 we will be
expanding our fund offerings to include the Touchstone Funds, also a part of the
Western-Southern Enterprise. The names of all the Countrywide Funds will be
changed to Touchstone. You will be receiving more information in the near
future.
Our success has been built on the confidence investors have extended to us. We
thank you for your support and look forward to offering continued service to you
in the future.
Sincerely,
/s/ Robert H. Leshner
Robert H. Leshner
President
Countrywide Investments - 3
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
OVERVIEW
The pace of economic activity in the U.S. over the past year remained quite
brisk. Strong employment growth, rising incomes and a relentless stock market
combined to fuel consumer consumption. Inflation remained subdued with the
Consumer Price Index up only 2% for the past fiscal year. The yield curve
steepened during the year with short-term maturities declining in yield, while
yields on bonds with intermediate and long-term maturities increased. During the
quarter ended September 30, 1998, a near meltdown in the emerging markets of
Russia, Asia and Latin America sparked a liquidity crisis in the bond market,
resulting in a "flight to quality" which sent Treasury yields sharply lower.
This caused a dislocation between the Treasury market and other sectors of the
bond market forcing yield spreads to widen dramatically. The Federal Reserve
Board responded by lowering the federal funds rate on three occasions, providing
the liquidity necessary for stability to return to the bond markets.
Interest rates began to rise by the start of 1999 due to improving conditions
overseas and a concern that robust domestic growth would lead to higher
inflation. By mid-year, Treasury yields had increased about 1% and, after
several warnings, the Fed finally raised the federal funds rate by 0.25% to 5%.
The change in municipal yields over the twelve months ended June 30 was
comparable to the change in Treasuries; however, in the second half of the
fiscal year, municipals outperformed Treasuries by a wide margin. Municipal bond
yields were up only about half as much as comparable maturity Treasuries, and
the total returns in most municipal sectors were twice that of the Treasury
market.
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, 1999, the Fund's total returns (excluding the impact of
applicable sales loads) were 2.07% and 1.40% for Class A shares and Class C
shares, respectively. The Lehman Brothers 5-Year Municipal G.O. Bond Index
returned 3.42% during the same period.
Our focus in managing the Tax-Free Intermediate Term Fund is to maximize the
tax-free yield while minimizing the share price volatility. This focus can
negatively impact our total return during periods of declining interest rates as
was experienced during the first three quarters of the Fund's fiscal year.
However, during the last quarter, as interest rates increased, the performance
of the Fund improved relative to the comparative Lehman Brothers Index, and
outperformed it after taking the Fund's operating expenses into consideration.
In addition, the Fund outperformed its Lipper peer group for the fiscal year.
Recently, we have made changes that we believe will help to improve the overall
total return of the portfolio. These changes include selling some of the shorter
maturity, higher coupon issues from the portfolio and buying new issues in the
10-year maturity range. The additional yield available in this maturity sector
provides an attractive opportunity for the Fund.
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, 1999, the Fund's total returns (excluding the impact of
applicable sales loads) were 1.81% and 1.05% for Class A shares and Class C
shares, respectively. The Lehman Brothers 15-Year Municipal G.O. Bond Index
returned 2.70% during the same period.
Performance of the Ohio Insured Tax-Free Fund for the fiscal year was comparable
to that of the Lehman Brothers 15-year Municipal G.O. Bond Index after factoring
in the associated expenses of the Fund. Over the course of the year, we
initiated several trades in the portfolio to improve the overall structure of
the portfolio. To accomplish this, we sold issues with higher coupons and short
call features and bought new issues with better call protection. Concerning the
purchases, we focused on issues in the 20-year maturity range offering call
protection of at least ten years. These issues provide the best combination of
yield and total return which, we believe, will ultimately improve the total
return potential of the Fund.
4 - Countrywide Investments
<PAGE>
COMPARISON OF THE CHANGE IN VALUE SINCE JUNE 30, 1989
OF A $10,000 INVESTMENT IN THE TAX-FREE INTERMEDIATE TERM FUND - CLASS A*
AND THE LEHMAN BROTHERS 5-YEAR MUNICIPAL G.O. BOND INDEX
[GRAPHIC OMITTED]
6/99
----
TAX-FREE INTERMEDIATE TERM FUND - CLASS A $17,450
LEHMAN BROTHERS 5-YEAR MUNICIPAL G.O. BOND INDEX $18,780
Past performance is not predictive of future performance.
--------------------------------------------------------
Tax-Free Intermediate Term Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception*
CLASS A 0.03% 4.52% 5.73% 6.05%
CLASS C 1.40% 4.30% -- 3.30%
--------------------------------------------------------
* 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.
COMPARISON OF THE CHANGE IN VALUE SINCE JUNE 30, 1989
OF A $10,000 INVESTMENT IN THE OHIO INSURED TAX-FREE FUND - CLASS A*
AND THE LEHMAN BROTHERS 15-YEAR MUNICIPAL G.O. BOND INDEX
[GRAPHIC OMITTED]
6/99
----
OHIO INSURED TAX-FREE FUND - CLASS A $18,060
LEHMAN BROTHERS 15-YEAR MUNICIPAL G.O. BOND INDEX $21,252
Past performance is not predictive of future performance.
--------------------------------------------------------
Ohio Insured Tax-Free Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception*
Class A -2.27% 4.92% 6.09% 7.26%
Class C 1.05% 5.11% -- 3.75%
--------------------------------------------------------
* 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.
Countrywide Investments - 5
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (UNAUDITED)
================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
(000'S) MONEY FUND MONEY FUND
--------------------------------------------------------------------------------
ASSETS
Investment securities:
At acquisition cost ................................. $ 27,263 $ 56,178
-------- --------
At amortized cost ................................... $ 27,245 $ 56,130
-------- --------
At market value (Note 2) ............................ $ 27,245 $ 56,130
Cash ................................................... 98 46
Interest receivable .................................... 265 435
Other assets ........................................... 14 14
-------- --------
TOTAL ASSETS ........................................... 27,622 56,625
-------- --------
LIABILITIES
Dividends payable ...................................... 1 5
Payable to affiliates (Note 4) ......................... 10 25
Other accrued expenses and liabilities ................. 5 7
-------- --------
TOTAL LIABILITIES ...................................... 16 37
-------- --------
NET ASSETS ............................................. $ 27,606 $ 56,588
-------- --------
NET ASSETS CONSIST OF:
Paid-in capital ........................................ $ 27,609 $ 56,590
Accumulated net realized losses from security
transactions ........................................ (3) (2)
-------- --------
Net Assets ............................................. $ 27,606 $ 56,588
-------- --------
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) . 27,620 56,590
-------- --------
Net asset value, offering price and redemption price
per share (Note 2) .................................. $ 1.00 $ 1.00
-------- --------
See accompanying notes to financial statements.
6 - Countrywide Investments
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (UNAUDITED)
================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
(000'S) MONEY FUND MONEY FUND
--------------------------------------------------------------------------------
ASSETS
Investment securities:
At acquisition cost .................................. $398,005 $ 28,585
-------- --------
At amortized cost .................................... $397,807 $ 28,560
-------- --------
At market value (Note 2) ............................. $397,807 $ 28,560
Cash .................................................... 469 --
Interest receivable ..................................... 3,472 199
Other assets ............................................ 109 8
-------- --------
TOTAL ASSETS ............................................ 401,857 28,767
-------- --------
LIABILITIES
Bank overdraft .......................................... -- 369
Dividends payable ....................................... 514 26
Payable to affiliates (Note 4) .......................... 194 6
Other accrued expenses and liabilities .................. 32 6
-------- --------
TOTAL LIABILITIES ....................................... 740 407
-------- --------
NET ASSETS .............................................. $401,117 $ 28,360
-------- --------
NET ASSETS CONSIST OF:
Paid-in capital ......................................... $401,106 $ 28,373
Accumulated net realized gains (losses) from security
transactions ......................................... 11 (13)
-------- --------
NET ASSETS .............................................. $401,117 $ 28,360
-------- --------
PRICING OF RETAIL SHARES
Net assets applicable to Retail shares .................. $236,129 $ 20,084
-------- --------
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) .. 236,116 20,089
-------- --------
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 ........... $164,988 $ 8,276
-------- --------
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) .. 164,990 8,283
-------- --------
Net asset value, offering price and redemption price
per share (Note 2) ................................... $ 1.00 $ 1.00
-------- --------
See accompanying notes to financial statements.
Countrywide Investments - 7
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (UNAUDITED)
================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
(000'S) TERM FUND FUND
--------------------------------------------------------------------------------
ASSETS
Investment securities:
At acquisition cost ................................... $ 46,289 $ 61,550
-------- --------
At amortized cost ..................................... $ 46,121 $ 61,484
-------- --------
At market value (Note 2) .............................. $ 45,782 $ 61,575
Cash ..................................................... 70 6
Interest receivable ...................................... 802 677
Receivable for capital shares sold ....................... 87 69
Other assets ............................................. 25 32
-------- --------
TOTAL ASSETS ............................................. 46,766 62,359
-------- --------
LIABILITIES
Dividends payable ........................................ 35 78
Payable for capital shares redeemed ...................... 87 67
Payable to affiliates (Note 4) ........................... 24 29
Other accrued expenses and liabilities ................... 9 9
-------- --------
TOTAL LIABILITIES ........................................ 155 183
-------- --------
NET ASSETS ............................................... $ 46,611 $ 62,176
-------- --------
NET ASSETS CONSIST OF:
Paid-in capital .......................................... $ 47,404 $ 62,395
Accumulated net realized losses from security transactions (454) (310)
Net unrealized appreciation (depreciation) on investments (339) 91
-------- --------
NET ASSETS ............................................... $ 46,611 $ 62,176
-------- --------
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares .................. $ 42,845 $ 58,044
-------- --------
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) ... 4,025 5,159
-------- --------
Net asset value and redemption price per share (Note 2) .. $ 10.64 $ 11.25
-------- --------
Maximum offering price per share (Note 2) ................ $ 11.17 $ 11.81
-------- --------
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares .................. $ 3,766 $ 4,132
-------- --------
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) ... 354 367
-------- --------
Net asset value and redemption price per share (Note 2) .. $ 10.65 $ 11.25
-------- --------
Maximum offering price per share (Note 2) ................ $ 10.78 $ 11.39
-------- --------
See accompanying notes to financial statements.
8 - Countrywide Investments
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
(000'S) MONEY FUND MONEY FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income ............................. $ 507 $ 909
----- -----
EXPENSES
Investment advisory fees (Note 4) ........... 68 137
Transfer agent fees (Note 4) ................ 16 15
Accounting services fees (Note 4) ........... 15 18
Postage and supplies ........................ 10 1
Registration fees ........................... 7 4
Professional fees ........................... 6 7
Custodian fees .............................. 5 5
Trustees' fees and expenses ................. 4 4
Reports to shareholders ..................... 3 2
Distribution expenses (Note 4) .............. 2 6
Insurance expense ........................... 2 4
Pricing expenses ............................ 1 2
----- -----
TOTAL EXPENSES .............................. 139 205
Fees waived by the Adviser (Note 4) ......... (19) --
----- -----
NET EXPENSES ................................ 120 205
----- -----
NET INVESTMENT INCOME ....................... 387 704
----- -----
NET REALIZED GAINS FROM SECURITY TRANSACTIONS -- 11
----- -----
NET INCREASE IN NET ASSETS FROM OPERATIONS .. $ 387 $ 715
----- -----
See accompanying notes to financial statements.
Countrywide Investments - 9
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
(000'S) MONEY FUND MONEY FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income ................................. $ 7,186 $ 555
------- -------
EXPENSES
Investment advisory fees (Note 4) ............... 878 80
Distribution expenses, Retail class (Note 4) .... 249 15
Insurance expense ............................... 50 6
Transfer agent fees, Retail class (Note 4) ...... 37 6
Transfer agent fees, Institutional class (Note 4) 6 6
Custodian fees (Note 4) ......................... 34 7
Accounting services fees (Note 4) ............... 30 21
Postage and supplies ............................ 25 1
Registration fees ............................... 17 --
Professional fees ............................... 16 5
Pricing expenses ................................ 5 2
Trustees' fees and expenses ..................... 4 4
Reports to shareholders ......................... 2 1
------- -------
TOTAL EXPENSES .................................. 1,353 154
Fees waived by the Adviser (Note 4) ............. (55) (49)
------- -------
NET EXPENSES .................................... 1,298 105
------- -------
NET INVESTMENT INCOME ........................... 5,888 450
------- -------
NET REALIZED LOSSES FROM SECURITY TRANSACTIONS .. -- (1)
------- -------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...... $ 5,888 $ 449
------- -------
See accompanying notes to financial statements.
10 - Countrywide Investments
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
(000'S) TERM FUND FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income ..................................... $ 1,366 $ 1,874
------- -------
EXPENSES
Investment advisory fees (Note 4) ................... 128 162
Transfer agent fees, Class A (Note 4) ............... 26 16
Transfer agent fees, Class C (Note 4) ............... 6 6
Accounting services fees (Note 4) ................... 24 24
Postage and supplies ................................ 19 3
Distribution expenses, Class A (Note 4) ............. 16 6
Distribution expenses, Class C (Note 4) ............. 9 11
Professional fees ................................... 7 7
Pricing expenses .................................... 6 7
Reports to shareholders ............................. 6 4
Insurance expense ................................... 5 7
Registration fees, Common ........................... 3 3
Registration fees, Class A .......................... 5 2
Registration fees, Class C .......................... 5 1
Custodian fees ...................................... 4 8
Trustees' fees and expenses ......................... 4 4
------- -------
TOTAL EXPENSES ...................................... 273 271
------- -------
Fees waived by the Adviser (Note 4) ................. (5) (11)
------- -------
NET INVESTMENT INCOME ............................... 1,098 1,614
------- -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions ...... (92) (236)
Net change in unrealized appreciation/depreciation
on investments ................................... (990) (2,440)
------- -------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS ... (1,082) (2,676)
------- -------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 16 $(1,062)
------- -------
See accompanying notes to financial statements.
Countrywide Investments - 11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
====================================================================================
CALIFORNIA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
DEC. 31, ENDED DEC. 31, ENDED
1999 JUNE 30, 1999 JUNE 30,
(000'S) (UNAUDITED) 1999 (UNAUDITED) 1999
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income .......... $ 387 $ 783 $ 704 $ 1,401
Net realized gains (losses) from
security transactions ....... -- (2) 11 (12)
--------- --------- --------- ---------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ............. 387 781 715 1,389
--------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ..... (393) (777) (704) (1,401)
--------- --------- --------- ---------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5)
Proceeds from shares sold ... 24,135 48,307 94,741 196,122
Reinvested distributions .... 392 751 677 1,332
Payments for shares redeemed (22,149) (61,211) (86,807) (190,488)
--------- --------- --------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS .......... 2,378 (12,153) 8,610 6,966
--------- --------- --------- ---------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............... 2,372 (12,149) 8,621 6,954
NET ASSETS
Beginning of year .............. 25,234 37,383 47,967 41,013
--------- --------- --------- ---------
End of year .................... $ 27,606 $ 25,234 $ 56,588 $ 47,967
--------- --------- --------- ---------
UNDISTRIBUTED NET INVESTMENT
INCOME ...................... $ -- $ 6 $ -- $ --
--------- --------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
12 - Countrywide Investments
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
=======================================================================================
OHIO FLORIDA
TAX-FREE TAX-FREE
MONEY FUND MONEY FUND
---------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
DEC. 31, ENDED DEC. 31, ENDED
1999 JUNE 30, 1999 JUNE 30,
(000'S) (UNAUDITED) 1999 (UNAUDITED) 1999
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income ............. $ 5,888 $ 10,174 $ 450 $ 1,596
Net realized losses from
security transactions .......... -- (3) (2) (11)
--------- --------- --------- ---------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ................ 5,888 10,171 448 1,585
--------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income,
Retail ......................... (3,096) (5,927) (274) (501)
From net investment income,
Institutional .................. (2,792) (4,247) (176) (1,095)
From net realized gains,
Retail ......................... -- -- -- (6)
From net realized gains,
Institutional .................. -- -- -- (16)
--------- --------- --------- ---------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS .. (5,888) (10,174) (450) (1,618)
--------- --------- --------- ---------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5)
RETAIL
Proceeds from shares sold ......... 182,555 455,007 9,162 29,958
Reinvested distributions .......... 3,042 5,786 277 495
Payments for shares redeemed ...... (164,160) (451,416) (10,725) (23,442)
--------- --------- --------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS FROM RETAIL
SHARE TRANSACTIONS ............. 21,437 9,377 (1,286) 7,011
--------- --------- --------- ---------
INSTITUTIONAL
Proceeds from shares sold ......... 190,959 459,806 35,156 67,739
Reinvested distributions .......... 224 18 50 427
Payments for shares redeemed ...... (202,301) (398,983) (42,213) (102,016)
--------- --------- --------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS FROM INSTITUTIONAL
SHARE TRANSACTIONS ............. (11,118) 60,841 (7,007) (33,850)
--------- --------- --------- ---------
TOTAL INCREASE (DECREASE)
IN NET ASSETS .................. 10,319 70,215 (8,295) (26,872)
NET ASSETS
Beginning of year ................. 390,797 320,582 36,655 63,527
--------- --------- --------- ---------
End of year ....................... $ 401,117 $ 390,797 $ 28,360 $ 36,655
--------- --------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
Countrywide Investments - 13
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
====================================================================================
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
TERM FUND FUND
------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
DEC. 31, ENDED DEC. 31, ENDED
1999 JUNE 30, 1999 JUNE 30,
(000'S) (UNAUDITED) 1999 (UNAUDITED) 1999
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income .......... $ 1,098 $ 2,320 $ 1,614 $ 3,294
Net realized gains (losses) from
security transactions ....... (92) 634 (236) 353
Net change in unrealized
appreciation/depreciation
on investments .............. (990) (1,787) (2,439) (2,151)
--------- --------- --------- ---------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ............. 16 1,167 (1,061) 1,496
--------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income,
Class A ..................... (1,021) (2,149) (1,517) (3,095)
From net investment income,
Class C ..................... (77) (171) (97) (199)
From net realized gains,
Class A ..................... -- -- -- (1,554)
From net realized gains,
Class C ..................... -- -- -- (115)
--------- --------- --------- ---------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (1,098) (2,320) (1,614) (4,963)
--------- --------- --------- ---------
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 5)
CLASS A
Proceeds from shares sold ...... 5,100 13,620 32,312 142,439
Reinvested distributions ....... 835 1,723 1,094 3,500
Payments for shares redeemed ... (9,998) (19,292) (35,618) (149,279)
--------- --------- --------- ---------
NET DECREASE IN NET ASSETS FROM
CLASS A SHARE TRANSACTIONS .. (4,063) (3,949) (2,212) (3,340)
--------- --------- --------- ---------
CLASS C
Proceeds from shares sold ...... 463 2,454 106 550
Reinvested distributions ....... 69 158 83 268
Payments for shares redeemed ... (1,309) (2,620) (603) (1,038)
--------- --------- --------- ---------
NET DECREASE IN NET ASSETS FROM
CLASS C SHARE TRANSACTIONS .. (777) (8) (414) (220)
--------- --------- --------- ---------
TOTAL DECREASE IN NET ASSETS ... (5,922) (5,110) (5,301) (7,027)
NET ASSETS
Beginning of year .............. 52,533 57,643 67,477 74,504
--------- --------- --------- ---------
End of year .................... $ 46,611 $ 52,533 $ 62,176 $ 67,477
--------- --------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
14 - Countrywide Investments
<PAGE>
TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
----------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1999 ----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Net investment income .............. 0.014 0.027 0.030 0.029 0.031 0.030
--------- --------- --------- --------- --------- ---------
Dividends from net investment income (0.014) (0.027) (0.030) (0.029) (0.031) (0.030)
--------- --------- --------- --------- --------- ---------
Net asset value at end of year ..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Total return ....................... 2.91%(B) 2.75% 3.03% 2.89% 3.15% 3.07%
--------- --------- --------- --------- --------- ---------
Net assets at end of year (000's) .. $ 27,606 $ 25,234 $ 37,383 $ 30,126 $ 25,342 $ 26,692
--------- --------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets(A) ........... 0.89%(B) 0.89% 0.92% 0.99% 0.99% 0.99%
Ratio of net investment income to
average net assets .............. 2.86%(B) 2.74% 2.98% 2.85% 3.09% 3.00%
</TABLE>
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net
assets would have been 1.03% and 0.95% for the periods ended December 31,
1999 and June 30, 1999, respectively (Note 4).
(B) Annualized
CALIFORNIA TAX-FREE MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
----------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1999 ----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Net investment income .............. 0.013 0.025 0.029 0.028 0.029 0.029
--------- --------- --------- --------- --------- ---------
Dividends from net investment income (0.013) (0.025) (0.029) (0.028) (0.029) (0.029)
--------- --------- --------- --------- --------- ---------
Net asset value at end of year ..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Total return ....................... 2.58%(B) 2.56% 2.94% 2.81% 2.95% 2.95%
--------- --------- --------- --------- --------- ---------
Net assets at end of year (000's) .. $ 56,588 $ 47,967 $ 41,013 $ 32,186 $ 36,122 $ 19,525
--------- --------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets(A) ........... 0.75%(B) 0.75% 0.77% 0.80% 0.80% 0.70%
Ratio of net investment income to
average net assets .............. 2.57%(B) 2.52% 2.89% 2.76% 2.88% 2.83%
</TABLE>
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 0.82% and 0.85% for the
years ended June 30, 1996 and 1995, respectively.
(B) Annualized
See accompanying notes to financial statements.
Countrywide Investments - 15
<PAGE>
OHIO TAX-FREE MONEY FUND - RETAIL
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
----------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1999 ----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Net investment income .............. 0.014 0.027 0.030 0.030 0.031 0.031
--------- --------- --------- --------- --------- ---------
Dividends from net investment income (0.014) (0.027) (0.030) (0.030) (0.031) (0.031)
--------- --------- --------- --------- --------- ---------
Net asset value at end of year ..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Total return ....................... 2.79%(B) 2.73% 3.07% 2.99% 3.14% 3.12%
--------- --------- --------- --------- --------- ---------
Net assets at end of year (000's) .. $ 236,129 $ 214,691 $ 205,316 $ 166,719 $ 240,323 $ 226,606
--------- --------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets(A) ........... 0.75%(B) 0.75% 0.75% 0.75% 0.75% 0.74%
Ratio of net investment income to
average net assets .............. 2.78%(B) 2.68% 3.02% 2.93% 3.09% 3.08%
</TABLE>
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 0.78%, 0.77%, 0.76% and
0.77% for the periods ended December 31, 1999 and June 30, 1999, 1998 and
1997, respectively (Note 4).
(B) Annualized
OHIO TAX-FREE MONEY FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=============================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED PERIOD
DEC. 31, YEAR ENDED JUNE 30, ENDED
1999 ------------------------------ JUNE 30,
(UNAUDITED) 1999 1998 1997(A)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- ---------
Net investment income ................ 0.015 0.029 0.033 0.016
--------- --------- --------- ---------
Dividends from net investment income . (0.015) (0.029) (0.033) (0.016)
--------- --------- --------- ---------
Net asset value at end of period ..... $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- ---------
Total return ......................... 3.05%(C) 2.98% 3.33% 3.31%(C)
--------- --------- --------- ---------
Net assets at end of period (000's) .. $ 164,988 $ 176,106 $ 115,266 $ 97,589
--------- --------- --------- ---------
Ratio of net expenses to
average net assets(B) ............. 0.50%(C) 0.50% 0.50% 0.50%(C)
Ratio of net investment income to
average net assets ................ 3.01%(C) 2.93% 3.27% 3.28%(C)
</TABLE>
(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 0.53%, 0.51%, 0.52% and
0.56%(C) for the periods ended December 31, 1999 and June 30, 1999, 1998
and 1997, respectively (Note 4).
(C) Annualized.
See accompanying notes to financial statements.
16 - Countrywide Investments
<PAGE>
FLORIDA TAX-FREE MONEY FUND - RETAIL
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
----------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1999 ----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Net investment income .............. 0.014 0.026 0.030 0.029 0.032 0.031
--------- --------- --------- --------- --------- ---------
Dividends from net investment income (0.014) (0.026) (0.030) (0.029) (0.032) (0.031)
--------- --------- --------- --------- --------- ---------
Net asset value at end of year ..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Total return ....................... 2.76%(B) 2.68% 3.03% 2.90% 3.29% 3.17%
--------- --------- --------- --------- --------- ---------
Net assets at end of year (000's) .. $ 20,084 $ 21,371 $ 14,368 $ 22,434 $ 28,906 $ 24,119
--------- --------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets(A) ........... 0.75%(B) 0.75% 0.75% 0.75% 0.61% 0.66%
Ratio of net investment income to
average net assets .............. 2.73%(B) 2.58% 2.98% 2.85% 3.24% 3.12%
</TABLE>
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratio
of expenses to average net assets would have been 0.99%, 0.98%, 0.95%,
0.94%, 0.80% and 0.80% for the periods ended December 31, 1999 and June 30,
1999, 1998, 1997, 1996 and 1995, respectively (Note 4).
(B) Annualized
FLORIDA TAX-FREE MONEY FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=========================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED PERIOD
DEC. 31, YEAR ENDED JUNE 30, ENDED
1999 ------------------------------------ JUNE 30,
(UNAUDITED) 1999 1998 1997 1996(A)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- ---------
Net investment income ................ 0.015 0.029 0.032 0.031 0.003
--------- --------- --------- --------- ---------
Dividends from net investment income . (0.015) (0.029) (0.032) (0.031) (0.003)
--------- --------- --------- --------- ---------
Net asset value at end of period ..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- ---------
Total return ......................... 3.01%(C) 2.93% 3.28% 3.16% 3.03%(C)
--------- --------- --------- --------- ---------
Net assets at end of period (000's) .. $ 8,276 $ 15,284 $ 49,159 $ 19,349 $ 19,145
--------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets(B) ............. 0.50%(C) 0.50% 0.50% 0.50% 0.50%(C)
Ratio of net investment income to
average net assets ................ 2.95%(C) 2.91% 3.23% 3.11% 3.03%(C)
</TABLE>
(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 0.91%, 0.71%, 0.71%,
0.79% and 0.87%(C) for the periods ended December 31, 1999 and June 30,
1999, 1998, 1997 and 1996, respectively (Note 4).
(C) Annualized.
See accompanying notes to financial statements.
Countrywide Investments - 17
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND - CLASS A
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1999 -------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 10.87 $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ........... 0.24 0.48 0.50 0.50 0.50 0.49
Net realized and unrealized gains
(losses) on investments ...... (0.23) (0.25) 0.11 0.16 (0.01) 0.17
--------- --------- --------- --------- --------- ---------
Total from investment operations ... 0.01 0.23 0.61 0.66 0.49 0.66
--------- --------- --------- --------- --------- ---------
Dividends from net investment income (0.24) (0.48) (0.50) (0.50) (0.50) (0.49)
--------- --------- --------- --------- --------- ---------
Net asset value at end of year ..... $ 10.64 $ 10.87 $ 11.12 $ 11.01 $ 10.85 $ 10.86
--------- --------- --------- --------- --------- ---------
Total return(A) .................... 0.12%(C) 2.07% 5.63% 6.19% 4.51% 6.36%
--------- --------- --------- --------- --------- ---------
Net assets at end of year (000's) . $ 46,611 $ 47,899 $ 52,896 $ 58,485 $ 67,675 $ 81,140
--------- --------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets .............. 0.99%(C) 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to
average net assets .............. 4.37%(C) 4.33% 4.50% 4.55% 4.52% 4.59%
Portfolio turnover rate ............ 42%(C) 51% 36% 30% 37% 32%
</TABLE>
(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 1.01% for the period
ended December 31, 1999.
(C) Annualized.
See accompanying notes to financial statements.
18 - Countrywide Investments
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND - CLASS C
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1999 -------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 10.88 $ 11.12 $ 11.01 $ 10.85 $ 10.86 $ 10.69
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ........... 0.16 0.40 0.42 0.43 0.44 0.44
Net realized and unrealized gains
(losses) on investments ...... (0.23) (0.24) 0.11 0.16 (0.01) 0.17
--------- --------- --------- --------- --------- ---------
Total from investment operations ... (0.07) 0.16 0.53 0.59 0.43 0.61
--------- --------- --------- --------- --------- ---------
Dividends from net investment income (0.16) (0.40) (0.42) (0.43) (0.44) (0.44)
--------- --------- --------- --------- --------- ---------
Net asset value at end of year ..... $ 10.65 $ 10.88 $ 11.12 $ 11.01 $ 10.85 $ 10.86
--------- --------- --------- --------- --------- ---------
Total return(A) .................... (0.62%) 1.40% 4.85% 5.49% 4.00% 5.82%
--------- --------- --------- --------- --------- ---------
Net assets at end of year (000's) .. $ 3,766 $ 4,634 $ 4,747 $ 5,161 $ 5,239 $ 4,814
--------- --------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets .............. 1.74%(C) 1.74% 1.74% 1.65% 1.49% 1.49%
Ratio of net investment income to
average net assets .............. 3.62%(C) 3.58% 3.75% 3.89% 4.02% 4.08%
Portfolio turnover rate ............ 42%(C) 51% 36% 30% 37% 32%
</TABLE>
(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 1.76% for the period
ended December 31, 1999.
(C) Annualized.
See accompanying notes to financial statements.
Countrywide Investments - 19
<PAGE>
OHIO INSURED TAX-FREE FUND - CLASS A
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1999 -------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 11.99 $ 11.74
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ........... 0.29 0.58 0.61 0.61 0.62 0.63
Net realized and unrealized gains
(losses) on investments ...... (0.49) (0.34) 0.23 0.25 (0.02) 0.25
--------- --------- --------- --------- --------- ---------
Total from investment operations ... (0.20) 0.24 0.84 0.86 0.60 0.88
--------- --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment
income ....................... (0.29) (0.58) (0.61) (0.61) (0.62) (0.63)
Distributions from net realized
gains ........................ -- (0.29) (0.08) -- -- --
--------- --------- --------- --------- --------- ---------
Total distributions ................ (0.29) (0.87) (0.69) (0.61) (0.62) (0.63)
--------- --------- --------- --------- --------- ---------
Net asset value at end of year ..... $ 11.25 $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 11.99
--------- --------- --------- --------- --------- ---------
Total return(A) .................... (3.39%)(C) 1.81% 7.03% 7.36% 5.05% 7.75%
--------- --------- --------- --------- --------- ---------
Net assets at end of year (000's) .. $ 58,044 $ 62,737 $ 69,289 $ 70,816 $ 75,938 $ 71,393
--------- --------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets(B) ........... 0.75%(C) 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets .............. 5.03%(C) 4.72% 4.95% 5.05% 5.12% 5.35%
Portfolio turnover rate ............ 63%(C) 26% 41% 33% 46% 29%
</TABLE>
(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 0.78% and 0.77% for the
periods ended December 31, 1999 and June 30, 1995, respectively.
(C) Annualized.
See accompanying notes to financial statements.
20 - Countrywide Investments
<PAGE>
OHIO INSURED TAX-FREE FUND - CLASS C
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=====================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1999 -------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 12.00 $ 11.74
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ........... 0.25 0.49 0.52 0.53 0.56 0.57
Net realized and unrealized gains
(losses) on investments ...... (0.49) (0.34) 0.23 0.25 (0.03) 0.26
--------- --------- --------- --------- --------- ---------
Total from investment operations ... (0.24) 0.15 0.75 0.78 0.53 0.83
--------- --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment
income ....................... (0.25) (0.49) (0.52) (0.53) (0.56) (0.57)
Distributions from net realized
gains ........................ -- (0.29) (0.08) -- -- --
--------- --------- --------- --------- --------- ---------
Total distributions ................ (0.25) (0.78) (0.60) (0.53) (0.56) (0.57)
--------- --------- --------- --------- --------- ---------
Net asset value at end of year ..... $ 11.25 $ 11.74 $ 12.37 $ 12.22 $ 11.97 $ 12.00
--------- --------- --------- --------- --------- ---------
Total return(A) .................... (4.13%)(C) 1.05% 6.24% 6.65% 4.44% 7.31%
--------- --------- --------- --------- --------- ---------
Net assets at end of year (000's) .. $ 4,132 $ 4,740 $ 5,215 $ 4,639 $ 3,972 $ 4,165
--------- --------- --------- --------- --------- ---------
Ratio of net expenses to
average net assets(B) ........... 1.50%(C) 1.50% 1.50% 1.42% 1.25% 1.25%
Ratio of net investment income to
average net assets .............. 4.28%(C) 3.97% 4.20% 4.37% 4.62% 4.84%
Portfolio turnover rate ............ 63%(C) 26% 41% 33% 46% 29%
</TABLE>
(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 1.53% and 1.27% for the
periods ended December 31, 1999 and June 30, 1995, respectively.
(C) Annualized.
See accompanying notes to financial statements.
Countrywide Investments - 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
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
and the Ohio Insured Tax-Free Fund (collectively, the Funds) are each a separate
series of shares of Countrywide Tax-Free Trust (the Trust). The Trust is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated April 13, 1981.
The Declaration of Trust, as amended, permits the Trustees to issue an unlimited
number of shares of each Fund.
The Tax-Free Money Fund seeks the highest level of interest income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-quality, short-term municipal obligations.
The California Tax-Free Money Fund seeks the highest level of interest income
exempt from federal and California income taxes, consistent with liquidity and
stability of principal, by investing primarily in high-quality, short-term
California municipal obligations.
The Ohio Tax-Free Money Fund seeks the highest level of current income exempt
from federal income tax and Ohio personal income tax, consistent with liquidity
and stability of principal. The Fund invests primarily in a portfolio of
high-quality, short-term Ohio municipal obligations.
The Florida Tax-Free Money Fund seeks the highest level of interest income
exempt from federal income tax, consistent with liquidity and stability of
principal, by investing primarily in high-quality, short-term Florida municipal
obligations the value of which is exempt from the Florida intangible personal
property tax.
The Tax-Free Intermediate Term Fund seeks high current income exempt from
federal income tax, consistent with protection of capital, by investing
primarily in high-grade municipal obligations maturing within twenty years or
less with a dollar-weighted average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income exempt
from federal income tax and Ohio personal income tax, consistent with protection
of capital. The Fund invests primarily in high and medium-quality, long-term
Ohio municipal obligations which are protected by insurance guaranteeing the
payment of principal and interest in the event of a default.
The 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.
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 (Note 7).
22 - Countrywide Investments
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Trust's significant accounting policies:
Security valuation -- Tax-Free Money Fund, California Tax-Free Money Fund, Ohio
Tax-Free Money Fund and Florida Tax-Free Money Fund securities are valued on an
amortized cost basis, which approximates market. This involves initially valuing
a security at its original cost and thereafter assuming a constant amortization
to maturity of any discount or premium. This method of valuation is expected to
enable these Funds to maintain a constant net asset value per share. Tax-Free
Intermediate Term Fund and Ohio Insured Tax-Free Fund securities are valued at
market using an independent pricing service which generally utilizes a
computerized grid matrix of tax-exempt securities and evaluations by its staff
to determine what it believes is the fair value of the securities. On limited
occasions, if the valuation provided by the pricing service ignores certain
market conditions affecting the value of a security or the pricing service
cannot provide a valuation, the fair value of the security will be determined in
good faith consistent with procedures established by the Board of Trustees.
Share valuation -- The net asset value per share of the Tax-Free Money Fund and
the California Tax-Free Money Fund is calculated daily by dividing the total
value of a Fund's assets, less liabilities, by its number of shares outstanding.
The 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 the net asset value
per share plus a sales load equal to 2.04% of the net asset value (or 2% of the
offering price). The maximum offering price of Class A shares of the Ohio
Insured Tax-Free Fund is equal to the 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 (Note 7).
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
the 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 determined 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. 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.
Countrywide Investments - 23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 December 31, 1999:
--------------------------------------------------------------------------------
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
(000'S) TERM FUND FUND
--------------------------------------------------------------------------------
Gross unrealized appreciation ........................ $ 687 $ 1,480
Gross unrealized depreciation ........................ (1,026) (1,389)
------- -------
Net unrealized appreciation .......................... $ (339) $ 91
------- -------
--------------------------------------------------------------------------------
The tax basis of portfolio investments for each Fund is equal to the amortized
cost as shown on the Statements of Assets and Liabilities.
As of December 31, 1999, the Tax-Free Intermediate Term Fund had a capital loss
carryforward for federal income tax purposes of $361,822, which expires on June
30, 2004. These capital loss carryforwards may be utilized in future years to
offset net realized capital gains prior to distribution to shareholders.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) were as follows for
the year ended December 31, 1999:
--------------------------------------------------------------------------------
TAX-FREE OHIO INSURED
INTERMEDIATE TAX-FREE
(000'S) TERM FUND FUND
--------------------------------------------------------------------------------
Purchases of investment securities .................. $10,014 $22,466
------- -------
Proceeds from sales and maturities of
investment securities ............................ $12,784 $19,380
------- -------
--------------------------------------------------------------------------------
4. TRANSACTIONS WITH AFFILIATES
The Chairman, President and certain other officers of the Trust are also
officers of Countrywide Financial Services, Inc., or its subsidiaries which
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.
24 - Countrywide Investments
<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 six months ended
December 31, 1999, the Adviser waived investment advisory fees of $19,415 for
the Tax-Free Money Fund, $54,856 for the Ohio Tax-Free Money Fund, $39,160 for
the Florida Tax-Free Money Fund, $10,671 for the Ohio Insured Tax-Free Fund, and
$5,375 for the Tax-Free Intermediate Fund.
TRANSFER AGENT 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 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 per shareholder account from each of the Tax-Free
Intermediate Term Fund and the Ohio Insured Tax-Free Fund, subject to a $1,000
minimum monthly fee for each Fund, or for each class of shares of a Fund, as
applicable. In addition, each Fund pays CFS 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 the Tax-Free Money Fund,
$3,000 per month from the California Tax-Free Money Fund, $6,000 per month from
the Ohio Tax-Free Money Fund, $3,500 per month from the Florida Tax-Free Money
Fund, and $4,000 per month from each of 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 $1,888 and
$11,412 from underwriting and broker commissions on the sale of shares of the
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund,
respectively, during the six months ended December 31, 1999. In addition, the
Adviser collected $2,318 and $552 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.
Countrywide Investments - 25
<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 December 31, 1999. 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 December 31, 1999. Under the terms of its Custodian
Agreement, Huntington receives from the Fund an asset-based fee.
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
and the Ohio Insured Tax-Free Fund are the result of the following capital share
transactions:
--------------------------------------------------------------------------------
TAX-FREE INTERMEDIATE OHIO INSURED
TERM FUND TAX-FREE FUND
--------------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
(000'S) 1999 1999 1999 1999
--------------------------------------------------------------------------------
CLASS A
Shares sold ......................... 472 1,222 2,802 11,637
Shares reinvested ................... 78 154 95 287
Shares redeemed ..................... (930) (1,729) (3,081) (12,181)
------ ------ ------ ------
Net increase (decrease) in
shares outstanding ............... (380) (353) (184) (257)
Shares outstanding, beginning of year 4,405 4,758 5,343 5,600
------ ------ ------ ------
Shares outstanding, end of year ..... 4,025 4,405 5,159 5,343
------ ------ ------ ------
CLASS C
Shares sold ......................... 43 219 9 45
Shares reinvested ................... 6 14 7 22
Shares redeemed ..................... (121) (234) (53) (85)
------ ------ ------ ------
Net increase (decrease) in
shares outstanding ............... (72) (1) (37) (18)
Shares outstanding, beginning of year 426 427 404 422
------ ------ ------ ------
Shares outstanding, end of year ..... 354 426 367 404
------ ------ ------ ------
--------------------------------------------------------------------------------
26 - Countrywide Investments
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
6. PORTFOLIO COMPOSITION
As of December 31, 1999, 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 94.0% invested in debt obligations issued by the
State of Florida and its political subdivisions, agencies, authorities and
instrumentalities and by other issuers the value of which is exempt from the
Florida intangible personal property tax. As of December 31, 1999, 26.6% of the
portfolio securities of the Tax-Free Money Fund were concentrated in the State
of Ohio, and 13.3% in the State of Illinois. For information regarding portfolio
composition by state for the Tax-Free Intermediate Term Fund, see the Fund's
Portfolio of Investments.
The California Tax-Free Money Fund, the Ohio Tax-Free Money Fund, the Florida
Tax-Free Money Fund and the Ohio Insured Tax-Free Fund are each non-diversified
Funds under the 1940 Act. Thus, investments may be concentrated in fewer issuers
than those of a diversified fund. As of December 31, 1999, no non-diversified
Fund had concentrations of investments (10% or greater) in any one issuer.
The Tax-Free Money Fund, the California Tax-Free Money Fund, the Ohio Tax-Free
Money Fund and the Florida Tax-Free Money Fund each invest in municipal
securities maturing in 13 months or less and having a short-term rating in one
of the top two ratings categories by at least two nationally recognized
statistical rating agencies (or by one such agency if a security is rated by
only that agency) or, if unrated, are determined by the Adviser, under the
supervision of the Board of Trustees, to be of comparable quality.
As of December 31, 1999, 40.5% of the Tax-Free Intermediate Term Fund's
portfolio securities were rated AAA/Aaa [using the higher of Standard & Poor's
Corporation (S&P) or Moody's Investors Service, Inc. (Moody's) ratings], 28.2%
were rated AA/Aa, 29.8% were rated A/A and 1.5% were not rated.
As of December 31, 1999, 80.0% 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 60.2%
of its portfolio securities.
Countrywide Investments - 27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The concentration of investments for each Fund as of December 31, 1999,
classified by revenue source, was as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
CALIFORNIA OHIO FLORIDA TAX-FREE OHIO
TAX-FREE TAX-FREE TAX-FREE TAX-FREE INTERMEDIATE INSURED
MONEY MONEY MONEY MONEY TERM TAX-FREE
FUND FUND FUND FUND FUND FUND
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
General Obligations ...... 11.1% 7.4% 18.3% 0.4% 16.8% 39.2%
Revenue Bonds:
Industrial Development/
Pollution Control .. 41.6% 29.2% 16.4% 2.9% 4.5% 5.0%
Hospital/Health Care .. 12.8% 6.8% 18.4% 20.1% 22.7% 19.6%
Utilities ............. 8.7% 12.3% 15.0% 11.6% 7.9% 11.7%
Bank & Financial ...... -- -- 1.2% 5.3% -- --
Education ............. 6.7% 9.5% 8.7% 11.7% 15.0% 8.4%
Housing/Mortgage ...... 6.1% 6.5% 3.8% 22.1% 10.7% 5.5%
Economic Development .. 5.1% 6.4% 7.7% 1.8% 6.8% 1.4%
Public Facilities ..... 2.4% 0.2% 1.9% 5.3% 5.0% 6.2%
Transportation ........ -- 1.3% 2.6% -- 5.5% 3.0%
Special Tax ........... -- -- -- -- 2.8% --
Leases ................ -- 2.9% -- -- -- --
Miscellaneous ......... 5.5% 10.4% 1.1% 6.5% 2.3% --
Commercial Paper ...... -- 7.1% 4.9% 12.3% -- --
----- ----- ----- ----- ----- -----
Total .................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- -----
-------------------------------------------------------------------------------------------
</TABLE>
7. MAXIMUM OFFERING PRICE PER SHARE
Effective August 1, 1999, for accounts opened after July 31, 1999, the maximum
offering price per share of Class A shares of the Tax-Free Intermediate Term
Fund and the Ohio Insured Tax-Free Fund is equal to the net asset value per
share plus a sales load equal to 4.99% of the net asset value (or 4.75% of the
offering price). Effective August 1, 1999, for all accounts, the maximum
offering price per share of Class C shares of each Fund is equal to the net
asset value per share plus a sales load equal to 1.27% of the net asset value
(or 1.25% of the offering price).
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 six months ended December
31, 1999, as "exempt-interest dividends."
28 - Countrywide Investments
<PAGE>
TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 27.4% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 600 Massillon City, OH, Parks and Recreation GO BANS ........... 3.730% 01/14/00 $ 600
500 American Municipal Power Sys. Equipment BANS
(Distributive Generation Proj.) ......................... 4.250 01/21/00 500
571 American Municipal Power Sys. Impt. BANS
(Milan Village Proj.) ................................... 3.500 01/21/00 571
500 Northern Ozaukee School Dist., WI, GO BANS ................. 3.400 02/01/00 500
395 Umatilla Indian Reservation Conferated Tribes GO, Ser. A ... 4.200 02/01/00 395
700 North Hampton Village, OH, Sewer Sys. First Mtg
BANS, Ser. B ............................................ 4.950 02/11/00 701
180 Lewisville, TX, GO ......................................... 5.000 02/15/00 180
120 The Colony, TX, GO, Prerefunded @ 100 ...................... 6.800 02/15/00 120
475 American Municipal Power Sys. Impt. BANS
(Bradner Village Proj.) ................................. 3.600 03/23/00 475
250 Denver, CO, City and County COP, Ser. A .................... 4.100 05/01/00 250
175 Greenville, SC, Hosp. Sys. Facs. Rev.,
Prerefunded @ 102 ....................................... 7.000 05/01/00 180
200 Campbell-Savona, NY, Central School Dist. GO ............... 4.650 06/15/00 201
100 Brownsburg, IN, Multi-School Bldg. Corp. Rev ............... 9.750 07/01/00 103
100 Washington St. Public Power Supply Sys. Rev.,
Ser. C (Nuclear Proj. No. 1), Prerefunded @ 102 ......... 8.000 07/01/00 104
100 Westmoreland Co., PA, Municipal Auth. Serv. Rev.,
Ser. M, Prerefunded @ 100 ............................... 7.250 07/01/00 102
155 Aransas Pass, TX, GO ....................................... 4.200 08/01/00 155
200 Floresville, TX, Electric Light and Power Sys. Rev ......... 5.570 08/15/00 202
200 Johnson Co., KS, USD No. 233 GO ............................ 5.500 09/01/00 202
660 Westminster, CO, COP ....................................... 3.800 09/01/00 660
400 New Knoxville, OH, Waterworks Sys. BANS .................... 4.250 10/05/00 400
450 Crestline, OH, Swimming Pool Impt. BANS .................... 4.470 11/16/00 451
520 American Municipal Power Sys. Impt. BANS
---------- (Wellington Village Proj.) .............................. 4.300 12/15/00 520
--------
$ 7,551 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
---------- (Amortized Cost $7,590,217) ................................ $ 7,572
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 46.2% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 200 Illinois Health Fac. Auth. Rev., Ser. B (Elmhurst Hosp.) ... 4.800% 01/01/00 $ 200
590 Brooklyn Park, MN, IDR (Schmidt Proj.) ..................... 5.700 01/07/00 590
900 Eddyville, IA, IDR (Heartland Lysine, Inc.) ................ 6.000 01/07/00 900
200 Flint, MI, Hosp. Bldg. Auth. Rev., Ser. B
(Hurley Medical Center) ................................. 5.500 01/07/00 200
475 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.) .................. 5.700 01/07/00 475
245 Frankfort, MN, IDR, Ser. 1995 (J&B, Inc.) .................. 5.950 01/07/00 245
649 Franklin Park, IL, Rev., Ser. 1994 (A.M. Castle & Co. Proj.) 5.800 01/07/00 649
1,395 Harvard, IL, Health Care Fac. Rev., Ser. 1998
(Harvard Memorial Hosp. Proj.) .......................... 5.750 01/07/00 1,395
200 Hope, AR, IDR, Ser. A (Champion Parts, Inc. Proj.) ......... 5.800 01/07/00 200
Countrywide Investments - 29
<PAGE>
TAX-FREE MONEY FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 46.2% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 300 Illinois Dev. Fin. Auth. Rev. (Jewish Elderly Council) ..... 5.500% 01/07/00 $ 300
1,080 Illinois Dev. Fin. Auth. Rev., Ser. 1992
(Uhlich Children's Home Proj.) .......................... 5.500 01/07/00 1,080
500 Indiana Health Fac. Fin. Auth. Rev., Ser. 1997
(Capital Access Designated Pool) ........................ 5.500 01/07/00 500
200 Indiana Health Fac. Fin. Auth. Rev., Ser. 1998
(Capital Access Designated Pool) ........................ 5.500 01/07/00 200
700 Indiana St. Dev. Fin. Auth. Rev. (Lutheran High School) .... 5.600 01/07/00 700
300 Iowa Fin. Auth. Rev. (Burlington Medical Center) ........... 5.550 01/07/00 300
973 Kansas City, MO, IDR (A.M. Castle & Co. Proj.) ............. 5.800 01/07/00 973
1,255 Mankota, MN, IDR, Ser. 1998 (Sacco Family LP Proj.) ........ 5.850 01/07/00 1,255
188 Rosemont, IL, IDR (A.M. Castle & Co. Proj.) ................ 5.800 01/07/00 188
1,100 Scio Twnp., MI, EDR ........................................ 4.920 01/07/00 1,100
500 Arapahoe Co., CO, Parkview Metro. Dist. GO ................. 4.000 01/30/00 500
800 Coppell, TX, IDR (Minyards Prop., Inc.) .................... 3.750 01/30/00 800
---------- --------
$ 12,750 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
---------- (Amortized Cost $12,750) ................................... $ 12,750
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) ADJUSTABLE RATE PUT BONDS-- 25.1% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 620 Lexington-Fayette Co., KY, Urban Govt. Rev
(Providence Montessori) ................................. 3.750% 01/01/00 $ 620
525 Colorado Health Fac. Auth. Rev., Ser. 1998A
(AMC Cancer Center) ..................................... 3.400 01/15/00 525
580 Buckeye Tax-Exempt Mtg. Bond Trust ......................... 3.900 02/01/00 578
555 Corpus Christi, TX, IDR (Tex-Air Invest. Co. Proj.) ........ 3.750 02/01/00 555
260 Summit Co., OH, IDR (S.D. Myers Inc. Proj.) ................ 3.800 02/15/00 260
1,200 Owensboro, KY, IDR, Ser. 1985 (Dart Container) ............. 4.100 03/01/00 1,200
270 Portage Co., OH, IDR (Neidlinger Proj.) .................... 3.900 03/01/00 270
255 Summit Co., OH, IDR (Keltec Inc. Proj.) .................... 3.900 03/01/00 255
500 Summit Co., OH, IDR (Struktol Co. America Proj.) ........... 3.900 03/01/00 500
265 Summit Co., OH, IDR (Triscari Proj.) ....................... 3.900 03/01/00 265
140 Cuyahoga Co., OH, IDR (Halle Office Bldg.) ................. 4.235 04/01/00 140
120 Richland Co., OH, IDR (Robon Partnership Proj.) ............ 4.000 04/01/00 120
435 Summit Co., OH, IDR (L & W Mfg. Proj.) ..................... 4.000 04/01/00 435
1,000 Westmoreland Co., PA, IDR (White Consolidated Industries) .. 4.180 06/01/00 1,000
200 Fairfield, OH, IDR (Skyline Chili) ......................... 5.000 09/01/00 200
---------- --------
$ 6,925 TOTAL ADJUSTABLE RATE PUT BONDS
---------- (Amortized Cost $6,923) .................................... $ 6,923
--------
$ 27,226 TOTAL INVESTMENT SECURITIES - 98.7%
---------- (Amortized Cost $27,263) ................................... $ 27,245
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.3% ............... 361
--------
NET ASSETS - 100.0% ........................................ $ 27,606
--------
</TABLE>
30 - Countrywide Investments
<PAGE>
CALIFORNIA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE & COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 23.1% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 802 University of California, Regents COP, Ser. A .............. 3.350% 01/01/00 $ 800
200 California St. GO .......................................... 6.500 02/01/00 200
125 California MFH HFA Rev., Ser. A ............................ 3.450 02/01/00 125
115 Palmdale, CA, Cmnty. Dev. Agcy. Residential Mtg ............
Rev., Ser. A ............................................ 6.500 02/01/00 115
250 Santa Clara Valley, CA, Water Dist. COP,
Prerefunded @ 102 ....................................... 6.600 02/01/00 256
250 California St. GO .......................................... 4.800 03/01/00 251
100 Mesa, CA, Consolidated Water Dist. COP ..................... 4.400 03/15/00 100
100 California St. GO .......................................... 6.650 04/01/00 101
350 California St. GO .......................................... 4.900 05/01/00 352
160 Newman, CA, Wastewater Treatment Fac. COP .................. 4.000 05/01/00 160
150 Northern California Trans. Rev., Ser. A,
Prerefunded @ 101.5 ..................................... 7.000 05/01/00 154
1,000 California St. Veterans GO ................................. 3.200 06/01/00 1,000
500 Riverside Co., CA, Trans. Comm. Sales Tax Rev., Ser. A ..... 5.000 06/01/00 503
1,500 Los Angeles Co., CA, School Pooled Fin. Prog. COP,
Ser. A .................................................. 4.000 06/30/00 1,503
200 California Health. Fac. Fin. Auth. Rev., Ser. B
(Catholic Health Facs.) ................................. 4.250 07/01/00 201
500 Puerto Rico Commonwealth Public Impt. GO, Ser. B ........... 5.500 07/01/00 505
165 Sacramento, CA, Utility Dist. Rev., Ser. 7 ................. 5.000 07/01/00 166
155 California Health. Fac. Fin. Auth. Rev. (Children's Hosp.),
Prerefunded @ 102 ....................................... 6.500 07/01/00 160
250 Los Angeles Co., CA, Trans. Comm. Sales Tax Rev.,
Ser. B .................................................. 5.600 07/01/00 253
200 Los Angeles Co., CA, Trans. Comm. Sales Tax Rev.,
Ser. A (Proposition C) .................................. 5.500 07/01/00 202
350 Southern California Rapid Trans. Dist. COP
(Workers Comp) .......................................... 7.625 07/01/00 357
1,000 Fremont, CA, USD, Alameda Co.TRANS ......................... 4.000 07/28/00 1,003
255 Berkeley, CA, USD GO, Ser. D ............................... 8.250 08/01/00 261
160 Long Beach, CA, USD GO, Ser. A ............................. 7.500 08/01/00 164
175 Santa Paula, CA, USD GO, Prerefunded @ 102 ................. 7.200 08/01/00 184
100 California St. Dept. of Veteran Affairs Home Purchase
Rev., Ser. A ............................................ 6.450 08/01/00 102
200 Castaic Lake, CA, Water Sys. Impt. Rev ..................... 6.750 08/01/00 203
1,040 Los Angeles Co., CA, Schools Regionalized Business
Svcs. Rev., Ser. A ...................................... 0.000 08/01/00 1,017
300 Paso Robles, CA, Joint USD COP ............................. 4.500 08/01/00 302
185 San Lorenzo, CA, USD COP ................................... 4.000 08/01/00 185
110 San Marcos, CA, Public Fac. Auth. Tax Rev., Ser. A ......... 4.500 08/01/00 111
625 Corona, CA, Comnty Fac. Dist. Special Tax .................. 4.000 09/01/00 627
320 Fontana, CA, Comnty Fac. Dist. Special Tax, Ser. A ......... 4.000 09/01/00 321
205 San Bernardino, CA, Joint Powers Fin. Auth. COP
(Police Station Proj.) .................................. 3.700 09/01/00 205
100 San Francisco, CA, City & Co. COP .......................... 5.300 09/01/00 101
Countrywide Investments - 31
<PAGE>
CALIFORNIA TAX-FREE MONEY FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE & COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 23.1% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 165 Kern Co., CA, Capital Impt. Proj. COP ...................... 4.000% 11/01/00 $ 165
590 Santa Ana, CA, Cmnty Redevelopment Agcy. Tax
---------- Allocation, Ser. B, Prerefunded @ 102 ................... 6.500 12/15/00 615
$ 12,952 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS --------
---------- (Amortized Cost $13,078) ................................... $ 13,030
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 65.5% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 2,100 Newport Beach, CA, Rev., Ser. B (Hoag Memorial Hosp.) ...... 4.400% 01/01/00 $ 2,100
1,500 Newport Beach, CA, Rev., Ser. C (Hoag Memorial Hosp.) ...... 4.000 01/01/00 1,500
2,000 ABAG Fin. Auth. Nonprofit Corps. MFH Rev., Ser. A .......... 5.400 01/07/00 2,000
2,000 ABN AMRO Munitops Trust Cert. (San Diego, CA) .............. 5.390 01/07/00 2,000
2,000 ABN AMRO Munitops Trust Cert., Ser. 1999-7 (LA USD) ........ 5.440 01/07/00 2,000
290 Alameda Co., CA, IDR (BAT Properties LLC Proj.) ............ 5.250 01/07/00 290
2,100 Alameda Co., CA, IDR (Meskimen Family Proj.) ............... 4.450 01/07/00 2,100
300 Alameda Co., CA, IDR, Ser. A (Tool Family Partnership) ..... 4.450 01/07/00 300
3,000 California Educ. Fac. Auth. Rev.(Foundation for Educ.) ..... 5.150 01/07/00 3,000
600 California St. EDR, Ser. A (Joseph Schmidt Proj.) .......... 5.250 01/07/00 600
220 California Statewide Cmntys. Dev. Auth. Apt. Dev. Rev ......
(Jaygee Realty Proj.) ................................... 5.050 01/07/00 220
520 California Statewide Cmntys. Dev. Corp. Rev ................
(Michigan Hanger) ....................................... 5.050 01/07/00 520
1,100 California Statewide Cmntys. Dev. Corp. Rev ................
(Whispering Winds) ...................................... 5.000 01/07/00 1,100
1,500 Hanford, CA, Sewer Rev., Ser A ............................. 5.300 01/07/00 1,500
300 Huntington Park, CA, Public Fin. Auth. Lease Rev., Ser. A
(Parking Proj.) ......................................... 4.900 01/07/00 300
1,700 Orange, CA, IDR (Control Air Conditioning) ................. 5.150 01/07/00 1,700
300 Orange, CA, Special Fin. Auth. Rev., Ser. B (Teeter Plan) .. 5.000 01/07/00 300
1,000 San Bernardino Co., CA, Capital Impt. Refinancing Proj. Rev 5.300 01/07/00 1,000
1,300 San Bernardino Co., CA, COP ................................ 5.150 01/07/00 1,300
900 San Bernardino, CA, IDR (LaQuinta Motor Inns) .............. 5.450 01/07/00 900
2,250 San Diego Co., CA, IDR (Apogee Enterprises Inc.) ........... 5.675 01/07/00 2,250
3,400 San Rafael, CA, IDR, Ser. 1984 (Phoenix American) .......... 5.500 01/07/00 3,400
500 Santa Paula, CA, Public Fin. Auth. Lease Rev ...............
(Water Sys. Acquisition Proj.) .......................... 5.000 01/07/00 500
1,600 Vacaville, CA, IDA IDR (Leggett & Platt, Inc.) ............. 5.100 01/07/00 1,600
400 California PCR Fin. Auth., Ser. 1983 (Southdown, Inc.) ..... 3.900 01/30/00 400
3,100 California PCR Fin. Auth., Ser. 1983 (Southdown, Inc.) ..... 3.900 01/30/00 3,100
600 Montebello, CA, IDR (Sunclipse, Inc. Proj.) ................ 3.500 01/30/00 600
500 Riverside, CA, IDR Issue A (Sunclipse, Inc. Proj.) ......... 3.500 01/30/00 500
---------- --------
$ 37,080 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
---------- (Amortized Cost $37,080) ................................... $ 37,080
--------
32 - Countrywide Investments
<PAGE>
CALIFORNIA TAX-FREE MONEY FUND (CONTINUED)
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) COMMERCIAL PAPER-- 10.6% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 2,000 Modesto, CA, Irrigation Dist. COP (Capital Impt. Proj.) .... 3.650% 01/12/00 $ 2,000
2,000 State of California GO ..................................... 3.650 01/19/00 2,000
2,020 California St. Dept. of Water Resources Rev ................ 3.600 02/01/00 2,020
---------- --------
$ 6,020 TOTAL COMMERCIAL PAPER
---------- (Amortized Cost $6,020) .................................... $ 6,020
--------
$ 56,052 TOTAL INVESTMENT SECURITIES-- 99.2%
---------- (Amortized Cost $56,178) ................................... $ 56,130
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.8% ............... 458
--------
NET ASSETS-- 100.0% ........................................ $ 56,588
--------
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
Countrywide Investments - 33
<PAGE>
OHIO TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE & COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 29.6% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 748 Lima, OH, Land Acquisition GO BANS (River Corridor Proj.) .. 3.600% 01/12/00 $ 748
660 Worthington, OH, CSD School Impt. GO BANS, Ser. 1999 ....... 3.440 01/13/00 660
5,000 American Municipal Power Sys. Impt. Equipment BANS
(Distributive Generation Proj.) ......................... 4.250 01/21/00 5,000
1,335 Marysville, OH, Various Purpose GO BANS .................... 3.410 01/27/00 1,335
500 North Ridgeville, OH,Water Sys. Impt. GO BANS .............. 3.600 02/01/00 500
1,120 Marion Co., OH, Various Purpose GO BANS .................... 3.500 02/08/00 1,120
486 Maple Heights, OH, CSD Energy Conservation Impt ............
GO BANS, Ser. 1999 ...................................... 4.000 02/11/00 486
975 Ottawa Co., OH, Regional Water Sys. Impt. GO BANS .......... 3.500 02/16/00 975
1,000 Mason, OH, CSD School Impt. GO BANS, Ser. 1999 ............. 3.380 02/17/00 1,001
765 Ottawa Co., OH, Port Auth. Fac. Impt. GO BANS .............. 3.550 02/21/00 765
3,000 Kings, OH, LSD Impt. GO BANS Ser. 1999 ..................... 4.190 03/01/00 3,004
600 North Ridgeville, OH, Road Impt. GO BANS, Ser. 1999
(Bainbridge Proj.) ...................................... 3.600 03/02/00 600
800 Salem, OH, CSD School Impt. GO BANS, Ser. 1999 ............. 3.460 03/03/00 800
3,267 Barnesville, OH, Exempted Village School Dist. Impt ........
GO BANS, Ser. 1999 ...................................... 4.200 03/15/00 3,272
1,000 Marysville, OH, Various Purpose GO BANS .................... 3.360 03/16/00 1,001
2,000 American Municipal Power Sys. Impt. BANS
(St. Mary's Proj.) ...................................... 3.550 03/23/00 2,000
300 New Knoxville, OH, School Construction GO BANS ............. 4.510 03/23/00 301
2,200 American Municipal Power Sys. Impt. BANS
(Lodi Village Proj.) .................................... 3.400 03/24/00 2,200
1,400 American Municipal Power Sys. Impt. BANS
(Genoa Village Proj.) ................................... 3.600 03/28/00 1,400
850 Genoa, OH, Water Sys. Impt. GO BANS ........................ 3.400 03/30/00 850
700 Franklin Co., OH, Dev. Ref. Rev., Ser. 1983
(American Chemical Society Proj.) ....................... 5.500 04/01/00 703
700 Brook Park, OH, Street Impt. GO BANS ....................... 3.500 04/07/00 700
1,060 Marysville, OH, Various Purpose GO BANS .................... 3.460 04/13/00 1,061
1,150 Marysville, OH, Various Purpose GO BANS .................... 3.590 04/13/00 1,151
2,000 Sandusky, OH, Various Purpose GO BANS ...................... 3.875 04/13/00 2,003
2,325 Marysville, OH, Various Purpose GO BANS .................... 4.059 04/15/00 2,327
500 Franklin Co., OH, Rev. (Online Computer Library Proj.) ..... 5.500 04/15/00 501
4,300 Hebron, OH, Sanitary Sewer Sys. Rev ........................ 4.000 04/17/00 4,307
1,000 Ohio St. Highway Impt. GO, Ser. C .......................... 4.000 05/01/00 1,001
1,500 Mentor, OH, Exempted Village School Dist ...................
GO BANS, Ser. 1999 ...................................... 3.380 05/04/00 1,500
3,000 Cincinnati, OH, CSD GO BANS ................................ 3.900 05/12/00 3,005
1,500 Ross Co., OH, Bldg. Auth. Acquisition GO BANS .............. 3.300 05/17/00 1,500
1,100 Williard City, OH, Street Impt. GO BANS .................... 3.650 05/25/00 1,101
2,740 Ohio St. Water Dev. Auth. Impt. Rev ........................ 5.400 06/01/00 2,762
1,040 Ohio St. Water Dev. Auth. Impt. Rev ........................ 5.000 06/01/00 1,046
450 Springboro, OH, GO BANS (South Main Street) ................ 3.660 06/01/00 450
1,100 Marysville, OH, GO BANS (Phase II Notes) ................... 3.880 06/15/00 1,101
2,450 Maryville, OH, Various Purpose GO BANS ..................... 3.660 06/15/00 2,453
1,645 Marysville, OH GO (Acquisition Notes) ...................... 3.920 06/15/00 1,647
34 - Countrywide Investments
<PAGE>
OHIO TAX-FREE MONEY FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE & COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 29.6% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 2,755 Obetz, OH, Various Purpose GO BANS ......................... 3.700% 06/15/00 $ 2,757
1,000 American Municipal Power Sys. Impt. BANS
(Village of New Breman Proj.) ........................... 3.700 06/16/00 1,000
1,250 American Municipal Power Sys. Impt. BANS
(Deshler, OH, Proj.) .................................... 4.000 06/16/00 1,250
5,726 Meigs, OH, LSD Impt. GO BANS ............................... 4.770 06/20/00 5,738
3,000 East Muskingum, OH, Water Auth. Rev. BANS .................. 4.320 06/22/00 3,004
2,350 American Municipal Power Sys. Impt. BANS
(Montpelier Village Proj.) .............................. 4.000 07/13/00 2,350
6,997 Morgan, OH, LSD Impt. GO BANS Ser. 1999 .................... 4.520 07/14/00 7,005
520 Allen Co., OH, BANS Ser. 1999 .............................. 4.300 07/20/00 522
2,000 Niles City, OH, Water Line Impt. BANS ...................... 4.150 07/20/00 2,003
1,800 American Municipal Power Sys. Impt. BANS
(Wapakoneta Proj.) ...................................... 3.750 07/27/00 1,800
1,445 Cuyahoga Co., OH, Hosp. Rev. (Meridia Health Sys.),
Prerefunded @ 102 ....................................... 7.250 08/15/00 1,494
6,000 American Municipal Power Sys. Impt. BANS
(City of Bryan Proj.) ................................... 3.900 08/25/00 6,000
1,200 Lisbon, OH, Exempted Village School Dist. Impt .............
GO BANS, Ser. 1999 ...................................... 3.800 08/31/00 1,200
1,265 Lorain Co., OH, Hosp. Fac. Rev .............................
(Catholic Healthcare Partners) .......................... 4.000 09/01/00 1,267
900 Springboro, OH, Street Impt. GO BANS ....................... 3.960 09/07/00 902
2,000 Springdale, OH, Street Impt. GO BANS ....................... 3.800 09/14/00 2,000
700 Lorain Co., OH, Various Purpose GO BANS, Ser. 1999 ......... 4.000 09/15/00 701
4,574 Lorain Co., OH, Various Purpose GO BANS, Ser. 1999 ......... 4.000 09/15/00 4,583
1,795 Bluffton Village, OH, Water Sys. Rev. BANS ................. 4.450 10/26/00 1,801
2,200 American Municipal Power Sys. Impt. BANS
(Pioneer Village Proj.) ................................. 4.200 11/02/00 2,200
600 Marysville, OH, Various Purpose GO BANS, Ser. F ............ 4.210 11/16/00 601
2,075 Belmont Co., OH, Sanitary Sewer Impt. GO BANS .............. 4.210 11/21/00 2,080
2,000 American Municipal Power Sys. Impt. BANS
(Bowling Green, OH Proj.) ............................... 4.100 12/01/00 2,000
4,000 American Municipal Power Sys. Impt. BANS
(Shelby Proj.) .......................................... 4.300 12/01/00 4,000
400 Cincinnati, OH, GO ......................................... 4.500 12/01/00 402
1,000 Springboro, OH, Various Purpose GO BANS, Ser. 1999 ......... 4.260 12/07/00 1,002
940 Clermont Co., OH, Road Impt. GO BANS ....................... 4.300 12/14/00 942
---------- --------
$ 118,758 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
---------- (Amortized Cost $119,132) .................................. $118,941
--------
Countrywide Investments - 35
<PAGE>
OHIO TAX-FREE MONEY FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 57.9% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 3,700 Cincinnati & Hamilton Co., OH, Port Auth. EDR
(Kenwood Office Assoc. Proj.) ........................... 4.500% 01/01/00 $ 3,700
7,785 Cuyahoga Co., OH, Econ. Dev. Rev ...........................
(The Cleveland Orchestra Proj.) ......................... 4.750 01/01/00 7,785
900 Cuyahoga Co., OH, Hosp. Impt. Rev ..........................
(University Hosp. Of Cleveland) ......................... 4.700 01/01/00 900
100 Cuyahoga Co., OH, Hosp. Rev.(Cleveland Clinic) ............. 4.800 01/01/00 100
6,250 Ohio St. Air Quality Dev. Auth. Rev. (CG&E) ................ 4.750 01/01/00 6,250
600 Ohio St. Air Quality Dev. Auth. Rev. (CG&E) Ser. 1985A ..... 4.500 01/01/00 600
750 Ohio St. Air Quality Dev. Auth. Rev. (CG&E) Ser. 1985B ..... 4.500 01/01/00 750
500 Ohio St. Air Quality Dev. Auth. Rev. (Mead Corp.) .......... 4.700 01/01/00 500
1,600 Ohio St. PCR (Sohio Air Proj.) ............................. 4.800 01/01/00 1,600
1,210 Ohio St. PCR (Sohio Water Proj.) ........................... 4.800 01/01/00 1,210
375 Akron, Bath & Copley, OH, Joint Twnsp. Hosp. Rev ...........
(Visiting Nurse Svcs. Proj.) ............................ 5.550 01/07/00 375
7,000 ABN AMRO Munitops Trust Cert. 1998-I8
(Cleveland Water Works) ................................. 5.580 01/07/00 7,000
3,200 Ashtubula Co., OH, Hosp. Fac. Rev., Ser. 1995
(Ashtubula Co. Med. Ctr. Proj.) ......................... 5.470 01/07/00 3,200
3,055 Butler Co., OH, Hosp. Fac. Rev. Ser. 1998A
(Berkeley Square Retirement Ctr. Proj.) ................. 5.550 01/07/00 3,055
930 Centerville, OH, Health Care Rev. (Bethany Memorial) ....... 5.550 01/07/00 930
6,311 Clermont Co., OH, Hosp. Fac. Rev. Ser. B
(Mercy Health Sys.) ..................................... 5.750 01/07/00 6,311
8,285 Cleveland, OH, Waterworks Rev., Ser. 58 .................... 5.560 01/07/00 8,285
1,600 Clinton Co., OH, Hosp. Rev. (Clinton Memorial Hosp.) ....... 5.550 01/07/00 1,600
7,000 Clinton Co., OH, Hosp. Rev. (Ohio Hospital Cap., Inc.) ..... 5.600 01/07/00 7,000
400 Columbus, OH, GO, Ser. 1 ................................... 5.300 01/07/00 400
2,170 Cuyahoga Co., OH, Educ. Fac. Rev., Ser. 1998
(United Cerebral Palsy Assoc.) .......................... 5.600 01/07/00 2,170
2,000 Cuyahoga Co., OH, IDR Ser. 1989 (Motch Corp. Proj.) ........ 5.700 01/07/00 2,000
845 Cuyahoga Co., OH, IDR (Pleasant Lake Assoc.) ............... 5.600 01/07/00 845
1,795 Defiance Co., OH, IDR (Isaac Property Proj.) ............... 5.600 01/07/00 1,795
3,500 Delaware Co., OH, Health Care Fac. Rev., Ser. 1998
(Sarah Moore Home Proj.) ................................ 5.610 01/07/00 3,500
800 Delaware Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.) .......... 5.600 01/07/00 800
2,080 Erie Co., OH, IDR (Toft Dairy, Inc.) ....................... 5.600 01/07/00 2,080
2,300 Franklin Co., OH, EDR (Dominican Sisters) .................. 5.600 01/07/00 2,300
3,685 Franklin Co., OH, EDR, Ser. 1998
(Unity Resource Center Proj.) ........................... 5.600 01/07/00 3,685
1,215 Franklin Co., OH, Health Care Fac. Rev .....................
(Lifeline Organ Procurement) ............................ 5.600 01/07/00 1,215
4,145 Franklin Co., OH, Hosp. Rev. (U.S. Health Corp.) ........... 5.400 01/07/00 4,145
2,000 Franklin Co., OH, IDR (Alco Standard Corp.) ................ 5.450 01/07/00 2,000
400 Franklin Co., OH, IDR (Columbus College) ................... 5.500 01/07/00 400
1,115 Franklin Co., OH, IDR (Ohio Girl Scouts) ................... 5.500 01/07/00 1,115
564 Franklin Co., OH, IDR Ser. D (Kindercare) .................. 5.500 01/07/00 564
1,900 Geauga Co., OH Health Care Fac. Rev., Ser. 1998A
(Heather Hill Proj.) .................................... 5.560 01/07/00 1,900
1,120 Greene Co., OH, Health Care Fac. Rev. (Green Oaks Proj.) ... 5.600 01/07/00 1,120
36 - Countrywide Investments
<PAGE>
OHIO TAX-FREE MONEY FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 57.9% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 5,000 Hamilton Co., OH, Fac. Rev., Ser. 1997A
(Episcopal Retirement Homes) ............................ 5.500% 01/07/00 $ 5,000
1,079 Hamilton Co., OH, EDR, Ser. 1995
(Cincinnati Assoc. for the Performing Arts) ............. 5.550 01/07/00 1,079
100 Hamilton Co., OH, Hosp. Fac. Rev., Ser. F
(Health Alliance of Greater Cincinnati) ................. 5.350 01/07/00 100
1,060 Hamilton Co., OH, Health Care Fac. Rev .....................
(Aloysius Orphanage Proj.) .............................. 5.600 01/07/00 1,060
400 Hamilton Co., OH, Hosp. Fac. Rev., Ser. 1997B
(Health Alliance of Greater Cincinnati) ................. 5.350 01/07/00 400
3,000 Hamilton OH, MFH Rev., Ser. A (Knollwood Village Apts.) .... 5.470 01/07/00 3,000
2,000 Hamilton OH, MFH Rev. (Knollwood Village Apts.) ............ 5.470 01/07/00 2,000
2,690 Hancock Co., OH, MFM Rev., Ser. A
(Crystal Glen Apts. Proj. Phase II) ..................... 5.470 01/07/00 2,690
375 Hudson Village, OH, IDR, Ser. A (Kindercare) ............... 5.500 01/07/00 375
725 Huron Co., OH, Rev. (Norwalk Furniture Corp.) .............. 5.600 01/07/00 725
6,805 Lima, OH, Hosp. Fac. & Impt. Rev., Ser. 1996
(Lima Memorial Hosp.) ................................... 5.600 01/07/00 6,805
494 Lorain Co., OH, IDR, Ser. C (Kindercare) ................... 5.000 01/07/00 494
1,875 Lorain Co., OH, IDR (EMH Med. Ctr. Proj.) .................. 5.600 01/07/00 1,875
250 Lucas Co., OH, Rev. (Sunshine Children's Home) ............. 5.550 01/07/00 250
935 Lucas Co., OH, IDR, Ser. D (Kindercare) .................... 5.500 01/07/00 935
360 Lucas Co., OH, IDR (Associates Proj.) ...................... 5.600 01/07/00 360
1,900 Mahoning Co., OH, Health Care Fac. Rev .....................
(Copeland Oaks) ......................................... 5.470 01/07/00 1,900
1,365 Mahoning Co., OH, Health Care Fac. Rev .....................
(Ohio Heart Institute) .................................. 5.500 01/07/00 1,365
330 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.) ...... 5.470 01/07/00 330
1,540 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.) ...... 5.470 01/07/00 1,540
590 Marion Co., OH, Hosp. Impt. Rev. (Pooled Lease Proj.) ...... 5.470 01/07/00 590
300 Medina, OH, IDR (Kindercare) ............................... 5.500 01/07/00 300
800 Meigs Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.) ............. 5.600 01/07/00 800
287 Middletown, OH, IDR, Ser. A (Kindercare) ................... 5.500 01/07/00 287
945 Monroe, OH, IDR, Ser. 1985 (Magnode Corp.) ................. 4.700 01/07/00 945
2,000 Montgomery Co., OH, EDR (Dayton Art Institute) ............. 5.400 01/07/00 2,000
360 Montgomery Co., OH, Health Care Rev., Ser. A
(Dayton Area MRI Consortium) ............................ 5.600 01/07/00 360
3,360 Montgomery Co., OH, Health Care Rev ........................
(Comm. Blood Ctr. Proj.) ................................ 5.500 01/07/00 3,360
340 Montgomery Co., OH, IDR (Kindercare) ....................... 5.500 01/07/00 340
3,600 Montgomery Co., OH, Ltd., Oblig. Rev., Ser. 1996
(St. Vincent de Paul Proj.) ............................. 5.500 01/07/00 3,600
1,000 Morrow Co., OH, IDR (Field Container Corp.) ................ 5.550 01/07/00 1,000
4,800 Ohio St. EDR, Ser. 1983 (Court St. Ctr. Assoc. Ltd. Proj.) . 4.850 01/07/00 4,800
4,800 Ohio St. Higher Educ. Fac. Rev. (Pooled Fin. ) ............. 5.500 01/07/00 4,800
4,100 Ohio St. Higher Educ. Fac. Rev. (Pooled Fin. ) ............. 5.500 01/07/00 4,100
4,300 Ohio St. Higher Educ. Fac. Rev. (Pooled Fin. ) ............. 5.500 01/07/00 4,300
3,500 Ohio St. Higher Educ. Fac. Rev. (Kenyon College Proj.) ..... 5.400 01/07/00 3,500
3,100 Ohio St. Higher Educ. Fac. Rev. (Kenyon College Proj.) ..... 5.400 01/07/00 3,100
5,000 Ohio St. Univ. Gen. Rec. Rev., Ser. 1999B .................. 5.600 01/07/00 5,000
Countrywide Investments - 37
<PAGE>
OHIO TAX-FREE MONEY FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 57.9% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 590 Ohio St. IDR, Ser. 1994 (A.M. Castle & Co. Proj.) .......... 5.800% 01/07/00 $ 590
10,465 Ohio St. Turnpike Rev., Ser. 71 ............................ 5.560 01/07/00 10,465
5,000 Ohio St. Univ. Gen. Rec. Rev., Ser. 1999B2 ................. 5.400 01/07/00 5,000
1,200 Ohio St. Water Dev. Auth. Rev. (Timken Co. Proj.) .......... 5.650 01/07/00 1,200
650 Orrville, OH, Hosp. Fac. Rev., Ser. 1990 (Orville Hosp.) ... 5.500 01/07/00 650
1,780 Ottawa Co., OH, Hosp. Fac. Rev .............................
(Luther Home of Mercy Proj.) ............................ 5.550 01/07/00 1,780
315 Pike Co., OH, EDR (Pleasant Hill) .......................... 5.470 01/07/00 315
800 Rickenbacker, OH, Port. Auth. Rev ..........................
(Rickenbacker Holdings, Inc.) ........................... 5.500 01/07/00 800
5,555 Sharonville, OH, IDR (Duke Realty Proj.) ................... 5.500 01/07/00 5,555
437 Stark Co., OH IDR, Ser. D (Kindercare) ..................... 5.500 01/07/00 437
1,814 Summit Co., OH, Health Care Fac. Rev., Ser. 1997
(Evant, Inc. Proj.) ..................................... 5.550 01/07/00 1,814
3,400 Summit, OH, Civic Fac. Rev., Ser. 1997 (YMCA Proj.) ........ 5.600 01/07/00 3,400
1,770 Summit Co., OH, IDR (Bowery Assoc.) ........................ 5.500 01/07/00 1,770
475 Summit Co., OH, IDR (Go-Jo Indust., Inc. Proj.) ............ 5.500 01/07/00 475
4,320 Trumbull Co., OH, Health Care Fac. Rev .....................
(Shepherd of the Valley) ................................ 5.470 01/07/00 4,320
3,995 Univ. of Akron, OH, Gen. Rec., Ser. 165 .................... 5.560 01/07/00 3,995
1,270 Village of Andover, OH, Health Care Fac. Rev. Ser. 1996
(D & M Realty Proj.) .................................... 5.470 01/07/00 1,270
375 Wadsworth, OH, IDR (Kindercare) ............................ 5.500 01/07/00 375
1,600 Warren Co., OH, IDR (Liquid Container Proj.) ............... 5.550 01/07/00 1,600
1,300 Westlake, OH, IDR (Nordson Co.) ............................ 5.600 01/07/00 1,300
800 Wyandot Co., OH, IDR, Ser. 1985 (MRG Ltd. Proj.) ........... 5.600 01/07/00 800
600 Columbus, OH, Elec. Sys. Rev ............................... 3.650 01/30/00 600
3,715 Cuyahoga Co., OH, IDR (S&R Playhouse Realty) ............... 4.500 01/30/00 3,715
3,700 Delaware Co., OH, IDR, (Radiation Sterilizers, Inc.) ....... 4.050 01/30/00 3,700
200 Franklin Co., OH, IDR (BOA Ltd. Proj.) ..................... 4.250 01/30/00 200
1,200 Franklin Co., OH, IDR (Jacobsen Stores) .................... 4.250 01/30/00 1,200
1,565 Franklin Co., OH, IDR (Capitol South) ...................... 4.250 01/30/00 1,565
1,400 Hamilton Co., OH, IDR (ADP System) ......................... 3.700 01/30/00 1,400
2,800 Muskingum Co., OH, IDR (Elder-Beerman) ..................... 4.150 01/30/00 2,800
500 Ohio St. Environmental Impt. Rev. (U.S. Steel Corp. Proj.) . 4.150 01/30/00 500
---------- --------
$ 232,241 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
---------- (Amortized Cost $232,241) .................................. $232,241
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) ADJUSTABLE RATE PUT BONDS-- 6.8% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 4,000 Ohio St. Air Quality Dev. Auth. Rev. (Duquesne) ............ 3.900% 01/19/00 $ 4,000
590 Riverside, OH, EDR (Riverside Assoc. Ltd. Proj.) ........... 3.650 03/01/00 590
4,760 Cuyahoga Co., OH, IDR (Halle Office Building) .............. 4.235 04/01/00 4,760
1,345 Clermont Co., OH, EDR (John Q. Hammons Proj.) .............. 4.000 05/01/00 1,345
550 Franklin Co., OH, IDR (GSW Proj.) .......................... 3.850 05/01/00 550
2,925 Ohio St. HFA MFH (Lincoln Park) ............................ 3.900 05/01/00 2,925
3,425 Richland Co., OH, IDR (Mansfield Sq. Proj.) ................ 4.050 05/15/00 3,425
38 - Countrywide Investments
<PAGE>
OHIO TAX-FREE MONEY FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) ADJUSTABLE RATE PUT BONDS-- 6.8% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 455 Cuyahoga Co., OH, Health Care Rev., Ser. A
(Cleveland Neighborhood) ................................ 4.050% 06/01/00 $ 455
3,410 Franklin Co., OH, IDR (Leveque & Assoc. Proj.) ............. 4.000 06/01/00 3,410
975 Scioto Co., OH, Health Care Rev. (Hillview Retirement) ..... 4.000 06/01/00 975
880 Gallia Co., OH, IDR (Jackson Pike Assoc.) .................. 4.100 06/15/00 880
185 Cincinnati and Hamilton Co., OH, Port. Auth. Rev ...........
(Bethesda One Ltd. Proj.) ............................... 3.600 08/01/00 185
2,470 Perry Co., OH, Nursing Fac. Rev., Ser. 1996
(New Lexington Health Corp. Proj.) ...................... 3.700 09/01/00 2,470
1,155 Miami Valley, OH, Tax-Exempt Mtg. Rev., Ser. 86 ............ 4.880 10/15/00 1,155
---------- --------
$ 23,500 TOTAL ADJUSTABLE RATE PUT BONDS
---------- (Amortized Cost $27,132) ................................... $ 27,125
--------
COMMERCIAL PAPER -- 4.9%
10,000 Montgomery Co., OH, (Miami Valley Hosp.) ................... 3.850 01/10/00 10,000
500 Montgomery Co., OH, (Miami Valley Hosp.) ................... 3.900 01/24/00 500
4,000 Lorain Co., OH, (Catholic Health Care) ..................... 3.500 01/26/00 4,000
5,000 Lorain Co., OH, (Catholic Health Care) ..................... 3.850 02/10/00 5,000
---------- --------
$ 19,500 TOTAL COMMERCIAL PAPER
---------- (Amortized Cost $19,500) ................................... $ 19,500
--------
$ 393,999 TOTAL INVESTMENTS AT VALUE-- 99.2%
---------- (Amortized Cost $398,005) .................................. $397,807
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.8% ............... 3,310
--------
NET ASSETS-- 100.0% ........................................ $401,117
--------
</TABLE>
Countrywide Investments - 39
<PAGE>
FLORIDA TAX-FREE MONEY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE & COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 19.0% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100 Dade Co., FL, GO, Ser. H ................................... 6.600% 06/01/00 $ 101
500 Florida St. Board Education Capital Outlay GO, Ser. A ...... 7.000 06/01/00 507
125 Florida St. Board Education Capital Outlay GO, Ser. A,
Prerefunded @ 102 ....................................... 7.250 06/01/00 130
600 Palm Beach Co., FL, Criminal Justice Facs. Rev.,
Prerefunded @ 102 ....................................... 7.250 06/01/00 624
1,000 Miami-Dade Co., FL, School Dist. TANS ...................... 4.000 06/28/00 1,003
500 Brevard Co., FL, School Dist. TANS ......................... 4.000 06/30/00 501
500 First Florida Governmental Fin. Commission, Rev., Ser. C ... 5.900 07/01/00 505
1,000 Florida St. Div. Board Fin. Dept. Gen. Services, Rev.,
Ser. B (Environmental Protection) ....................... 4.500 07/01/00 1,004
500 Seminole Co., FL, School Dist. TANS ........................ 4.000 07/28/00 502
500 Lee Co., FL, School Board COP, Ser. A ...................... 6.200 08/01/00 508
---------- --------
$ 5,325 TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS
---------- (Amortized Cost $5,410) .................................... $ 5,385
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 67.3% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 500 Collier Co., FL, Health Fac. Auth. Hosp. Rev ...............
(Cleveland Clinic) ...................................... 4.700% 01/01/00 $ 500
500 Illinois Health Fac. Auth. Rev., Ser. A
(Elmhurst Memorial Health) .............................. 4.800 01/01/00 500
300 Ohio St. Air Quality Dev. Auth., Rev., Ser. A (CG&E) ....... 4.750 01/01/00 300
2,000 ABN AMRO Munitops Trust Cert., Ser. 1998-8
(Dade Co., FL, Water & Sewer Sys. Rev.) ................. 5.660 01/07/00 2,000
700 ABN AMRO Munitops Trust Cert., Ser. 1998-9
(Florida Board of Educ.) ................................ 5.660 01/07/00 700
1,000 Broward Co., FL, HFA MFH Rev. (Waters Edge Proj.) .......... 4.900 01/07/00 1,000
180 Florida HFA MFH Rev., Ser. EEE (Carlton Arms II Proj.) ..... 5.350 01/07/00 180
600 Florida Housing Fin. Corp. MFH Rev., (South Pointe Proj.) .. 4.700 01/07/00 600
1,000 Gulf Breeze, FL, Rev. (Local Government Loan Prog.) ........ 5.250 01/07/00 1,000
500 Illinois Dev. Fin. Auth. Rev., Ser. 1992
(Uhlich Children's Home Proj.) .......................... 4.700 01/07/00 500
400 Illinois Dev. Fin. Auth. Rev., Ser. 1995
(Uhlich Children's Home Proj.) .......................... 5.500 01/07/00 400
1,000 Jacksonville, FL, Health Fac. Rev. (Faculty Practice Assoc.) 5.450 01/07/00 1,000
1,150 Jacksonville, FL, Health Fac. Rev. (River Garden) .......... 5.100 01/07/00 1,150
500 Jacksonville, FL, Rev. (YMCA Florida First Coast Proj.) .... 5.000 01/07/00 500
500 Lee Co., FL, IDR Educ. Fac. Rev. (Canterbury School Proj.) . 5.550 01/07/00 500
900 Manatee Co., FL, HFA MFH Rev. (Harbour Proj. B) ............ 5.550 01/07/00 900
500 Orange Co., FL, Health Fac. Auth. Rev. (Adventist Sunbelt) . 5.400 01/07/00 500
500 Orange Co., FL, HFA MFH Rev. (Post Lake Apts. Proj.) ....... 5.500 01/07/00 500
1,750 Palm Beach Co., FL, Rev. (Community Foundation Proj.) ...... 5.350 01/07/00 1,750
900 Palm Beach Co., Fl, Rev. (Henry Morrison Flagler Proj.) .... 5.350 01/07/00 900
995 Pinellas Co., FL, Health Fac. Auth. Rev .................... 5.000 01/07/00 995
1,100 Plant City, FL, Hosp. Rev. (South Florida Baptist Hosp.) ... 5.450 01/07/00 1,100
40 - Countrywide Investments
<PAGE>
FLORIDA TAX-FREE MONEY FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 67.3% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 225 Putnam Co., FL, Dev. Auth. PCR, Ser. H-1
(Seminole Elec. Coop.) .................................. 5.550% 01/07/00 $ 225
900 St. Petersburg, FL, HFA Rev., Ser. 1997
(Menorah Manor Proj.) ................................... 5.400 01/07/00 900
475 Volusia Co., FL, HFA MFH Rev., Ser. H (Sun Pointe Apts.) ... 5.200 01/07/00 475
---------- --------
$ 19,075 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
---------- (Amortized Cost $19,075) ................................... $ 19,075
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) ADJUSTABLE RATE PUT BONDS-- 2.1% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 600 Putnam Co., FL, Dev. Auth. PCR, Ser. 1984D
---------- (Seminole Elec. Coop.)
(Amortized Cost $600) ...................................... 3.800% 06/15/00 $ 600
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) COMMERCIAL PAPER-- 12.3% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 1,500 Jacksonville FL., Electric System .......................... 3.750% 01/10/00 $ 1,500
2,000 Orlando FL., Utilities Commission (Water & Electric) ....... 3.650% 01/18/00 2,000
---------- --------
$ 3,500 TOTAL COMMERCIAL PAPER
(Amortized Cost $3,500) .................................... $ 3,500
--------
$ 28,500 TOTAL INVESTMENTS AT VALUE-- 100.7%
---------- (Amortized Cost $28,585) ................................... $ 28,560
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.7)% ............. (200)
--------
NET ASSETS-- 100.0% ........................................ $ 28,360
--------
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
Countrywide Investments - 41
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
=============================================================================================================
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) MUNICIPAL BONDS-- 98.2% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARIZONA-- 3.2%
$ 400 Arizona Educ. Loan Mkt. Corp. Rev., Ser. A ................. 6.700% 03/01/00 $ 401
600 Maricopa Co., AZ, School Dist. Rev., Ser. 1991C
(Tempe Elem.) ........................................... 8.000 07/01/04 676
300 Tucson, AZ, Water Dist. Rev ................................ 9.750 07/01/10 406
--------
1,483
--------
CALIFORNIA-- 1.5%
445 Sacramento Co., CA, MFH ARPB (Fairway One Apts.) ........... 5.875 02/01/03 445
250 California HFA Multi-Unit Rental Rev., Ser. B .............. 6.500 08/01/05 258
--------
703
--------
COLORADO-- 0.6%
300 Highland Ranch, CO, Metro. Dist. GO, Ser. A ................ 5.000 12/01/10 282
--------
DISTRICT OF COLUMBIA-- 1.1%
500 District of Columbia Rev. (Catholic University Proj.) ...... 5.250 10/01/10 494
--------
FLORIDA-- 12.0%
500 Florida HFA MFH ARPB, Ser. 1978B
(Hampton Lakes II Proj.) ................................ 5.700 04/01/01 501
750 Hillsborough Co., FL, Solid Waste Rev ...................... 5.500 10/01/05 770
455 Pensacola, FL, Airport Rev., Ser. 1997B .................... 5.400 10/01/07 462
1,000 Pasco Co., FL, HFA MFH Rev., Ser. 1997B
(Cypress Trail Apts.) ................................... 5.500 06/01/08 1,003
1,255 Florida HFA MFH Sr. Lien, Ser. I-1 ......................... 6.100 01/01/09 1,288
1,000 Halifax Hosp. Medical Ctr., FL, Health Care Fac. Rev.,
Ser. 1998A .............................................. 4.800 04/01/10 909
365 Halifax Hosp. Medical Ctr.. FL, Health Care Fac. Rev.,
Ser. 1998A .............................................. 5.000 04/01/11 334
365 Halifax Hosp. Medical Ctr., FL, Health Care Fac. Rev.,
Ser. 1998A .............................................. 5.000 04/01/12 330
--------
5,597
--------
INDIANA-- 5.6%
1,000 Indiana Bond Bank Special Prog. Rev., Ser. A-1 ............. 6.650 01/01/03 1,040
1,000 Indiana Health Fac. Fin. Auth. Hosp. Rev ...................
(Clarian Health Partners) ............................... 6.000 02/15/05 1,035
500 Indiana HFA Multi-Unit Mtg. Prog. Rev., Ser. 1992A ......... 6.600 01/01/12 516
--------
2,591
--------
IOWA-- 2.3%
120 Cedar Rapids, IA, Hosp. Fac. Rev ...........................
(St. Luke's Methodist Hosp.), Prerefunded @ 102 ......... 6.000 08/15/03 127
250 Iowa Student Loan Liquidity Corp. Rev ...................... 6.400 07/01/04 262
305 Iowa HFA Rev., Ser. A ...................................... 6.500 07/01/06 311
240 Iowa Student Loan Liquidity Corp. Rev ...................... 6.600 07/01/08 253
130 Cedar Rapids, IA, Hosp. Fac. Rev ...........................
(St. Luke's Methodist Hosp.) ............................ 6.000 08/15/09 135
--------
1,088
--------
KENTUCKY-- 1.6%
750 Kentucky St. Turnpike Auth. EDR (Revitalization Proj.) ..... 5.250 07/01/05 763
--------
42 - Countrywide Investments
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) MUNICIPAL BONDS-- 98.2% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
LOUISIANA-- 2.1%
$ 500 West Ouachita Parish, LA, School Dist. GO, Ser. A .......... 6.700% 03/01/03 $ 522
440 Louisiana Public Fac. Auth. Rev. (Medical Ctr. of Louisiana) 6.000 10/15/03 453
--------
975
--------
MASSACHUSETTS -- 3.2%
500 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992A ......... 6.500 09/01/02 520
500 New England Educ. Loan Mkt. Corp. Rev., Ser. 1992B ......... 6.600 09/01/02 520
445 Massachusetts St. Indust. Fin. Agy. Rev., Ser. 1997
(Hudner Assoc.) ......................................... 5.000 01/01/08 442
--------
1,482
--------
MICHIGAN-- 1.0%
450 Battle Creek, MI, EDR ARPB (Kellogg Co. Proj.) ............. 5.125 02/01/09 445
--------
MISSISSIPPI-- 1.1%
500 Mississippi Higher Educ. Rev., Ser. B ...................... 6.100 07/01/01 509
--------
NEBRASKA-- 3.2%
555 Nebraska Invest. Fin. Auth. Rev., Ser. 1989
(Foundation for Educ. Fund), Escrowed to Maturity ....... 7.000 11/01/09 566
1,000 Nebraska Gas Supply Rev., Ser. A
(American Public Energy Agcy.) .......................... 4.600 06/01/10 907
--------
1,473
--------
NEVADA-- 2.3%
1,000 Las Vegas, NV, GO, Sewer Impt. Rev.,
Prerefunded @ 102 ....................................... 6.500 04/01/02 1,056
--------
NEW YORK-- 1.1%
500 New York Local Govt. Asst. Corp. Rev., Ser. 1991B,
Prerefunded @ 102 ....................................... 7.000 04/01/01 525
--------
OHIO-- 39.6%
500 Hamilton Co., OH, Hosp. Fac. Rev. (Bethesda Hosp.) ......... 7.000 07/01/00 506
370 Fairfield, OH, IDR ARPB (Skyline Chili, Inc.) .............. 5.000 09/01/00 370
270 Warren Co., OH, Hosp. Fac. Rev. (Otterbein Home),
Prerefunded @ 102 ....................................... 7.000 07/01/01 284
1,000 Allen Co., OH, EDR ARPB(Young Men's Christian Assoc.) ...... 4.600 04/15/03 986
835 Ohio St. EDR Ohio Enterprise Bond Fd .......................
(Smith Steelite Proj.) .................................. 5.600 12/01/03 849
500 Hamilton Co., OH, Hosp. Fac. Rev ...........................
(Episcopal Retirement Home) ............................. 6.600 01/01/04 519
290 Ohio St. EDR Ohio Enterprise Bond Fd .......................
(Cheryl & Co.) .......................................... 5.500 12/01/04 295
1,005 Franklin Co., OH, Health Care Rev ..........................
(First Comm. Village) ................................... 6.000 06/01/06 1,020
530 Toledo, OH, GO ............................................. 6.000 12/01/06 562
710 Hamilton Co., OH, Health Care Fac. (Twin Towers) ........... 5.750 10/01/07 721
500 Ohio St. IDR, Ser. 1997 (Bomaine Corporation Proj.) ........ 5.500 11/01/07 499
674 Columbus, OH, Special Assessment GO ........................ 5.050 04/15/08 662
800 West Clermont, OH, LSD GO .................................. 6.150 12/01/08 842
1,000 Franklin Co., OH, GO ....................................... 5.450 12/01/09 1,014
Countrywide Investments - 43
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) MUNICIPAL BONDS-- 98.2% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 1,000 Cuyahoga Co., OH, EDR, Ser. B (University School Proj.) .... 5.300% 12/01/09 $ 995
1,000 Cuyahoga Co., OH, Hosp. Rev.
(Fairview General & Lutheran Hosp.) ..................... 6.250 08/15/10 1,047
930 Hamilton Co., OH, Health Care Fac. Rev. (Twin Towers) ...... 5.250 10/01/10 887
1,000 Franklin Co., OH, Rev. (Online Computer Library Ctr.) ...... 4.650 10/01/11 900
275 Akron, OH, GO .............................................. 6.000 11/01/11 287
1,000 Ohio St. University Rev., Ser. A ........................... 5.125 12/01/11 975
1,000 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.) ............ 5.125 01/15/12 963
1,000 Franklin Co., OH, Rev. (Online Computer Library Ctr.) ...... 4.700 10/01/12 892
520 Sycamore, OH, CSD COP ...................................... 4.700 12/01/12 467
615 Ohio St. University General Receipts Rev., Ser. A .......... 5.750 12/01/13 626
1,365 Toledo, OH, GO ............................................. 5.000 12/01/13 1,298
--------
18,466
--------
PENNSYLVANIA -- 1.7%
250 Pennsylvania St. IDR, Ser. A, Prerefunded @ 102 ............ 7.000 07/01/01 264
500 Pennsylvania Fin. Auth. Muni. Capital Impt. Proj. Rev. ..... 6.600 11/01/09 530
--------
794
--------
SOUTH CAROLINA -- 1.6%
725 Richland-Lexington, SC, Airport Dist. Rev., Ser. 1995
(Columbia Metro.) ....................................... 6.000 01/01/08 749
--------
TENNESSEE-- 2.8%
500 Nashville, TN, Metro. Airport Rev., Ser. C ................. 6.625 07/01/01 523
525 Southeast, TN, Tax-Exempt Mtg. Trust ARPB, Ser. 1990 ....... 7.250 04/01/03 559
250 Nashville & Davidson Co., TN, Health & Educ. Fac. Rev.,
Ser. A (Vanderbilt Univ.) ............................... 5.000 10/01/11 240
--------
1,322
--------
TEXAS-- 8.6%
500 Houston, TX, Sr. Lien Rev., Ser. A
(Hotel Tax & Parking Fac.), Prerefunded @ 100 ........... 7.000 07/01/01 518
500 N. Texas Higher Educ. Student Loan Rev., Ser. 1991A ........ 6.875 04/01/02 512
50 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS, Prerefunded @ 102 ....................... 6.000 05/15/02 53
450 N. Central, TX, Health Fac. Rev. (Baylor Health Care),
Indexed INFLOS .......................................... 6.000 05/15/08 472
515 Robinson, TX, ISD GO ....................................... 5.750 08/15/10 533
490 Dallas, TX, ISD ............................................ 5.600 08/15/11 497
210 Midland, TX, HFC Rev., Ser. A-2 ............................ 8.450 12/01/11 222
990 San Antonio, TX, Elec. & Gas Rev. .......................... 5.000 02/01/12 937
10 San Antonio, TX, Elec. & Gas Rev., Escrowed to Maturity .... 5.000 02/01/12 10
300 Waco, TX, COP .............................................. 4.800 02/01/15 262
--------
4,016
--------
WASHINGTON-- 1.2%
550 Washington St. Power Supply Sys. Rev., Ser. A
(Nuclear Proj. No. 2) ................................... 6.500 07/01/01 574
--------
WISCONSIN-- 0.8%
430 Wisconsin St. Health & Educ. Fac. Auth. Rev.
(Agnesian Healthcare, Inc.) ............................. 4.900 07/01/11 395
--------
44 - Countrywide Investments
<PAGE>
TAX-FREE INTERMEDIATE TERM FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT COUPON MATURITY VALUE
(000'S) MUNICIPAL BONDS-- 98.2% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 45,604 TOTAL MUNICIPAL BONDS-- 98.2%
---------- (Amortized Cost $46,121) ................................... $ 45,782
--------
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.8% ............... 829
--------
NET ASSETS-- 100.0% ........................................ $ 46,611
--------
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
Countrywide Investments - 45
<PAGE>
OHIO INSURED TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE & COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 98.0% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 255 Summit Co., OH, GO, Ser. A, Prerefunded @ 102 .............. 6.900% 08/01/00 $ 269
95 Ohio St. Higher Educ. Fac. Comm. Rev., Prerefunded @ 102 ... 7.250 12/01/00 100
200 Montgomery Co., OH, Hosp. Rev. (Sisters of Charity),
Prerefunded @ 102 ....................................... 6.625 05/15/01 207
250 Franklin Co., OH, IDR (1st Comm. Village Healthcare),
Crossover Prerefunded @ 101.5 ........................... 10.125 08/01/01 274
30 Clermont Co., OH, Hosp. Fac. Rev., Ser. A
(Mercy Health Sys.), Prerefunded @ 100 .................. 7.500 09/01/01 31
460 Westerville, Minerva Park & Blendon, OH, Joint Hosp ........
Dist. Rev. (St. Ann's), Prerefunded @ 102 ............... 7.100 09/15/01 488
1,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.),
Prerefunded @ 102 ....................................... 6.733 09/25/01 1,051
850 Alliance, OH, Waterworks Sys. Rev., Prerefunded @ 102 ...... 6.650 10/01/01 897
500 Celina, OH, Wastewater Sys. Mtg. Rev., Prerefunded @ 101 ... 6.550 11/01/01 523
500 Summit Co., OH, Various Purpose GO, Prerefunded @ 102 ...... 6.625 12/01/01 529
500 Clermont Co., OH, Sewer Sys. Rev., Prerefunded @ 102 ....... 7.100 12/01/01 533
500 Greene Co., OH, Water Sys. Rev., Prerefunded @ 102 ......... 6.850 12/01/01 530
461 Cleveland, OH, Waterworks Impt. Rev., Ser. 1992B,
Prerefunded @ 102 ....................................... 6.500 01/01/02 486
360 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.),
Prerefunded @ 102 ....................................... 6.250 01/15/02 378
1,000 Kent St. University General Receipts Rev.,
Prerefunded @ 102 ....................................... 6.500 05/01/02 1,059
500 Franklin Co., OH, Hosp. Rev., Ser. 1991
(Mt. Carmel Health), Prerefunded @ 102 .................. 6.750 06/01/02 533
500 Mahoning Co., OH, Hosp. Impt. Rev. (YHA Proj.),
Prerefunded @ 100 ....................................... 7.000 10/15/02 521
675 Reynoldsburg, OH, CSD GO, Prerefunded @ 102 ................ 6.550 12/01/02 722
500 Seneca Co., OH, GO (Jail Fac.), Prerefunded @ 102 .......... 6.500 12/01/02 535
127 Ohio St. Bldg. Auth. Rev. (Columbus St. Proj.),
Prerefunded @ 100 ....................................... 10.125 04/01/03 144
31 Ohio St. Bldg. Auth. Rev. (Frank Lausche Proj.),
Prerefunded @ 100 ....................................... 10.125 04/01/03 35
230 Summit Co., OH, GO, Ser. A, Prerefunded @ 100 .............. 6.900 08/01/03 246
500 Newark, OH, Water Sys. Impt. Rev., Prerefunded @ 102 ....... 6.000 12/01/03 531
290 Northwest, OH, LSD GO, Prerefunded @ 102 ................... 7.050 12/01/03 309
500 Ohio St. Bldg. Auth. Rev., Ser. 1994A
(Juvenille Correctional Bldg.), Prerefunded @ 102 ....... 6.600 10/01/04 546
290 Alliance, OH, CSD GO ....................................... 6.900 12/01/06 307
1,095 West Clermont, OH, LSD GO .................................. 6.900 12/01/07 1,203
500 Mansfield, OH, Hosp. Impt. Rev. (Mansfield General) ........ 6.700 12/01/09 525
465 Ohio Capital Corp. MFH Rev., Ser. 1990A .................... 7.500 01/01/10 479
500 Hamilton, OH, Water Sys. Mtg. Rev., Ser. 1991A ............. 6.400 10/15/10 523
500 Butler Co., OH, Hosp. Fac. Rev .............................
(Middletown Regional Hosp.) ............................. 6.750 11/15/10 526
39 Cleveland, OH, Waterworks Impt. Rev., Ser. F ............... 6.500 01/01/11 41
240 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.),
Escrowed to Maturity .................................... 9.000 06/01/11 290
46 - Countrywide Investments
<PAGE>
OHIO INSURED TAX-FREE FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE & COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 98.0% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 320 Ohio HFA SFM Rev., Ser. D .................................. 7.000% 09/01/11 $ 333
365 Bexley, OH, CSD GO ......................................... 7.125 12/01/11 423
530 Urbana, OH, Wastewater Impt. GO ............................ 7.050 12/01/11 569
600 Westerville, OH, Water Sys. Impt. GO ....................... 6.450 12/01/11 635
500 Strongsville, OH, CSD GO ................................... 5.375 12/01/12 503
500 Worthington, OH, CSD GO .................................... 6.375 12/01/12 525
530 Ottawa Co., OH, GO ......................................... 5.750 12/01/14 534
1,000 Portage Co., OH, GO ........................................ 6.200 12/01/14 1,045
1,000 Clermont Co., OH, Hosp. Fac. Rev. (Mercy Health Sys.) ...... 5.875 09/01/15 1,002
400 Warren, OH, Waterworks Rev ................................. 5.500 11/01/15 393
1,000 Buckeye Valley, OH, LSD GO ................................. 6.850 12/01/15 1,128
500 Delaware, OH, CSD GO ....................................... 5.750 12/01/15 501
500 Ohio St. Higher Educ. Fac. Rev. (University of Dayton) ..... 6.750 12/01/15 529
500 Cleveland, OH, Waterworks Impt. Rev., Ser. F ............... 6.250 01/01/16 511
750 Columbus-Polaris Hsg. Corp. Rev ............................ 7.400 01/01/16 817
500 Ohio St. Air Quality Dev. Rev., Ser. A (Ohio Edison) ....... 7.450 03/01/16 512
186 Ohio HFA SFM Rev., Ser. 1990F .............................. 7.600 09/01/16 191
606 Ohio HFA SFM Rev., Ser. 1991D .............................. 7.050 09/01/16 630
750 Montgomery Co., OH, Hosp. Rev. (Miami Valley Hosp.) ........ 6.250 11/15/16 762
815 Butler Co., OH, GO ......................................... 5.750 12/01/16 816
590 Garfield Heights, OH, Various Purpose GO,
Prerefunded @ 102 ....................................... 7.050 12/01/16 617
1,000 Youngstown St. University, OH, General Receipts Rev ........ 4.750 12/15/16 861
1,260 Cleveland, OH, Airport Sys. Rev., Ser. C ................... 5.125 01/01/17 1,148
750 Butler Co., OH, Trans. Impt. Dist., Ser. A ................. 5.125 04/01/17 684
800 Ohio St. Bldg. Auth. Rev. (Adult Correctional Bldg.) ....... 5.600 04/01/17 782
1,000 Lorain Co., OH, Hosp. Rev. (Catholic Healthcare Partners) .. 5.625 09/01/17 967
500 Toledo, OH, Sewer Sys. Rev ................................. 6.350 11/15/17 515
1,000 Toledo, OH, Waterworks Sys. Mtg. Rev ....................... 4.750 11/15/17 853
1,000 Rocky River, OH, CSD GO, Ser. 1998 ......................... 5.375 12/01/17 949
1,400 Cuyahoga Co., OH, Util. Sys. Impt. Rev .....................
(Medical Center Proj.) .................................. 5.125 02/15/18 1,262
500 Ohio St. Air Quality Dev. Rev., Ser. 1990B (Ohio Edison) ... 7.100 06/01/18 515
2,500 Ohio St. Bldg. Auth. Rev. (Adult Correctional Bldg.) ....... 5.250 10/01/18 2,296
1,000 Akron, OH, GO .............................................. 5.000 12/01/18 891
1,670 Canton, OH, GO ............................................. 4.750 12/01/18 1,416
1,000 University of Cincinnati, OH, General Receipts Rev., Ser. A0 5.750 06/01/19 983
1,000 Lucas-Northgate, OH, Housing Dev. Corp. Rev., Ser. A,
(Northgate Apt.) ........................................ 5.950 07/01/19 965
1,000 Lorain Co., OH, Health Fac. Rev., Ser. A
(Catholic Healthcare Partners) .......................... 5.500 09/01/19 935
500 Rural Lorain, OH, Water Auth. Resource Impt. Rev ........... 5.750 10/01/19 493
1,750 Lucas Co., OH, Hosp. Rev. (Promedica Healthcare) ........... 5.625 11/15/19 1,665
2,000 Avon Lake, OH, CSD GO ...................................... 5.500 12/01/19 1,909
2,145 Brunswick, OH, CSD GO, Ser. B .............................. 5.750 12/01/19 2,115
745 Crawford Co., OH, GO ....................................... 4.750 12/01/19 625
1,000 Evergreen, OH, LSD GO ...................................... 5.500 12/01/19 955
2,000 Hamilton, OH, CSD GO, Ser. A ............................... 5.500 12/01/19 1,909
475 Ohio St. University General Receipts Rev., Ser. A .......... 5.750 12/01/19 464
500 Akron, OH, GO .............................................. 5.800 11/01/20 481
Countrywide Investments - 47
<PAGE>
OHIO INSURED TAX-FREE FUND (CONTINUED)
=============================================================================================================
PRINCIPAL MARKET
AMOUNT FIXED RATE REVENUE & COUPON MATURITY VALUE
(000'S) GENERAL OBLIGATION BONDS-- 98.0% (CONTINUED) RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 1,000 Greene Co., OH, Sewer Sys. Rev ............................. 5.125% 12/01/20 $ 891
1,000 Ohio St. Air Quality Dev. Rev., Ser. 1985A
(Columbus & Southern Power) ............................. 6.375 12/01/20 1,018
1,000 Hamilton, OH, CSD GO ....................................... 5.625 12/01/24 949
1,250 Ohio St. University General Receipts Rev., Ser. A .......... 5.750 12/01/24 1,200
1,000 Ohio St. Air Quality Dev. Auth. Rev.(Pollution Control) .... 6.450 05/01/27 1,019
1,000 Hamilton Co., OH, Sales Tax. Rev. (Football Stadium Proj.) . 5.000 12/01/27 842
---------- --------
$ 61,630 TOTAL FIXED RATED REVENUE & GENERAL OBLIGATION BONDS
---------- (Amortized Cost $60,813) ................................... $ 60,904
--------
-------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT FLOATING & VARIABLE RATE COUPON MATURITY VALUE
(000'S) DEMAND NOTES-- 1.0% RATE DATE (000'S)
-------------------------------------------------------------------------------------------------------------
$ 650 Cuyahoga Co., OH, Hosp. Rev. (University Hosp.) ............ 4.700% 01/01/00 $ 650
21 Summit Co., OH, Healthcare Fac. Rev., Ser. 97 .............. 5.550 01/07/00 21
---------- --------
$ 671 TOTAL FLOATING & VARIABLE RATE DEMAND NOTES
---------- (Amortized Cost $671) ...................................... 671
--------
$ 62,301 TOTAL INVESTMENTS AT VALUE-- 99.0%
---------- (Amortized Cost $61,484) ................................... $ 61,575
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.0% ............... 601
--------
NET ASSETS-- 100.0% ........................................ $ 62,176
--------
</TABLE>
See accompanying notes to financial statements and notes to portfolios of
investments.
48 - Countrywide Investments
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS
DECEMBER 31, 1999
================================================================================
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
December 31, 1999.
Put bonds may be redeemed at the discretion of the holder on specified dates
prior to maturity. Mandatory put bonds are automatically redeemed at a specified
put date unless action is taken by the holder to prevent redemption.
Bonds denoted as prerefunded are anticipated to be redeemed prior to their
scheduled maturity. The dates indicated in the Portfolios of Investments are the
stipulated prerefunded dates.
PORTFOLIO ABBREVIATIONS:
ARPB - Adjustable Rate Put Bond
BANS - Bond Anticipation Notes
COP - Certificates of Participation
CSD - City School District
EDR - Economic Development Revenue
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corporation
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
ISD - Independent School District
LSD - Local School District
MFH - Multi-Family Housing
MFM - Multi-Family Mortgage
PCR - Pollution Control Revenue
RANS - Revenue Anticipation Notes
SFM - Single Family Mortgage
TANS - Tax Anticipation Notes
USD - Unified School District
Countrywide Investments - 49
<PAGE>
This page intentionally left blank.
50 - Countrywide Investments
<PAGE>
This page intentionally left blank.
Countrywide Investments - 51
<PAGE>
COUNTRYWIDE TAX-FREE TRUST
--------------------------
312 Walnut St., 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll Free) 800-543-8721
Cincinnati: 629-2000
Rate Line: 579-0999
SHAREHOLDER SERVICES
--------------------
Nationwide: (Toll Free) 800-543-0407
Cincinnati: 629-2050
BOARD OF TRUSTEES
-----------------
William O. Coleman
Phillip R. Cox
H. Jerome Lerner
Robert H. Leshner
Jill T. McGruder
Oscar P. Robertson
Nelson Schwab, Jr.
Robert E. Stautberg
Joseph S. Stern, Jr.
INVESTMENT ADVISER/MANAGER
--------------------------
Countrywide Investments, Inc.
312 Walnut St., 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
--------------
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
This report is authorized for distribution only when it is accompanied or
preceded by a current prospectus of Countrywide Tax-Free Trust.
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
--------
(a) ARTICLES OF INCOPORATION.
(i) Restated Agreement and Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 36, is hereby
incorporated by reference.
(ii) Amendment No. 1 to the Restated Agreement and Declaration of Trust,
dated May 25, 1994, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 36, is hereby incorporated by reference.
(iii)Amendment No. 2 to the Restated Agreement and Declaration of Trust,
dated July 31, 1996, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 38, is hereby incorporated by reference.
(iv) Amendment No. 3 to the Restated Agreement and Declaration of Trust,
dated February 28, 1997, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 40, is hereby incorporated by reference.
(b) BYLAWS
Bylaws, as amended, which were filed as Exhibits to Registrant's
Post-Effective Amendment No. 38, are hereby incorporated by reference.
(c) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
Article IV of Registrant's Restated Agreement and Declaration of Trust
provides the following rights for security holders:
LIQUIDATION. In event of the liquidation or dissolution of the Trust,
the Shareholders of each Series that has been established and
designated shall be entitled to receive, as a Series, when and as
declared by the Trustees, the excess of the assets belonging to that
Series over the liabilities belonging to that Series. The assets so
distributable to the Shareholders of any particular Series shall be
distributed among such Shareholders in proportion to the number of
Shares of that Series held by them and recorded on the books of the
Trust.
VOTING. All shares of all Series shall have "equal voting rights" as
such term is defined in the Investment Company Act of 1940 and except
as otherwise provided by that Act or rules, regulations or orders
promulgated thereunder. On each matter submitted to a vote of the
Shareholders, all shares of each Series shall vote as a single class
except as to any matter with respect to which a vote of all Series
voting as a single series is required by the 1940 Act or rules and
regulations promulgated thereunder, or would be required under the
Massachusetts Business Corporation Law if the Trust were a
Massachusetts business corporation. As to any matter which does not
affect the interest of a particular Series, only the holders of Shares
of the one or more affected Series shall be entitled to vote.
<PAGE>
REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Series shall have the right at such times as may be permitted by the
Trust, but no less frequently than once each week, to require the
Trust to redeem all or any part of his Shares of that Series at a
redemption price equal to the net asset value per Share of that Series
next determined in accordance with subsection (h) of this Section 4.2
after the Shares are properly tendered for redemption. Notwithstanding
the foregoing, the Trust may postpone payment of the redemption price
and may suspend the right of the holders of Shares of any Series to
require the Trust to redeem Shares of that Series during any period or
at any time when and to the extent permissible under the 1940 Act, and
such redemption is conditioned upon the Trust having funds or property
legally available therefor.
TRANSFER. All Shares of each particular Series shall be transferable,
but transfers of Shares of a particular Series will be recorded on the
Share transfer records of the Trust applicable to that Series only at
such times as Shareholders shall have the right to require the Trust
to redeem Shares of that Series and at such other times as may be
permitted by the Trustees.
Article V of Registrant's Restated Agreement and Declaration of Trust
provides the following rights for security holders:
VOTING POWERS. The Shareholders shall have power to vote only (i) for
the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940
Act, (iii) with respect to any termination or reorganization of the
Trust or any Series to the extent and as provided in Sections 7.1 and
7.2, (iv) with respect to any amendment of this Declaration of Trust
to the extent and as provided in Section 7.3, (v) to the same extent
as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should
not be brought or maintained derivatively or as a class action on
behalf of the Trust or the Shareholders, and (vi) with respect to such
additional matters relating to the Trust as may be required by the
1940 Act, this Declaration of Trust, the Bylaws or any registration of
the Trust with the Commission (or any successor agency) in any state,
or as the Trustees may consider necessary or desirable. There shall be
no cumulative voting in the election of any Trustee or Trustees.
Shares may be voted in person or by proxy.
(d) INVESTMENT ADVISORY CONTRACTS
(i) Form of Advisory Agreement with Touchstone Advisors, Inc. which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 45,
and is hereby incorporated by reference.
(ii) Form of Subadvisory Agreement with Fort Washington Investment
Advisors, Inc., which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 45, and is hereby incorporated by
reference.
<PAGE>
(e) UNDERWRITING CONTRACTS
(i) Form of Underwriter's Agreement with Touchstone Securities, Inc. which
was filed as an Exhibit to Post-Effective Amendment No. 71 to the
Registration Statement of Touchstone Investment Trust (File Nos.
2-52242 and 811-2538), is hereby incorporated by reference.
(f) BONUS OR PROFIT SHARING CONTRACTS
None.
(g) CUSTODIAN AGREEMENTS
(i) Custody Agreement with The Fifth Third Bank, the Custodian for the
Tax-Free Money Fund, the Tax-Free Intermediate Term Fund, the Ohio
Insured Tax-Free Fund, the Ohio Tax-Free Money Fund and the California
Tax-Free Money Fund, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 38, is hereby incorporated by reference.
(ii) Custody Agreement with the Huntington Trust Company, the Custodian for
the Florida Tax-Free Money Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 36, is hereby incorporated
by reference.
(h) OTHER MATERIAL CONTRACTS
(i) Registrant's Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement with Countrywide Fund Services, Inc., which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 44,
is hereby incorporated by reference.
(ii) Administration Agreement with Countrywide Fund Services, Inc., which
was filed as an Exhibit to Registrant's Post-Effective Amendment No.
42, is hereby incorporated by reference.
(i) LEGAL OPINION
Opinion and Consent of Counsel, which was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1.
(j) OTHER OPINIONS
(i) Consent of Arthur Anderson LLP is filed herewith.
(ii) Consent of Ernst & Young LLP is filed herewith.
(k) OMITTED FINANCIAL STATEMENTS
None.
(l) INITIAL CAPITAL AGREEMENTS
Letter of Initial Stockholder, which was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 and which was filed in
electronic form as an Exhibit to Registrant's Post-Effective Amendment No.
45, is hereby incorporated by reference.
<PAGE>
(m) RULE 12B-1 PLAN
(i) Registrant's Plans of Distribution Pursuant to Rule 12b-1, which were
filed as Exhibits to Registrant's Post-Effective Amendment No. 40, are
hereby incorporated by reference.
(ii) Form of Administration Agreement, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 44, is hereby incorporated
by reference.
(iii)Form of Sales Agreement for Money Market Funds, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 41, is hereby
incorporated by reference.
(n) RULE 18F-3 PLAN
Amended Rule 18f-3 Plan Adopted with Respect to the Multiple Class
Distribution System, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 41, is hereby incorporated by reference.
(o) RESERVED
(p) CODE OF ETHICS
(i) Registrant's Code of Ethics, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 45, is hereby incorporated
by reference.
(ii) Code of Ethics of Touchstone Advisors, Inc., which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 45, is hereby
incorporated by reference.
(iii)Code of Ethics of Fort Washington Investment Advisors, Inc., which
was filed as an Exhibit to Registrant's Post-Effective Amendment No.
45, is hereby incorporated by reference.
(iv) Code of Ethics of Touchstone Securities, Inc., which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 45, is hereby
incorporated by reference.
Item 24. Persons Controlled by or Under Common Control with the Registrant
----------------------------------------------------------------------
None
Item 25. Indemnification
---------------
(a) Article VI of the Registrant's Restated Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
Section 6.4 Indemnification of Trustees, Officers, etc.
<PAGE>
The Trust shall indemnify each of its Trustees and officers, including
persons who serve at the Trust's request as directors, officers or trustees
of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person") against all liabilities, including but not limited to amounts paid
in satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by
any Covered Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person
may be or may have been involved as a party or otherwise or with which such
person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a Trustee or officer, director or
trustee, and except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered Person
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office ("disabling conduct"). Anything
herein contained to the contrary notwithstanding, no Covered Person shall
be indemnified for any liability to the Trust or its Shareholders to which
such Covered Person would otherwise be subject unless (1) a final decision
on the merits is made by a court or other body before whom the proceeding
was brought that the Covered Person to be indemnified was not liable by
reason of disabling conduct or, (2) in the absence of such a decision, a
reasonable determination is made, based upon a review of the facts, that
the Covered Person was not liable by reason of disabling conduct, by (a)
the vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Company as defined in the Investment Company Act of 1940
nor parties to the proceeding ("disinterested, non-party Trustees"), or (b)
an independent legal counsel in a written opinion.
Section 6.5 Advances of Expenses.
The Trust shall advance attorneys' fees or other expenses incurred by a
Covered Person in defending a proceeding, upon the undertaking by or on
behalf of the Covered Person to repay the advance unless it is ultimately
determined that such Covered Person is entitled to indemnification, so long
as one of the following conditions is met: (i) the Covered Person shall
provide security for his undertaking, (ii) the Trust shall be insured
against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the disinterested non-party Trustees of the Trust,
or an independent legal counsel in a written opinion, shall determine,
based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Section 6.6 Indemnification Not Exclusive, etc.
The right of indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered Person
may be entitled. As used in this Article VI, "Covered Person" shall include
such person's heirs, executors and administrators, an "interested Covered
Person" is one against whom the action, suit or other proceeding in
question or another action, suit or other proceeding on the same or similar
grounds is then or has been pending or threatened, and a "disinterested"
person is a person against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending or threatened. Nothing
contained in this article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power
of the Trust to purchase and maintain liability insurance on behalf of any
such person.
(b) The Registrant maintains a mutual fund and investment advisory professional
and directors and officers liability policy. The policy provides coverage
to the Registrant, its trustees and officers and Touchstone Advisors, Inc.
(the "Adviser") in its capacity as investment adviser and Touchstone
Securities, Inc. (the "Underwriter") in its capacity as principal
underwriter, among others. Coverage under the policy includes losses by
reason of any act, error, omission, misstatement, misleading statement,
neglect or breach of duty. The Registrant may not pay for insurance which
protects the Trustees and officers against liabilities rising from action
involving willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their offices.
The Advisory Agreements and the Subadvisory Agreements provide that the
Adviser (or Subadvisor) shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Registrant in connection
with the matters to which the Agreements relate, except a loss resulting
from willful misfeasance, bad faith or gross negligence of the Adviser (or
Subadvisor) in the performance of its duties or from the reckless disregard
by the Adviser (or Subadvisor) of its obligations under the Agreement.
Registrant will advance attorneys' fees or other expenses incurred by the
Adviser (or Subadvisor) in defending a proceeding, upon the undertaking by
or on behalf of the Adviser (or Subadvisor) to repay the advance unless it
is ultimately determined that the Adviser is entitled to indemnification.
The Underwriting Agreement with the Underwriter provides that the
Underwriter, its directors, officers, employees, shareholders and control
persons shall not be liable for any error of judgment or mistake of law or
for any loss suffered by Registrant in connection with the matters to which
the Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of any of such persons in the
performance of the Underwriter's duties or from the reckless disregard by
any of such persons of the Underwriter's obligations and duties under the
Agreement. Registrant will advance attorneys' fees or other expenses
incurred by any such person in defending a proceeding, upon the undertaking
by or on behalf of such person to repay the advance if it is ultimately
determined that such person is not entitled to indemnification.
Item 26. Business and Other Connections of the Investment Advisers
---------------------------------------------------------
<PAGE>
A. Touchstone Advisors, Inc. ("Touchstone") is a registered investment adviser
which provides investment advisory services to the Registrant. Touchstone
also serves as the investment adviser to Touchstone Variable Series Trust,
Touchstone Series Trust, Touchstone Strategic Trust and Touchstone
Investment Trust.
The following list sets forth the business and other connections of the
directors and executive officers of Touchstone. The addresses of the
corporations listed below are shown in the table under Item 26C.
(1) Jill T. McGruder, President and a Director of Touchstone.
(a) President of Ft. Washington Brokerage Services, Inc., IFS Fund
Distributors, Inc., Integrated Fund Services, Inc., CFSI, Inc.,
Touchstone Series Trust and Touchstone Variable Series Trust
(b) Trustee of Touchstone Strategic Trust, Touchstone Investment
Trust and Touchstone Tax-Free Trust.
(c) President, Chief Executive Officer and Director of IFS Financial
Services, Inc. and Touchstone Securities, Inc.
(d) President and a Director of IFS Agency Services, Inc., IFS
Insurance Agency, Inc. and IFS Systems, Inc.
(e) Senior Vice President of Western-Southern Life Assurance Company
(2) Teresa A. Wiedenheft, Chief Financial Officer of Touchstone.
(a) Chief Financial Officer of IFS Financial Services, Inc. and
Touchstone Securities, Inc.
(b) Senior Vice President, Chief Financial Officer and Treasurer of
CFSI, Inc., Ft. Washington Brokerage Services, Inc., IFS Fund
Distributors, Inc. and Integrated Fund Services, Inc.
(3) Patricia J. Wilson, Chief Compliance Officer of Touchstone
(a) Chief Compliance Officer of Touchstone Securities, Inc.
(4) Donald J. Wuebbling, Director, Secretary and Chief Legal Officer of
Touchstone
(a) Director and Secretary of IFS Financial Services, Inc.
(b) Director of IFS Agency Services, Inc., IFS Insurance Agency,
Inc., IFS Systems. Inc., and Touchstone Securities, Inc.
<PAGE>
(c) Senior Vice President and General Counsel of The Western and
Southern Life Insurance Company and Western-Southern Life
Assurance Company.
(d) Vice President and Secretary of Columbus Life Insurance Company.
(5) James N. Clark, a Director of Touchstone
(a) Director of Columbus Life Insurance Company, IFS Financial
Services, Inc., IFS Insurance Agency, Inc. and IFS Systems, Inc.
(b) Executive Vice President, Secretary and Director of The Western
and Southern Life Insurance Company and Western-Southern Life
Assurance Company.
(6) William F. Ledwin, a Director of Touchstone
(a) Director of CS Holdings, Inc., Integrated Fund Services, Inc.,
IFS Fund Distributors, Inc., Ft. Washington Brokerage Services,
Inc., IFS Agency Services, Inc., Capital Analysts Incorporated,
IFS Insurance Agency, Inc., Touchstone Securities, Inc., IFS
Financial Services, Inc., IFS Systems, Inc. and Eagle Realty
Group, Inc.
(b) President and Director of Fort Washington Investment Advisors,
Inc.
(c) Vice President and Chief Investment Officer of Columbus Life
Insurance Company
(d) Senior Vice President and Chief Investment Officer of The
Western-Southern Life Insurance Company and Western-Southern Life
Assurance Company
(7) Edward S. Heenan, Vice President and Comptroller of Touchstone
(a) Vice President, Comptroller and Director of IFS Agency, Services,
Inc., IFS Financial Services, Inc., IFS Insurance Agency, Inc.,
IFS Systems, Inc.
(b) Comptroller and Director of Touchstone Securities, Inc.
(c) Vice President and Comptroller of Columbus Life Insurance
Company, The Western-Southern Life Insurance Company and
Western-Southern Life Assurance Company
(8) Richard K. Taulbee, Vice President of Touchstone
(a) Vice President of IFS Agency Services, Inc., IFS Financial
Services, Inc., IFS Insurance Agency, Inc., IFS Systems, Inc.,
Touchstone Securities, Inc. and Western-Southern Life Assurance
Company
<PAGE>
(9) James J. Vance, Vice President and Treasurer of Touchstone
(a) Vice President and Treasurer of Columbus Life Insurance Company,
IFS Agency Services, Inc., IFS Financial Services, Inc., IFS
Insurance Agency, Inc., IFS Systems, Inc., Touchstone Securities,
Inc., The Western and Southern Life Insurance Company and
Western-Southern Life Assurance Company.
B. Fort Washington Investment Advisors, Inc. ("Ft. Washington") is a
registered investment adviser which provides sub-advisory services to the
Funds in the Registrant and to certain Funds in Touchstone Variable Series
Trust, Touchstone Investment Trust and Touchstone Strategic Trust. Ft.
Washington also provides investment advice to institutional and individual
clients.
The following list sets forth the business and other connections of the
directors and executive officers of Ft. Washington. The addresses of the
corporations listed below are shown in the table under Item 26C.
(1) William J. Williams, Chairman and a director of Ft. Washington
(a) Chairman of the Board of The Western and Southern Life Insurance
Company
(2) William F. Ledwin, President and a director of Ft. Washington
See biography above
(3) James J. Vance, Vice President and Treasurer of Ft. Washington
See biography above
(4) Rance G. Duke, Vice President and Senior Portfolio Manager of Ft.
Washington
(a) Second Vice President and Senior Portfolio Manager of The Western
and Southern Life Insurance Company
(5) John C. Holden, Vice President and Senior Portfolio Manager of Ft.
Washington
(a) Vice President and Senior Portfolio Manager of Ft. Washington
Brokerage Services
(6) Charles E. Stutenroth IV, Vice President and Senior Portfolio Manager
of Ft. Washington
(a) Vice President and Senior Portfolio Manager of Ft. Washington
Brokerage Services
<PAGE>
(b) Senior Vice President and Portfolio Manager of Bank of America
Investment Management, Charlotte North Carolina until 1999.
(7) Brendan M. White, Vice President and Senior Portfolio Manager of Ft.
Washington
C. The address and principal business of each corporation listed in Item 26A
and Item 26B are shown below.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
ADDRESS CORPORATION PRINCIPAL BUSINESS
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
311 Pike Street Cincinnati OH IFS Financial Services, Inc. Holding company
IFS Agency Services, Inc. Insurance agency
IFS Insurance Agency, Inc. Insurance agency
IFS Systems, Inc. Information systems provider
Touchstone Advisors, Inc. Investment advisor
Touchstone Series Trust Investment company
Touchstone Variable Series Trust Investment company
-----------------------------------------------------------------------------------------------------
312 Walnut Street Cincinnati OH CFSI, Inc. Holding company
Integrated Fund Services, Inc. Mutual fund services provider
Ft. Washington Brokerage Services Investment advisor and
Investments, Inc. broker-dealer
Touchstone Investment Trust Investment company
Touchstone Strategic Trust Investment company
Touchstone Tax-Free Trust Investment company
IFS Fund Distributors, Inc. Broker-dealer
-----------------------------------------------------------------------------------------------------
400 Broadway Cincinnati OH The Western and Southern Life Insurance company
Insurance Company
Western-Southern Life Assurance Insurance Company
company
-----------------------------------------------------------------------------------------------------
400 East Fourth Street Columbus Life Insurance Company Insurance company
Cincinnati OH
-----------------------------------------------------------------------------------------------------
420 East Fourth Street Fort Washington Investment Investment advisor
Cincinnati OH Advisors, Inc.
-----------------------------------------------------------------------------------------------------
421 East Fourth Street Eagle Realty Group, Inc. Real estate brokerage and
Cincinnati OH management service provider
-----------------------------------------------------------------------------------------------------
3 Radnor Corporate Center Radnor PA Capital Analysts Incorporated Investment advisor and
broker-dealer
-----------------------------------------------------------------------------------------------------
</TABLE>
Item 27 Principal Underwriters
----------------------
(a) Touchstone Securities acts as underwriter for Touchstone Strategic
Trust and Touchstone Investment Trust.
<PAGE>
(b) The following list sets forth the business and other connections of
the directors and executive officers of Touchstone. Unless otherwise
noted with an asterisk, the address of the persons named below is 411
Pike Street, Cincinnati, Ohio 45202.
NAME POSITION WITH UNDERWRITER POSITION WITH
REGISTRANT
----------------------------------------------------------------------
Jill T. McGruder President/Director Trustee
William F. Ledwin Director None
Patricia J. Wilson Chief Compliance Officer None
Teresa A. Wiedenheft Chief Financial Officer None
James J. Vance Vice President/Treasurer None
Edward S. Heenan Controller/Director None
Donald J. Wuebbling Director None
James N. Clark Director None
Robert F. Morand Secretary None
Richard K. Taulbee Vice President None
John R. Lindholm Vice President None
Don W. Cummings Vice President None
(c) None
Item 28. Location of Accounts and Records
--------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant.
Item 29. Management Services Not Discussed in Part A or Part B
-----------------------------------------------------
None.
Item 30. Undertakings
------------
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the provisions of
Massachusetts law and the Agreement and Declaration of Trust of the
Registrant or the Bylaws of the Registrant, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
<PAGE>
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) Within five business days after receipt of a written application by
shareholders holding in the aggregate at least 1% of the shares then
outstanding or shares then having a net asset value of $25,000,
whichever is less, each of whom shall have been a shareholder for at
least six months prior to the date of application (hereinafter the
"Petitioning Shareholders"), requesting to communicate with other
shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon removal of any Trustee of the
Registrant, which application shall be accompanied by a form of
communication and request which such Petitioning Shareholders wish to
transmit, Registrant will:
(i) provide such Petitioning Shareholders with access to a list of
the names and addresses of all shareholders of the Registrant; or
(ii) inform such Petitioning Shareholders of the approximate number of
shareholders and the estimated costs of mailing such
communication, and to undertake such mailing promptly after
tender by such Petitioning Shareholders to the Registrant of the
material to be mailed and the reasonable expenses of such
mailing.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment to
the Registrant's Registration Statement and has duly caused this Post-Effective
Amendment to the Registrant's Registration Statement to be signed on its behalf
by the undersigned, duly authorized, in the City of Cincinnati, State of Ohio,
on the 8th day of June, 2000.
TOUCHSTONE TAX-FREE TRUST
By: /s/ Robert H. Leshner
---------------------
Robert H. Leshner, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated.
SIGNATURE TITLE
/s/ Robert H. Leshner June 8, 2000
--------------------- President and Trustee
Robert H. Leshner
/s/ Theresa M. Samocki June 9, 2000
---------------------- Treasurer
Theresa M. Samocki
William O. Coleman* Trustee
Phillip R. Cox Trustee
H. Jerome Lerner* Trustee
/s/ Jill T. McGruder June 8, 2000
-------------------- Trustee
Jill T. McGruder
Oscar P. Robertson* Trustee
Nelson Schwab, Jr.* Trustee
Robert E. Stautberg* Trustee
Joseph S. Stern, Jr.* Trustee
*By: /s/ Jill T. McGruder June 8, 2000
--------------------
Jill T. McGruder
As attorney in fact for each Trustee
<PAGE>
EXHIBIT INDEX
99.23(j)(i) - Consent of Arthur Anderson LLP
99.23(j)(ii) - Consent of Ernst & Young LLP
